Delaware
|
7372 | 41-2015127 | ||
(State or other jurisdiction
of
incorporation or organization) |
(Primary Standard Industrial
Classification Code Number) |
(I.R.S. Employer
Identification No.) |
Andrew G. Humphrey
Jonathan R. Zimmerman Faegre & Benson LLP 2200 Wells Fargo Center 90 South Seventh Street Minneapolis, MN 55402-3901 (612) 766-7000 |
Mark J. Macenka
Kenneth J. Gordon Goodwin Procter LLP Exchange Place 53 State Street Boston, MA 02109 (617) 570-1000 |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company x |
Proposed Maximum
|
Amount of
|
|||||
Title of Each Class of
|
Aggregate Offering
|
Registration
|
||||
Securities to be Registered | Price (1) | Fee | ||||
Common stock, par value $0.001 per share
|
$46,000,000 | $2,566.80(2) | ||||
(1) | Estimated solely for the purpose of computing the registration fee pursuant to Rule 457(o) under the Securities Act. |
(2) | Previously paid. |
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted.
|
Per Share | Total | |||||||
Initial public offering price
|
$ | $ | ||||||
Underwriting discount
|
$ | $ | ||||||
Proceeds, before expenses, to us
|
$ | $ | ||||||
Proceeds, before expenses, to the selling stockholders
|
$ | $ |
William Blair & Company | Needham & Company, LLC |
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F-1 | ||||||||
EX-4.2 | ||||||||
EX-10.1 | ||||||||
EX-10.2 | ||||||||
EX-10.3 | ||||||||
EX-10.4 | ||||||||
EX-10.5 | ||||||||
EX-10.9 | ||||||||
EX-10.10 | ||||||||
EX-10.11 | ||||||||
EX-10.12 | ||||||||
EX-10.13 | ||||||||
EX-10.14 | ||||||||
EX-10.15 | ||||||||
EX-10.17 | ||||||||
EX-10.18 | ||||||||
EX-10.19 | ||||||||
EX-23.1 |
1
Table of Contents
Increasing Retailer Service and Performance Demands.
Within the supply chain ecosystem, retailers hold a significant
strategic position relative to their trading partners. Given
this power dynamic, retailers continuously demand enhanced
levels of performance from suppliers.
Globalization of the Supply Chain Ecosystem.
Large
physical distances between the sources of materials,
manufacturers and retailers increase the complexity in the
supply chain ecosystem and increase the time needed by suppliers
to deliver goods relative to the time typically demanded by
retailers.
Increasing Complexity of the Supply Chain Ecosystem.
The
specialization of non-core functions leads more suppliers to
outsource functions, which increases the number of participants
in, and the complexity of, the supply chain ecosystem.
Increasing Use of Outsourcing by Small- and Medium-Sized
Suppliers.
Comfort around using the services of outsourced
service providers, limited internal expertise and constrained
budgets drive the need for suppliers to rely on third-party
service providers to manage the complexity of their supply chain
at an affordable cost.
2
Table of Contents
Trading Partner Integration.
Our Trading Partner
Integration solution replaces or augments an organizations
existing trading partner electronic communication
infrastructure, enabling suppliers to comply with
retailers rule books and allowing for the electronic
exchange of information among numerous trading partners through
various protocols.
Trading Partner Enablement.
Our Trading Partner
Enablement solution helps organizations, typically large
retailers, implement new integrations with trading partners,
typically suppliers, to drive automation and electronic
communication across their supply chains.
Trading Partner Intelligence.
In 2009, we introduced our
Trading Partner Intelligence solution, which consists of six
data analytics applications and allows our supplier customers to
improve their visibility across, and analysis of, their supply
chains. Retailers improve their visibility into supplier
performance and their understanding of product sell-through.
Other Trading Partner Solutions.
We provide a number of
peripheral solutions such as barcode labeling and our scan and
pack application, which helps trading partners process
information to streamline the picking and packaging process.
Further Penetrate Our Current Market.
We believe the
global supply chain management market is under-penetrated. We
intend to continue leveraging our relationships with customers
and their trading partners to obtain new sales leads.
Increase Revenues from Our Customer Base.
We believe our
overall customer satisfaction is strong and will lead our
customers to further utilize our current solutions as their
businesses grow. We also expect to introduce new solutions to
sell to our customers.
3
Table of Contents
Expand Our Distribution Channels.
We intend to grow our
business by expanding our network of direct sales
representatives to gain new customers. We also believe there are
valuable opportunities to promote and sell our solutions through
collaboration with other providers.
Expand Our International Presence.
We plan to increase
our international sales efforts to obtain new supplier customers
worldwide. We also intend to leverage our current international
presence to increase the number of integrations we have with
retailers in foreign markets to make our platform more valuable
to suppliers based overseas.
Enhance and Expand Our Platform.
We intend to further
improve and develop the functionality and features of our
platform, including developing new solutions and applications.
Selectively Pursue Strategic Acquisitions.
To complement
and accelerate our internal growth, we may pursue acquisitions
of other supply chain management companies to add customers. We
also may pursue acquisitions that allow us to expand into
regions or industries where we do not have a significant
presence or to offer new functionalities we do not currently
provide.
4
Table of Contents
Common stock offered by us
shares
Common stock offered by selling stockholders
shares
Common stock to be outstanding after this offering
shares
Over-allotment option
shares
Use of proceeds
We estimate that the net proceeds to us from this offering,
after deducting estimated underwriting discounts and offering
expenses, will be approximately
$ million, assuming the
shares are offered at $ per share,
which is the mid-point of the estimated offering price range set
forth on the cover page of this prospectus. We will not receive
any of the proceeds from the sale of shares by the selling
stockholders. See Principal and Selling Stockholders.
We intend to use $ million of
our net proceeds from this offering to repay indebtedness under
our equipment term loans. We intend to use any remaining
proceeds for working capital and general corporate purposes,
including potential acquisitions. See Use of
Proceeds.
Proposed Nasdaq Capital Market symbol
SPSC
5
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7
(In thousands, except per share and recurring revenue customer
data)
6
Table of Contents
Year Ended December 31,
Nine Months Ended September 30,
2006
2007
2008
2008
2009
(Unaudited)
$
19,859
$
25,198
$
30,697
$
22,617
$
27,765
5,219
6,379
9,208
6,584
8,742
14,640
18,819
21,489
16,033
19,023
8,098
11,636
12,543
9,538
10,005
3,190
3,546
3,640
2,779
3,226
4,199
5,458
6,716
4,992
4,672
15,487
20,640
22,899
17,309
17,903
(847
)
(1,821
)
(1,410
)
(1,276
)
1,120
(558
)
(439
)
(419
)
(322
)
(225
)
108
120
28
1
114
(450
)
(319
)
(391
)
(321
)
(111
)
(4
)
(16
)
(94
)
(12
)
(60
)
$
(1,301
)
$
(2,156
)
$
(1,895
)
$
(1,609
)
$
949
$
(2.93
)
$
(3.12
)
$
(1.72
)
$
(1.53
)
$
0.79
$
(2.93
)
$
(3.12
)
$
(1.72
)
$
(1.53
)
$
0.03
444
692
1,101
1,054
1,238
444
692
1,101
1,054
36,850
Year Ended December 31,
Nine Months Ended September 30,
2006
2007
2008
2008
2009
(Unaudited)
$
748
$
103
$
763
$
318
$
2,501
8,024
9,589
10,156
10,113
11,017
As of December 31,
As of September 30, 2009
Pro Forma
2007
2008
Actual
Pro Forma
As Adjusted
(Unaudited)
$
6,117
$
3,715
$
5,796
$
5,796
4,535
3,614
4,429
4,429
4,992
4,471
2,939
2,939
65,964
65,964
65,964
(60,111
)
(61,844
)
(60,718
)
5,246
Table of Contents
(1)
Includes stock-based compensation
expense as follows:
Nine Months Ended
Year Ended December 31,
September 30,
2006
2007
2008
2008
2009
(Unaudited)
$
$
2
$
19
$
12
$
43
33
60
44
74
2
4
3
3
6
9
74
51
57
$
6
$
46
$
157
$
110
$
177
(2)
Reflects the conversion of all of
our preferred stock into common stock and
a
for reverse stock split of our
common stock that will occur immediately prior to the
consummation of this offering.
(3)
EBITDA consists of net income
(loss) plus depreciation and amortization, interest expense and
income tax expense. Adjusted EBITDA consists of EBITDA plus our
non-cash, share-based compensation expense. We use Adjusted
EBITDA as a measure of operating performance because it assists
us in comparing performance on a consistent basis, as it removes
from our operating results the impact of our capital structure.
We believe Adjusted EBITDA is useful to an investor in
evaluating our operating performance because it is widely used
to measure a companys operating performance without regard
to items such as depreciation and amortization, which can vary
depending upon accounting methods and the book value of assets,
and to present a meaningful measure of corporate performance
exclusive of our capital structure and the method by which
assets were acquired. The following table provides a
reconciliation of net income (loss) to Adjusted EBITDA:
Nine Months Ended
Year Ended December 31,
September 30,
2006
2007
2008
2008
2009
(Unaudited)
$
(1,301
)
$
(2,156
)
$
(1,895
)
$
(1,609
)
$
949
1,481
1,758
1,988
1,483
1,090
558
439
419
322
225
4
16
94
12
60
742
57
606
208
2,324
6
46
157
110
177
$
748
$
103
$
763
$
318
$
2,501
(4)
This reflects the number of
recurring revenue customers at the end of the period. Recurring
revenue customers are customers with contracts to pay us monthly
fees. A minority portion of our recurring revenue customers
consists of separate units within a larger organization. We
treat each of these units, which may include divisions,
departments, affiliates and franchises, as distinct customers.
Our contracts with our recurring revenue customers typically
allow the customer to cancel the contract for any reason with
30 days prior notice.
(5)
Total debt consists of our current
and long-term capital lease obligations, current and long-term
equipment and term loans, line of credit and interest payable.
8
Table of Contents
development. If this market does not develop or develops more
slowly than we expect, our
revenues may decline or fail to grow and we may incur operating
losses.
our ability to maintain high levels of customer satisfaction;
our ability to maintain continuity of service for all users of
our platform;
the price, performance and availability of competing
solutions; and
our ability to assuage suppliers confidentiality concerns
about information stored outside of their controlled computing
environments.
therefore depends on our ability to maintain a high level of
customer satisfaction and a strong
reputation in the supply chain management industry.
9
Table of Contents
our sales cycles and make it difficult for us to forecast
operating results accurately.
our ability to retain and increase sales to customers and
attract new customers, including our ability to maintain and
increase our number of recurring revenue customers;
the timing and success of introductions of new solutions or
upgrades by us or our competitors;
the strength of the economy, in particular as it affects the
retail sector;
changes in our pricing policies or those of our competitors;
competition, including entry into the industry by new
competitors and new offerings by existing competitors;
10
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the amount and timing of expenditures related to expanding our
operations, research and development, or introducing new
solutions; and
changes in the payment terms for our solutions.
11
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12
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13
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incurring significantly higher than anticipated capital
expenditures and operating expenses;
failing to assimilate the operations and personnel of the
acquired company or business;
disrupting our ongoing business;
dissipating our management resources;
failing to maintain uniform standards, controls and
policies; and
impairing relationships with employees and customers as a result
of changes in management.
14
Table of Contents
Software-as-a-Service providers that deliver
business-to-business information systems using a multi-tenant
approach;
traditional on-premise software providers; and
managed service providers that combine traditional on-premise
software with professional information technology services.
15
Table of Contents
develop and enhance our solutions;
continue to expand our technology development, sales and
marketing organizations;
hire, train and retain employees; or
respond to competitive pressures or unanticipated working
capital requirements.
16
Table of Contents
fluctuations in currency exchange rates;
unexpected changes in foreign regulatory requirements;
longer accounts receivable payment cycles and difficulties in
collecting accounts receivable;
difficulties in managing and staffing international operations;
potentially adverse tax consequences, including the complexities
of foreign value added tax systems and restrictions on the
repatriation of earnings;
localization of our solutions, including translation into
foreign languages and associated expenses;
the burdens of complying with a wide variety of foreign laws and
different legal standards, including laws and regulations
related to privacy;
increased financial accounting and reporting burdens and
complexities;
political, social and economic instability abroad, terrorist
attacks and security concerns in general; and
reduced or varied protection for intellectual property rights in
some countries.
variations in our quarterly operating results;
decreases in market valuations of similar companies;
the failure of securities analysts to cover our common stock
after this offering or changes in financial estimates by
analysts who cover us, our competitors or our industry;
17
Table of Contents
failure by us or our competitors to meet analysts
projections or guidance that we or our competitors may give to
the market; and
fluctuations in stock market prices and volumes.
18
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permit our board of directors to issue up
to shares
of preferred stock, with any rights, preferences and privileges
as our board may designate, including the right to approve an
acquisition or other change in our control;
provide that the authorized number of directors may be changed
by resolution of the board of directors;
provide that all vacancies, including newly created
directorships, may, except as otherwise required by law, be
filled by the affirmative vote of a majority of directors then
in office, even if less than a quorum;
provide that stockholders seeking to present proposals before a
meeting of stockholders or to nominate candidates for election
as directors at a meeting of stockholders must provide notice in
writing in a timely manner, and also specify requirements as to
the form and content of a stockholders notice; and
do not provide for cumulative voting rights.
delaying, deferring or preventing a change in corporate control;
impeding a merger, consolidation, takeover or other business
combination involving us; or
discouraging a potential acquirer from making a tender offer or
otherwise attempting to obtain control of us.
19
Table of Contents
less than expected growth in the supply chain management
industry, especially for Software-as-a-Service solutions within
this industry;
lack of acceptance of new solutions we offer;
an inability to continue increasing our number of customers or
the revenues we derive from our recurring revenue customers;
continued economic weakness and constrained retail sales;
an inability to effectively develop new solutions that compete
effectively with the solutions our current and future
competitors offer;
risk of increased regulation of the Internet;
an inability to identify attractive acquisition opportunities,
successfully negotiate acquisition terms or effectively
integrate acquired companies or businesses;
unexpected changes in our anticipated capital expenditures
resulting from unforeseen required maintenance or repairs,
upgrades or capital asset additions;
an inability to effectively manage our growth;
lack of capital available on acceptable terms to finance our
continued growth;
risks of conducting international commerce, including foreign
currency exchange rate fluctuations, changes in government
policies or regulations, longer payment cycles, trade
restrictions, economic or political instability in foreign
countries where we may increase our business and reduced
protection of our intellectual property;
an inability to add sales and marketing, research and
development or other key personnel who are able to successfully
sell or develop our solutions; and
other risk factors included under Risk Factors in
this prospectus.
20
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| repay $115,000 of indebtedness under equipment term loans that bear interest at rates between 11.6% and 12.0% and mature in the year ending December 31, 2010; |
| repay $416,000 of indebtedness under equipment term loans that bear interest at rates between 11.9% and 12.5% and mature in the year ending December 31, 2011; and |
| repay $201,000 of indebtedness under equipment term loans that bear interest at a rate of 11.8% and mature on January 1, 2012. |
21
on an actual basis;
on a pro forma basis to reflect the conversion of all
outstanding preferred stock into common stock immediately prior
to the completion of this offering, as if the conversion
occurred as of September 30, 2009; and
on a pro forma as adjusted basis to reflect the conversion
described above, as well as our sale of shares in this offering
at an assumed initial public offering price of
$ per share, which is the
mid-point of our filing range, after deducting estimated
underwriting discounts and commissions and offering expenses
payable by us, and the application of the net proceeds from our
sale of common stock in this offering to repay
$ million of indebtedness
under our equipment term loans, as if each had occurred as of
September 30, 2009.
As of September 30, 2009
Pro Forma
Actual
Pro Forma
As Adjusted
(In thousands, except share data)
$
5,796
$
$
11,142
4,706
37,676
20,844
7,444
65,964
1
5,146
(65,865
)
(60,718
)
$
21,094
$
$
22
Table of Contents
an aggregate
of shares
issuable upon the exercise of then outstanding options at a
weighted average exercise price of
$ per share;
an aggregate
of shares
issuable upon the exercise of then outstanding warrants at a
weighted average exercise price of
$ per share;
an aggregate
of shares
available for future issuance under our 2010 Equity Incentive
Plan, which we plan to adopt in connection with this
offering; and
the shares
of common stock subject to the underwriters over-allotment
option.
23
Table of Contents
$
$
$
$
$
Shares Purchased
Total Consideration
Average Price
Number
Percent
Amount
Percent
per Share
%
$
%
$
%
$
%
$
100%
$
100%
$
an aggregate
of shares
issuable upon the exercise of then outstanding options at a
weighted average exercise price of
$ per share;
an aggregate
of shares
issuable upon the exercise of then outstanding warrants at a
weighted average exercise price of
$ per share;
24
Table of Contents
an aggregate
of shares
then available for future issuance under our 2010 Equity
Incentive Plan, which we plan to adopt in connection with this
offering; and
the
shares of common stock subject to the underwriters
over-allotment option.
25
Table of Contents
Nine Months Ended
Year Ended December 31,
September 30,
2004
2005
2006
2007
2008
2008
2009
(In thousands, except per share data)
(Unaudited)
$
12,002
$
13,827
$
19,859
$
25,198
$
30,697
$
22,617
$
27,765
3,556
3,823
5,219
6,379
9,208
6,584
8,742
8,446
10,004
14,640
18,819
21,489
16,033
19,023
3,169
5,034
8,098
11,636
12,543
9,538
10,005
2,148
2,129
3,190
3,546
3,640
2,779
3,226
3,120
3,180
4,199
5,458
6,716
4,992
4,672
347
8,784
10,343
15,487
20,640
22,899
17,309
17,903
(338
)
(339
)
(847
)
(1,821
)
(1,410
)
(1,276
)
1,120
(285
)
(299
)
(558
)
(439
)
(419
)
(322
)
(225
)
28
(15
)
108
120
28
1
114
(257
)
(314
)
(450
)
(319
)
(391
)
(321
)
(111
)
(1
)
(23
)
(4
)
(16
)
(94
)
(12
)
(60
)
$
(596
)
$
(676
)
$
(1,301
)
$
(2,156
)
$
(1,895
)
$
(1,609
)
$
949
26
Table of Contents
Nine Months Ended
Year Ended December 31,
September 30,
2004
2005
2006
2007
2008
2008
2009
(In thousands, except per share data)
(Unaudited)
$
(1.63
)
$
(1.78
)
$
(2.93
)
$
(3.12
)
$
(1.72
)
$
(1.53
)
$
0.79
$
(1.63
)
$
(1.78
)
$
(2.93
)
$
(3.12
)
$
(1.72
)
$
(1.53
)
$
0.03
366
379
444
692
1,101
1,054
1,238
366
379
444
692
1,101
1,054
36,850
As of September 30, 2009
As of December 31,
Pro
Pro Forma
2004
2005
2006
2007
2008
Actual
Forma
As Adjusted
(In thousands)
(Unaudited)
$
1,643
$
1,609
$
1,942
$
6,117
$
3,715
$
5,796
$
5,796
230
(234)
(647)
4,535
3,614
4,429
4,429
5,349
6,767
12,228
20,687
19,197
21,094
21,094
1,898
2,719
5,167
5,550
5,569
4,706
4,706
1,903
2,675
5,018
4,992
4,471
2,939
2,939
56,072
56,072
58,520
65,964
65,964
65,964
$
(56,082)
$
(56,758)
$
(58,046)
$
(60,111)
$
(61,844)
$
(60,718)
$
5,246
Nine Months Ended
Year Ended December 31,
September 30,
2004
2005
2006
2007
2008
2008
2009
(Unaudited; Adjusted EBITDA in thousands)
$
414
$
385
$
748
$
103
$
763
$
318
$
2,501
5,451
6,110
8,024
9,589
10,156
10,113
11,017
(1)
Includes stock-based compensation expense as follows:
Nine Months Ended
Year Ended December 31,
September 30,
2004
2005
2006
2007
2008
2008
2009
(In thousands)
(Unaudited)
$
$
$
$
2
$
19
$
12
$
43
33
60
44
74
2
4
3
3
6
9
74
51
57
$
$
$
6
$
46
$
157
$
110
$
177
(2)
Reflects the conversion of all of our preferred stock into
common stock and a
for reverse stock split of our
common stock that will occur immediately prior to the
consummation of this offering.
27
Table of Contents
(3)
Total debt consists of our current and long-term capital lease
obligations, current and long-term equipment and term loans,
line of credit, interest payable and, as of December 31,
2004, 2005, and 2006, mezzanine debt.
(4)
EBITDA consists of net income (loss) plus depreciation and
amortization, interest expense and income tax expense. Adjusted
EBITDA consists of EBITDA plus our non-cash, share-based
compensation expense. We use Adjusted EBITDA as a measure of
operating performance because it assists us in comparing
performance on a consistent basis, as it removes from our
operating results the impact of our capital structure. We
believe Adjusted EBITDA is useful to an investor in evaluating
our operating performance because it is widely used to measure a
companys operating performance without regard to items
such as depreciation and amortization, which can vary depending
upon accounting methods and the book value of assets, and to
present a meaningful measure of corporate performance exclusive
of our capital structure and the method by which assets were
acquired. The following table provides a reconciliation of net
income (loss) to Adjusted EBITDA:
Nine Months Ended
Year Ended December 31,
September 30,
2004
2005
2006
2007
2008
2008
2009
(Unaudited; in thousands)
$
(596
)
$
(676
)
$
(1,301
)
$
(2,156
)
$
(1,895
)
$
(1,609
)
$
949
724
739
1,481
1,758
1,988
1,483
1,090
285
299
558
439
419
322
225
1
23
4
16
94
12
60
414
385
742
57
606
208
2,324
6
46
157
110
177
$
414
$
385
$
748
$
103
$
763
$
318
$
2,501
(5)
This reflects the number of recurring revenue customers at the
end of the period. Recurring revenue customers are customers
with contracts to pay us monthly fees. A minority portion of our
recurring revenue customers consists of separate units within a
larger organization. We treat each of these units, which may
include divisions, departments, affiliates and franchises, as
distinct customers. Our contracts with our recurring revenue
customers typically allow the customer to cancel the contract
for any reason with 30 days prior notice.
28
Table of Contents
RESULTS OF OPERATIONS
29
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30
Table of Contents
Nine Months Ended
Year Ended December 31,
September 30,
2006
2007
2008
2008
2009
(Unaudited; in thousands)
$
(1,301)
$
(2,156)
$
(1,895)
$
(1,609)
$
949
1,481
1,758
1,988
1,483
1,090
558
439
419
322
225
4
16
94
12
60
742
57
606
208
2,324
6
46
157
110
177
$
748
$
103
$
763
$
318
$
2,501
31
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32
Table of Contents
Year Ended December 31,
Nine Months Ended September 30,
2006
2007
2008
2008
2009
4.4%
4.4%
4.0%
4.0%
2.7% - 4.0%
9
8
7
7
4-7
60%
52%
53%
53%
49%-53%
0%
0%
0%
0%
0%
(1)
Rates for options granted during these periods varied within the
ranges stated.
(2)
Expected term for options granted during these periods varied
within the ranges stated.
(3)
Estimated volatility for options granted during these periods
varied within the ranges stated.
33
Table of Contents
Number of
Per Share
Fair Value(s)
Black-Scholes
Options
Exercise
Estimate
Value(s) per
Granted
Price(s)
per Share
Valuation Date(s)
Share
8,500
$
1.25
$
1.25
October 31, 2008
$
0.73
309,000
$
0.92
$
0.92
February 10, 2009
$
0.49
374,000
(1)
$
0.65-0.68
$
0.65-0.68
April 1, 2009
and April 22, 2009
$
0.35-0.38
893,364
(2)
$
0.81
$
0.81
July 23, 2009
$
.04-.45
34
Table of Contents
(1)
On April 1, 2009, we unilaterally amended the terms of the
309,000 stock options granted to three employees in the first
quarter of 2009 to reduce the exercise price for all of the
shares subject to each option to $0.65 per share, which was the
fair market value of our common stock on the date of the
amendments. The amendments did not affect the vesting provisions
or the number of shares subject to any of the option awards. For
financial statement reporting, we treat the previously granted
options as being forfeited and the amendments as new option
grants; however, none of the holders of these options made any
investment decisions in connection with the amendments.
(2)
Includes a total of 890,364 stock options granted to
17 employees and one director that resulted from our
unilateral amendment to reduce the exercise price for all of the
shares subject to options previously granted to the employees
and director. The amendments did not affect the vesting
provisions or the number of shares subject to any of the option
awards. For financial statement reporting, we treat the
previously granted options as being forfeited and the amendments
as new option grants; however, none of the holders of the
previously granted options made any investment decisions in
connection with the amendments.
Our actual financial condition and results of operations during
the relevant period;
The status of strategic initiatives to increase the market for
our services;
The competitive environment that existed at the time of the
valuation;
All important developments for our company, including the growth
of our customer base and the progress of our business model,
such as the introduction of new services; and
The status of our efforts to build our management team to retain
and recruit the talent and size organization required to support
our anticipated growth.
The market conditions affecting the technology industry; and
The general economic outlook in the United States and on a
global basis, including the extreme market downturn and turmoil
that was triggered in part by the September 2008 Lehman Brothers
bankruptcy filing as well as the ensuing decrease in employment,
purchasing power and consumer confidence that significantly
affected the U.S. and global economy and future outlook for
both.
The fact that the option grants involved illiquid securities in
a private company; and
The likelihood of achieving a liquidity event for the shares of
common stock underlying the options such as an initial public
offering or sale of our common stock, given prevailing market
conditions and our relative financial condition at the time of
grant.
the assumed initial public offering price will not include the
discounts for lack of liquidity of our common stock that existed
prior to our initial public offering;
35
Table of Contents
since our preferred stock will be converted to common stock
immediately prior to the initial public offering, the assumed
initial public offering price will not include the negative
impact of the liquidation preferences of the preferred stock;
the assumed initial public offering price will be based on our
current financial performance and outlook, which has changed
since the valuation dates described in this prospectus; and
the development of our business in the ordinary course, which
has continued since the valuation dates described in this
prospectus.
Results of Operations:
Our cash and cash
equivalents and short-term investment balances of
$3.9 million as of September 30, 2008 were not
sufficient to sustain long-term growth and provide cash to
invest in operations. Our revenues grew from $6.7 million
for the three months ended September 30, 2007 to
$8.1 million for the three months ended September 30,
2008. At the same time, our losses for each of the first three
quarters of 2008 were ($918,000), ($555,000) and ($135,000).
Preferred Stock Preferences:
During this
period our audit committee also considered the rights,
preferences and privileges of our preferred stock relative to
the common stock. As of September 30, 2008, our preferred
stock possessed an aggregate liquidation preference of
$38.6 million. The participation rights of our preferred
stock also provide that the preferred stock participates with
the common stock pro rata in our remaining assets. Our audit
committee did not believe at that time we were a candidate for a
liquidity event, such as an initial public offering or sale of
our company at a premium whereby our preferred stock would
convert to common thereby eliminating the liquidation
preferences of the preferred stock.
36
Table of Contents
Results of Operations:
Our cash and cash
equivalents and short-term investment balances of
$3.7 million as of December 31, 2008 were not
sufficient to sustain long term growth and provide cash to
invest in operations. Our revenues grew from $6.9 million
for the three months ended December 31, 2007 to
$8.1 million for the three months ended December 31,
2008. At the same time, our losses for each of the last three
quarters of 2008 were ($555,000), ($135,000) and ($287,000).
Preferred Stock Preferences:
During this
period our audit committee also considered the rights,
preferences and privileges of the preferred stock relative to
the common stock. As of December 31, 2008, our preferred
stock possessed an aggregate liquidation preference of
$38.6 million. The participation rights of our preferred
stock also provide that the preferred stock participates with
the common stock pro rata in our remaining assets. Our audit
committee did not believe at that time we were a candidate for a
liquidity event, such as an initial public offering or sale of
the company at a premium whereby our preferred stock would
convert to common thereby eliminating the liquidation
preferences of the preferred stock.
Results of Operations:
Our cash and cash
equivalents and short-term investment balances of
$4.3 million as of March 31, 2009, which were not
sufficient to sustain long-term growth and provide cash to
invest in operations. Our revenues grew from $7.0 million
for the three months ended March 31, 2008 to
$8.5 million for the three months ended March 31,
2009. At the same time, our losses for each of the three most
recently completed quarters were ($135,000), ($287,000) and
($56,000).
Preferred Stock Preferences:
During this
period our audit committee also considered the rights,
preferences and privileges of our preferred stock relative to
the common stock. As of March 31, 2009, our preferred stock
possessed an aggregate liquidation preference of
$38.6 million. The participation rights of our preferred
stock also provide that the preferred stock participates with
the common stock pro rata in our remaining assets. Our audit
committee did not believe at that time we were a candidate for a
liquidity event, such as an initial public offering or sale of
our company at a
37
Table of Contents
premium whereby our preferred stock would convert to common
thereby eliminating the liquidation preferences of the preferred
stock.
Results of Operations:
Our cash and cash
equivalents and short-term investments balances of
$5.4 million as of June 30, 2009 were not sufficient
to sustain long-term growth and provide cash to invest in
operations. Our revenues grew from $7.6 million for the
three months ended June 30, 2008 to $9.6 million for
the three months ended June 30, 2009. At the same time, our
losses for each of the three most recently completed quarters
were ($287,000), ($56,000) and ($135,000).
Preferred Stock Preferences:
During this
period our audit committee also considered the rights,
preferences and privileges of our preferred stock relative to
the common stock. As of June 30, 2009, our preferred stock
possessed an aggregate liquidation preference of
$38.6 million. The participation rights of our preferred
stock also provide that the preferred stock participates with
the common stock pro rata in our remaining assets. At that time,
our audit committee believed we could become a candidate for a
liquidity event, such as an initial public offering or sale of
our company at a premium whereby our preferred stock would
convert to common thereby eliminating the liquidation
preferences of the preferred stock. However, the audit committee
was unsure if there was any interest by potential underwriters
for an initial public offering or by potential acquirers of the
Company, as neither the audit committee nor the board of
directors had held any substantive discussions with potential
underwriters
38
Table of Contents
or acquirers during the preceding 12 months. If there was
interest by a potential underwriter or acquirer, the audit
committee also was unsure of when an offering or acquisition
would occur and believed any offering or acquisition could occur
well in the future.
39
Table of Contents
Year Ended December 31,
Nine Months Ended September 30,
2006
2007
2008
2008
2009
(In thousands)
(Unaudited)
$
19,859
$
25,198
$
30,697
$
22,617
$
27,765
5,219
6,379
9,208
6,584
8,742
14,640
18,819
21,489
16,033
19,023
8,098
11,636
12,543
9,538
10,005
3,190
3,546
3,640
2,779
3,226
4,199
5,458
6,716
4,992
4,672
15,487
20,640
22,899
17,309
17,903
(847
)
(1,821
)
(1,410
)
(1,276
)
1,120
(558
)
(439
)
(419
)
(322
)
(225
)
108
120
28
1
114
(450
)
(319
)
(391
)
(321
)
(111
)
(4
)
(16
)
(94
)
(12
)
(60
)
$
(1,301
)
$
(2,156
)
$
(1,895
)
$
(1,609
)
$
949
40
Table of Contents
Year Ended December 31,
Nine Months Ended September 30,
2006
2007
2008
2008
2009
(Unaudited)
100%
100%
100%
100%
100%
26
25
30
29
31
74
75
70
71
69
41
46
41
42
36
16
14
12
12
12
21
22
22
22
17
78
82
75
76
65
(4)
(7)
(5)
(6)
4
(3)
(2)
(1)
(1)
(1)
(3)
(2)
(1)
(1)
(1)
(7)%
(9)%
(6)%
(7)%
3%
41
Table of Contents
42
Table of Contents
43
Table of Contents
44
Table of Contents
Three Months Ended
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
September 30,
2007
2007
2007
2007
2008
2008
2008
2008
2009
2009
2009
(Unaudited; in thousands)
$
5,407
$
6,169
$
6,710
$
6,912
$
6,957
$
7,586
$
8,073
$
8,081
$
8,531
$
9,599
$
9,635
1,203
1,517
1,729
1,930
1,976
2,184
2,424
2,623
2,837
2,896
3,009
4,204
4,652
4,981
4,982
4,981
5,402
5,649
5,458
5,694
6,703
6,626
marketing (1)
2,359
2,889
3,130
3,258
3,172
3,255
3,111
3,006
3,075
3,391
3,539
847
883
918
898
949
954
876
862
1,044
1,058
1,123
1,198
1,426
1,434
1,400
1,639
1,669
1,685
1,724
1,652
1,519
1,500
4,404
5,198
5,482
5,556
5,760
5,878
5,672
5,592
5,771
5,968
6,162
(200
)
(546
)
(501
)
(574
)
(779
)
(476
)
(23
)
(134
)
(77
)
735
464
(145
)
(98
)
(88
)
(108
)
(112
)
(106
)
(104
)
(97
)
(89
)
(75
)
(61
)
10
31
15
64
(20
)
30
(5
)
26
121
(2
)
(7
)
(135
)
(67
)
(73
)
(44
)
(132
)
(76
)
(109
)
(71
)
32
(77
)
(68
)
14
4
1
(3
)
7
3
3
82
11
49
$
(349
)
$
(617
)
$
(575
)
$
(615
)
$
(918
)
$
(555
)
$
(135
)
$
(287
)
$
(56
)
$
658
$
347
$
62
$
68
$
(13
)
$
(13
)
$
(258
)
$
76
$
503
$
441
$
534
$
1,104
$
862
45
Table of Contents
(1)
Includes stock-based compensation
expense, as follows:
Three Months Ended
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
September 30,
2007
2007
2007
2007
2008
2008
2008
2008
2009
2009
2009
(Unaudited; in thousands)
$
0
$
0
$
$
2
$
4
$
4
$
4
$
7
$
11
$
12
$
20
2
1
15
15
14
15
15
16
15
17
42
0
0
1
1
1
1
1
1
1
1
1
1
1
1
6
17
17
17
23
20
21
16
$
3
$
2
$
17
$
24
$
36
$
37
$
37
$
47
$
47
$
51
$
79
(2)
EBITDA consists of net income
(loss) plus depreciation and amortization, interest expense and
income tax expense. Adjusted EBITDA consists of EBITDA plus our
non-cash, share-based compensation expense. We use Adjusted
EBITDA as a measure of operating performance because it assists
us in comparing performance on a consistent basis, as it removes
from our operating results the impact of our capital structure.
We believe Adjusted EBITDA is useful to an investor in
evaluating our operating performance because it is widely used
to measure a companys operating performance without regard
to items such as depreciation and amortization, which can vary
depending upon accounting methods and the book value of assets,
and to present a meaningful measure of corporate performance
exclusive of our capital structure and the method by which
assets were acquired. The following table provides a
reconciliation of net income (loss) to Adjusted EBITDA:
Three Months Ended
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
September 30,
2007
2007
2007
2007
2008
2008
2008
2008
2009
2009
2009
(Unaudited; in thousands)
$
(349
)
$
(617
)
$
(575
)
$
(615)
$
(918
)
$
(555
)
$
(135
)
$
(287
)
$
(56
)
$
658
$
347
249
581
456
472
505
485
494
502
442
321
326
145
98
88
109
112
106
104
97
89
75
61
14
4
1
(3)
7
3
3
82
11
49
59
66
(30
)
(37)
(294
)
39
466
394
486
1,054
783
3
2
17
24
36
37
37
47
48
50
79
$
62
$
68
$
(13
)
$
(13)
$
(258
)
$
76
$
503
$
441
$
534
$
1,104
$
862
46
Table of Contents
Three Months Ended
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
September 30,
2007
2007
2007
2007
2008
2008
2008
2008
2009
2009
2009
(Unaudited)
100
%
100
%
100
%
100
%
100
%
100
%
100
%
100
%
100
%
100
%
100
%
22
25
26
28
28
29
30
32
33
30
31
78
75
74
72
72
71
70
68
67
70
69
44
47
47
47
46
43
39
37
36
35
37
16
14
14
13
14
13
11
11
12
11
12
22
23
21
20
24
22
21
21
19
16
16
81
84
82
80
83
77
70
69
68
62
64
(4
)
(9
)
(7
)
(8
)
(11
)
(6
)
(2
)
(1
)
8
5
(2
)
(2
)
(1
)
(2
)
(2
)
(1
)
(1
)
(1
)
(1
)
(1
)
(1
)
1
1
1
(3
)
(1
)
(1
)
1
(2
)
(1
)
(1
)
(1
)
(1
)
(1
)
1
1
(6
)%
(10
)%
(9
)%
(9
)%
(13
)%
(7
)%
(2
)%
(4
)%
(1
)%
7
%
4
%
47
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48
Table of Contents
49
Table of Contents
Payments Due by Period
Less Than
More Than
Total
1 Year
1-3 Years
3-5 Years
5 Years
(In thousands)
$
2,159
$
1,427
$
723
$
9
$
994
441
553
3,021
771
1,577
673
4,096
$
10,270
$
2,639
$
2,853
$
682
$
(1)
Consists of equipment loans from BlueCrest Venture Finance
Master Fund Limited.
(2)
Consists of the long-term portion of deferred revenues and
deferred tax liability.
50
Table of Contents
ASU
No. 2009-13,
Revenue Recognition (ASC Topic 605), Multiple-Deliverable
Revenue Arrangements, a consensus of the FASB Emerging Issues
Task Force
; and
ASU
No. 2009-14,
Software (ASC Topic 985), Certain Revenue Arrangements That
Include Software Elements, a consensus of the FASB Emerging
Issues Task Force
.
51
Table of Contents
52
Table of Contents
53
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54
Table of Contents
Increasing Retailer Service and Performance Demands.
Within the supply chain ecosystem, retailers hold a significant
strategic position relative to their trading partners,
particularly small- and medium-sized suppliers. Retailers
maintain the direct relationship with the consumer and collect
the retail price, within which the cost of manufacture and
distribution must be covered. Given this power dynamic,
retailers continuously demand enhanced levels of performance
from suppliers, including more frequent on-time delivery of
goods, increased availability of goods to manage inventory and
lower prices. We believe the recent economic downturn has
exacerbated these trends.
Globalization of the Supply Chain Ecosystem.
Globalization creates the need for participants in the supply
chain ecosystem to connect across time zones with different
languages and regulatory environments. Retailers typically
demand a
10-day
turnaround upon submitting a purchase order. However, growing
physical distances between the sources of materials,
manufacturers and retailers, as well as the complexities of
connecting with trading partners worldwide, increase the time a
supplier typically needs to obtain goods to 60 days from
receipt of a purchase order. This increased time pressure to
deliver goods requires that the various trading partners in the
supply chain communicate more efficiently than current solutions
typically offer.
Increasing Complexity of the Supply Chain Ecosystem.
Increasing cost pressures force many suppliers, especially those
of a small and medium size, to focus on product development and
business management. This specialization drives organizations to
outsource non-core business functions, including fabrication,
distribution and transportation. Outsourcing these functions
increases the number of participants in the supply chain
ecosystem. The increasing complexity from these additional
participants drives demand for a more integrated approach
allowing suppliers to communicate and track a larger volume of
information among a larger number of trading partners than
traditional solutions have supported.
Increasing Use of Outsourcing by Small- and Medium-Sized
Suppliers
. The outsourcing of non-core business functions,
including by small- and medium-sized suppliers, has helped
participants in the supply chain ecosystem become more
comfortable utilizing outsourced service providers, including
for information technology services. Limited internal expertise
and constrained budgets also drive the need for suppliers to
rely on third-party service providers to manage the complexity
of their supply chain at an affordable cost.
55
Table of Contents
56
Table of Contents
More reliable and faster integration with retailers by
leveraging our expertise to comply with retailers rule
book requirements;
Reduced costs through improved efficiency and accuracy in the
order fulfillment process through on-demand communications with
trading partners around the world, reduced manual data entry and
access to support services such as our translation application;
Reduced deployment risk, simplified ongoing operations and lower
maintenance costs, each of which results from the ability of
SPSCommerce.net to provide a supplier with connectivity to its
trading partners without a significant upfront investment in
specialized software or ongoing investments in personnel to
maintain the software; and
Increased sales from enhanced supply chain visibility into
retailers inventory and
point-of-sale
information, which reduces
out-of-stock
situations and improves the effectiveness of promotional
activities.
Reduced expenses through automation of the receipt of goods at
distribution centers, more effective reconciliation of
shipments, orders and payments, and reduced manual effort and
data entry;
Improved reliability of suppliers who are more likely to comply
with rule book requirements by leveraging our expertise
integrating trading partners;
Decreased cost and enhanced quality of inventory by more
efficiently tracking sales and inventory information and
communicating with suppliers; and
Growth of revenue by reducing the risk of failing to keep
products in stock and the associated reputational impact with
consumers.
Trading Partner Integration.
Our Trading Partner
Integration solution replaces or augments an organizations
existing trading partner electronic communication
infrastructure, enabling suppliers to comply with
retailers rule books and allowing for the electronic
exchange of information among numerous trading partners through
various protocols.
Trading Partner Enablement.
Our Trading Partner
Enablement solution helps organizations, typically large
retailers, implement new integrations with trading partners to
drive automation and electronic communication across their
supply chains.
57
Table of Contents
Trading Partner Intelligence.
In 2009, we introduced our
Trading Partner Intelligence solution, which consists of six
data analytics applications and allows our supplier customers to
improve their visibility across, and analysis of, their supply
chains. Retailers improve their visibility into supplier
performance and their understanding of product sell-through.
Other Trading Partner Solutions.
We provide a number of
peripheral solutions such as barcode labeling and our scan and
pack application, which helps trading partners process
information to streamline the picking and packaging process.
Retailer Sales.
We employ a team of sales professionals
who focus on selling our Trading Partner Enablement solution to
retailers, grocers and distributors. These sales professionals
seek to establish relationships with executive managers at
existing and new retailers, through whom we generate supplier
sales leads. In addition to supplier sales leads, a portion of
these retailers purchase our solutions as well, resulting in
increased revenue generation.
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Supplier Sales.
We employ a team of supplier sales
representatives based in North America. We also maintain an
office in China with sales representatives. These sales
professionals primarily work over the phone to convert sales
leads into customers and then actively sell additional solutions
to those customers over time.
Business Development Efforts.
Our business development
organization focuses on indirect sales channels. This group
establishes relationships with resellers, system integrators,
software providers and other partners. In the future, we expect
to forge additional indirect channel partnerships to continue to
grow this part of our business.
Further Penetrate Our Current Market.
We believe the
global supply chain management market is under-penetrated and,
as the supply chain ecosystem becomes more complex and
geographically dispersed, the demand for supply chain management
solutions will increase, especially among small- and
medium-sized businesses. We intend to continue leveraging our
relationships with customers and their trading partners to
obtain new sales leads. We believe our leadership in providing
supply chain management solutions favorably positions us to
convert these sales leads into customers.
Increase Revenues from Our Customer Base.
We believe our
overall customer satisfaction is strong and will lead our
customers to further utilize our current solutions as their
businesses grow, generating additional revenues for us. We also
expect to introduce new solutions to sell to our customers. We
believe our position as the incumbent supply chain management
solution provider to our customers, our integration into our
recurring revenue customers business systems and the
modular nature of our platform are conducive to deploying
additional solutions with customers.
Expand Our Distribution Channels.
We intend to grow our
business by expanding our network of direct sales
representatives to gain new customers. We also believe there are
valuable opportunities to promote and sell our solutions through
collaboration with other providers. For example, we currently
provide tracking, visibility and data analysis applications to a
leading global logistics provider. We believe there are
opportunities for us to leverage our relationship with this
company to identify sales leads that will continue to lead to
new customers. We integrated our applications with
NetSuites business software, which is another relationship
we expect will continue to provide us new sales leads.
Expand Our International Presence.
We believe our
presence in China represents a significant competitive
advantage. We plan to increase our international sales efforts
to obtain new supplier customers around the world. We also
intend to leverage our current international presence to
increase the number of integrations we have with retailers in
foreign markets to make our platform more valuable to suppliers
based overseas.
Enhance and Expand Our Platform.
We intend to further
improve and develop the functionality and features of our
platform, including developing new solutions and applications.
For example, in 2009, we launched our Trading Partner
Intelligence solution, which delivers data analytics
applications to suppliers and retailers to improve performance.
We also introduced a scan and pack application in 2009 that
helps trading partners process information to streamline the
picking and packaging process.
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Selectively Pursue Strategic Acquisitions.
The fragmented
nature of our market provides opportunity for selective
acquisitions. To complement and accelerate our internal growth,
we may pursue acquisitions of other supply chain management
companies to add customers. We also may pursue acquisitions that
allow us to expand into regions or industries where we do not
have a significant presence or to offer new functionalities we
do not currently provide. We plan to evaluate potential
acquisitions of other supply chain management companies
primarily based on the number of customers the acquisition would
provide relative to the purchase price. We plan to evaluate
potential acquisitions to expand into new regions or industries
or offer additional functionalities primarily based on the
anticipated growth the acquisition would provide, the purchase
price and our ability to integrate and operate the acquired
business. We are not currently in negotiations for any
acquisitions.
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breadth of pre-built connections to retailers, third-party
logistics providers and other trading partners;
history of establishing and maintaining reliable integration
connections with trading partners;
reputation of the Software-as-a-Service vendor in the supply
chain management industry;
price;
specialization in a customer market segment;
speed and quality with which the Software-as-a-Service vendor
can integrate its customers to their trading partners;
functionality of the Software-as-a-Service solution, such as the
ability to integrate the solution with a customers
business systems;
breadth of complementary supply chain management solutions the
Software-as-a-Service vendor offers; and
training and customer support services provided during and after
a customers initial integration.
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47
Chief Executive Officer, President and Director
42
Executive Vice President and Chief Financial Officer
45
Executive Vice President and Chief Strategy Officer
50
Executive Vice President of Operations
41
Executive Vice President of Business Development
38
Chairman of the Board of Directors
43
Director
52
Director
46
Director
58
Director
48
Director
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Nominating and Governance
Audit Committee
Committee
Compensation Committee
Steve A. Cobb, Chairperson
George H. Spencer, III, Chairperson
Sven A. Wehrwein
Michael B. Gorman
Martin J. Leestma
evaluate the qualifications, performance and independence of our
independent auditor and review and approve both audit and
nonaudit services to be provided by the independent auditor;
discuss with management and our independent auditors any major
issues as to the adequacy of our internal controls, any actions
to be taken in light of significant or material control
deficiencies and the adequacy of disclosures about changes in
internal control over financial reporting;
establish procedures for the receipt, retention and treatment of
complaints regarding accounting, internal accounting controls or
auditing matters, including the confidential, anonymous
submission by employees of concerns regarding accounting or
auditing matters; and
prepare the audit committee report that SEC rules require to be
included in our annual proxy statement and annual report on
Form 10-K.
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Option Awards (1)
Total
($)
($)
7,110
7,110
(1)
Reflects the incremental fair value related to an amendment to
the terms of an option to purchase 75,000 shares of common
stock held by Mr. Wehrwein. The amendment decreased the
options exercise price from $1.26 per share to
$0.81 per share, which was the fair market value of our
common stock on the date of the amendment. The incremental fair
value related to the amendment is calculated as of the date of
the amendment in accordance with ASC 718 (excluding
estimates of forfeitures) and is determined based on the
assumptions in Note H to our financial statements in this
prospectus. None of our directors held any unvested options at
December 31, 2009, except for Mr. Wehrwein, who held
26,563 unvested options and Mr. Leestma who held 4,688
unvested options.
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Non-Equity
Option
Incentive Plan
All Other
Salary
Bonus
Awards
Compensation
Compensation
Total
Year
($)
($)
($)
($)
($)(1)
($)
2009
276,000
29,728
100,579
2,827
409,134
2009
215,000
23,625
22,550
(2)
79,931
3,110
344,216
2009
215,000
24,800
28,431
(2)
83,908
3,123
355,262
2009
184,000
15,000
113,790
(3)
50,750
363,540
2009
215,000
23,625
79,931
1,745
320,301
(1)
Represents matching 401(k) contributions.
(2)
Reflects the incremental fair value related to an amendment to
the terms of an option granted to the named executive officer
prior to 2009. See Compensation Discussion and
Analysis Equity Awards. The incremental fair
value is calculated as of the date of the amendment in
accordance with ASC 718 (excluding estimates of
forfeitures) and is determined based on the assumptions in
Note H to the financial statements in this prospectus.
(3)
Represents the grant date fair value of an award granted to
Mr. Gray on February 10, 2009 computed in accordance
with ASC 718 (excluding estimates of forfeitures) and the
incremental fair value related to an amendment to that award on
April 1, 2009, in each case based on the assumptions in
Note H to the financial statements in this prospectus.
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All Other
Option
Awards:
Number
Exercise or
Grant Date
Securities
Base Price
Fair Value
Estimated Future Payouts Under Non-Equity Incentive Plans
Underlying
of Option
of Stock
Threshold
Target
Maximum
Options
Awards
and Option
($)
($)
($)
(#)
($/Sh)
Awards
January 30, 2009
38,151
99,093
130,307
January 30, 2009
30,319
78,750
103,556
July 23, 2009
500,000
(1)
0.81
22,500
January 30, 2009
31,827
82,668
108,709
July 23, 2009
140,364
(1)
0.81
28,431
January 30, 2009
19,250
50,000
65,750
February 10, 2009
300,000
(2)
0.92
103,620
April 1, 2009
300,000
(2)
0.65
10,170
January 30, 2009
30,319
78,750
103,556
(1)
Represents amendments to the per share exercise price of stock
options granted to the named executive officer prior to 2009.
See Compensation Discussion and Analysis.
(2)
The April 1, 2009 grant to Mr. Gray represents an
amendment to the per share exercise price of stock options
granted to him on February 10, 2009. See
Compensation Discussion and Analysis.
Number of
Number of
Securities
Securities
Underlying
Underlying
Unexercised
Unexercised
Option
Options (#)
Options (#)
Exercise
Exercisable (1)
Unexercisable (1)
Price ($)(1)
137,500
0.10
October 5, 2011(2)
15,102
0.10
June 30, 2012(3)
364,760
0.10
November 12, 2013(4)
162,500
0.10
June 30, 2014(5)
169,000
0.10
December 31, 2014(6)
404,938
36,832
0.10
March 31, 2016(7)
250,000
250,000
$
0.81
November 27, 2017(8)
3,000
0.55
July 5, 2010(9)
125,000
$
0.81
October 5, 2011(10)
15,364
$
0.81
June 30, 2012(3)
530,000
0.10
August 17, 2013(11)
125,000
0.10
June 30, 2014(12)
22,890
2,110
0.10
March 31, 2016(13)
300,000
0.65
March 31, 2019(14)
302,802
197,198
0.78
June 30, 2017(15)
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(1)
Does not reflect the effect of the for
reverse split of our common stock that will occur immediately
prior to consummation of this offering.
(2)
This option vested as to one-fourth of the shares on
May 26, 2002, with the remaining shares vesting in 36 equal
monthly installments thereafter beginning June 26, 2002 and
continuing to and including May 26, 2005.
(3)
This option vested in full on July 25, 2002.
(4)
This option vested as to 113,988 shares on August 18,
2003, with the remaining shares vesting in equal monthly
installments of 7,599 shares thereafter beginning
September 1, 2003.
(5)
This option vested as to 88,030 shares on July 1,
2004, with the remaining shares vesting in equal monthly
installments of 3,385 shares thereafter beginning
August 1, 2004.
(6)
This option vested as to 93,730 shares on December 24,
2005, with the remaining shares vesting in equal monthly
installments of 8,521 shares thereafter beginning
January 1, 2006 for each additional month of service.
(7)
This option vested as to 110,442 shares on April 1,
2007, with the remaining shares vesting in equal monthly
installments of 9,203 shares thereafter beginning
May 1, 2007 for each additional month of service.
(8)
This option vested as to one-fourth of the shares on
December 1, 2008, with the remaining shares vesting in 36
equal monthly installments on the first day of each month
thereafter beginning January 1, 2009 for each additional
month of service.
(9)
This option vested as to one-fourth of the shares on each of
July 5, 2000, July 5, 2001, July 5, 2002 and
July 5, 2003.
(10)
This option vested as to one-fourth of the shares on
May 26, 2002, with the remaining shares vesting in 36 equal
monthly installments thereafter beginning June 26, 2002.
(11)
This option vested as to 165,625 shares on August 18,
2003, with the remaining shares vesting in equal installments of
11,042 shares on the first day of each month thereafter
beginning September 1, 2003.
(12)
This option vested as to 67,712 shares on July 1,
2004, with the remaining shares vesting in equal monthly
installments of 2,604 shares thereafter beginning
August 1, 2004.
(13)
This option vested as to 6,250 shares on April 1,
2007, with the remaining shares vesting in equal monthly
installments of 520 shares on the first day of each month
thereafter beginning May 1, 2007 for each additional month
of service.
(14)
This option vests as to one-fourth of the shares on
January 1, 2010, with the remaining shares vesting in
36 equal monthly installments on the first day of each
month thereafter beginning February 1, 2010 for each
additional month of service.
(15)
This option vested as to 125,000 shares on July 1,
2008, with the remaining shares vesting in 36 equal monthly
installments on the first day of each month thereafter beginning
August 1, 2008 for each additional month of service.
Option Awards
Number of Shares
Value Realized
Acquired on Exercise (#)
on Exercise ($)
25,000
22,250(1
)
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(1)
The value realized on exercise represents (1) the
difference between (a) the value of our common stock (as
most recently determined by our audit committee prior to
exercise) and (b) the per share exercise price
(2) multiplied by the number of shares acquired on exercise.
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Salary, Bonus &
Health
Vesting of Unvested
Unused Vacation
Benefits(1)
Stock Options
$
302,538
$
6,212
$
6,212
$
45,600
$
16,390
$
45,600
$
32,780
(1)
The amounts for health benefits were calculated by multiplying
our standard monthly rates for family health and dental benefits
by 12.
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Vesting of Unvested
Salary
Stock Options
$
107,500
$
215,000
22,500
45,000
Vesting of Unvested
Salary & Bonus
Stock Options
$
107,500
$
215,000
$
46,000
$
939
$
46,000
$
1,878
Vesting of Unvested
Salary
Stock Options
$
92,000
$
184,000
51,000
102,000
Vesting of Unvested
Salary
Stock Options
$
107,500
$
215,000
$
20,706
$
41,412
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Stock Options.
Stock options permit the holder to
purchase a specified number of shares of our common stock at a
set price. Options granted under the plan may be either
incentive or nonqualified stock options. The exercise price of
options granted under the plan generally may not be less than
the fair market value of our common stock on the date of grant.
Incentive stock options granted to employees who hold more than
10% of the total combined voting power of our stock will have an
exercise price not less than 110% of the fair market value of
our common stock on the date of grant and will have a maximum
term of five years. The plan administrator will determine the
terms and conditions of options granted under the plan,
including exercise price and vesting and exercisability terms.
The maximum number of shares subject to stock options that may
be granted during a calendar year to a participant may not
exceed .
SARs.
SARs provide for payment to the holder of all or a
portion of the excess of the fair market value of a specified
number of shares of our common stock on the date of exercise
over a specified exercise price. Payment may be made in cash or
shares of our common stock or a combination of both, as
determined by the plan administrator. The administrator will
establish the terms and conditions of exercise, including the
exercise price, of SARs granted under the plan. The maximum
number of shares subject to SARs that may be granted during a
calendar year to a participant may not
exceed .
Restricted Stock.
Restricted stock awards are awards of
shares of our common stock that are subject to restrictions
determined by the plan administrator, which may include vesting
conditions, forfeiture
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conditions and other restrictions. The administrator will
determine whether any consideration other than services to our
company must be paid for a restricted stock award. The maximum
number of shares of restricted stock that may be granted during
a calendar year to a participant may not
exceed .
Stock Units.
Stock units provide the holder with the
right to receive, in cash or shares of our common stock or a
combination of both, the fair market value of a share of our
common stock and will be subject to such vesting and forfeiture
conditions and other restrictions as the plan administrator
determines. Stock unit awards may, at the discretion of the plan
administrator, provide the holder with the right to receive
dividend equivalent payments with respect to the shares subject
to the award. The administrator will determine whether any
consideration other than services to our company must be paid
for a stock unit award. The maximum number of stock units that
may be granted during a calendar year to a participant may not
exceed .
Other.
The plan administrator, in its discretion, may
grant other stock-based awards under the plan. The administrator
will set the terms and conditions of such awards.
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BVCF IV, L.P., an affiliated fund of George H.
Spencer, III, purchased 494,570 shares
River Cities SBIC III L.P., an affiliated fund of Murray R.
Wilson, purchased 1,435,928 shares
St. Paul Venture Capital VI, LLC, an affiliated fund of Michael
B. Gorman, purchased 463,767 shares
BVCF IV, L.P., an affiliated fund of George H.
Spencer, III, purchased 250,000 shares
CID Mezzanine Capital, L.P., an affiliated fund of Steve A.
Cobb, purchased 901,745 shares
River Cities SBIC III L.P. and River Cities Capital Fund II
L.P., affiliated funds of Murray R. Wilson, purchased an
aggregate of 2,348,438 shares
St. Paul Venture Capital VI, LLC, an affiliated fund of Michael
B. Gorman, purchased 468,750 shares
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Beneficial Ownership
Prior to Offering
Beneficial Ownership After this Offering
Percent
Percent
Number
(assuming no
(assuming full
of Shares
exercise of
exercise of
Number
Percent
Offered
Number
over-allotment)
over-allotment)
(1
)
%
%
%
(2
)
%
%
%
(3
)
%
%
%
(4
)
%
%
%
(5
)
%
%
%
(6
)
%
%
%
(7
)
%
%
%
(8
)
%
%
%
(9
)
%
%
%
(10
)
%
%
%
(11
)
%
%
%
%
%
%
(9
)
%
%
%
(2
)
%
%
%
(11
)
%
%
%
(5
)
%
%
%
*
Indicates ownership of less than 1%.
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(1)
Includes shares
owned by the Archie C. and Jane McDonald Black Charitable Trust
(the Charitable Trust) for which Mr. Black serves as
a co-trustee
and shares
subject to options that are exercisable within 60 days of
the date of the table. Mr. Black may be deemed to have shared
voting and investment power over the shares held by the
Charitable Trust, but disclaims beneficial ownership of such
shares.
(2)
Includes shares
owned by CID Equity Fund V Liquidating Trust (the CID
Trust)
and shares
owned by CID Mezzanine Capital, LP (CID Mezzanine
Capital). Mr. Cobb is a representative to an advisory
board that controls the voting and disposition of the shares
held by the CID Trust and CID Mezzanine Capital. Mr. Cobb
may be deemed to have shared voting and investment power over
the shares held by the CID Trust and CID Mezzanine Capital.
Mr. Cobb disclaims beneficial ownership of such shares,
except to the extent of his pecuniary interest therein. The
address of the CID Trust and CID Mezzanine Capital is
201 W. 103rd Street, Suite 200, Indianapolis, IN
46290.
(3)
Includes shares
subject to options that are exercisable within 60 days of
the date of the table.
(4)
Includes shares
subject to options that are exercisable within 60 days of
the date of the table.
(5)
Includes shares
held by SPVC IV,
LLC, shares
held by SPVC V,
LLC, shares
held by SPVC VI, LLC
and shares
held by SPVC Affiliates Fund I, LLC. Split Rock Partners,
LLC, together with Vesbridge Partners, LLC, is the manager of
SPVC IV, LLC, SPVC V, LLC, SPVC VI, LLC and SPVC Affiliates
Fund I, LLC, however voting and investment power are
delegated solely to Split Rock Partners, LLC. Michael Gorman,
James Simons, David Stassen and Allan Will, as managing
directors of Split Rock Partners, LLC, share voting and
investment power with respect to the shares. Voting and
investment power over shares held by each of the named funds
above may be deemed to be shared with each of the managing
directors and Split Rock Partners, LLC due to the affiliate
relationships described above. Each of the managing directors
and Split Rock Partners, LLC disclaims any beneficial ownership
of the shares, except to the extent of any pecuniary interest
therein. The address for each of these SPVC funds is 10400
Viking Drive, Suite 550, Minneapolis, MN 55344.
(6)
Includes shares
subject to options that are exercisable within 60 days of
the date of the table.
(7)
Includes shares
subject to options that are exercisable within 60 days of
the date of the table.
(8)
Includes shares
subject to options that are exercisable within 60 days of
the date of the table.
(9)
Includes shares
held by BVCF IV, LP. Mr. Spencer is a partner in
BVCF IV, LP and may be deemed to have shared voting and
investment power over the shares held by BVCF IV, LP.
Mr. Spencer disclaims beneficial ownership of such shares,
except to the extent of his pecuniary interest therein. The
address for BVCF IV, LP is One N. Wacker Drive, Chicago, IL
60606.
(10)
Includes shares
subject to options that are exercisable within 60 days of
the date of the table.
(11)
Includes shares
owned by River Cities Capital Fund II Limited
Partnership
and shares
owned by River Cities SBIC III, L.P. Mr. Wilson is a
managing director of the general partner of River Cities Capital
Fund II Limited Partnership and River Cities SBIC III, L.P.
Mr. Wilson may be deemed to have shared voting and
investment power over the shares held by River Cities Capital
Fund II Limited Partnership and River Cities SBIC III, L.P.
Mr. Wilson disclaims beneficial ownership of such shares,
except to the extent of his pecuniary interest therein. The
address for each of these River Cities funds is 221 East Fourth
Street, Suite 2400, Cincinnati, OH 45202.
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the number of shares;
the designations, preferences and relative rights, including
voting rights, dividend rights, conversion rights, redemption
privileges and liquidation preferences; and
any qualifications, limitations or restrictions.
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prior to the date of the transaction, the board of directors of
the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an
interested stockholder;
the interested stockholder owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of
shares outstanding (a) shares owned by persons who are
directors and also officers and (b) shares owned by
employee stock plans in which employee participants do not have
the right to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange
offer; or
on or subsequent to the date of the transaction, the business
combination is approved by the board of directors and authorized
at an annual or special meeting of stockholders, and not by
written consent, by the affirmative vote of at least two-thirds
of the outstanding voting stock which is not owned by the
interested stockholder.
any merger or consolidation involving the corporation and the
interested stockholder;
any sale, transfer, pledge or other disposition involving the
interested stockholder of 10% or more of the assets of the
corporation;
subject to exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder; and
the receipt by the interested stockholder of the benefit of any
loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation.
permit our board of directors to issue up
to shares
of preferred stock, with any rights, preferences and privileges
as they may designate, including the right to approve an
acquisition or other change in our control;
provide that the authorized number of directors may be changed
by resolution of the board of directors;
provide that all vacancies, including newly created
directorships, may, except as otherwise required by law, be
filled by the affirmative vote of a majority of directors then
in office, even if less than a quorum;
provide that stockholders seeking to present proposals before a
meeting of stockholders or to nominate candidates for election
as directors at a meeting of stockholders must provide notice in
writing in a timely manner, and also specify requirements as to
the form and content of a stockholders notice; and
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do not provide for cumulative voting rights (therefore allowing
the holders of a majority of the shares of common stock entitled
to vote in any election of directors to elect all of the
directors standing for election, if they should so choose).
breach of their duty of loyalty to us or our stockholders;
act or omission not in good faith or that involves intentional
misconduct or a knowing violation of law;
unlawful payment of dividends or redemption of shares as
provided in Section 174 of the Delaware General Corporation
Law; or
transaction from which the directors derived an improper
personal benefit.
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1% of the number of shares of our common stock then
outstanding; or
the average weekly trading volume of our common stock on the
Nasdaq Capital Market during the four calendar weeks preceding
the filing of a notice on Form 144 with respect to the sale.
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FOR
NON-U.S.
HOLDERS OF OUR COMMON STOCK
an individual who is a citizen or a resident of the United
States;
a corporation or other entity taxable as a corporation for
U.S. federal income tax purposes that was created or
organized in or under the laws of the United States, any state
thereof or the District of Columbia;
an estate whose income is subject to U.S. federal income
taxation regardless of its source;
a trust (a) if a U.S. court is able to exercise
primary supervision over the trusts administration and one
or more U.S. persons have the authority to control all of
the trusts substantial decisions or (b) that has a
valid election in effect under applicable U.S. Treasury
regulations to be treated as a U.S. person; or
an entity that is disregarded as separate from its owner if all
of its interests are owned by a single person described above.
insurance companies and financial institutions;
tax-exempt organizations;
controlled foreign corporations and passive foreign investment
companies;
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partnerships or other pass-through entities;
regulated investment companies or real estate investment trusts;
pension plans;
persons who received our common stock as compensation;
brokers and dealers in securities;
owners that hold our common stock as part of a straddle, hedge,
conversion transaction, synthetic security or other integrated
investment; and
former citizens or residents of the United States subject to tax
as expatriates.
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the gain is effectively connected with a U.S. trade or
business (and, if an applicable income tax treaty so provides,
is also attributable to a permanent establishment or a fixed
base maintained within the United States by the
non-U.S. holder),
in which case the gain will be taxed on a net income basis
generally in the same manner as if the
non-U.S. holder
were a U.S. person, and, if the
non-U.S. holder
is a corporation, the additional branch profits tax described
above in Distributions on Our Common Stock may also
apply;
the
non-U.S. holder
is an individual who is present in the United States for
183 days or more in the taxable year of the disposition and
certain other conditions are met, in which case the
non-U.S. holder
will be subject to a 30% tax on the net gain derived from the
disposition, which may be offset by
U.S.-source
capital losses of the
non-U.S. holder,
if any; or
we are, or have been at any time during the five-year period
preceding such disposition (or the
non-U.S. holders
holding period, if shorter), a United States real property
holding corporation.
93
Table of Contents
Number of Shares
the valuation multiples of publicly-traded companies that the
representatives of the underwriters believe are comparable to us;
our financial information;
our history and prospects and the outlook for our industry;
an assessment of our management, our past and present
operations, and the prospects for, and timing of, our future
revenues; and
the above factors in relation to market values and various
valuation measures of other companies engaged in activities
similar to ours.
94
Table of Contents
Total
Without
Without
Per Share
Over-Allotment
Over-Allotment
$
$
$
95
Table of Contents
96
Table of Contents
97
Table of Contents
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-24
F-1
Table of Contents
F-2
Table of Contents
BALANCE SHEETS
(In thousands, except share amounts)
F-3
Table of Contents
STATEMENTS OF OPERATIONS
(In thousands, except per share
amounts)
For the Year Ended
For the Nine Months Ended
December 31,
September 30,
2006
2007
2008
2008
2009
(Unaudited)
$
19,859
$
25,198
$
30,697
$
22,617
$
27,765
5,219
6,379
9,208
6,584
8,742
14,640
18,819
21,489
16,033
19,023
8,098
11,636
12,543
9,538
10,005
3,190
3,546
3,640
2,779
3,226
4,199
5,458
6,716
4,992
4,672
15,487
20,640
22,899
17,309
17,903
(847
)
(1,821
)
(1,410
)
(1,276
)
1,120
(558
)
(439
)
(419
)
(322
)
(225
)
108
120
28
1
114
(450
)
(319
)
(391
)
(321
)
(111
)
(4
)
(16
)
(94
)
(12
)
(60
)
$
(1,301
)
$
(2,156
)
$
(1,895
)
$
(1,609
)
$
949
$
(2.93
)
$
(3.12
)
$
(1.72
)
$
(1.53
)
$
0.79
$
(2.93
)
$
(3.12
)
$
(1.72
)
$
(1.53
)
$
0.03
444
692
1,101
1,053
1,237
444
692
1,101
1,053
36,850
$
(0.06
)
$
0.03
$
(0.06
)
$
0.03
31,681
31,818
31,681
36,850
F-4
Table of Contents
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS DEFICIT
(In thousands, except share amounts)
Stockholders Deficit
Redeemable Convertible Preferred Stock
Additional
Total
Series A
Series B
Series C
Common Stock
Paid-in
Accumulated
Stockholders
Shares
Amount
Shares
Amount
Shares
Amount
Total
Shares
Amount
Capital
Deficit
Deficit
4,322,708
$
37,676
19,015,966
$
18,396
$
$
56,072
385,897
$
$
4,704
$
(61,462
)
$
(56,758
)
2,554,278
2,448
2,448
6
6
71,975
7
7
(1,301
)
(1,301
)
4,322,708
37,676
21,570,244
20,844
58,520
457,872
4,717
(62,763
)
(58,046
)
4,687,500
7,444
7,444
46
46
466,642
1
44
45
(2,156
)
(2,156
)
4,322,708
37,676
21,570,244
20,844
4,687,500
7,444
65,964
924,514
1
4,807
(64,919
)
(60,111
)
157
157
8,360
307,684
5
5
(1,895
)
(1,895
)
4,322,708
37,676
21,570,244
20,844
4,687,500
7,444
65,964
1,240,558
1
4,969
(66,814
)
(61,844
)
177
177
33,580
3
3
(3,442
)
(3
)
(3
)
949
949
4,322,708
$
37,676
21,570,244
$
20,844
4,687,500
$
7,444
$
65,964
1,270,696
$
1
$
5,146
$
(65,865
)
$
(60,718
)
F-5
Table of Contents
STATEMENTS OF CASH FLOWS
(In thousands)
For the Year Ended
For the Nine Months Ended
December 31,
September 30,
2006
2007
2008
2008
2009
(Unaudited)
$
(1,301
)
$
(2,156
)
$
(1,895
)
$
(1,609
)
$
949
1,457
1,729
1,963
1,463
1,082
195
151
396
237
319
24
29
25
20
8
6
46
157
110
177
(85
)
68
45
49
(95
)
52
57
33
26
16
(1,176
)
(800
)
(811
)
(628
)
(574
)
(52
)
54
232
(2
)
(12
)
(101
)
(6
)
(8
)
(5
)
(6
)
(695
)
(2,885
)
(1,659
)
(1,517
)
(128
)
(59
)
520
(319
)
49
133
(101
)
(4
)
(16
)
(31
)
1,459
1,849
1,526
1,202
837
82
21
367
658
(510
)
(284
)
1,318
45
(65
)
27
53
(84
)
111
49
(87
)
(157
)
172
247
(803
)
(807
)
(1,009
)
4,102
(1,029
)
(1,123
)
(884
)
(663
)
(506
)
(3,679
)
1,263
220
(1,263
)
(4,708
)
(2,386
)
379
(443
)
(506
)
8,000
3,125
10,425
6,650
12,025
(7,900
)
(2,875
)
(10,125
)
(6,400
)
(12,025
)
1,181
756
855
580
(574
)
(432
)
(721
)
(511
)
(580
)
2,000
(129
)
(553
)
(621
)
(459
)
(515
)
7
45
5
5
(238
)
(117
)
(529
)
(508
)
(420
)
2,447
6,152
4,794
6,101
(711
)
(643
)
(1,515
)
333
2,912
(1,139
)
(2,095
)
2,081
1,609
1,942
4,854
4,854
3,715
$
1,942
$
4,854
$
3,715
$
2,759
$
5,796
$
477
$
512
$
374
$
122
$
78
$
72
$
1,407
$
166
$
166
$
$
$
1,292
$
$
$
F-6
Table of Contents
F-7
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
2 5 years
5 7 years
2 7 years
F-8
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
F-9
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
Nine Months Ended
Year Ended December 31,
September 30,
2006
2007
2008
2008
2009
(Unaudited)
$
(1,301
)
$
(2,156
)
$
(1,895
)
$
(1,609
)
$
949
444
692
1,101
1,053
1,237
$
(2.93
)
$
(3.12
)
$
(1.72
)
$
(1.53
)
$
0.79
444
692
1,101
1,053
36,850
$
(2.93
)
$
(3.12
)
$
(1.72
)
$
(1.53
)
$
0.03
Nine Months Ended
Year Ended December 31,
September 30,
2006
2007
2008
2008
2009
(Unaudited)
4,095
4,646
4,448
4,443
71
25,893
30,580
30,580
30,580
474
356
256
256
F-10
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
F-11
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
December 31,
2007
2008
September 30, 2009
Carrying
Accumulated
Carrying
Accumulated
Carrying
Accumulated
Amount
Amortization
Net
Amount
Amortization
Net
Amount
Amortization
Net
(Unaudited)
$
1,930
$
1,179
$
751
$
1,930
$
1,822
$
108
$
1,930
$
1,930
$
580
97
483
580
242
338
580
290
290
$
2,510
$
1,276
$
1,234
$
2,510
$
2,064
$
446
$
2,510
$
2,064
$
290
Level 1 quoted prices in active markets for
identical assets and liabilities.
Level 2 observable inputs other than quoted
prices in active markets for identical assets and liabilities.
Level 3 unobservable inputs in which there is
little or no market data available, which require the reporting
entity to develop its own assumptions.
F-12
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
Fair Value Measurements
Total
Level 1
Level 2
Level 3
$
3,715
$
3,715
$
$
188
188
$
3,903
$
3,715
$
$
188
$
143
45
188
(95
)
93
F-13
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
ASU
No. 2009-13,
Revenue Recognition (ASC Topic 605),
Multiple-Deliverable
Revenue Arrangements, a consensus of the FASB Emerging Issues
Task Force
; and
ASU
No. 2009-14,
Software (ASC Topic 985),
Certain Revenue Arrangements That
Include Software Elements, a consensus of the FASB Emerging
Issues Task Force
.
NOTE B
ACQUISITION
OF OWENS DIRECT
F-14
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
$
30
580
1,930
1,139
$
3,679
NOTE C
DEBT
ISSUE COSTS
December 31,
September 30,
2007
2008
2009
(Unaudited)
$
109
$
114
$
119
(83
)
(106
)
(113
)
$
26
$
8
$
6
NOTE D
INCOME
TAXES
2006
2007
2008
$
4
$
16
$
12
82
$
4
$
16
$
94
F-15
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
2006
2007
2008
$
(441)
$
(728)
$
(612)
(41)
(68)
(52)
5
79
106
2
4
38
479
729
614
$
4
$
16
$
94
2007
2008
$
91
$
125
214
252
305
377
(305)
(377)
$
$
$
19,632
$
19,867
573
530
521
789
20,726
21,186
(20,726)
(21,268)
$
$
82
F-16
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
NOTE E
LINE OF
CREDIT AND LONG-TERM DEBT
F-17
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
December 31,
September 30,
2007
2008
2009
(Unaudited)
$
1,318
$
697
$
182
1,328
1,462
880
$
2,646
$
2,159
$
1,062
(49)
(18)
(2)
2,597
2,141
1,060
(1,230)
(1,409)
(727)
$
1,367
$
732
$
333
$
1,427
499
224
9
$
2,159
NOTE F
COMMITMENTS
AND CONTINGENCIES
December 31,
September 30,
2007
2008
2009
(Unaudited)
$
1,529
$
1,664
$
1,094
(681)
(795)
(260)
$
848
$
869
$
834
F-18
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
$
529
472
125
1,126
(132)
994
(441)
$
553
$
771
783
794
673
$
3,021
NOTE G
STOCKHOLDERS
DEFICIT
F-19
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
NOTE H
SHARE-BASED
COMPENSATION
F-20
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
Weighted-
Average
Options
Exercise
Outstanding
Price
3,390,957
$
0.54
785,770
0.10
(71,975
)
0.10
(10,951
)
1.94
4,093,801
0.46
1,165,115
0.87
(466,642
)
0.10
(146,130
)
0.13
4,646,144
0.61
173,000
1.23
(307,684
)
0.10
(63,381
)
0.98
4,448,079
0.66
1,267,364
0.76
(33,580
)
0.10
(918,184
)
2.19
4,763,679
$
0.40
Aggregate
Fair
Intrinsic
Number of
Per Share
Value(s)
Value of
Options
Exercise
Estimate
Options
Granted
Price(s)
per Share
Granted
Valuation Date(s)
8,500
$
1.25
$
1.25
$
(1)
October 31, 2008
309,000
$
0.92
$
0.92
$
22
February 10, 2009
374,000
$
0.65-0.68
$
0.65-0.68
$
125
April 1, 2009
and April 22, 2009
893,364
$
0.81
$
0.81
$
161
July 23, 2009
(1)
All stock options granted in the fourth quarter of 2008 were
amended in July 2009 to lower the per share exercise price to
$0.81.
F-21
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
Weighted-
Average
Weighted-
Weighted-
Remaining
Average
Average
Options
Contractual
Exercise
Options
Exercise
Outstanding
Life
Price
Exercisable
Price
2,890,642
5.0
$
0.10
2,673,308
$
0.10
1,332,115
8.8
0.92
364,002
0.85
212,050
2.7
2.02
212,050
2.02
8,945
0.1
61.04
8,945
61.04
4,202
0.4
105.01
4,202
105.01
125
0.0
180.00
126
180.00
4,448,079
6.0
$
0.66
3,262,632
$
0.62
2006
2007
2008
2009
(Unaudited)
60.0
%
52.0
%
53.0
%
49.0% - 53.0%
0.0
%
0.0
%
0.0
%
0.0%
9.0
8.0
7.0
4.0 - 7.0
4.4
%
4.4
%
4.0
%
2.7% - 4.0%
F-22
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
NOTE I
EMPLOYEE
BENEFIT PLAN
NOTE J
GUARANTEES
NOTE K
SUBSEQUENT
EVENTS
F-23
Table of Contents
Charged to
Balance at
Revenue,
Beginning of
Cost or
Balance at
Period
Expenses
Deductions
End of Period
(In thousands)
$
149
$
195
$
(103
)
$
241
$
241
$
150
$
(193
)
$
198
$
198
$
396
$
(286
)
$
308
Table of Contents
,
2010
William
Blair & Company
Needham & Company, LLC
Table of Contents
Item 13.
Other
Expenses of Issuance and Distribution.
Amount
$
2,567
5,100
50,000
*
*
*
*
*
$
*
*
To be filed by amendment
breach of a directors duty of loyalty to the corporation
or its stockholders;
act or omission not in good faith or that involves intentional
misconduct or a knowing violation of law;
unlawful payment of dividends or redemption of shares; or
transaction from which the director derives an improper personal
benefit.
II-1
Table of Contents
II-2
Table of Contents
Total
Preferred
Common
Consideration
Series C convertible preferred stock
April 10, 2007
124,536
$
199,257.60
Series C convertible preferred stock
April 10, 2007
250,000
$
400,000.00
Series C convertible preferred stock
April 10, 2007
625,000
$
1,000,000.00
Series C convertible preferred stock
April 10, 2007
468,750
$
750,000.00
Series C convertible preferred stock
April 10, 2007
901,742
$
1,442,787.20
Series C convertible preferred stock
April 18, 2007
1,473,438
$
2,357,500.80
Series C convertible preferred stock
April 18, 2007
312,500
$
500,000.00
Series C convertible preferred stock
April 18, 2007
263,127
$
421,003.20
Series C convertible preferred stock
April 18, 2007
250,000
$
400,000.00
Series C convertible preferred stock
April 18, 2007
15,000
$
24,000.00
Series C convertible preferred stock
April 18, 2007
3,407
$
5,451.20
common stock
April 20, 2007
27,092
$
2,709.20
common stock
June 29, 2007
232,848
$
23,284.80
common stock
July 11, 2007
200,000
$
20,000.00
common stock
August 9, 2007
6,322
$
632.20
common stock
August 18, 2007
380
$
38.00
common stock
January 16, 2008
3,038
$
778.80
common stock
May 21, 2008
8,360
*
common stock
May 30, 2008
263,260
*
common stock
August 8, 2008
1,386
$
138.60
common stock
September 4, 2008
40,000
$
4,000.00
common stock
September 11, 2009
30,188
*
*
Indicates shares acquired upon
cashless exercise of an option or warrant. In the case of PNC
Investment Corp., the exercise price of $2,000 was paid by
cancellation of 1,640 shares subject to the applicable
warrant. In the case of Patrick J. Maurer, the exercise price of
$28,676 was paid by cancellation of 25,506 shares subject
to the applicable option. In the case of Sandra L. Evanson, the
exercise price of $3,358 was paid by cancellation of
3,392 shares subject to the applicable option.
II-3
Table of Contents
Current
Number of
Grant Date
Grant Date
Exercise
Options Granted
Exercise Price
Fair Value
Price
53,475
$
0.53
$
0.53
$
0.53
3,000
$
0.64
$
0.64
$
0.64
522,640
$
0.78
$
0.78
$
0.78
15,000
$
0.96
$
0.96
$
0.81
6,000
$
0.96
$
0.96
$
0.96
500,000
$
0.99
$
0.99
$
0.81
65,000
$
0.99
$
0.99
$
0.81
35,000
$
1.14
$
1.14
$
0.81
3,000
$
1.14
$
1.14
$
1.14
3,000
$
1.22
$
1.22
$
0.81
123,500
$
1.26
$
1.26
$
0.81
8,500
$
1.25
$
1.25
$
0.81
309,000
$
0.92
$
0.92
$
0.65
309,000
(1)
$
0.65
$
0.65
$
0.65
65,000
$
0.68
$
0.68
$
0.68
893,364
(2)
$
0.81
$
0.81
$
0.81
3,000
$
0.99
$
0.99
$
0.99
(1)
Represents stock options granted to three employees that result
from our unilateral amendment to reduce the exercise price for
all of the shares subject to options granted to the employees on
February 10, 2009. The amendments reduce the exercise price
of the previously granted options to $0.65 per share, which was
the fair market value of our common stock on the date of the
amendments. The amendments did not affect the vesting provisions
or the number of shares subject to any of the option awards. For
financial statement reporting, we treat the previously granted
options as being forfeited and the amendments as new option
grants; however, none of the holders of the previously granted
options made any investment decisions in connection with the
amendments.
(2)
Includes a total of 890,364 stock options granted to
17 employees and one director that result from our
unilateral amendment to reduce the exercise price for all of the
shares subject to options previously granted to the employees
and director. The amendments reduce the exercise price of the
previously granted options to $0.81 per share, which was the
fair market value of our common stock on the date of the
amendments. The amendments did not affect the vesting provisions
or the number of shares subject to any of the option awards. For
financial statement reporting, we treat the previously granted
options as being forfeited and the amendments as new option
grants; however, none of the holders of the previously granted
options made any investment decisions in connection with the
amendments.
II-4
Table of Contents
II-5
Table of Contents
By:
President and Chief Executive Officer (principal executive
officer)
January 11, 2010
Executive Vice President and Chief Financial Officer
(principal financial and accounting officer)
January 11, 2010
Director
January 11, 2010
Director
January 11, 2010
Director
January 11, 2010
Director
January 11, 2010
Director
January 11, 2010
Director
January 11, 2010
*
By:
Kimberly K. Nelson
Agent and attorney-in-fact
II-6
Table of Contents
1
.1*
Form of Underwriting Agreement
3
.1*
Amended and Restated Certificate of Incorporation of the
registrant to be effective immediately prior to the closing of
the offering
3
.2*
Amended and Restated Bylaws of the registrant to be effective
immediately prior to the closing of the offering
4
.1*
Specimen Certificate representing shares of common stock of SPS
Commerce, Inc.
4
.2
Registration rights agreement dated April 10, 2007
5
.1*
Opinion of Faegre & Benson LLP
10
.1
1999 Equity Incentive Plan**
10
.2
Form of Option Agreement under 1999 Equity Incentive Plan**
10
.3
2001 Stock Option Plan**
10
.4
Form of Incentive Stock Option Agreement under 2001 Stock Option
Plan**
10
.5
Form of Non-Statutory Stock Option Agreement (Director) under
2001 Stock Option Plan**
10
.6*
2010 Equity Incentive Plan**
10
.7*
Form of Incentive Stock Option Agreement under 2010 Equity
Incentive Plan**
10
.8*
Form of Non-Statutory Stock Option Agreement (Director) under
2010 Equity Incentive Plan**
10
.9
Loan and Security Agreement dated February 3, 2006 by and
between Ritchie Capital Finance, L.L.C. and the Company
10
.10
Amendment to Loan and Security Agreement dated March 20,
2007 by and between BlueCrest Venture Finance Master
Fund Limited, as assignee of Ritchie Capital Finance, LLC
and Ritchie Debt Acquisition Fund, Ltd., and the Company
10
.11
Second Amendment to Loan and Security Agreement dated
March 24, 2008 by and between BlueCrest Venture Finance
Master Fund Limited, as assignee of Ritchie Capital
Finance, LLC and Ritchie Debt Acquisition Fund, Ltd., and the
Company
10
.12
Third Amendment to Loan and Security Agreement dated
March 30, 2009 by and between BlueCrest Venture Finance
Master Fund Limited, as assignee of Ritchie Capital
Finance, LLC and Ritchie Debt Acquisition Fund, Ltd., and the
Company
10
.13
Fourth Amendment to Loan and Security Agreement dated
April 8, 2009 by and between BlueCrest Venture Finance
Master Fund Limited, as assignee of Ritchie Capital
Finance, LLC and Ritchie Debt Acquisition Fund, Ltd., and the
Company
10
.14
2002 Management Incentive Agreement between the Company and
Archie C. Black**
10
.15
2002 Management Incentive Agreement between the Company and
James J. Frome**
10
.16*
Non-Employee Director Compensation Policy**
10
.17
Form of Indemnification Agreement for Steve A. Cobb, Michael B.
Gorman, George H. Spencer, III and Murry R. Wilson
10
.18
Form of Indemnification Agreement for Martin J. Leestma and Sven
A. Wehrein
10
.19
Form of Indemnification Agreement for Archie C. Black**
10
.20*
Employment Agreement between the Company and Archie C. Black**
10
.21*
Employment Agreement between the Company and Kimberly K. Nelson**
10
.22*
Employment Agreement between the Company and James J. Frome**
10
.23*
Employment Agreement between the Company and Michael J. Gray**
10
.24*
Employment Agreement between the Company and David J. Novak,
Jr.**
II-7
Table of Contents
23
.1
Consent of Grant Thornton LLP
23
.2*
Consent of Faegre & Benson LLP (included in
Exhibit 5.1)
24
.1
Power of Attorney
*
To be filed by amendment.
**
Indicates management contract or compensatory plan or
arrangement.
Previously filed.
II-8
Page | ||||
Section 1. Definitions
|
1 | |||
Section 2. Securities Subject to this Agreement
|
3 | |||
Section 3. Demand Registration
|
3 | |||
Section 4. Piggyback Registrations
|
4 | |||
Section 5. Restrictions on Public Sale by the Company and Others
|
6 | |||
Section 6. Registration Procedures
|
6 | |||
Section 7. Registration Expenses
|
9 | |||
Section 8. Indemnification
|
9 | |||
Section 9. Rule 144 and Rule 144A; Company Obligations
|
10 | |||
Section 10. Participation in Underwritten Registrations
|
11 | |||
Section 11. Miscellaneous
|
11 | |||
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||||
Exhibit A Investors
|
||||
Exhibit B Notice of Adoption
|
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page A-i |
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page A-1 |
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page 2 |
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page 3 |
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page 4 |
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page 5 |
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page 6 |
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page 7 |
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page 8 |
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page 9 |
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page 10 |
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page 11 |
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page 12 |
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page 13 |
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page A-1 |
BVCF IV, L.P. | ||||||
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By: | J.W. Puth Associates LLC, its General Partner | ||||
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By: | Brinson Venture Management LLC, its Attorney-in-Fact | ||||
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By: | Adams Street Partners, LLC, as its Administrative | ||||
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Member | |||||
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By: | /s/ Jeffrey T. Diehl | ||||
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Partner | |||||
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CID EQUITY CAPITAL V, L.P. | ||||||
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By: | CID Equity Partners V, as General Partner | ||||
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By: | /s/ John C. Aplin | ||||
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John C. Aplin | |||||
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General Partner | |||||
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CID MEZZANINE CAPITAL, L.P. | ||||||
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By: | CID Mezzanine Partners, L.P., as General Partner | ||||
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By: | /s/ John C. Aplin | ||||
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John C. Aplin | |||||
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General Partner | |||||
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/s/ Molly Joel Coye | |||||
Molly Joel Coye |
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page 2 |
DAMAC INVESTORS, INC. | ||||||
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By: | |||||
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Name: | |||||
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Its: | |||||
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DAMAC TECHNOLOGY PARTNERS, L.P. | ||||||
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By: | |||||
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Name: | |||||
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Its: | |||||
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GTG DAMAC PARTNERS, LP | ||||||
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By: | |||||
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Name: | |||||
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Its: | |||||
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Thomas Domencich | ||||||
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GRANITE PRIVATE EQUITY II, LLC | ||||||
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By: | |||||
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Vice President | |||||
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ML PARTNERS | ||||||
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By: | |||||
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Name: | |||||
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Its: | |||||
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SPS Registration Rights Agreement [Amended and Restated April 2007] | Page 3 |
PACIFIC CAPITAL VENTURES, LLC | ||||||
|
||||||
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By: | /s/ Roy L. Wickland | ||||
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||||||
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Roy L. Wickland | |||||
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Member | |||||
|
||||||
JAMIT LLC | ||||||
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By: | |||||
|
||||||
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Roy L. Wickland | |||||
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Member | |||||
|
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PV SECURITIES CORP. | ||||||
|
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By: | |||||
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Name: | |||||
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Its: | |||||
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RONALD P. KARLSBERG, TTEE FBO R.P. | ||||||
KARLSBERG CARDIOVASCULAR MEDICAL | ||||||
GROUP OF SOUTHERN CALIFORNIA 401K | ||||||
PROFIT SHARING PLAN DTD 1/1/1989 | ||||||
|
||||||
|
By: | /s/ Ronald P. Karlsberg | ||||
|
|
|||||
|
Trustee | |||||
|
||||||
RIVER CITIES CAPITAL FUND II LIMITED PARTNERSHIP | ||||||
By: Mayson, Inc. | ||||||
Its: General Partner | ||||||
|
||||||
|
By: | /s/ Edwin T. Robinson | ||||
|
||||||
|
Name: | Edwin T. Robinson | ||||
|
||||||
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Its: | President | ||||
|
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page 4 |
/s/ Casimir Skrzypcak | ||||||
Casimir Skrzypcak | ||||||
|
||||||
ST. PAUL VENTURE CAPITAL AFFILIATES
FUND I, LLC |
||||||
By: St. Paul Venture Capital, Inc. | ||||||
Its: Manager | ||||||
|
||||||
|
By: | /s/ Michael B. Gorman | ||||
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|
|||||
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Executive Vice President | |||||
|
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ST. PAUL VENTURE CAPITAL IV, LLC | ||||||
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||||||
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By: | /s/ Michael B. Gorman | ||||
|
||||||
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Michael B. Gorman | |||||
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Managing Member | |||||
|
||||||
ST. PAUL VENTURE CAPITAL V, LLC | ||||||
|
||||||
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By: | /s/ Michael B. Gorman | ||||
|
||||||
|
Michael B. Gorman | |||||
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Managing Member | |||||
|
||||||
ST. PAUL VENTURE CAPITAL VI, LLC | ||||||
By: SPVC Management VI, LLC | ||||||
Its: Managing Member | ||||||
|
||||||
|
By: | /s/ Michael B. Gorman | ||||
|
||||||
|
Michael B. Gorman | |||||
|
Managing Director |
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page 5 |
SVOBODA, COLLINS & COMPANY, L.P. | ||||||
By: Svoboda, Collins L.L.C. | ||||||
Its: General Partner | ||||||
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By: | |||||
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Analyst | |||||
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||||||
SVOBODA, COLLINS & COMPANY Q.P., L.P. | ||||||
By: Svoboda, Collins L.L.C. | ||||||
Its: General Partner | ||||||
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||||||
|
By: | |||||
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||||||
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Maneesh A. Gandhi | |||||
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Analyst | |||||
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TENX VENTURE PARTNERS, LLC | ||||||
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By: | |||||
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Name: | |||||
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Its: | |||||
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ZAFA LLC | ||||||
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By: | |||||
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Name: | |||||
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Its: | |||||
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RIVER CITIES SBIC III, L.P. | ||||||
By: RCCF Management Inc. | ||||||
Its: General Partner | ||||||
|
||||||
|
By: | /s/ Edwin T. Robinson | ||||
|
||||||
|
Name: | Edwin T. Robinson | ||||
|
||||||
|
Its: | President | ||||
|
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page 6 |
SVOCO, L.P. | ||||||
By: SvoCo, G.P. | ||||||
Its: General Partner | ||||||
By: SvoCo, Inc. | ||||||
Its: Managing General Partner | ||||||
|
||||||
|
By: | |||||
|
|
|||||
|
President |
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page 7 |
|
||||
STOCKHOLDERS:
|
|
|||
|
||||
|
|
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page A-8 |
** | Ronald P. Karlsberg, TTEE FBO R.P. Karlsberg Cardiovascular Medical Group of Southern California 401K, profit sharing plan, DTD 1/1/1989 |
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page A-1 |
Shares Purchased:
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||
|
||
Class of Stock:
|
Printed Name of Adopting Party | |
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Date:
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||
|
Signature | |
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||
Address
|
||
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||
Facsimile: (
)
|
Printed Name and Title of Authorized Signatory of Adopting Party | |
|
SPS Registration Rights Agreement [Amended and Restated April 2007] | Page B-1 |
2
3
4
5
6
SPS COMMERCE, INC.
|
||||
By: | ||||
7
Page 2
(i) | ten years after the date such option is granted (or in the case of an incentive stock option granted to a 10% Stockholder, five years after the date such option is granted) or on such date prior thereto as may be fixed by the Committee on or before the date such option is granted; | ||
(ii) | the expiration of the period after the termination of the optionees employment within which the option is exercisable as specified in paragraph 10(b) or 10(c), whichever is applicable (provided that the Committee may, in any option agreement provided for in paragraph 6 or by Committee action with respect to any outstanding option, extend the periods specified in paragraph 10(b) and 10(c)); | ||
(iii) | termination of an optionees employment by the Company for Cause (as hereinafter defined); or | ||
(iv) | the date, if any, fixed for cancellation pursuant to paragraph 11(c) or 12 below. |
Page 3
Page 4
(i) | an option shall continue to be exercisable for 30 days after termination of the optionees employment but only to the extent that the option was exercisable immediately prior to such optionees termination of employment; provided, however, that if termination of the optionees employment shall have been for Cause (as hereinafter defined), any option held by such optionee shall expire, and all rights to purchase Shares thereunder shall terminate, immediately upon such termination; for purposes of this paragraph 10(b)(i), Cause shall be deemed to exist upon (A) the failure to cure a material breach by the optionee of the |
Page 5
terms of any non-competition/non-solicitation agreement between the Company and the optionee within 30 days of receipt of written notice of such breach from the Company, (B) gross negligence or willful misconduct by the optionee, (C) conviction of the optionee of, or the entry of a pleading of guilty or nolo contendere by the optionee to, any crime involving moral turpitude or any felony, (D) willful violation of specific and lawful instructions from the Board or the Companys Chief Executive Officer that are reasonably related to the optionees employment by the Company, and (E) fraud, embezzlement, theft or proven dishonesty against the Company; | |||
(ii) | in the case of an optionee who is disabled (as hereinafter defined) while employed, an option shall continue to be exercisable for one year after termination of such optionees employment; and | ||
(iii) | as to any optionee whose termination occurs following a declaration pursuant to paragraph 12 below, an option may be exercised at any time permitted by such declaration. |
Page 6
(A) | any acquisition of Shares or Voting Securities of the Company directly from the Company; | ||
(B) | any acquisition or beneficial ownership by the Company or a subsidiary; | ||
(C) | any acquisition or beneficial ownership by any employee benefit plan (or related trust) sponsored or maintained by the Company or one or more of its subsidiaries; | ||
(D) | any acquisition or beneficial ownership by any corporation with respect to which, immediately following such acquisition, more than 50% of both the combined voting power of the Companys then outstanding Voting Securities and the Shares of the Company is then beneficially owned, directly or indirectly, by all or substantially all of the persons who beneficially owned Voting Securities and Shares of the Company immediately prior to such acquisition in substantially the same proportions as their ownership of such Voting Securities and Shares, as the case may be, immediately prior to such acquisition; |
Page 7
Page 8
Page 9
Page 10
Name of Optionee:
|
||
|
||
No. of Shares Covered:
|
Date of Grant: | |
|
||
Exercise Price Per Share:
|
Expiration Date: | |
|
||
Exercise Schedule (Cumulative):
|
1. | Grant . The Optionee is granted this Option to purchase the number of Shares specified at the beginning of this Agreement. | |
2. | Exercise Price . The price to the Optionee of each Share subject to this Option shall be the exercise price specified at the beginning of this Agreement. | |
3. | Incentive Stock Option . This Option is intended to be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the Code ). | |
4. | Exercise Schedule . This Option shall vest and become exercisable as to the number of Shares and on the dates specified in the exercise schedule at the beginning of this Agreement. The exercise schedule shall be cumulative; thus, to the extent this Option has not already been exercised and has not expired, terminated or been cancelled, the Optionee or the person otherwise entitled to exercise this Option as provided herein may at any time, and from time to time, purchase all or any portion of the Shares then purchasable under the exercise schedule. | |
This Option may also be exercised (notwithstanding the exercise schedule) under the circumstances described in Section 8 of this Agreement if it has not expired prior thereto. | ||
5. | Expiration . This Option shall expire at 5:00 p.m. Central Time on the earliest of: |
If termination of the Optionees employment by the Company shall have been for Cause, this Option shall expire immediately upon such termination. In no event may anyone exercise this Option, in whole or in part, after it has expired, notwithstanding any other provision of this Agreement. | ||
6. | Procedure to Exercise Option . | |
Notice of Exercise . This Option may be exercised by delivering written notice of exercise to the Company at the principal executive office of the Company, to the attention of the Companys Secretary, in the form attached to this Agreement. The notice shall state the number of Shares to be purchased, and shall be signed by the person exercising this Option. If the person exercising this Option is not the Optionee, he/she also must submit appropriate proof of his/her right to exercise this Option. | ||
Tender of Payment . Upon giving notice of any exercise hereunder, the Optionee shall provide for payment of the purchase price of the Shares being purchased through one or a combination of the following methods: |
* | Unless the context indicates otherwise, terms that are not defined in this Agreement shall have the meaning set forth in the Plan as it currently exists or as it is amended in the future. |
-2-
Notwithstanding the foregoing, the Optionee shall not be permitted to pay any portion of the purchase price with Shares if the Committee, in its sole discretion, determines that payment in such manner is undesirable. | ||
Delivery of Certificates . As soon as practicable after the Company receives the notice and purchase price provided for above, it shall deliver to the person exercising this Option, in the name of such person, a certificate or certificates representing the Shares being purchased. The Company shall pay any original issue or transfer taxes with respect to the issue or transfer of the Shares and all fees and expenses incurred by it in connection therewith. All Shares so issued shall be fully paid and nonassessable. Notwithstanding the foregoing, delivery of certificates for Shares pursuant to the exercise of the Option may be postponed by the Company for such period as may be required for it with reasonable diligence to comply with the applicable requirements of any federal, state or local law or regulation or any administrative or quasi-administrative requirement applicable to the sale, issuance, distribution or delivery of such Shares. The Board, or the Committee if one has been appointed, may, in its sole discretion, require the Optionee to furnish the Company with appropriate representations and a written investment letter prior to the exercise of the Option or the delivery of any Shares pursuant to the Option. | ||
7. | Employment Requirement . This Option may be exercised only while the Optionee remains employed with the Company or a parent or subsidiary thereof, and only if the Optionee has been continuously so employed since the date of this Agreement; provided that : | |
(a) This Option may be exercised for 30 days following the day the Optionees employment by the Company ceases if such cessation of employment is for a reason other than death or disability, but only to the extent that it was exercisable immediately prior to termination of employment; provided, however , that if termination of the Optionees employment shall have been for Cause, this Option shall expire, and all rights to purchase Shares hereunder shall terminate, immediately upon such termination . |
-3-
(b) This Option may be exercised within one year after the Optionees employment by the Company ceases if such cessation of employment is because of death or disability. | ||
(c) If the Optionees employment terminates after a declaration made pursuant to Section 8(b) of this Agreement in connection with an Event, this Option may be exercised at any time permitted by such declaration. | ||
Notwithstanding the above, this Option may not be exercised after it has expired. | ||
8. | Acceleration of Option . | |
(a) Change in Control . In the event of a Change in Control, as defined in paragraph 11 of the Plan, **[STANDARD GRANTS : then the Committee may, as provided in paragraph 11(c) of the Plan, determine that this Option shall be cancelled and make certain cash payments with respect to this Option pursuant to such paragraph 11(c).] **[ ALTERNATIVE FOR SENIOR MANAGEMENT : then, without any action by the Committee or the Board, (i) 50% of the Shares subject to this Option that have not already vested in accordance with the exercise schedule set forth above or otherwise accelerated in accordance with this Section 8 shall become immediately exercisable in full (on a pro-rata basis, such that the remaining (unaccelerated) 50% of the Shares subject to this Option (the Remaining Unvested Options ) shall continue to be subject, proportionately, to vesting in accordance with such exercise schedule) and (ii) the Remaining Unvested Options shall also become immediately exercisable if the Company (or the corporation resulting from such Change in Control) terminates the Optionees employment (or materially reduces the Optionees employment responsibilities or base salary) (A) other than for Cause and (B) prior to the first anniversary date of such Change in Control. ] | ||
(b) Event . In the event of an Event as defined in paragraph 12 of the Plan (including without limitation any Event that is also a Change in Control), the Committee may, but shall not be obligated to: |
-4-
full and the Optionee shall have the right, during the period preceding the time of cancellation of this Option, to exercise this Option as to all or any part of the Shares covered by this Option. In the event of a declaration pursuant to this subsection, to the extent this Option has not been exercised prior to the Event, the unexercised part of this Option shall be canceled at the time of, or immediately prior to, the Event, as provided in the declaration. Notwithstanding the foregoing, the holder of this Option shall not be entitled to the payment provided for in this subsection if this Option shall have expired pursuant to Section 5 above. | ||
(c) Discretionary Acceleration . In addition to any acceleration provided for elsewhere herein, the Committee has the power, in its sole discretion, to declare at any time that this Option shall be immediately exercisable. | ||
(d) Possible Tax Effect of Acceleration . If acceleration of this Option results in the vesting of Shares with a Fair Market Value in excess of $100,000 in any given year, then this Option shall not be deemed an incentive stock option within the meaning of Section 422 of the Code to the extent the Fair Market Value of vested Shares exceeds $100,000 in such year. | ||
9. | Limitation on Transfer . While the Optionee is alive, only the Optionee or his/her guardian or legal representative may exercise this Option. This Option may not be assigned or transferred other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder. | |
10. | No Shareholder Rights Before Exercise . No person shall have any of the rights of a shareholder of the Company with respect to any Share subject to this Option until the Share actually is issued to him/her upon exercise of this Option. | |
11. | Discretionary Adjustment . In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, or extraordinary dividend or divestiture (including a spin-off), or any other change in the corporate structure or Shares of the Company, the Committee (or if the Company does not survive any such transaction, a comparable committee of the Board of Directors of the surviving corporation) may, without the consent of the Optionee, make such adjustment as it determines in its discretion to be appropriate as to the number and kind of securities subject to and reserved under the Plan and, in order to prevent dilution or enlargement of rights of the Optionee, the number and kind of securities issuable upon exercise of this Option and the exercise price hereof. | |
12. | Transfer of Shares Tax Effects . The Optionee hereby acknowledges that if any Shares received pursuant to the exercise of any portion of this Option are sold within two years from the date of grant or within one year from the effective date of exercise of the Option, or if certain other requirements of the Code are not satisfied, such Shares will be deemed under the Code not to have been acquired by the Optionee pursuant to an incentive stock option as defined in the Code; and that the Company shall not be liable to the Optionee in the event the Option for any reason is deemed not to be an incentive stock option within the meaning of the Code. |
-5-
13. | Interpretation of This Agreement . All decisions and interpretations made by the Committee with regard to any question arising hereunder or under the Plan shall be binding and conclusive upon the Company and the Optionee. If there is any inconsistency between the provisions of this Agreement and the Plan, the provisions of the Plan shall govern. | |
14. | Discontinuance of Employment . This Agreement shall not give the Optionee a right to continued employment with the Company, any parent or subsidiary of the Company or any successor entity, and the Company, any such parent or subsidiary or any such successor entity employing the Optionee may terminate his/her employment at any time, change the Optionees employment responsibilities and terms of employment, and otherwise deal with the Optionee without regard to the effect it may have upon him/her under this Agreement. | |
15. | Tax Consequences . | |
(a) The Optionee may incur tax liability as a result of the Optionees purchase or disposition of the Shares. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES. | ||
(b) Notwithstanding the Companys good faith determination of the Fair Market Value of the Companys common stock for purposes of determining the exercise price per Share of the Option, the taxing authorities may assert that the fair market value of the Companys common stock on the date of grant was greater than the exercise price per Share. The Option may fail to qualify as an incentive stock option if the exercise price per Share of the Option is less than the fair market value of the Companys common stock on the date of grant. In addition, under Section 409A of the Code, if the exercise price per Share of the Option is less than the fair market value of the Companys common stock on the date of grant, the Option may be treated as a form of deferred compensation and the Optionee may be subject to an additional 20% tax, plus interest and possible penalties. The Optionee is encouraged to consult a tax adviser regarding the potential impact of Section 409A of the Code. | ||
16. | Amendment to Meet the Requirements of Section 409A . The Optionee acknowledges that the Company, in the exercise of its sole discretion and without the consent of the Optionee, may amend or modify this Agreement in any manner and delay the payment of any amounts payable pursuant to this Agreement to the minimum extent necessary to meet the requirements of Section 409A of the Code as amplified by any Internal Revenue Service or U.S. Treasury Department regulations or guidance as the Company deems appropriate or advisable. | |
17. | Option Subject to Plan, Certificate of Incorporation and By-Laws . The Optionee acknowledges that this Option and the exercise thereof is subject to the Plan, the Certificate of Incorporation, as amended from time to time, and the By-Laws, as amended from time to time, of the Company, and any applicable federal or state laws, rules or regulations. The Optionee hereby accepts this Option subject to all of the terms, conditions and provisions of this Agreement and the Plan. The Optionee has received a copy of the Plan and has agreed to be bound and to abide by all requests, decisions and determinations of the Committee made in accordance with the Plan. | |
18. | Market Stand-Off . In connection with the Companys initial public offering of the Companys securities, Optionee agrees, upon request of the Company or the underwriters |
-6-
managing any underwritten offering of the Companys securities, not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of the Shares received pursuant to the exercise of any portion of this Option (other than those included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 180 days) from the effective date of such registration as may be requested by the underwriters. | ||
19. | Binding Effect . This Agreement shall be binding in all respects on the heirs, representatives, successors and assigns of the Optionee. | |
20. | Choice of Law . This Agreement is entered into under the laws of the State of Delaware and shall be construed and interpreted thereunder (without regard to its conflict of law principles). |
|
OPTIONEE | |||
|
||||
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|
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|
SPS COMMERCE, INC. |
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By: | |||||
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Name: |
|
||||
|
||||||
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Its: | |||||
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-7-
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Name: | |||
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||||
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Date of Grant of Option: | |||
|
||||
|
||||
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Exercise Price Per Share: | |||
|
||||
|
||||
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Number of Shares With Respect to | |||
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Which the Option is Hereby Exercised: | |||
|
||||
|
||||
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Total Exercise Price: | |||
|
|
Name in Which to Issue Certificate: | |||
|
||||
|
||||
|
Address to Which Certificate Should | |||
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be Delivered: | |||
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||||
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Principal Mailing Address for | |||
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Holder of the Certificate (if different | |||
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from above): | |||
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Very truly yours, | |||
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-2-
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Name of Optionee: | |||
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Date of Grant of Option: | |||
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|
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Exercise Price Per Share: | |||
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||||
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||||
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Number of Shares With Respect to | |||
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Which the Option is to be Exercised: | |||
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Total Exercise Price: | |||
|
Very truly yours, | ||||||
|
||||||
Broker Name | ||||||
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By | |||||
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Name of Optionee:
|
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No. of Shares Covered:
|
Date of Grant: | |
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Exercise Price Per Share:
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Expiration Date: | |
|
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Exercise Schedule (Cumulative):
|
1. | Grant . The Optionee is granted this Option to purchase the number of Shares specified at the beginning of this Agreement. | |
2. | Exercise Price . The price to the Optionee of each Share subject to this Option shall be the exercise price specified at the beginning of this Agreement. | |
3. | Non-Statutory Stock Option . This Option is not intended to be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the Code ). | |
4. | Exercise Schedule . This Option shall vest and become exercisable as to the number of Shares and on the dates specified in the exercise schedule at the beginning of this Agreement. The exercise schedule shall be cumulative; thus, to the extent this Option has not already been exercised and has not expired, terminated or been cancelled, the Optionee or the person otherwise entitled to exercise this Option as provided herein may at any time, and from time to time, purchase all or any portion of the Shares then purchasable under the exercise schedule. | |
This Option may also be exercised in full (notwithstanding the exercise schedule) under the circumstances described in Section 8 of this Agreement if it has not expired prior thereto. | ||
5. | Expiration . This Option shall expire at 5:00 p.m. Central Time on the earliest of: |
In no event may anyone exercise this Option, in whole or in part, after it has expired, notwithstanding any other provision of this Agreement. | ||
6. | Procedure to Exercise Option . | |
Notice of Exercise . This Option may be exercised by delivering written notice of exercise to the Company at the principal executive office of the Company, to the attention of the Companys Secretary, in the form attached to this Agreement. The notice shall state the number of Shares to be purchased, and shall be signed by the person exercising this Option. If the person exercising this Option is not the Optionee, he/she also must submit appropriate proof of his/her right to exercise this Option. | ||
Tender of Payment . Upon giving notice of any exercise hereunder, the Optionee shall provide for payment of the purchase price of the Shares being purchased through one or a combination of the following methods: |
* | Unless the context indicates otherwise, terms that are not defined in this Agreement shall have the meaning set forth in the Plan as it currently exists or as it is amended in the future. |
-2-
Notwithstanding the foregoing, the Optionee shall not be permitted to pay any portion of the purchase price with Shares if the Committee, in its sole discretion, determines that payment in such manner is undesirable. | ||
Delivery of Certificates . As soon as practicable after the Company receives the notice and purchase price provided for above, it shall deliver to the person exercising this Option, in the name of such person, a certificate or certificates representing the Shares being purchased. The Company shall pay any original issue or transfer taxes with respect to the issue or transfer of the Shares and all fees and expenses incurred by it in connection therewith. All Shares so issued shall be fully paid and nonassessable. Notwithstanding the foregoing, delivery of certificates for Shares pursuant to the exercise of the Option may be postponed by the Company for such period as may be required for it with reasonable diligence to comply with the applicable requirements of any federal, state or local law or regulation or any administrative or quasi-administrative requirement applicable to the sale, issuance, distribution or delivery of such Shares. The Board, or the Committee if one has been appointed, may, in its sole discretion, require the Optionee to furnish the Company with appropriate representations and a written investment letter prior to the exercise of the Option or the delivery of any Shares pursuant to the Option. | ||
7. | Service Requirement . This Option may be exercised only while the Optionee serves as a director of the Company or a parent or subsidiary thereof, and only if the Optionee has continuously served as a director since the date of this Agreement; provided that : | |
(a) This Option may be exercised for 30 days following the day the Optionees service as a director of the Company ceases if such cessation of service is for a reason other than death or disability, but only to the extent that it was exercisable immediately prior to termination of service as a director. |
-3-
(b) This Option may be exercised within one year after the Optionees service as a director of the Company ceases if such cessation of service is because of death or disability. | ||
(c) If the Optionees service as a director of the Company terminates after a declaration made pursuant to Section 8(b) of this Agreement in connection with an Event, this Option may be exercised at any time permitted by such declaration. | ||
Notwithstanding the above, this Option may not be exercised after it has expired. | ||
8. | Acceleration of Option . | |
(a) Change in Control . In the event of a Change in Control as defined in paragraph 11 of the Plan, then, without any action by the Committee or the Board, 100% of the Shares subject to this Option that have not already vested in accordance with the exercise schedule set forth above shall become immediately exercisable in full. | ||
(b) Event . In the event of an Event as defined in paragraph 12 of the Plan (including without limitation any Event that is also a Change in Control), the Committee may, but shall not be obligated to: |
-4-
(c) Discretionary Acceleration . In addition to any acceleration provided for elsewhere herein, the Committee has the power, in its sole discretion, to declare at any time that this Option shall be immediately exercisable. | ||
9. | Limitation on Transfer . While the Optionee is alive, only the Optionee or his/her guardian or legal representative may exercise this Option. This Option may not be assigned or transferred other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder. | |
10. | No Shareholder Rights Before Exercise . No person shall have any of the rights of a shareholder of the Company with respect to any Share subject to this Option until the Share actually is issued to him/her upon exercise of this Option. | |
11. | Discretionary Adjustment . In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, or extraordinary dividend or divestiture (including a spin-off), or any other change in the corporate structure or Shares of the Company, the Committee (or if the Company does not survive any such transaction, a comparable committee of the Board of Directors of the surviving corporation) may, without the consent of the Optionee, make such adjustment as it determines in its discretion to be appropriate as to the number and kind of securities subject to and reserved under the Plan and, in order to prevent dilution or enlargement of rights of the Optionee, the number and kind of securities issuable upon exercise of this Option and the exercise price hereof. | |
12. | Tax Withholding . Delivery of Shares upon exercise of this Option shall be subject to any required withholding taxes. As a condition precedent to receiving Shares upon exercise of this Option, the Optionee may be required to pay to the Company, in accordance with the provisions of paragraph 9 of the Plan, an amount equal to the amount of any required withholdings. | |
13. | Interpretation of This Agreement . All decisions and interpretations made by the Committee with regard to any question arising hereunder or under the Plan shall be binding and conclusive upon the Company and the Optionee. If there is any inconsistency between the provisions of this Agreement and the Plan, the provisions of the Plan shall govern. | |
14. | Option Subject to Plan, Certificate of Incorporation and By-Laws . The Optionee acknowledges that this Option and the exercise thereof is subject to the Plan, the Certificate of Incorporation, as amended from time to time, and the By-Laws, as amended from time to time, of the Company, and any applicable federal or state laws, rules or regulations. The Optionee hereby accepts this Option subject to all of the terms, conditions and provisions of this Agreement and the Plan. The Optionee has received a copy of the Plan and has agreed to be bound and to abide by all requests, decisions and determinations of the Committee made in accordance with the Plan. | |
15. | Market Stand-Off . In connection with the Companys initial public offering of the Companys securities, Optionee agrees, upon request of the Company or the underwriters managing any underwritten offering of the Companys securities, not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of the Shares received pursuant to the exercise of any portion of this Option (other than those |
-5-
included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed one hundred eighty (180) days) from the effective date of such registration as may be requested by the underwriters. | ||
16. | Binding Effect . This Agreement shall be binding in all respects on the heirs, representatives, successors and assigns of the Optionee. | |
17. | Choice of Law . This Agreement is entered into under the laws of the State of Delaware and shall be construed and interpreted thereunder (without regard to its conflict of law principles). |
|
OPTIONEE | |||
|
||||
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|
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SPS COMMERCE INC. |
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By: | |||||
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Name: |
|
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Its: |
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-6-
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Name: | |||
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Date of Grant of Option: | |||
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|
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Exercise Price Per Share: | |||
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Number of Shares With Respect to | |||
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Which the Option is Hereby Exercised: | |||
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Total Exercise Price: | |||
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Name in Which to Issue Certificate: | |||
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Address to Which Certificate Should | |||
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be Delivered: | |||
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Principal Mailing Address for | |||
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Holder of the Certificate (if different | |||
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from above): | |||
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Very truly yours, | |||
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|
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|
Name of Optionee: | |||
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Date of Grant of Option: | |||
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|
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Exercise Price Per Share: | |||
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||||
|
||||
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Number of Shares With Respect to | |||
|
Which the Option is to be Exercised: | |||
|
||||
|
||||
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Total Exercise Price: | |||
|
Very truly yours, | ||||||
|
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Broker Name | ||||||
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By |
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2
3
4
5
6
7
8
9
10
11
(i) | All Receivables; | ||
(ii) | All Equipment; | ||
(iii) | All Fixtures; | ||
(iv) | All General Intangibles; | ||
(v) | All Inventory; | ||
(vi) | All Investment Property; | ||
(vii) | All Deposit Accounts; | ||
(viii) | All Cash; | ||
(ix) | All Documents; | ||
(x) | All Proceeds from the sale, transfer or other disposition of Intellectual Property; |
12
(xi) | All other Goods and tangible and intangible personal property of Borrower other than Intellectual Property, whether now or hereafter owned or existing, leased, consigned by or to, or acquired by, Borrower and wherever located, and | ||
(xii) | to the extent not otherwise included, all Proceeds of each of the foregoing and all accessions to, substitutions and replacements for, and rents, profits and products of each of the foregoing and all attachments, accessories, accessions, replacements, substitutions, additions or improvements to any of the foregoing, wherever located and all products and proceeds of the foregoing including without limitation proceeds of insurance policies insuring the foregoing and all books and records with respect thereto; |
13
14
6.1 | Borrower Representations . Borrower warrants and represents to Lender as of the date hereof and as of the date of any Loan made hereunder, and agrees and covenants to Lender that: |
15
16
17
18
19
20
21
22
23
|
Accepted By: | |||||
Borrower:
|
SPS Commerce, Inc. | Lender: | RITCHIE CAPITAL FINANCE, L.L.C. | |||
By:
|
/s/ Thomas C. Velin | By: | /s/ Mary J. Caulfield | |||
Name:
|
Thomas C. Velin | Name: | Mary J. Caulfield | |||
Title:
|
CFO | Title: | President | |||
Address for
|
333 South Seventh Street, | Address for | 2100 Enterprise Avenue | |||
Notices:
|
Suite 1000, | Notices: | Geneva, IL 60134 | |||
|
Minneapolis, MN 55402 | Attention: Legal Department | ||||
|
Attn: Chief Financial Officer | Telephone | 630-845-5730 | |||
|
Facsimile: | 630-345-7932 | ||||
Telephone:
|
612-435-9438 | |||||
Facsimile:
|
612-435-9404 | with a copy to: | ||||
|
||||||
|
225 West Washington | |||||
|
Chicago, IL 60606 | |||||
|
Attention: Mark King | |||||
|
Telephone: | 630-482-7166 | ||||
|
Facsimile: | 630-345-7955 |
(i) | FINANCIAL STATEMENTS General . The attached financial statements fairly reflect the financial condition of Borrower in all material respects in accordance with generally accepted accounting principles applied in a consistent manner, except, in the case of interim financial statements, for normal year-end adjustments and the absence of footnote disclosures and, except as disclosed on the attached Schedule of Financial Statement Exceptions (if none, so state on said Schedule), there has been no material adverse change in the assets, liabilities or financial condition of Borrower since ___, 200_; | ||
(ii) | FINANCIAL STATEMENTS Off-Balance Sheet . All material off-balance sheet leasing obligations of Borrower and all material guarantees by Borrower of the financial obligations of others not otherwise listed and itemized on the attached financial statements are disclosed on the attached Schedule of Financial Statement Exceptions (if none, so state on said Schedule); | ||
(iii) | FINANCIAL STATEMENTS Related Party Transactions . All material transactions between Borrower and any of Borrowers officers, employees or Affiliates, including but not limited to loans, receivables or payables due to/from Borrowers officers, employees or Affiliates, but excluding any payment of employee compensation in the ordinary course of business and any payment or reimbursement of reasonable and customary directors fees and expenses, are disclosed on the attached Schedule of Financial Statement Exceptions (if none, so state on said Schedule); | ||
(iv) | COMPLIANCE WITH APPLICABLE LAW . Except as noted on the attached Schedule of Compliance Issues , there are no events whereby Borrower or any of its Subsidiaries is acting or conducting business contrary to applicable local, state, or national laws in the country or countries in which said parties are conducting business, except for such events which have not had and could not reasonably be expected to have a Material Adverse Effect; | ||
(v) | ABSENCE OF DEFAULT . Except as noted on the attached Schedule of Compliance Issues , no Default or Event of Default exists on the date hereof; and | ||
(vi) | LITIGATION . Except as noted on the attached Schedule of Compliance Issues , there are no actions, suits or proceedings pending or, to the knowledge of Borrower and the undersigned, threatened against Borrower in any court or before any governmental commission, board or authority which, if adversely determined, will have a Material Adverse Effect (if none, so state on said Schedule). |
25
Category of Disclosure | Financial Date | Comments (if none, state none) | ||
General Exceptions:
|
||||
|
||||
Off-Balance Sheet:
|
||||
|
||||
Related Party Transactions:
|
Parties Involved | Date of filing/incident | Nature of Dispute or Issue (if none, state none) | ||
Compliance Issues:
|
||||
Litigation Issues:
|
26
1. | Any and all indebtedness of any kind outstanding under, or incurred in connection with, that certain 15% Senior Subordinated Secured Note, dated May 16, 2003, in the original principal amount of $1,292,472.03, issued by SPS Commerce, Inc. (as Maker thereunder) to CID Mezzanine Capital, L.P. or its registered assigns (as Holder thereunder) (the CID Debt). |
2. | SPS Commerce, Inc. is party to the following capital leases of Equipment (the Capital Leases): |
Balance at | Contract Increase | |||||||||||
Company | Schedule | 12/31/2005 | in Liability 2006 | |||||||||
Data Sales
|
6 | $ | 4,394.80 | |||||||||
Data Sales
|
7 | $ | 8,641.02 | |||||||||
Data Sales
|
8 | $ | 8,055.97 | |||||||||
Dell
|
011 | $ | 4,917.74 | |||||||||
Dell
|
012 | $ | 11,387.65 | |||||||||
Dell
|
013 | $ | 19,759.30 | |||||||||
Oracle/Key Financial*
|
N/A | $ | 177,280.53 | $ | 77,400.00 | |||||||
|
||||||||||||
|
$ | 234,437.01 | $ | 77,400.00 | ||||||||
|
* | SPS Commerce, Inc.s service and support agreement expires at the end of February, 2006. In March, 2006 the renewal fee, to extend this agreement, will be added to SPS Commerce, Inc.s lease liability. This addition does not increase our quarterly liability. |
27
1. | Liens, security interests and other encumbrances on substantially all of the assets of SPS Commerce, Inc. securing the CID Debt. |
2. | Liens, security interests and other encumbrances on the leased Equipment securing obligations under the Capital Leases. |
28
Ritchie Capital Finance, L.L.C.
|
SPS Commerce, Inc. | |
Technology and Life Science
|
333 South Seventh Street | |
2100 Enterprise Avenue
|
Minneapolis, MN 55403 | |
Geneva, IL 60134
|
||
|
As of Revolver Agreement No. V06101 |
Foreign | Domestic | Total | ||||||||||||||||||
I. Accounts receivable
|
||||||||||||||||||||
1. Accounts receivable (book value from detailed aging
report)
|
||||||||||||||||||||
|
||||||||||||||||||||
2. Other Receivables (As applicable, to be determined
by Lender)
|
| | ||||||||||||||||||
|
||||||||||||||||||||
3. Total accounts receivable
|
| | $ | | ||||||||||||||||
|
||||||||||||||||||||
IIa. Accounts receivable reductions:
|
||||||||||||||||||||
4. Ineligible Accounts Receivable:
|
||||||||||||||||||||
4a. Accounts unpaid over 90 days from Invoice date
|
||||||||||||||||||||
|
||||||||||||||||||||
4b. Cross Age: 25% or greater of a Single Account
Debtor is unpaid more than 90 days from inv date |
0 | 0 | ||||||||||||||||||
|
||||||||||||||||||||
4c.* Concentration Limit: Single Account Debtor
exceeds 20% of total Accounts Rec. book value (#3) |
0 | 0 | ||||||||||||||||||
|
||||||||||||||||||||
4d.** Other Foreign A/R defined as ineligible
(ref. EXIM Country Limitation Sched) and Govt. A/R |
0 | 0 | ||||||||||||||||||
|
||||||||||||||||||||
5. Total accounts receivable deductions
|
0 | 0 | ||||||||||||||||||
|
||||||||||||||||||||
6. Total Eligible Accounts Domestic and Foreign
(#3 minus #5)
|
| | ||||||||||||||||||
|
||||||||||||||||||||
7a. Loan Value of Domestic Accounts (85% of #6,
Domestic Column) |
$ | 0 | ||||||||||||||||||
|
||||||||||||||||||||
7b. Loan Value of Foreign Accounts (70% of #6,
Foreign Column) |
$ | 0 | $ | | ||||||||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
III. Balances (Foreign & Domestic Combined)
|
||||||||||||||||||||
8. Combined total Loan Value of Eligible Accounts
(From lines #7a, 7b, and 7c above)
|
| |||||||||||||||||||
|
||||||||||||||||||||
9. Current balance owing on Line of Credit as of the
date of this Certificate
|
| |||||||||||||||||||
|
||||||||||||||||||||
10. Total Borrowing Availability based on Loan Value
of Eligible Accounts (#8 minus #9)
|
| |||||||||||||||||||
|
||||||||||||||||||||
11. Maximum Line or Credit Amount
|
1,250,000 | |||||||||||||||||||
|
||||||||||||||||||||
12. Total
Borrowing Availability (lesser of #10 or #11)
|
||||||||||||||||||||
|
||||||||||||||||||||
IV. Loan Balance Allocation
|
||||||||||||||||||||
13. Balance Outstanding Attributed to Value of Foreign
Receivable Loan Value |
$ | 0 | ||||||||||||||||||
14. Balance Outstanding Attributed to Value of
Domestic Receivable Loan Value |
||||||||||||||||||||
|
||||||||||||||||||||
CURRENT BALANCE OWING AS OF DATE OF CERTIFICATE
|
0.00 | % | $ | 0 | ||||||||||||||||
|
||||||||||||||||||||
V. Request for Funding:
|
||||||||||||||||||||
Borrower hereby requests that the amount at the right
be advanced pursuant to the terms of the Revolver
Agreement and as permitted by the forgoing
calculations
|
$ | 0 | ||||||||||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
VI. Amount Repaid:
|
||||||||||||||||||||
Borrower hereby remits the amount at the right as
either a Mandatory Prepayment (if #12 above is a
negative number) or a voluntary
prepayment
of
principal
|
$ | 0 | ||||||||||||||||||
|
||||||||||||||||||||
VII. Other
amounts remitted by Borrower for expenses and fees (detail on attachment)
|
$ | 0 | ||||||||||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
VII. Most recent financial statement being provided as
attachment:
|
||||||||||||||||||||
|
* | Concentration Limit in #4c above shall be calculated by multiplying gross book value book A/R times 20%, the result being the Concentration Limit. The ineligible portion, for any single account debtor, shall be the amount that exceeds the Concentration Limit for that account debtor. | |
** | A/R arising from sales directly to the Federal Government requires specific documentation for eligibility including notification and acknowledgement by the government entity regarding assignability, etc. Government A/R is considered Ineligible until such documentation has been completed. |
|
Borrower: | SPS Commerce, Inc. | ||||
|
||||||
|
Signature: | |||||
|
||||||
|
Name: | |||||
|
||||||
|
Title: | |||||
|
||||||
|
Date: | |||||
|
29
Customized | Maximum | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Items/ | Aged # | Accum | Advance | Customer | Customer | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Vendor name | Invoice # | Invoice Date | QTY | Description | Serial Number | Equip Cost | Freight | Installation | Tax | Sub Total | Total | Months | Depreciation | Amount | Payment Date | Check Number | ||||||||||||||||||||||||||||||||||||||||||||||||
|
5,000.00 | 100,00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Final Advance Amount: | Initials | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equipment Location: |
30
Ritchie Capital Finance, L.L.C.
|
SPS Commerce, Inc. | |
Technology and Life Science
|
333 South Seventh Street | |
2100 Enterprise Avenue
|
Minneapolis, MN 55403 | |
Geneva, IL 60134
|
||
|
As of Revolver Agreement No. V06101 |
Foreign | Domestic | Total | ||||||||||||||||||
I. Accounts receivable
|
||||||||||||||||||||
1. Accounts receivable (book value from detailed aging
report)
|
||||||||||||||||||||
|
||||||||||||||||||||
2. Other Receivables (As applicable, to be determined
by Lender)
|
| | ||||||||||||||||||
|
||||||||||||||||||||
3. Total accounts receivable
|
| | $ | | ||||||||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
IIa. Accounts receivable reductions:
|
||||||||||||||||||||
4. Ineligible Accounts Receivable:
|
||||||||||||||||||||
4a. Accounts unpaid over 90 days from Invoice date
|
||||||||||||||||||||
|
||||||||||||||||||||
4b. Cross Age: 25% or greater of a Single Account
Debtor is unpaid more than 90 days from inv date
|
0 | 0 | ||||||||||||||||||
|
||||||||||||||||||||
4c.* Concentration Limit: Single Account Debtor
exceeds 20% of total Accounts Rec. book value (#3)
|
0 | 0 | ||||||||||||||||||
|
||||||||||||||||||||
4d.** Other Foreign A/R defined as ineligible
(ref. EXIM Country Limitation Sched) and Govt. A/R
|
0 | 0 | ||||||||||||||||||
|
||||||||||||||||||||
5. Total accounts receivable deductions
|
0 | 0 | ||||||||||||||||||
|
||||||||||||||||||||
6. Total Eligible Accounts Domestic and Foreign
(#3 minus #5)
|
| | ||||||||||||||||||
|
||||||||||||||||||||
7a. Loan Value of Domestic Accounts (85% of #6,
Domestic Column)
|
$ | 0 | ||||||||||||||||||
|
||||||||||||||||||||
7b. Loan Value of Foreign Accounts (70% of #6, Foreign
Column)
|
$ | 0 | $ | | ||||||||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
III. Balances (Foreign & Domestic Combined)
|
||||||||||||||||||||
8. Combined total Loan Value of Eligible Accounts
(From lines #7a, 7b and 7c above)
|
| |||||||||||||||||||
|
||||||||||||||||||||
9. Current balance owing on Line of Credit as of the
date of this Certificate
|
| |||||||||||||||||||
|
||||||||||||||||||||
10. Total Borrowing Availability based on Loan Value
of Eligible Accounts (#8 minus #9)
|
| |||||||||||||||||||
|
||||||||||||||||||||
11. Maximum Line of Credit Amount
|
1,250,000 | |||||||||||||||||||
|
||||||||||||||||||||
12. Total
Borrowing Availability (lesser of #10 or #11)
|
||||||||||||||||||||
|
||||||||||||||||||||
IV. Loan Balance Allocation
|
||||||||||||||||||||
13. Balance Outstanding Attributed to Value of Foreign
Receivable Loan Value
|
$ | 0 | ||||||||||||||||||
14. Balance Outstanding Attributed to Value of
Domestic Receivable Loan Value
|
||||||||||||||||||||
|
||||||||||||||||||||
CURRENT BALANCE OWING AS OF DATE OF CERTIFICATE
|
0.00 | % | $ | 0 | ||||||||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
V. Request for Funding:
|
||||||||||||||||||||
Borrower hereby requests that the amount at the right
be advanced pursuant to the terms of the Revolver
Agreement and as permitted by the forgoing
calculations
|
$ | 0 | ||||||||||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
VI. Amount Repaid:
|
||||||||||||||||||||
Borrower hereby remits the amount at the right as
either a Mandatory Prepayment (if #12 above is a
negative number) or a voluntary prepayment of
principal
|
$ | 0 | ||||||||||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
VII. Other
amounts remitted by Borrower for expenses and fees (detail on attachment)
|
$ | 0 | ||||||||||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
VIII. Most recent financial statement being provided as
attachment:
|
||||||||||||||||||||
|
* | Concentration Limit in #4c above shall be calculated by multiplying gross book A/R times 20%, the result being the Concentration Limit. The ineligible portion, for any single account debtor, shall be the amount that exceeds the concentration Limit for that account Debtor. | |
** | A/R arising from sales directly to the Federal Government requires specific documentation for eligibility including notification and acknowledgment by the government entity regarding assign ability, etc. Government A/R is considered ineligible until such documentation has been completed. |
|
Borrower: | SPS Commerce, Inc. | ||||
|
||||||
|
Signature: | |||||
|
||||||
|
Name: | |||||
|
||||||
|
Title: | |||||
|
||||||
|
Date: | |||||
|
31
1
2
3
By:
|
/s/ Paul Dehadray
|
|||
Name: Paul Dehadray | ||||
Title: General Counsel | ||||
|
||||
SPS COMMERCE, INC. | ||||
|
||||
By:
|
/s/ Thomas C. Velin
|
|||
Name: Thomas C. Velin | ||||
Title: CFO |
4
2
3
4
By:
|
/s/ Peter Cox
|
|||
Name: Peter Cox | ||||
Title: Chief Operation Officer | ||||
|
||||
SPS COMMERCE, INC. | ||||
|
||||
By:
|
/s/ Kimberly K. Nelson
|
|||
Name: Kimberly Nelson | ||||
Title: CFO |
5
BLUECREST VENTURE FINANCE MASTER FUND LIMITED | ||||
|
acting through its duly appointed agent and investment | |||
|
manager, BlueCrest Capital Management LLP | |||
|
||||
By:
|
/s/ Peter Cox | |||
|
||||
Name: Peter Cox | ||||
Title: C.O.O. | ||||
|
||||
SPS COMMERCE, INC. | ||||
|
||||
By:
|
/s/ Kimberly K. Nelson | |||
|
||||
Name: Kim Nelson | ||||
Title: CFO |
BLUECREST VENTURE FINANCE MASTER FUND LIMITED | ||||
|
acting through its duly appointed agent and investment | |||
|
manger, BlueCrest Capital Management LLP | |||
|
||||
By:
|
/s/ Peter Cox
|
|||
Name: Peter Cox | ||||
Title: Chief Operation Officer | ||||
|
||||
SPS COMMERCE, INC. | ||||
|
||||
By:
|
/s/ Kimberly K. Nelson
|
|||
Name: Kim Nelson | ||||
Title: CFO |
2
3
4
SPS COMMERCE, INC. | EMPLOYEE | |||||
|
||||||
By:
|
/s/ Archie Black | /s/ Archie Black | ||||
|
||||||
Name: Archie Black | Archie Black | |||||
Its: CEO |
5
2
3
4
SPS COMMERCE, INC. | EMPLOYEE | |||||
|
||||||
By:
|
/s/ Archie Black | /s/ James Frome | ||||
|
||||||
Name: Archie Black | James Frome | |||||
Its: CEO |
5
SPS Commerce, Inc. Form of Director Indemnification Agreement [VC Director] | Page 1 |
SPS Commerce, Inc. Form of Director Indemnification Agreement [VC Director] | Page 2 |
SPS Commerce, Inc. Form of Director Indemnification Agreement [VC Director] | Page 3 |
SPS Commerce, Inc. Form of Director Indemnification Agreement [VC Director] | Page 4 |
SPS Commerce, Inc. Form of Director Indemnification Agreement [VC Director] | Page 5 |
SPS Commerce, Inc. Form of Director Indemnification Agreement [VC Director] | Page 6 |
SPS Commerce, Inc. Form of Director Indemnification Agreement [VC Director] | Page 7 |
SPS Commerce, Inc. Form of Director Indemnification Agreement [VC Director]
Page 8
SPS Commerce, Inc. Form of Director Indemnification Agreement [VC Director]
Page 9
Attention: Chief Executive Officer
Accenture Tower
333 South Seventh Street, Suite 1000
Minneapolis, MN 55402
Fax: 612-435-9402
SPS Commerce, Inc. Form of Director Indemnification Agreement [VC Director]
Page 10
SPS Commerce, Inc. Form of Director Indemnification Agreement [VC Director]
Page 11
|
||||||
COMPANY | ||||||
|
||||||
|
By: | |||||
|
||||||
|
Archie C. Black | |||||
|
Chief Executive Officer | |||||
|
||||||
INDEMNITEE | ||||||
|
||||||
Name: | ||||||
|
||||||
Address: | ||||||
|
||||||
|
||||||
|
||||||
SPS Commerce, Inc. Form of Director Indemnification Agreement [VC Director] | Signature Page |
SPS Commerce, Inc. Form of Director Indemnification Agreement [Independent Director] | Page 1 |
SPS Commerce, Inc. Form of Director Indemnification Agreement [Independent Director] | Page 2 |
SPS Commerce, Inc. Form of Director Indemnification Agreement [Independent Director] | Page 3 |
SPS Commerce, Inc. Form of Director Indemnification Agreement [Independent Director] | Page 4 |
SPS Commerce, Inc. Form of Director Indemnification Agreement [Independent Director] | Page 5 |
SPS Commerce, Inc. Form of Director Indemnification Agreement [Independent Director] | Page 6 |
SPS Commerce, Inc. Form of Director Indemnification Agreement [Independent Director] | Page 7 |
SPS Commerce, Inc. Form of Director Indemnification Agreement [Independent Director]
Page 8
SPS Commerce, Inc. Form of Director Indemnification Agreement [Independent Director]
Page 9
SPS Commerce, Inc. Form of Director Indemnification Agreement [Independent Director] | Page 10 |
|
||||||
COMPANY | ||||||
|
||||||
|
By: | |||||
|
||||||
|
Archie C. Black | |||||
|
Chief Executive Officer | |||||
|
||||||
INDEMNITEE | ||||||
|
||||||
Name: | ||||||
|
||||||
Address: | ||||||
|
||||||
|
||||||
|
||||||
SPS Commerce, Inc. Form of Director Indemnification Agreement [Independent Director] | Signature 11 |
SPS Commerce, Inc. Director Indemnification Agreement [Black] | Page 1 |
SPS Commerce, Inc. Director Indemnification Agreement [Black] | Page 2 |
SPS Commerce, Inc. Director Indemnification Agreement [Black] | Page 3 |
SPS Commerce, Inc. Director Indemnification Agreement [Black] | Page 4 |
SPS Commerce, Inc. Director Indemnification Agreement [Black] | Page 5 |
SPS Commerce, Inc. Director Indemnification Agreement [Black] | Page 6 |
SPS Commerce, Inc. Director Indemnification Agreement [Black] | Page 7 |
SPS Commerce, Inc. Director Indemnification Agreement [Black] | Page 8 |
SPS Commerce, Inc. Director Indemnification Agreement [Black] | Page 9 |
SPS Commerce, Inc. Director Indemnification Agreement [Black] | Page 10 |
|
||||||
COMPANY | ||||||
|
||||||
|
By: | |||||
|
||||||
|
Name: | |||||
|
||||||
|
Its: | |||||
|
||||||
|
||||||
INDEMNITEE | ||||||
|
||||||
Name: Archie C. Black | ||||||
|
||||||
Address: | ||||||
c/o SPS Commerce, Inc. | ||||||
Accenture Tower | ||||||
333 South Seventh Street, Suite 1000 | ||||||
Minneapolis, MN 55402 |
SPS Commerce, Inc. Director Indemnification Agreement [Black] | Signature Page |