AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 7, 1999
REGISTRATION NO. 333-67309
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BOTTOMLINE TECHNOLOGIES (DE), INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7372 02-0433294
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
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155 FLEET STREET
PORTSMOUTH, NEW HAMPSHIRE 03801
(603) 436-0700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DANIEL M. MCGURL
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BOTTOMLINE TECHNOLOGIES (DE), INC.
155 FLEET STREET
PORTSMOUTH, NEW HAMPSHIRE 03801
(603) 436-0700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
JOHN A. BURGESS, ESQ. MARK L. JOHNSON, ESQ.
PHILIP P. ROSSETTI, ESQ. RICHARD G. COSTELLO, ESQ.
HALE AND DORR LLP FOLEY, HOAG & ELIOT LLP
60 STATE STREET ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109 BOSTON, MASSACHUSETTS 02109
TELEPHONE: (617) 526-6000 TELEPHONE: (617) 832-1000
TELECOPY: (617) 526-5000 TELECOPY: (617) 832-7000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date hereof.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. [_]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [_]
CALCULATION OF REGISTRATION FEE
PROPOSED
TITLE OF EACH CLASS OF MAXIMUM PROPOSED MAXIMUM
SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER SHARE PRICE REGISTRATION FEE(2)
------------------------------------------------------------------------------------------------
Common Stock $.001 par
value per
share ................ 3,507,500 shares $13.00 $45,597,500 $12,676.11
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(1) Includes 457,500 shares which the Underwriters have the option to purchase from the Company to cover over-allotments, if any. See "Underwriting."
(2) Pursuant to Rule 457(o) under the Securities Act of 1933, as amended, $11,120 of the registration fee was paid in connection with the initial filing of the Registration Statement on November 13, 1998.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY + +NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN + +OFFER TO SELL SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE + +SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. + |
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JANUARY 7, 1999
[LOGO]
3,050,000 SHARES
COMMON STOCK
Bottomline Technologies (de), Inc. is offering 2,250,000 shares of its common stock and the selling stockholders are selling an additional 800,000 shares. This is Bottomline's initial public offering and no public market currently exists for its shares. We have applied for approval for quotation on the Nasdaq National Market under the symbol "EPAY" for the shares we are offering. We anticipate that the initial public offering price will be between $11.00 and $13.00 per share.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
PER SHARE TOTAL
--------- -----
Public Offering Price........................................... $ $
Underwriting Discounts and Commissions.......................... $ $
Proceeds to the Company......................................... $ $
Proceeds to the Selling Stockholders............................ $ $
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THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Bottomline has granted the underwriters a 30-day option to purchase up to an additional 457,500 shares of common stock to cover over-allotments.
BANCBOSTON ROBERTSON STEPHENS
BT ALEX. BROWN INCORPORATED
CIBC OPPENHEIMER
THE DATE OF THIS PROSPECTUS IS , 1999.
[INSIDE FRONT COVER]
[This is a graphic which shows a paper check with a universal "no" sign
through it. The words "Payment Management Software and Services that Enable
Organizations to Manage their Transition from Paper Checks to Electronic
Payments" will be above the graphic. Below the graphic is an illustration
entitled "Electronic Commerce--Electronic Payments." The graphic shows four
entities linked by an electronic wave from left to right in the following order:
"Payor," "Payor's Bank," "Payee's Bank," and "Payee."]
[FRONT COVER FOLDOUT]
[This is a graphic which contains the following text:
"Bottomline Technologies is the enterprise payment specialist -- Payment Management Software and Services that Enable Organizations to Manage their Transition from Paper Checks to Electronic Payments
> Bottomline Provides the Bridge to Electronic Payments
> Single platform for paper and electronic payments
> Cash management
> Enterprise-wide payment control
> Security and fraud protection
> Ability to meet Government mandates
> Web access
Beside the text is a graphic containing three concentric circles. The inside circle represents a Payment Server and contains the following text:
"Electronic Payments/Receipts; LaserCheck Printing; Electronic Remittance Advice; Check Fraud Avoidance; Web Access"
The Second Circle is divided into four quadrants. Each quadrant in the second circle is color coded to relate to three color coded rings in the outer circle. The quadrants in the second circle and the related outside rings contain the following text:
"Financial Institutions (Large Banks, Federal Reserve and Small Banks). Payees (Individuals, Government and Businesses). Internet/Intranet (Employees, Customers and Vendors); and Payors (Accounting Software, Legacy Financials and Enterprise Resource Planning Systems)."
Below the graphic is an illustration entitled "Electronic Commerce-- Electronic Payments." The graphic shows four entities linked by an electronic wave from left to right in the following order: "Payor," "Payor's Bank," "Payee's Bank," and "Payee."]
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK. IN THIS PROSPECTUS, THE "COMPANY," "BOTTOMLINE," "WE," "US" AND "OUR" REFER TO BOTTOMLINE TECHNOLOGIES (DE), INC. (UNLESS THE CONTEXT OTHERWISE REQUIRES).
UNTIL [ ], 1999, ALL DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary....................................................... 4
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 12
Dividend Policy.......................................................... 12
Capitalization........................................................... 13
Dilution................................................................. 14
Selected Financial Data.................................................. 15
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 16
Business................................................................. 29
Management............................................................... 43
Principal and Selling Stockholders....................................... 52
Description of Capital Stock............................................. 54
Shares Eligible for Future Sale.......................................... 56
Underwriting............................................................. 58
Legal Matters............................................................ 59
Experts.................................................................. 59
Additional Filings and Company Information............................... 60
Index to Financial Statements............................................ F-1
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Bottomline Technologies, CheckGard, LaserCheck and PayBase are registered trademarks of Bottomline. All other trademarks or trade names referred to in this prospectus are the property of their respective owners.
SUMMARY
This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully. Unless otherwise indicated, all information contained in this prospectus assumes that the underwriters will not exercise their over-allotment option. This prospectus contains forward- looking statements which involve risks and uncertainties. Bottomline's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors" and elsewhere in this prospectus. All information contained in this prospectus reflects a 3-for-1 stock split of the common stock effected on January 6, 1999.
THE COMPANY
We are a leading provider of software used to make and manage corporate payments. Our products and services enable organizations to transition from the traditional paper check process to electronic payments and to facilitate electronic commerce. Our software offers a single solution to control, manage and issue all payments. Our software complements and integrates with existing corporate payment applications, such as accounts payable, payroll, travel and entertainment expense, insurance claims and commissions. Our products provide Internet capability and run on Windows NT, Microsoft's leading network technology. Today, we have more than 2,000 customers, representing every major industry-sector, including The Charles Schwab Corporation, Dow Jones & Company, Inc., The Federal Reserve System, Microsoft Corporation and Nissan Motor Acceptance Corporation.
Most enterprises today still rely on pre-printed, paper checks to generate and receive payments. It is estimated that in 1997, United States businesses processed approximately 73 billion transactions involving paper checks. With the significant growth of the Internet and electronic commerce, many enterprises are seeking to implement a cost-effective, secure, electronic payment system. The National Automated Clearing House Association estimates that the cost of a business-to-business electronic payment averages $3.00 compared to $8.33 for a similar paper-based payment. It also estimates that approximately 4.5 billion secured Automated Clearing House payments were made in 1997.
Bottomline's PayBase product suite is designed to control, manage and issue all payments, whether paper-based or electronic, across an enterprise. This suite includes a range of products that can be purchased as an entire group or as separate applications. Our products permit customers to leverage the Internet while increasing security and fraud avoidance. Our technology complements our customers' existing information systems and payment applications. We provide users multiple options for delivery of detailed payment or remittance information, including mail, fax and the Internet. Our LaserCheck product is a cost-effective, software-based, laser-printing system that allows an enterprise to streamline its paper-payment process and to generate checks at the point of need. We also offer consulting services and related equipment and supplies to help customers plan, design and implement the transition from paper to electronic payments.
Our objective is to be the leading provider of payment management software for businesses, financial institutions and public sector organizations. In addition to our direct selling efforts, we also promote our products and services through relationships with enterprise resource planning and accounting system vendors, such as Oracle and SAP, and implementation consultants. For example, we recently entered into a working agreement with Arthur Andersen LLP. Under the working agreement, Arthur Andersen LLP will work with us to develop a marketing program and to utilize the enterprise consulting experience of Arthur Andersen LLP to demonstrate the benefits of migrating to our PayBase/32/ payment management solution. In March 1998, we were selected by The Federal Reserve System to provide the necessary software to enable up to 12,000 banks to process electronic payments with remittance information for their commercial customers.
Bottomline was originally organized as a New Hampshire corporation in 1989 and was reincorporated as a Delaware corporation in August 1997. Bottomline's principal office is located at 155 Fleet Street, Portsmouth, New Hampshire 03801 and its telephone number is (603) 436-0700. The Company's web site is www.bottomline.com. The Company's web site is not a part of this prospectus.
THE OFFERING
Common Stock offered by Bottomline... 2,250,000 shares
Common Stock offered by the selling
stockholders....................... 800,000 shares
Common Stock to be outstanding after
the offering....................... 9,643,272 shares
Use of proceeds...................... To fund continued growth and expansion
of its business, product development,
potential acquisitions and other general
corporate purposes
Nasdaq National Market symbol........ EPAY
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SUMMARY FINANCIAL DATA
(In thousands, except per share data)
Bottomline has 801,000 shares of redeemable common stock outstanding which are redeemable at the option of the holders at a redemption price that increases over time. The earnings (loss) per share available to common stockholders shown below have been adjusted to reflect the increase in the redemption price for each period. These redemption rights will terminate upon the effectiveness of this offering. The shares used in computing diluted earnings per share available to common stockholders include the redeemable common stock.
THREE MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30,
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1994 1995 1996 1997 1998 1997 1998
------- ------- ------- ------- ------- --------- ---------
(UNAUDITED)
STATEMENTS OF OPERATIONS
DATA:
Revenues................ $10,408 $15,115 $18,067 $22,126 $29,037 $ 6,064 $ 8,105
Income (loss) from
operations............ 1,454 1,234 1,553 (1,732) 2,830 358 747
Net income (loss)....... 924 775 883 (1,252) 1,603 194 457
Earnings (loss) per
share available to
common stockholders:
Basic................. $ 0.16 $ 0.12 $ 0.14 $ (0.23) $ 0.24 $ 0.03 $ 0.07
Diluted............... $ 0.13 $ 0.10 $ 0.11 $ (0.23) $ 0.20 $ 0.02 $ 0.06
Shares used in computing
earnings (loss) per
share available to
common stockholders:
Basic................. 5,257 5,523 5,693 5,986 6,314 6,307 6,361
Diluted............... 6,536 6,850 7,001 5,986 7,316 7,297 7,456
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SEPTEMBER 30, 1998
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PRO FORMA
ACTUAL AS ADJUSTED (1)(2)
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(UNAUDITED)
BALANCE SHEET DATA:
Cash and cash equivalents............................ $ 1,491 $25,193
Working capital...................................... 4,127 27,829
Total assets......................................... 12,084 35,786
Redeemable common stock, at redemption value......... 1,381 --
Stockholders' equity................................. 4,797 29,880
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(1) Gives effect to the termination of redemption rights of the redeemable common stock upon the effectiveness of this offering.
(2) Gives effect to the sale by Bottomline of 2,250,000 shares of common stock offered hereby at an assumed public offering price of $12.00 per share and after deducting the estimated underwriting discounts and commissions and offering expenses payable by Bottomline.
RISK FACTORS
You should carefully consider the following risks before making an investment decision. Our business, operating results and financial condition could be adversely affected by any of the following risks. The trading price of our common stock could decline due to any of these risks, and you could lose all or part of your investment. You should also refer to the other information set forth in this prospectus, including our financial statements and the related notes. This prospectus contains forward-looking statements that involve risks and uncertainties. These forward-looking statements are usually accompanied by words such as "believes," "anticipates," "plans," "expects" and similar expressions. Our actual results may differ materially from the results discussed in the forward-looking statements because of factors such as the Risk Factors discussed below.
OUR QUARTERLY RESULTS MAY FLUCTUATE
Our revenues and operating results may fluctuate from period to period. Factors that could cause these fluctuations include:
. the incurrence of costs
relating to the integration
. the timing of orders and of software products and
longer sales cycles, operations in connection with
particularly due to increased acquisitions of technologies
average selling prices of our or businesses
payment solutions
. the loss of key employees and . delivery interruptions
the time required to train relating to equipment and
new hires, particularly sales supplies purchased from
and engineering personnel third-party vendors, which
could delay system sales
. the timing and market
acceptance of new products or . economic conditions which may
product enhancements by affect our customers' and
either us or our competitors potential customers' budgets
for technological
expenditures
. the timing of product
implementations, which are
highly dependent on
customers' resources and
discretion
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A significant percentage of our expenses, particularly personnel costs and rent, are relatively fixed, and, therefore, shortfalls in revenues may cause significant variations in operating results in any quarter. Because of these factors, we believe that period to period comparisons of our results of operations are not necessarily meaningful, and that investors should not rely on them as indicators of future performance. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." In addition, it is possible that in some future quarters our results of operations will be below the expectations of public market analysts and investors, and in that case the price of our common stock could be materially adversely affected.
OUR REVENUES ARE SEASONAL
During our second fiscal quarter ended December 31, revenues have typically increased as customers on a calendar-based fiscal year completed their capital spending plans. During our third fiscal quarter ended March 31, revenues have typically declined as customers focus internal resources on statutory and regulatory reporting requirements. Our fourth fiscal quarter ended June 30, generally has the highest revenues as customers complete projects before summer, when activity in many corporate financial departments tends to slow. As a result, we have historically experienced first quarter revenues that are lower than those of the immediately preceding quarter.
OUR PERFORMANCE WILL DEPEND ON MARKET ACCEPTANCE OF OUR PAYMENT MANAGEMENT OFFERINGS
Substantially all of our revenues come from the license and maintenance of our payment management offerings and sales of related products and services. Our PayBase software products are designed to provide a single platform to control, manage and issue all payments, whether paper-based or electronic, across an enterprise. Our future performance will depend to a large degree upon the market acceptance of PayBase as 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 LaserCheck solution, as well as our ability to introduce enhancements to meet the market's evolving needs for secure, payment management solutions. Any reduction in demand for our payment management solutions, or lack of meaningful growth in the market for electronic and payment management solutions could have a material adverse effect on our business, operating results and financial condition. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business--Products and Services."
OUR BUSINESS CAN BE AFFECTED BY PROBLEMS WITH THIRD-PARTY HARDWARE
We resell laser printers made by third parties as part of our product offerings. During our 1997 fiscal year, we experienced a significant problem with a third-party printer that we were then reselling. The printer problem had a material adverse effect on our operating results, including:
. increased customer support expenses incurred in receiving, investigating and responding to printer-related issues;
. increased service, maintenance and supply expenses incurred in repairing and, in some cases, replacing the defective printers;
. a decrease in orders from both new and existing customers as printer problems adversely affected sales productivity; and
. an inventory write-off of $217,000 related to the defective printers.
In response, we have revised and enhanced our quality assurance control programs and now utilize multiple printers and printer vendors. Any repetition of these problems could, however, have a material adverse effect on our business, operating results and financial condition.
OUR MARKET IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE
Our success is dependent on the ability to develop new and enhanced software, services and related products to meet rapidly evolving requirements for payment management software. Trends which could have a critical impact on Bottomline include:
. rapidly changing technology, particularly in the areas of database management and network technology;
. evolving industry standards, including both formal and de facto standards relating to electronic payments;
. developments and changes relating to the Internet;
. competing products which offer increased functionality; and
. changes in customer requirements.
If we are unable to develop and introduce new products, or enhancements to existing products, in a timely and successful manner, our business, operating results and financial condition could be materially adversely affected.
WE HAVE SIGNIFICANT COMPETITION FROM A VARIETY OF SOURCES
The market for payment management software is intensely competitive and characterized by rapid technological change. Our competitors are diverse and offer a range of solutions directed at different segments of the payment management market. These competitors include:
. companies offering a broad suite of electronic data interchange products, such as Sterling Commerce;
. companies that provide a broad spectrum of electronic payment solutions, such as CheckFree;
. companies that offer laser-check printing software and services; and
. providers of traditional payment products, including check stock and check printing software and services, such as Standard Register.
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. Sales opportunities may also be reduced to the extent that organizations choose to develop payment management solutions internally. Increased competition may result in price reductions of our products and services, reduced revenues and gross margins and loss of market share, any one of which could have a material adverse effect on our business, operating results and financial condition. See "Business--Competition."
WE MAY HAVE DIFFICULTY IN MANAGING OUR GROWTH
Our rapid growth has sometimes strained, and may in the future strain, our managerial and other resources. Our ability to manage growth will depend in part on our ability to continue to enhance our operating, financial and management information systems. There can be no assurance that our personnel, systems, procedures and controls will be adequate to support our growth. If we are unable to manage growth effectively, the quality of our services, our ability to retain key personnel and our business, operating results and financial condition could be materially adversely affected. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
WE ARE DEPENDENT ON A NUMBER OF KEY EXECUTIVES
Our success depends upon the efforts and ability of our executive officers and key technical employees who are skilled in electronic commerce, payment methodology and regulation, and Internet, database and network technologies. We currently do not maintain "key man" life insurance policies on any of our employees. While certain executive officers have employment agreements with us, the loss of the services of any of our senior executive officers or other key employees could have a material adverse effect on our business, operating results and financial condition. See "Management."
WE MUST COMPETE FOR SKILLED PERSONNEL
We are dependent upon the ability to attract, hire, train and retain highly skilled technical, sales and marketing, and support personnel, particularly with expertise in electronic payment technology and knowledge of the banking industry. Competition for qualified personnel is intense. In addition, our location in Portsmouth, New Hampshire may limit our access to skilled personnel. Any failure to attract, hire or retain such personnel could have a material adverse effect on our business, operating results and financial condition. In addition, we plan to expand our sales and marketing and customer support organizations. Based on our experience, it takes an average of six months for a salesperson to become fully productive. There can be no assurance that we will be successful in increasing the productivity of our sales personnel, and the failure to do so could have a material adverse effect on our business, operating results and financial condition.
WE HAVE A NUMBER OF RISKS ASSOCIATED WITH THE YEAR 2000
Computer systems and software must accept four digit entries to distinguish 21st century dates from 20th century dates. As a result, many software and computer systems may need to be upgraded in order to be year 2000 compliant. Significant uncertainties exist in the software industry concerning the potential effects associated with such compliance. We have assessed the impact of year 2000 compliance on our products and systems. We cannot, however, be certain that we have identified all of the potential risks to our business that could result from matters related to the year 2000. We have identified the following risks that you should be aware of:
. Year 2000 problems that affect our internal systems. Although the vendors for each of our major internal software systems, such as accounting and database management, have certified that such software
is year 2000 compliant, it is possible that such systems could contain undetected problems that could cause serious and costly disruptions which would have a material adverse effect on our business, operating results and financial condition. We have relied on the certifications by our software vendors regarding the year 2000 readiness of our internal software systems and have not conducted independent tests of these systems. We are developing contingency plans to address issues that we believe are critical to our operations in the event that internal systems fail to be year 2000 compliant and anticipate finalizing such plans by June 30, 1999.
. Year 2000 problems that affect our discontinued products. Bottomline has discontinued the sale and maintenance of certain previous generations of its payments software products that operated in the DOS operating system environment. The DOS based products are not year 2000 compliant. In 1997, we notified customers that had purchased DOS based products that their products were not year 2000 compliant and that we would no longer be supporting those products. Based on the notification we provided and the contractual provisions limiting liability contained in our standard terms and conditions which governed the sale of our DOS based products, we do not believe there are significant risks to our business relating to year 2000 compliance of these products. However, there can be no assurance that customers who purchased such products will not assert claims against us alleging that such products should have been year 2000 compliant at the time of purchase. Such claims could result in costly litigation which could divert management's attention and could have a material adverse effect on our business, operating results and financial condition.
. Undetected year 2000 problems that could affect our currently supported products. We believe that all of our products that have been installed after February 1997 were year 2000 compliant at the time of installation, and we have conducted extensive tests to validate their compliance. However, we cannot be certain that these tests would have detected all potential year 2000 problems. The failure of our currently supported products to be fully year 2000 compliant could result in claims by or liability to our customers, which could have a material adverse effect on our business, operating results and financial condition.
. Purchasing patterns could be affected by year 2000 issues. The purchasing patterns of our customers and potential customers may be affected by year 2000 issues because they may be required to expend significant resources on year 2000 compliance matters, rather than investing in new software solutions or services such as those we offer.
OUR BUSINESS COULD BE ADVERSELY AFFECTED IF OUR SOFTWARE CONTAINS BUGS
Our software products could contain errors or "bugs" that could adversely affect their performance. Additionally, we regularly introduce new releases and periodically introduce new versions of our software products. Any defects or errors in new products or enhancements could result in adverse customer reactions and negative publicity regarding Bottomline and our products and could have a material adverse effect on our business, operating results and financial condition. See "Business--Products and Services."
OUR BUSINESS COULD BE SUBJECT TO PRODUCT LIABILITY CLAIMS
Our software and hardware products are designed to provide critical payment management functions and to limit the risk of fraud or loss in effecting such transactions. As a result, our products are critical to our customers and there is the potential for significant product liability claims. Our license agreements with customers typically place the responsibility for use of the system on the customer and contain provisions intended to limit our exposure to product liability claims. However, these limitation provisions may not preclude all potential claims. We have not experienced any product liability claims to date. However, a product liability claim brought against us, even if not successful, would likely be time consuming and costly. A successful liability claim could have a material adverse effect on our business, operating results and financial condition. See "Business--Products and Services."
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. We have one allowed United States patent application relating to certain security aspects of our dual payment process. However, there can be no assurance that our allowed patent, or any other patents that may be issued in the future, will be of sufficient scope and strength to provide meaningful protection of our technology or any commercial advantage to us, or that the patents will not be challenged, invalidated or circumvented. We enter into agreements with our employees and clients that seek to limit and protect the distribution of proprietary information. There can be no assurance that the steps we have taken to protect our property rights, however, will be adequate to deter misappropriation of proprietary information, and we may not be able to detect unauthorized use and take appropriate steps to enforce our intellectual property rights. See "Business--Proprietary Rights."
OTHERS COULD CLAIM THAT WE INFRINGE THEIR INTELLECTUAL PROPERTY
Although we believe that our products and services do not infringe upon the intellectual property rights of others and that we have all rights necessary to utilize the intellectual property employed in our business, we are subject to the risk of claims alleging infringement of third-party intellectual property rights. Any such claims could require us to spend significant sums in litigation, pay damages, delay product installments, develop non-infringing intellectual property or acquire licenses to intellectual property that is the subject of any such infringement. Therefore, such claims could have a material adverse effect on our business, operating results and financial condition. See "Business--Proprietary Rights."
RISKS ASSOCIATED WITH OUR POTENTIAL ACQUISITIONS
As part of our overall business strategy, we intend to pursue strategic acquisitions that would provide additional product or service offerings, additional industry expertise, a broader client base or an expanded geographic presence. Any future acquisition could result in the use of significant amounts of cash, potentially dilutive issuances of equity securities, or the incurrence of debt or amortization expenses related to goodwill and other intangible assets, any of which could materially adversely affect our business, operating results and financial condition. In addition, acquisitions involve numerous risks, including:
. difficulties in the assimilation of the operations, technologies, products and personnel of the acquired company;
. the diversion of management's attention from other business concerns;
. risks of entering markets in which we have no or limited prior experience; and
. the potential loss of key employees of the acquired company.
From time to time, we have engaged in discussions with third parties concerning potential acquisitions of product lines, technologies and businesses. However, there are currently no active negotiations, commitments or agreements with respect to any acquisition. In the event that such an acquisition does occur, there can be no assurance that our business, operating results and financial condition will not be materially adversely affected.
YOU WILL HAVE A NUMBER OF MARKET RISKS TYPICALLY ASSOCIATED WITH INITIAL PUBLIC OFFERINGS
Before this offering, there has been no public market for our common stock. Bottomline, the selling stockholders and the underwriters will determine the public offering price by negotiations, and this price may not be the price at which our common stock will trade. See "Underwriting" for a discussion of factors to be considered in determining the public offering price. Although our common stock will be quoted on the Nasdaq National Market, an active trading market may not develop and be sustained after this offering.
In addition, the market for shares in newly public technology companies is subject to extreme price and volume fluctuations. Securities class action litigation has often been brought against companies that experience volatility in the market price of their securities. Litigation brought against us could result in substantial costs and a diversion of management's attention, which could have a material adverse effect on our business, operating results and financial condition.
YOU WILL EXPERIENCE AN IMMEDIATE AND SUBSTANTIAL DILUTION IN THE BOOK VALUE OF YOUR INVESTMENT
The public offering price per share of common stock is expected to be substantially higher than the net tangible book value per share of our common stock. Purchasers of shares of common stock in this offering will experience immediate and substantial dilution of $8.87 in the pro forma net tangible book value per share of common stock (assuming a public offering price of $12.00 per share). The exercise of outstanding options to purchase our common stock will result in additional dilution per share. See "Dilution."
CERTAIN PROVISIONS OF DELAWARE LAW AND OUR CHARTER AND BY-LAW PROVISIONS MAY MAKE A TAKEOVER OF OUR COMPANY MORE DIFFICULT
Delaware corporate law contains, and our certificate of incorporation and by- laws will contain, certain provisions that could have the effect of delaying, deferring or preventing a change in control of Bottomline. See "Description of Capital Stock" for a discussion of these provisions. These provisions could limit the price that certain investors might be willing to pay in the future for shares of our common stock. Certain of these provisions:
. authorize the issuance of "blank check" preferred stock (preferred stock which can be created and issued by the Board of Directors without prior stockholder approval) with rights senior to those of common stock;
. provide for a staggered Board of Directors (so that it would take three successive annual meetings to replace all directors);
. prohibit stockholder action by written consent; and
. establish advance notice requirements for submitting nominations for election to the Board of Directors and for proposing matters that can be acted upon by stockholders at a meeting.
FUTURE SALES BY EXISTING STOCKHOLDERS COULD DEPRESS THE MARKET PRICE OF OUR COMMON STOCK
Sales of our common stock in the public market following this offering could adversely affect the market price of our common stock. All of the shares offered under this prospectus will be freely tradable in the open market. The remaining 6,593,272 shares of common stock which will be outstanding after this offering are considered "restricted securities" under Rules 144 or 701 of the Securities Act. Generally, restricted securities that have been owned for a period of at least two years may be sold immediately after the completion of this offering and restricted securities that have been owned for at least one year may be sold 90 days after the completion of this offering. Most of the restricted securities are subject to lock-up agreements with the underwriters. Persons subject to lock-up agreements have agreed not to sell shares of common stock for a period of 180 days after the completion of this offering without the underwriters' prior permission. The table below sets forth information regarding potential sales of restricted securities.
. 101,667 shares may be sold immediately after completion of this offering;
. 6,384,460 additional shares may be sold upon the expiration of the lock-up agreements;
. 16,500 additional shares may be sold 90 days after the completion of this offering as a result of the exercise of vested options; and,
. 364,881 additional shares may be sold upon the expiration of the lock- up agreements as a result of the exercise of vested options.
We intend to register an aggregate of 3,330,000 shares of common stock, which may be issued under our 1989 Stock Option Plan, 1997 Stock Incentive Plan and 1998 Director Stock Option Plan after this offering.
In addition, we intend to register an aggregate of 750,000 shares of common stock reserved for issuance under our 1998 Employee Stock Purchase Plan. However, no shares will be issuable under the 1998 Employee Stock Purchase Plan until June 30, 1999.
USE OF PROCEEDS
The net proceeds we will receive from the sale of 2,250,000 shares of common stock offered by us are estimated to be $23,702,000 after deducting the estimated underwriting discounts and commissions and offering expenses payable by us and assuming a public offering price of $12.00 per share. We will not receive any of the proceeds from the sale of shares by the selling stockholders.
The principal purposes of this offering are:
. to increase our equity capital;
. to facilitate future access by us to public equity markets;
. to provide increased visibility and credibility in a marketplace where several of our current and potential competitors are, or may in the future be, public companies; and
. to enhance our ability to use our common stock as consideration for acquisitions and as a means of attracting and retaining key employees.
We will use the net proceeds from this offering for growth and expansion of our business, product development, international expansion, possible acquisitions and for working capital and other general corporate purposes. We have not identified specific uses for such proceeds and management will have discretion over their use and investment. We intend to invest the net proceeds from this offering in short-term, investment grade, interest-bearing instruments until they are used.
We intend to seek acquisitions that could provide additional new product or service offerings, additional industry expertise, a broader client base or an expanded geographic presence, and a portion of the net proceeds may be used for such acquisitions. From time to time, we have engaged in discussions with third parties concerning potential acquisitions of product lines, technologies and businesses. However, there are currently no active negotiations, commitments or agreements with respect to any acquisition.
DIVIDEND POLICY
We currently intend to retain earnings, if any, to fund the development and growth of our business and do not anticipate paying cash dividends in the foreseeable future. Payment of future dividends, if any, will be at the discretion of our Board of Directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs and plans for expansion. The terms of our revolving credit agreement restrict our ability to pay cash dividends if we fail to meet the minimum debt service ratio specified in the agreement.
CAPITALIZATION
The following table sets forth as of September 30, 1998: (i) the actual capitalization of Bottomline, (ii) the pro forma capitalization of Bottomline after giving effect to the termination of redemption rights of the redeemable common stock upon the effectiveness of this offering and (iii) the pro forma as adjusted capitalization of Bottomline after giving effect to the sale by Bottomline of 2,250,000 shares of common stock offered hereby at an assumed public offering price of $12.00 per share and after deducting the estimated underwriting discounts and commissions and offering expenses payable by Bottomline. See "Use of Proceeds." This table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements and Notes thereto appearing elsewhere in this prospectus.
The pro forma as adjusted authorized amounts shown below include the additional shares of common stock and the shares of preferred stock to be authorized immediately prior to the effectiveness of this offering. The pro forma and pro forma as adjusted calculations below do not include 107,145 shares issued after September 30, 1998.
SEPTEMBER 30, 1998
----------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
(IN THOUSANDS, EXCEPT SHARE
DATA)
Redeemable common stock, at redemption value;
authorized, issued and outstanding 801,000
shares, actual; no shares authorized, issued
and outstanding, pro forma and pro forma as
adjusted....................................... $1,381 $ -- $ --
Stockholders' equity:
Preferred stock, $.001 par value; authorized
shares -- none, actual and pro forma;
authorized shares -- 4,000,000, pro forma as
adjusted; no shares issued and outstanding,
actual, pro forma and pro forma as
adjusted..................................... -- -- --
Common stock, $.001 par value; authorized
shares -- 15,000,000, actual and pro forma;
authorized shares -- 50,000,000, pro forma
as adjusted; issued and outstanding
shares -- 6,485,127, actual; issued and
outstanding shares -- 7,286,127, pro forma;
issued and outstanding shares -- 9,536,127,
pro forma as adjusted........................ 6 7 10
Additional paid-in-capital....................... 1,867 3,247 26,946
Retained earnings................................ 2,924 2,924 2,924
------ ------ -------
Total stockholders' equity.................. 4,797 6,178 29,880
------ ------ -------
Total capitalization....................... $6,178 $6,178 $29,880
====== ====== =======
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DILUTION
The pro forma net tangible book value of Bottomline as of September 30, 1998, assuming the termination of redemption rights of the redeemable common stock upon the effectiveness of this offering was $6,178,000 or $0.85 per share of common stock. Pro forma net tangible book value per share is determined by dividing Bottomline's pro forma tangible net worth (tangible assets less liabilities) by the number of shares of common stock outstanding. After giving effect to the sale of 2,250,000 shares of common stock offered hereby at an assumed public offering price of $12.00 per share and after deducting the estimated underwriting discounts and commissions and offering expenses payable by Bottomline, the net tangible book value of Bottomline as of September 30, 1998 would have been $3.13 per share. This represents an immediate increase in such net tangible book value of $2.28 per share to existing stockholders and an immediate dilution of $8.87 per share to new investors purchasing shares in this offering. If the public offering price is higher or lower, the dilution to the new investors will in turn be greater or less. The following table illustrates the per share dilution:
Assumed public offering price per share........................ $12.00
Pro forma net tangible book value per share as of September
30, 1998................................................... $0.85
Increase per share attributable to this offering............. 2.28
-----
Net tangible book value per share after this offering (3)...... 3.13
------
Dilution per share to new investors (3)........................ $ 8.87
======
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The following table summarizes, on a pro forma basis as of September 30, 1998, the total number of shares of common stock purchased from Bottomline, the total consideration paid and the average consideration paid per share by the existing stockholders and by the new investors based (for new investors) upon an assumed public offering price of $12.00 per share (before deducting the estimated underwriting discounts and commissions and offering expenses):
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------- ------------------- PRICE
NUMBER(2) PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
Existing stockholders (1)(2)... 7,286,127 76.4% $ 2,674,000 9.0% $ 0.37
New investors.................. 2,250,000 23.6 27,000,000 91.0 12.00
--------- ----- ----------- -----
Total (3).................... 9,536,127 100.0% $29,674,000 100.0%
========= ===== =========== =====
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(1) Shares owned by existing stockholders will be reduced by the number of
shares sold by them in the offering. As a result, the number of shares
owned by existing stockholders will be reduced to 68.0% of the shares of
common stock outstanding after the offering.
(2) Gives effect to the termination of redemption rights of the redeemable
common stock upon the effectiveness of this offering.
(3) Does not include 107,145 shares issued after September 30, 1998.
SELECTED FINANCIAL DATA
The following selected financial data are derived from the financial statements of Bottomline. The selected financial data as of June 30, 1997 and 1998 and for each of the three years in the period ended June 30, 1998 are derived from financial statements, which have been audited by Ernst and Young LLP, independent auditors, included elsewhere in this prospectus. The selected financial data as of June 30, 1994, 1995 and 1996 and for each of the two years in the period ended June 30, 1995 are derived from financial statements, which have been audited by Ernst and Young LLP, independent auditors, not included in this prospectus. The selected financial data as of September 30, 1998 and for the three months ended September 30, 1997 and 1998 are derived from unaudited financial statements, included elsewhere in this prospectus. The data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements and the Notes thereto included elsewhere in this prospectus.
The Company has 801,000 shares of redeemable common stock outstanding which are redeemable at the option of the holders at a redemption price that increases over time. The earnings (loss) per share available to common stockholders shown below have been adjusted to reflect the increase in the redemption price for each period. These redemption rights will terminate upon the effectiveness of this offering. The shares used in computing diluted earnings per share available to common stockholders include the redeemable common stock.
THREE MONTHS
FISCAL YEAR ENDED JUNE 30, ENDED SEPTEMBER 30,
----------------------------------------- ---------------------
1994 1995 1996 1997 1998 1997 1998
------- ------- ------- ------- ------- ------ -------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENTS OF OPERATIONS
DATA:
Revenues:
Software licenses...... $ 3,337 $ 4,144 $ 4,689 $ 6,392 $ 9,887 $1,591 $ 3,477
Service and
maintenance.......... 1,643 3,083 4,580 6,729 9,701 1,937 2,254
Equipment and
supplies............. 5,428 7,888 8,798 9,005 9,449 2,536 2,374
------- ------- ------- ------- ------- ------ -------
Total revenues........ 10,408 15,115 18,067 22,126 29,037 6,064 8,105
Cost of revenues:
Software licenses...... 72 54 27 160 215 48 123
Service and
maintenance.......... 1,030 1,790 2,655 4,206 4,261 851 1,106
Equipment and
supplies............. 3,138 5,215 5,361 6,410 6,526 1,648 1,682
------- ------- ------- ------- ------- ------ -------
Total cost of
revenues............ 4,240 7,059 8,043 10,776 11,002 2,547 2,911
------- ------- ------- ------- ------- ------ -------
Gross profit............ 6,168 8,056 10,024 11,350 18,035 3,517 5,194
Operating expenses:
Sales and marketing.... 2,728 3,716 4,190 6,631 7,675 1,557 2,242
Product development and
engineering.......... 231 701 1,237 2,185 3,158 670 928
General and
administrative....... 1,755 2,405 3,044 4,266 4,372 932 1,277
------- ------- ------- ------- ------- ------ -------
Total operating
expenses............ 4,714 6,822 8,471 13,082 15,205 3,159 4,447
------- ------- ------- ------- ------- ------ -------
Income (loss) from
operations............ 1,454 1,234 1,553 (1,732) 2,830 358 747
Interest income
(expense), net........ 11 12 (6) (56) (50) (22) 15
------- ------- ------- ------- ------- ------ -------
Income (loss) before
provision (benefit)
for income taxes and
cumulative effect of
change in accounting
for income taxes...... 1,465 1,246 1,547 (1,788) 2,780 336 762
Provision (benefit) for
income taxes.......... 577 471 664 (536) 1,177 142 305
Cumulative effect of
change in accounting
for income taxes...... 36 -- -- -- -- -- --
------- ------- ------- ------- ------- ------ -------
Net income (loss)....... $ 924 $ 775 $ 883 $(1,252) $ 1,603 $ 194 $ 457
======= ======= ======= ======= ======= ====== =======
Earnings (loss) per
share available to
common stockholders:
Basic.................. $ 0.16 $ 0.12 $ 0.14 $ (0.23) $ 0.24 $ 0.03 $ 0.07
======= ======= ======= ======= ======= ====== =======
Diluted................ $ 0.13 $ 0.10 $ 0.11 $ (0.23) $ 0.20 $ 0.02 $ 0.06
======= ======= ======= ======= ======= ====== =======
Shares used in computing
earnings (loss) per
share available to
common stockholders:
Basic.................. 5,257 5,523 5,693 5,986 6,314 6,307 6,361
======= ======= ======= ======= ======= ====== =======
Diluted................ 6,536 6,850 7,001 5,986 7,316 7,297 7,456
======= ======= ======= ======= ======= ====== =======
JUNE 30, SEPTEMBER 30,
----------------------------------------- -------------
1994 1995 1996 1997 1998 1998
------- ------- ------- ------- ------- -------------
(IN THOUSANDS) (UNAUDITED)
BALANCE SHEET DATA:
Cash and cash
equivalents........... $ 910 $ 632 $ 1,080 $ 827 $ 1,362 $ 1,491
Working capital......... 1,323 2,027 3,123 2,476 3,884 4,127
Total assets............ 4,130 7,394 9,144 10,481 11,301 12,084
Short-term and long-term
debt.................. -- 499 597 1,384 75 50
Redeemable common stock,
at redemption value... 973 1,061 1,148 1,246 1,353 1,381
Stockholders' equity.... 1,222 2,183 3,708 2,680 4,368 4,797
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those discussed in the forward-looking statements as a result of certain factors including those set forth under "Risk Factors" and elsewhere in this prospectus. The following discussion and analysis should be read in conjunction with "Selected Consolidated Financial Data" and the Financial Statements and Notes thereto appearing elsewhere in this prospectus.
OVERVIEW
The Company is a leading provider of software used to make and manage corporate payments. In 1989, the Company released its first product, LaserCheck for DOS, to offer enterprises a cost-effective method to issue checks using specialized laser printers and toners, eliminating the need for pre-printed, negotiable check stock. In 1992, the Company entered into an arrangement with Xerox to sell an advanced laser printer and newly developed magnetic ink character recognition toners. Over the next few years Bottomline:
. became one of the largest re-sellers of Xerox Corporation magnetic ink character recognition products;
.adapted its LaserCheck products to run on Windows 3.X and Windows 95 operating platforms; and
.developed new check fraud avoidance software applications.
In 1996, in order to expand its offerings to include an electronic-payment solution, the Company acquired CertiSoft Solutions, Inc., a developer of software designed to let users make secure electronic payments. In February 1997, the Company built on the CertiSoft technology to introduce its PayBase software products that enable users to control, manage and issue electronic payments across an entire enterprise, running on Microsoft's Windows 98 and Windows NT operating systems. In March 1998, The Federal Reserve Board selected the Company to develop electronic payment-related software that would be made available to its 12,000 member financial institutions. Today, the Company's customer base includes over 2,000 customers in industries such as financial services, health care, communications, education, media, manufacturing and government.
Bottomline's revenues are primarily derived from three sources.
. Software License Fees. Bottomline derives software license revenues primarily from PayBase software license fees, which are generally based on the number of software applications and user licenses purchased. Fees from the sale of software licenses are generally recognized upon delivery of the software to the customer, unless the company has significant obligations remaining with respect to the software.
. Service and Maintenance Fees. Bottomline derives service and maintenance revenues from (i) consulting, design and training fees which are fixed on a project-to-project basis and (ii) customer support and maintenance fees. Revenues relating to custom consulting, design and service fees are recognized at the time services are rendered. Customer support and training fees are established as a percentage, typically 18% of the list price for the software license, and are prepaid annually. Support and maintenance agreements generally have a term of 12 months and are renewable annually. The Company recognizes revenues related to customer support and maintenance fees ratably over the life of the agreement.
. Equipment and Supply Sales. Bottomline derives equipment and supply revenues from the sales of printers, check paper and magnetic ink character recognition toners that are recognized at the time of delivery.
Bottomline expects to continue making significant investments in product development and engineering in order to enhance its current products, develop new products and further advance its Internet and payment technologies. Future investments in product development and engineering will generally be related to the hiring of additional software engineering personnel.
The continued investment in and expansion of Bottomline's direct sales force is an important part of its strategy. Bottomline intends to add approximately 10 new sales professionals during fiscal year 1999. Bottomline also intends to continue to increase the promotion of its products and services through conferences, seminars, direct marketing and trade publications, as well as through relationships with enterprise resource planning and accounting system vendors, such as Oracle and SAP, and implementation consultants.
In addition, Bottomline expects to increase its system engineering and sales support personnel located in its existing field sales offices in San Francisco, California; Chicago, Illinois; Englewood, Colorado; and New York, New York and to open additional field sales offices in other major cities.
Bottomline records software development costs in accordance with Financial Accounting Standards Board Statement No. 86. The Company has not had any software development costs that were capitalized during the last fiscal year and does not currently have any software development costs that are being capitalized.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1997, the American Institute of Certified Public Accountants issued SOP 97-2, which Bottomline adopted on July 1, 1998. SOP 97-2 requires, among other things, that revenue should be recognized when there is persuasive evidence of an existing agreement, delivery has occurred, the fees charged are fixed or determinable and collectibility is probable. Additionally, SOP 97-2 provides that for those arrangements which consist of multiple elements such as services, software, software upgrades, enhancements and post-contract support, the fees charged must be allocated to each element of the arrangement based upon vendor-specific objective evidence of fair value, which is to be determined based upon the price charged when the element is sold separately or the price for the element established by management with relevant authority. Bottomline believes that SOP 97-2 will not have a material adverse effect on its future operating results.
RECENT DEVELOPMENT
In October 1998, Bottomline entered into a working agreement with Arthur Andersen LLP. Under the working agreement, Arthur Andersen LLP will work with Bottomline to introduce its PayBase/32/ solution to enterprises that would likely benefit from anticipated cost efficiencies and enhanced internal controls realized from PayBase/32/. Bottomline plans to utilize the enterprise consulting experience of Arthur Andersen LLP to demonstrate to the users of its departmental payment products the benefits of migrating to the Company's PayBase/32/ enterprise-wide payment solution. In October 1998, Arthur Andersen LLP also made an investment in Bottomline's common stock.
RESULTS OF OPERATIONS
The following table sets forth certain financial data as a percentage of revenues for the periods indicated.
THREE MONTHS
ENDED
FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30,
-------------------------- -------------
1996 1997 1998 1997 1998
-------- -------- -------- ------ ------
Revenues:
Software licenses............. 25.9% 28.9% 34.0% 26.3% 42.9%
Service and maintenance....... 25.4 30.4 33.4 31.9 27.8
Equipment and supplies........ 48.7 40.7 32.6 41.8 29.3
-------- -------- -------- ------ ------
Total revenues............... 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Software licenses............. 0.1 0.7 0.7 0.8 1.5
Service and maintenance....... 14.7 19.0 14.7 14.0 13.6
Equipment and supplies........ 29.7 29.0 22.5 27.2 20.8
-------- -------- -------- ------ ------
Total cost of revenues....... 44.5 48.7 37.9 42.0 35.9
-------- -------- -------- ------ ------
Gross profit 55.5 51.3 62.1 58.0 64.1
Operating expenses:
Sales and marketing........... 23.2 29.9 26.4 25.7 27.7
Product development and
engineering................. 6.9 9.9 10.9 11.0 11.4
General and administrative.... 16.8 19.3 15.1 15.4 15.8
-------- -------- -------- ------ ------
Total operating expenses..... 46.9 59.1 52.4 52.1 54.9
-------- -------- -------- ------ ------
Income (loss) from operations.. 8.6 (7.8) 9.7 5.9 9.2
Interest income (expense),
net.......................... -- (0.3) (0.1) (0.4) 0.2
-------- -------- -------- ------ ------
Income (loss) before provision
(benefit) for income taxes... 8.6 (8.1) 9.6 5.5 9.4
Provision (benefit) for income
taxes........................ 3.7 (2.4) 4.1 2.3 3.8
-------- -------- -------- ------ ------
Net income (loss).............. 4.9% (5.7)% 5.5% 3.2% 5.6%
======== ======== ======== ====== ======
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FISCAL QUARTER ENDED SEPTEMBER 30, 1998 COMPARED TO FISCAL QUARTER ENDED
SEPTEMBER 30, 1997
Revenues
Total revenues increased by $2.0 million to $8.1 million in the fiscal quarter ended September 30, 1998 from $6.1 million in the fiscal quarter ended September 30, 1997, an increase of 33%.
Software Licenses. Software license fees increased by $1.9 million to $3.5 million in the fiscal quarter ended September 30, 1998 from $1.6 million in the fiscal quarter ended September 30, 1997, an increase of 119%. Software licenses fees represented 43% of total revenues in the fiscal quarter ended September 30, 1998 compared to 26% of total revenues for the fiscal quarter ended September 30, 1997. The increase in software license fees was due primarily to growing market acceptance of PayBase/32/ and the delivery of software to the Federal Reserve System.
Service and Maintenance. Service and maintenance fees increased by $300,000 to $2.2 million in the fiscal quarter ended September 30, 1998 from $1.9 million in the fiscal quarter ended September 30, 1997, an increase of 16%. Service and maintenance fees represented 27% of total revenues in the fiscal quarter ended September 30, 1998 compared to 31% of total revenues in the fiscal quarter ended September 30, 1997. The increase in service and maintenance fees was due primarily to an increase in the number of sales of software licenses, which resulted in increased orders for services and sales of software maintenance and technical support.
Equipment and Supplies. Equipment and supplies sales decreased by $200,000 to $2.4 million in the fiscal quarter ended September 30, 1998 from $2.6 million in the fiscal quarter ended September 30, 1997, a decrease of 8%. Equipment and supplies sales represented 30% of total revenues in the fiscal quarter ended September 30, 1998 compared to 43% of total revenues in the fiscal quarter ended September 30, 1997. The decrease in equipment and supplies sales was due primarily to a reduction in sales of printer accessories.
Cost of Revenues
Software Licenses. Software license costs consist of expenses incurred by Bottomline to manufacture, package and distribute its software products and related documentation and costs of licensing third-party software incorporated into its products. Software license costs increased by $75,000 to $123,000 in the fiscal quarter ended September 30, 1998 from $48,000 in the fiscal quarter ended September 30, 1997, an increase of 156%. Software license costs were 4% of software revenues in the fiscal quarter ended September 30, 1998 compared to 3% of software revenues in the fiscal quarter ended September 30, 1997. The increase in software license costs was due primarily to royalty payments made in connection with the software delivered to The Federal Reserve System.
Service and Maintenance. Service and maintenance costs include salary expense and other related costs for Bottomline's customer service, maintenance and telephone support staffs, as well as third-party contractor expenses. Service and maintenance costs increased by $249,000 to $1.1 million in the fiscal quarter ended September 30, 1998 from $851,000 in the fiscal quarter ended September 30, 1997, an increase of 29%. Service and maintenance costs were 50% of service and maintenance revenues in the fiscal quarter ended September 30, 1998 compared to 45% of service and maintenance revenues in the fiscal quarter ended September 30, 1997. The increase in service and maintenance costs was due primarily to increased staffing expenses.
Equipment and Supplies. Equipment and supplies costs increased by $100,000 to $1.7 million in the fiscal quarter ended September 30, 1998 from $1.6 million in the fiscal quarter ended September 30, 1997, an increase of 6%. Equipment and supplies costs were 71% of equipment and supply revenues in the fiscal quarter ended September 30, 1998 compared to 62% of equipment and supplies sales in the fiscal quarter ended September 30, 1997. The increase in equipment and supplies costs as a percentage of equipment and supplies revenues was due primarily to competitive pressure on the pricing of supplies.
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist primarily of salaries and other related costs for sales and marketing personnel, sales commissions, travel, public relations and marketing materials and trade shows. Sales and marketing expenses increased by $600,000 to $2.2 million in the fiscal quarter ended September 30, 1998 from $1.6 million in the fiscal quarter ended September 30, 1997, an increase of 38%. Sales and marketing expenses were 27% of total revenues in the fiscal quarter ended September 30, 1998 compared to 26% of total revenues in the fiscal quarter ended September 30, 1997. The dollar increase was due primarily to increases in staffing.
Product Development and Engineering. Product development and engineering expenses consist primarily of personnel costs to support product development. Product development and engineering expenses increased by $258,000 to $928,000 in the fiscal quarter ended September 30, 1998 from $670,000 in the fiscal quarter ended September 30, 1997, an increase of 39%. Product development and engineering expenses remained constant at 11% of total revenues in the fiscal quarters ended September 30, 1998 and September 30, 1997. The dollar increase was due primarily to increases in staffing.
General and Administrative. General and administrative expenses consist primarily of salaries and other related costs for operations and finance employees, legal and accounting services and certain facilities-related expenses. General and administrative expenses increased by $368,000 to $1.3 million in the fiscal quarter ended September 30, 1998 from $932,000 in the fiscal quarter ended September 30, 1997, an increase of 39%. General and administrative expenses were 16% of total revenues in the fiscal quarter ended September 30, 1998 compared to 15% of total revenues in the fiscal quarter ended September 30, 1997. The increase was due to personnel costs which increased by $134,000 and, to a lesser extent, facility, information system and other expenses necessary to support Bottomline's expanding operations.
Interest Income (Expense), Net. Interest income (expense), net consists of interest income and interest expense. Interest income (expense), net increased by $37,000 to $15,000 in the fiscal quarter ended
September 30, 1998 from ($22,000) in the fiscal quarter ended September 30, 1997. The increase was due to lower average balances outstanding under Bottomline's revolving credit agreement and higher cash balances on hand.
Provision (Benefit) for Income Taxes. The provision (benefit) for income taxes increased by $163,000 to $305,000 in the fiscal quarter ended September 30, 1998 from $142,000 in the fiscal quarter ended September 30, 1997. The effective tax rate in the fiscal quarter ended September 30, 1998 was 40% compared to 42% in the fiscal quarter ended September 30, 1997. The effective tax rates in the fiscal quarters ended September 30, 1998 and September 30, 1997 differed from the federal statutory rate due principally to the effect of state income taxes.
Net Income. Net income increased by $263,000 to $457,000 in the fiscal quarter ended September 30, 1998 from $194,000 in the fiscal quarter ended September 30, 1997.
FISCAL YEAR ENDED JUNE 30, 1998 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1997
Revenues
Total revenues increased by $6.9 million to $29.0 million in the fiscal year ended June 30, 1998 from $22.1 million in the fiscal year ended June 30, 1997, an increase of 31%. The increase was primarily attributable to the growing market acceptance of PayBase/32/, which the Company released in February 1997, and the addition of new clients to Bottomline's customer base, resulting in substantial growth in software license fees and related services and maintenance fees.
Software Licenses. Software license fees increased by $3.5 million to $9.9 million in the fiscal year ended June 30, 1998 from $6.4 million in the fiscal year ended June 30, 1997, an increase of 55%. Software licenses fees represented 34% of total revenues in the fiscal year ended June 30, 1998 compared to 29% of total revenues in the fiscal year ended June 30, 1997. In February 1997, Bottomline released PayBase/32/. PayBase/32/ is a more advanced, higher priced product. The increase in software license fees during the fiscal year ended June 30, 1998 was due primarily to the higher price of the PayBase/32/ product and an increase in the number of customers as a result of growing market acceptance of PayBase/32/. Revenues from the Company's existing product line were consistent with the prior year.
Service and Maintenance. Service and maintenance fees increased by $3.0 million to $9.7 million in the fiscal year ended June 30, 1998 from $6.7 million in the fiscal year ended June 30, 1997, an increase of 45%. Service and maintenance fees represented 33% of total revenues in the fiscal year ended June 30, 1998 compared to 30% of total revenues in the fiscal year ended June 30, 1997. The increase in service and maintenance fees was due primarily to an increase in the number of customers and sales of software licenses, which resulted in increased orders for services and sales of software maintenance and technical support.
Equipment and Supplies. Equipment and supplies sales increased by $400,000 to $9.4 million in the fiscal year ended June 30, 1998 from $9.0 million in the fiscal year ended June 30, 1997, an increase of 4%. Equipment and supplies sales represented 33% of total revenues in the fiscal year ended June 30, 1998 compared to 41% of total revenues in the fiscal year ended June 30, 1997. The increase in equipment and supplies sales was due primarily to increased sales of magnetic ink character recognition toners and check stock.
Cost of Revenues
Software Licenses. Software license costs increased by $55,000 to $215,000 in the fiscal year ended June 30, 1998 from $160,000 in the fiscal year ended June 30, 1997, an increase of 34%, due to increased software sales. Software license costs were 2% of software revenues in the fiscal year ended June 30, 1998 compared to 3% of software revenues in the fiscal year ended June 30, 1997.
Service and Maintenance. Service and maintenance costs increased by $100,000 to $4.3 million in the fiscal year ended June 30, 1998 from $4.2 million in the fiscal year ended June 30, 1997, an increase of 2%. Service and maintenance costs were 44% of service and maintenance revenues in the fiscal year ended June 30, 1998 compared to 63% of service and maintenance revenues in the fiscal year ended June 30, 1997. Service and maintenance costs as a percentage of service and maintenance revenues were significantly higher in the fiscal year ended June 30, 1997 as a result of increased maintenance costs and charges incurred in fiscal year 1997 by Bottomline due to a problem with a third-party printer that it had been reselling.
Equipment and Supplies. Equipment and supplies costs increased by $100,000 to $6.5 million in the fiscal year ended June 30, 1998 from $6.4 million in the fiscal year ended June 30, 1997, an increase of 2%. Equipment and supplies costs were 69% of equipment and supplies sales in the fiscal year ended June 30, 1998 compared to 71% in the fiscal year ended June 30, 1997. The decrease in equipment and supplies costs as a percentage of equipment and supplies sales was due primarily to a higher provision for inventory obsolescence recognized during fiscal year 1997 related to a third-party printer that the Company had been reselling.
Operating Expenses
Sales and Marketing. Sales and marketing expenses increased by $1.1 million to $7.7 million in the fiscal year ended June 30, 1998 from $6.6 million in the fiscal year ended June 30, 1997, an increase of 17%. Sales and marketing expenses were 26% of total revenues in the fiscal year ended June 30, 1998 compared to 30% of total revenues in the fiscal year ended June 30, 1997. The dollar increase was due primarily to an increase in sales and marketing personnel costs which increased by $816,000 and, to a lesser extent, increased marketing expenditures relating to the introduction of PayBase/32/.
Product Development and Engineering. Product development and engineering expenses increased by $1.0 million to $3.2 million in the fiscal year ended June 30, 1998 from $2.2 million in the fiscal year ended June 30, 1997, an increase of 45%. Product development and engineering expenses were 11% of total revenues in the fiscal year ended June 30, 1998 compared to 10% of total revenues in the fiscal year ended June 30, 1997. The dollar increase was due primarily to the hiring of additional personnel to develop new software products.
General and Administrative. General and administrative expenses increased by $100,000 to $4.4 million in the fiscal year ended June 30, 1998 from $4.3 million in the fiscal year ended June 30, 1997, an increase of 2%. General and administrative expenses were 15% of total revenues in the fiscal year ended June 30, 1998 compared to 19% of total revenues in the fiscal year ended June 30, 1997. The dollar increase was due primarily to increased personnel costs which increased by $88,000 and, to a lesser extent, facility expenses necessary to support the Company's expanding operations.
Interest Income (Expense), Net. Interest expense net decreased by $6,000 to $50,000 in the fiscal year ended June 30, 1998 from $56,000 in the fiscal year ended June 30, 1997. The decrease was due to lower prevailing interest rates and lower borrowings in fiscal year 1998 compared to fiscal year 1997.
Provision (Benefit) for Income Taxes. The Company had income tax expense of $1.2 million in the fiscal year ended June 30, 1998 compared to an income tax benefit of $536,000 in the fiscal year ended June 30, 1997. The effective tax rate used to calculate the Company's income tax expense in the fiscal year ended June 30, 1998 was 42% compared to an effective tax rate of 30.0% used to calculate the Company's income tax benefit in the fiscal year ended June 30, 1997. The effective tax rate in the fiscal year ended June 30, 1998 differed from the federal statutory rate due principally to the effect of state income taxes and reduced levels of available research and development credits. The effective tax rate in the fiscal year ended June 30, 1997 differed from the federal statutory rate due principally to the effect of non-deductible expenses associated principally with the CertiSoft acquisition, which were offset partially by research and development credits.
Net Income (Loss). Net income increased by $2.9 million to $1.6 million in the fiscal year ended June 30, 1998 from a net loss of $1.3 million in the fiscal year ended June 30, 1997.
FISCAL YEAR ENDED JUNE 30, 1997 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1996
Revenues
Total revenues increased by $4.0 million to $22.1 million in the fiscal year ended June 30, 1997 from $18.1 million in the fiscal year ended June 30, 1996, an increase of 22%. This increase was primarily attributable to the addition of new clients to the Company's customer base, resulting in substantial growth in software license fees and related services and maintenance fees. Revenues were adversely affected in fiscal year 1997 due to a problem with a third-party printer that the Company had been reselling.
Software Licenses. Software license fees increased by $1.7 million to $6.4 million in the fiscal year ended June 30, 1997 from $4.7 million in the fiscal year ended June 30, 1996, an increase of 36%. Software license fees represented 29% of total revenues in the fiscal year ended June 30, 1997 compared to 26% of total revenues in the fiscal year ended June 30, 1996. The increase in software license fees was due primarily to a higher average license price for existing products, an increase in customers as a result of growing market acceptance of LaserCheck and, to a lesser extent, the introduction of PayBase. Software license fees were adversely affected in fiscal year 1997 due to a decrease in orders from both new and existing customers as a result of a problem with a third-party printer that the Company had been reselling, which reduced sales productivity.
Service and Maintenance. Service and maintenance fees increased by $2.1 million to $6.7 million in the fiscal year ended June 30, 1997 from $4.6 million in the fiscal year ended June 30, 1996, an increase of 46%. Service and maintenance fees represented 30% of total revenues in the fiscal year ended June 30, 1997 compared to 25% of total revenues in the fiscal year ended June 30, 1996. The increase in service and maintenance fees was due primarily to an increase in the number of customers and sales of software licenses, which resulted in increased orders for professional services and sales of software maintenance and technical support.
Equipment and Supplies. Equipment and supplies sales increased by $200,000 to $9.0 million in the fiscal year ended June 30, 1997 from $8.8 million in the fiscal year ended June 30, 1996, an increase of 2%. Equipment and supplies sales represented 41% of total revenues in the fiscal year ended June 30, 1997 compared to 49% of total revenues in the fiscal year ended June 30, 1996. The increase in equipment and supplies sales was due primarily to increased sales of magnetic ink character recognition toners and check stock.
Cost of Revenues
Software Licenses. Software license costs increased by $133,000 to $160,000 in the fiscal year ended June 30, 1997 from $27,000 in the fiscal year ended June 30, 1996, an increase of 493%. Software license costs represented 3% of software license revenues in the fiscal year ended June 30, 1997 compared to 1% of software license revenues in the fiscal year ended June 30, 1996. Software license costs increased primarily because the Company converted from diskette to CD-ROM media for packaging its software.
Service and Maintenance. Service and maintenance costs increased by $1.5 million to $4.2 million in the fiscal year ended June 30, 1997 from $2.7 million in the fiscal year ended June 30, 1996, an increase of 56%. Service and maintenance costs represented 63% of service and maintenance revenues in the fiscal year ended June 30, 1997 compared to 58% of service and maintenance revenues in the fiscal year ended June 30, 1996. The increase was primarily due to expansion of the Company's customer services organization and higher than expected charges incurred in fiscal year 1997 related to a problem with a third-party printer that the Company had been reselling.
Equipment and Supplies. Equipment and supplies costs increased by $1.0 million to $6.4 million in the fiscal year ended June 30, 1997 from $5.4 million in the fiscal year ended June 30, 1996, an increase of 19%.
Equipment and supplies costs represented 71% of equipment and supplies sales in the fiscal year ended June 30, 1997 compared to 61% of equipment and supplies sales in the fiscal year ended June 30, 1996. This increase was due primarily to inventory write-offs and higher provisions for printer inventory obsolescence recognized during fiscal year 1997 due to a problem with a third- party printer that the Company had been reselling.
Operating Expenses
Sales and Marketing. Sales and marketing expenses increased by $2.4 million to $6.6 million in the fiscal year ended June 30, 1997 from $4.2 million in the fiscal year ended June 30, 1996, an increase of 57%. Sales and marketing expenses represented 30% of total revenues in the fiscal year ended June 30, 1997 compared to 23% of total revenues in the fiscal year ended June 30, 1996. The increase was due to a significant increase in sales and marketing personnel costs which increased by $1.8 million and, to a lesser extent, increased marketing program expenditures to launch PayBase products and to increased sales of LaserCheck software.
Product Development and Engineering. Product development and engineering expenses increased by $1.0 million to $2.2 million in the fiscal year ended June 30, 1997 from $1.2 million in the fiscal year ended June 30, 1996, an increase of 83%. Product development and engineering expenses represented 10% of total revenues in the fiscal year ended June 30, 1997 compared to 7% of total revenues in the fiscal year ended June 30, 1996. The increase was due primarily to additional amortization of certain acquired software costs charged to operations and increases in staffing to support development of PayBase.
General and Administrative. General and administrative expenses increased by $1.3 million to $4.3 million in the fiscal year ended June 30, 1997 from $3.0 million in the fiscal year ended June 30, 1996, an increase of 43%. General and administrative expenses represented 19% of total revenues in the fiscal year ended June 30, 1997 compared to 17% of total revenues in the fiscal year ended June 30, 1996. The increase was due to personnel costs which increased by $387,000, expenses of $300,000 related to the conversion to a new accounting system and facility expenses necessary to support expanding operations.
Interest Income (Expense), Net. Interest expense net increased by $50,000 to $56,000 in the fiscal year ended June 30, 1997 from $6,000 in the fiscal year ended June 30, 1996, an increase of 833%. The increase was due primarily to increased borrowings under the Company's revolving credit agreement in fiscal year 1997.
Provision (Benefit) for Income Taxes. The Company had an income tax benefit of $536,000 in the fiscal year ended June 30, 1997, compared to an income tax expense of $664,000 in the fiscal year ended June 30, 1996. The effective tax rate used to calculate the Company's income tax benefit in the fiscal year ended June 30, 1997 was 30% compared to an effective tax rate of 43% used to calculate the Company's income tax expense in the fiscal year ended June 30, 1996. The effective tax rate in the fiscal year ended June 30, 1997 differed from the federal statutory rate due principally to non-deductible expenses associated with Bottomline's CertiSoft acquisition and research and development tax credits. The effective tax rate in the fiscal year ended June 30, 1996 differed from the federal statutory rate due principally to the effect of state income taxes and non-deductible expenses associated with the CertiSoft acquisition.
Net Income (Loss). Net income decreased by $2.2 million to a net loss of $1.3 million in the fiscal year ended June 30, 1997 from net income of $883,000 in the fiscal year ended June 30, 1996. The net loss was principally attributable to a significant problem with a third-party printer that the Company had been reselling. The printer problem had a adverse effect on operating results. It resulted in increased customer support expenses incurred in responding to printer-related issues; increased service, maintenance and supply expenses incurred in repairing and replacing the defective printers; inventory write- offs related to the defective printers; and a decrease in orders from customers as printer problems adversely affected sales productivity.
SELECTED QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited quarterly results of operations of Bottomline for each of the nine quarters ended September 30, 1998. In management's opinion, this unaudited information has been prepared on the same basis as the audited Financial Statements appearing elsewhere in this prospectus and includes all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the unaudited quarterly results when read in conjunction with the audited Financial Statements and Notes thereto included elsewhere in this prospectus. The results of operations for any quarter are not necessarily indicative of future results of operations.
The Company has 810,000 shares of redeemable common stock outstanding which are redeemable at the option of the holders at a redemption price that increases over time. The earnings (loss) per share available to common stockholders shown below have been adjusted to reflect the increase in the redemption price for each period. These redemption rights will terminate upon the effectiveness of this offering. The shares used in computing diluted earnings per share available to common stockholders include the redeemable common stock.
THREE MONTHS ENDED
-----------------------------------------------------------------------------------
SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1996 1996 1997 1997 1997 1997 1998 1998 1998
--------- -------- -------- -------- --------- -------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues:
Software licenses...... $1,415 $1,510 $1,458 $2,009 $1,591 $2,844 $2,506 $2,946 $3,477
Service and
maintenance.......... 1,340 1,716 1,788 1,885 1,937 2,534 2,280 2,950 2,254
Equipment and
supplies............. 2,041 2,426 2,244 2,294 2,536 2,106 2,675 2,132 2,374
------ ------ ------ ------ ------ ------ ------ ------ ------
Total revenues........ 4,796 5,652 5,490 6,188 6,064 7,484 7,461 8,028 8,105
Cost of revenues:
Software licenses...... 36 44 30 50 48 70 44 53 123
Service and
maintenance.......... 892 1,251 1,015 1,048 851 1,178 1,060 1,172 1,106
Equipment and
supplies............. 1,380 1,904 1,546 1,580 1,648 1,528 1,828 1,522 1,682
------ ------ ------ ------ ------ ------ ------ ------ ------
Total cost of
revenues............ 2,308 3,199 2,591 2,678 2,547 2,776 2,932 2,747 2,911
------ ------ ------ ------ ------ ------ ------ ------ ------
Gross profit............ 2,488 2,453 2,899 3,510 3,517 4,708 4,529 5,281 5,194
Operating expenses:
Sales and marketing.... 1,338 1,594 1,665 2,034 1,557 2,033 1,879 2,206 2,242
Product development and
engineering.......... 408 338 501 938 670 822 811 855 928
General and
administrative....... 1,026 1,123 1,036 1,081 932 1,074 1,152 1,214 1,277
------ ------ ------ ------ ------ ------ ------ ------ ------
Total operating
expenses............ 2,772 3,055 3,202 4,053 3,159 3,929 3,842 4,275 4,447
------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) from
operations............ (284) (602) (303) (543) 358 779 687 1,006 747
Interest income
(expense), net........ 7 (24) (34) (5) (22) (28) (10) 10 15
------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before
provision (benefit)
for income taxes...... (277) (626) (337) (548) 336 751 677 1,016 762
Provision (benefit) for
income taxes.......... (109) (247) (133) (47) 142 318 287 430 305
------ ------ ------ ------ ------ ------ ------ ------ ------
Net income (loss)....... $ (168) $ (379) $ (204) $ (501) $ 194 $ 433 $ 390 $ 586 $ 457
====== ====== ====== ====== ====== ====== ====== ====== ======
Earnings (loss) per
share
available to common
stockholders:
Basic.................. $(0.03) $(0.07) $(0.04) $(0.08) $ 0.03 $ 0.06 $ 0.06 $ 0.09 $ 0.07
====== ====== ====== ====== ====== ====== ====== ====== ======
Diluted................ $(0.03) $(0.07) $(0.04) $(0.08) $ 0.02 $ 0.06 $ 0.05 $ 0.08 $ 0.06
====== ====== ====== ====== ====== ====== ====== ====== ======
Shares used in computing
earnings
(loss) per share
available to
common stockholders:
Basic.................. 5,871 5,904 5,907 6,261 6,307 6,306 6,312 6,330 6,361
====== ====== ====== ====== ====== ====== ====== ====== ======
Diluted................ 5,871 5,904 5,907 6,261 7,297 7,305 7,308 7,362 7,456
====== ====== ====== ====== ====== ====== ====== ====== ======
|
The following table sets forth unaudited quarterly results of operations as a percentage of revenues for each of the nine quarters ended September 30, 1998.
THREE MONTHS ENDED
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SEPT. 30, DEC. 31, MAR. 30, JUNE 30, SEPT. 30, DEC. 31, MAR. 30, JUNE 30, SEPT. 30,
1996 1996 1997 1997 1997 1997 1998 1998 1998
--------- -------- -------- -------- --------- -------- -------- -------- ---------
Revenues:
Software licenses...... 29.5% 26.7% 26.5% 32.5% 26.3% 38.0% 33.6% 36.7% 42.9%
Service and
maintenance.......... 27.9 30.4 32.6 30.4 31.9 33.9 30.5 36.7 27.8
Equipment and
supplies............. 42.6 42.9 40.9 37.1 41.8 28.1 35.9 26.6 29.3
----- ----- ----- ----- ----- ----- ----- ----- -----
Total revenues........ 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Software licenses...... 0.7 0.8 0.5 0.8 0.8 0.9 0.6 0.6 1.5
Service and
maintenance.......... 18.6 22.1 18.5 17.0 14.0 15.8 14.2 14.6 13.6
Equipment and supplies
..................... 28.8 33.7 28.2 25.5 27.2 20.4 24.5 19.0 20.8
----- ----- ----- ----- ----- ----- ----- ----- -----
Total cost of
revenues............ 48.1 56.6 47.2 43.3 42.0 37.1 39.3 34.2 35.9
----- ----- ----- ----- ----- ----- ----- ----- -----
Gross profit............ 51.9 43.4 52.8 56.7 58.0 62.9 60.7 65.8 64.1
Operating expenses:
Sales and marketing.... 27.9 28.2 30.3 32.9 25.7 27.2 25.2 27.5 27.7
Product development and
engineering.......... 8.5 6.0 9.1 15.1 11.0 11.0 10.9 10.7 11.4
General and
administrative....... 21.4 19.9 18.9 17.5 15.4 14.3 15.4 15.0 15.8
----- ----- ----- ----- ----- ----- ----- ----- -----
Total operating
expenses............ 57.8 54.1 58.3 65.5 52.1 52.5 51.5 53.2 54.9
----- ----- ----- ----- ----- ----- ----- ----- -----
Income (loss) from
operations............ (5.9) (10.7) (5.5) (8.8) 5.9 10.4 9.2 12.6 9.2
Interest income
(expense), net........ 0.1 (0.4) (0.6) (0.1) (0.4) (0.4) (0.1) 0.1 0.2
----- ----- ----- ----- ----- ----- ----- ----- -----
Income (loss) before
provision (benefit)
for income taxes...... (5.8) (11.1) (6.1) (8.9) 5.5 10.0 9.1 12.7 9.4
Provision (benefit) for
income taxes.......... (2.3) (4.4) (2.4) (0.8) 2.3 4.2 3.9 5.4 3.8
----- ----- ----- ----- ----- ----- ----- ----- -----
Net income (loss)....... (3.5)% (6.7)% (3.7)% (8.1)% 3.2% 5.8% 5.2% 7.3% 5.6%
===== ===== ===== ===== ===== ===== ===== ===== =====
|
Revenues
The Company has experienced year-to-year growth with seasonal fluctuations in revenues and earnings. During the Company's second fiscal quarter ended December 31, revenues have typically increased as customers on a calendar-based fiscal year completed their capital spending plans. During the third fiscal quarter ended March 31, revenues have typically declined as customers focus internal resources on statutory and regulatory reporting requirements. The fourth fiscal quarter ended June 30, generally has the highest revenues as customers complete projects before summer, when activity in many corporate financial departments tends to slow, which can result in a difference between fourth and first quarter revenues.
Revenues decreased by $100,000 to $6.1 million during the fiscal quarter ended September 30, 1997 from $6.2 million during the fiscal quarter ended June 30, 1997. The decrease was consistent with seasonal trends for revenues. Equipment and supplies sales increased by $200,000 to $2.5 million during the fiscal quarter ended September 30, 1997 from $2.3 million during the fiscal quarter ended June 30, 1997. The increase was due primarily to orders for new third-party printers and related toners. Equipment and supplies sales as a percent of total revenues decreased in subsequent quarters as printer orders stabilized.
Cost of Revenues
During the four quarters of fiscal year 1997, the Company experienced a significant problem with a third-party printer it had been reselling. The printer problem had a material adverse effect on operating results, including:
. increased customer support expenses incurred in receiving, investigating and responding to printer-related issues;
. increased service, maintenance and supply expenses incurred in repairing and, in some cases, replacing the defective printers;
. a decrease in orders from both new and existing customers as printer problems adversely affected sales productivity; and
. inventory write-offs of $217,000 related to the defective printers.
The Company has since established a product qualification process and periodic quality inspections. In addition, the Company has revised and enhanced its quality assurance programs.
Operating Expenses
Sales and marketing expenses increased by $300,000 to $2.0 million in the fiscal quarter ended June 30, 1997 from $1.7 million in the fiscal quarter ended March 31, 1997. The increase was due primarily to commission expenses generated from increased sales of PayBase and related services, which had a higher average commission payment rate. Additionally, marketing expenses increased as the Company promoted a new third-party laser printer.
Product development and engineering expenses increased by $437,000 to $938,000 in the fiscal quarter ended June 30, 1997 from $501,000 in the fiscal quarter ended March 31, 1997. The increase was due primarily to additional amortization of certain acquired software costs charged to operations.
Sales and marketing expenses increased by $400,000 to $2.0 million in the fiscal quarter ended December 31, 1997 from $1.6 million in the fiscal quarter ended September 30, 1997. The increase was due primarily to commission expenses generated from increased sales of PayBase and related professional services, which carried higher commission payment rates.
In addition to seasonal fluctuations, quarterly results of operations may be subject to significant fluctuations due to several factors, including:
.the size, timing and number of customer orders;
.product and price competition;
. the loss of key employees and the time required to train new hires, particularly sales and engineering personnel;
.timing of new product introductions and enhancements;
.sales, implementation and budget cycles of the Company's customers;
.the number of business days in a particular period;
. market acceptance of new products or product enhancements by either the Company or its competitors;
.the incurrence of costs relating to possible acquisitions of technologies or businesses;
.the Company's ability to address new and related market opportunities;
.the mix of license and maintenance revenue in any period; and
.general economic conditions.
The Company anticipates that its operating expenses will continue to increase significantly. If sales in any quarter do not increase correspondingly, results of operations for that quarter would be materially adversely affected. For the foregoing reasons, the Company believes that quarter-to-quarter comparisons of its results of operations are not necessarily meaningful and that the Company's results of operations in any particular quarter should not be relied upon as necessarily indicative of future performance. Moreover, for the foregoing reasons, there can be no assurance that the profitability attained in the last fiscal year will continue.
LIQUIDITY AND CAPITAL RESOURCES
Bottomline has financed its operations primarily from cash provided by operating activities, the sale of common stock and bank credit facilities for leasehold improvements and working capital. The Company had net working capital of $4.1 million at September 30, 1998, including cash and cash equivalents totaling $1.5 million.
Net cash provided by operating activities was $588,000 in the fiscal quarter ended September 30, 1998. Net cash provided by operating activities during the fiscal quarter ended September 30, 1998 was primarily the result of net income and increases in accounts payable and accrued expenses, partially offset by increases in accounts receivable and prepaid expenses. Net cash provided by operating activities was $2.6 million in the fiscal year ended June 30, 1998 and $820,000 in the fiscal year ended June 30, 1996. Net cash used in operating activities was $668,000 in the fiscal year ended June 30, 1997. Net cash provided by operating activities during the fiscal year ended June 30, 1998 and the fiscal year ended June 30, 1996 was primarily the result of net income and increases in deferred revenues partially offset by increases in accounts receivable. During the fiscal year ended June 30, 1997, net cash used in operations was primarily the result of net losses, an increase in accounts receivable and refundable income taxes partially offset by increases in deferred revenues, accounts payable and accrued expenses.
Net cash used in investing activities was $434,000 in the fiscal quarter ended September 30, 1998. Cash was used during this period to acquire computer equipment and software for internal use. Net cash used in investing activities was $993,000 in the fiscal year ended June 30, 1998, $694,000 in the fiscal year ended June 30, 1997 and $469,000 in the fiscal year ended June 30, 1996. Cash was used during these periods to acquire property and equipment and for software development costs. The Company currently has no significant capital spending or purchase commitments, but expects to continue to engage in capital spending in the ordinary course of business. During fiscal year 1998, the Company expensed as incurred all software development costs.
Net cash used in financing activities was $1.1 million in the fiscal year ended June 30, 1998. Net cash provided by financing activities was $1.1 million in the fiscal year ended June 30, 1997 and $98,000 in the fiscal year ended June 30, 1996. Net cash used in financing activities during the fiscal year ended June 30, 1998 primarily represented repayment of indebtedness. Net cash provided by financing activities during the fiscal year ended June 30, 1997 primarily represented borrowings under the Company's revolving credit agreement.
In December 1998, the Company renewed its revolving credit agreement with a bank which provides for borrowings of up to $5.0 million. Borrowings under its revolving credit agreement bear interest at the bank's prime rate, are due on demand and are secured by substantially all of the Company's assets. As of December 31, 1998, the Company had no outstanding balances under its revolving credit agreement. The agreement expires on December 31, 1999.
The Company believes that the proceeds generated by the sale of its common stock in this offering, cash generated from operations and cash and cash equivalents on hand, will be sufficient to meet its working capital requirements for the foreseeable future.
YEAR 2000 CONSIDERATIONS
Computer systems and software must accept four digit entries to distinguish 21st century dates from 20th century dates. As a result, many software and computer systems may need to be upgraded in order to be year 2000 compliant.
The vendors of each of Bottomline's major internal software systems have certified that such software is year 2000 compliant. In addition, the Company has assessed its currently supported products, including tools, equipment and software provided by others, for possible problems in processing, reporting, displaying, functioning with and otherwise handling date data containing the year 2000 and beyond and has concluded that such products are year 2000 compliant. The Company does not plan to assess specifically its facility
management systems or the external forces such as utility or transportation year 2000 compliance failures that might generally affect industry and commerce. The Company is developing contingency plans to address those issues that it believes will be critical to its operations in the event that internal systems fail to be year 2000 compliant and anticipates finalizing such contingency plans by June 30, 1999.
The Company believes that all of its products installed after February 1997 were year 2000 compliant at the time of installation. However, products installed prior to that time that operated in the DOS operating system environment are not year 2000 compliant. In 1997, the Company notified customers that had purchased DOS based products that their products were not year 2000 compliant and that the Company would no longer be supporting those products. The Company has no plan to address year 2000 readiness for these older products. Based on the notification the Company provided and the contractual provisions limiting liability contained in its standard terms and conditions which governed the sale of the Company's DOS based products, the Company does not believe there are significant risks to its business relating to year 2000 compliance of these products.
During the past eighteen months, the Company purchased $1.5 million in information systems, hardware and software, some of which purchases were accelerated in connection with year 2000 compliance. The Company does not expect any future material expenses to be incurred in connection with year 2000 compliance.
BUSINESS
We are a leading provider of software used to make and manage corporate payments. Our products and services enable organizations to transition from the traditional paper check process to electronic payments and to facilitate electronic commerce. Our software offers a single solution to control, manage and issue all payments. Our software complements and integrates with existing corporate payment applications, such as accounts payable, payroll, travel and entertainment expense, insurance claims and commissions. Our products provide Internet capability and run on Windows NT, Microsoft's leading network technology. Today, we have more than 2,000 customers, representing every major industry-sector, including The Charles Schwab Corporation, Dow Jones & Company, Inc., The Federal Reserve System, Microsoft Corporation and Nissan Motor Acceptance Corporation.
INDUSTRY BACKGROUND
Most enterprises today still rely on pre-printed, paper checks to generate and receive payments. It is estimated that in 1997, United States businesses processed approximately 73 billion transactions involving paper checks. With the significant growth of the Internet and electronic commerce, many enterprises are seeking to implement a cost-effective, secure, electronic payment system. The National Automated Clearing House Association estimates that the cost of a business-to-business electronic payment averages $3.00 compared to $8.33 for a similar paper-based payment. It also estimates that approximately 4.5 billion secured Automated Clearing House payments were made in 1997.
Paper Payment Process
Traditional Check Printing. Most businesses today rely primarily on checks to make and receive payments. They typically use pre-printed checks, which are blank, legally negotiable instruments that must be securely stored, controlled and accounted for with physical audits. These checks are either manually completed or, more frequently, mechanically generated in batches and put through an impact printer. The checks are then:
- -signed by a signing machine that contains the company's signature plates;
- -sorted by a decolator machine, which separates the checks from their copies;
- -run through a burster machine, which separates batch run checks along their perforated lines;
- -manually or mechanically stuffed into envelopes for mailing; and
- -copied, collated and delivered to the appropriate departments for filing and record updating.
Breakdowns along the processing line can be costly and time consuming. Damaged checks must be voided, filed and recorded for auditing purposes and replacements must be issued.
When an enterprise receives a check, either through a lockbox (a third-party depositing service) or directly, the check must often be physically separated from the check stub. The stub, which contains detailed payment information, is forwarded to accounts receivable for data entry and payment record reconciliation. Because many payments cover multiple invoices or billings that may contain discounts, offsets or other adjustments, the reconciliation process is labor intensive and often results in many internal and external payment inquiries. After reconciliation, the check is processed as part of a bank deposit and continues through the banking system to the payor's bank.
Laser Check Printing. The inefficiencies and opportunity for fraud inherent in traditional check printing has caused many enterprises to acquire software- based laser check printing systems to generate checks. As with printed checks, the process begins with the creation of initial payment information, including payee, payment amount and invoice reference. The software takes that information, merges it with permanently stored data used to create printed checks, such as bank information, check design and layout, signatures and logos, and automatically generates checks on a high-speed laser printer. The system can also include a magnetic ink
character recognition line on the checks to facilitate their subsequent processing. A laser-printed check is manually or mechanically stuffed into an envelope for mailing and then continues through the same receipt and disbursement process as a pre-printed check.
Electronic Payment Process
The most basic electronic payment, an Automated Clearing House transaction, such as a direct deposit payroll transaction, consists of data formatted to comply with National Automated Clearing House Association standards. This data includes the necessary information to effect the transfer of funds from one account to another, such as the payor and payee's bank accounts, settlement date and dollar amount. Basic Automated Clearing House transactions do not include financial electronic data interchange information (which is commonly referred to as financial EDI), which consists of payment-related details about the purpose of the payment, such as a listing of all the invoices to be credited in connection with the payment. The Federal Reserve System and participating banks maintain the computer and network infrastructure needed to transmit these electronic payments.
Electronic payments generally are processed in the following sequence:
- -payment data is input;
- - the data is formatted to comply with Automated Clearing House and financial EDI standards and transmitted to the payor's bank where appropriate debits are made electronically to the payors' accounts;
- - the data is merged with other electronic payment transactions and sent through The Federal Reserve System's Automated Clearing House system, ultimately arriving at the payee bank, where appropriate credits are made electronically to the payees accounts; and,
- -the receiving bank transmits payment notification and remittance information to the payee.
The following graphic depicts the traditional check process, laser check process and electronic payment process:
[graph to describe the processes for edgar filing]
This graphic depicts the differences between Traditional Check Printing, Laser Check Printing and Electronic Payment processes.
[This graphic contains three separate graphs which represent the three different payment processes. Each graph assimilates an ascending stairway, each step of the stairway representing a different requirement of the respective payment process.
The first ascending stairway is labelled "Traditional Check Printing" and is broken into three sections, as labelled on the side of the stairway. In the first section, entitled "Steps Required to Create a Traditional Check," ten steps ascend, representing different steps in the process. The steps are entitled "Input Payment Data," "Check Stock Audit & Control Pre Check Run," "Align Check Stock," "Sign Out Signature Plate," "Impact Printer," "Signer," "Decollator," "Burster," "Stuffer" and "Check Stock Audit & Control Post Check Run." In the second section, entitled "Time to Deliver the Check," three steps are grouped together and labelled, respectively, "Payor's Mailroom," "Postage" and "Payee's Mailroom." In the third section of the stairway, entitled "Steps Required to Receive Post & Archive the Check," six steps ascend, representing different steps in the process. The steps are entitled "Envelope Opener," "Deposit Check," "Credit at Payees Bank," "Enter Detail," "Archive Stub" and "Debit at Payors Bank."
The second ascending stairway is labelled "Laser Check Printing" and is also broken into three sections, as labelled on the side of the stairway. In the first section, entitled "Steps Required to Create a Laser Check," four steps ascend, representing different steps in the process. The steps are entitled "Input Payment Data," "Blank Paper," "Laser Printer" and "Stuffer." In the second section, "Time to Deliver the Check," three ascending steps are grouped together and labelled, respectively, "Payor's Mailroom," "Postage" and "Payee's Mailroom." In the third section of the stairway, entitled "Steps Required to Receive Post & Archive the Check," six steps ascend, representing different steps in the process. The steps are entitled "Envelope Opener," "Deposit Check," "Credit at Payees Bank," "Enter Detail," "Archive Stub" and "Debit at Payors Bank."
The third ascending stairway is labelled "Electronic Payment," and only contains one section, entitled "Steps Required to Make an Electronic Payment." This section consists of five ascending steps labelled, respectively, "Input Payment Data," "Format & Transfer Payment Data," "Debit at Payors Bank," "Credit at Payees Bank" and "Payee Notification of Detail."]
Comparison of Payment Processes
Laser-printed checks are less expensive to generate than pre-printed checks due to reduced printing, processing and labor costs. Electronic payments further reduce printing, processing and labor costs as well as costs associated with mailing, "float" (the time between issuance and clearance of a check), fraud, error and paper-related payment inquiries. Electronic payments provide enterprises with the opportunity for improved cash management, the flexibility to make instantaneous payments and the ability to distribute and make payments at remote offices.
The competitive benefits of electronic payments as well as government and trading partner mandates are accelerating the transition to electronic payments from paper-based payments. A comparison of electronic payments to paper payments sent by the government found that 58% of the 850 million payments made by the federal government in 1997 were electronic payment transfers. Results of the comparison also showed the following:
. the average cost per transaction was 21.5 times less for electronic payments than for paper-based payments;
. the payment inquiry rate was 22 times less for electronic payments than for paper-based payments and the average time to resolve an inquiry for an electronic payment was 24 hours, compared to 14 days for paper-based payments; and
. there were no incidences of forgery involving electronic payments while 63,000 incidences of forgery were reported involving paper-based payments.
CURRENT INDUSTRY TRENDS AND DEVELOPMENTS
Growth of the Internet and electronic commerce. The Internet and electronic commerce are expanding dramatically. Forrester Research, Inc. estimates the total value of goods and services traded between companies over the Internet will increase from $8 billion in 1997 to $327 billion in 2002. This growth has created a need for secure, electronic payment management solutions that can support the conduct of commerce without resorting to the use of paper at the most critical stage--generating and evidencing payments. The National Automated Clearing House Association estimates that approximately 4.5 billion secured Automated Clearing House payments were made in 1997.
Increase in cost-based competition. Enterprises are increasingly seeking cost-based solutions in all facets of their organizations in order to remain competitive. Laser-printed checks reduce an enterprise's printing, processing and labor costs and electronic payments provide additional cost savings and operational efficiencies through reduced costs associated with mailing, float, fraud, error and paper-related inquiries. The National Automated Clearing House Association estimates that the cost of a business-to-business electronic payment averages $3.00 compared to $8.33 for a similar paper-based payment.
Ongoing changes in regulation of payments. Enterprises are increasingly subject to both federal and state regulation mandating the use of electronic payments. The Debt Collection Improvement Act of 1996 requires federal agencies to convert federal payments (other than payments under the Internal Revenue Code of 1986) made by paper checks to electronic payments by January 1, 1999. Current treasury regulations require that a business that paid more than $50,000 in annual employment or other depository taxes in 1995, 1996 or 1997 begin to make such payments electronically on or before January 1, 1999, depending on the year in which the business first paid more than $50,000 in depository taxes. Non-complying taxpayers may be subject to a 10% penalty if they fail to comply with such requirements by July 1, 1999. Recently, The National Automated Clearing House Association required financial EDI capabilities for the banks participating in its network. In addition, as of September 1998, 47 of the 50 states had programs in place to accept electronic payments.
Adoption of third-party, enterprise-wide solutions. Enterprises are increasingly seeking integrated, enterprise-wide solutions that provide competitive advantages through increased data access and automation.
This trend has been accelerated by the shortage of qualified technical personnel, increased allocation of staff resources to year 2000 problems and the competitive need to rapidly adopt new technologies. This trend is illustrated by widespread adoption in recent years of enterprise resource planning systems offered by companies such as SAP and Baan to manage operations across enterprises. To expand from a department level to an enterprise-wide solution, enterprises are increasingly looking to third-party suppliers with expertise in replacing and/or integrating their aging payment management systems.
Migration to distributed computing. In recent years, enterprises have adopted distributed computing systems that offer computing power and business solutions at the point of need, as well as remote access capabilities such as through the Internet and intranets. These systems have been deployed to enable individual users to access enterprise databases. Advances in network management technologies, such as Windows NT, have further accelerated this trend. Companies purchasing distributed computing software systems require that they conform to corporate computing standards, including databases such as Microsoft SQL Server, Oracle, Sybase, IBM DB2 and Informix.
Need for increased security. Advances in scanner, copier and desktop publishing technology have resulted in increased check forgery, counterfeiting and misappropriation and an increased demand for secure payment solutions. Enterprises are seeking to lower the estimated $12 billion annual cost of both internal and external check fraud through implementation of process and data security and audit functions. In particular, enterprises are demanding centralized control over the form, initiation and authorization of their payments throughout a distributed environment.
MARKET OPPORTUNITY
Enterprises are seeking a third-party payment management solution that enables them to cost-effectively respond to the significant growth in electronic commerce, increased fraud and on-going changes in the regulation of payments and migrate to distributed computing. Traditional paper-based payment systems lack the flexibility to cost-effectively handle the growth in electronic commerce and the ability to integrate disparate payment and paper- related management functions. Most companies, even those with enterprise resource planning systems, have multiple payment issuing systems in different departments and, therefore, lack a single view of all payment activity. Although laser-printing check systems provide some flexibility improvements and cost savings, they cannot match the transmission and receipt advantages of electronic payment solutions. Increasingly, enterprises are seeking to implement a cost-effective, secure, electronic-payments solution that accommodates electronic and paper-based payments across an enterprise.
THE BOTTOMLINE SOLUTION
Our PayBase product suite is designed to control, manage and issue all payments, whether paper-based or electronic, across an enterprise. Our software products can be purchased as an entire suite or as separate applications. Our products operate in different computer operating environments that correspond to customer needs and infrastructure requirements:
. The PayBase/32/ Workstation Server and Enterprise Server products operate on powerful, 32-bit computers to provide high levels of performance for an enterprise-wide environment, supporting very high volumes of activity across an organization.
. The PayBase/16/ Workstation Server and Enterprise Server products operate on 16-bit computers to provide cost-effective support for single-location or departmental activities.
Our products permit customers to leverage the Internet while increasing security and fraud avoidance. They also complement our customers' existing information systems and payment applications. We provide multiple options for delivery of detailed payment or remittance information including mail, fax and the Internet. Our LaserCheck product is a cost-effective, software-based, laser-printing system that allows an enterprise to streamline its paper payment process and to generate checks at the point of need. We also offer consulting services and related equipment and supplies to help customers plan, design and implement the transition from paper to electronic payments.
The Company's PayBase product suite offers customers the following benefits:
. Internet/intranets remote access capability. Bottomline's PayBase product suite provides users with a secure, convenient means to remotely access and transmit payment information. PayBase enables enterprises to manage and control payments through the Internet and intranets. PayBase provides users with a secure, convenient means to remotely access and transmit payment information.
. Flexible, dual payment process. Bottomline's PayBase product suite has been designed to provide customers with a single software solution that permits both paper and electronic payments. PayBase's dual payment capacity gives enterprises the flexibility to manage the transition to electronic payments at a pace compatible with the needs of their customers and business partners as they evolve in response to market demands and government mandates. Bottomline has one allowed United States patent application relating to certain security aspects of its dual payment process.
. Enterprise-wide payment control. Bottomline's PayBase product suite offers enterprises a centralized payment control and management system while allowing users to make payments at the point of need. PayBase records all payments, transactions and events in a central database, which improves cash management, control of disbursement and receipt functions and audit capabilities. In addition, Bottomline's PayBase payment control capabilities permit enterprises to readily outsource payment management functions to banks or other third-party suppliers.
. Cost-effective payment solution. Bottomline's PayBase product suite provides operational efficiencies that reduce staffing, mailing, processing and auditing costs as well as costs associated with float, risk of error, fraud and fraud related inquiries. PayBase is designed to be easy to use and implement and requires only limited commitment of an enterprise's resources to achieve operational efficiencies.
. Open and scaleable technology. Bottomline's PayBase product suite runs on one or more application servers using industry standard Unix or Microsoft Windows NT operating systems and database servers such as Microsoft SQL Server, Oracle, Sybase, IBM DB2 Universal Server and Informix. PayBase's flexible design provides an enterprise with a scaleable solution to meet growing needs and to manage the migration from a department-wide to an enterprise-wide, payment system.
. Enhanced security and fraud protection. Bottomline's PayBase product suite reduces the risk of fraud through a secure, encrypted database and control of all payment and operator activity. In addition, PayBase can automatically send a file of all checks issued instantaneously to the payor's bank, enabling banks to quickly isolate fraudulent or incorrect checks and to evaluate questionable payments. For its laser-printing process, LaserCheck uses blank paper that is non-negotiable until it is printed and can use specialized magnetic ink character recognition printers for additional security.
STRATEGY
Bottomline's objective is to be the leading provider of payment management software for businesses, financial institutions and public sector organizations. Key elements of Bottomline's strategy include the following:
. Further penetrate customer base. Bottomline intends to further penetrate its customer base, which Bottomline believes is only in the early stages of implementing electronic payment solutions. Additional sales opportunities to Bottomline's existing customers include:
- -expanding department level installations to encompass an enterprise's entire payment system;
- - selling complementary payment capabilities through sales of additional software modules (such as electronic payment and receipt creation or check fraud avoidance);
- -introducing software upgrades;
- - marketing new products; and
- - generating additional revenues from its customer base by providing maintenance and support services and selling supplies.
. Expand customer base. Bottomline intends to expand its broad customer base through:
- - enhancing its direct sales force to market to large enterprises;
- - increasing indirect sales channels;
- - targeting sales opportunities with financial institutions by leveraging its experience and industry recognition as the developer of FedEDI, the Federal Reserve System's financial EDI software solution;
- - developing additional marketing partnerships; and
- - pursuing strategic acquisitions.
. Expand and leverage strategic relationships. Bottomline intends to expand and leverage its relationships with business partners who play a key role in the sales, marketing and distribution of its products. The Company plans to expand sales through strategic alliances with technology providers and financial institutions, and through existing reseller relationships with companies such as Moore Corporation and John H. Harland Company. Bottomline also intends to expand its relationships with enterprise resource planning and accounting system vendors, such as Oracle and SAP, and with consulting firms that assist companies with the implementation of Bottomline's products. For example, Bottomline recently entered into a working agreement with Arthur Andersen LLP under which Arthur Andersen LLP will work with the Company to develop a marketing program and to utilize the enterprise consulting experience of Arthur Andersen LLP to demonstrate the benefits of migrating to Bottomline's enterprise-wide PayBase/32/ payment solution.
. Develop new products and technologies. Bottomline intends to develop new products and technologies which leverage its existing offerings and customer base. To capitalize on the growth of the Internet and electronic commerce and changes in payment technologies and practices, Bottomline employs professionals who are skilled in the complex environments of electronic commerce, financial EDI and banking and payment systems. Furthermore, Bottomline's technical staff is experienced in the latest database, networking and software development tools, technologies and methodologies. Bottomline intends to leverage this combination of business expertise and technical knowledge to deliver new products and technologies.
. Expand international capabilities. Bottomline intends to enhance its products with additional functionality to expand their use in international markets. Bottomline believes that this will enable it to better accommodate existing and future customer needs. Current initiatives include extending check-printing capabilities to accommodate multiple language print output, multiple currency print requirements, and international magnetic ink character recognition fonts.
. Pursue strategic acquisitions. Bottomline intends to pursue strategic acquisitions that would provide additional product or service offerings, additional industry expertise, a broader client base or an expanded geographic presence.
PRODUCTS AND SERVICES
Bottomline's software products enable enterprises to control, manage and issue all payments, whether paper-based or electronic, across an enterprise or at one specific location or department. Bottomline also offers complementary add-on functionality software products that customers can select according to their specific needs, as well as hardware to complement its software product offerings. Bottomline's software products are further enhanced by a comprehensive and experienced consulting service and support system. These consultants help customers to plan, design, implement and manage an enterprise's transition from paper to electronic payments and to enhance operational productivity and customer satisfaction.
The following graph depicts the different payment options for PayBase:
[This graphic contains five columns of information, each column linking into the next, from left to right, via connecting pipes.
The first column contains a list of eleven phrases in separate boxes entitled: "Payroll," "T&E Payments," "Commissions," "Trusts," "Rebates," "Royalties," "401K," "Health Claim Payments," "Accounts Payable," "Loan Proceeds," and "Accounts Receivable." These eleven boxes are linked vertically by a pipe, and all link horizontally to one box in the second column, entitled "PayBase."
The "PayBase" box is linked horizontally to the third column of boxes, which represent the different PayBase payment options. This third column contains three boxes, entitled "e-Payments," "Laser Checks" and "e-Receipts." The "e-Payments" box is linked horizontally to two boxes in the fourth column, entitled "ACH & financial EDI" and "Remittance Advice." The "Laser Checks" box is linked horizontally to a box in the fourth column, entitled "Check Fraud Avoidance." The "e-Receipts" box is linked horizontally to a box in the fourth column, entitled "Remittance Detail." The fourth column contains a total of four boxes.
From the fourth column, the "ACH & financial EDI" box is linked horizontally to one box in the fifth column, entitled "Banks." The "Remittance Advice" box is linked to three vertically interconnected boxes in the fifth column entitled "e-Mail," "Fax" and "Print." The "Check Fraud Avoidance" box in the fourth column is linked horizontally to one box entitled "Banks," and also branches off to a second box in the fifth column entitled "Payees." Finally, the "Remittance Detail" box is linked to three vertically interconnected boxes in the fifth column entitled "Banks," "VAN" and "Internet." The fifth column contains a total of nine boxes.]
PAYBASE/32/ PRODUCTS
Bottomline's PayBase/32/ provides a single software solution to control, manage and issue all payments across an entire enterprise. PayBase/32/ includes the following modules which can be purchased as separate products or together:
ESP (Electronically Sent Payments) Module. The ESP module allows users to create electronic payments, facilitating the transition from paper checks to electronic funds transfers. This module permits users to create standard files that meet National Automated Clearing House Association standards and other financial EDI protocols, and to transmit those files to their banks. The PayBase ESP module can also create electronic tax payments in the formats required by federal and state governments. With this module, users can process payment instructions received from an external database, such as payroll or accounts receivable. When installed with Bottomline's LaserCheck printing software module, PayBase can create both electronic payments and checks during the same payment run.
The ESP module also can be adapted to allow users to automatically post financial EDI remittance information to their accounts receivable system. This feature eliminates the need for manually entering information into accounting ledgers, saving time and preventing mistakes.
ERADS (Electronic Remittance Advice Delivery System) Module. The ERADS module allows an enterprise to convert to electronic payments immediately and to deliver the remittance detail by fax, e-mail, communications networks or the Internet, depending on the technology available to its payees. This module can be used for payments to individuals (e.g., travel reimbursements) and to enterprises (e.g., vendor payments). Whenever payments are sent electronically through the secure Automated Clearing House network, the ERADS module automatically channels the remittance details to each payee by the appropriate media and the payee receives an electronic payment directly deposited into its bank account. Enterprises can realize cost efficiencies through reduced check printing or processing and the lower cost of transmitting remittance information electronically.
Secure WebPay Series (Internet/Intranet Access) Modules. The Secure WebPay Internet/Intranet Access modules extend the functionality of PayBase to the Internet. Secure WebPay allows enterprises to use the Internet or a corporate intranet to request, approve and initiate payments from remote sites, including locations which are not linked by a corporate network. Secure WebPay can also provide automatic e-mail delivery of remittance advice both internally and to third parties such as vendors, customers and employees. Secure WebPay incorporates administration software that maintains central payment information that can be accessed on the Internet or over an intranet by authorized users to review payment status and correct data as appropriate.
LaserCheck Module. The LaserCheck module allows users to print checks (including all variable data, such as magnetic ink character recognition lines, logos and signatures) on blank paper using a laser printer. This module can be deployed over the user's network or the Internet wherever it is needed, whether in a centralized printing facility, the issuing department (e.g., payroll) or in a remote location. With LaserCheck's CheckSort feature, users can sort checks to lower postage rates and produce copies in a specified order to simplify filing. LaserCheck also provides password protection, as well as hardware and software security features, and initiates printing of all checks, confirmation notices and reports.
Check Fraud Avoidance Module. The Check Fraud Avoidance module allows users to automatically send a digital file of all checks issued to their bank. Most commercial banks employ a "Positive Pay" system that determines, when the check is presented to the bank, whether a bank customer has in fact issued it. A number of banks will only reimburse customers for check fraud losses if the customer uses Positive Pay. This module protects the user from having altered or unissued checks paid from their account and protects banks from fraudulent checks received from other institutions. The Check Fraud Avoidance software receives its data input from PayBase, but can also receive input from a non- PayBase system that uses printed checks.
Additional Key Features Included in PayBase/32/. PayBase/32/ also features the Report Generator, which gives users access to the PayBase/32/ audit database and creates personalized screens and print reports. These reports can be run automatically at the conclusion of a payment run or at the request of the user and can satisfy certain auditing and record requirements. In addition, PayBase/32/ features DesignerPlus, which allows users to set up and integrate PayBase/32/ into their existing payment environment.
Complementary Add-On Functionality for PayBase/32/
Y2K IntelligentAutoRepair. Y2K IntelligentAutoRepair is a software tool sold separately that permits users of PayBase/32/ to examine and repair date fields identified as suspect in their data files on a fully automated basis, permitting them to isolate and correct year 2000 problems in their payment systems and databases.
PayBase/32/ for Value Added Banks. PayBase/32/ enables companies to outsource payment processing to banks. The PayBase/32/ software can be installed at either the company or the bank. When installed at the company, PayBase/32/ formats and transmits payment information according to the bank's requirements. The bank uses its systems to create checks or electronic payments. When installed at the bank, the company transmits unformatted payment information to the bank, where PayBase/32/ reformats the data into checks and electronic payments.
PAYBASE/16/ PRODUCTS
PayBase/16/ is designed as a cost-effective payment solution for use with desktop personal computers in a departmental setting. It operates on the Windows 3.X, Windows 95, Windows 98 and Windows NT operating systems. PayBase/16/ supports the following modules: LaserCheck, Check Fraud Avoidance and ESP.
- - LaserCheck and Check Fraud Avoidance functions are controlled through a comprehensive set of security options. PayBase/16/ automatically records all transactions and payments in a database that can be accessed by the user using a report generator that is included as part of the module. The LaserCheck module allows printing to locally attached printers. The optional Check Fraud Avoidance module stores check information in a Microsoft-Access database and includes bundled communication software for transmitting positive pay files to the customer's bank.
- - The ESP module is accessed through a tool bar on the PayBase/16/ main menu. The ESP module features independent security and audit tables as well as a separate report generator. File transmission can be executed with most third-party communication software packages.
PROFESSIONAL SERVICES
Bottomline's team of service professionals draws on extensive experience in electronic commerce and payment technologies to provide consulting services, project implementation and training services to Bottomline's clients. Consulting service professionals are available to review clients' current payment methods and processes, report findings, and recommend changes and solutions. Project implementation professionals are available to coordinate system installation, including check and electronic payment design, payment reporting format and delivery, bank data and communication requirements, signature and authority set up and security, audit and control procedures. Bottomline offers training services to all customer personnel involved in the payment cycle, including management, users and information technology personnel involved in the transition from paper-based payment methods to electronic payments. Bottomline maintains a fee-based Payment Technology Institute, which provides classes on trends in the payment industry, payment technology strategies and Bottomline's products.
EQUIPMENT AND SUPPLIES
Bottomline offers consumable products needed for payment disbursements and check printing, including magnetic ink character recognition toner and blank- paper check stock. Bottomline also provides printers and
printer-related equipment, primarily through drop-ship arrangements with its hardware vendors, to enhance its software product offerings. Bottomline has reseller agreements with the two leading secure magnetic ink character recognition printer manufacturers in the country, Troy Systems (using Hewlett Packard printers) and Source Technology (using Lexmark printers).
TECHNOLOGY
The Company's technology focus is on its advanced 32-bit payment processing software. PayBase/32/ has been designed using a client server architecture. The server platform supports open database connectivity (ODBC) compliant Unix and Windows NT databases. The server platform is the warehouse for information relating to the customer's payment solution including security tables, application form parameters and audit tables. The client workstation houses the PayBase/32/ executable programs. This design enables PayBase/32/ to be highly scaleable for both distributed and high volume centralized check printing, as well as electronic payment origination. The client workstation interacts with the database to ascertain authority, to retrieve information to create the form and to update the audit tables with transaction information and payment result information. Print output can be sent to any addressable network printer. The ESP and Check Fraud Avoidance modules are bundled with communication software that allows scripting of the data transmission. Transmission can be executed from any client workstation.
PayBase/32/ is designed to be network independent and can be implemented in leading network architectures, including Novell, Windows NT and TCP/IP. The product design creates predictable low volume network traffic in order to minimize the implementation concerns for corporate information technology. Installation of the product is highly automated using InstallShield. PayBase/32/ has been submitted and approved for the "Designed for BackOffice" logo from Microsoft, indicating it conforms to Microsoft standards for design and operation.
PayBase/32/ was developed as a high end Windows NT 32-bit application. Development methods conform to the latest Microsoft development specifications, including extensive use of MFC (Microsoft Foundation Classes) and the DCOM/COM ((Distributed) Component Object Model) standards. Components are designed as OLE (Object Linking and Embedding) Automation Servers for ease of future development and enhancement as well as interoperability. Web enabled components are written as ActiveX controls. The primary development tool is Visual C++.
The PayBase/32/ suite also includes PayBase/32/ DesignerPlus, a sophisticated proprietary data mapping and design tool. This tool is used to create sophisticated payment applications using multiple form designs and multiple payment methods, including all forms of electronic payments. It provides a proprietary mapping tool to transform any type of host data file into the format needed for efficient payment creation. The forms design function allows easy creation of paper output formats from checks to W-2 forms and includes design wizards to further automate the process. The data mapping and design are securely linked to the desired business payment process.
PRODUCT DEVELOPMENT AND ENGINEERING
Bottomline's product development and engineering organization includes 41 persons. There are three primary development groups: software engineering, quality assurance and technical support. The Company spent $1.2 million in fiscal year 1996, $2.2 million in fiscal year 1997 and $3.2 million in fiscal year 1998 on product development and engineering costs.
The software engineering team averages over nine years of development experience per person and over seven years experience per person in payment systems design. The software engineers have substantial experience in advanced software development techniques as well as extensive knowledge of the complex processes invloved in business payment systems. Bottomline engineers actively participate in the Microsoft Developer Network programs and maintain extensive knowledge of software development trends.
The quality assurance engineers have both extensive knowledge of Bottomline's products and expertise in software quality assurance techniques. Members of the quality assurance group make extensive use of automated software testing tools to facilitate comprehensive and timely testing of products. The quality assurance group members participate in all beta releases (i.e., all tests of new products or enhancements) and provide initial training materials for customer support and service.
The technical support group provides all product documentation as well as technical support for released products. Members of the technical group include experienced technical writers, Bottomline business analysts and network analysts. The technical writers are versed in current document technology and work closely with the software engineers to ensure documentation is clear, current and complete. The technical support engineers are responsible for the analysis of reported software problems and work closely with customers and customer support staff. The group's broad knowledge of Bottomline products, operating systems, communications, and printers allows them to rapidly respond to software configuration needs.
CUSTOMERS
Bottomline's customer base includes over 2,000 companies in industries such as financial services, health care, communications, education, media, manufacturing and government. A partial list of Bottomline's customers follows:
ABM Industries Great Lakes Higher North Carolina
Aetna Inc. Services Corporation Office
American HomePatient, Inc. Harvard University of the State
Arthur Andersen LLP (Accounts Payable) Controller
The Bank of New York Hillsborough County Paradigm Health
Company, Inc. Tax Collector's Office Corporation
Bankers Trust Corporation Kaiser Permanente PMA Reinsurance
Bestfoods Lands' End, Inc. Corporation
The Charles Schwab Corporation Liberty Corporation The Rouse Company
Dow Jones & Company, Inc. Microsoft Corporation Spencer Gifts, Inc.
The Federal Reserve System Nissan Motor Acceptance TeleBank
Corporation The University of
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Argonne National Laboratory
CASE STUDIES
Harvard University (Accounts Payable). Harvard University (Accounts Payable) began using Bottomline's LaserCheck system in 1992. In 1998, Harvard University (Accounts Payable) wanted to upgrade to an automated, electronic-payment system that could manage its account payables, which included vendor payments and staff reimbursements. Harvard University (Accounts Payable) upgraded to Bottomline's PayBase/32/ Enterprise Server in order (i) to port its existing Oracle financials applications, (ii) to provide an electronic path for both payments and remittance information from Concur Technologies' expense management software and (iii) to offer paper-based payments for recipients requesting them. Harvard University (Accounts Payable) uses the ESP module to send electronic expense reimbursement payments and uses the ERADS module to transmit remittance information by e-mail. As a result, Harvard University (Accounts Payable) has reduced its typical transaction cycle by several days while significantly reducing banking fees.
Federal Reserve System. The Debt Collection Improvement Act of 1996 requires federal agencies to convert federal payments (other than payments under the Internal Revenue Code of 1986) made by paper checks to electronic payments by January 1, 1999. The payments must be made using the financial EDI format. In early 1997, it was determined that fewer than 1,000 of the 12,000 Financial Reserve System member financial institutions could process financial EDI transactions. In response, The Federal Reserve System published a request for a proposal seeking a solution that would allow banks to process financial EDI transactions. In March 1998, The Federal Reserve System chose Bottomline to provide the necessary financial EDI translation software. This software, named FedEDI, is PC-based and available in both
DOS and Microsoft Windows NT versions. FedEDI supplements FedLine, the Federal Reserve System's electronic payment connection that processes all incoming and outgoing Automated Clearing House files. FedEDI enables an increased number of banks and their customers to receive financial EDI formatted payments.
Nissan Motor Acceptance Corporation. Nissan Motor Acceptance Corporation and its Infiniti Financial Services division provide $15 billion in consumer lease and loan financing for its customers, as well as wholesale inventory, mortgage, equipment and working capital financing for Nissan and Infiniti retailers. Nissan was seeking a payment platform that would: (i) be seamlessly integrated into its current accounts payable application; (ii) require minimum training efforts and be easy to use; (iii) be implemented quickly; (iv) provide a distributed check printing solution and a pathway to electronic payments capability; and (v) offer a secure year 2000 compliant solution. In May 1998, Nissan implemented PayBase/32/ Enterprise Server to meet these requirements. The multi-site system installation enhanced competitiveness, allowing higher levels of service and responsiveness at the point of need. PayBase/32/ improved payment methods to customers for refunds, vendors for accounts payables and retailers for commissions.
Bestfoods. Bestfoods, with annual sales of approximately $8.4 billion, markets a broad array of leading consumer food brands, including Arnold, Entenmann's, Hellmann's, Knorr, Mazola, Skippy and Thomas'. Bestfoods operates approximately 115 plants world-wide and employs approximately 47,000 people. Bestfoods' payroll system for its 14,000 North American employees was outdated, expensive and error-prone. In 1996, Bestfoods originally selected Bottomline's PayBase/16/ Enterprise Server to manage and control its entire North American payroll process. In 1998, Bestfoods upgraded to the more powerful PayBase/32/ Enterprise Server to achieve better control, enhance back-office efficiencies and gain an even more efficient, reliable, employee payroll process. Bestfoods' corporate headquarters uses the PeopleSoft HRMS System to prepare the check data for payment. The LaserCheck system secures the check data, distributes it to 32 remote printer locations and prints nearly 20,000 payroll checks per month, complete with signatures, logos, custom forms and magnetic ink character recognition lines.
SALES AND MARKETING
Sales
Bottomline employs 37 systems trained sales executives, 30 of whom are divided among six geographical markets and focus on sales to large and medium sized enterprises and seven of which focus exclusively on sales to large banks and financial institutions. Bottomline's systems trained sales executives are supported by eight systems engineers. In addition, a dedicated telephone-sales team markets new applications, software upgrades and additional services to Bottomline's existing customers. The Company also sells its products through reseller relationships with companies such as Moore Corporation and John H. Harland Company.
Marketing
Bottomline promotes its products and services through conferences, seminars, direct marketing and trade publications, as well as through relationships with enterprise resource planning and accounting system vendors, such as Oracle and SAP, and implementation consultants. Bottomline's marketing partners sponsor joint mailings and seminars and issue joint press releases with Bottomline, as well as advertising Bottomline on their web sites. Bottomline also maintains membership in key industry organizations such as Financial Services Technology Consortium, Microsoft Value Chain Initiative, American Bankers Association and various operating committees of the National Automated Clearing House Association. In addition, the Company participates in industry conferences such as Treasury Management, National Automated Clearing House Association, Payments, American Payroll Congress and National User Conferences of Software Partners. Bottomline also promotes brand awareness through its public relations program and by advertising in respected buying guides.
Arthur Andersen LLP Working Agreement
Bottomline recently entered into a working agreement with Arthur Andersen LLP. Under the working agreement, Arthur Andersen LLP will work with Bottomline to introduce the Company's PayBase/32/ solution to
enterprises that would likely benefit from anticipated cost efficiencies and enhanced internal controls realized from PayBase/32/. Bottomline plans to utilize the enterprise consulting experience of Arthur Andersen LLP to demonstrate to the users of its departmental payment products the benefits of migrating to Bottomline's PayBase/32/ enterprise-wide payment solution. In October 1998, Arthur Andersen LLP also made an investment in Bottomline's common stock.
COMPETITION
Bottomline competes primarily with companies that offer a broad suite of electronic data interchange products, such as Sterling Commerce, companies that provide a broad spectrum of electronic payments solutions, such as CheckFree, and companies that offer laser check printing software and services. Bottomline competes to a lesser extent with providers of enterprise resource planning solutions, such as SAP and PeopleSoft, and providers of traditional payments products, including check stock and check printing software and services, such as Standard Register. In addition, Bottomline also experiences competition from its customers and potential customers who develop, implement and maintain their own payment solutions.
Bottomline believes it competes on a number of factors, including:
. scope, quality and cost-effectiveness of its payment solutions;
. industry knowledge and expertise;
. interoperability of solutions with existing information technology and payments infrastructure;
. product performance and technical features;
. patented and proprietary technologies; and
. customer service and support.
Although a number of Bottomline's competitors may be better positioned to compete in certain segments of the payments industry, Bottomline believes that its market position is enhanced by:
. its ability to provide a single, scalable, open, dual-payment platform that gives customers the flexibility to transition to electronic payments solutions while maintaining the ability to make paper-based payments using laser-printed checks;
. its relationships with its strategic partners;
. its large customer base; and
. the level of payments-industry expertise of its development, sales and customer service and support professionals.
Although Bottomline believes that it competes favorably in its industry, the market for payment management software is intensely competitive and characterized by rapid technological change and a number of factors could adversely affect Bottomline's ability to compete in the future.
PROPRIETARY RIGHTS
Bottomline has one allowed United States patent application relating to certain security aspects of its dual payment process. However, there can be no assurance that Bottomline's allowed patent, or any other patents that may be issued in the future, will be of sufficient scope and strength to provide meaningful protection of Bottomline's technology or any commercial advantage to Bottomline, or that the patents will not be challenged, invalidated or circumvented. In addition, Bottomline relies upon a combination of copyright and trademark laws and non-disclosure and other intellectual property contractual arrangements to protect its proprietary rights. Bottomline owns registered trademarks to "Bottomline Technologies," "CheckGard," "LaserCheck" and "PayBase." Bottomline also enters into agreements with its employees and clients, that seek to limit and protect the distribution of proprietary information. There can be no assurance that the steps Bottomline has taken to protect its property rights, however, will be adequate to deter misappropriation of proprietary information, and Bottomline may not be able to detect unauthorized use and take appropriate steps
to enforce its intellectual proprietary rights. Although Bottomline believes that its products and services do not infringe upon the intellectual property rights of others and that it has all rights necessary to utilize the intellectual property employed in its business, Bottomline is subject to the risk of claims alleging infringement of third-party intellectual property rights. Any such claims could require Bottomline to spend significant sums in litigation, pay damages, delay product installments, develop non-infringing intellectual property or acquire licenses to intellectual property that is the subject of any such infringement. Therefore, such claims could have a material adverse effect on Bottomline's business, operating results and financial condition.
GOVERNMENT REGULATION
Although Bottomline's operations have not been subject to any material industry-specific governmental regulation, some of its existing and potential customers are subject to extensive federal and state governmental regulations. In addition, governmental regulation in the financial services industry is evolving, particularly with respect to payment technology, and Bottomline's customers may become subject to increased regulation in the future. Accordingly, Bottomline's products and services must be designed to work within the regulatory constraints under which its customers operate.
Federal regulations require that all federal payments (other than payments under the Internal Revenue Code of 1986) made after January 1, 1999, must be made electronically. These regulations require that the conversion from checks to electronic payments be made in two phases. During the first phase, recipients who became eligible to receive federal payments on or after July 26, 1996, were required to receive payments electronically unless they certified in writing that they did not have an account with a financial institution or an authorized payment agent. The second phase will begin on January 2, 1999. Beginning on that date, all federal payments, except payments under the Internal Revenue Code, must be made electronically.
The National Automated Clearing House Association now requires that, upon the request of the receiver of an electronic payment, its bank must provide to each receiver all payment-related information contained within the transmitted remittance information. Banks must provide this information to their receivers by the opening of business on the second banking day following the settlement date of the entry.
Current treasury regulations require that a business that paid more than $50,000 in annual employment or other depository taxes in 1995, 1996 or 1997 begin to make such payments electronically on or before January 1, 1999, depending on the year in which the business first paid more than $50,000 in depository taxes. Non-complying taxpayers may be subject to a 10% penalty if they fail to comply with such requirements by July 1, 1999. In addition, state and local taxing authorities have been implementing electronic solutions for collecting tax payments. The electronic payment of certain taxes is required by law in states such as New York, California, Connecticut and Arkansas.
EMPLOYEES
As of September 30, 1998, Bottomline had a total of 235 employees. None of Bottomline's employees is represented by a labor union. Bottomline has not experienced any work stoppages and considers relations with its employees to be good.
FACILITIES
Bottomline currently leases approximately 32,000 square feet of space at its headquarters in Portsmouth, New Hampshire under a lease that expires in May 2002. The Company also maintains field sales offices in San Francisco, California; Chicago, Illinois; Englewood, Colorado; and New York, New York.
REPORTS TO STOCKHOLDERS
Upon the effective date of the registration statement, of which this prospectus is a part, Bottomline will become a reporting company. Thereafter, Bottomline intends to distribute to its stockholders annual reports containing audited financial statements.
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The executive officers, directors and key employees of the Company and their respective ages as of September 30, 1998 are as follows:
NAME AGE POSITION
---- --- --------
Daniel M. McGurl*......... 62 Chairman of the Board, President and Chief
Executive Officer
Joseph L. Mullen*......... 46 Executive Vice President, Operations and
Director
Robert A. Eberle*......... 37 Executive Vice President, Chief Financial
Officer and Treasurer
James L. Loomis........... 48 Senior Executive Advisor and Director
Joseph L. Barry, Jr. (1).. 65 Director
Bruce E. Elmblad (1)(2)... 70 Director
James W. Zilinski (2)..... 54 Director
Leonard J. DiIuro, Jr..... 51 Executive Vice President, Sales
John C. Insko............. 36 Vice President, Electronic Commerce and Finance
Division
Jonathan L. Smolowe....... 42 Vice President, Sales
Philip P. Grannan......... 55 Vice President, Marketing
Cleo A. O'Donnell III..... 44 Vice President, Development
James V. McMullen, Jr..... 55 Vice President, Customer Support and Services
Mark A. Attarian.......... 40 Vice President, Finance
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Daniel M. McGurl co-founded Bottomline in May 1989, and has served as Chairman of the Board of Directors, President and Chief Executive Officer of Bottomline since May 1989. From 1987 to 1989, Mr. McGurl served as Senior Vice President of State Street Bank and Trust Company. Prior to 1987, Mr. McGurl held a variety of positions at IBM Corporation, including Director of Marketing Planning and Director of Far East Operations.
Joseph L. Mullen has served as a director of Bottomline and Executive Vice President of Operations since July 1996, and served as Vice President of Sales and Marketing from July 1991 to July 1996. From 1977 to 1989, Mr. Mullen held a variety of positions at IBM Corporation, including Marketing Manager and Northeast Area Market Planning Manager.
Robert A. Eberle has served as Executive Vice President, Chief Financial Officer and Treasurer of Bottomline since September 1998. From December 1996 to September 1998, Mr. Eberle served as Executive Vice President of Telxon Corporation, a mobile computing and wireless data company, with primary responsibility for its Technical Subsidiaries Group. From August 1994 to December 1996, Mr. Eberle served as Executive Vice President and Chief Operating Officer of Itronix Corporation, a designer and manufacturer of notebook and hand-held computers and then a subsidiary of Texlon Corporation, with primary responsibility for the financial and operational performance of the company. From August 1993 to August 1994, Mr. Eberle served as Vice President of Corporate Development of Telxon Corporation, with primary responsibility for acquisitions, strategic relationships and its investment portfolio.
James L. Loomis co-founded Bottomline in May 1989, and has served as a director of Bottomline since May 1989. Since August 1998, Mr. Loomis has served as Senior Executive Advisor of Bottomline. From July 1996 to August 1998, Mr. Loomis served as Executive Vice President of Bottomline and from May 1989 to July 1996 Mr. Loomis served as Vice President and Treasurer. Prior to 1989, Mr. Loomis held a variety of positions with the Nashua Corporation, a manufacturer of imaging supply products, including Director of International Finance and treasurer of a foreign subsidiary.
Joseph L. Barry, Jr. has served as a director of Bottomline since June 1990. Since 1990, Mr. Barry has served as President of Hallmark Mechanical Corp., a machinery service company, and since 1956 as President of Hallamore Corp., a transportation and rigging company. Since 1975, Mr. Barry has served as Chairman of Northeast Concrete Products and since 1978 as Co-Chairman of New England Teamsters Pension Fund.
Bruce E. Elmblad has served as a director of Bottomline since August 1996. Since April 1994, Mr. Elmblad has served as President of Venture Investment Advisors, a venture capital advisory firm. From April 1990 to April 1994, Mr. Elmblad served as President of SED Management Co., Inc., an international venture capital management company. Mr. Elmblad is also a director of Antex Biologics Inc., a biopharmaceutical company.
James W. Zilinski has served as a director of Bottomline since August 1994. Since July 1995, Mr. Zilinski has served as President and Chief Executive Officer and a director of Berkshire Life Insurance Company, a life insurance company. From January 1994 to July 1995, Mr. Zilinski served as President of The BISYS Group, Inc., a provider of outsourcing services to financial institutions. From August 1993 to January 1994, Mr. Zilinski served as President of the Investment Services Group of The BISYS Group, Inc. Prior to 1993, Mr. Zilinski served as Executive Vice President and Chief Marketing Officer of New England Mutual Life Insurance Company.
Leonard J. DiIuro, Jr. has served as Executive Vice President of Sales of Bottomline since July 1998, and served as Vice President of Business Development from July 1996 to July 1998. From July 1994 to July 1996, Mr. DiIuro served as Vice President of Strategic Alliances and Area Manager of Bottomline and from May 1993 to July 1994 as Vice President of Strategic Alliances. Prior to 1993, Mr. DiIuro held a variety of positions at IBM Corporation, including Business Unit Executive, Branch Manager and Area Marketing Planning Manager.
John C. Insko has served as Vice President of Electronic Commerce and Finance Division of Bottomline since July 1998. From May 1996 to July 1998, Mr. Insko served as Vice President of Marketing of Electronic Commerce of Bottomline. From July 1994 to May 1996, Mr. Insko served as Vice President of Marketing of CertiSoft Solutions, Inc., a developer of software applications which Bottomline acquired in 1996. From November 1984 to July 1994, Mr. Insko held a variety of positions at Colorado National Bank, including Assistant Vice President and Manager of Cash Management and Operations. From January 1993 to October 1998, Mr. Insko served as a director of NACHA and since 1993 as a President of the Board of Directors of Rocky Mountain Automated Clearing House Association.
Jonathan L. Smolowe has served as Vice President of Sales of Bottomline since July 1991. From July 1990 to July 1991, Mr. Smolowe served as Account Executive for Bottomline. Prior to 1990, Mr. Smolowe held various executive level positions at IBM, including Location Branch Manager and International Executive Briefing Center Manager.
Philip P. Grannan has served as Vice President of Marketing of Bottomline since May 1994. From June 1993 to May 1994, Mr. Grannan served as Manager of the Electronic Payment Software Division. From September 1992 to June 1993, Mr. Grannan served as Northeast Area Manager of the Company. Prior to 1992, Mr. Grannan served as an Account Executive of Bottomline.
Cleo A. O'Donnell III has served as Vice President of Development of Bottomline since June 1996. From October 1989 to June 1996, Mr. O'Donnell served as Manager of Information Technology of Arbella Mutual Insurance Company, an insurance company, with primary responsibility for application development and network management. Prior to 1989, Mr. O'Donnell served as Project Manager of Blue Cross and Blue Shield of Massachusetts.
James V. McMullen, Jr. has served as Vice President of Customer Support and Services of Bottomline since July 1998. From September 1997 to July 1998, Mr. McMullen worked as an independent consultant to
the Company with primary responsibility for customer service and support. From November 1995 to September 1997, Mr. McMullen served as Vice President of Americas Customer Support for Lotus Development Corporation, a subsidiary of IBM Corporation, with primary responsibility for all post-sales technical support. From October 1989 to October 1995, Mr. McMullen served as the Director of Customer Support at Lotus Development Corporation with primary responsibility for technical support. Prior to 1989, Mr. McMullen held a variety of positions at IBM Corporation, including Systems Engineer Manager and Manager of Marketing and Support.
Mark A. Attarian has served as Vice President of Finance of Bottomline since September 1998. From February 1997 to September 1998, Mr. Attarian served as Vice President, Chief Financial Officer and Treasurer of Bottomline. From October 1996 to January 1997, Mr. Attarian served as an independent financial consultant. From July 1994 to September 1996, Mr. Attarian served as Chief Financial Officer and Vice President of Diatide, Inc., a biopharmaceutical company. From October 1993 to June 1994, Mr. Attarian served as an independent financial consultant.
BOARD OF DIRECTORS
Pursuant to the First Amendment and Restatement of Stock Rights and Voting Agreement, as amended, dated as of March 31, 1992 among Bottomline and certain stockholders of Bottomline, such stockholders were granted the right (which terminates upon the closing of this offering) to designate representatives on Bottomline's Board of Directors. Under this agreement, Messrs. McGurl, Loomis and Barry were elected to the Board of Directors.
Following this offering, the Board of Directors of Bottomline will be divided into three staggered classes, each of whose members will serve for a three-year term. The Board will consist of two Class I Directors (Messrs. Barry and Elmblad), two Class II Directors (Messrs. Mullen and Zilinski) and two Class III Directors (Messrs. McGurl and Loomis). At each annual meeting of stockholders, a class of directors will be elected for a three-year term to succeed the directors of the same class whose terms are then expiring. The terms of the Class I Directors, Class II Directors and Class III Directors will expire upon the election and qualification of successor directors at the Annual Meeting of Stockholders to be held during calendar years 1999, 2000 and 2001, respectively.
Each officer serves at the discretion of the Board of Directors and holds office until his or her successor is elected and qualified or until his or her earlier resignation or removal. There are no family relationships among any of the directors or executive officers of Bottomline.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a Compensation Committee composed of Messrs. Barry and Elmblad, which makes recommendations concerning salaries and incentive compensation for employees of Bottomline and administers and grants stock options under Bottomline's stock option plans. The Board of Directors also has an Audit Committee composed of Messrs. Elmblad and Zilinski, which reviews the results and scope of the audit and other services provided by Bottomline's independent public auditors.
DIRECTOR COMPENSATION
All of the directors are reimbursed for expenses incurred to attend Board of Directors and committee meetings. In addition, non-employee directors of Bottomline receive stock options under Bottomline's 1998 Director Stock Option Plan. See "Stock Plans--1998 Director Stock Option Plan."
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued for the fiscal year ended June 30, 1998 for each person who was serving as an executive officer of Bottomline on June 30, 1998 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------
SECURITIES ALL OTHER
NAME AND SALARY UNDERLYING COMPENSATION
PRINCIPAL POSITION ($) BONUS ($) OPTIONS (1) ($)(2)
------------------ ---------- ----------------------- ------------
Daniel M. McGurl
Chairman of the Board,
President and Chief
Executive Officer.......... $ 172,333 $ 50,000 30,000 $1,680
Joseph L. Mullen
Executive Vice President,
Operations................. 144,375 62,966 30,000 2,158
Mark A. Attarian
Vice President, Chief
Financial Officer and
Treasurer(3)............... 125,000 20,000 -- 1,706
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OPTION GRANTS DURING FISCAL 1998
The following table sets forth grants of stock options to each of the Named Executive Officers during the fiscal year ended June 30, 1998.
INDIVIDUAL GRANTS
-----------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM (1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
---- ---------- ------------- ----------- ---------- ----------- -----------
Daniel M. McGurl........ 30,000 5.0% $8.80 4/23/03 $ 42,308 $ 122,522
Joseph L. Mullen........ 30,000 5.0 8.00 4/23/08 150,935 382,498
Mark A. Attarian........ -- -- -- -- -- --
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FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information concerning the number and value of unexercised options held by each of the Named Executive Officers on June 30, 1998. None of the Named Executive Officers exercised stock options in the fiscal year ended June 30, 1998.
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
JUNE 30, 1998 JUNE 30, 1998 (1)
--------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------------------- ----------- -------------
Daniel M. McGurl.......... -- 30,000 -- $ 96,000
Joseph L. Mullen.......... -- 30,000 -- 120,000
Mark A. Attarian.......... 17,646 57,354 $70,584 229,416
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(1) Assumes a per share fair market value equal to $12.00, the mid-point of the estimated per share price range of the common stock offered hereby.
STOCK PLANS
1998 Director Stock Option Plan
The Board of Directors adopted Bottomline's 1998 Non-Employee Director Stock Option Plan in November 1998, subject to stockholder approval. Under the plan, directors of Bottomline who are not employees of Bottomline or any subsidiary of Bottomline receive non-statutory options to purchase shares of common stock. A total of 300,000 shares of common stock may be issued upon the exercise of options granted under the plan.
Under the terms of the 1998 plan, each non-employee director who first becomes a non-employee director after the closing of this offering will be granted an option to purchase 15,000 shares of common stock on the date of his or her initial election to the Board of Directors, which will vest ratably over four years on each anniversary of the date of grant. In addition, each non- employee director will receive an option to purchase 7,500 shares of common stock on the date of each annual meeting of stockholders commencing with the 1999 Annual Meeting of Stockholders (other than a director who was initially elected to the Board of Directors at any such annual meeting or, if previously, at any time after the prior year's annual meeting). The options granted annually vest upon the earlier of one year from the date of grant or the date immediately preceding the next Annual Meeting of Stockholders, so long as the optionee remains a director of Bottomline. The exercise price per share of all such options will be the fair market value of a share of common stock on the date of grant.
1989 Stock Option Plan and 1997 Stock Incentive Plan
Bottomline's 1989 Stock Option Plan was adopted by the Board of Directors and approved by the stockholders in 1989. As of September 30, 1998, options to purchase an aggregate of 330,000 shares of common stock at a weighted average exercise price of $5.54 per share were outstanding under the 1989 Plan. No additional option grants will be made under the 1989 Plan.
Bottomline's 1997 Stock Incentive Plan was adopted by the Board of Directors and the stockholders of Bottomline in August 1997. An amendment to the plan in November 1998 increased the number of authorized shares, subject to stockholder approval, under the plan to 2,700,000 shares of common stock. As of September 30, 1998, an aggregate of 783,000 shares of common stock at a weighted average exercise price of $8.48 per share were outstanding under the 1997 plan and an aggregate of 1,917,000 shares of common stock were reserved for issuance for future option grants.
The 1997 plan provides for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986, non-statutory stock options, restricted stock awards and other stock-based awards.
All officers, employees, directors, consultants and advisors of Bottomline and its subsidiaries are eligible to receive awards under the 1997 plan. Under present law, however, incentive stock options may only be granted to employees. No participant may receive an award for more than 300,000 shares in any calendar year.
The Company may grant options at an exercise price less than, equal to or greater than the fair market value of the common stock on the date of grant. Under present law, incentive stock options and options intended to qualify as performance-based compensation under Section 162(m) of the Code may not be granted at an exercise price less than the fair market value of the common stock on the date of grant (or less than 110% of the fair market value in the case of incentive stock options granted to optionees holding more than 10% of the voting power of Bottomline). The 1997 plan permits the Board of Directors to determine how optionees may pay the exercise price of their options, including by cash, check or in connection with a "cashless exercise" through a broker, by surrender to Bottomline of shares of common stock, by delivery to Bottomline of a promissory note, or by any combination of the permitted forms of payment.
The Board of Directors administers the 1997 plan. The Board of Directors has the authority to adopt, amend and repeal the administrative rules, guidelines and practices relating to the plan and to interpret its provisions. It may delegate authority under the plan to one or more committees of the Board of Directors and, subject to certain limitations, to one or more executive officers of Bottomline. The Board of Directors has authorized the Compensation Committee to administer the 1997 plan, including the granting of options to executive officers. Subject to any applicable limitations contained in the 1997 plan, the Board of Directors, the Compensation Committee or any other committee or executive officer to whom the Board of Directors delegates authority, as the case may be, selects the recipients of awards and determines:
. the number of shares of common stock covered by options and the dates upon which such options become exercisable;
. the exercise price of options;
. the duration of options; and
. the number of shares of common stock subject to any restricted stock or other stock-based awards and the terms and conditions of such awards, including the conditions for repurchase, issue price and repurchase price.
In the event of a merger, liquidation or other acquisition event, the Board of Directors is authorized to provide for outstanding options or other stock- based awards to be assumed or substituted for by the acquiror and to take certain other actions, including accelerating the vesting schedule of awards.
No award may be granted under the 1997 plan after August 2007, but the vesting and effectiveness of awards previously granted may extend beyond that date. The Board of Directors may at any time amend, suspend or terminate the 1997 plan, except that no award granted after an amendment of the 1997 plan and designated as subject to Section 162(m) of the Code by the Board of Directors shall become exercisable, realizable or vested (to the extent such amendment was required to grant such award) unless and until such amendment is approved by Bottomline's stockholders.
1998 Employee Stock Purchase Plan
The Board of Directors adopted Bottomline's 1998 Employee Stock Purchase Plan in November 1998, subject to stockholder approval. The Purchase Plan authorizes the issuance of up to a total of 750,000 shares of common stock to participating employees.
All employees of Bottomline, including directors of Bottomline who are employees, and all employees of any participating subsidiaries, whose customary employment is more than 20 hours per week for more than five months in any calendar year, are eligible to participate in the Purchase Plan. Employees who would immediately after the grant own 5% or more of the total combined voting power or value of the stock of Bottomline or any subsidiary are not eligible to participate. As of September 30, 1998, approximately 226 of Bottomline's employees would have been eligible to participate in the Purchase Plan.
On the first day of a designated payroll deduction period (the "Offering Period"), Bottomline will grant to each eligible employee who has elected to participate in the Purchase Plan an option to purchase shares of
common stock as follows: the employee may authorize an amount (a whole
percentage from 1% to 10% of such employee's base pay) to be deducted by
Bottomline from such employee's base pay during the Offering Period. On the
last day of the Offering Period, the employee is deemed to have exercised the
option, at the option exercise price, to the extent of accumulated payroll
deductions. Under the terms of the Purchase Plan, the option price is an amount
equal to 85% of the average market price (as defined) per share of the common
stock on either the first day or the last day of the Offering Period, whichever
is lower. In no event may an employee purchase in any one Offering Period a
number of shares which exceeds the number of shares determined by dividing (a)
the product of $2,083 and the number of whole months in the Offering Period by
(b) the closing price of a share of common stock on the commencement date of
the Offering Period. The Compensation Committee may, in its discretion, choose
an Offering Period of 12 months or less for each Offering and may choose a
different Offering Period for each Offering.
An employee who is not a participant on the last day of the Offering Period is not entitled to exercise any option, and the employee's accumulated payroll deductions will be refunded. An employee's rights under the Purchase Plan terminate upon voluntary withdrawal from the Purchase Plan at any time, or when the employee ceases employment for any reason, except that upon termination of employment because of death, the employee's beneficiary has certain rights to elect to exercise the option to purchase the shares that the accumulated payroll deductions in the participant's account would purchase at the date of death.
Because participation in the Purchase Plan is voluntary, Bottomline cannot now determine the number of shares of common stock to be purchased by any particular current executive officer, by all current executive officers as a group or by non-executive employees as a group.
401(K) PLAN
Bottomline has a 401(k) salary reduction plan, which is intended to qualify under Sections 401(a) and 401(k) of the Code. Generally, all employees are eligible to participate in the 401(k) Plan after they have completed three months of service.
Eligible employees electing to participate in the 401(k) Plan may defer a portion of their compensation, on a pre-tax basis, by making a contribution to the 401(k) Plan. The maximum contribution is fixed in Section 401(k) of the Code. The contribution limit for calendar year 1998 was $10,000. The Company may contribute a discretionary matching contribution, annually equal to 25% of each such participant's deferred compensation up to 5% of their annual compensation (in 1996, up to 20% of the first 3% for eligible employees' contributions). The Company contributed to the 401(k) Plan an aggregate of $14,000 in fiscal 1996, $26,000 in fiscal 1997 and $98,000 in fiscal 1998. Eligible employees who elect to participate in the 401(k) Plan are generally vested in Bottomline's matching contribution according to the following schedule:
YEARS OF SERVICE % VESTED ---------------- -------- Three............................... 20 Four................................ 40 Five................................ 60 Six................................. 80 Seven............................... 100 |
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with each of Messrs. McGurl, Mullen and Eberle. The provisions of each agreement are substantially the same. The term of each executive agreement is the greater of 36 months or 24 months after a Change in Control of the Company.
A Change in Control of the Company would occur if:
- - any person becomes the beneficial owner of 50% or more of the voting power of the Company's outstanding securities;
- - the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, unless (i) the Company's stockholders continued to own more than 80% of the combined voting power of the voting securities of the surviving entity or (ii) a merger or consolidation effected a recapitalization of the Company in which no person acquired more than 50% of the voting power of the Company's then outstanding securities; or
- - the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale of all or substantially all of the Company's assets.
If the employee's employment is terminated either by the employee as a result of an Involuntary Termination or by the Company without Cause, then all outstanding options held by the employee would become immediately exercisable in full (this provision does not become effective until November 2000 with respect to Messrs. McGurl and Mullen) and the employee would be entitled to receive a lump sum payment and continuation of benefits for a period of 12 months, in the case of Messrs. Eberle and Mullen, and for a period of 24 months in the case of Mr. McGurl. In the case of Messrs. Mullen and Eberle, the lump sum payment would equal one year's salary plus the maximum amount of bonus they were eligible to earn in the then current year. In the case of Mr. McGurl, the lump sum payment would equal two times the sum of his then annual salary plus the maximum amount of bonus he was eligible to earn in the then current year.
An Involuntary Termination would occur if:
- - the employee's duties were changed significantly;
- - the employee's base compensation were reduced;
- - the employee were required to work at a location outside a radius of 50 miles from the then current location; or
- - the Company materially breached the agreement (subject to the Company's ability to cure the breach in certain instances).
Cause means, prior to a Change in Control of the Company, the discharge of the employee resulting from:
- - a felony conviction;
- - failure to follow reasonable written policies or directives established by the chief executive officer or the Board of Directors, as the case may be, which failure continues for 21 days following written notice thereof to the employee;
- - the willful and persistent failure to attend to material duties or obligations reasonably imposed by the executive agreement, which failure continues for 21 days following written notice thereof to the employee;
- - the breach by the employee of any of his material obligations under any agreement between him and the Company which imposes confidentiality, proprietary information, assignment of invention(s), non-competition or similar obligations on him; or
- - the act or omission of the employee, which if he were prosecuted and convicted for such act or omission would constitute a crime or offense involving money or property of the Company (in either case in an amount or at a value in excess of $5,000), or which would constitute a felony in the jurisdiction involved.
The second, third and fourth items specified above would not be applicable after a Change in Control of the Company.
If the employee's employment is terminated upon or after a Potential Change in Control of the Company by the employee as a result of an Involuntary Termination or by the Company without Cause, all then outstanding options held by the employee would become immediately exercisable (this provision does not become effective until November 2000 with respect to Messrs. McGurl and Mullen) in full and the employee would be entitled to receive a lump sum payment and continuation of benefits for a period of 24 months. In the case of each of Messrs. Mullen and Eberle, the lump sum payment would equal two times the sum of his then annual salary plus the maximum amount of bonus he was eligible to earn in the then current year. In the case of Mr. McGurl, the lump sum payment would equal three times the sum of his then annual salary plus the maximum amount of bonus he was eligible to earn in the then current year.
A Potential Change in Control of the Company will be deemed to have occurred if:
- - the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Company;
- - any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control of the Company; or
- - the adoption of a resolution by the Board of Directors of the Company approving a Change in Control of the Company.
Each of the agreements provides that, in the event of a Change in Control, the Company would pay any excise tax which the employee would be liable for under Section 4999 of the Code as a result of having received the severance benefits. Mr. McGurl's agreement provides that, during the first year of the agreement, he will be paid an annual base salary of $185,000 and will have the opportunity to earn a bonus of up to $55,000. Under their agreements, each of Messrs. Mullen and Eberle will be paid an annual base salary of $175,000 and will each have the opportunity to earn a bonus of up to $50,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee of the Board of Directors are Messrs. Barry and Elmblad. No executive officer of Bottomline has served as a director or member of the compensation committee (or other committee serving an equivalent function) of any other entity whose executive officers served as a director or member of the Compensation Committee. From August 1997 to November 1998, Mr. McGurl served as a member of the Compensation Committee of the Board of Directors. Mr. McGurl is President and Chief Executive Officer of Bottomline.
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information regarding the beneficial ownership of the common stock of Bottomline as of September 30, 1998, and as adjusted to reflect the sale of the shares of common stock in the offering, for: (i) each person or entity known to Bottomline to own beneficially more than 5% of Bottomline's common stock, (ii) each of the directors of Bottomline, (iii) each of the Named Executive Officers, (iv) all directors and executive officers as a group and (v) each of the other selling stockholders. Except as indicated below, none of these persons or entities has a relationship with Bottomline or, to the knowledge of Bottomline, any of the Underwriters or their respective affiliates. Unless otherwise indicated, each person or entity named in the table has sole voting power and investment power (or shares such power with his or her spouse) with respect to all shares of capital stock listed as owned by such person or entity. The address of each of the employees, officers and directors of Bottomline is c/o Bottomline Technologies (de), Inc., 155 Fleet Street, Portsmouth, NH 03801.
SHARES SHARES
BENEFICIALLY OWNED NUMBER BENEFICIALLY OWNED
PRIOR TO OFFERING (1) OF AFTER OFFERING (1)(2)
------------------------- SHARES -------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
------------------------ ------------- ----------- ------- ------------- -----------
Daniel M. McGurl........ 1,875,000 25.4% 248,496 1,626,504 16.9%
James L. Loomis......... 1,875,000 25.4 248,496 1,626,504 16.9
John H. Harland Compa-
ny(3).................. 581,394 7.9 -- 581,394 6.0
Charles P. O'Leary(4)... 510,000 6.9 67,591 442,409 4.6
Joseph L. Barry,
Jr.(5)................. 174,375 2.6 -- 174,375 1.8
Bruce E. Elmblad(6)..... 45,000 * -- 45,000 *
Joseph L. Mullen........ 270,606 3.7 35,864 234,742 2.4
James W. Zilinski(7).... 45,000 * -- 45,000 *
Robert A. Eberle........ 15,000 * -- 15,000 *
All executive officers
and directors as a
group
(7 persons)(8)......... 4,299,981 58.6 532,856 3,767,125 39.5
Dennis E. Barry(9)...... 159,375 2.2 21,122 138,253 1.4
Lionel P. Boissiere,
Jr.(10) ............... 43,521 * 5,768 37,753 *
Fredrick A.
Brudreski(11).......... 15,000 * 994 14,006 *
Case Children's 1991 Ir-
revocable Trust(12).... 54,630 * 7,240 47,390 *
Carin H. Case(13)....... 13,656 * 1,810 11,846 *
Jeffrey H. Case(13)..... 13,656 * 1,810 11,846 *
Leonard L. DiIuro,
Jr.(14) ............... 60,000 * 7,952 52,048 *
Philip P. Grannan Revo-
cable Trust(15)........ 45,000 * 3,977 41,023 *
Hambrecht & Quist
Venture Investors,
L.P.(13)............... 236,751 3.2 31,377 205,374 2.1
Helmar B. Herman(16).... 279,000 3.8 36,976 242,024 2.5
David Hickey(17)........ 15,000 * 1,988 13,012 *
David Hickey and
Margaret
McEachern(17).......... 7,500 * 994 6,506 *
The Hoffmaster Family
Investment, L.P.(18)... 27,315 * 3,620 23,695 *
James T. Jewell(19) .... 37,500 * 4,970 32,530 *
Alan Kessman(20)........ 13,656 * 1,810 11,846 *
William E. Mayer(21).... 36,423 * 4,827 31,596 *
Margaret M. O'Toole(22)
....................... 45,000 * 5,964 39,036 *
Jeanette Roberts(23) ... 159,000 2.2 21,072 137,928 1.4
Stanley S. Shuman(24)... 36,423 * 4,827 31,596 *
Jonathan L. Smolowe(25)
....................... 75,000 1.0 9,940 65,060 *
William R. Timken(13)... 36,423 * 4,827 31,596 *
Vinod Gupta Revocable
Trust(26).............. 81,951 1.1 10,861 71,090 *
The Wellington Trust
UTA(27)................ 36,423 * 4,827 31,596 *
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(1) The number of shares beneficially owned by each stockholder is determined under rules promulgated by the Securities and Exchange Commission, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power and any shares as to which the individual or entity has the right to acquire beneficial ownership within 60 days after September 30, 1998 through the exercise of any stock option or other right. The inclusion herein of such shares, however, does not constitute an admission that the named stockholder is a direct or indirect beneficial owner of such shares. The aggregate number of outstanding shares of common stock includes 107,145 shares issued after September 30, 1998.
(2) In the event that the over-allotment option is exercised in full, the aggregate number of outstanding shares of common stock is 10,100,772.
(3) The stockholder's address is 2939 Miller Road, Decatur, GA 30035.
(4) The stockholder's address is 13 Greystone Lane, Hopkinton, Massachusetts 01748.
(5) Includes an aggregate of 15,000 shares of common stock subject to options which are exercisable within 60 days after September 30, 1998.
(6) Includes an aggregate of 15,000 shares of common stock subject to options which are exercisable within 60 days after September 30, 1998.
(7) Consists of an aggregate of 45,000 shares of common stock subject to options which are exercisable within 60 days after September 30, 1998.
(8) Includes an aggregate of 75,000 shares of common stock subject to options which are exercisable within 60 days after September 30, 1998.
(9) The stockholder's address is 138 Bedford Street, Lakeville, Massachusetts 02347.
(10) The stockholder's address is c/o Doyle & Boissiere LLC, 330 Primrose Road, 5th Floor, Burlingame, CA 94010. Includes an aggregate of 7,500 shares of common stock subject to options which are exercisable within 60 days after September 30, 1998.
(11) The stockholder is an Account Executive at Bottomline.
(12) The stockholder's address is Lionel P. Boissiere, Jr., Trustee, c/o Doyle & Boissiere LLC, 330 Primrose Road, 5th Floor, Burlingame, California 94010.
(13) The stockholder's address is c/o Hambrecht & Quist, One Bush Street, 18th Floor, San Francisco, California 94104.
(14) The stockholder is Senior Vice President of Sales at Bottomline.
(15) Philip P. Grannan, trustee of the revocable trust, is Vice President of Marketing at Bottomline. Includes an aggregate of 15,000 shares of common stock subject to options which are exercisable within 60 days after September 30, 1998.
(16) The stockholder is Vice President of Technology at Bottomline.
(17) The stockholder is Vice President of Customer Sales at Bottomline.
(18) The stockholder's address is c/o Jon D. Hoffmaster, American Business Information, 8905 Farnam Court, Omaha, Nebraska 68114.
(19) The stockholder is Vice President of Strategic Alliances at Bottomline.
(20) The stockholder's address is 11 Hedgerow Lane, Greenwich, Connecticut 06831.
(21) The stockholder's address is 172 Long Neck Point, Darien, Connecticut 06820.
(22) The stockholder is Director of Product Architecture at Bottomline.
(23) The stockholder is an On-Site Consultant at Bottomline.
(24) The stockholder's address is 711 Fifth Avenue, New York, New York 10022.
(25) The stockholder is Vice President of Sales at Bottomline.
(26) The stockholder's address is P.O. Box 27395, Omaha, Nebraska 68127.
(27) The stockholder's address is c/o Robert or Martha Cohn, TTEE, 215 Lowell Avenue, Palo Alto, California 94310.
DESCRIPTION OF CAPITAL STOCK
After this offering, the authorized capital stock of Bottomline will consist of 50,000,000 shares of common stock, $.001 par value per share, and 4,000,000 shares of preferred stock, $.001 par value per share. As of September 30, 1998, there were outstanding (i) 7,286,127 shares of common stock held by 44 stockholders of record after giving effect to the termination of redemption rights of the redeemable common stock upon the effectiveness of this offering and (ii) options to purchase an aggregate of 1,113,000 shares of common stock.
The following summary of certain provisions of Bottomline's common stock, preferred stock, Restated Certificate of Incorporation and Amended and Restated By-laws (the "By-laws") is not intended to be complete and is qualified by reference to the provisions of applicable law and to Bottomline's Restated Certificate of Incorporation and By-laws included as exhibits to the Registration Statement of which this prospectus is a part. See "Additional Filings and Company Information."
COMMON STOCK
Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. Accordingly, holders of a majority of the shares of common stock entitled to vote in any election of directors may elect all of the directors standing for election. Holders of common stock are entitled to receive proportionately any such dividends declared by the Board of Directors, subject to any preferential dividend rights of outstanding preferred stock. Upon the liquidation, dissolution or winding up of Bottomline, the holders of common stock are entitled to receive ratably the net assets of Bottomline available after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock. Holders of common stock have no preemptive, subscription, redemption or conversion rights. The outstanding shares of common stock are, and the shares offered by Bottomline in this offering will be, when issued and paid for, fully paid and nonassessable. The rights, preferences and privileges of holders of common stock are subject to the rights of the holders of shares of any series of preferred stock which Bottomline may designate and issue in the future. Certain holders of common stock have the right to require Bottomline to register their shares of common stock under the Securities Act in certain circumstances. See "Shares Eligible for Future Sale."
PREFERRED STOCK
Under the terms of the Restated Certificate of Incorporation, the Board of Directors is authorized to issue such shares of Preferred Stock in one or more series without stockholder approval. The Board has discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences of each series of preferred stock.
The purpose of authorizing the Board of Directors to issue preferred stock and determine its rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could make it more difficult for a third party to acquire, or could discourage a third party from acquiring, a majority of the outstanding voting stock of Bottomline. Bottomline has no present plans to issue any shares of preferred stock.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
Bottomline is subject to the provisions of Section 203 of the Delaware General Corporation Law statute. Section 203 prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. A "business combination" includes mergers, asset sales and other transactions resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an "interested stockholder" is a person who, together with affiliates and associates, owns, or within three years did own, 15% or more of the corporation's voting stock.
The By-laws provide for the division of the Board of Directors into three classes as nearly equal in size as possible with staggered three-year terms. See "Management." Under the By-laws, any vacancy on the Board of Directors, including a vacancy resulting from an enlargement of the Board of Directors, may only be filled by vote of a majority of the directors then in office. The classification of the Board of Directors and the limitation on and filling of vacancies could make it more difficult for a third party to acquire, or discourage a third party from acquiring, control of Bottomline.
The By-laws also provide that after this offering, any action required or permitted to be taken by the stockholders of Bottomline at an annual meeting or special meeting of stockholders may only be taken if it is properly brought before such meeting and may not be taken by written action in lieu of a meeting. The By-laws further provide that special meetings of the stockholders may only be called by the Chairman of the Board, the President or the Board of Directors.
In order for any matter to be considered "properly brought" before a meeting, a stockholder must comply with advance notice and information disclosure requirements. The stockholder must deliver written notice of the matter to the Secretary of Bottomline, to be received not less than 60 days nor more than 90 days prior to the meeting. However, if less than 70 days' notice or prior public disclosure of the date of the meeting is given to stockholders, the notice would have to be received by the Secretary not later than the close of business on the 10th day following the date on which the notice of the meeting was mailed or such public disclosure was made, whichever occurs first. If the matter relates to the election of directors of Bottomline, the notice must set forth specific information regarding each nominee and the nominating shareholder. For any other matter, the notice must set forth a brief description of the business desired to be brought and the reasons for conducting business at the annual meeting and certain information regarding the proponent stockholder. These provisions could have the effect of delaying until the next stockholders meeting stockholder actions which are favored by the holders of a majority of the outstanding voting securities of Bottomline. These provisions could also discourage a third party from making a tender offer for the common stock, because even if it acquired a majority of the outstanding voting securities of Bottomline, the third party would be able to take action as a stockholder (such as electing new directors or approving a merger) only at a duly called stockholders' meeting, and not by written consent.
The Delaware General Corporation Law statute provides generally that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend a corporation's certificate of incorporation or by-laws, unless a corporation's certificate of incorporation or by-laws, as the case may be, requires a greater percentage. The By-laws require the affirmative vote of holders of at least 75% of the votes which all the stockholders would be entitled to cast in any annual election of directors or class of directors to amend or repeal any of the provisions described in the prior two paragraphs.
The Restated Certificate of Incorporation contains certain provisions permitted under the Delaware General Corporation Law statute relating to the liability of directors. The provisions eliminate a director's liability for monetary damages for a breach of fiduciary duty, except in certain circumstances involving wrongful acts, such as the breach of a director's duty of loyalty or acts or omissions which involve intentional misconduct or a knowing violation of law. Further, the Restated Certificate of Incorporation contains provisions to indemnify Bottomline's directors and officers to the fullest extent permitted by the Delaware General Corporation Law statute. Bottomline believes that these provisions will assist Bottomline in attracting and retaining qualified individuals to serve as directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is State Street Bank and Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for the securities of Bottomline. After completion of this offering there will be 9,643,272 shares of common stock of Bottomline outstanding (assuming no exercise of the underwriters' over-allotment option or outstanding options of Bottomline). Of these shares, the 3,050,000 shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act of 1933, except that any shares purchased by "affiliates" of Bottomline, as that term is defined in Rule 144 under the Securities Act, may generally only be sold in compliance with the limitations of Rule 144 described below.
SALES OF RESTRICTED SHARES
All of the shares offered under this prospectus will be freely tradable in the open market. The remaining 6,593,272 shares of common stock that will be outstanding after this offering are considered "restricted securities" under Rules 144 or 701 of the Securities Act. Generally, restricted securities that have been owned for a period of at least two years may be sold immediately after the completion of this offering and restricted securities that have been owned for at least one year may be sold 90 days after the completion of this offering. Certain of the restricted securities are subject to lock-up agreements with the underwriters. Persons subject to lock-up agreements have agreed not to sell shares of common stock without the prior permission of the underwriters for a period of 180 days after the completion of this offering. The table below sets forth information regarding potential sales of restricted securities.
. 101,667 shares may be sold immediately after completion of this offering; and
. 6,384,460 additional shares may be sold upon the expiration of the lock-up agreements.
OPTIONS
Shares of common stock may also be issued and sold upon the exercise of options. After this offering, Bottomline intends to register an aggregate of 3,330,000 shares of common stock, which may be issued under its 1989 Stock Option Plan, 1997 Stock Incentive Plan and 1998 Director Stock Option Plan. Shares issued upon the exercise of stock options after the effective date of the Form S-8 registration statements will be eligible for resale in the public market without restriction, subject to Rule 144 limitations applicable to affiliates and the lock-up agreements noted above, if applicable. As a result of the exercise of vested options 90 days after the completion of this offering, 16,500 additional shares may be sold. Upon the expiration of the lock-up agreements, 364,881 additional shares may be sold as a result of the exercise of vested options.
In addition, Bottomline intends to register an aggregate of 750,000 shares of common stock reserved for issuance under its 1998 Employee Stock Purchase Plan. However, no shares will be issuable under the 1998 Employee Stock Purchase Plan until June 30, 1999.
REGISTRATION RIGHTS
Under agreements with the Company, certain current stockholders will be entitled following this offering to certain rights to register under the Securities Act a total of approximately 5,236,469 shares of common stock. The agreements generally provide that if the Company proposes to register any of its securities under the Securities Act, the stockholders will be entitled to include shares in the registration. The managing underwriter of any underwritten public offering would, however, have the right, for marketing reasons, to cut-back the number of shares that the stockholders could include in such registration.
Certain of the stockholders with registration rights may require the Company to prepare and file a registration statement under the Securities Act for their shares at any time after this offering, provided that the minimum aggregate offering price is at least $2.0 million. The Company is not required to effect more than three registration statements and is not required to file a registration statement within 180 days after the effective date of any other registration statement filed by the Company.
EFFECT OF SALES OF SHARES
Prior to this offering, there has been no public market for the common stock, and no prediction can be made as to the effect, if any, that market sales of shares of common stock or the availability of shares for sale will have on the market price of the common stock prevailing from time to time. Nevertheless, sales of significant numbers of shares of the common stock in the public market could adversely affect the market price of the common stock and could impair Bottomline's future ability to raise capital through an offering of its equity securities.
UNDERWRITING
The underwriters named below acting through their representatives, BancBoston Robertson Stephens Inc., BT Alex. Brown Incorporated and CIBC Oppenheimer Corp., have severally agreed with Bottomline and certain stockholders of the Company, subject to the terms and conditions of the underwriting agreement, to purchase from Bottomline and the selling stockholders the number of shares of common stock set forth opposite their names below. The underwriters are committed to purchase and pay for all such shares if any are purchased.
NUMBER
UNDERWRITER OF SHARES
----------- ---------
BancBoston Robertson Stephens Inc. ................................
BT Alex. Brown Incorporated........................................
CIBC Oppenheimer Corp. ............................................
---------
Total......................................................... 3,050,000
=========
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Bottomline and the selling stockholders have been advised by the representatives that the underwriters propose to offer the shares of common stock to the public at the public offering price set forth on the cover page of this prospectus and to certain dealers at such price less a concession of not in excess of $[ ] per share, of which $[ ] may be reallowed to other dealers. After this offering, the public offering price, concession, and reallowance to dealers may be reduced by the representatives. No such reduction shall change the amount of proceeds to be received by the Company and the selling stockholders as set forth on the cover page of this prospectus.
Bottomline has granted to the underwriters an option, exercisable during the 30-day period after the date of this prospectus, to purchase up to 457,500 additional shares of common stock at the same price per share as the Company and the selling stockholders will receive for the 3,050,000 shares that the underwriters have agreed to purchase. To the extent that the underwriters exercise such option, each of the underwriters will have a firm commitment to purchase approximately the same percentage of such additional shares that the number of shares of common stock to be purchased by it shown in the above table represents as a percentage of the 3,050,000 shares offered hereby. If purchased, such additional shares will be sold by the underwriters on the same terms as those on which the 3,050,000 shares are being sold. Bottomline will be obligated, pursuant to the option, to sell shares to the extent the option is exercised. The underwriters may exercise such option only to cover over- allotments made in connection with the sale of the shares of common stock offered hereby.
The underwriting agreement contains covenants of indemnity among the underwriters, the Company and the selling stockholders against certain civil liabilities, including liabilities under the Securities Act and liabilities arising from breaches of representations and warranties contained in the underwriting agreement.
Each officer and director of the Company and certain other holders of shares of common stock have agreed, for the lock-up period, subject to certain exceptions, not to offer to sell, contract to sell, or otherwise sell, dispose of, loan, pledge or grant any rights with respect to any shares of common stock or any options to purchase any shares of common stock, or any securities convertible into or exchangeable for shares of common stock owned as of the date of this prospectus or thereafter acquired directly by such holders or with respect to which they have the power of disposition, without the prior written consent of BancBoston Robertson Stephens Inc. However, BancBoston Robertson Stephens Inc. may, in its sole discretion and at any time without notice, release all or any portion of securities subject to lock-up agreement. There are no existing agreements between the representatives and any of Bottomline's stockholders providing consent to the sale of shares prior to the expiration of the lock-up period. In addition, Bottomline has agreed that during the lock-up period the Company will not, without the prior written consent of BancBoston Robertson Stephens Inc., subject to certain exceptions, (i) consent to the disposition of any shares held by stockholders subject to lock-up agreements
prior to the expiration of the lock-up period or (ii) issue, sell, contract to sell, or otherwise dispose of, any shares of common stock, any options to purchase any shares of common stock or any securities convertible into, exercisable for or exchangeable for shares of common stock other than the Company's sale of shares in this offering, the issuance of common stock upon the exercise of outstanding options, and the Company's issuance of options and shares under existing stock option and incentive plans. See "Shares Eligible for Future Sale."
The underwriters do not intend to confirm sales to any accounts over which they exercise discretionary authority.
Prior to this offering, there has been no public market for the common stock. Consequently, the public offering price for the common stock offered by this prospectus will be determined through negotiations among the Company, the selling stockholders and the representatives. Among the factors to be considered in such negotiations are prevailing market conditions, certain financial information of the Company, market valuations of other companies that the Company and the representatives believe to be comparable to the Company, estimates of the business potential of the Company, the present state of the Company's development and other factors deemed relevant.
The representatives have advised the Company that, pursuant to Regulation M under the Securities Act, certain persons participating in this offering may engage in transactions, including stabilizing bids, syndicate covering transactions or the imposition of penalty bids, that may have the effect of stabilizing or maintaining the market price of the common stock at a level above that which might otherwise prevail in the open market. A "stabilizing bid" is a bid for or the purchase of common stock on behalf of the underwriters for the purpose of fixing or maintaining the price of the common stock. A "syndicate covering transaction" is the bid for or the purchase of common stock on behalf of the underwriters to reduce a short position incurred by the underwriters in connection with this offering. A "penalty bid" is an arrangement permitting the representatives to reclaim the selling concession otherwise accruing to an underwriter or syndicate member in connection with this offering if the common stock originally sold by such underwriter or syndicate member is purchased by the representatives in a syndicate covering transaction and has therefore not been effectively placed by such underwriter or syndicate member. The representatives have advised the Company that such transactions may be effected on the Nasdaq National Market or otherwise and, if commenced, may be discontinued at any time.
LEGAL MATTERS
The validity of the shares of common stock offered by Bottomline hereby will be passed upon for Bottomline by Hale and Dorr LLP, Boston, Massachusetts, and for the underwriters by Foley, Hoag & Eliot LLP, Boston, Massachusetts.
EXPERTS
The financial statements of Bottomline Technologies (de), Inc. at June 30, 1997 and 1998, and for each of the three years in the period ended June 30, 1998, appearing in this prospectus and Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing.
ADDITIONAL FILINGS AND COMPANY INFORMATION
We have filed a Registration Statement on Form S-1 with the Commission. This prospectus, which is a part of the Registration Statement, does not contain all of the information included in the Registration Statement. Certain information is omitted and you should refer to the Registration Statement and its exhibits. With respect to references made in this prospectus to any contract, agreement or other document of Bottomline, such references are not necessarily complete and you should refer to the exhibits attached to the Registration Statement for copies of the actual contract, agreement or other document. You may review a copy of the Registration Statement, including exhibits, at the Commission's public reference room at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 or Seven World Trade Center, 13th Floor, New York, New York 10048 or Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Please call the Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms.
We will also file annual, quarterly and current reports, proxy statements and other information with the Commission. You may read and copy any reports, statements or other information on file at the public reference rooms. You can also request copies of these documents, for a copying fee, by writing to the Commission.
Our Commission filings and the Registration Statement can also be reviewed by accessing the Commission's Internet site at http://www.sec.gov, which contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission.
BOTTOMLINE TECHNOLOGIES (DE), INC.
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Report of Independent Auditors............................................ F-2
Balance Sheets as of June 30, 1997 and 1998 and September 30, 1998
(Unaudited)............................................................. F-3
Statements of Operations for the years ended June 30, 1996, 1997 and 1998
and for the three months ended September 30, 1997 and 1998 (Unaudited).. F-4
Statements of Stockholders' Equity for the years ended June 30, 1996, 1997
and 1998 and for the three months ended September 30, 1998 (Unaudited).. F-5
Statements of Cash Flows for the years ended June 30, 1996, 1997 and 1998
and for the three months ended September 30, 1997 and 1998 (Unaudited).. F-6
Notes to Financial Statements ............................................ F-7
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REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Bottomline Technologies (de), Inc.
We have audited the accompanying balance sheets of Bottomline Technologies
(de), Inc. as of June 30, 1997 and 1998, and the related statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended June 30, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bottomline Technologies (de), Inc. at June 30, 1997 and 1998, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 1998, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
August 6, 1998, except for
Note 11 as to which the
date is November 12, 1998
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and Note 12 as to which
the date is January 6, 1999
BOTTOMLINE TECHNOLOGIES (DE), INC.
BALANCE SHEETS
JUNE 30,
------------------------- SEPTEMBER 30,
1997 1998 1998
------------ ------------ ------------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS (Note 6)
Current assets:
Cash and cash equivalents......... $ 827 $ 1,362 $ 1,491
Accounts receivable, net of
allowances for doubtful
accounts and returns of $644 at
June 30, 1997, $970 at June 30,
1998 and $1,071 at September
30, 1998........................ 5,596 6,997 7,228
Inventory, net.................... 656 174 156
Refundable income taxes........... 905 -- --
Deferred income taxes (Note 10)... 571 724 724
Prepaid expenses and other
current assets.................. 187 89 316
------------ ------------ ------------
Total current assets................ 8,742 9,346 9,915
Property and equipment, net (Note
4)................................ 1,446 1,865 2,109
Capitalized and acquired software
costs, net of accumulated
amortization of $836 in 1997
(Notes 2 and 3)................... 253 -- --
Other assets........................ 40 90 60
------------ ------------ ------------
Total assets........................ $ 10,481 $ 11,301 $ 12,084
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Amounts due under revolving
credit arrangement (Note 6)..... $ 1,045 -- --
Accounts payable.................. 2,177 $ 1,177 $ 1,474
Accrued expenses (Note 5)......... 1,696 2,030 2,141
Deferred revenue and deposits..... 1,063 2,121 2,069
Income taxes payable.............. -- 59 54
Current portion of long-term debt
(Note 6)........................ 285 75 50
------------ ------------ ------------
Total current liabilities........... 6,266 5,462 5,788
Deferred income taxes payable (Note
10)............................... 235 118 118
Long-term debt, less current portion
(Note 6).......................... 54 -- --
Commitments and contingent
liabilities (Note 7)..............
Redeemable common stock, at
redemption value (Note 8)
(Authorized, issued and outstanding
shares -- 801 in all periods)..... 1,246 1,353 1,381
Stockholders' equity (Note 8):
Common stock, $.001 par value:
Authorized shares -- 15,000
Issued and outstanding shares--
6,306 at June 30, 1997, 6,360
at June 30, 1998 and 6,486 at
September 30, 1998........... 6 6 6
Additional paid-in-capital........ 1,675 1,867 1,867
Retained earnings................. 999 2,495 2,924
------------ ------------ ------------
Total stockholders' equity.......... 2,680 4,368 4,797
------------ ------------ ------------
Total liabilities and stockholders'
equity............................ $ 10,481 $ 11,301 $ 12,084
============ ============ ============
|
See accompanying notes.
BOTTOMLINE TECHNOLOGIES (DE), INC.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
YEARS ENDED JUNE 30, SEPTEMBER 30,
------------------------- --------------------
1996 1997 1998 1997 1998
------- ------- ------- --------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues:
Software licenses.......... $ 4,689 $ 6,392 $ 9,887 $ 1,591 $ 3,477
Service and maintenance.... 4,580 6,729 9,701 1,937 2,254
Equipment and supplies..... 8,798 9,005 9,449 2,536 2,374
------- ------- ------- --------- ---------
Total revenues............... 18,067 22,126 29,037 6,064 8,105
Cost of revenues:
Software licenses.......... 27 160 215 48 123
Service and maintenance.... 2,655 4,206 4,261 851 1,106
Equipment and supplies..... 5,361 6,410 6,526 1,648 1,682
------- ------- ------- --------- ---------
Total cost of revenues....... 8,043 10,776 11,002 2,547 2,911
------- ------- ------- --------- ---------
Gross profit................. 10,024 11,350 18,035 3,517 5,194
Operating expenses:
Sales and marketing........ 4,190 6,631 7,675 1,557 2,242
Product development and
engineering............... 1,237 2,185 3,158 670 928
General and
administrative............ 3,044 4,266 4,372 932 1,277
------- ------- ------- --------- ---------
Total operating expenses..... 8,471 13,082 15,205 3,159 4,447
------- ------- ------- --------- ---------
Income (loss) from opera-
tions....................... 1,553 (1,732) 2,830 358 747
Interest income.............. 48 53 35 7 17
Interest expense............. (54) (109) (85) (29) (2)
------- ------- ------- --------- ---------
(6) (56) (50) (22) 15
------- ------- ------- --------- ---------
Income (loss) before provi-
sion (benefit) for income
taxes....................... 1,547 (1,788) 2,780 336 762
Provision (benefit) for in-
come taxes (Note 10)........ 664 (536) 1,177 142 305
------- ------- ------- --------- ---------
Net income (loss)............ $ 883 $(1,252) $ 1,603 $ 194 $ 457
======= ======= ======= ========= =========
Earnings (loss) per share
available to common
stockholders (Note 9):
Basic...................... $ 0.14 $ (0.23) $ 0.24 $ .03 $ .07
======= ======= ======= ========= =========
Diluted.................... $ 0.11 $ (0.23) $ 0.20 $ .02 $ .06
======= ======= ======= ========= =========
Shares used in computing
earnings (loss) per share
available to common
stockholders (Note 9):
Basic...................... 5,693 5,986 6,314 6,307 6,361
======= ======= ======= ========= =========
Diluted.................... 7,001 5,986 7,316 7,297 7,456
======= ======= ======= ========= =========
|
See accompanying notes.
BOTTOMLINE TECHNOLOGIES (DE), INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1996, 1997 AND 1998 AND
THREE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
COMMON STOCK ADDITIONAL TOTAL
------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- -------- -------------
(IN THOUSANDS)
Balances at July 1, 1995...... 5,613 $ 6 $ 624 $1,553 $2,183
Issuance of common stock
upon exercise of stock
options (Note 8).......... 141 -- 250 -- 250
Issuance of common stock for
acquisition of the common
stock of CertiSoft (Note
3)........................ 90 -- 480 -- 480
Accretion to redemption
value on redeemable common
stock..................... -- -- -- (88) (88)
Net income.................. -- -- -- 883 883
----- ---- ------ ------ ------
Balances at June 30, 1996..... 5,844 6 1,354 2,348 3,708
Issuance of common stock
upon exercise of stock
options (Note 8).......... 135 -- 297 -- 297
Issuance of common stock
upon exercise of stock
warrants (Note 8)......... 327 -- 24 -- 24
Accretion to redemption
value on redeemable common
stock..................... -- -- -- (97) (97)
Net loss.................... -- -- -- (1,252) (1,252)
----- ---- ------ ------ ------
Balances at June 30, 1997..... 6,306 6 1,675 999 2,680
Issuance of common stock
upon exercise of stock
options (Note 8).......... 54 -- 192 -- 192
Accretion to redemption
value on redeemable common
stock..................... -- -- -- (107) (107)
Net income.................. -- -- -- 1,603 1,603
----- ---- ------ ------ ------
Balances at June 30, 1998..... 6,360 6 1,867 2,495 4,368
Issuance of common stock
upon exercise of stock
warrants (Note 8)
(Unaudited)............... 126 -- -- -- --
Accretion to redemption
value on redeemable common
stock (Unaudited)......... -- -- -- (28) (28)
Net income (Unaudited)...... -- -- -- 457 457
----- ---- ------ ------ ------
Balances at September 30, 1998
(Unaudited)................. 6,486 $ 6 $1,867 $2,924 $4,797
===== ==== ====== ====== ======
|
See accompanying notes.
BOTTOMLINE TECHNOLOGIES (DE), INC.
STATEMENTS OF CASH FLOWS
THREE
YEARS ENDED MONTHS ENDED
JUNE 30, SEPTEMBER 30,
------------------------ ---------------
1996 1997 1998 1997 1998
------ ------- ------- ------- ------
(UNAUDITED)
(IN THOUSANDS)
OPERATING ACTIVITIES
Net income (loss).................. $ 883 $(1,252) $ 1,603 $ 194 $ 457
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization..... 784 1,174 827 216 190
Provision for allowances on
accounts receivable............. 4 487 326 29 28
Provision for allowances for
obsolescence of inventory....... -- 217 -- -- --
Deferred income tax benefit....... (102) (297) (270) -- --
Changes in operating assets and
liabilities:
(Increase) decrease in accounts
receivable..................... (506) (1,452) (1,727) 537 (259)
Decrease (increase) in inventory,
prepaid expenses and other
current assets and other
assets......................... (237) (138) 530 134 (179)
Decrease (increase) in refundable
income taxes................... -- (905) 905 136 --
Increase (decrease) in accounts
payable, accrued expenses and
deferred revenue and deposits.. (343) 1,907 392 (1,080) 356
(Decrease) increase in income
taxes payable.................. 337 (409) 59 -- (5)
------ ------- ------- ------- ------
Net cash provided by (used in)
operating activities............. 820 (668) 2,645 166 588
INVESTING ACTIVITIES
Purchases of property and
equipment, net................... (311) (580) (993) (159) (434)
Increase in capitalized software
costs............................ (158) (114) -- -- --
------ ------- ------- ------- ------
Net cash used in investing
activities....................... (469) (694) (993) (159) (434)
FINANCING ACTIVITIES
Net borrowings (repayments) on
revolving credit arrangement..... -- 1,045 (1,045) (45) --
Repayments on notes payable........ (152) (258) (264) (71) (25)
Proceeds from exercise of stock
options and stock warrants....... 250 321 192 -- --
------ ------- ------- ------- ------
Net cash provided by (used in)
financing activities............. 98 1,108 (1,117) (116) (25)
------ ------- ------- ------- ------
Increase (decrease) in cash and
cash equivalents................. 449 (254) 535 (109) 129
Cash and cash equivalents at
beginning of year................ 632 1,081 827 827 1,362
------ ------- ------- ------- ------
Cash and cash equivalents at end of
year............................. $1,081 $ 827 $ 1,362 $ 718 $1,491
====== ======= ======= ======= ======
Supplemental disclosure of cash
flow information:
Cash paid during the year for:
Interest......................... $ 54 $ 106 $ 85 $ 28 $ 2
Income taxes..................... $ 446 $ 1,017 $ 464 $ 7 $ 141
Non-cash transactions:
Acquisition of the common stock
of CertiSoft for common stock
and assumption of note payable
(Note 3)....................... $ 764 -- -- -- --
|
See accompanying notes.
BOTTOMLINE TECHNOLOGIES (DE), INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996, 1997 AND 1998; THREE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1998 (UNAUDITED)
1. ORGANIZATION AND NATURE OF BUSINESS
Bottomline Technologies, Inc. (the predecessor Company) was incorporated in New Hampshire in 1989 and, on August 25, 1997, the predecessor Company was merged with and into Bottomline Technologies (de), Inc. (the Company), a company incorporated in Delaware. The Company is a domestic company that develops and markets proprietary software and complementary products and services. The Company's products and services are sold to customers operating in many different industries. The Company does not require collateral on its accounts receivable, which is in accordance with industry practice.
On May 2, 1996, the Company acquired CertiSoft Solutions, Inc. (CertiSoft) and on January 9, 1997, CertiSoft was merged into the predecessor Company. CertiSoft is included in the results of operations from May 2, 1996, the date of acquisition.
2. SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Cash and cash equivalents consists of demand deposit accounts and an overnight investment account at a financial institution. The Company considers all highly liquid instruments with an original maturity of ninety days or less to be cash equivalents.
Inventory
Inventory is stated at the lower of cost (first-in, first-out method) or market.
Property and Equipment
Property and equipment is stated at cost. Depreciation is provided on the straight-line method over the estimated useful lives of the assets, principally from 3-7 years. Leasehold improvements are amortized over their useful lives or the term of the lease, whichever is less.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising costs were $62,000, $114,000 and $129,000 for the years ended June 30, 1996, 1997 and 1998, respectively, and $39,000 and $15,000 for the three months ended September 30, 1997 and 1998, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates include but are not limited to the allowances for doubtful accounts and returns. Actual results could differ from those estimates.
Income Taxes
Deferred income taxes are provided for differences in bases of assets and liabilities for financial reporting and income tax purposes. Temporary differences relate primarily to depreciation, various accruals, and allowances for doubtful accounts, returns and inventory.
BOTTOMLINE TECHNOLOGIES (DE), INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Stock-Based Compensation
Statement of Financial Accounting Standards No. 123, "Accounting for Stock- Based Compensation" (SFAS 123) encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has elected to continue to account for stock based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related Interpretations.
Capitalized and Acquired Software Costs
Costs incurred to develop software to be sold, leased or otherwise marketed are capitalized upon attainment of technological feasibility and amortized on a product-by-product basis over the estimated useful life of the related software. Such software costs totaled $1,089,000 at June 30, 1997. Also included in capitalized software costs was $546,000 attributable to acquired software in connection with the acquisition of CertiSoft (See Note 3). Capitalized and acquired software costs charged to operations were $423,000, $631,000 and $253,000 for the years ended June 30, 1996, 1997 and 1998, respectively, including additional amortization in 1997 on certain acquired software, and $75,000 and $-0- for the three months ended September 30, 1997 and 1998, respectively. At June 30, 1998, capitalized software costs had been fully amortized.
The carrying value of intangible assets is periodically reviewed by the Company based on the expected future undiscounted operating cash flows of the related asset. If an impairment is indicated, the Company will adjust the carrying value of the intangible assets.
Revenue Recognition
Revenue for software is recognized when product is shipped and there are no significant remaining obligations of the Company. Revenue for services is recognized as the services are provided to the customer. Revenue under software maintenance agreements is recognized ratably over the term of the agreement, generally one year. Revenue for hardware is recognized when product is shipped. Revenue is recognized in accordance with Statement of Position (SOP) 91-1 for periods prior to July 1, 1998. See Accounting Pronouncements below.
Customer Returns
Customer returns are estimated and accrued for when known based on return authorizations.
Earnings per Share
The Company computes earnings per share in accordance with Statement of Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS 128). SFAS 128 requires calculation and presentation of basic and diluted earnings per share. Basic earnings per share is calculated based on the weighted average number of common shares outstanding and excludes any dilutive effects of warrants, stock options or other type securities. Diluted earnings per share is calculated based on the weighted average number of common shares outstanding and the dilutive effect of stock options, warrants and related securities calculated using the treasury stock method. Dilutive securities are excluded from the diluted earnings per share calculation if their effect is antidilutive.
401(k) Plan
The Company has a 401(k) Profit Sharing Plan (the Plan), whereby eligible employees may contribute up to 15% (20% in 1997) of their compensation, subject to limitations established by the Internal Revenue Code. The Company may contribute a discretionary matching contribution, annually, equal to 25% of each such
BOTTOMLINE TECHNOLOGIES (DE), INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
participant's deferred compensation up to 5% of their annual compensation (in 1996, up to 20% of the first 3% for eligible employees' contributions). The Company charged $14,000, $26,000 and $98,000 to expense in the years ended June 30, 1996, 1997 and 1998, respectively, and $23,000 and $81,000 to expense in the three months ended September 30, 1997 and 1998, respectively, under the Plan.
Accounting Pronouncements
In October 1997, the Accounting Standards Executive Committee of the American Institute (ACSEC) of Certified Public Accountants issued Statement of Position (SOP) 97-2 "Software Revenue Recognition", which the Company adopted on July 1, 1998. This statement supersedes SOP 91-1, Software Revenue Recognition, and provides guidance on applying generally accepted accounting principles in recognizing revenue on software transactions entered into in fiscal years beginning after December 15, 1997. The Company believes that SOP 97-2 will not have a material impact on the Company's future operating results.
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
130 "Reporting Comprehensive Income" and SFAS No. 131 "Disclosures About
Segments of an Enterprise and Related Information." Both SFAS No. 130 and SFAS
No. 131 are effective for fiscal years beginning after December 15, 1997. The
Company believes that the adoption of these new accounting standards will not
have a material impact on the Company's financial statements.
Interim Financial Information (Unaudited)
The interim financial information at September 30, 1998 and for the three months ended September 30, 1997 and 1998, all of which is unaudited, was prepared by the Company on a basis consistent with the audited financial statements. In management's opinion, such information reflects all adjustments which are of a normal recurring nature and which are necessary to present fairly the results of the periods presented.
3. ACQUISITION
On May 2, 1996, the Company, through its newly-formed, wholly-owned subsidiary, CSI Acquisition, Inc. (Acquisition), acquired CertiSoft Solutions, Inc. (CertiSoft) by merging with and into CertiSoft. Each share of CertiSoft common stock outstanding prior to the merger was surrendered and subsequently retired and each CertiSoft shareholder received 4.83 shares of the Company's common stock for each CertiSoft share surrendered. The total consideration paid by the Company to acquire CertiSoft included 90,003 shares of the Company's common stock, estimated at $480,000, and the assumption of a $250,000 note payable to the former majority owner of CertiSoft and certain other trade obligations.
The acquisition has been accounted for as a purchase and, accordingly, the results of operations of CertiSoft are included in the consolidated financial statements since the date of acquisition. In connection with the acquisition, the Company acquired assets with an estimated fair value of $764,000 and assumed liabilities of $284,000, which includes the $250,000 note payable described above.
BOTTOMLINE TECHNOLOGIES (DE), INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
JUNE 30,
-------------
SEPTEMBER 30,
1997 1998 1998
------ ------ -------------
(UNAUDITED)
(IN THOUSANDS)
Furniture and fixtures......................... $ 387 $ 399 $ 407
Technical equipment............................ 1,979 2,693 2,965
Software....................................... 210 453 586
Leasehold improvements......................... 126 151 172
------ ------ ------
2,702 3,696 4,130
Less: Accumulated depreciation and amortiza-
tion.......................................... 1,256 1,831 2,021
------ ------ ------
$1,446 $1,865 $2,109
====== ====== ======
|
5. ACCRUED EXPENSES
Accrued expenses consist of the following:
JUNE 30,
-------------
SEPTEMBER 30,
1997 1998 1998
------ ------ -------------
(UNAUDITED)
(IN THOUSANDS)
Employee compensation and benefits............... $ 799 $1,392 $1,221
Sales taxes...................................... 425 214 151
Other............................................ 472 424 769
------ ------ ------
$1,696 $2,030 $2,141
====== ====== ======
|
6. BORROWING ARRANGEMENTS
In December 1997, the Company entered into a revolving credit agreement (the revolving agreement) with a bank which provides for available borrowings of up to $4,000,000. Borrowings under the revolving agreement bear interest at the bank's prime rate (8.5% at June 30, 1998) and are due on demand. The outstanding balance under the revolving agreement at June 30, 1997 and 1998 and September 30, 1998 was $1,045,000, $-0- and $-0-, respectively. The revolving agreement expires on December 30, 1998.
In June 1995, the Company entered into a $500,000 term loan with a bank. The term loan was due in thirty-six monthly installments of principal and interest of $16,000. Interest under the term loan was at 8.75%. The balance outstanding at June 30, 1997 and 1998 and September 30, 1998 was $164,000, $-0- and $-0-, respectively.
Borrowings under the revolving agreement and the term loan are secured by substantially all assets of the Company.
In May 1996, in connection with the acquisition of CertiSoft, CertiSoft assumed a $250,000 promissory note payable to the former majority owner of CertiSoft. The note is due in 10 equal installments of $25,000, beginning November 1996 and every third month thereafter, plus accrued interest at 8.25% per annum. This note is guaranteed by the Company. The balance outstanding at June 30, 1997 and 1998 and September 30, 1998 was $175,000, $75,000 and $50,000, respectively.
BOTTOMLINE TECHNOLOGIES (DE), INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
7. COMMITMENTS AND CONTINGENT LIABILITIES
The Company leases its principal office facility under a noncancellable operating lease expiring in 2002. In addition to the base term, the Company has two five-year options to extend the term of the lease. Rent payments are fixed for the initial two years of the lease and may be increased after that during the initial term of the lease by the Consumer Price Index. In addition, the Company is obligated to pay certain incremental operating costs over the base amount.
The Company also leases office space in other cities. All such leases expire in fiscal years 1999 and 2000.
Future minimum annual rental commitments under this lease at June 30, 1998 are as follows:
(IN THOUSANDS)
--------------
1999.......................................................... $ 373
2000.......................................................... 349
2001.......................................................... 307
2002.......................................................... 281
------
$1,310
======
|
Rent expense charged to operations for the years ended June 30, 1996, 1997 and 1998 was $286,000, $338,000 and $342,000, respectively, and for the three months ended September 30, 1997 and 1998 was $85,000 and $107,000, respectively.
8. CAPITAL TRANSACTIONS
Common Stock
In connection with the sale of its common stock in 1992, the Company and certain existing stockholders amended previous agreements covering stock rights and voting arrangements. The amended agreement provides certain stockholders with preemptive rights and certain registration rights in the event of certain circumstances.
In connection with the sale of its common stock, the Company has also agreed with certain stockholders to redeem, at the stockholders' option, 801,000 shares of common stock anytime after June 29, 1995. The initial redemption value was $1.00 per share and increases each year in accordance with the agreement. The redemption value was $1,246,000, $1,353,000 and $1,381,000 at June 30, 1997 and 1998 and September 30, 1998, respectively.
In March 1994, the Company and certain existing stockholders amended the March 31, 1992 stock rights and voting arrangements to provide an additional stockholder with preemptive rights and certain registration rights in the event of certain circumstances.
Stock Option Plan
The Company adopted the Bottomline Technologies, Inc. Stock Option Plan, as amended, (the Plan) on August 1, 1989, which provides for the issuance of incentive stock options and nonstatutory stock options. The Plan is administered by the Board of Directors which has the authority to determine to whom options may be granted, the period of exercise and what other restrictions, if any, should apply. The Company has reserved up to 1,440,000 shares of its common stock for issuance under the Plan. Incentive stock options may be granted to employees at a price of no less than 100% of the fair market value of the common stock at the date of grant. Options expire a maximum of ten years from the date of grant.
BOTTOMLINE TECHNOLOGIES (DE), INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. CAPITAL TRANSACTIONS--(CONTINUED)
On August 21, 1997, Bottomline Technologies, Inc. adopted the 1997 Stock Incentive Plan (the 1997 Plan), which provides for the issuance of stock options and nonstatutory stock options. The 1997 Plan is administered by the Board of Directors which has the authority to determine to whom options may be granted, the period of exercise and what other restrictions, if any, should apply. The Company has reserved up to 1,200,000 shares of its common stock for issuance under the 1997 Plan to employees at a price of no less than 100% of the fair market value of the common stock at the date of grant. Options expire a maximum of ten years from the date of grant.
The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related interpretations in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under SFAS 123 requires the use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, as the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized.
Option valuation models have been developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. Such models require the input of highly subjective assumptions. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. A summary of assumptions is as follows:
THREE
MONTHS ENDED
YEARS ENDED JUNE 30, SEPTEMBER 30,
---------------------------- --------------
1996 1997 1998 1997 1998
--------- ------ --------- ------ ------
(UNAUDITED)
Dividend yield............... 0% 0% 0% 0% 0%
Expected lives of options
(years).................... 4 4 4 4 4
Risk-free interest rate...... 6.18-6.67% 6.02% 5.65-6.20% 6.20% 6.00%
|
For purposes of the required pro forma disclosures, the estimated fair value of the options is amortized over the options' vesting period. Had compensation cost for the Company's stock option plan been determined based on the fair value at the grant dates for awards under those plans consistent with the minimum value method of SFAS 123, the Company's pro forma net income (loss) and pro forma earnings (loss) per share available to common stockholders would have been as follows:
THREE MONTHS
ENDED
YEARS ENDED JUNE 30, SEPTEMBER 30,
--------------------- -------------
1996 1997 1998 1997 1998
----- ------- ------ ------ ------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
Pro forma net income (loss).............. $ 837 $(1,320) $1,488 $ 181 $ 359
Pro forma earnings (loss) per share
available to common stockholders:
Basic................................. $0.13 $ (0.24) $ 0.22 $ 0.02 $ 0.05
Diluted............................... $0.11 $ (0.24) $ 0.19 $ 0.02 $ 0.05
|
As the provisions of SFAS 123 are effective only for fiscal years beginning
after December 15, 1994, the effects of applying SFAS 123 for pro forma
disclosures are not necessarily representative of the effects on net income
(loss) for future years.
BOTTOMLINE TECHNOLOGIES (DE), INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. CAPITAL TRANSACTIONS--(CONTINUED)
A summary of option activity is as follows:
YEARS ENDED JUNE 30,
-------------------------------------------------- THREE MONTHS ENDED
1996 1997 1998 SEPTEMBER 30, 1998
---------------- ---------------- ---------------- --------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------- -------- ------- -------- ------- -------- --------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Outstanding, beginning
of period............. 354 $ 2.28 279 $3.17 339 $5.10 885 $ 6.69
Options granted......... 90 4.33 195 5.84 600 7.91 228 9.61
Options exercised....... (141) 1.79 (135) 2.20 (54) 3.67 -- --
Options expired......... (24) 2.50 -- -- -- -- -- --
---- ------- ---- ----- --- ----- --------- ---------
Outstanding, end of
period................ 279 3.17 339 5.10 885 6.69 1,113 7.28
Exercisable, end of
period................ 165 $ 1.80 75 $3.87 102 $5.20 222 $ 5.42
Weighted average fair
value of options
granted during the
period................ $ 0.93 $1.52 $1.53 $ 2.05
|
As of June 30, 1998, options to purchase 102,000 shares were exercisable at option prices ranging from $4.33 to $6.33 per share. As of June 30, 1997 and 1998 and September 30, 1998, options to purchase 63,000, 645,000 and 417,000 shares, respectively, were available for grant from the 1997 Plan and the Plan. The weighted average remaining contractual life of options outstanding at June 30, 1998 is seven and one half years, and the range of exercise prices is from $4.33 to $8.80 per share.
WARRANTS
In connection with the sale of its common stock in March 1992, the Company issued warrants for the purchase of an aggregate 644,000 shares of common stock at exercise prices ranging from $1.00 to $2.00 per share. During 1997, warrants for 12,000 shares were exercised at a price of $2.00 per share. Additionally, under the terms of the warrant agreement, certain warrant holders elected a non-cash exercise under which 489,000 warrants with a weighted average exercise price of $2.00 were exercised and the Company issued 315,000 shares to the warrant holders. The shares issued, as a result of this non-cash exercise, were based on the relationship of the exercise price to the fair market value of the Company's stock at the exercise date, as defined in the original agreement.
At June 30, 1998, there were warrants outstanding for 143,000 shares, at exercise prices ranging from $1.00--$1.33 per share and a weighted average exercise price of $1.19. The warrants were exercised on September 30, 1998.
BOTTOMLINE TECHNOLOGIES (DE), INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
9. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
(loss) per share:
THREE
MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30,
----------------------------- --------------
1996 1997 1998 1997 1998
-------- --------- -------- ------ ------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Numerator:
Net income (loss)......... $ 883 $ (1,252) $ 1,603 $ 194 $ 457
Accretion to redemption
value on redeemable
common stock............. (88) (97) (107) (27) (28)
-------- --------- -------- ------ ------
Numerator for basic and
diluted earnings (loss) per
share available to common
stockholders............... $ 795 $ (1,349) $ 1,496 $ 167 $ 429
======== ========= ======== ====== ======
Denominator:
Denominator for basic
earnings (loss) per share
available to common
stockholders--weighted-
average shares
outstanding.............. 5,693 5,986 6,314 6,307 6,361
Effect of employee stock
options, warrants and
redeemable common stock.. 1,308 -- 1,002 990 1,095
-------- --------- -------- ------ ------
Denominator for diluted
earnings (loss) per share
available to common
stockholders............... 7,001 5,986 7,316 7,297 7,456
======== ========= ======== ====== ======
Earnings (loss) per share
available to common
stockholders:
Basic..................... $ 0.14 $ (0.23) $ 0.24 $ .03 $ .07
======== ========= ======== ====== ======
Diluted................... $ 0.11 $ (0.23) $ 0.20 $ .02 $ .06
======== ========= ======== ====== ======
|
BOTTOMLINE TECHNOLOGIES (DE), INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
10. INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109. SFAS No. 109 requires the use of the liability method in which income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities are as follows:
JUNE 30,
------------ SEPTEMBER 30,
1997 1998 1998
----- ----- -------------
(UNAUDITED)
(IN THOUSANDS)
Deferred tax assets:
Allowances..................................... $ 284 $ 572 $ 572
Various accrued expenses....................... 144 115 115
Deferred software maintenance revenue.......... 8 -- --
Inventory...................................... 135 37 37
----- ----- -----
Total deferred tax assets................... 571 724 724
Deferred tax liabilities:
Property, plant and equipment.................. (135) (118) (118)
Capitalized software costs..................... (100) -- --
----- ----- -----
Total deferred tax liabilities.............. (235) (118) (118)
----- ----- -----
Net deferred tax assets (liabilities).......... $ 336 $ 606 $ 606
===== ===== =====
|
The provision (benefit) for income taxes consisted of the following:
THREE
MONTHS ENDED
YEARS ENDED JUNE 30, SEPTEMBER 30,
----------------------- -------------
1996 1997 1998 1997 1998
------ ------ ------- ------ ------
(UNAUDITED)
(IN THOUSANDS)
Current:
Federal............................ $ 610 $ (247) $ 1,238 $ 121 $ 259
State.............................. 156 8 209 21 46
------ ------ ------- ------ ------
766 (239) 1,447 142 305
Deferred:
Federal............................ (90) (252) (241) -- --
State.............................. (12) (45) (29) -- --
------ ------ ------- ------ ------
(102) (297) (270) -- --
------ ------ ------- ------ ------
$ 664 $ (536) $ 1,177 $ 142 $ 305
====== ====== ======= ====== ======
|
BOTTOMLINE TECHNOLOGIES (DE), INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
10. INCOME TAXES--(CONTINUED)
A reconciliation of the federal statutory rate to the effective income tax is as follows:
THREE
MONTHS ENDED
YEARS ENDED JUNE 30, SEPTEMBER 30,
------------------------ --------------
1996 1997 1998 1997 1998
------ ------- ------ ------ ------
(UNAUDITED)
Tax (benefit) at federal
statutory rate................ 34.0% (34.0)% 34.0% 34.0% 34.0%
State taxes, net of federal
benefit....................... 6.0 (1.4) 6.5 6.5 6.0
Non-deductible expenses......... 5.6 12.6 .6 -- --
Research and development tax
credits....................... -- (7.2) (3.6) -- --
Other........................... (2.7) -- 4.8 1.8 --
------ ------- ------ ------ ------
42.9% (30.0)% 42.3% 42.3% 40.0%
====== ======= ====== ====== ======
|
The principal non-deductible expense for income tax purposes is the amortization related to the acquired software costs recorded in connection with the purchase of CertiSoft.
11. SUBSEQUENT EVENTS
On November 12, 1998, the Company's Board of Directors approved various actions, subject to stockholder approval, including: (1) increasing the authorized shares of common stock to 50,000,000; (2) authorizing a class of Preferred Stock with 4,000,000 shares available; (3) the establishment of the 1998 Employee Stock Purchase Plan under which 750,000 shares of common stock may be issued; (4) the establishment of the 1998 Director Stock Option Plan under which 300,000 shares of common stock may be issued and (5) increasing the number of shares reserved for issuance under the Company's 1997 Stock Incentive Plan to 2,700,000.
12. STOCK SPLIT
On January 6, 1999, the Company's Board of Directors approved a three for one stock split of the Company's common stock. Accordingly, all share and per share amounts in the accompanying financial statements have been restated to reflect the stock split.
[INSIDE BACK COVER]
[This graphic contains the following text:
Centered at the top of the page are the words:
"Payment Management Software and
Services that Enable Organizations to Manage their Transition from Paper Checks to Electronic Payments"
Descending from left to right are three slides. The words above the top
slide are:
"Secure Payment Server"
The words in the slide are:
> Enterprise-wide payments
> Point-of-need payments
> All payment information
> Reporting
> Auditing
> Processing
> Remittance delivery
The words above the second slide are:
"All Types of Payments"
The words in the slide are:
> Electronic payments to satisfy Government mandates
> Automated Clearing House Payments
> Financial EDI
> LaserCheck
> Check Fraud/Positive Pay
> Electronic Remittance Advice Delivery
> Web access
The words above the third slide are:
"Industry Standards"
The words in the slide are:
> Windows NT
> Integrates into current computing environment;
network and database independent
> Transitions easily as payments needs grow and change
> Certified by Microsoft as "Designed for BackOffice"
"Bottomline Technologies" is in a box on the bottom inside left of the page]
[LOGO]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses, all of which will be borne by the Registrant, in connection with the sale and distribution of the securities being registered, other than the underwriting discounts and commissions. All amounts shown are estimates except for the Securities and Exchange Commission registration fee and the NASD filing fee.
SEC registration fee.......................................... $ 12,676.11
NASD filing fee............................................... 5,059.75
Nasdaq National Market listing fee............................ 55,000.00
Blue Sky fees and expenses.................................... 15,000.00
Transfer Agent and Registrar fees............................. 17,000.00
Accounting fees and expenses.................................. 350,000.00
Legal fees and expenses....................................... 450,000.00
Printing and mailing expenses................................. 198,500.00
Miscellaneous................................................. 304,764.14
-------------
Total....................................................... $1,408,000.00
=============
|
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article EIGHTH of the Registrant's Amended and Restated Certificate of Incorporation (the "Restated Certificate of Incorporation") provides that no director of the Registrant shall be personally liable for any monetary damages for any breach of fiduciary duty as a director, except to the extent that the Delaware General Corporation Law prohibits the elimination or limitation of liability of directors for breach of fiduciary duty.
Article NINTH of the Registrant's Restated Certificate of Incorporation provides that a director or officer of the Registrant (a) shall be indemnified by the Registrant against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement incurred in connection with any litigation or other legal proceeding (other than an action by or in the right of the Registrant) brought against him by virtue of his position as a director or officer of the Registrant if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Registrant, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful and (b) shall be indemnified by the Registrant against all expenses (including attorneys' fees) and amounts paid in settlement incurred in connection with any action by or in the right of the Registrant brought against him by virtue of his position as a director or officer of the Registrant if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Registrant, except that no indemnification shall be made with respect to any matter as to which such person shall have been adjudged to be liable to the Registrant, unless a court determines that, despite such adjudication but in view of all of the circumstances, he is entitled to indemnification of such expenses. Notwithstanding the foregoing, to the extent that a director or officer has been successful, on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, he is required to be indemnified by the Registrant against all expenses (including attorneys' fees) incurred in connection therewith. Expenses shall be advanced to a director or officer at his request, provided that he undertakes to repay the amount advanced if it is ultimately determined that he is not entitled to indemnification for such expenses.
Indemnification is required to be made unless the Registrant determines that the applicable standard of conduct required for indemnification has not been met. In the event of a determination by the Registrant that the director or officer did not meet the applicable standard of conduct required for indemnification, or if the
II-1
Registrant fails to make an indemnification payment within 60 days after such payment is claimed by such person, such person is permitted to petition the court to make an independent determination as to whether such person is entitled to indemnification. As a condition precedent to the right of indemnification, the director or officer must give the Registrant notice of the action for which indemnity is sought and the Registrant has the right to participate in such action or assume the defense thereof.
Article NINTH of the Registrant's Restated Certificate of Incorporation further provides that the indemnification provided therein is not exclusive, and provides that in the event that the Delaware General Corporation Law is amended to expand the indemnification permitted to directors or officers the Registrant must indemnify those persons to the fullest extent permitted by such law as so amended.
Section 145 of the Delaware General Corporation Law provides that a corporation has the power to indemnify a director, officer, employee or agent of the corporation and certain other persons serving at the request of the corporation in related capacities against amounts paid and expenses incurred in connection with an action or proceeding to which he is or is threatened to be made a party by reason of such position, if such person shall have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal proceeding, if such person had no reasonable cause to believe his conduct was unlawful; provided that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the adjudicating court determines that such indemnification is proper under the circumstances.
Under Section 8 of the Underwriting Agreement, the Underwriters are obligated, under certain circumstances, to indemnify directors and officers of the Registrant against certain liabilities, including liabilities under the Securities Act. Reference is made to the form of Underwriting Agreement filed as Exhibit 1 hereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth in chronological order is information regarding shares of common stock issued and options granted by the Registrant since November 1995. Further included is the consideration, if any, received by the Registrant for such shares and options and information relating to the section of the Securities Act of 1933, as amended (the "Securities Act"), or rule of the Securities and Exchange Commission under which exemption from registration was claimed.
The Registrant's 1989 Stock Option Plan was adopted by the Board of Directors and approved by the stockholders of the Registrant on August 1, 1989. The Registrant's 1997 Stock Incentive Plan was originally adopted by the Board of Directors and approved by the stockholders of the Registrant on August 21, 1997, and was amended by the Board of Directors on November 12, 1998. Since November 1995, options to purchase 327,501 shares of common stock had been exercised for an aggregate consideration of $740,000 and as of November 12, 1998 options to purchase 330,000 shares of common stock were outstanding under the 1989 Stock Option Plan. As of November 12, 1998, no options had been exercised and options to purchase 783,000 shares of common stock were outstanding under the 1997 Stock Incentive Plan.
In October 1998, the Registrant issued 107,145 shares of Common Stock to Arthur Andersen LLP at a purchase price of $9.33 per share for an aggregate consideration of $1,000,020.
In connection with financing activities in 1992, the Company issued warrants for the purchase of an aggregate of 643,500 shares of common stock at exercise prices ranging from $1.00 to $2.00 per share. During 1997, warrants for 12,000 shares were exercised at a price of $2.00 per share. Additionally, in 1997 and 1998, in accordance with the warrant agreements, the remainder of the warrant holders elected to exercise their warrants on a cashless basis and, in connection therewith, the Company issued an additional 441,873 shares.
II-2
The securities issued in the foregoing transactions were either (i) offered and sold in reliance upon exemptions from the Securities Act registration requirements set forth in Sections 3(b) and 4(2) of the Securities Act, or any regulations promulgated thereunder, relating to sales by an issuer not involving any public offering, or (ii) in the case of certain options to purchase shares of common stock and shares of common stock issued upon the exercise of such options, such offers and sales were made in reliance upon an exemption from registration under Rule 701 of the Securities Act. No underwriters were involved in the foregoing sales of securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
EXHIBIT
NO. DESCRIPTION
------- -----------
1* Form of Underwriting Agreement.
3.1+ Certificate of Incorporation of the Registrant.
3.2+ Amended and Restated Certificate of Incorporation of the Registrant,
to be effective immediately prior to the closing of this offering.
3.3+ By-Laws of the Registrant.
3.4+ Amended and Restated By-Laws of the Registrant, to be effective
immediately prior to the closing of this offering.
4.1 Specimen certificate for shares of common stock.
5* Opinion of Hale and Dorr LLP.
10.1+ 1989 Stock Option Plan, as amended, including form of stock option
agreement for incentive and non-statutory stock options.
10.2+ Amended and Restated 1997 Stock Incentive Plan, including form of
stock option agreement for incentive and non-statutory stock options.
10.3+ 1998 Director Stock Option Plan, including form of non-statutory stock
option agreement.
10.4+ 1998 Employee Stock Purchase Plan.
10.5+ First Amendment and Restatement of Stock Rights and Voting Agreement,
as amended.
10.6+ Second Stock Rights Agreement, as amended.
10.7 Lease dated November 28, 1994, between the Registrant and Wenberry
Associates L.L.C.
10.8 Employment Agreement between the Registrant and Mr. McGurl.
10.9 Employment Agreement between the Registrant and Mr. Mullen.
10.10 Employment Agreement between the Registrant and Mr. Eberle.
10.11 Revolving Credit Agreement between the Registrant and Shawmut Bank
N.A., dated January 13, 1995.
10.12 Secured Revolving Time Note between the Registrant and Shawmut Bank
N.A., dated January 13, 1995.
10.13 First Amendment of the Loan Agreement between the Registrant and Fleet
National Bank of Massachusetts, dated December 29, 1995.
10.14 Secured Revolving Time Note between the Registrant and Fleet National
Bank of Massachusetts, dated December 29, 1995.
10.15 Second Amendment of the Loan Agreement between the Registrant and
Fleet National Bank, dated December 20, 1996.
10.16 Secured Revolving Time Note between the Registrant and Fleet National
Bank, dated December 20, 1996.
10.17 Third Amendment of the Loan Agreement between the Registrant and Fleet
National Bank, dated December 29, 1997.
|
II-3
EXHIBIT
NO. DESCRIPTION
------- -----------
10.18 Secured Revolving Time Note between the Registrant and Fleet National
Bank, dated December 29, 1997.
10.19 Fourth Amendment of the Loan Agreement between the Registrant and
Fleet National Bank, dated December 29, 1998.
10.20 Secured Revolving Time Note between the Registrant and Fleet National
Bank, dated December 29, 1998.
10.21 Line of Credit Agreement for the Acquisition of Equipment between the
Registrant and Shawmut Bank N.A., dated January 13, 1995.
10.22 Secured Term Note between the Registrant and Shawmut Bank N.A., dated
June 28, 1995.
10.23 Security Agreement between the Registrant and Shawmut Bank N.A., dated
January 13, 1995.
23.1 Consent of Ernst & Young LLP.
23.2* Consent of Hale and Dorr LLP (included in Exhibit 5).
24+ Power of Attorney (included on page II-6).
27 Financial Data Schedule.
|
+Previously filed.
(B) FINANCIAL STATEMENT SCHEDULES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS ALLOWANCE FOR DOUBTFUL ACCOUNTS AND RETURNS
BALANCE AT ADDITIONS (CHARGED
BEGINNING OF TO COSTS AND BALANCE AT
YEAR ENDED YEAR EXPENSES) DEDUCTIONS END OF YEAR
---------- ------------ ------------------ ---------- -----------
(IN THOUSANDS)
June 30, 1996..... $288 4 135 $157
June 30, 1997..... $157 487 $644
June 30, 1998..... $644 326 $970
|
All other schedules have been omitted because they are not required or because the required information is given in the Registrant's Financial Statements or Notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions contained in the Amended and Restated Certificate of Incorporation of the Registrant and the laws of the State of Delaware, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser.
II-4
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted form the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Portsmouth, New Hampshire, on this 7th day of January, 1999.
BOTTOMLINE TECHNOLOGIES (de), INC.
By: /s/ Daniel M. McGurl ----------------------------------- Daniel M. McGurl, Chairman of the Board, President and Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Daniel M. McGurl Chairman of the Board, January 7, 1999
______________________________________ President and Chief
DANIEL M. MCGURL Executive Officer
(Principal Executive
Officer)
/s/ Robert A. Eberle* Executive Vice President, January 7, 1999
______________________________________ Chief Financial Officer
ROBERT A. EBERLE and Treasurer (Principal
Financial and Accounting
Officer)
/s/ Joseph L. Barry, Jr.* Director January 7, 1999
______________________________________
JOSEPH L. BARRY, JR.
/s/ Bruce E. Elmblad* Director January 7, 1999
______________________________________
BRUCE E. ELMBLAD
/s/ James L. Loomis* Director January 7, 1999
______________________________________
JAMES L. LOOMIS
/s/ Joseph L. Mullen* Director January 7, 1999
______________________________________
JOSEPH L. MULLEN
/s/ James W. Zilinski* Director January 7, 1999
______________________________________
JAMES W. ZILINSKI
|
*By: /s/ Daniel M. McGurl
---------------------------------
DANIEL M. MCGURL
|
ATTORNEY-IN-FACT
II-6
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
------- -----------
1* Form of Underwriting Agreement.
3.1+ Certificate of Incorporation of the Registrant.
3.2+ Amended and Restated Certificate of Incorporation of the Registrant,
to be effective immediately prior to the closing of this offering.
3.3+ By-Laws of the Registrant.
3.4+ Amended and Restated By-Laws of the Registrant, to be effective
immediately prior to the closing of this offering.
4.1 Specimen certificate for shares of common stock.
5* Opinion of Hale and Dorr LLP.
10.1+ 1989 Stock Option Plan, as amended, including form of stock option
agreement for incentive and non-statutory stock options.
10.2+ Amended and Restated 1997 Stock Incentive Plan, including form of
stock option agreement for incentive and non-statutory stock options.
10.3+ 1998 Director Stock Option Plan, including form of non-statutory stock
option agreement.
10.4+ 1998 Employee Stock Purchase Plan.
10.5+ First Amendment and Restatement of Stock Rights and Voting Agreement,
as amended.
10.6+ Second Stock Rights Agreement, as amended.
10.7 Lease dated November 28, 1994, between the Registrant and Wenberry
Associates L.L.C.
10.8 Employment Agreement between the Registrant and Mr. McGurl.
10.9 Employment Agreement between the Registrant and Mr. Mullen.
10.10 Employment Agreement between the Registrant and Mr. Eberle.
10.11 Revolving Credit Agreement between the Registrant and Shawmut Bank
N.A., dated January 13, 1995.
10.12 Secured Revolving Time Note between the Registrant and Shawmut Bank
N.A., dated January 13, 1995.
10.13 First Amendment of the Loan Agreement between the Registrant and Fleet
National Bank of Massachusetts, dated December 29, 1995.
10.14 Secured Revolving Time Note between the Registrant and Fleet National
Bank of Massachusetts, dated December 29, 1995.
10.15 Second Amendment of the Loan Agreement between the Registrant and
Fleet National Bank, dated December 20, 1996.
10.16 Secured Revolving Time Note between the Registrant and Fleet National
Bank, dated December 20, 1996.
10.17 Third Amendment of the Loan Agreement between the Registrant and Fleet
National Bank, dated December 29, 1997.
10.18 Secured Revolving Time Note between the Registrant and Fleet National
Bank, dated December 29, 1997.
10.19 Fourth Amendment of the Loan Agreement between the Registrant and
Fleet National Bank, dated December 29, 1998.
10.20 Secured Revolving Time Note between the Registrant and Fleet National
Bank, dated December 29, 1998.
|
EXHIBIT
NO. DESCRIPTION
------- -----------
10.21 Line of Credit Agreement for the Acquisition of Equipment between the
Registrant and Shawmut Bank N.A., dated January 13, 1995.
10.22 Secured Term Note between the Registrant and Shawmut Bank N.A., dated
June 28, 1995.
10.23 Security Agreement between the Registrant and Shawmut Bank N.A., dated
January 13, 1995.
23.1 Consent of Ernst & Young LLP.
23.2* Consent of Hale and Dorr LLP (included in Exhibit 5).
24+ Power of Attorney (included on page II-6).
27 Financial Data Schedule.
|
*To be filed by amendment.
+Previously filed.
EXHIBIT 4.1
COMMON STOCK COMMON STOCK
[EPAY] [ ]
THIS CERTIFICATE IS TRANSFERABLE SEE REVERSE FOR CERTAIN DEFINITIONS
IN BOSTON, MA OR IN NEW YORK, NY CUSIP
|
[LOGO OF BOTTOMLINE TECHNOLOGIES]
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $.001 PER SHARE, OF
=========================BOTTOMLINE TECHNOLOGIES (de), INC.==================== transferable upon the books of the Corporation in person or by attorney upon surrender of this certificate duly endorsed or assigned. This certificate and the shares represented hereby are subject to the laws of the State of Delaware and to the provisions of the Certificate of Incorporation and By-laws of the Corporation, as from time to time amended or restated. This certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar.
IN WITNESS WHEREOF, Bottomline Technologies (de), Inc. has caused its facsimile corporate seal and facsimile signatures of its duly authorized officers to be hereunto affixed.
Dated:
[SEAL OF BOTTOMLINE TECHNOLOGIES (de), INC.]
/s/ Robert A. Eberle /s/ Daniel M. McGurl EXECUTIVE VICE PRESIDENT, CHAIRMAN OF THE BOARD OF DIRECTORS, CHIEF FINANCIAL OFFICER PRESIDENT AND CHIEF EXECUTIVE AND TREASURER OFFICER |
COUNTERSIGNED AND REGISTERED:
STATE STREET BANK AND TRUST COMPANY
TRANSFER AGENT AND REGISTRAR
By
AUTHORIZED SIGNATURE
BOTTOMLINE TECHNOLOGIES (de), INC.
THE CORPORATION IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OF STOCK. THE CORPORATION WILL FURNISH TO EACH STOCKHOLDER UPON REQUEST WITHOUT CHARGE THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL, OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF, AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT _______Custodian_______
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right under Uniform Gifts to Minors
of survivorship and not Act___________________________
as tenants in common (State)
|
Additional abbreviations may also be used though not in the above list.
For value received, ____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
------------------------------------------------------------------------ Shares of capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint
--------------------------------------------------------------------- Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.
Dated, ______________________________
NOTICE: ________________________________________________________________
THE SIGNATURE(S) TO THE ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed: ______________________________________________________
THE SIGNATURE(S) MUST 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 SECURITIES AND EXCHANGE COMMISSION RULE
17Ad-15.
Exhibit 10.7
LEASE AGREEMENT
BETWEEN
WENBERRY ASSOCIATES L.L.C.
AND
BOTTOMLINE TECHNOLOGIES, INC.
PORTSMOUTH, NEW HAMPSHIRE
This lease is made by Wenberry Associates, L.L.C. of 40 Pleasant Street, Portsmouth, New Hampshire (hereinafter referred to as Owner) and Bottomline Technologies, Inc. of One Court Street, Exeter, New Hampshire (hereinafter referred to as Tenant).
In consideration of the mutual covenants contained herein and the considerations referred to hereafter, the parties agree as follows:
Within one (1) month of the occupancy of the building by Tenant, Tenant agrees to lease an additional 8,000 square feet of space located to the rear of the third floor Fleet Street location and shown on the floor plan attached hereto as Exhibit A-4. Except as set forth in Section 3, all lease terms for this additional 8,000 square feet of space shall be consistent with and coterminous with the original space including without limitation Section 18.c.
In addition, the Tenant shall have two five year options to extend the term of this lease. To exercise this option, Tenant must give written notice of its intent to Owner at least 90 days before the expiration of the initial, lease term or extended term, as the case may be.
a. For the first two years of the initial lease term, Tenant shall pay $9.50 per square foot, plus all utilities.
b. With respect to the additional 8000 square feet referred to in the second paragraph of Section 1, Tenant's obligation to pay rent there for shall commence on the later of substantial completion, as defined in Section 24, or
i. for the first 2000 square feet thereof, three (3) months after substantial completion, as defined in Section 24, of the initial 24,000 square feet;
ii. for the second 2000 square feet thereof, three (3) months after the date specified in (i) above;
iii. for the third 2000 square feet thereof, three (3) months after the date specified in (ii) above; and
iv. for the remainder, three (3) months after the date specified in (iii) above.
c. For the third year, rent shall be the base rent of the previous year, plus any increase in the rate of the National Consumer Price Index for the previous year, applicable to base rent, minus real estate taxes. In addition, Tenant shall pay all utilities and any increase in property tax from the previous year.
d. For the fourth through the seventh year rent shall be the base rent of the previous year plus any increase in the National Consumer Price Index for the previous year, but said increase shall not exceed five percent in any one year.
e. During the extension terms the rent shall be 95% of the fair market rent but not less than the rent during the seventh year or the twelfth year, as the case may be.
In addition, the Tenant shall pay all utilities and any increase in property tax from the previous year. In calculating Tenant's obligation to pay increases in property taxes, Tenant's share of such increases shall be a fraction, the numerator of which is the number of square feet of the leased premises and the denominator of which is the number of square feet of the building for which the tax bill is issued.
f. Annual rent shall be made in monthly installments due on the first day of the month. In the event owner has not received Tenant's rent by the seventh (7th) day of the month, an additional late charge of 5% of the monthly payment shall be imposed.
The Security Deposit shall be held by Owner as security for the faithful performance by Tenant of all the terms, covenants, conditions and provisions of this Lease to be kept and performed or observed by Tenant. If Tenant defaults with respect to any provision of this Lease, including, but not limited to, the provisions relating to the payment of Rent or any other monetary sums due herewith, Owner may (but shall not be required to) use, apply or retain all or any part of the Security Deposit for the payment of any Rent or other monetary sums due herewith and/or for the payment of any other amount which Owner may spend or become obligated by reason of Tenant's default, or to compensate Owner for any other loss or damage which Owner may suffer thereby. If any portion of the Security Deposit is so used or applied, Tenant shall, within ten (10) days after demand therefore, deposit cash with Owner in an amount sufficient to restore the Security Deposit to the full amount thereof and Tenant's failure to do so shall be a material breach of this Lease.
Furthermore, whenever the Base Rent increases, Tenant shall deposit additional cash with Owner so that the amount of the Security Deposit is always at least one full months rent for the entire Leased Premises. Owner shall keep the Security Deposit separate from its general accounts and in accordance with provisions of New Hampshire law. If Tenant shall fully and faithfully perform all of its obligations hereunder, the Security Deposit, or any balance thereof that has not theretofore been applied by Owner, shall be returned to Tenant, after any lawful deductions, within thirty (30) days of the Termination of Tenancy.
a. The property shall be used only as commercial office space and accessory purposes. The Tenant may display items outside of the leased premises, but only in those locations approved by the Owner and approved by the City of Portsmouth and State of New Hampshire. The Tenant shall not store or otherwise keep any items outside of the leased premises without the permission of the Owner. Tenant acknowledges that no trade or occupation shall be conducted in the leased premises or use made thereof which would be unlawful, improper, noisy or offensive, or contrary to any law or ordinance in force in the City of Portsmouth or State of New Hampshire. Owner represents and warrants that the leasehold property is currently zoned as commercial property and use of the leasehold as office space is permitted by the City of Portsmouth.
b. Owner shall at its sole cost and expense comply with all applicable covenants, conditions and restrictions now or hereafter affecting the Premises, or the Building, or the Property, with all laws, rules, ordinances, regulations, directives and requirements of all federal, state, county and municipal authorities having jurisdiction over the Premises, or the Building, or the Property ("Laws"), including without limitation those relating to health, safety, noise,
environmental protection, waste disposal, water and air quality, and other environmental matters, and the use, storage and disposal of Hazardous Materials, as such term is defined in Section 5.d. below, and with the certificate of occupancy for the Premises or the Building. Tenant shall not permit anything to be done on the Premises in violation thereof. Upon written demand, Tenant shall discontinue any use of the Premises in violation of any covenants, conditions and restrictions, or of any Law or of the certificate of occupancy. Owner shall be responsible for changes required in the building for handicap access.
c. Tenant shall not do or permit anything to be done in, or about the Premises, or the Building, or the Property which will in any way obstruct or interfere with the rights of other tenants or occupants of the Building, or injure or annoy them, or use or allow the Premises to be used for any improper, immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance in, on, or about the Premises or the Building, or the Property nor use or permit to be used any loudspeaker, or other device, system or apparatus which can be heard outside the premises without the prior written consent of Owner. Tenant shall not commit or suffer to be committed any waste in or upon the Premises, the Building, or the Property.
d. Tenant shall at all times and in all respects comply with all federal, state and local laws, ordinances and regulations (collectively "Hazardous Materials Laws") relating to industrial hygiene, environmental protection or the use, analysis, generation, manufacture, storage, disposal, or transportation of any oil, gasoline and related products, flammable substance or explosives, asbestos, radioactive materials or waste, or other hazardous, toxic contaminated or polluting materials, substances, chemicals, wastes or related injurious materials, whether injurious by themselves or in combination with other materials including, without limitation, any "hazardous substances," "hazardous wastes," "hazardous materials," or "toxic substances" under any such Laws, any toxic or hazardous substance, material or waste listed in the United States Department of Transportation Table (49 CFR 172.101) or by the Environmental Protection Agency as a hazardous substance (40 CFR, Part 302) and amendments thereto, or such substances, materials and wastes which are or become regulated or listed as toxic under any applicable local, state or federal law) (collectively, "Hazardous Materials").
Tenant at a rent in excess of the subleased portion's pro-rata share of the rent payable hereunder by Tenant, Tenant shall pay to Landlord, as additional rent, fifty percent (50%) of such excess rent net of all reasonable expenses of the assignment or subletting.
a. Tenant shall act with care in its use and occupancy of the Premises and the fixtures (and all Tenant's improvements and fixtures) therein and, at Tenant's sole cost and expense and to the satisfaction of the Owner, shall make all repairs and replacements to the Premises and the fixtures and the Building, structural or otherwise, necessitated or occasioned by the acts, omissions, carelessness, negligence of other cause of Tenant, its servants, employees, agents, visitors or licensees or any person claiming through or under Tenant or by the use or occupancy or manner of use or occupancy of the Premises by Tenant or any such person. Ordinary maintenance items on the Premises shall be maintained or repaired as the need arises at the expense of the owner. Tenant, at Tenant's sole cost and expense, shall make all repairs and replacements to Tenant's special installations, if any. All such aforesaid repairs, restoration and replacements shall be in quality and class equal to the original work or installation. Regarding the Tenant's need to make repairs or replacements to any Structural, Mechanical, Electrical, HVAC, or surface treatment of walls, floors, and ceilings, Tenant shall notify Owner, who reserves the right to perform such work and charge back the Tenant.
b. Except as otherwise provided in paragraph (a) of this Article, Owner shall make the following repairs as and when necessary; (i) major structural repairs to the Premises and Building; (ii) repairs required in order to provide the elevator, plumbing, electrical, heating and air conditioning services to be furnished by
Owner pursuant to this Lease; and (iii) repairs to exterior portions of the Building, including the 2nd and 3rd story windows and roof thereof.
c. All personal property of the Tenant or special installations in the Premises or in the Building shall be at the sole risk of the Tenant and the Tenant shall, through the term of this Lease, keep same insured against all loss or damage by fire or other casualty. The Owner shall not be liable for any injury or damage to Tenant or its employees, invitees, occupants or persons in or on the Premises or to the property of Tenant resulting from the use of the heating, cooling, electrical or plumbing apparatus or any other cause, and Owner shall not, in any event, be liable for damages or injury resulting from water, steam or other causes, except in the case of Owner's negligence or willful misconduct. Tenant hereby expressly releases Owner from any liability incurred or claimed by reason of such damage or injury.
d. The Owner assumes no liability or responsibility whatsoever with respect to the conduct and operation of the business to be conducted in the Premises. The Owner shall not be liable for any accident or injury to any person or persons or property in or about the Premises which are caused by the conduct and operation of said business or by virtue of equipment or property of the Tenant in said Premises. The Tenant agrees to defend and hold the Owner harmless against all such claims.
e. The Owner agrees to keep all common areas of the leasehold Premises reasonably clean and free from debris at its expense.
In case of destruction or injury to the demised premises, the Owner shall restore said demised premises reasonably to the same condition as originally leased, and during such restoration period, the rental shall be prorated and returned to the
Tenant proportionate to available use; provided however, if the destruction or injury shall exceed fifty (50) percent of the replacement cost, the Owner and/or Tenant shall have the option of terminating this Agreement, and the rental shall be prorated and returned to the Tenant as of the date of destruction.
In the event that a mutually selected contractor estimates the period of restoration will exceed 120 days, the Tenant shall have the right to terminate this Lease. In the event the estimated period of restoration is less than 120 days, but the actual period of restoration exceeds 120 days, this Lease shall not terminate, but rent shall continue to be prorated as provided herein.
In the event said Premises shall be taken under eminent domain proceedings in whole or to the extent that they are not functional for the Tenant, then this Agreement shall be terminated, and the rental shall be prorated and returned to the Tenant as of the date of such taking.
a. The Owner agrees to pay all property taxes for the leased premises for the first two years of the lease term. Thereafter, the Owner shall pay to the City of Portsmouth an amount equal to the second year tax obligation, with the Tenant paying any increase in property taxes provided in Section 3.
b. Owner shall, throughout the term of this lease, at its expense, keep the building insured against all loss or damage by fire with extended coverage in an amount equal to its full replacement cost.
c. Owner shall deliver the leased premises to Tenant in accordance with the final renovation plan as agreed by the parties, which shall be attached hereto and specifically incorporated into this Lease Agreement, which shall include, but not necessarily be limited to:
- properly designed HVAC for office use
- executive type lobby, reception area and elevator
- building atrium
- satisfactory carpeting, ceiling and painting
- construction and for renovating of internal offices and bathrooms
consistent with Tenant's space requirements
- a new facade on Fleet Street with opening windows to meet
Portsmouth Historical District approval
The parties shall cooperate together and use best efforts to prepare and agree on a renovation plan for the initial premises containing 24,000 square feet including drawings and specifications for the work within four (4) weeks of the date of this
Lease, and to agree on a renovation plan for the additional premises containing 8000 square feet within three (3) weeks after the date of this Lease. Attached hereto as Exhibit B is a Description of Tenant Fit-Up Work which the parties agree shall be used as a guideline for developing the renovation plans for the premises.
d. Owner shall replace the carpet throughout the entire leased premises with carpet of equal or better quality no later than the end of the seventh lease year.
If at any time during the Term there shall be filed by or against the
Tenant or any successor Tenant then in possession, in any Court pursuant to any
statute either of the United States or any State, a petition (a) in bankruptcy,
(b) alleging insolvency, (c) for reorganization, (d) for the appointment of a
receiver, or (e) for an arrangement under the Bankruptcy Acts, or if a similar
type of proceeding shall be filed, the Owner may terminate the Tenant's rights
under this lease by notice in writing to the Tenant under the applicable laws of
the State of New Hampshire.
In the event of a breach by the Tenant of any of the covenants or provisions hereof, the Owner shall have, in addition to any other remedies which it may have, the right to invoke any remedy allowed at law or in equity to enforce Lessor's rights or any of them, as if re-entry and other remedies were not herein provided.
Tenant shall also nave the right of first refusal to purchase the leased premises if the property is being sold to a third party. This right shall not preclude the Owner from syndicating the property. Tenant shall communicate its intent to purchase within thirty (30) days of its receipt of notice by Owner of intent to sell.
The provisions of this Section 23 shall survive the termination of this Lease with respect to any claims or liability occurring prior to such termination.
Owner shall Substantially Complete the initial premises no later than six
(6) months after the date of this Lease and the additional 8000 square feet of
the leased premises within seven (7) months after the date of this Lease.
"Substantially Complete" means:
i. Owner and Tenant agree that the improvements described in the renovation plans referred to in Section 18.c. have been substantially completed in compliance with the terms of this Lease and all Legal Requirements so that Tenant can use the leased premises for their intended purposes without material interference to Tenant conducting its ordinary business activities;
ii. The only incomplete items are minor or insubstantial details of construction, mechanical adjustments or finishing touches like touch-up plastering or painting as identified on a punchlist prepared by Tenant;
iii. Owner has secured a permanent certificate of occupancy from the City of Portsmouth, permitting the building, the common areas and the leased premises to be occupied by Tenant in accordance with all legal requirements;
iv. Tenant, its employees, agents and invitees, having ready access to and egress from the building and leased premises through the common areas which shall be clean, free of construction equipment and materials and in good working order;
v. All major building systems, including the electrical, heating, ventilation and air conditioning systems, plumbing, utilities, and elevators are installed and are in good working order; and
vi. The leased premises are broom clean.
Prior to the commencement date the Tenant shall inspect the leased premises and Owner shall demonstrate all building systems. If the leased premises are acceptable to Tenant, with the exception of minor items, Owner and Tenant shall prepare and execute a Punchlist. The Punchlist shall list incomplete, minor and insubstantial details of construction, necessary mechanical adjustments, and needed finishing touches. Owner shall complete the items set forth in the Punchlist within thirty (30) days after the commencement date. Owner will promptly correct any latent defects as they become known to Owner or within thirty (30) days after Tenant notifies Owner in writing of the defect. If Owner fails to complete the punchlist
items or known latent defects, Owner shall pay Tenant, as liquidated damages, the sum of $100.00 per day. Tenant, if it so elects, shall have the option to withhold the liquidated damages from its monthly rent. Owner shall keep all contractor's and manufacturer's warranties and guarantees on file and shall make same available for inspection by Tenant upon request.
This paragraph shall not apply to damage or delay caused by fire, flood, earthquake or other natural disaster, or war, riots, labor strike or civil unrest.
This paragraph shall not apply to damage or delay caused by fire, flood, earthquake or other natural disaster, or war, riots, labor strike or civil unrest.
Legal Requirements shall mean: all federal, state, county, municipal and other governmental statutes, laws, rules, regulations, and ordinances affecting the building
or the use thereof, including the Local and/or National Board of Fire Underwriters or its equivalent, whether now or hereafter enacted and in force, including without limitation any which may require repairs, modifications or alterations (structural or otherwise) in or to the land, building or the lease premises, and all permits, licenses, authorizations and regulations relating thereto; any which deal with environmental matters and/or Hazardous Substances; the Americans with Disabilities Act of 1990 (the "ADA"), and all covenants, agreements, restrictions and encumbrances affecting the building.
Governmental Authority ("Hazardous Substances"). The term Hazardous Substances shall not include incidental quantities of substances which are commonly used in offices, such as copier fluid, typewriter, corrections fluids and ordinary cleaning solvents, provided that such are at all times used, kept and stored in a manner which complies with all Legal Requirements. If the Premises contains Hazardous Substances, prior to Owner's delivering possession of the Premises to Tenant, Owner shall at Owner's sole cost and expense, remove, contain or abate all Hazardous Substances. Removal, containment or abatement of Hazardous Substances shall be done in compliance with (a) all applicable Legal Requirements; and (b) the performance prescribed by a contractor licensed and certified in the jurisdiction in which the Premises is located to remove, contain or abate such Hazardous Substances. If at any time during the Term the removal, containment or abatement of any Hazardous Substances located on or in the property is required by any applicable Legal Requirements, Owner shall proceed to remove, contain or abate the Hazardous Substances as required by the applicable Legal Requirements.
Signed this 24th day of November, 1994.
WITNESS: OWNER:
WENBERRY ASSOCIATES, L.L.C.
/s/ Daniel Jones By: /s/ James Kenny
------------------------- ---------------------------
printed name:
title:
TENANT:
BOTTOMLINE TECHNOLOGIES, INC.
/s/ Phillip D. Stevenson By: /s/ James L. Loomis
------------------------- ---------------------------
printed name: James L. Loomis
title: Vice President
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EXHIBITS A-1, A-2, A-3
Floor plans of the first, second and third floors fronting on Fleet Street in the building known as 155 Fleet Street in Portsmouth, New Hampshire, initially comprising approximately 24,000 square feet.
EXHIBIT A-4
Floor plan of an additional 8,000 square feet of space located to the rear of the third floor Fleet Street location, which Bottomline agreed to lease within one month of the occupancy of the building.
Exhibit 10.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made as of the 3rd day of December 1998, is entered into by Bottomline Technologies (de), Inc., a Delaware corporation with its principal place of business at 155 Fleet Street, Portsmouth, NH 03801 (the "Company"), and Mr. Daniel M. McGurl, residing at 375 Night Heron Drive, Boca Grande, Florida 33921 (the "Employee").
The Company desires to employ the Employee, and the Employee desires to be employed by the Company. In consideration of the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties agree as follows:
1. Term of Employment. The Company hereby agrees to employ the Employee, and the Employee hereby accepts employment with the Company, upon the terms set forth in this Agreement, for the 36 month period commencing on December 3, 1998 (the "Commencement Date") and ending on December 3, 2001, unless sooner terminated in accordance with the provisions of Section 5 or extended by mutual written agreement of the parties hereto (such period, the "Employment Period"); provided that, if a Change in Control of the Company (as defined in Section 4) shall have occurred during the Employment Period, the Employment Period and this Agreement shall continue in effect for a period of not less than 24 months beyond the date which such Change in Control occurred. The Company will notify the Employee whether it intends to extend the Employment Period at least 60 days prior to the end of the Employment Period.
2. Title; Capacity. During the Employment Period, the Employee shall serve as President and Chief Executive Officer of the Company. During the Employment Period, the Employee shall be subject to the supervision of, and shall have such authority as is delegated to him by, the Board of Directors of the Company (the "Board" or "Board of Directors"). The Employee hereby accepts such employment and agrees to undertake the duties and responsibilities normally inherent in such position and such other duties and responsibilities as the Board shall from time to time reasonably assign to him. During the Employment Period, the Employee shall, subject to the direction and supervision of the Board, devote his full business time, best efforts, business judgment, skill and knowledge to the advancement of the Company's business and interests and to the discharge of his duties and responsibilities hereunder. The Employee agrees to abide by the rules, regulations, instructions, personnel practices and policies of the Company and any changes therein which may be adopted from time to time by the Company.
3. Compensation and Benefits.
3.1 Salary and Bonus. The Company shall pay the Employee, in arrears in installments consistent with the Company's usual payroll practices, an annual base salary of $185,000. The Company agrees to review the Employee's annual base salary on each anniversary of the Commencement Date and may consider a merit increase in such annual base salary for the ensuing contract year based upon the performance of the Employee during the prior year. In the event that the Employee is, or is to be, employed for less than a full payroll installment period, such installment of the annual base salary shall be appropriately adjusted. The Employee shall be eligible to receive an annual bonus based upon his
performance. For performance during the Company's fiscal year ending June 30, 1999, the Employee shall be eligible to receive a bonus of up to $55,000.
3.2 Fringe Benefits. The Employee shall be entitled to participate in all employee benefit programs that the Company establishes and makes available to its executive officers from time to time (such as life insurance, health insurance, dental insurance, long-term disability insurance and retirement programs whether such programs are qualified, nonqualified and/or pretax contribution programs). The Employee shall be entitled to three weeks paid vacation per year, to be taken at reasonable times.
3.3 Reimbursement of Expenses. The Company shall reimburse the Employee for all reasonable travel, entertainment and other expenses incurred or paid by the Employee in connection with, or related to, the performance of his duties, responsibilities or services under this Agreement, in accordance with expense reimbursement policies of the Company, upon presentation by the Employee of documentation, expense statements, vouchers and/or such other supporting information as the Company may reasonably request.
3.4 Stock Incentives. The Company and the Employee have executed and delivered one or more stock option agreements, pursuant to which the Employee has been granted options to purchase shares of the Company's Common Stock (collectively, with any future grants of stock options, the "Stock Options"), such Stock Options being subject to the terms and conditions of the respective Stock Option agreements and Section 6 of this Agreement. In addition, the Employee shall be eligible to receive grants of stock options and other awards and benefits pursuant to such employee stock option and other stock-based employee benefit plans as the Company may maintain from time to time during the
Employment Period with respect to its key employees of like stature and compensation, and such amounts as may be determined by the Board of Directors in its discretion.
4. Change in Control of the Company; Potential Change in Control. The Company recognizes that a Potential Change in Control of the Company (as defined below) and/or a Change in Control of the Company (as defined below) and the uncertainties which may arise among its senior executives in connection therewith could result in the departure or distraction of its senior executives to the detriment of the Company and its stockholders. Accordingly, in order to induce the Employee to remain in the employ of the Company and to secure for the Company and its stockholders the benefits of the Employee's continued attention and dedication during the tenancy of any Potential Change in Control of the Company or Change in Control of the Company, including the Employee's assessment of, and advice to the Company's Board of Directors regarding, whether any Potential Change in Control and/or Change in Control proposal would be in the best interest of the Company and its stockholders, the Company has determined that it is in the best interest of the Company and its stockholder to provide to the Employee the extended severance benefits contained in this Agreement.
4.1 Change in Control of the Company. A "Change in Control of the Company" shall occur or be deemed to have occurred only if any one or more of the following events occur: (i) any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportion as their ownership of stock of the Company) is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 50% or
more of the combined voting power of the Company's then outstanding securities
(ii) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 80% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation or (B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no "person"
(as hereinabove defined) acquires more than 50% of the combined voting power of
the Company's then outstanding securities; or (iii) the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or substantially all of the
Company's assets.
4.2 Potential Change in Control of the Company. A "Potential Change in Control of the Company" shall be deemed to have occurred if:
(i) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Company;
(ii) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control of the Company; or
(iii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred.
5. Employment Termination. The employment of the Employee by the Company shall terminate upon the occurrence of any of the following:
5.1 Expiration of the Employment Period in accordance with Section 1.
5.2 At the election of the Company, for cause, immediately upon written notice by the Company to the Employee. For the purposes of this Agreement, prior to a Change in Control of the Company,"for cause" shall mean the discharge resulting from a determination by a vote of the Board that the Employee:
(i) has been convicted of a felony involving dishonesty, fraud, theft or embezzlement or any other felony;
(ii) has failed or refused, in any material respect, to follow reasonable written policies or directives established by the Board, which failure or refusal continues for 21 days following written notice thereof to the Employee;
(iii) has willfully and persistently failed to attend to material duties or obligations reasonably imposed on him under this Agreement, which failure continues for 21 days following written notice thereof to the Employee;
(iv) has breached any of his material obligations under any agreement between the Employee and the Company which imposes confidentiality, proprietary information, assignment of invention(s), non- competition or similar obligations on the Employee, as may be in effect from time to time (collectively "Company Agreements"); or
(v) has performed or failed to act, which if he were prosecuted and convicted for such performance or failure would constitute a crime or offense
involving money or property of the Company (in either case in an amount or at a value in excess of $5,000), or which would constitute a felony in the jurisdiction involved.
For purposes of this Agreement, after a Change in Control of the Company, "for cause" shall mean the discharge resulting from a determination by a vote of the Board under clause (i) or (v) of this Section 5.2.
5.3 Thirty days after the death or disability of the Employee. As used in this Agreement, the term "disability" shall mean the Employee shall have been unable to perform the services contemplated under this Agreement for a period of 90 days, whether or not consecutive, during any 360-day period, due to a physical or mental disability. A determination of disability shall be made by a physician satisfactory to both the Employee and the Company; provided, that if the Employee and the Company do not agree on a physician, the Employee and the Company shall each select a physician and these two together shall select a third physician, whose determination as to disability shall be binding on all parties.
5.4 At the election of the Employee, as a result of Involuntary Termination (as defined below), immediately upon written notice by the Employee to the Company. For the purposes of this Section 5.4, "Involuntary Termination" shall mean:
(i) the continued assignment to the Employee of any duties or the continued significant change in the Employee's duties, either of which is substantially inconsistent with the Employee's duties immediately prior to such assignment or change for a period of thirty (30) days after notice thereof from the Employee to the
Board setting forth in reasonable detail the respects in which the Employee believes such assignments or duties are significantly inconsistent with the Employee's prior duties;
(ii) a reduction in the Employee's base compensation;
(iii) the imposition of a requirement by the Company, any person in control of the Company or any successor to the Company, that the location at which the Employee performs his principal duties for the Company or any successor to the Company be changed to a new location outside a radius of 50 miles from the then current location; or
(iv) any breach by the Company of any material provision of this Agreement that continues uncured for 30 days following written notice thereof; provided that (A) none of the foregoing shall constitute Involuntary Termination to the extent the Employee has agreed in writing thereto; and (B) after a Change in Control of the Company, the 30-day cure periods described in clauses (i) and (iv) shall not apply.
The right of the Employee to terminate his employment as a result of an Involuntary Termination shall not be affected by the Employee's disability, or the fact that the Employee at such time may have an offer of employment from another employer or any other reason for terminating his employment with the Company.
5.5 At the election of the Company, without cause, upon 60 days' prior written notice to the Employee.
5.6 At the election of the Employee, other than as a result of an Involuntary Termination, upon 30 days prior written notice to the Company.
6. Effect of Termination.
6.1 Termination by the Company for Cause or by the Employee other than as a result of an Involuntary Termination. In the event the Employee's employment is terminated by the Company pursuant to Section 5.2 or by the Employee pursuant to Section 5.6, the Company shall pay to the Employee the base salary and benefits (excluding any bonuses) through the last day of his actual employment by the Company.
6.2 Termination for Death or Disability. If the Employee's employment is terminated by death or because of disability pursuant to Section 5.3, the Company shall pay to the estate of the Employee or to the Employee, as the case may be, the base salary and benefits to which the Employee would otherwise be entitled under Section 3 through the last day of his actual employment (including the maximum bonus that the Employee would have been entitled to under the Company's executive bonus program for the then current period).
6.3 Involuntary Termination.
6.3.1 Prior to a Potential Change in Control of the Company. In the event that the Employee's employment is terminated by the Employee as a result of Involuntary Termination prior to a Potential Change in Control of the Company or after the termination of a Potential Change in Control of the Company transaction that is not consummated, (i) the Company shall pay to the Employee, within ten (10) business days after the termination of the Employee's employment, an amount equal to two times his then annual base salary (including the maximum bonus that the Employee would have been entitled to under the
Company's executive bonus program for the then current period); (ii) the Company shall continue to provide benefits as then in effect for a period of 24 months (other than benefits associated with any Company bonus plan), commencing with the first day following the effective date of termination; and (iii) the Employee's right to exercise the Stock Options shall become immediately exercisable in full upon the date of such termination if such date of termination occurs later than two years after the date of this Agreement.
6.3.2 Upon or After a Potential Change in Control of the Company. In the event that the Employee's employment is terminated by the Employee as a result of Involuntary Termination upon or after the occurrence of a Potential Change in Control of the Company, for so long as such Potential Change in Control of the Company transaction is not terminated prior to consummation or after the Change in Control of the Company, (i) the Company shall pay to the Employee, within ten (10) business days after the termination of the Employee's employment, an amount equal to three times his then annual base salary (including the maximum bonus that the Employee would have been entitled to under the Company's executive bonus program for the then current period); (ii) the Company shall continue to provide benefits as then in effect for a period of 24 months (other than benefits associated with any Company bonus plan), commencing with the first day following the effective date of termination; and (iii) the Employee's right to exercise the Stock Options shall become immediately exercisable in full upon the date of such termination if such date of termination occurs later than two years after the date of this Agreement.
6.4 Termination Without Cause.
6.4.1 Prior to a Potential Change in Control of the Company. In the
event that the Employee's employment is terminated by the Company pursuant to
Section 5.5 prior to a Potential Change in Control of the Company or after the
termination of a Potential Change in Control of the Company transaction that is
not consummated, (i) the Company shall pay to the Employee, within ten (10)
business days after the termination of the Employee's employment, an amount
equal to two times his then annual base salary (including the maximum bonus that
the Employee would have been entitled to under the Company's executive bonus
program for the then current period); (ii) the Company shall continue to provide
benefits as then in effect for a period of 24 months (other than benefits
associated with any Company bonus plan), commencing with the first day following
the effective date of termination; and (iii) the Employee's right to exercise
the Stock Options shall become immediately exercisable in full upon the date of
such termination if such date of termination occurs later than two years after
the date of this Agreement.
6.4.2 Upon or After a Potential Change in Control of the Company. In
the event that the Employee's employment is terminated by the Company pursuant
to Section 5.5 upon or after a Potential Change in Control of the Company, for
so long as such Potential Change in Control of the Company transaction is not
terminated prior to consummation, or after the Change in Control of the Company
(i) the Company shall pay to the Employee, within ten (10) business days after
the termination of the Employee's employment, an amount equal to three times his
then annual base salary (including any bonuses that were earned and had vested
prior to such termination, but that were not paid to the Employee by the Company
prior to such termination); (ii) the Company shall continue to provide benefits as then in effect for a period of 24 months (other than benefits associated with any Company bonus plan), commencing with the first day following the effective date of termination; and (iii) the Employee's right to exercise the Stock Options shall become immediately exercisable in full upon the date of such termination if such date of termination occurs later than two years after the date of this Agreement.
6.5 No Duty to Mitigate. The Employee shall not be required to mitigate the amount of any payment provided for in this Section 6 nor shall the amount of any payment provided for in this Section 6 be reduced by any compensation earned by the Employee as a result of employment by another employer or by retirement; provided, that the Company shall not provide any non-cash benefit otherwise receivable by the Employee if an equivalent benefit is actually received by the Employee. The Employee agrees to report receipt of any non-cash benefit received by the Employee.
6.6 Violation of Company Agreements. Notwithstanding any other provision of this Agreement, the Company shall not be required to make any payments or provide any benefits to the Employee under this Section 6 if the Employee shall have breached any of his material obligations under any Company Agreement.
6.7 Survival. The provisions of Section 6 shall survive the termination of this Agreement.
6.8 No offset. Upon or after the occurrence of a Potential Change in Control of the Company, for so long as such Potential Change in Control of the Company transaction is not terminated prior to consummation, or after a Change in Control of the Company, the
Company shall have no right to offset any amounts owed by the Employee to the Company against any amounts owed by the Company to the Employee under this Agreement.
7. Successors; Binding Agreement. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement. Failure of the Company to obtain an assumption of this Agreement upon the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Employee, upon the effectiveness of any such succession, to compensation from the Company in the same amount as the Employee would be entitled hereunder if the Employee had terminated his employment as a result of Involuntary Termination upon or after the occurrence of a Potential Change in Control of the Company. As used in this Agreement, "Company" shall mean the Company as defined above and any successor to its business or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
8. Notices. All notices required or permitted under this Agreement shall be in writing and shall be deemed effective upon personal delivery or three days after deposit in the United States Post Office, by registered or certified mail, postage prepaid, return receipt requested, addressed to the other party at the address shown above (and, in the case of any notice to the Company, with a copy to John A. Burgess Esq., Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109), or at such other address or addresses as either party shall designate to the other in accordance with this Section 8.
10. Entire Agreement. This Agreement along with Stock Options constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter of such agreements; provided, however, that the provisions contained herein relating to Stock Options are in addition to and intended to supplement the terms and conditions of such Stock Options; provided, further that in the case of any conflict between the terms provided herein and the terms of any Stock Option or any document issued or entered into in connection with any such Stock Option or the terms of any plan governing any such Stock Option, the terms provided herein shall govern.
11. Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Employee.
12. Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the laws of the State of New Hampshire, without giving effect to conflict of laws provisions.
13. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any corporation with which or into which the Company may be merged or which may succeed to its assets or business and the Employee's heirs, estate administrator, executor and personal
representative, provided, however, that the obligations of the Employee are personal and shall not be assigned by him.
14. Legal Fees. The Company shall pay all legal fees and related expenses incurred by the Employee protecting, obtaining or enforcing any right or benefit accruing to the Employee hereunder after a Potential Change in Control of the Company which has not been terminated or after a Change in Control of the Company.
15. Taxes.
(a) All payments to be made to the Employee under this Agreement will be subject to required withholding of federal, state and local income and employment taxes.
(b) In the event that the Company undergoes a "Change in Ownership or Control" (as defined below), the Company shall determine after receipt of each "Contingent Compensation Payment" (as defined below) by the Employee, the amount, if any, of the excise tax (the "Excise Tax") payable pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") by the Employee with respect to each such payment. Within 7 days of the receipt of each Contingent Compensation Payment by the Employee, the Company shall make a cash payment (the "Gross-Up Payment") to the Employee in an amount equal to the sum of (i) the amount of the Excise Tax payable with respect to the Contingent Compensation Payment and (ii) the amount necessary to pay all additional taxes imposed on (or economically borne by) the Employee (including the Excise Taxes, state and federal income taxes and all applicable withholding taxes) attributable to the receipt of the Gross-Up Payment. For purpose of the preceding sentence, all taxes attributable to the receipt of the Gross-Up Payment shall be computed assuming the application of the maximum tax
rates provided by law. For purposes of this Section 15, the final determination of (i) which amounts are properly characterized as Contingent Compensation Payments, (ii) the Excise Tax payable with respect to the Contingent Compensation Payments, and (iii) the amount of any taxes attributable to the receipt of the Gross-Up Payment shall be made by the Employee.
(c) For purposes of this Section 15, the following terms shall have the meaning given them in this subsection (c):
(i) "Change in Ownership or Control" shall mean a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company determined in accordance with Section 280G(b)(2) of the Code.
(ii) "Contingent Compensation Payment" shall mean any payment (or benefit) in the nature of compensation that is made or supplied to a "disqualified individual" (as defined in Section 280G(c) of the Code) and that is contingent (within the meaning of Section 280G(b)(2)(A)(i) of the Code) on a Change in Ownership or Control of the Company.
16. Miscellaneous.
16.1 No delay or omission by either party in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by either party on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion.
16.2 The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.
16.3 In case any provision of this Agreement shall be invalid, illegal or otherwise unenforceable, the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby.
16.4 This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set forth above.
BOTTOMLINE TECHNOLOGIES (de), INC.
By: /s/ Joseph L. Barry, Jr.
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Joseph L. Barry, Jr.
Title: Chairman of Compensation Committee
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EMPLOYEE:
/s/ Daniel M. McGurl
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Daniel M. McGurl
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Exhibit 10.9
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made as of the third day of December 1998, is entered into by Bottomline Technologies (de), Inc., a Delaware corporation with its principal place of business at 155 Fleet Street, Portsmouth, NH 03801 (the "Company"), and Mr. Joseph L. Mullen, residing at One Berkshire Road, Wellesley, MA 02481 (the "Employee").
The Company desires to employ the Employee, and the Employee desires to be employed by the Company. In consideration of the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties agree as follows:
1. Term of Employment. The Company hereby agrees to employ the Employee, and the Employee hereby accepts employment with the Company, upon the terms set forth in this Agreement, for the 36 month period commencing on December 3, 1998 (the "Commencement Date") and ending on December 3, 2001, unless sooner terminated in accordance with the provisions of Section 5 or extended by mutual written agreement of the parties hereto (such period, the "Employment Period"); provided that, if a Change in Control of the Company (as defined in Section 4) shall have occurred during the Employment Period, the Employment Period and this Agreement shall continue in effect for a period of not less than 24 months beyond the date which such Change in Control occurred. The Company will notify the Employee whether it intends to extend the Employment Period at least 60 days prior to the end of the Employment Period.
2. Title; Capacity. During the Employment Period, the Employee shall serve as Executive Vice President, Operations of the Company. During the Employment Period, the Employee shall be subject to the supervision of, and shall have such authority as is delegated to him by, the Chief Executive Officer of the Company (the "CEO") and/or the Board of Directors of the Company (the "Board" or "Board of Directors"). The Employee hereby accepts such employment and agrees to undertake the duties and responsibilities normally inherent in such position and such other duties and responsibilities as the CEO and/or the Board shall from time to time reasonably assign to him. During the Employment Period, the Employee shall, subject to the direction and supervision of the CEO and/or the Board, devote his full business time, best efforts, business judgment, skill and knowledge to the advancement of the Company's business and interests and to the discharge of his duties and responsibilities hereunder. The Employee agrees to abide by the rules, regulations, instructions, personnel practices and policies of the Company and any changes therein which may be adopted from time to time by the Company.
3. Compensation and Benefits.
3.1 Salary and Bonus. The Company shall pay the Employee, in arrears in installments consistent with the Company's usual payroll practices, an annual base salary of $175,000. The Company agrees to review the Employee's annual base salary on each anniversary of the Commencement Date and may consider a merit increase in such annual base salary for the ensuing contract year based upon the performance of the Employee during the prior year. In the event that the Employee is, or is to be, employed for less than a full payroll installment period, such installment of the annual base salary shall be appropriately
adjusted. The Employee shall be eligible to receive an annual bonus based upon his performance. For performance during the Company's fiscal year ending June 30, 1999, the Employee shall be eligible to receive a bonus of up to $50,000.
3.2 Fringe Benefits. The Employee shall be entitled to participate in all employee benefit programs that the Company establishes and makes available to its executive officers from time to time (such as life insurance, health insurance, dental insurance, long-term disability insurance and retirement programs whether such programs are qualified, nonqualified and/or pretax contribution programs). The Employee shall be entitled to three weeks paid vacation per year, to be taken at reasonable times.
3.3 Reimbursement of Expenses. The Company shall reimburse the Employee for all reasonable travel, entertainment and other expenses incurred or paid by the Employee in connection with, or related to, the performance of his duties, responsibilities or services under this Agreement, in accordance with expense reimbursement policies of the Company, upon presentation by the Employee of documentation, expense statements, vouchers and/or such other supporting information as the Company may reasonably request.
3.4 Stock Incentives. The Company and the Employee have executed and delivered one or more stock option agreements, pursuant to which the Employee has been granted options to purchase shares of the Company's Common Stock, (collectively, with any future grants of stock options, the "Stock Options"), such Stock Options being subject to the terms and conditions of the respective Stock Option agreements and Section 6 of this Agreement. In addition, the Employee shall be eligible to receive grants of stock options and other awards and benefits pursuant to such employee stock option and other stock-based
employee benefit plans as the Company may maintain from time to time during the Employment Period with respect to its key employees of like stature and compensation, and such amounts as may be determined by the Board of Directors in its discretion.
4. Change in Control of the Company; Potential Change in Control. The Company recognizes that a Potential Change in Control of the Company (as defined below) and/or a Change in Control of the Company (as defined below) and the uncertainties which may arise among its senior executives in connection therewith could result in the departure or distraction of its senior executives to the detriment of the Company and its stockholders. Accordingly, in order to induce the Employee to remain in the employ of the Company and to secure for the Company and its stockholders the benefits of the Employee's continued attention and dedication during the tenancy of any Potential Change in Control of the Company or Change in Control of the Company, including the Employee's assessment of, and advice to the Company's Board of Directors regarding, whether any Potential Change in Control and/or Change in Control proposal would be in the best interest of the Company and its stockholders, the Company has determined that it is in the best interest of the Company and its stockholder to provide to the Employee the extended severance benefits contained in this Agreement.
4.1 Change in Control of the Company. A "Change in Control of the Company" shall occur or be deemed to have occurred only if any one or more of the following events occur: (i) any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company,
or any corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities (ii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 50% of the combined voting power of the Company's then outstanding securities; or (iii) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets.
4.2 Potential Change in Control of the Company. A "Potential Change in Control of the Company" shall be deemed to have occurred if:
(i) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Company;
(ii) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control of the Company; or
(iii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred.
5. Employment Termination. The employment of the Employee by the Company shall terminate upon the occurrence of any of the following:
5.1 Expiration of the Employment Period in accordance with Section 1.
5.2 At the election of the Company, for cause, immediately upon written notice by the Company to the Employee. For the purposes of this Agreement, prior to a Change in Control of the Company,"for cause" shall mean the discharge resulting from a determination by a vote of the Board that the Employee:
(i) has been convicted of a felony involving dishonesty, fraud, theft or embezzlement or any other felony;
(ii) has failed or refused, in any material respect, to follow reasonable written policies or directives established by the CEO and/or the Board, which failure or refusal continues for 21 days following written notice thereof to the Employee;
(iii) has willfully and persistently failed to attend to material duties or obligations reasonably imposed on him under this Agreement, which failure continues for 21 days following written notice thereof to the Employee;
(iv) has breached any of his material obligations under any agreement between the Employee and the Company which imposes confidentiality, proprietary information, assignment of invention(s), non-competition or similar obligations on the Employee, as may be in effect from time to time (collectively "Company Agreements"); or
(v) has performed or failed to act, which if he were prosecuted and convicted for such performance or failure would constitute a crime or offense involving money or property of the Company (in either case in an amount or at a value in excess of $5,000), or which would constitute a felony in the jurisdiction involved.
For purposes of this Agreement, after a Change in Control of the Company, "for cause" shall mean the discharge resulting from a determination by a vote of the Board under clause (i) or (v) of this Section 5.2.
5.3 Thirty days after the death or disability of the Employee. As used in this Agreement, the term "disability" shall mean the Employee shall have been unable to perform the services contemplated under this Agreement for a period of 90 days, whether or not consecutive, during any 360-day period, due to a physical or mental disability. A determination of disability shall be made by a physician satisfactory to both the Employee and the Company; provided, that if the Employee and the Company do not agree on a physician, the Employee and the Company shall each select a physician and these two together shall select a third physician, whose determination as to disability shall be binding on all parties.
5.4 At the election of the Employee, as a result of Involuntary Termination (as defined below), immediately upon written notice by the Employee to the Company. For the purposes of this Section 5.4, "Involuntary Termination" shall mean:
(i) the continued assignment to the Employee of any duties or the continued significant change in the Employee's duties, either of which is substantially
inconsistent with the Employee's duties immediately prior to such assignment or change for a period of thirty (30) days after notice thereof from the Employee to the CEO setting forth in reasonable detail the respects in which the Employee believes such assignments or duties are significantly inconsistent with the Employee's prior duties;
(ii) a reduction in the Employee's base compensation;
(iii) the imposition of a requirement by the Company, any person in control of the Company or any successor to the Company, that the location at which the Employee performs his principal duties for the Company or any successor to the Company be changed to a new location outside a radius of 50 miles from the then current location; or
(iv) any breach by the Company of any material provision of this Agreement that continues uncured for 30 days following written notice thereof; provided that (A) none of the foregoing shall constitute Involuntary Termination to the extent the Employee has agreed in writing thereto; and (B) after a Change in Control of the Company, the 30-day cure periods described in clauses (i) and (iv) shall not apply.
The right of the Employee to terminate his employment as a result of an Involuntary Termination shall not be affected by the Employee's disability, or the fact that the Employee at such time may have an offer of employment from another employer or any other reason for terminating his employment with the Company.
5.5 At the election of the Company, without cause, upon 60 days' prior written notice to the Employee.
5.6 At the election of the Employee, other than as a result of an Involuntary Termination, upon 30 days prior written notice to the Company.
6. Effect of Termination.
6.1 Termination by the Company for Cause or by the Employee other than as a result of an Involuntary Termination. In the event the Employee's employment is terminated by the Company pursuant to Section 5.2 or by the Employee pursuant to Section 5.6, the Company shall pay to the Employee the base salary and benefits (excluding any bonuses) through the last day of his actual employment by the Company.
6.2 Termination for Death or Disability. If the Employee's employment is terminated by death or because of disability pursuant to Section 5.3, the Company shall pay to the estate of the Employee or to the Employee, as the case may be, the base salary and benefits to which the Employee would otherwise be entitled under Section 3 through the last day of his actual employment (including the maximum bonus that the Employee would have been entitled to under the Company's executive bonus program for the then current period).
6.3 Involuntary Termination.
6.3.1 Prior to a Potential Change in Control of the Company. In the event that the Employee's employment is terminated by the Employee as a result of Involuntary Termination prior to a Potential Change in Control of the Company or after the termination of a Potential Change in Control of the Company transaction that is not consummated, (i) the Company shall pay to the Employee, within ten (10) business days after the termination of
the Employee's employment, an amount equal to his then annual base salary (including the maximum bonus that the Employee would have been entitled to under the Company's executive bonus program for the then current period); (ii) the Company shall continue to provide benefits as then in effect for a period of 12 months (other than benefits associated with any Company bonus plan), commencing with the first day following the effective date of termination; and (iii) the Employee's right to exercise the Stock Options shall become immediately exercisable in full upon the date of such termination if such date of termination occurs later than two years after the date of this Agreement.
6.3.2 Upon or After a Potential Change in Control of the Company. In the event that the Employee's employment is terminated by the Employee as a result of Involuntary Termination upon or after the occurrence of a Potential Change in Control of the Company, for so long as such Potential Change in Control of the Company transaction is not terminated prior to consummation or after the Change in Control of the Company, (i) the Company shall pay to the Employee, within ten (10) business days after the termination of the Employee's employment, an amount equal to two times his then annual base salary (including the maximum bonus that the Employee would have been entitled to under the Company's executive bonus program for the then current period); (ii) the Company shall continue to provide benefits as then in effect for a period of 24 months (other than benefits associated with any Company bonus plan), commencing with the first day following the effective date of termination; and (iii) the Employee's right to exercise the Stock Options shall become immediately exercisable in full upon the date of such termination if such date of termination occurs later than two years after the date of this Agreement.
6.4 Termination Without Cause.
6.4.1 Prior to a Potential Change in Control of the Company. In the
event that the Employee's employment is terminated by the Company pursuant to
Section 5.5 prior to a Potential Change in Control of the Company or after the
termination of a Potential Change in Control of the Company transaction that is
not consummated, (i) the Company shall pay to the Employee, within ten (10)
business days after the termination of the Employee's employment, an amount
equal to his then annual base salary (including the maximum bonus that the
Employee would have been entitled to under the Company's executive bonus program
for the then current period); (ii) the Company shall continue to provide
benefits as then in effect for a period of 12 months (other than benefits
associated with any Company bonus plan), commencing with the first day following
the effective date of termination; and (iii) the Employee's right to exercise
the Stock Options shall become immediately exercisable in full upon the date of
such termination if such date of termination occurs later than two years after
the date of this Agreement.
6.4.2 Upon or After a Potential Change in Control of the Company. In
the event that the Employee's employment is terminated by the Company pursuant
to Section 5.5 upon or after a Potential Change in Control of the Company, for
so long as such Potential Change in Control of the Company transaction is not
terminated prior to consummation, or after the Change in Control of the Company
(i) the Company shall pay to the Employee, within ten (10) business days after
the termination of the Employee's employment, an amount equal to two times his
then annual base salary (including any bonuses that were earned and had vested
prior to such termination, but that were not paid to the Employee by the Company
prior to
such termination); (ii) the Company shall continue to provide benefits as then in effect for a period of 24 months (other than benefits associated with any Company bonus plan), commencing with the first day following the effective date of termination; and (iii) the Employee's right to exercise the Stock Options shall become immediately exercisable in full upon the date of such termination if such date of termination occurs later than two years after the date of this Agreement.
6.5 No Duty to Mitigate. The Employee shall not be required to mitigate the amount of any payment provided for in this Section 6 nor shall the amount of any payment provided for in this Section 6 be reduced by any compensation earned by the Employee as a result of employment by another employer or by retirement; provided, that the Company shall not provide any non-cash benefit otherwise receivable by the Employee if an equivalent benefit is actually received by the Employee. The Employee agrees to report receipt of any non-cash benefit received by the Employee.
6.6 Violation of Company Agreements. Notwithstanding any other provision of this Agreement, the Company shall not be required to make any payments or provide any benefits to the Employee under this Section 6 if the Employee shall have breached any of his material obligations under any Company Agreement.
6.7 Survival. The provisions of Section 6 shall survive the termination of this Agreement.
6.8 No offset. Upon or after the occurrence of a Potential Change in Control of the Company, for so long as such Potential Change in Control of the Company transaction is not terminated prior to consummation, or after a Change in Control of the Company, the
Company shall have no right to offset any amounts owed by the Employee to the Company against any amounts owed by the Company to the Employee under this Agreement.
7. Successors; Binding Agreement. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement. Failure of the Company to obtain an assumption of this Agreement upon the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Employee, upon the effectiveness of any such succession, to compensation from the Company in the same amount as the Employee would be entitled hereunder if the Employee had terminated his employment as a result of Involuntary Termination upon or after the occurrence of a Potential Change in Control of the Company. As used in this Agreement, "Company" shall mean the Company as defined above and any successor to its business or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
8. Notices. All notices required or permitted under this Agreement shall be in writing and shall be deemed effective upon personal delivery or three days after deposit in the United States Post Office, by registered or certified mail, postage prepaid, return receipt requested, addressed to the other party at the address shown above (and, in the case of any notice to the Company, with a copy to John A. Burgess Esq., Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109), or at such other address or addresses as either party shall designate to the other in accordance with this Section 8.
10. Entire Agreement. This Agreement along with Stock Options constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter of such agreements; provided, however, that the provisions contained herein relating to Stock Options are in addition to and intended to supplement the terms and conditions of such Stock Options; provided, further that in the case of any conflict between the terms provided herein and the terms of any Stock Option or any document issued or entered into in connection with any such Stock Option or the terms of any plan governing any such Stock Option, the terms provided herein shall govern.
11. Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Employee.
12. Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the laws of the State of New Hampshire, without giving effect to conflict of laws provisions.
13. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any corporation with which or into which the Company may be merged or which may succeed to its assets or business and the Employee's heirs, estate administrator, executor and personal
representative, provided, however, that the obligations of the Employee are personal and shall not be assigned by him.
14. Legal Fees. The Company shall pay all legal fees and related expenses incurred by the Employee protecting, obtaining or enforcing any right or benefit accruing to the Employee hereunder after a Potential Change in Control of the Company which has not been terminated or after a Change in Control of the Company.
15. Taxes.
(a) All payments to be made to the Employee under this Agreement will be subject to required withholding of federal, state and local income and employment taxes.
(b) In the event that the Company undergoes a "Change in Ownership or Control" (as defined below), the Company shall determine after receipt of each "Contingent Compensation Payment" (as defined below) by the Employee, the amount, if any, of the excise tax (the "Excise Tax") payable pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") by the Employee with respect to each such payment. Within 7 days of the receipt of each Contingent Compensation Payment by the Employee, the Company shall make a cash payment (the "Gross-Up Payment") to the Employee in an amount equal to the sum of (i) the amount of the Excise Tax payable with respect to the Contingent Compensation Payment and (ii) the amount necessary to pay all additional taxes imposed on (or economically borne by) the Employee (including the Excise Taxes, state and federal income taxes and all applicable withholding taxes) attributable to the receipt of the Gross-Up Payment. For purpose of the preceding sentence, all taxes attributable to the receipt of the Gross-Up Payment shall be computed assuming the application of the maximum tax
rates provided by law. For purposes of this Section 15, the final determination of (i) which amounts are properly characterized as Contingent Compensation Payments, (ii) the Excise Tax payable with respect to the Contingent Compensation Payments, and (iii) the amount of any taxes attributable to the receipt of the Gross-Up Payment shall be made by the Employee.
(c) For purposes of this Section 15, the following terms shall have the meaning given them in this subsection (c):
(i) "Change in Ownership or Control" shall mean a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company determined in accordance with Section 280G(b)(2) of the Code.
(ii) "Contingent Compensation Payment" shall mean any payment (or benefit) in the nature of compensation that is made or supplied to a "disqualified individual" (as defined in Section 280G(c) of the Code) and that is contingent (within the meaning of Section 280G(b)(2)(A)(i) of the Code) on a Change in Ownership or Control of the Company.
16. Miscellaneous.
16.1 No delay or omission by either party in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by either party on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion.
16.2 The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.
16.3 In case any provision of this Agreement shall be invalid, illegal or otherwise unenforceable, the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby.
16.4 This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set forth above.
BOTTOMLINE TECHNOLOGIES (de), INC.
By: /s/ Daniel M. McGurl
-------------------------------------------
Daniel M. McGurl
Title: President, Chief Executive Officer
and Chairman
|
EMPLOYEE:
/s/ Joseph L. Mullen
-------------------------------------------
Joseph L. Mullen
|
Exhibit 10.10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made as of the 30th day of September 1998, is entered into by Bottomline Technologies (de), Inc., a Delaware corporation with its principal place of business at 155 Fleet Street, Portsmouth, NH 03801 (the "Company"), and Mr. Robert Eberle, residing at 579 Sagamore Avenue, Unit 70, Portsmouth, NH 03801 (the "Employee").
The Company desires to employ the Employee, and the Employee desires to be employed by the Company. In consideration of the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties agree as follows:
1. Term of Employment. The Company hereby agrees to employ the Employee, and the Employee hereby accepts employment with the Company, upon the terms set forth in this Agreement, for the 36 month period commencing on September 30, 1998 (the "Commencement Date") and ending on September 30, 2001, unless sooner terminated in accordance with the provisions of Section 5 or extended by mutual written agreement of the parties hereto (such period, the "Employment Period"); provided that, if a Change in Control of the Company (as defined in Section 4) shall have occurred during the Employment Period, the Employment Period and this Agreement shall continue in effect for a period of not less than 24 months beyond the date which such Change in Control occurred. The Company will notify the Employee whether it intends to extend the Employment Period at least 60 days prior to the end of the Employment Period.
2. Title; Capacity. During the Employment Period, the Employee shall serve as Executive Vice President, Chief Financial Officer and Treasurer of the Company. During the Employment Period, the Employee shall be subject to the supervision of, and shall have such authority as is delegated to him by, the Chief Executive Officer of the Company (the "CEO") and/or the Board of Directors of the Company (the "Board" or "Board of Directors"). The Employee hereby accepts such employment and agrees to undertake the duties and responsibilities normally inherent in such position and such other duties and responsibilities as the CEO and/or the Board shall from time to time reasonably assign to him. During the Employment Period, the Employee shall, subject to the direction and supervision of the CEO and/or the Board, devote his full business time, best efforts, business judgment, skill and knowledge to the advancement of the Company's business and interests and to the discharge of his duties and responsibilities hereunder. The Employee agrees to abide by the rules, regulations, instructions, personnel practices and policies of the Company and any changes therein which may be adopted from time to time by the Company.
3. Compensation and Benefits.
3.1 Salary and Bonus. The Company shall pay the Employee, in arrears in installments consistent with the Company's usual payroll practices, an annual base salary of $175,000. The Company agrees to review the Employee's annual base salary on each anniversary of the Commencement Date and may consider a merit increase in such annual base salary for the ensuing contract year based upon the performance of the Employee during the prior year. In the event that the Employee is, or is to be, employed for less than a full payroll installment period, such installment of the annual base salary shall be appropriately adjusted. The Employee shall
be eligible to receive an annual bonus based upon his performance. For performance during the Company's fiscal year ending June 30, 1999, the Employee shall be eligible to receive a bonus of up to $50,000.
3.2 Fringe Benefits. The Employee shall be entitled to participate in all employee benefit programs that the Company establishes and makes available to its executive officers from time to time (such as life insurance, health insurance, dental insurance, long-term disability insurance and retirement programs whether such programs are qualified, nonqualified and/or pretax contribution programs). The Employee shall be entitled to three weeks paid vacation per year, to be taken at reasonable times.
3.3 Reimbursement of Expenses. The Company shall reimburse the Employee for all reasonable travel, entertainment and other expenses incurred or paid by the Employee in connection with, or related to, the performance of his duties, responsibilities or services under this Agreement, in accordance with expense reimbursement policies of the Company, upon presentation by the Employee of documentation, expense statements, vouchers and/or such other supporting information as the Company may reasonably request.
3.4 Stock Incentives. Concurrently with the execution and delivery of this Agreement by the Employee and the Company or shortly thereafter, the Company and the Employee have executed and delivered, or will execute and deliver, an Incentive Stock Option Agreement and a Nonstatutory Stock Option Agreement pursuant to which the Employee shall be granted options to purchase up to an aggregate of 54,000 shares of the Company's Common Stock, at an exercise price of $30.00 per share (collectively, with any future grants of stock options, the "Stock Options"), such stock options being subject to the terms and conditions of the respective Stock
Option agreements and Section 6 of this Agreement. In addition, the Employee shall be eligible to receive grants of stock options and other awards and benefits pursuant to such employee stock option and other stock-based employee benefit plans as the Company may maintain from time to time during the Employment Period with respect to its key employees of like stature and compensation, and such amounts as may be determined by the Board of Directors in its discretion.
4. Change in Control of the Company; Potential Change in Control. The Company recognizes that a Potential Change in Control of the Company (as defined below) and/or a Change in Control of the Company (as defined below) and the uncertainties which may arise among its senior executives in connection therewith could result in the departure or distraction of its senior executives to the detriment of the Company and its stockholders. Accordingly, in order to induce the Employee to remain in the employ of the Company and to secure for the Company and its stockholders the benefits of the Employee's continued attention and dedication during the tenancy of any Potential Change in Control of the Company or Change in Control of the Company, including the Employee's assessment of, and advice to the Company's Board of Directors regarding, whether any Potential Change in Control and/or Change in Control proposal would be in the best interest of the Company and its stockholders, the Company has determined that it is in the best interest of the Company and its stockholder to provide to the Employee the extended severance benefits contained in this Agreement.
4.1 Change in Control of the Company. A "Change in Control of the Company" shall occur or be deemed to have occurred only if any one or more of the following events occur: (i) any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities (ii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 50% of the combined voting power of the Company's then outstanding securities; or (iii) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets.
4.2 Potential Change in Control of the Company. A "Potential Change in Control of the Company" shall be deemed to have occurred if:
(i) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Company;
(ii) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control of the Company; or
(iii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred.
5. Employment Termination. The employment of the Employee by the Company shall terminate upon the occurrence of any of the following:
5.1 Expiration of the Employment Period in accordance with Section 1.
5.2 At the election of the Company, for cause, immediately upon written notice by the Company to the Employee. For the purposes of this Agreement, prior to a Change in Control of the Company,"for cause" shall mean the discharge resulting from a determination by a vote of the Board that the Employee:
(i) has been convicted of a felony involving dishonesty, fraud, theft or embezzlement or any other felony;
(ii) has failed or refused, in any material respect, to follow reasonable written policies or directives established by the CEO and/or the Board, which failure or refusal continues for 21 days following written notice thereof to the Employee;
(iii) has willfully and persistently failed to attend to material duties or obligations reasonably imposed on him under this Agreement, which failure continues for 21 days following written notice thereof to the Employee;
(iv) has breached any of his material obligations under any agreement between the Employee and the Company which imposes confidentiality, proprietary information, assignment of invention(s), non-competition or similar obligations on the Employee, as may be in effect from time to time (collectively "Company Agreements"); or
(v) has performed or failed to act, which if he were prosecuted and convicted for such performance or failure would constitute a crime or offense involving money or property of the Company (in either case in an amount or at a value in excess of $5,000), or which would constitute a felony in the jurisdiction involved.
For purposes of this Agreement, after a Change in Control of the Company, "for cause" shall mean the discharge resulting from a determination by a vote of the Board under clause (i) or (v) of this Section 5.2.
5.3 Thirty days after the death or disability of the Employee. As used in this Agreement, the term "disability" shall mean the Employee shall have been unable to perform the services contemplated under this Agreement for a period of 90 days, whether or not consecutive, during any 360-day period, due to a physical or mental disability. A determination of disability shall be made by a physician satisfactory to both the Employee and the Company; provided, that if the Employee and the Company do not agree on a physician, the Employee and the Company shall each select a physician and these two together shall select a third physician, whose determination as to disability shall be binding on all parties.
5.4 At the election of the Employee, as a result of Involuntary Termination (as defined below), immediately upon written notice by the Employee to the Company. For the purposes of this Section 5.4, "Involuntary Termination" shall mean:
(i) the continued assignment to the Employee of any duties or the continued significant change in the Employee's duties, either of which is substantially inconsistent with the Employee's duties immediately prior to such assignment or change for a period of thirty (30) days after notice thereof from the Employee to the CEO setting forth in
reasonable detail the respects in which the Employee believes such assignments or duties are significantly inconsistent with the Employee's prior duties;
(ii) a reduction in the Employee's base compensation;
(iii) the imposition of a requirement by the Company, any person in control of the Company or any successor to the Company, that the location at which the Employee performs his principal duties for the Company or any successor to the Company be changed to a new location outside a radius of 50 miles from the then current location; or
(iv) any breach by the Company of any material provision of this Agreement that continues uncured for 30 days following written notice thereof; provided that (A) none of the foregoing shall constitute Involuntary Termination to the extent the Employee has agreed in writing thereto; and (B) after a Change in Control of the Company, the 30-day cure periods described in clauses (i) and (iv) shall not apply.
The right of the Employee to terminate his employment as a result of an Involuntary Termination shall not be affected by the Employee's disability, or the fact that the Employee at such time may have an offer of employment from another employer or any other reason for terminating his employment with the Company.
5.5 At the election of the Company, without cause, upon 60 days' prior written notice to the Employee.
5.6 At the election of the Employee, other than as a result of an Involuntary Termination, upon 30 days prior written notice to the Company.
6. Effect of Termination.
6.1 Termination by the Company for Cause or by the Employee other than as a result of an Involuntary Termination. In the event the Employee's employment is terminated by the Company pursuant to Section 5.2 or by the Employee pursuant to Section 5.6, the Company shall pay to the Employee the base salary and benefits (excluding any bonuses) through the last day of his actual employment by the Company.
6.2 Termination for Death or Disability. If the Employee's employment is terminated by death or because of disability pursuant to Section 5.3, the Company shall pay to the estate of the Employee or to the Employee, as the case may be, the base salary and benefits to which the Employee would otherwise be entitled under Section 3 through the last day of his actual employment (including the maximum bonus that the Employee would have been entitled to under the Company's executive bonus program for the then current period).
6.3 Involuntary Termination.
6.3.1 Prior to a Potential Change in Control of the Company. In the event that the Employee's employment is terminated by the Employee as a result of Involuntary Termination prior to a Potential Change in Control of the Company or after the termination of a Potential Change in Control of the Company transaction that is not consummated, (i) the Company shall pay to the Employee, within ten (10) business days after the termination of the Employee's employment, an amount equal to his then annual base salary (including the maximum bonus that the Employee would have been entitled to under the Company's executive bonus program for the then current period); (ii) the Company shall continue to provide benefits as then in effect for a period of 12 months (other than benefits associated with any Company bonus plan), commencing with the first day following the effective date of termination; and (iii) the Employee's right to
exercise the Stock Options shall become immediately exercisable in full upon the date of such termination.
6.3.2 Upon or After a Potential Change in Control of the Company. In the event that the Employee's employment is terminated by the Employee as a result of Involuntary Termination upon or after the occurrence of a Potential Change in Control of the Company, for so long as such Potential Change in Control of the Company transaction is not terminated prior to consummation or after the Change in Control of the Company, (i) the Company shall pay to the Employee, within ten (10) business days after the termination of the Employee's employment, an amount equal to two times his then annual base salary (including the maximum bonus that the Employee would have been entitled to under the Company's executive bonus program for the then current period); (ii) the Company shall continue to provide benefits as then in effect for a period of 24 months (other than benefits associated with any Company bonus plan), commencing with the first day following the effective date of termination; and (iii) the Employee's right to exercise the Stock Options shall become immediately exercisable in full upon the date of such termination.
6.4 Termination Without Cause.
6.4.1 Prior to a Potential Change in Control of the Company. In the
event that the Employee's employment is terminated by the Company pursuant to
Section 5.5 prior to a Potential Change in Control of the Company or after the
termination of a Potential Change in Control of the Company transaction that is
not consummated, (i) the Company shall pay to the Employee, within ten (10)
business days after the termination of the Employee's employment, an amount
equal to his then annual base salary (including the maximum bonus that the
Employee
would have been entitled to under the Company's executive bonus program for the then current period); (ii) the Company shall continue to provide benefits as then in effect for a period of 12 months (other than benefits associated with any Company bonus plan), commencing with the first day following the effective date of termination; and (iii) the Employee's right to exercise the Stock Options shall become immediately exercisable in full upon the date of such termination.
6.4.2 Upon or After a Potential Change in Control of the Company. In
the event that the Employee's employment is terminated by the Company pursuant
to Section 5.5 upon or after a Potential Change in Control of the Company, for
so long as such Potential Change in Control of the Company transaction is not
terminated prior to consummation, or after the Change in Control of the Company
(i) the Company shall pay to the Employee, within ten (10) business days after
the termination of the Employee's employment, an amount equal to two times his
then annual base salary (including any bonuses that were earned and had vested
prior to such termination, but that were not paid to the Employee by the Company
prior to such termination); (ii) the Company shall continue to provide benefits
as then in effect for a period of 24 months (other than benefits associated with
any Company bonus plan), commencing with the first day following the effective
date of termination; and (iii) the Employee's right to exercise the Stock
Options shall become immediately exercisable in full upon the date of such
termination.
6.5 No Duty to Mitigate. The Employee shall not be required to mitigate the amount of any payment provided for in this Section 6 nor shall the amount of any payment provided for in this Section 6 be reduced by any compensation earned by the Employee as a result of employment by another employer or by retirement; provided, that the Company shall not provide
any non-cash benefit otherwise receivable by the Employee if an equivalent benefit is actually received by the Employee. The Employee agrees to report receipt of any non-cash benefit received by the Employee.
6.6 Violation of Company Agreements. Notwithstanding any other provision of this Agreement, the Company shall not be required to make any payments or provide any benefits to the Employee under this Section 6 if the Employee shall have breached any of his material obligations under any Company Agreement.
6.7 Survival. The provisions of Section 6 shall survive the termination of this Agreement.
6.8 No offset. Upon or after the occurrence of a Potential Change in Control of the Company, for so long as such Potential Change in Control of the Company transaction is not terminated prior to consummation, or after a Change in Control of the Company, the Company shall have no right to offset any amounts owed by the Employee to the Company against any amounts owed by the Company to the Employee under this Agreement.
7. Successors; Binding Agreement. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement. Failure of the Company to obtain an assumption of this Agreement upon the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Employee, upon the effectiveness of any such succession, to compensation from the Company in the same amount as the Employee would be entitled hereunder if the Employee had terminated his employment as a result of Involuntary Termination upon or after the occurrence of a Potential
Change in Control of the Company. As used in this Agreement, "Company" shall mean the Company as defined above and any successor to its business or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
8. Notices. All notices required or permitted under this Agreement shall be in writing and shall be deemed effective upon personal delivery or three days after deposit in the United States Post Office, by registered or certified mail, postage prepaid, return receipt requested, addressed to the other party at the address shown above (and, in the case of any notice to the Company, with a copy to John A. Burgess Esq., Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109), or at such other address or addresses as either party shall designate to the other in accordance with this Section 8.
10. Entire Agreement. This Agreement along with Stock Options constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter of such agreements; provided, however, that the provisions contained herein relating to Stock Options are in addition to and intended to supplement the terms and conditions of such Stock Options; provided, further that in the case of any conflict between the terms provided herein and the terms of any Stock Option or any document issued or entered into in connection with any such Stock Option or the terms of any plan governing any such Stock Option, the terms provided herein shall govern.
11. Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Employee.
12. Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the laws of the State of New Hampshire, without giving effect to conflict of laws provisions.
13. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any corporation with which or into which the Company may be merged or which may succeed to its assets or business and the Employee's heirs, estate administrator, executor and personal representative, provided, however, that the obligations of the Employee are personal and shall not be assigned by him.
14. Legal Fees. The Company shall pay all legal fees and related expenses incurred by the Employee protecting, obtaining or enforcing any right or benefit accruing to the Employee hereunder after a Potential Change in Control of the Company which has not been terminated or after a Change in Control of the Company.
15. Taxes.
(a) All payments to be made to the Employee under this Agreement will be subject to required withholding of federal, state and local income and employment taxes.
(b) In the event that the Company undergoes a "Change in Ownership or Control" (as defined below), the Company shall determine after receipt of each "Contingent Compensation Payment" (as defined below) by the Employee, the amount, if any, of the excise tax (the "Excise Tax") payable pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") by the Employee with respect to each such payment. Within 7 days of the receipt of
each Contingent Compensation Payment by the Employee, the Company shall make a
cash payment (the "Gross-Up Payment") to the Employee in an amount equal to the
sum of (i) the amount of the Excise Tax payable with respect to the Contingent
Compensation Payment and (ii) the amount necessary to pay all additional taxes
imposed on (or economically borne by) the Employee (including the Excise Taxes,
state and federal income taxes and all applicable withholding taxes)
attributable to the receipt of the Gross-Up Payment. For purpose of the
preceding sentence, all taxes attributable to the receipt of the Gross-Up
Payment shall be computed assuming the application of the maximum tax rates
provided by law. For purposes of this Section 15, the final determination of
(i) which amounts are properly characterized as Contingent Compensation
Payments, (ii) the Excise Tax payable with respect to the Contingent
Compensation Payments, and (iii) the amount of any taxes attributable to the
receipt of the Gross-Up Payment shall be made by the Employee.
(c) For purposes of this Section 15, the following terms shall have the meaning given them in this subsection (c):
(i) "Change in Ownership or Control" shall mean a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company determined in accordance with Section 280G(b)(2) of the Code.
(ii) "Contingent Compensation Payment" shall mean any payment (or benefit) in the nature of compensation that is made or supplied to a "disqualified individual" (as defined in Section 280G(c) of the Code) and that is contingent (within the meaning of Section 280G(b)(2)(A)(i) of the Code) on a Change in Ownership or Control of the Company.
16. Miscellaneous.
16.1 No delay or omission by either party in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by either party on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion.
16.2 The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.
16.3 In case any provision of this Agreement shall be invalid, illegal or otherwise unenforceable, the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby.
16.4 This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set forth above.
BOTTOMLINE TECHNOLOGIES (de), INC.
By: /s/ Daniel M. McGurl
--------------------------------------------
Daniel M. McGurl
Title: President, Chief Executive Officer
and Chairman
|
EMPLOYEE:
/s/ Robert A. Eberle
--------------------------------------------
Robert A. Eberle
|
EXHIBIT 10.11
SHAWMUT BANK, N.A. LOAN AGREEMENT
THIS AGREEMENT made this 13th day of January, 1995, by and between Bottomline Technologies, Inc., a New Hampshire corporation with an address and principal place of business at One Court Street, Exeter, New Hampshire, 03833- 2742 (hereinafter called the "BORROWER") and Shawmut Bank, N.A., a national banking association organized and existing under the laws of the United States of America, with a principal place of business at One Federal Street, Boston, Massachusetts 02211-3204 (hereinafter called the "BANK").
W I T N E S S E T H:
The following agreement of the parties:
1.1 Subject to the terms and conditions of this Agreement, the Bank hereby establishes a revolving line of credit of up to $2,000,000.00 (the "REVOLVING LOAN") to be advanced as hereinafter provided. The Bank may, in its discretion, from time to time, make advances to the Borrower upon the Borrower's request; provided, however, that no advance will be made if, after giving effect to the Borrower's request for such advance, the outstanding principal balance of the Revolving Loan would exceed the sum of $2,000,000 (the "CREDIT LIMIT") MINUS the amount of advances constituting the Equipment Line (as hereinafter defined).
1.2 Interest on advances under the Revolving Loan shall be payable monthly in arrears commencing on the first day of the first month next succeeding the date hereof at the rate of the Bank's Corporate Base Rate in effect from time to time. The Bank's "CORPORATE BASE RATE" shall mean the annual rate of interest established by the Bank from time to time at its principal office, as its Corporate Base Rate it being understood that such rate is a reference rate and not necessarily the lowest rate of interest charged by Bank. The rate of interest payable by the Borrower shall be changed effective as of that day on which a change in the Bank's Corporate Base Rate becomes effective. Interest shall be computed on the basis of a 360-day year, for the actual number of days elapsed. Default interest shall be charged in accordance with the terms of the Revolving Note (as defined herein).
1.3 The principal balance of the Revolving Loan shall be payable on the Termination Date (as hereinafter defined). On any date on which a payment of interest or principal is due hereunder, the Bank may charge the Borrower's demand deposit account(s) with the amount thereof. The failure of the Bank so to charge such account shall not relieve the Borrower of its obligations to make payments hereunder.
1.4 As evidence of the Borrower's obligations under the Revolving Loan, the Borrower shall execute and deliver to the Bank a Secured Revolving Time Note (the "REVOLVING NOTE") of even date herewith.
1.5 The Bank need not enter payments of interest and principal upon the Revolving Note but may maintain a record thereof on a separate ledger maintained by the Bank.
1.6 No advance under the Revolving Loan will be made after December 30, 1995 (the "EXPIRATION DATE"), and the entire unpaid principal balance of the Revolving Loan, together with all unpaid interest accrued thereon and all accrued and unpaid fees, if any, shall be due and payable without notice or demand on December 31, 1995 (the "TERMINATION DATE").
1.7 Prior to the close of the Bank's business on the Expiration Date, the Borrower may. repay, in whole or in part, the principal amount of the Revolving Loan minus the aggregate amount of advances constituting the Equipment Line (as hereinafter defined) and may, in the Bank's discretion, reborrow any such amounts repaid, all in accordance with this Section 1. If, at any time, the unpaid principal balance of the Revolving Loan exceeds the Credit Limit, the Borrower shall immediately pay to the Bank the amount of such excess without notice or demand.
1.8 The Bank may, at any time and from time to time, upon the request of the Borrower, but in the Bank's sole and absolute discretion, extend either or both of the Expiration Date and the Termination Date.
1.9 Subject to the terms and conditions of this Agreement, the Bank will make an equipment line available to the Borrower in the maximum principal amount of $500,000.00 (the "EQUIPMENT LINE" and together with all other advances under the Revolving Loan, the "LOANS"), as evidenced by a Line of Credit Agreement for the Acquisition of Equipment (the "LINE OF CREDIT AGREEMENT") of even date.
1.10 Interest on the principal balance of the Equipment Line shall be payable monthly in arrears commencing on the first day of the first month next succeeding the date of the first advance under the Equipment Line at the rate of the Bank's
Corporate Base Rate in effect from time to time. The rate of interest payable by the Borrower shall be changed effective as of that day on which a change in the Bank's Corporate Base Rate becomes effective. Interest shall be computed on the basis of a 360-day year, for the actual number of days elapsed.
1.11 The principal balance of the Equipment Line shall be due and payable in full on December 31, 1995 unless that balance (or portions thereof in increments of at least One Hundred Thousand ($100,000.00) Dollars) is converted to a term loan(s) pursuant to the form of Term Note (the "EQUIPMENT TERM NOTE(S)") attached to the Line of Credit Agreement. The principal balance of the Equipment Term Note(s) shall be amortized in thirty-six (36) consecutive monthly installments, together with interest thereon at the Bank's Corporate Base Rate or at a fixed rate acceptable to Borrower and Bank. Such principal and interest payments shall be paid inonthly in arrears on the first day of each month, commencing with the first day of the first month next succeeding the date of the Equipment Term Note(s). On any date on which a payment of interest and principal is due under the Equipment Line or the Equipment Term Note(s), the Bank may charge the Borrower's demand deposit account(s) with the amount thereof. The failure of the Bank so to charge such account shall not relieve the Borrower of its obligations to make payments thereunder.
1.12 Any principal payments under the Equipment Line or any Equipment Term Note(s) shall not create availability for the acquisition of additional equipment or with respect to the Revolving Loan as a whole.
1.13 The Bank need not enter payments of interest or principal upon the Line of Credit Agreement or the Equipment Term Note, but may maintain a record thereof on a separate ledger maintained by the Bank.
1.14 All of the Borrower's obligations to the Bank, of every kind and description, including those arising under this Agreement, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, regardless of how they arise or by what agreement or instrument they may be evidenced, including those arising under any other agreements, instruments or documents executed in conjunction herewith, or whether evidenced by an agreement or instrument, including obligations to perform acts and refrain from taking action, as well as obligations to repay the Loans, shall constitute the Borrower's "LIABILITIES" to the Bank, as the same may be modified, amended, replaced or extended from time to time.
1.15 The Revolving Note, Line of Credit Agreement and the Equipment Term Note are incorporated herein to the same extent as if they were set forth in full in this Agreement.
1.16 If after the date hereof, Bank determines that (i) the adoption of
any applicable law, rule, or regulation regarding capital requirements for
banks, bank holding companies or trust companies or the subsidiaries thereof,
(ii) any change in the interpretation or administration of any such law, rule or
regulation by any governmental authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or (iii) compliance
by Bank or its holding company with any request or directive of any such
governmental authority, central bank or comparable agency regarding capital
adequacy (whether or not having the force of law), has the effect of reducing
the rate of return on Bank's capital to a level below that which Bank could have
achieved (taking into consideration Bank's and its holding company's policies
with respect to capital adequacy immediately before such adoption, change, or
compliance and assuming that Bank's capital was fully utilized prior to such
adoption, change, or compliance) but for such adoption, change, or compliance as
a consequence of Bank's commitment to make advances pursuant hereto by any
amount deemed by Bank to be material:
i. Bank shall promptly, after Bank's determination of such occurrence, give notice thereof to Borrower; and
ii. Borrower shall pay to Bank as an additional fee from time to time, on demand, such amount as Bank certified to be the amount that will compensate Bank for such reduction. Notwithstanding the aforesaid, no such fee shall be due and payable if Borrower satisfies all of its Liabilities to the Bank and terminates this Agreement within thirty (30) days of any such demand.
A certificate of Bank claiming entitlement to compensation as set forth above will be conclusive in the absence of manifest error. Such certificate will set forth the nature of the occurrence giving rise to such compensation, the additional amount or amounts to be paid to Bank, and the method by which such amounts were determined. In determining such amount, Bank may use any reasonable averaging and attribution method.
2.1 To induce the Bank to enter into this Loan Agreement and to make the Loans, the Borrower warrants and represents that, as of this date:
(a) The Borrower is a duly or ani ed and existing corporation under the laws of the State of New Hampshire and is in good standing under the laws of said State of New Hampshire.
(b) The Borrower is duly qualified to do business and in good standing as a foreign corporation in each state or other jurisdiction where the failure to qualify would have a material adverse effect on the Borrower's business or the collateral for the Liabilities.
(c) The Borrower has good and clear record and marketable title to all properties and assets which it purports to own, free and clear of all mortgages, liens, pledges, charges, security interests and encumbrances, other than those being granted to the Bank, if any, and those reflected on EXHIBIT A attached hereto.
(d) The Borrower owns and holds or leases all real and personal property necessary or incidental to the present future conduct of its business, including, without limitation, patents, trademarks, service marks, trade names, copyrights and licenses and other rights with respect to the foregoing.
(e) All books and records of the Borrower, including, but not limited to, minute books, by-laws and books of account are materially accurate and reflect all material matters and transactions which should currently be reflected therein.
(f) The general nature of the Borrower's business is as set forth on EXHIBIT A attached hereto.
(g) The Borrower has no subsidiaries and no investments in the stock or securities of any other corporation, firm, trust or other entity, except as set forth on EXHIBIT A.
(h) Except as set forth on EXHIBIT A and to the best of Borrower's knowledge, there are no actions, suits, investigations or proceedings pending, or to the knowledge of the Borrower threatened, against the Borrower or any of its properties in any court, before any governmental authority, arbitration board, or any other tribunal which, singly or in the aggregate, if decided adversely to the Borrower, would materially and adversely affect the business, properties or condition (whether financial or otherwise) of the Borrower. The Borrower is not, nor by execution and delivery of this Agreement and the performance of its obligations hereunder (with or without the passage of time) will the Borrower be in default with respect to any order of any court, governmental authority, arbitration board or other tribunal.
(i) The Borrower has furnished to the Bank the financial statements for the time period indicated on EXHIBIT A attached hereto. Said statements fairly present, in all material respects, the condition of the Borrower at the dates thereof, and the statements of operation contained therein fairly present the results of the operations of the Borrower for the periods indicated, all in conformity with generally accepted accounting principles consistently applied.
(j) Except to the extent reflected or reserved against in the financial statements referred to above, the Borrower, as of the date of said financial statements, had no liabilities of any nature, whether accrued, absolute, contingent or otherwise, including, without limitation, tax liabilities, due or to become due, or arising out of transactions entered into or any state of facts existing prior thereto.
(k) Since the date of the financial statements referred to in
Section 2.1(i), and except as shown on EXHIBIT A, to the best of the Borrower's
knowledge, there has not been:
(i) any change in the condition of the Borrower's assets or liabilities, other than changes in its ordinary course of business, none of which has been materially adverse, nor has there been any depletion of cash or decrease of working capital which has been materially adverse;
(ii) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the Borrower's properties or business;
(iii) any declaration of, setting aside of, or making of a payment of any dividend or other distribution with respect to the Borrower's capital stock or any direct or indirect redemption, purchase or other acquisition of any such stock, except for distributions to its stockholders to satisfy federal and state tax liabilities on undistributed income (if Borrower is a Subchapter "S" corporation); or
(iv) any materially adverse:
(1) controversy with any labor organization or employees;
(2) claim or controversy involving any federal, state or local governmental agencies; or
(3) other event or condition materially affecting the business or properties of the Borrower.
(l) The Borrower has filed all federal and state income tax returns, excise tax returns, and all other tax returns of every kind and nature which are required to be filed by the Borrower as of the date hereof and has paid all taxes shown to be due on said returns.
(m) The Borrower keeps all records concerning its accounts (as said term is defined in the Massachusetts Uniform Commercial Code) and has its chief executive office and principal place of business at the address set forth at the beginning of the Agreement. The Borrower has no other addresses at which the
Borrower has an office, conducts business or at which any of the Borrower's property is located except as set forth on EXHIBIT A.
(n) The execution and delivery of this Agreement, the borrowing by the Borrower as herein provided, the execution and delivery by the Borrower of all instruments, agreements and documents of every kind and nature pursuant hereto and the performance by the Borrower of all of its obligations to the Bank hereunder ave been duly authorized by the Board of Directors of the Borrower and, to the extent required by law or otherwise, by the Borrower's stockholders, and this Agreement and all instruments, agreements and documents executed pursuant hereto are valid and binding obligations of the Borrower enforceable in accordance with their terms except to the extent such enforceability may be limited by laws of general application affecting the rights of creditors.
(o) There is no provision in the articles of organization, agreement of association or the by-laws of the Borrower, or any indenture, contract or agreement to which it is a party or by which it is bound, which prohibits the execution and delivery of this Agreement or the performance by the Borrower of its obligations hereunder.
(p) No event has occurred and no condition exists, which, upon the execution and delivery of this Agreement would constitute a default or an Event of Default hereunder. Neither the nature of the Borrower or any of its business or properties, nor any relationships between the Borrower and any other person, nor any circumstances in connection with the execution or delivery of this Agreement, is such as to require a consent, approval, or authorization of or filing, registration, or qualification with, any governmental authority on the part of the Borrower as a condition of the execution and delivery of this Agreement or any other instrument, agreement or document contemplated hereby, or the performance by the Borrower of its obligations hereunder or thereunder.
(q) The Borrower has no pension, profit sharing, stock option, Employee Stock Ownership Trust ("ESOT"), insurance or other similar plan providing for a program of deferred compensation or ,benefits for any employee or officer, except as indicated on EXHIBIT A hereto.
3.1 The Borrower will duly and punctually pay all interest and principal becoming due to the Bank and will duly and punctually perform all things on its part
to be done or performed under this Agreement, or pursuant to any instrument, document or agreement executed pursuant hereto.
3.2 The Borrower will, at all times, keep proper books of account in which full, true and correct entries will be made of its transactions in accordance with generally accepted accounting principles consistently applied.
3.3 The Borrower will, at all reasonable times, make its books and records available, in its offices, for inspection, examination and copying by the Bank and the Bank's representatives and will, at all reasonable times, permit inspection of its properties by the Bank and the Bank's representatives.
3.4 The Borrower will, from time to time, furnish the Bank with such information and statements as the Bank may reasonably request and with copies of all financial statements and reports that it shall send or make available to stockholders.
3.5 The Borrower will furnish the Bank quarterly, within forty-five (45) days after the close of each fiscal quarter, commencing with the quarterly period in which this Agreement is executed, a balance sheet and income statement reflecting the financial condition of the Borrower at the end of each such period and the results of its operation during each such period. Each statement shall also contain comparative statements for the same period during the prior fiscal year. Each balance sheet and income statement is to be certified by the President or Treasurer of the Borrower, such certification to state that such balance sheet and income statement fairly present the financial condition and the result of operations of the Borrower at the end of such period and during such period in accordance with generally accepted accounting principles consistently applied, subject, however, to ordinary year-end adjustments, none of which will be materially adverse.
3.6 The Borrower will furnish the Bank annually, within ninety (90) days after the close of each fiscal year, a balance sheet and income statement reflecting the financial condition of the Borrower at the end of each such fiscal year and the results of its operation during such fiscal year. Each such statement shall also contain comparative statements for the prior fiscal year. Each such balance sheet and income statement is to be audited by an independent certified public accountant satisfactory to the Bank with an audit quality statement to be issued by the accountant and signed by the President and/or Treasurer representing that neither the accounting firm nor the President and/or Treasurer of the Borrower is aware of any material modifications necessary to the financial statements for them to be in conformity with generally accepted accounting principles consistently applied.
3.7 The Borrower will, on a quarterly basis, within forty-five (45) days of the end of each fiscal quarter, deliver to the Bank certificates signed by its President
or Treasurer certifying that each such officer has reviewed the provisions of this Agreement (including, without limitation, the financial covenants contained in this Agreement, to the extent they are being tested at that time) and stating in his opinion, if such be the fact, that the Borrower has not been and is not in default as to any of the covenants and agreements of the Borrower contained in this Agreement, or in the event of any such default, setting forth the details thereof.
3.8 The Borrower shall furnish to Bank monthly, within twenty (20) days after the close of each fiscal month, an accounts receivable aging, such aging to be in such form and certified by such officers of the Borrower as Bank may prescribe from time to time.
3.9 The Borrower shall make its books and records available to the Bank for audit at any time and from time to time at the Bank's discretion and at the Borrower's expense provided that the maximum aggregate cost to the Borrower in any fiscal year shall not exceed $3,000.00 per year absent the occurrence of an Event of Default hereunder.
3.10 The Borrower will maintain its corporate existence in good standing, comply with all laws and regulations of the United States, of any state or states thereof, of any political subdivision thereof and of any governmental authority which may be applicable to the Borrower or to the Borrower's business.
3.11 The Borrower will pay all real and personal property taxes, assessments and charges and all franchise, income, unemployment, old age benefit, withholding, sales and other taxes assessed against it or payable by it at such times and in such manner to prevent any penalty from accruing or any lien or charge from attaching to its properties. The provisions of this section, however, shall not preclude the Borrower from contesting in good faith and diligently prosecuting any such tax. The Borrower shall not be in default under this Section by reason of the existence of a lien for taxes not then due.
3.12 The Borrower will put and maintain its properties in good repair, working condition and order and, from time to time, make all needful and proper repairs, renewals and replacements.
3.13 The Borrower will maintain insurance at all times covering such risks and in such amounts as the Bank may reasonably require in accordance with industry standards, all such insurance to be in such form and for such periods and written by such companies as shall be reasonably acceptable to the Bank.
3.14 The Borrower will pay or reimburse the Bank, on demand, for all expenses (including, without limitation, reasonable counsel fees and expenses) incurred or paid by the Bank in connection with the preparation, amendment,
interpretation, extension or negotiation of this Agreement, and any instrument, agreement or document to be delivered pursuant hereto; the enforcement by the Bank of its rights as against the Borrower or any other person primarily or secondarily liable to the Bank hereunder or thereunder; the administration, supervision, protection or realization on any Collateral held by the Bank as security for any obligation of the Borrower or any other person primarily or secondarily liable with respect thereto and in the defense of any action against the Bank with respect to its rights or liabilities hereunder or thereunder.
3.15 The Borrower will punctually and promptly make all payments and perform all other obligations which may be required of it with respect to any indebtedness (whether for money borrowed, goods purchased, services rendered or however such indebtedness may otherwise arise) owing to persons, firms or corporations other than the Bank, including, without limitation, indebtedness which may be secured by a security interest in assets of the Borrower or property of the Borrower, and all obligations under the terms of any lease in which the Borrower is the lessee. The provisions of this section shall not preclude the Borrower from contesting in good faith and diligently prosecuting any such indebtedness or obligation.
3.16 The Borrower shall pay or cause to be paid when due all amounts necessary to fund in accordance with their terms all the Borrower's deferred compensation plans whether now in existence or hereafter created, and the Borrower will not withdraw from participation in, permit the termination or partial termination of, or permit the occurrence of any other event with respect to any deferred compensation plan maintained for the benefit of its employees under circumstances that could result in liability to the Pension Benefit Guaranty Corporation, or any of its successors or assigns, or to the entity which provides funds for such deferred compensation plan.
4.1 The Borrower will not issue evidences of indebtedness or create, assume, become contingently liable for, or suffer to exist indebtedness in addition to indebtedness to the Bank, except for debt to its officers, directors and stockholders that is subordinated to the Loans on terms satisfactory to the Bank (the "SUBORDINATED DEBT"); provided, however, that the Borrower may incur liabilities which are incurred or arise in the ordinary course of the Borrower's business (other than liabilities incurred or arising with respect to money borrowed) and purchase money security interests in acquired assets as reflected on EXHIBIT A.
4.2 The Borrower will not pay dividends either in cash or in kind on any class of its capital stock; provided that the Borrower may pay dividends in the form of stock.
4.3 The Borrower will not make any loans or advances to any individual, firm or corporation, including, without limitation, its officers and employees in excess of $100,000.00 outstanding in the aggregate (exclusive of the loan referenced below); provided, however, that the Borrower may make advances to its employees, including its officers, with respect to expenses incurred by such employees, which expenses are reimbursable by the Borrower and directly related to the conduct of the Borrower's business and provided that the Bank recognizes that a loan in the amount of $65,000.00 is outstanding as of the date hereof.
4.4 The Borrower will not invest in or purchase any stock or securities of any individual, firm or corporation, provided, however, the Borrower may invest in direct obligations of the United States of America having a maturity of one year or less from the date of investment.
4.5. The Borrower will not merge or consolidate or be merged or consolidated with or into any other corporation.
4.6 The Borrower will not sell or dispose of any of its assets except for sales of inventory in the ordinary course of its business; provided, however, that the Borrower may dispose of (or trade in) equipment which is no longer required for the conduct of the Borrower's business so long as the Borrower receives therefor a sum (or credit) substantially equal to such equipment's fair value.
4.7 Except as set forth on EXHIBIT A, the Borrower will not -grant or suffer to exist any mortgage, pledge, title retention agreement, security interest, lien, charge or encumbrance with respect to any of its assets, tangible or intangible, whether now owned or hereafter acquired, or subject any of such assets to the prior payment of any indebtedness, or transfer in any manner any of such assets with the intent or purpose, directly or indirectly, of subjecting such assets to the payment of indebtedness.
4.8 The Borrower will not engage in any business other than the business in which it is currently engaged or a business reasonably allied thereto.
MINIMUM AMOUNT TIME PERIOD -------------- ----------- $1,809,000.00 Fiscal Year ending June 30, 1995 |
The term "TANGIBLE NET WORTH" shall mean stockholders' equity determined in accordance with generally accepted accounting principles, consistently applied,
MAXIMUX PERCENTAGE TIME PERIOD
------------------ -----------
200% Fiscal Year ending June 30, 1995
|
(a) the aggregate of (i) earnings before interest, taxes, depreciation and amortization, MINUS (ii) unfinanced capital expenditures, MINUS (iii) permitted dividends, MINUS (iv) taxes actually paid by the Borrower to:
(b) the sum of (i) interest, and (ii) the current maturities of long- term debt to be less than 1.50:1 for the twelve-month period ending on June 30, 1995.
4.12 All accounting terms shall be construed and interpreted in accordance with generally accepted accounting principles consistently applied.
4.13 The Borrower will not permit any changes in the senior management of the Borrower consisting of the President and Vice President\Chief Financial Officer without consulting the Bank prior to any proposed changes and obtaining the Bank's approval.
4.14 The Borrower will not permit any material changes in the ownership of the Borrower (in excess of twenty (20%) percent of the issued and outstanding stock of the Borrower) without consulting the Bank prior to any proposed changes and obtaining the Bank's approval.
5.1 The Bank shall have and hold as security for the repayment of the Loans and all other Liabilities of the Borrower to the Bank a security interest in substantially all of the Borrower's business assets (the "COLLATERAL"), and the Borrower will execute and deliver all agreements, instruments and documents, in form and substance satisfactory to the Bank, to establish, create and perfect the same, including, without limitation, a Security Agreement (All Assets) of even date (the "SECURITY AGREEMENT").
5.2 Any and all deposits or other sums at any time credited by or due from the Bank to the Norrower shall at all times constitute additional security for all obligations of the Borrower to the Bank and may be set off against any such obligatios at any time after the occurrence of an Event of Default, as applicable, whether or not security held by the Bank is deemed to be adequate. Any and all instruments, documents, policies and certificates insurance, securities, goods, accounts receivable, choses in action, chattel paper, cash, property and the proceeds thereof owned by the Borrower or in which the Borrower has an interest, which now or hereafter are at any time in possesion or control of the Bank or in transit by mail or carrier to or from the Bank or in the possession of any third party acting in the Bank's behalf, without regard to whether the Bank received the same in pledge, for safekeeping, as agent for collection or transmission or otherwise or whether the Bank has conditionally released the same, shall constitute additional security for such obligations and may be applied at any time after demand or the occurrence of an Event of Default, as applicabe, to such obligations, whether due or not.
6.1 The occurrence of any of the following events (after the expiration of any applicable grace period) shall be an Event of Default hereunder:
(a) The Borrower shall fail to pay any installment of principal or interest on account of the Loans when such payment is due, or on demand, if such payment is due on demand.
(b) The Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement or in any instrument, document or
agreement executed pursuant hereto and the expiration of fifteen (15) days from
such failure, or failure to adhere to the financial covenants contained in
Section 4 hereof (without any grace period).
(c) Any warranty, representation or statement made or furnished to the Bank by or on behalf of the Borrower proves to have been false in any material respect when made or furnished.
(d) Any event which results in the acceleration of the aturity of the indebtedness of the Borrower to others in excess of $10,000.00 under any indenture, agreement, undertaking or otherwise.
(e) Dissolution, termination of existence, insolvency, or business failure of the Borrower.
(f) The Borrower shall: (i) cease, be unable, or admit in writing its
inability to pay its debts as they mature, or make a general assignment for the
benefit of, or enter into any composition, trust mortgage or other arrangement
with creditors; (ii) apply for, or consent (by admission of material allegations
of a petition or otherwise) to the appointment of a receiver, trustee or
liquidator of the Borrower or of a substantial part of its assets, or authorize
such application or consent, or proceedings seeking such appointment shall be
commenced against the Borrower and continue undismissed for sixty (60) days; or
(iii) apply for, or consent (by admission of material allegations of a petition
or otherwise) to the application of any bankruptcy, reorganization, readjustment
of debt, insolvency, dissolution, liquidation or other similar law of any
jurisdiction, or authorize such application or consent, or proceedings to such
end shall be instituted against the Borrower and remain unstayed and undismissed
for sixty (60) days, be approved as properly instituted or result in
adjudication of bankruptcy or insolvency. Upon the filing of any involuntary
petition, Bank's agreement to consider making additional Loans hereunder shall
terminate until the involuntary petition is dismissed.
(g) The calling or sufferance by the Borrower of a meeting of the creditors of the Borrower or the occurrence of a meeting by the Borrower or a representative thereof with a formal or informal committee of creditors of the Borrower.
(h) The occurrence of an Event of Default under the Equipment Term Note(s) or the Line of Credit Agreement.
6.2 Upon the occurrence of any Event of Default, all Liabilities of the Borrower to the Bank shall, at the Bank's option and without notice or demand, and notwithstanding any terms of payment in any note or other instrument evidencing such Liabilities, become immediately due and payable, and any obligation of the Bank to consider making Loans pursuant to Section 1 shall terminate.
7.1 All notices and other communications hereunder shall be made by facsimile, telegram, telex, electronic transmitter, overnight air courier, or certified or registered mail, return receipt requested, and shall be deemed to be received by the party to whom it was sent one (1) business day after sending, if sent by telegram, telex, electronic transmitter, or overnight air courier, and three (3) business days after mailing if sent by certified or registered mail. All such notices and other communications to a party hereto shall be addressed to such party at the address set forth at the beginning of this Agreement or to such other address as such party may designate for itself in a notice to the other party given in accordance with this section.
7.2 The addresses to which such communications shall be sent are as follows:
(a) If intended for the Borrower, to:
Bottomline Technologies, Inc.
One Court Street
Exeter, New Hampshire 03833-2742
Attn: Ms. Laurel J. Greenlaw, Director of Finance
with copies to:
John A. Burgess, Esq.
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
(b) If intended for the Bank, to:
Shawmut Bank, N.A.
One Federal Street
Boston, MA 02211-3202
Attn: Mr. Robert A. Lupien, V.P.
with copies to:
Brian T. Garrity, Esq.
Shapiro, Israel & Weiner, P.C.
100 North Washington Street
Boston, MA 02114
7.3 The addresses set forth herein may be changed by notice hereunder.
8.1 The Borrower will from time to time execute and deliver to the Bank all such other and further instruments and documents and take or cause to be taken all such other and further action as the Bank may reasonably request in order to effect and confirm or vest more securely in the Bank all rights contemplated in this Agreement.
8.2 The Borrower may take any action herein prohibited or omit to perform any act required to be performed by the Borrower if the Borrower shall obtain the Bank's prior written consent to each such action, or omission to act. No waiver on the Bank's part on any one occasion shall be deemed a waiver on any other occasion. The Bank shall not be deemed to have waived any of its rights hereunder unless such waiver shall be in writing and duly signed by an authorized officer of the Bank.
8.3 This Agreement may be amended only by an instrument in writing and duly signed by the Borrower and an authorized officer of the Bank.
8.4 All covenants, agreements, representations and warranties contained in this Agreement shall bind the Borrower, the Bank and their respective successors and assigns, and shall inure to the Borrower's and Bank's benefit and the benefit of the Borrower's and Bank's successors and assigns, whether expressed or not.
8.5 All rights of the Bank hereunder shall be cumulative. The Bank shall not be required to have recourse to any Collateral before enforcing its rights or remedies against the Borrower. The Borrower hereby waives presentment and protest of any instrument and any notice thereof.
8.6 If any provisions of this Agreement shall be held to be illegal or unenforceable, such illegality or unenforceability shall relate solely to such provision and shall not affect the remainder of this Agreement.
8.7 This Agreement shall be construed and enforced in accordance with the laws of the Commonwealth of Massachusetts.
8.8 This Agreement shall take effect as an instrument under seal.
8.9 BORROWER AND BANK EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE OR HEREAFTER HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
Borrower hereby certifies that neither Bank nor any of its representatives, agents or counsel has represented, expressly or otherwise, that Bank would not, in the event of any such suit, action or proceeding, seek to enforce this waiver of right to trial by jury. Borrower acknowledges that Bank has been induced to enter into this Agreement by, among other things, this waiver. Borrower acknowledges that it has read the provisions of this Agreement and in particular, this Section; has consulted legal counsel; understands the right it is granting in this Agreement and is waiving in this Section in particular, and makes the above waiver knowingly, voluntarily and intentionally.
8.10 Borrower and Bank agree that any action or proceeding to enforce or arising out of this Agreement may be commenced in any court of the Commonwealth of Massachusetts sitting in the counties of Suffolk or Middlesex, or in the District Court of the United States for the District of Massachusetts, and Borrower waives personal service of process and agrees that a summons and complaint commencing an action or proceeding in any such court shall be properly served and confer personal jurisdiction if served by registered or certified mail to Borrower or as otherwise provided by the laws of the Commonwealth of Massachusetts or the United States of America.
8.11 The Exhibit annexed hereto as Exhibit A is the only Exhibit to be annexed to this Agreement, and the material contained therein shall be incorporated herein.
8.12 The captions herein contained are inserted as a matter of convenience only and such captions do not form a part of this Agreement and shall not be utilized in the construction hereof.
WITNESS: BOTTOMLINE TECHNOLOGIES, INC.
(AS TO BOTH)
/s/ Brian T. Garrity By: /s/ James L. Loomis ----------------------------- -------------------------------- Brian T. Garrity James L. Loomis, Treasurer |
SHAWMUT BANK, N.A.
By: /s/ Robert A. Lupien
--------------------------------
Robert A. Lupien, Vice President
|
EXHIBIT 10.12
$2,000,000.00 January 13 , 1995 Boston, Massachusetts
On December 31, 1995, for value received, Bottomline Technologies, Inc., a New Hampshire corporation, promises to pay to Shawmut Bank, N.A. (the "BANK"), at the office of the Bank located at One Federal Street, Boston, Massachusetts, 02211, or at such other place as the Bank hereof shall designate, the principal sum of Two Million Dollars ($2,000,000.00) (or if less, the aggregate unpaid principal amount of all loans outstanding pursuant to a loan agreement of even date between the Bank and the undersigned (the "LOAN AGREEMENT"), exclusive of any amounts evidenced by Equipment Term Note(s) as defined in the Loan Agreement, together with interest on the unpaid balance, payable monthly in arrears on the first day of each calendar month, commencing on the first day of the first month next succeeding the date hereof, at a fluctuating interest rate per annum equal to the Bank's Corporate Base Rate in effect from time to time. Each change in such interest rate shall take effect simultaneously with the corresponding change in such Corporate Base Rate. "CORPORATE BASE RATE" shall mean the rate of interest announced by Bank in Boston from time to time as its Corporate Base Rate, it being understood that such rate is a reference rate, and not necessarily the lowest rate of interest charged by Bank. Interest shall be calculated on the basis of actual days elapsed and a 360-day year. If this Note is not paid in full at maturity or upon the exercise by the Bank of its rights in the event of the undersigned's default, interest on unpaid balances shall thereafter be payable at a fluctuating interest rate per annum equal to three percent (3%) above the Corporate Base Rate in effect from time to time.
The undersigned hereby authorizes the Bank to charge the amount of all monthly interest and the principal payment, when due and payable hereunder, against the undersigned's loan account created pursuant to a Loan Agreement.
This Note is issued pursuant to the Loan Agreement, to which reference may be had for a complete description of the rights, obligations, liabilities and restrictions of the undersigned and the Bank.
At the option of the Bank, this Note shall become immediately due and payable without notice or demand upon the occurrence at any time of (i) the failure to pay in full and when due any installment of principal or interest hereunder; (ii) one or more Events of Default as defined in the Loan Agreement and the expiration of any applicable grace period; (iii) the termination of the Loan Agreement.
The undersigned agrees to pay all costs of collection, including reasonable fees of attorneys.
No delay or omission on the part of the Bank in exercising any right hereunder shall operate as a waiver of such right or of any other right of such Bank, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. Every one of the undersigned and every indorser or guarantor of this Note regardless of the time, order or place of signing waives presentment, demand, protest and notices of every kind and assents to any one or more extensions or postponements of the time of payment or any other indulgences, to any substitutions, exchanges or releases of collateral if at any time there be available to the Bank collateral for this Note, and to the additions or releases of any other parties or persons primarily or secondarily liable.
All rights and obligations hereunder shall be governed by the law of the Commonwealth of Massachusetts and this Note shall be deemed to be under seal.
WITNESS: BOTTOMLINE TECHNOLOGIES, INC. /s/ Robert A. Lupien By: /s/ James L. Loomis -------------------------------- ------------------------------- Robert A. Lupien James L. Loomis, Treasurer |
THIS NOTE IS SECURED PURSUANT TO A SECURITY AGREEMENT
(ALL ASSETS) OF EVEN DATE.
2.1(c) Encumbrances
SECURED PARTY OR LESSOR: COLLATERAL:
------------------------ -----------
Computer Lab Equipment
People's Heritage Bank Leased Equipment
NYNEX Credit Company Telephone Equipment
IBM Credit Corporation IBM Equipment
Fleet Bank-NH Blanket Security Interest
(to be terminated as part this
transaction)
Purchased Money Secured Parties for
any assets acquired with purchase
money financing, whether now existing
or arising in the future
2.1(f) General Nature of Borrower's business Borrower is a software developer
and systems integrator.
2.1(g) Subsidiaries and Investments
None
2.1(h) Litigation
None
2.1(i) Date and period covered of most recent financial statements furnished
to the Bank.
Audited financial statements for fiscal year ending
6/30/94
Unaudited financial statements for four months ending
10/31/94
2.1(k) Material Changes in Operations
None
-3-
|
2.1(m) Other Locations
Borrower has approximately 8-10 salary and commission employees and
approximately 20 independent contractors providing services to the
Borrower in jurisdictions outside New Hampshire
2.1(q) Deferred Compensation Plans
Borrower has a qualified 401(k) profit sharing plan
|
EXHIBIT 10.13
FLEET NATIONAL BANK OF MASSACHUSETTS
One Federal Street
Boston, MA 02211-3202
December 29, 1995
Mr. James L. Loomis
Treasurer
Bottomline Technologies, Inc.
155 Fleet Street
Portsmouth, NH 03801-4050
Re: First Amendment of Loan Agreement
Dated January 13, 1995
Gentlemen:
Reference is made to that certain Loan Agreement dated January 13, 1995 (the "LOAN AGREEMENT") by and between Bottomline Technologies, Inc. (the "BORROWER") and Fleet National Bank of Massachusetts, formerly known as Shawmut Bank, N.A. (the "BANK"). Notwithstanding the provisions of the Loan Agreement, the Loan Agreement is hereby amended, effective immediately, as follows:
1. All capitalized terms used herein, unless otherwise defined, shall have the meanings ascribed to them in the Agreement.
2. All references to Shawmut Bank, N.A. contained in the Loan Agreement shall mean and refer to Fleet National Bank of Massachusetts, pursuant to a name change effective December 1, 1995.
3. Sections 1.1, 1.2, 1.4 and 1.6 of Section 1 of the Loan Agreement are hereby deleted in their entirety and the following new Sections 1.1, 1.2, 1.4 and 1.6 substituted therefor, - as follows:
"1.1 Subject to the terms and conditions of this Agreement, the Bank hereby establishes a revolving line of credit of up to $3,000,000.00 (the "REVOLVING LOAN") to be advanced as hereinafter provided. The Bank may, in its discretion,
from time to time, make advances to the Borrower upon the Borrower's request; provided, however, that no advance will be made if, after giving effect to the Borrower's request for such advance, the outstanding principal balance of the Revolving Loan would exceed the sum of $3,000,000 (the "CREDIT LIMIT")."
"1.2 Interest on advances under the Revolving Loan shall be payable monthly in arrears commencing on the first day of the first month next succeeding the date hereof at the rate of the Bank's Prime Rate in effect from time to time. The Bank's "PRIME RATE" shall mean the annual rate of interest established by the Bank from time to time at its principal office, as its Prime Rate it being understood that such rate is a reference rate and not necessarily the lowest rate of interest charged by Bank. The rate of interest payable by the Borrower shall be changed effective as of that day on which a change in the Bank's Prime Rate becomes effective. Interest shall be computed on the basis of a 360-day year, for the actual number of days elapsed. Default interest shall be charged in accordance with the terms of the Revolving Note (as defined herein)."
"1.4 As evidence of the Borrower's obligations under the Revolving Loan, the Borrower shall execute and deliver to the Bank a Secured Revolving Time Note (the "REVOLVING NOTE") dated December 29, 1995."
"1.6 No advance under the Revolving Loan will be made after December 30, 1996 (the "EXPIRATION DATE"), and the entire unpaid principal balance of the Revolving Loan, together with all unpaid interest accrued thereon and all accrued and unpaid fees, if any, shall be due and payable without notice or demand on December 31, 1996 (the "TERMINATION DATE") ."
4. Sections 4.9, 4.10 and 4.11 of the Loan Agreement are hereby deleted in their entirety and the following new Sections 4.9, 4.10 and 4.11 substituted therefor, as follows:
MINIMUM AMOUNT TIME PERIOD -------------- ----------- $2,250,000.00 Fiscal Year ending June 30, 1996 |
MAXIMUM PERCENTAGE TIME PERIOD ------------------ ----------- 200% Fiscal Year ending June 30, 1996" |
(a) the aggregate of (i) earnings before interest, taxes, depreciation and amortization, MINUS (ii) unfinanced capital expenditures, MINUS (iii) permitted dividends, MINUS (iv) taxes actually paid by the Borrower to:
(b) the sum of (i) interest, and (ii) the current maturities of long-term debt to be less than 1.50:1 for the twelve-month period ending on June 30, 1996."
5. Section 6.1 of the Loan Agreement is hereby amended to add the following new subsection (i) thereto, at the end thereof, as follows:
"(i) The occurrence of an Event of Default under that certain Secured Term Note (Equipment) dated June 28, 1995 in the original principal amount of $500,000.00."
6. Section 7.2 of the Loan Agreement is hereby amended to change the address for the Borrower to:
"Bottomline Technologies, Inc.
155 Fleet Street
Portsmouth, NH 03801-4050"
7. Except as specifically amended hereby, the Loan Agreement remains in full force and effect, and the Borrower hereby reaffirms all warranties and representations contained therein, as of the date hereof.
Please acknowledge your agreement to the matters contained herein by signing this letter in the space provided and returning it to the undersigned, whereupon it shall take effect as an instrument under seal.
Very truly yours,
FLEET NATIONAL BANK OF MASSACHUSETTS
By: /s/ Robert A. Lupien
-------------------------------
Robet A. Lupien, Vice President
|
ACCEPTED AND AGREED TO:
BOTTOMLINE TECHNOLOGIES, INC.
By: /s/ James L. Loomis
---------------------------
James L. Loomis, Treasurer
|
EXHIBIT 10.14
$3,000,000.00 December 29, 1995 Boston, Massachusetts
On December 31, 1996, for value received, Bottomline Technologies, Inc., a New Hampshire corporation, promises to pay to Fleet National bank of Massachusetts, formerly known as Shawmut Bank, N.A. (the "BANK"), at the office of the Bank located at One Federal Street, Boston, Massachusetts, 02211, or at such other place as the holder hereof shall designate, the principal sum of Three Million Dollars ($3,000,000.00) (or if less, the aggregate unpaid principal amount of all loans outstanding pursuant to a loan agreement dated January 13, 1995 between the Bank and the undersigned, as amended (the "LOAN AGREEMENT"), together with interest on the unpaid balance, payable monthly in arrears on the first day of each calendar month, commencing on the first day of the first month next succeeding the date hereof, at a fluctuating interest rate per annum equal to the Bank's Prime Rate in effect from time to time. Each change in such interest rate shall take effect simultaneously with the corresponding change in such Prime rate. "PRIME RATE" shall mean the rate of interest announced by Bank from time to time as its Prime Rate, it being understood that such rate is a reference rate, and not necessarily the lowest rate of interest charged by Bank. Interest shall be calculated on the basis of actual days elapsed and a 360-day year. If this Note is not paid in full at maturity or upon the exercise by the Bank of its rights in the event of the undersigned's default, interest on unpaid balances shall thereafter be payable at a fluctuating interest rate per annum equal to three percent (3%) above the Prime Rate in effect from time to time.
The undersigned hereby authorizes the Bank to charge the amount of all monthly interest and the principal payment, when due and payable hereunder, against the undersigned's loan account created pursuant to a Loan Agreement.
This Note is issued pursuant to the Loan Agreement, to which reference may be had for a complete description of the rights, obligations, liabilities and restrictions of the undersigned and the Bank.
At the option of the Bank, this Note shall become immediately due and payable without notice or demand upon the occurrence at any time of (i) the failure to pay in full and when due any installment of principal or itnerest hereunder; (ii) one or more Events of Default as defined in the Loan Agreement and the expiration of any applicable grace period; (ii) the termination of the Loan Agreement.
The undersigned agrees to pay all costs of collection, including reasonable fees of attorneys.
No delay or omission on the part of the Bank in exercising any right hereunder shall operate as a waiver of such right or of any other right of such Bank, not shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. Every one of the undersigned and every indorser or guarantor of this Note regardless of the time, order or place of signing waives presentment, demand, protest and notices of every kind and assents to any one or more extensions or postponements of the time of payment or any other indulgences, to any substitutions, exchanges or releases of collateral if at any time there be available to the Bank collateral for this Note, and to the additions or releases of any other parties or persons primarily or secondarily liable.
All rights and obligations hereunder shall be governed by the law of the Commonwealth of Massachusetts and this Note shall be deemed to be under seal.
WITNESS: BOTTOMLINE TECHNOLOGIES, INC. /s/ Robert A. Lupien By: /s/ James L. Loomis -------------------------- ------------------------------ Robert A. Lupien James L. Loomis, Treasurer |
THIS NOTE IS SECURED PURSUANT TO A SECURITY
AGREEMENT (ALL ASSETS) DATED JANUARY 13, 1995.
EXHIBIT 10.15
December 20, 1996
Mr. James L. Loomis
Treasurer
Bottomline Technologies, Inc.
155 Fleet Street
Portsmouth, NH 03801-4050
Re: Second Amendment of Loan Agreement Dated January 13, 1995
Gentleman:
Reference is made to that certain Loan Agreement dated January 13, 1995, as amended (the "Agreement") by and between Bottomline Technologies, Inc. (the "BORROWER") and Fleet National Bank (the "BANK"). Notwithstanding the provisions of the Agreement, the Agreement is hereby amended, effective immediately, as follows:
1. All capitalized terms herein, unless otherwise defined, shall have the meanings ascribed to them in the Agreement.
2. Sections 1.1, 1.4, 1.6, 4.9, 4.10 and 4.11 of the Agreement are hereby deleted in their entirety and the following new Sections 1.1, 1.4, 1.6, 4.9, 4.10 and 4.11 substituted therefore, as follows:
"1.1 Subject to the terms and conditions of this Agreement, the Bank hereby establishes a revolving line of credit of up to $4,000,000.00 (the "REVOLVING LOAN") to be advanced as hereinafter provided. The Bank may, in its discretion, from time to time, make advances to the Borrower upon the Borrower's request; provided, however, that no advance will be made if, after giving effect to the Borrower's request for such advance, the outstanding principal balance of the Revolving Loan would exceed the sum of $4,000,000 (the "CREDIT LIMIT")."
"1.4 As evidence of the Borrower's obligations under the Revolving Loan, the Borrower shall execute and deliver to the Bank a Secured Revolving Time Note (the "REVOLVING NOTE") dated December 20, 1996."
"1.6 No advance under the Revolving Loan will be made after December 30, 1997 (the "EXPIRATION DATE"), and the entire unpaid principal balance of the Revolving Loan, together with all unpaid interest accrued thereon and all accrued and
unpaid fees, if any, shall be due and payable without notice or demand on December 31, 1997 (the "TERMINATION DATE")."
MINIMUM AMOUNT TIME PERIOD
-------------- -----------
$3,900,000.00 Fiscal year ending June 30, 1997
and as at the end of each fiscal
year thereafter.
|
The term "TANGIBLE NET WORTh" shall mean stockholders' equity determined in accordance with generally accepted accounting principles, consistently applied, subtracting therefrom: (i) intangibles (as determined in accordance with such principles so applied), and (ii) accounts and indebtedness owing from any employee or parent, subsidiary or other affiliate."
MAXIMUM PERCENTAGE TIME PERIOD
------------------ -----------
200% Fiscal year ending June 30, 1997
and as at the end of each fiscal
year thereafter."
|
(a) the aggregate of (i) earnings before interest, taxes, depreciation
and amortization, MINUS (ii) unfinanced capital expenditures, MINUS
(iii) permitted dividends, MINUS (iv) taxes actually paid by the
Borrower to:
(b) the sum of (i) interest, and (ii) the current maturities of long- term debt to be less than 1.50:1 for the twelve-month period ending on June 30, 1997 or on June 30 in any subsequent year."
Except as specifically amended hereby, the Agreement remains in full force and effect, and the Borrower hereby reaffirms all warranties and representations contained therein, as of the date hereof.
Please acknowledge your agreement to the matters contained herein by signing this letter in the space provided and returning it to the undersigned, whereupon it shall take effect as an instrument under seal.
Very truly yours,
FLEET NATIONAL BANK
By: /s/ Robert A. Lupien
-------------------------------------
Robert A. Lupien, Vice President
|
ACCEPTED AND AGREED TO:
BOTTOMLINE TECHNOLOGIES, INC.
By: /s/ James L. Loomis
----------------------------------
James L. Loomis, Treasurer
|
EXHIBIT 10.16
$4,000,000.00 December 20, 1996 Boston, Massachusetts
On December 31, 1997, for value received, Bottomline Technologies, Inc., a New Hampshire corporation, promises to pay to Fleet National Bank (the "BANK"), at the office of the Bank located at One Federal Street, Boston, Massachusetts, 02211, or at such other place as the holder hereof shall designated, the principal sum of Four Million Dollars ($4,000,000.00) (or if less, the aggregate unpaid principal amount of all loans outstanding pursuant to a loan agreement dated January 13, 1995 between the Bank and the undersigned, as amended (the "LOAN AGREEMENT"), together with interest on the unpaid balance, payable monthly in arrears on the first day of each calendar month, commencing on the first day of the first month next succeeding the date hereof, at a fluctuating interest rate per annum equal to the Bank's Prime Rate in effect from time to time. Each change in such interest rate shall take effect simultaneously with the corresponding change in such Prime Rate. "Prime Rate" shall mean the rate of interest announced by Bank from time to time as its Prime Rate, it being understood that such rate is a reference rate, and not necessarily the lowest rate of interest charged by Bank. Interest shall be calculated on the basis of actual days elapsed and a 360-day year. If this Note is not paid in full at maturity or upon the exercise by the Bank of its rights in the event of the undersigned's default, interest on unpaid balances shall thereafter be payable at a fluctuating interest rate per annum equal to three percent (3%) above the Prime Rate in effect from time to time.
The undersigned hereby authorizes the Bank to charge the amount of all monthly interest and the principal payment, when due and payable hereunder, against the undersigned's loan account created pursuant to a Loan Agreement.
This Note is issued pursuant to the Loan Agreement, to which reference may be had for a complete description of the rights, obligations, liabilities and restrictions of the undersigned and the Bank.
At the option of the Bank, this Note shall become immediately due and payable without notice or demand upon the occurrence at any time of (i) the failure to pay in full and when due any installment of principal or interest hereunder; (ii) one or more Events of Default as defined in the Loan Agreement and the expiration of any applicable grace period; (iii) the termination of the Loan Agreement.
The undersigned agrees to pay all costs of collection, including reasonable fees of attorneys.
No delay or omission on the part of the Bank in exercising any right hereunder shall operate as a waiver of such right or of any other right of such Bank, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. Every one of the undersigned and every indorser or guarantor of this Note regardless of the time, order or place of signing waives presentment, demand, protest and notices of every kind and assents to any one or more extensions or postponements of the time of payment or any other indulgences, to any substitutions, exchanges or releases of collateral if at any time there be available to the Bank collateral for this Note, an the additions or releases of any other parties or persons primarily or secondarily liable.
All rights and obligations hereunder shall be governed by the law of the Commonwealth of Massachusetts and this Note shall be deemed to be under seal.
WITNESS: BOTTOMLINE TECHNOLOGIES. INC. /s/ Robert A. Lupien /s/ James L. Loomis ------------------------------- ---------------------------- Robert A. Lupien James L. Loomis |
EXHIBIT 10.17
Fleet Bank
December 29, 1997
Bottomline Technologies (de), Inc.
155 Fleet Street
Portsmouth, NH 03801-4050
ATTN: Mark A. Attarian, Vice President
Chief Financial Officer and Treasurer
Re: Third Amendment of Loan Agreement Dated January 13, 1995
Gentlemen:
Reference is made to the Loan Agreement by and between Bottomline Technologies (de), Inc., successor by merger to Bottomline Technologies, Inc. (the "Borrower") and Fleet National Bank (the "Bank") dated January 13, 1995, as amended (the "Agreement"). Notwithstanding the provisions of the Agreement, the Agreement is hereby amended, effective immediately, that the Agreement is amended as follows:
1. All references in the Agreement to "Bottomline Technologies, Inc." are hereby replaced with references to "Bottomline Technologies (de), Inc.", and all references to the "Borrower" shall mean Bottomline Technologies (de), Inc.
2. Section 1.4 of the Agreement is hereby deleted in its entirety and the following new Section 1.4 substituted therefor:
"1.4 As evidence of the Borrower's obligations under the Revolving Loan, the Borrower shall execute and deliver to the Bank a Secured Revolving Time Note (the "Revolving Note") dated December 29, 1997."
3. Section 1.6 of the Agreement is hereby deleted in its entirety and the following new Section 1.6 substituted therefor:
"1.6 No advance under the Revolving Loan will be made after December 30, 1998 (the "Expiration Date"), and the entire unpaid principal balance of the Revolving Loan, together with all unpaid interest accrued thereon and all accrued and unpaid fees, if any, shall be due and payable without notice or demand on December 31, 1998 (the "Termination Date")."
4. Section 4.9 of the Agreement is hereby deleted in its entirety and the following new Section 4.9 substituted therefor:
5. Section 4.10 of the Agreement is hereby deleted in its entirety and the following new Section 4.10 substituted therefor:
6. Section 4.11 of the Agreement is hereby deleted in its entirety and the following new Section 4.11 substituted therefor:
(a) the aggregate of its (i) earnings before interest, taxes, depreciation and amortization, MINUS (ii) permitted dividends, MINUS (iii) taxes actually paid by the Borrower; to:
(b) the sum of its (i) interest, PLUS (ii) the current maturities of long-term debt;
to be less than 1.50:1 for the fiscal year-to-date ending on the last day of each fiscal quarter of the Borrower."
Except as specifically amended hereby, the Agreement remains in full force and effect, and the Borrower hereby reaffirms all warranties and representations contained therein, as of the date hereof.
Please acknowledge your agreement to the matters contained herein by signing this Amendment in the space provided and returning it to the undersigned, whereupon it shall take effect as an instrument under seal.
Very truly yours,
FLEET NATIONAL BANK
By: /s/ Robert A. Lupien ------------------------------------ Robert A. Lupien, Vice President |
ACCEPTED AND AGREED TO:
BOTTOMLINE TECHNOLOGIES (DE), INC.
By: /s/ Mark A. Attarian
-------------------------------------
Mark A. Attarian, Vice President,
Chief Financial Officer and Treasurer
|
EXHIBIT 10.18
$4,000,000.00 December 29, 1997 Boston, Massachusetts
On December 31, 1998, for value received, Bottomline Technologies (de), Inc., a Delaware corporation, promises to pay to Fleet National Bank (the "Bank"), at the office of the Bank located at One Federal Street, Boston, Massachusetts, 02200, or at such other place as the holder hereof shall designate, the principal sum of Four Million Dollars ($4,000,000.00) or if less, the aggregate unpaid principal amount of all loans outstanding pursuant to a Loan Agreement between the Bank and the undersigned dated January 13, 1995, as amended (the "Loan Agreement"), together with interest on the unpaid balance, payable monthly in arrears on the first day of each calendar month, commencing on the first day of the first month next succeeding the date hereof, at a fluctuating interest rate per annum equal to the Bank's Prime Rate in effect from time to time. Each change in such interest rate shall take effect simultaneously with the corresponding change in such Prime Rate. "Prime Rate" shall mean the rate of interest announced by Bank from time to time as its Prime Rate, it being understood that such rate is a reference rate, and not necessarily the lowest rate of interest charged by Bank. Interest shall be calculated on the basis of actual days elapsed and a 360-day year. If this Note is not paid in full at maturity or upon the exercise by the Bank of its rights in the event of the undersigned's default, interest on unpaid balances shall thereafter be payable at a fluctuating interest rate per annum equal to three percent (3%) above the Prime Rate in effect from time to time.
The undersigned hereby authorizes the Bank to charge the amount of all monthly interest and the principal payment, when due and payable hereunder, against the undersigned's loan account created pursuant to a Loan Agreement.
This Note is issued pursuant to the Loan Agreement, to which reference may be had for a complete description of the rights, obligations, liabilities and restrictions of the undersigned and the Bank.
At the option of the Bank, this Note shall become immediately due and
payable without notice or demand upon the occurrence at any time (i) the failure
to pay in full and when due any installment of principal or interest hereunder;
(ii) one or more Events of Default as defined in the Loan Agreement and the
expiration of any applicable grace period; (iii) the termination of the Loan
Agreement.
The undersigned agrees to pay all costs of collection, including reasonable fees of attorneys.
No delay or omission on the part of the Bank in exercising any right hereunder shall operate as a waiver of such right or of any other right of such Bank, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. Every one of the undersigned and every indorser or guarantor of this Note regardless of the time, order or place of signing waives presentment, demand, protest and notices of every kind and assents to any one or more extensions or postponements of the time of payment or any other indulgences, to any substitutions, exchanges or releases of collateral if at any time there be available to the Bank collateral for this Note, and to the additions or releases of any other parties or persons primarily or secondarily liable.
All rights and obligations hereunder shall be governed by the law of the Commonwealth of Massachusetts and this Note shall be deemed to be under seal.
WITNESS: BOTTOMLINE TECHNOLOGIES (DE), INC.
/s/ Robert A. Lupien /s/ Mark A. Attarian
-------------------------------- -----------------------------------
Robert A. Lupien Mark A. Attarian, Vice President
Chief Financial Officer and Treasurer
|
THIS NOTE IS SECURED PURSUANT TO A SECURITY AGREEMENT (ALL
ASSETS DATED JANUARY 13, 1995.
EXHIBIT 10.19
December 29, 1998
Bottomline Technologies (de), Inc.
155 Fleet Street
Portsmouth, NH 03801-4050
ATTN: Robert A. Eberle,
Executive Vice President and Chief Financial Officer
Gentlemen:
Reference is made to the Loan Agreement by and between Bottomline Technologies (de), Inc., successor by merger to Bottomline Technologies, Inc. (the "Borrower") and Fleet National Bank (the "Bank") dated January 13, 1995, as amended (the "Agreement"). Notwithstanding the provisions of the Agreement, the Agreement is hereby amended, effective immediately, that the Agreement is amended as follows:
1. Section 1.4 of the Agreement is hereby deleted in its entirety and the following new Section 1.4 substituted therefor:
"1.4 As evidence of the Borrower's obligations under the Revolving Loan, the Borrower shall execute and deliver to the Bank a Secured Revolving Time Note (the "Revolving Note") dated December 29, 1998."
2. Section 1.6 of the Agreement is hereby deleted in its entirety and the following new Section 1.6 substituted therefor:
"1.6 No advance under the Revolving Loan will be made after December 30, 1999 (the "Expiration Date"), and the entire unpaid principal balance of the Revolving Loan, together with all unpaid interest accrued thereon and all accrued and unpaid fees, if any, shall be due and payable without notice or demand on December 31, 1999 (the "Termination Date")."
3. Section 2.1(a) of the Agreement is hereby deleted in its entirety and the following new Section 2.1(a) substituted therefor:
"(a) The Borrower is a duly organized and existing corporation under the laws of the State of Delaware and is in good standing under the laws of said State of Delaware."
4. Section 3.8 of the Agreement is hereby deleted in its entirety and the following new Section 3.8 substituted therefor:
"3.8 The Borrower shall furnish to the Bank quarterly, within forty- five (45) days after the close of each fiscal quarter, an accounts receivable aging, such aging to be in such form and certified by such officers of the Borrower as the Bank may prescribe from time to time."
5. Section 4.2 of the Agreement is hereby deleted in its entirety.
6. Section 4.3 of the Agreement is hereby deleted in its entirety and the following new Section 4.3 substituted therefor:
"4.3 The Borrower will not make any loans or advances to any individual, firm or corporation, including, without limitation, its officers and employees, in excess of $500,000.00 outstanding in the aggregate."
7. Section 4.9 of the Agreement is hereby deleted in its entirety and the following new Section 4.9 substituted therefor:
8. Section 4.13 of the Agreement is hereby deleted in its entirety and the following new Section 4.13 substituted therefor, as follows:
"4.13 The Borrower will not permit any changes in the senior management of the Borrower consisting of the President and Executive Vice President/Chief Financial Officer without providing prior notice to the Bank of any such changes."
9. Section 4.14 of the Agreement is hereby deleted in its entirety and the following new Section 4.14 substituted therefor, as follows:
"4.14 The Borrower will not permit any material changes in the ownership of the Borrower (in excess of fifty (50%) percent of the issued and
outstanding stock of the Borrower) without consulting the Bank prior to any proposed changes and obtaining the Bank's approval."
10. Section 4.11 of the Agreement is hereby deleted in its entirety and the following new Section 4.11 substituted therefor, as follows:
(a) the aggregate of its (i) earnings before interest, taxes, depreciation and amortization, MINUS (ii) permitted dividends, MINUS (iii) taxes actually paid by the Borrower; to:
(b) the sum of its (i) interest, PLUS (ii) the current maturities of long- term debt; to be less than 1.50.1 for the twelve (12) month period ending on the last day of any fiscal quarter of the Borrower."
11. Section 6.1(h) of the Agreement is hereby deleted in its entirety.
12. Section 7.2(a) of the Agreement is hereby deleted in its entirety and the following new Section 7.2(a) substituted therefor:
"(a) If intended for the Borrower, to:
Bottomline Technologies (de), Inc.
155 Fleet Street
Portsmouth, NH 03801-4050
Attn: Robert A. Eberle, Executive Vice President
and Chief Financial Officer
with copies to:
Bottomline Technologies (de), Inc.
155 Fleet Street
Portsmouth, NH 03801-4050
Attn: Mark A. Attarian, Vice President, Finance
and
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: John A. Burgess, Esq.
Except as specifically amended hereby, the Agreement remains in full force and effect, and the Borrower hereby reaffirms all warranties and representations contained therein, as of the date hereof.
Please acknowledge your agreement to the matters contained herein by signing this Amendment in the space provided and returning it to the undersigned, whereupon it shall take effect as an instrument under seal.
Very truly yours,
FLEET NATIONAL BANK
By: /s/ Robert A. Lupien --------------------------------- Robert A. Lupien, Vice President |
ACCEPTED AND AGREED TO:
BOTTOMLINE TECHNOLOGIES (DE), INC.
By: /s/ Robert A. Eberle ----------------------------- Robert A. Eberle, Executive Vice President and Chief Financial Officer |
EXHIBIT 10.20
SECURED REVOLVING TIME NOTE
(LIBOR OPTION)
$5,000,000.00 December 29, 1998
Boston, Massachusetts
For value received, on December 31, 199___, the undersigned, Bottomline
|
Technologies (de), Inc., (the "BORROWER"), promises to pay to Fleet National Bank, at One Federal Street, Boston, Massachusetts 02110 (the "BANK"), or order, the principal sum of Five Million ($5,000,000.00) Dollars, or if less, such amount as may be the aggregate unpaid principal amount of all loans or advances made by the Bank to the Borrower pursuant to a Loan Agreement between the Borrower and the Bank dated January 13, 1995, as amended (the "AGREEMENT"), together with interest (as provided below) on the aggregate unpaid principal balance from time to time outstanding.
Upon the Borrower's request, the Bank may, in its sole discretion, make loans and advances to the Borrower from time to time in accordance with the terms of the Agreement in an aggregate amount not to exceed the maximum principal amount of this Note, and the Borrower may repay and reborrow such loans and advances, provided, that no further advances of principal shall be made after December 31, 1999 (the "TERMINATION DATE").
At the Borrower's election, each advance hereunder will bear interest at either: (i) a variable per annum rate equal to the Prime Rate (hereinafter referred to as a "PRIME RATE LOAN(S)"); or (ii) a fixed per annum rate equal to the LIBOR Interest Rate plus Margin, determined as provided below (hereinafter referred to as a "LIBOR LOAN(S)"). Interest shall be computed on the basis of the actual number of days elapsed over a year of 360 days. If the outstanding balance of each advance evidenced by this Note is not paid in full when due or after the occurrence of an Event of Default, interest on such unpaid balance shall thereafter accrue and be payable at a per annum rate equal to four (4%) percent greater than the rate of interest otherwise applicable to such balance (the "Default Rate"). In no event, however, shall advances evidenced by this Note bear interest rate in excess of the maximum interest permitted by applicable law.
Interest on the aggregate principal balance of Prime Rate Loans owing to the Bank at the close of each day shall be payable monthly in arrears commencing on the first day of the month next succeeding the date hereof, and continuing on the first day of each month thereafter until such principal balance is fully and finally paid. Interest on the unpaid principal balance of each LIBOR Loan shall be payable on the first day of each month of the Interest Period with respect to such LIBOR Loan, in arrears. If the entire amount of any payment of principal or interest required hereunder is not paid within ten (10) days after the same becomes due, the Borrower shall pay to the Bank a late fee equal to five (5%) percent of the required payment.
The Borrower may request Prime Rate Loans hereunder by telephone, facsimile or mail by specifying the amount of the requested advance and electing the Prime Rate interest option. The Borrower may request LIBOR Loans hereunder by submitting to the Bank a written notification in the form of Exhibit 1 annexed hereto (herein a "NOTICE OF BORROWING"), which indicates (i) the Borrowing Date for the requested LIBOR Loan and; (ii) the amount of the LIBOR Loan (which shall be in increments of not be less than One Hundred Thousand ($100,000.00) Dollars). The Interest Period (as hereinafter defined) shall be for one, two or three month periods as specified on the Notice of Borrowing. Each Notice of Borrowing must be received by the Bank not less than two (2) Banking Days prior to the Borrowing Date. A Notice of Borrowing may be transmitted by facsimile or mail, but may not be transmitted by telephone. The Bank shall incur no liability to the Borrower in acting upon requests for advances hereunder by telephone, facsimile or mail which the Bank believes in good faith to have been given by an officer or other person authorized to borrow on behalf of the Borrower in accordance with the borrowing resolutions provided by the Borrower to the Bank.
After receipt from the Borrower of any Notice of Borrowing, the Bank shall determine if it is able to make such LIBOR Loan (or if it is unable to do so for reasons described in this Paragraph) and will notify the Borrower accordingly. If the Bank determines in good faith that, by reason of circumstances affecting the Interbank Market, adequate and reasonable methods do not exist for ascertaining the LIBOR which would otherwise be applicable to such LIBOR Loan, then the Bank shall so notify the Borrower on or before 4:00 p.m. on the Banking Day prior to the Borrowing Date specified in the Notice of Borrowing, and in such event, the Bank shall not be obligated to make such LIBOR Loan and the Notice of Borrowing shall be deemed to have been withdrawn by the Borrower with the Bank's consent and, in the case of new advances, substituted with a request for a Prime Rate Loan in an amount equal to the requested LIBOR Loan.
Except as otherwise provided in the Paragraph above, any Notice of Borrowing which requests a LIBOR Loan shall be irrevocable and binding upon the Borrower. In the event the Borrower fails to borrow the LIBOR Loan requested on the Borrowing Date specified in such Notice of Borrowing, the Borrower shall indemnify the Bank against any and all losses and expenses incurred by the Bank by reason of such failure including, without limiting the generality of the foregoing, all losses and expenses incurred by reason of the liquidation, disposition or redeployment of deposits or other funds acquired by the Bank to fund such LIBOR Loan.
Each advance which constitutes a LIBOR Loan hereunder shall be repaid in full on its Maturity Date. In the event a LIBOR Loan is not repaid in full on its Maturity Date, the outstanding principal balance of such LIBOR Loan shall thereafter convert to a Prime Rate Loan and bear interest accordingly. Any LIBOR Loan may be repaid with the proceeds of another LIBOR Loan.
No LIBOR Loan may be prepaid prior to its Maturity Date. In the event a LIBOR Loan is prepaid prior to its Maturity Date, whether voluntarily or upon exercise by the Bank of its rights hereunder following the occurrence of an Event of Default, the Borrower shall, upon demand by the Bank, pay to the Bank any amounts required to compensate the Bank for any additional losses, costs or expenses which it may reasonably incur as a result of such prepayment, including, without limitation, any loss, costs or expenses incurred by reason of the liquidation of redeployment of deposits or other funds acquired by the Bank to fund or maintain such LIBOR Loan.
Notwithstanding any other provision of this Note, (1) if the introduction of, or any change in, any law or regulation (or change in the interpretation thereof) applicable to the Bank or any foreign branch, agent or correspondent thereof shall make it unlawful, or (2) if any central bank or other governmental authority having jurisdiction over the Bank or any such branch, agent or correspondent, shall asset that it is unlawful, for the Bank to perform its obligations hereunder or for any such branch, agent or correspondent to act on behalf of the Bank to make LIBOR Loans to the Borrower or to continue to fund or maintain LIBOR Loans for the Borrower hereunder, or (3) if the Bank determines after making all reasonable efforts, that deposits of the relevant amount and for the relevant LIBOR Loan are not available to the Bank in the Interbank Market, then, on notice thereof by the Bank to the Borrower, the obligation of the Bank to the Borrower to make future LIBOR Loans shall terminate. If, as a result of any of the foregoing described events, the Bank is prohibited from maintaining LIBOR Loans the Bank shall, upon the happening of such event, notify the Borrower and the Borrower shall, in the case of each LIBOR Loan on the Maturity Date thereof (or, in any event, if the Bank so requests, on such earlier date as may be required by the relevant law, regulation or interpretation), either prepay such LIBOR Loan, or convert such LIBOR Loan into a Prime Rate Loan.
Calculation of the LIBOR Interest Rate, as well as all other fees and charges payable with respect to each LIBOR Loan shall be made and paid as though the Bank had actually funded the relevant LIBOR Loan through the purchase of a Eurodollar deposits at LIBOR in an amount equal to the amount of the LIBOR Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore agent or office of the Bank to a domestic office of the Bank in the United States of America, provided, however, that the Bank may fund each LIBOR Loan in any manner it sees fit and the foregoing assumptions shall be nevertheless used for the calculation of the LIBOR Interest Rate and such other fees and charges.
At the option of the Bank, this note shall become immediately due and payable without notice or demand upon the occurrence at any time of: (i) the failure to pay in full and when due any installment of principal or interest hereunder, (ii) an Event of Default as defined in the Agreement between the Bank and the Borrower, as amended from time to time; or (iii) termination of the Agreement.
Any deposits or other sums at any time credited by or due from the Bank to the Borrower or any guarantor hereof, and any securities or other property of the Borrower or any such guarantor, in the possession of the Bank, may at any and all times be held and treated as security for the payment of the liabilities hereunder; and the Bank may apply or set off such deposits or other sums, at any time, and without notice to the Borrower or to any such guarantor, against any of such liabilities, whether or not the same have matured, and whether or not other collateral is available to the Bank.
No delay or omission on the part of the Bank in exercising any right hereunder shall operate as a waiver of such right or of any other right of the Bank, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. The Borrower and every other maker and every endorser or guarantor of this Note, regardless of the time, order or place of signing, waives presentment, demand, protest and notices of every kind and assents to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of collateral, and to the addition or release of any other party or person primarily or secondarily liable.
The Borrower agrees to pay all costs of collection of the principal of and interest on this Note; including, without limitation, reasonable attorneys' fees.
As used in this Note, the following terms shall have the following meanings:
(1) "BANKING DAY" shall mean a day on which banks are open for business in Boston, Massachusetts, and if the applicable "Banking Day" relates to a LIBOR Loan, a day on which dealings are carried on and banks are open for business in the relevant Interbank Market.
(2) "BORROWING DATE" shall mean any day upon which a LIBOR Loan is made.
(3) "DOLLARS" or "S" shall mean currency of the United States of America.
(4) "EUROCURRENCY LIABILITIES" shall have the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.
(5) "EURODOLLARS" shall mean Dollars acquired by the Bank through the purchase or other acquisition of deposits denominated in Dollars and made with any bank or branch of a bank (including any branch of the Bank) located outside the United States of America.
(6) "INTERBANK MARKET" shall mean, with respect to any LIBOR Loan, any recognized interbank Eurodollar market chosen in good faith by the Bank.
(7) "INTEREST PERIOD" shall mean, with respect to each LIBOR Loan, a period commencing on the Borrowing Date of such loan, and ending on the numerically corresponding day in the first, second or third month thereafter, as determined in accordance with the provisions of this Note, provided that any Interest Period which would otherwise end on a day which is not a Banking Day, shall end and the next Interest Period shall commence on the next preceding or the next succeeding day which is a Banking Day as determined in good faith by the Bank in accordance with the then current bank practices in the relevant Interbank Market.
(8) "LIBOR" shall mean, with respect to a LIBOR Loan, the rate per annum
(rounded upward, if necessary, to the nearest one-eight (1/8th) of one (1%)
percent) at which deposits in Dollars are offered to the Bank or the Bank's
representative or agent for delivery on the Borrowing Date for such LIBOR Loan,
in the relevant Interbank Market at 11:00 a.m., local time, two Banking Days
prior to such Borrowing Date for a period equal to the Interest Period chosen by
Borrower with respect to such LIBOR Loan and in an amount substantially equal to
the principal amount thereof. The Bank shall give prompt notice to the Borrower
of the LIBOR determined for each LIBOR Loan and such notice shall be conclusive
and binding, absent manifest error, for all purposes.
(9) "LIBOR INTEREST RATE" shall mean an interest rate per annum (rounded upward, if necessary, to the nearest one-eight (1/8th) of one (1%) percent) determined by the Bank pursuant to the following formula:
(10) "MARGIN" shall mean: one hundred fifty (150) basis points.
(11) "MATURITY DATE" shall mean the date on which an Interest Period expires.
(12) "PRIME RATE" shall mean the rate of interest announced from time to time by the Bank, at its head office, as its Prime Rate, it being understood that such rate is a reference rate and not necessarily the lowest rate of interest charged by the Bank. The rate of interest payable by the Borrower on Prime Rate Loans shall be changed effective as of that date on which a change in the Prime Rate becomes effective.
(13) "RESERVE RATE" shall mean the rate (expressed as a decimal) at which the Bank would be required to maintain reserves under REGULATION D of the
Board of Governors of the Federal Reserve System against Eurodollar Liabilities if such Liabilities were outstanding. The LIBOR Interest Rate shall be adjusted automatically as of the effective date of any change in the Reserve Rate.
THE BORROWER AND THE BANK HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY THAT THE BORROWER OR THE BANK MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR IN EQUITY, IN CONNECTION WITH THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS RELATED THERETO. THE BORROWER HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF THE BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. THE BORROWER ACKNOWLEDGES THAT THE BANK HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE PROVISIONS OF THIS SECTION.
All rights and obligations hereunder shall be governed by the laws of the Commonwealth of Massachusetts, and this Note shall be deemed to be under seal.
WITNESS: BOTTOMLINE TECHNOLOGIES, (de) INC.
/s/ Mark A. Attarian By: /s/ Robert A. Eberle
------------------------- -------------------------
Robert A. Eberle
Executive Vice President
and Chief Financial Officer
|
Date:_____________, 19____
To: Fleet National Bank
One Federal Street
Boston, Massachusetts 02110
Re: Secured Revolving Time Note between Fleet National Bank (the "Bank") and Bottomline Technologies (de), Inc. (the "Borrower") dated December 29, 1998 (the "Note")
This Notice of Borrowing confirms the following request for a LIBOR Loan under the Note.
The Borrower hereby certifies that all representations and warranties contained in the Agreement between the Borrower and the Bank are true and accurate in all material respects on the date of this Notice of Borrowing as though such representations and warranties had been made on this date (except to the extent that such representation or warranty expressly relates to an earlier date).
Terms used herein which are defined in the Note are used as so defined.
BOTTOMLINE TECHNOLOGIES (de), INC.
* Must be in increments of $100,000.00
EXHIBIT 10.21
SHAWMUT
LINE OF CREDIT AGREEMENT
FOR THE ACQUISITION OF EQUIPMENT
($500,000.00 LINE)
January 13, 1995
Bottomline Technologies, Inc.
One Court Street
Exeter, NH 03833-2742
Attn: Mr. Dan McGurl
President
Gentlemen:
We (hereinafter "LENDER") are pleased to advise you (here in- after referred to as the "BORROWER") that Lender has established a line of credit of up to Five Hundred Thousand ($500,000.00) Dollars (subject to limitations contained herein) (hereinafter the "CREDIT LIMIT") for Borrower to be used exclusively for the purchase of new equipment. This line of credit is subject to the following terms and conditions:
1. Any advances, extensions of credit, or loan of funds pursuant to this line of credit (hereinafter collectively and separately referred to as the "LOAN") will be made only if in the opinion of Lender there has been no material adverse change of circumstances and if there exists no Event(s) of Default (as hereinafter defined). No advances, extensions of credit, or loan of funds will be made after the first to occur of: (a) the date on which outstanding principal balance of the Loans equals the Credit Limit; or (b) on December 31, 1995. Any sums prepaid hereunder shall not be readvanced.
2. Borrower agrees that each monthly or other statement of account mailed or delivered by Lender to Borrower pertaining to the outstanding balance of the Loan, the amount of interest due thereon, fees, and costs and expenses shall be final, conclusive and binding on Borrower absent manifest error and shall constitute an "account stated" with respect to the matters contained therein unless within forty (40) calendar days from when such statement is mailed or if not mailed, delivered to Borrower, Borrower shall deliver to Lender written notice of any objections which it may have as to such
statement of account and in such event, only the terms to which objection is expressly made in such notice shall be considered to be disputed by Borrower.
3. Interest will be charged to Borrower at a rate which is the daily equivalent to the Corporate Base Rate in effect from time to time, upon any balance owing to Lender at the close of each day. The rate of interest payable by Borrower shall be changed effective as of that date in which a change in the Corporate Base Rate becomes effective. Interest shall be computed on the basis of the actual number of days elapsed over a year of three hundred sixty (360) days. Such interest shall be payable monthly in arrears on the first (1st) day of each month, commencing on the first of such dates next succeeding the date hereof. Upon the occurrence of an Event of Default hereunder, interest on unpaid balances shall thereafter be payable at a fluctuating interest rate per annum equal to three percent (3%) greater than the rate of interest specified herein.
The term "CORPORATE BASE RATE" as used herein shall mean the rate of interest announced by Lender from time to time as its Corporate Base Rate, it being understood that such rate is a reference rate and not necessarily the lowest rate of interest charged by Lender.
4. The Borrower hereby authorizes Lender to charge the amount of all interest, principal payments and fees, when due and payable hereunder, against Borrower's loan account created pursuant to Borrower's Loan Agreement with the Lender of even date (the "LOAN AGREEMENT").
5. The Loan may, but need not, be evidenced by notes in a form reasonably satisfactory to Lender, but in the absence of notes, shall be conclusively evidenced by Lender's records of disbursements, absent manifest error. The Loan, together with interest thereon, is secured pursuant to a Security Agreement (All Assets) of even date.
6. Borrower may draw upon this line of credit by presenting to Lender: (i) an invoice from the vendor of such equipment in a form acceptable to Lender, which includes, without limitation, the purchase price of such equipment, including all accessions thereto, net of all discounts, rebates, and other dealer or manufacturer incentives; and (ii) a certificate of origin, bill of sale, or other documentation satisfactory to Lender evidencing that the equipment being purchased is new and unused equipment (Items (i) and (ii) are hereinafter referred to as the "EQUIPMENT DOCUMENTATION"). The Equipment Documentation shall be delivered to the Lender accompanied by an Equipment Documentation Certification in the form of EXHIBIT A annexed hereto.
7. The aggregate principal amount of any Loan made against any Equipment Documentation shall not exceed eighty percent (80%) of the net purchase price (exclusive of any soft costs, transportation or installation charges) of the equipment referred to therein.
8. Lender agrees that so long as Borrower complies with the terms and conditions of this Line of Credit Agreement, and provides not less than twenty- four (24) hours notice of any proposed Loan, Lender shall cause the amount of such Loan to be made available to Borrower at the time and in the manner requested by Borrower; provided, however, that Lender shall have no obligation to make the requested Loan if, after giving effect to the requested Loan, the outstanding principal balance of all Loans under this Line of Credit Agreement will exceed the Credit Limit.
9. Borrower will pay or reimburse Lender for all reasonable expenses, including attorneys' fees, which Lender may in any way incur in connection with this agreement or any other agreement between Borrower and Lender or with any Loan or which result from any claim or action by any third person against Lender which would not have been asserted were it not for Lender's relationship with Borrower hereunder or otherwise.
10. The Loan will be due and payable in full on December 31, 1995 unless Borrower elects to convert the principal balance of the Loan or increment thereof of at least $100,000.00 into a term loan(s) by execution of a Secured Term Note (Equipment) in substantially the form of EXHIBIT B attached hereto, with appropriate insertions in the space provided reflecting the actual amount of the Loan. The Loan (or increments thereof) shall then mature and bear interest as provided in the applicable Secured Term Note (Equipment) and shall otherwise be subject to the terms and conditions of that Note and of this Line of Credit Agreement.
11. Upon the occurrence of any one or more of the following events (hereinafter "EVENTS OF DEFAULT"), any and all obligations of Borrower to Lender shall become immediately due and payable, at the option of Lender and without notice or demand. The occurrence of any such Event of Default shall also constitute, without notice or demand, a default under all other agreements between Lender and Borrower and instruments and papers given Lender by Borrower, whether such agreements, instruments, or papers now exist or hereafter arise.
(a) The failure by Borrower to pay when due any amount due under this Line of Credit Agreement.
(b) The termination of the Loan Agreement, or the occurrence of an Event of Default as described in the Loan Agreement.
12. Borrower agrees that notwithstanding anything contained herein, the Loan Agreement or otherwise, if the Borrower shall pay off all amounts due under the Loan Agreement, Lender shall have the right to demand the immediate payment of the balance due under this Line of Credit Agreement.
13. The execution, delivery and performance of this Line of Credit Agreement, any Note or any other instrument or document at any time required in respect hereof
or of the Loan are within the corporate powers of Borrower, and not in contravention of law, the Articles of Organization or By-Laws of Borrower or any amendment thereof, or of any indenture, agreement or undertaking to which Borrower is a party or may otherwise be bound, and each such instrument and document represents a valid and binding obligation of Borrower and is fully enforceable according to its terms. Borrower will, concurrently with the execution of this Line of Credit Agreement, furnish Lender with the opinion of counsel for Borrower with respect to any or all of the foregoing or other matters, such opinion to be in substance and form satisfactory to Lender.
14. This Line of Credit Agreement is supplementary to each and every other agreement between Borrower and Lender an shall not be so construed as to limit or otherwise derogate from any of the rights or remedies of Lender or any of the liabilities, obligations or undertakings of Borrower under any such agreement, nor shall any contemporaneous or subsequent agreement between Borrower and Lender be construed to limit or otherwise derogate from any of the rights or remedies of Lender or any of the liabilities, obligations or undertakings of Borrower hereunder unless such other agreement specifically refers to this Line of Credit Agreement and expressly so provides.
15. This Line of Credit Agreement and the covenants and agreements herein contained shall continue in full force and effect and shall be applicable not only in respect of the Loan, but also to all other obligations, liabilities and undertakings of Borrower to Lender whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising or acquired, until all such obligations, liabilities and undertakings have been paid or otherwise satisfied in full. No delay or omission on the part of Lender in exercising any right hereunder shall operate as a waiver of such right or any other right and waiver on any one or more occasions shall not be construed as a bar to or waiver of any right or remedy of Lender on any future occasion. This Line of Credit Agreement is intended to take effect as a sealed instrument, shall be governed by and construed according to the laws of the Commonwealth of Massachusetts, shall be binding upon Lender's and Borrower's successors and assigns and shall inure to the benefit of Lender's and Borrower's successors and assigns.
Very truly yours,
Shawmut Bank, N.A.
By: /s/ Robert A. Lupien
-------------------------------------
Robert A. Lupien, Vice President
|
Bottomline Technologies, Inc.
By: /s/ James L. Loomis ---------------------------- James L. Loomis, Treasurer |
EQUIPMENT DOCUMENTATION CERTIFICATION
The undersigned, ____________________ of Bottomline Technologies, Inc. (the "BORROWER") hereby certifies to Shawmut Bank, N.A., that:
1. The attached copy of the Equipment Documentation (as defined in Paragraph 6 of the Borrower's Line of Credit Agreement for the Acquisition of Equipment dated _________________ 1995), is a true, correct and complete copy of the Equipment Documentation;
2. The net purchase price (exclusive of soft cost, transportation and installation charges) of the equipment referred to in the attached Equipment Documentation is in the amount of $________;
3. The soft cost, transportation and installation charges of the equipment referred to in the attached Equipment Documentation is in the amount of $_______;
4. The total purchase price of the equipment referred to in the attached Equipment Documentation (the net purchase price, plus the soft cost, transportation and installation charges) is in the amount of $________; and
5. The aggregate principal amount of the Loan requested in connect ion with the attached Equipment Documentation does not exceed eighty percent (80%) of the net purchase price of the equipment set forth in Item 2 above.
Bottomline Technologies, Inc.
Title:
Date: ______________, 1995
SECURED TERM NOTE
(EQUIPMENT)
$________________ _________________, 1995
Boston, Massachusetts
The term "CORPORATE BASE RATE" as used herein shall mean the rate of interest announced by Lender from time to time as its Corporate Base Rate, it being understood that such rate is a reference rate and not necessarily the lowest rate of interest charged by Lender.
The undersigned hereby authorizes Lender to charge the amount of all monthly interest and principal payments, when due and payable hereunder, against the undersigned's loan account created pursuant to a Loan Agreement dated January 13, 1995 (the "AGREEMENT").
At the option of the Lender, this Note shall become immediately due and payable without notice or demand upon the occurrence at any time of (i) a default of any liability, obligation or undertaking of the undersigned, hereunder or otherwise, including failure to pay in full and when due any installment of principal or interest hereunder; (ii) an Event of Default as defined in the Agreement; or (iii) termination of the Agreement.
Any deposits or other sums at any time credited by or due from Lender to the undersigned or any guarantor hereof, and any securities or other property of the undersigned or any such guarantor, in the possession of Lender, may at any and all times be held and treated as security for the payment of the liabilities hereunder; and Lender may apply or set off such deposits or other sums, at any time after default hereunder, and without notice to the undersigned or to any such guarantor, against any of such liabilities, whether or not the same have matured, and whether or not other collateral is available to Lender.
The undersigned agrees to pay all costs of collection including reasonable fees of attorney.
No delay or omission on the part of the Lender in exercising any right hereunder shall operate as a waiver of such right or of any other right of such Lender, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. The undersigned regardless of the time, order or place of signing waives presentment, demand, protest and notices of every kind and assents to any one or more extensions or postponements of the time of payment or any other indulgences, to any substitutions, exchanges or releases of collateral if at any time there be available to the Lender collateral for this Note, and to the additions or releases of any other parties or persons primarily or secondarily liable.
This Note is secured pursuant to a Security Agreement (All Assets) dated January 13, 1995.
This Note represents amounts loaned to Borrower pursuant to a Line of Credit Agreement for the Acquisition of Equipment dated January 13, 1995.
All rights and obligations hereunder shall be governed by the law of the Commonwealth of Massachusetts and this Note shall be deemed to be under seal.
WITNESS: Bottomline Technologies, Inc.
_______________________ By: ____________________________
EXHIBIT 10.22
SECURED TERM NOTE
(EQUIPMENT)
$500,000.00 June 28, 1995 Boston, Massachusetts
For value received, the undersigned promises to pay to Shawmut Bank, N.A.
("LENDER"), or order, at its office, the principal sum of FIVE HUNDRED THOUSAND
($500,000.00) DOLLARS, together with interest thereon at the rate of EIGHT AND
THREE-QUARTERS (8.75%) PERCENT PER ANNUM, to be paid in thirty-six (36)
consecutive monthly installments of principal and interest as follows:
$15,841.75 on July 30, 1995, and the same amount (except the last installment
which shall be the unpaid balance) on the last day of each month thereafter
until this Note is fully paid. Interest shall be calculated on the basis of
actual days elapsed and a 360-day year. If this Note is not paid in full on the
date of maturity or upon the exercise by Lender of its rights in the event of
the undersigned's default, interest on unpaid balances shall thereafter be
payable at a fluctuating interest rate per annum equal to three percent (3%)
greater than the rate of interest specified herein.
The undersigned hereby authorizes Lender to charge the -amount of all monthly interest and principal payments, when due and payable hereunder, against the undersigned's checking account.
At the option of the Lender, this Note shall become immediately due and payable without notice or demand upon the occurrence at any time of (i) a default of any liability, obligation or undertaking of the undersigned, hereunder or otherwise, including failure to pay in full and when due any installment of principal or interest hereunder; (ii) an Event of Default as defined in the Agreement; or (iii) termination of the Agreement.
In the event of a prepayment of the undersigned's obligations to the Lender, either at the undersigned's default, the undersigned agrees to pay to the Lender its lost net interest income resulting from the prepayment. Therefore, the undersigned's final payment to the Lender shall consist of all principal amounts outstanding, all interest owing up to the date of such prepayment or demand by the Lender, together with the Lender's lost net interest income, if any, computed as described hereafter.
As of the date of prepayment, or as of the date of demand after default, the Lender will determine the interest rate differential between the rate stated in this Note and the yield on a United States Government Treasury Note with the maturity closest
to the Note as the same is reported in The Wail Street Journal of that day (reporting the previous day's activity). In the event that the rate differential so determined is such that the Treasury Note yield is greater than the Note yield, no lost net interest income shall be paid to the Lender, nor, in any event, shall any sum be owing by the Lender to the undersigned.
In the event that the rate differential so determined is such that the Note yield is greater than the Treasury Note yield, the difference shall be multiplied by the outstanding principal balance of this Note, computed monthly for the remaining term of this Note; the present value of such monthly computation shall be calculated and paid to the Lender as its lost net interest income. For the purpose of computing the present value, the interest rate used for discounting shall be the bond equivalent yield of the six-month United States Treasury Bill rate as reported in The Wall Street Journal of that day (reporting the previous day's activity).
Notwithstanding the foregoing, the Lender may, in its sole discretion, choose to waive its right to receive either all or any portion of its lost net interest income as provided herein.
The undersigned agrees to pay all costs of collection including reasonable fees of attorney.
No delay or omission on the part of the Lender in exercising any right hereunder shall operate as a waiver of such right or of any other right of such Lender, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. The undersigned regardless of the time, order or place of signing waives presentment, demand, protest and notices of every kind and assents to any one or more extensions or postponements of the time of payment or any other indulgences, to any substitutions, exchanges or releases of collateral if at any time there be available to the Lender collateral for this Note, and to the additions or releases of any other parties or persons primarily or secondarily liable.
This Note is secured pursuant to a Security Agreement (All Assets) dated January 13, 1995.
This Note represents amounts loaned to Borrower pursuant to a Line of Credit Agreement for the Acquisition of Equipment dated January 13, 1995.
All rights and obligations hereunder shall be governed by the law of the Commonwealth of Massachusetts and this Note shall be deemed to be under seal.
WITNESS: Bottomline Technologies, Inc.
/s/ Janet M. Ford By: /s/ James L. Loomis
-------------------------- -----------------------------
Janet M. Ford James L. Loomis
Vice President and Treasurer
|
EXHIBIT 10.23
SECURITY AGREEMENT
(ALL ASSETS)
Bottomline Technologies, Inc., a New Hampshire corporation with a principal place of business at One Court Street, Exeter, New Hampshire, on behalf of itself and any successors or assigns (the "BORROWER"), and Shawmut Bank, N.A., a national banking association organized and existing under the laws of the United States of America, with a principal place of business at One Federal Street, Boston, Massachusetts, 02211-3204, its successors and assigns (the "BANK"), are the parties to this Agreement. In consideration of the Bank's extending or having extended loans and/or other financial considerations to the Borrower on this date or on one or more occasions, the Borrower agrees with the Bank as follows:
SECTION 1. THE SECURITY INTEREST: As security for the payment and performance of all Liabilities (as defined below) now existing or hereafter arising of the Borrower to the Bank, whether arising by future advances or otherwise, the Borrower hereby grants a security interest to the Bank in the following property, wherever located, and in all proceeds and products of such property:
1.01 ALL INVENTORY of the Borrower now existing or hereafter arising; meaning all goods, merchandise, raw materials, supplies, goods in process, finished goods, and other tangible personal property held by the Borrower for processing, sale, or other business purpose, or to be used or consumed in the Borrower's business.
1.02 ALL ACCOUNTS AND ACCOUNTS RECEIVABLE of the Borrower now existing or hereafter arising; meaning all accounts, accounts receivable, papers, notes, drafts, acceptances, and all other debts, obligations, and liabilities in whatever form owing to the Borrower from any person, firm, corporation, or any other legal entity ("ACCOUNT DEBTORS").
1.03 ALL DOCUMENTS of the Borrower now existing or hereafter arising; meaning all documents of title, including bills of lading, dock warrants, dock receipts, warehouse receipts, and orders for the delivery of goods, and also any other document which in the regular course of business or financing is treated as adequately evidencing that the person in the possession of it is entitled to receive, hold, and dispose of the document and goods it covers.
1.04 ALL INSTRUMENTS of the Borrower now existing or hereafter arising; meaning all negotiable instruments, securities, and any other writings which evidence a right to payment of money and are not themselves security agreements or leases and are of a type which are in the ordinary course of business transferred by delivery with any necessary endorsement or assignment.
1.05 ALL CHATTEL PAPER of the Borrower now existing or hereafter arising; meaning a writing or writings which evidence both a monetary obligation and a security interest in or a lease of specific goods.
1.06 ALL GENERAL INTANGIBLES, including, but not limited to, choses in action of the Borrower now existing or hereafter arising, meaning any personal property other than goods, accounts, chattel papers, documents, and instruments, including, but not limited to, general intangibles of the following description or type: goodwill, literary rights, contract rights and rights to performance, copyrights, trade- marks, patents, computer programs, access codes, source codes, trade secrets, customer lists and all tax refunds.
1.07 ALL OTHER GOODS of the Borrower, wherever located, now existing or hereafter acquired; meaning all motor vehicles, equipment, machinery, and other tangible personal property, whether fixtures or not, any and all records relating to any of the Collateral (as defined below) and all attachments and accessories thereto and substitutes therefor.
It is the Borrower's express intention that the continuing grant of this security interest remain as security for payment and performance of all of its Liabilities, whether now existing, or which may hereinafter be incurred by future advances, or otherwise, and whether or not such Liabilities are related to any transactions described in this Agreement, by class or kind, or whether or not contemplated by the parties at the time of the granting of this security interest. The notice of the continuing grant of this security interest therefore shall not be required to be stated on the face of any document representing any of the Borrower's Liabilities nor otherwise identify it as being secured hereby. If any Liability of the Borrower shall be or become excused, the Borrower hereby expressly hypothecates his, her, its, or their ownership interest in the Collateral to the extent required to satisfy such Liabilities, without restriction or limitation. Any such Liabilities will include all advances by the Bank whether or not the advances are made pursuant to commitments.
SECTION 2. DEFINITIONS: All types of Collateral mentioned in Section 1 shall have the meanings given to them under Chapter 106 of the Massachusetts General Laws unless specifically defined otherwise in that section or elsewhere in this Agreement.
In addition, as used herein, the following terms shall have the following respective meanings:
2.01 LIABILITIES means all liabilities of the Borrower to the Bank of every kind and description, including those arising under a loan agreement with the Bank of even date (the "LOAN AGREEMENT"), direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, regardless of how they arise or by what agreement or instrument they may be evidenced, including those arising under this Agreement, or whether evidenced by any agreement or instrument, including obligations to perform acts and refrain from taking action as well as obligations to pay money.
2.02 COLLATERAL means any and all property of the Borrower in which the Bank now has, by this Agreement, or hereafter acquires a security interest and specifically includes without limitation all inventory, accounts, documents, instruments, chattel paper, general intangibles and other goods, as those terms are defined in Section 1 hereof.
SECTION 3. BORROWER'S REPRESENTATIONS, WARRANTIES AND COVENANTS: To induce the Bank to enter into this Agreement the Borrower represents, warrants, agrees, and covenants that:
3.01 BORROWER OWNS ASSETS: The Borrower owns all its assets, including the Collateral, as represented on any papers furnished to the Bank and has and will have the exclusive right and authority to grant security interests therein.
3.02 ASSETS FREE OF ENCUMBRANCES: All the Borrower's assets, including the Collateral, are and will be kept in good condition and clear of all security interests, mortgages, liens, and encumbrances, except those granted or allowed under this Agreement and those set forth on the attached SCHEDULE A, and the Borrower has marketable title to all Collateral and shall defend the same against the claims and demands of all persons. The Bank has the right but not the duty to discharge any liability giving rise to a lien on Collateral, including any liens of any taxing authority, and the Borrower shall repay the Bank immediately for all amounts paid by the Bank to discharge such liabilities.
3.03 LOCATION OF COLLATERAL: Tangible Collateral, including, but not limited to, equipment, inventory, and fixtures, and if the Bank permits the Borrower to retain possession thereof, instruments, documents, and chattel paper, will be kept in the possession of the Borrower at its place of business named above, or those set forth on the attached SCHEDULE A.
The location or locations of such Collateral shall not be changed without the prior written notice to the Bank. Bank recognizes that Borrower intends to change the location of its chief executive office within New Hampshire and Bank assents to that relocation provided Borrower promptly notifies Bank of such relocation. Immediately upon the Bank's request, whether or not the Borrower is in default with respect to any Liability to the Bank, the Borrower will turn over to the Bank all instruments, documents and chattel paper which are Collateral under this Agreement.
3.04 RECORDS AND INFORMATION WITH RESPECT TO BORROWER AND COLLATERAL:
(a) The Borrower will furnish all information, financial or otherwise, that a duly authorized lending officer of the Bank deems reasonably necessary to properly inform the Bank with respect to Collateral or the condition of the Borrower. The Borrower will inform the Bank immediately in the event of any material change in the Borrower's financial condition or in the event of any breach of this Agreement or in the event that any of the representations and warranties herein contained do not continue to be true and correct as though continuously made to the Bank.
(b) The Borrower will execute upon the request of the Bank such financing statements and like papers as the Bank deems reasonably necessary to properly protect Collateral and its security interest therein and will pay the cost of filing them in such offices as the Bank requests.
3.05 FIXTURES: If any machinery, equipment, or other property serving as Collateral under this Agreement is or will be attached to any real estate, the Borrower will, upon Bank's request, furnish the Bank with a description of such real estate with a disclaimer, signed by all persons having an interest in said real estate, of any interest in the Collateral which has or may have priority over the Bank's interest, and will notify the Bank in writing of any intended sale, mortgage, or conveyance of such real estate, and will give written notice of the terms and conditions of this Agreement to any prospective purchaser, mortgagee, or grantee of such real estate.
3.06 LIABILITIES OWING TO BORROWER: Any liabilities in whatever form owing to the Borrower from any person, firm, or other legal entity serving as Collateral are and will be good and valid indebtedness not subject to any defenses, set-offs, claims, counter-claims, or agreements under which any deduction or discount may be made thereon, except as specified to the
Bank on a statement or invoice made available to the Bank on or prior to the date hereof or from time to time hereafter.
3.07 RETURNED MERCHANDISE: The Bank may in its unfettered discretion charge to the Borrower the amount represented to be owing on any liability, in whatever form owing to the Borrower, from whatever source, if said liability serves as Collateral under this Agreement, and if any merchandise giving rise to any such liability is returned, and until such debit is made, Borrower shall hold any such returned merchandise segregated in trust for the Bank subject to its exclusive disposition.
3.08 TAXES: The Borrower will pay any sales or other taxes which may become due and payable with respect to a sale or other transaction giving rise to any Collateral.
3.09 CHATTEL PAPER: The Borrower agrees to label all chattel paper serving as Collateral under this Agreement with the words, "Subject to the security interest of (the Bank)", naming the Bank.
3.10 INSURANCE:
(a) The Borrower agrees at its or his own expense to keep all Collateral insured in accordance with the requirements of the Loan Agreement.
(b) The Bank shall have no risk, liability, or responsibility in connection with payment or non-payment of any loss, the sole obligation of the Bank being to credit the Borrower's loan account with the net proceeds of any insurance payments received on account of any loss.
3.11 SALE OF COLLATERAL: Unless otherwise specifically provided by this Agreement or the Loan Agreement, the Borrower will not sell any Collateral without the prior written consent of the Bank. So long as the Borrower is not in default hereunder the Borrower shall have the right to sell inventory, which may be Collateral, in the ordinary course of its or his business. A sale in the ordinary course of business shall not include a transfer in total or partial satisfaction of a debt, other than a debt which has arisen solely as a result of prepayment or deposit by customers of the Borrower for items of inventory subsequently to be purchased or delivered. Borrower shall also be entitled to sell (or trade in) used or obsolete equipment so long as Borrower receives therefor a sum (or credit) substantially equal to such equipment's fair value.
3.12 BANK'S RIGHT TO POSSESSION:
(a) Unless otherwise provided by law, at any time after the occurrence of an Event of Default hereunder, the Bank shall have the right to the immediate possession of all Collateral and its products and proceeds, and in its sole discretion may operate and use said Collateral, complete work in process, and sell Collateral without being liable to the Borrower on account of any losses, damage, or depreciation that may occur as a result thereof so long as the Bank shall act in good faith.
(b) Unless otherwise provided by law, at any time after the occurrence of an Event of Default hereunder, the Bank may, at the expense of the Borrower, maintain possession of the Borrower's premises by the use of a custodian or custodians, or in such other manner as the Bank may determine.
(c) Unless otherwise provided by law, at any time after the occurrence of an Event of Default hereunder, the Bank may at all times, at the expense of the Borrower, enter upon any premises on which Collateral may be situated and remove any such Collateral to such other places as the Bank determines.
(d) Unless otherwise provided by law, the Bank may at any time, after the occurrence of an Event of Default hereunder, transfer any Collateral into its own name or that of its nominee and may at any time after the occurrence of an Event of Default hereunder receive the income thereon and hold the same as security for Liabilities or apply it to principal or interest due on the Liabilities.
SECTION 4. COLLECTION:
4.01 (a) The Bank may at any time after the occurrence of an Event of
Default hereunder require the Borrower to establish a "lock
box" arrangement with the Bank for the receipt of Account
Debtor remittances.
(b) The Bank may at any time after the occurrence of an Event of
Default hereunder, notify Account Debtors, on any Collateral,
or require the Borrower to notify such Account Debtors, that
they shall make all payments on their account or accounts with
the Borrower directly to the Bank; or require the Borrower to
hold all proceeds received from collection in trust for the
Bank without commingling the same with other funds of the
Borrower, and to turn the same
-6-
|
over to the Bank immediately upon receipt the identical form
received, at which time the Bank may at its option either
apply such proceeds to the Liabilities of the Borrower, in
accordance with Section 4.03, or release such proceeds to the
Borrower for use in its business.
(c) The Bank has the right at any time after the occurrence of an
Event of Default hereunder, directly or through its agent, to
collect proceeds directly from Account Debtors, on any
Collateral and for that purpose to do all acts and things
necessary or incident thereto, including the right to sue on
such accounts, and to sell, transfer, set over, compromise,
discharge, or extend the whole or any part of the accounts.
(d) Borrower does hereby make, constitute and appoint any officer
or agent of Bank as Borrower's true and lawful attorney-in-
fact, with power to endorse the name of Borrower or any of
Borrower's officers or agents upon any notices, checks,
drafts, money orders, or other instruments of payment
(including payments payable under any policy of insurance on
the Collateral) or Collateral that may come into possession of
the Bank in full or part payment of any amounts owing to Bank;
to sign and endorse the name of Borrower or any of Borrower's
officers or agents upon any warehouse receipts, drafts against
debtors, assignments, verifications and notices in connection
with accounts, and any instruments or documents relating
thereto, or to Borrower's rights therein; to give written
notice to such office or officials of the United States Post
Office to effect such change or changes of address so that all
mail addressed to the Borrower may be delivered directly to
the Bank; granting unto Borrower's said attorney full power to
do any and all things necessary to be done in and about the
premises as fully and effectually as Borrower might or could
do, and hereby ratifying all that said attorney shall lawfully
do or cause to be done by virtue hereof. Neither the Bank nor
the attorney shall be liable for any acts or omissions nor for
any errors of judgment or mistake, except for their gross
negligence or willful misconduct. This power of attorney shall
be irrevocable for the term of this Agreement and all
transactions hereunder and thereafter as long as Borrower may
be indebted to Bank. With the exception of the power granted
to the Bank to endorse checks, drafts, and any other form of
payment, which right may be exercised at any time and from
time to time, the Bank will not exercise any of the powers
granted hereunder absent the occurrence of an Event of Default
hereunder.
|
4.02 Until the Bank exercises the rights contained in Section 4.01 (except under the last sentence in Section 4.01(d)), the Borrower may continue to collect proceeds from Account Debtors on any Collateral and use the proceeds in any lawful manner not inconsistent with the terms of this Agreement.
4.03 In the event that the Bank exercises the rights contained in Section
4.01 (except under the last sentence in Section 4.01(d)), the Bank
shall credit to the Borrower the proceeds obtained from Account
Debtors of the Borrower, such credits to be entered within two (2)
business days after receipt of the proceeds. Such credits, however,
are conditional upon final payment to the Bank at its office in cash
or solvent credits of the items giving rise to them, and, if any item
is not so paid, the amount of any credit given with respect to any of
the Borrower's Liabilities shall be reversed or, in the discretion of
the Bank, it shall be charged to any deposit accounts of the Borrower
with the Bank, whether or not the item is returned.
SECTION 5. DEFAULT AND ACCELERATION:
5.01 Any or all of the Liabilities of the Borrower to the Bank shall, at the option of the Bank and notwithstanding any time or credit allowed by any instrument evidencing a Liability, be immediately due and payable without notice or demand upon the occurrence of any of the following Events of Default (each an "EVENT OF DEFAULT"):
(a) Default in the payment, upon demand (or when due and payable, if not payable on demand), of any Liability of the Borrower;
(b) An injunction or attachment against property of the Borrower remains undischarged for a period of thirty (30) days;
(c) The failure by the Borrower to promptly, punctually and faithfully perform, or observe any term, covenant or agreement on its part to be performed or observed pursuant to any of the provisions of this Agreement (and the expiration of ten (10) days from such failure).
(d) The occurrence of any material uninsured loss, theft, damage or destruction to any material asset(s) of the Borrower.
(e) The security interest granted to the Bank in the Collateral
shall, at any time after the execution and delivery of this
Agreement, for any reason, ceases (i) to create a valid and
perfected first priority security interest in the Collateral
including, without limitation, the occurrence of any event
which would cause a lien creditor, as that term is defined in
Section 9-301 of the Code, to take priority over advances made
by Bank; the filing against or
relating to the Borrower of a federal tax lien in favor of the United States of America or any political subdivision of the United States of America, or the filing against or relating to the Borrower of a state tax lien in favor of any state of the United States of America or any political subdivision of any such state; or (ii) this Agreement shall cease to be in full force and effect or shall be declared null and void, or the validity or enforceability hereof shall be contested by the Borrower.
(f) The occurrence of an Event of Default under the Loan Agreement after the expiration of any applicable grace period or termination for any reason of the Loan Agreement.
5.02 Upon the occurrence of any of the Events of Default, the Bank shall have all the rights and remedies of a secured party under Chapter 106, Article 9, of the Massachusetts General Laws, in addition to all other rights and remedies mentioned in this Agreement. Unless otherwise provided by law, the Bank may require the Borrower to assemble any tangible personal property constituting Collateral and make it available to the Bank at a place to be designated by the Bank which is reasonably convenient to both parties.
5.03 The Borrower hereby grants to the Bank a nonexclusive irrevocable license in connection with the Bank's exercise of its rights hereunder, to use, apply and affix any trademark, trade name, logo or the like in which the Borrower now or hereafter has rights, which license may be used upon the occurrence of any of the Events of Default, or upon demand, if applicable.
SECTION 6. EXPENSES:
6.01 The Borrower shall pay or reimburse the Bank on demand for all out-of-pocket expenses of every nature which the Bank may incur in connection with this Agreement and the preparation thereof, the making of any loan in connection herewith, or the collection of the Borrower's Liabilities secured under this Agreement, including but not limited to reasonable attorney's fees, and fees and expenses related to the perfection and protection of any security interest granted by the Borrower; or the Bank, if it chooses, may charge any of the Borrower's funds on deposit with the Bank.
SECTION 7. GOVERNING LAW, MODIFICATION, AND WAIVERS:
7.01 This Agreement, including modifications or additions thereto, will be governed, interpreted, and construed in accordance with the laws of the Commonwealth of Massachusetts.
7.02 The rights, remedies, powers, privileges and discretions of the Bank hereunder shall be cumulative and not exclusive of any rights or remedies which it would otherwise have.
7.03 Any determination that any provision of this Agreement or any application thereof is invalid, illegal or unenforceable in any respect in any instance shall not affect the validity, legality and enforceability of such provision in any other instance, nor the validity, legality or enforceability of any other provision of this Agreement.
7.04 No modification of this Agreement will be binding unless in writing and signed by a duly authorized lending officer of the Bank and a duly authorized officer of Borrower.
7.05 Any default by the Borrower may be waived by the Bank in writing signed by a duly authorized lending officer of the Bank, but no such waiver shall extend to any subsequent default or any other default.
7.06 No delay on the part of the Bank in exercising any of the rights granted or referred to in this Agreement shall be held to constitute a waiver.
SECTION 8. NOTICE, ASSIGNMENT, TERMINATION:
8.01 Unless otherwise provided for by law, any demand, notice, or other communication to the Borrower that the Bank may elect to give shall be effective if sent in accordance with the terms of the Loan Agreement.
8.02 This Agreement shall continue until all Liabilities of the Borrower to the Bank have been satisfied.
8.03 Any obligations the Bank may have to the Borrower, whether now existing or hereafter arising, run only to the Borrower and may not be assigned or transferred by said Borrower without the written consent of a duly authorized officer of the Bank.
SECTION 9. HEADINGS: SEAL:
9.01 Headings preceding the text of the several sections hereof are for the convenience of reference only and shall not constitute a part of this Agreement nor shall they affect its meaning, construction, or effect.
9.02 It is intended that this Agreement take effect as a sealed instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed as a sealed instrument this 13th day of January, 1995.
WITNESS: BOTTOMLINE TECHNOLOGIES, INC. (As to Both) /s/ Brian T. Garrity By: /s/ James L. Loomis ---------------------- -------------------- Brian T. Garrity James L. Loomis, Treasurer |
SHAWMUT BANK, N.A.
By: /s/ Robert A. Lupien
-------------------------------
Robert A. Lupien, Vice President
|
SCHEDULE A
SECURED PARTY OR LESSOR: COLLATERAL:
------------------------ ----------
Computer Lab Equipment
People's Heritage Bank Leased Equipment
NYNEX Credit Company Telephone Equipment
IBM Credit Corporation IBM Equipment
Fleet Bank-NH Blanket Security Interest
(to be terminated as part
this transaction)
Purchased Money Secured Parties
for any assets acquired with
purchase money financing, whether
now existing or arising in the future
|
None
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and "Selected Financial Data" and to the use of our report dated August 6, 1998, except for Note 11 as to which the date is November 12, 1998 and Note 12 as to which the date is January 6, 1999, in Amendment No. 1 to the Registration Statement (Form S-1 No. 333-67309) and related Prospectus of Bottomline Technologies (de), Inc. for the registration of its common stock.
Our audits also included the financial statement schedule of Bottomline Technologies (de), Inc. included in the Registration Statement. This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Boston, Massachusetts
January 6, 1999
|
| ARTICLE 5 |
| This schedule contains summary financial information extracted from the Company's financial statements, and notes thereto, included in the Company's registration statement, to which this schedule is an exhibit, and is qualified in its entirety by reference to such financial statements. |
| RESTATED: |
| PERIOD TYPE | 12 MOS | 3 MOS |
| FISCAL YEAR END | JUN 30 1998 | JUN 30 1999 |
| PERIOD START | JUL 01 1997 | JUL 01 1998 |
| PERIOD END | JUN 30 1998 | SEP 30 1998 |
| CASH | 1,362 | 1,491 |
| SECURITIES | 0 | 0 |
| RECEIVABLES | 7,967 | 8,299 |
| ALLOWANCES | 970 | 1,071 |
| INVENTORY | 174 | 156 |
| CURRENT ASSETS | 9,346 | 9,915 |
| PP&E | 3,696 | 4,130 |
| DEPRECIATION | 1,831 | 2,021 |
| TOTAL ASSETS | 11,301 | 12,084 |
| CURRENT LIABILITIES | 5,462 | 5,788 |
| BONDS | 0 | 0 |
| PREFERRED MANDATORY | 1,353 | 1,381 |
| PREFERRED | 0 | 0 |
| COMMON | 6 | 6 |
| OTHER SE | 4,362 | 4,791 |
| TOTAL LIABILITY AND EQUITY | 11,301 | 12,084 |
| SALES | 9,449 | 2,374 |
| TOTAL REVENUES | 29,037 | 8,105 |
| CGS | 6,526 | 1,682 |
| TOTAL COSTS | 11,002 | 2,911 |
| OTHER EXPENSES | 15,205 | 4,447 |
| LOSS PROVISION | 0 | 0 |
| INTEREST EXPENSE | 85 | 2 |
| INCOME PRETAX | 2,780 | 762 |
| INCOME TAX | 1,177 | 305 |
| INCOME CONTINUING | 1,603 | 457 |
| DISCONTINUED | 0 | 0 |
| EXTRAORDINARY | 0 | 0 |
| CHANGES | 0 | 0 |
| NET INCOME | 1,603 | 457 |
| EPS PRIMARY | .24 | .07 |
| EPS DILUTED | .20 | .06 |