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-1.1 | ||||||||
EX-3.2 | ||||||||
EX-4.1 | ||||||||
EX-10.6 | ||||||||
EX-10.7 | ||||||||
EX-10.8 | ||||||||
EX-10.20 | ||||||||
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EX-10.22 | ||||||||
EX-10.23 | ||||||||
EX-23.1 |
1
Table of Contents
increasing retailer service and performance demands;
globalization of the supply chain ecosystem;
increasing complexity of the supply chain ecosystem; and
increasing use of outsourcing by small- and medium-sized
suppliers.
Trading Partner Integration.
Our Trading Partner
Integration solution enables suppliers to comply with
retailers rule books and allows 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.
2
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further penetrating our current market;
increasing revenues from our customer base;
expanding our distribution channels;
expanding our international presence;
enhancing and expanding our platform; and
selectively pursuing strategic acquisitions.
3
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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 $594,000 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
4
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6
(In thousands, except per share and recurring revenue customer
data)
5
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Year Ended December 31,
2007
2008
2009
$
25,198
$
30,697
$
37,746
6,379
9,258
11,715
18,819
21,439
26,031
11,636
12,493
13,506
3,546
3,640
4,305
5,458
6,716
6,339
20,640
22,849
24,150
(1,821
)
(1,410
)
1,881
(439
)
(419
)
(270
)
120
28
(358
)
(319
)
(391
)
(628
)
(16
)
(94
)
(91
)
$
(2,156
)
$
(1,895
)
$
1,162
$
(3.12
)
$
(1.72
)
$
0.94
$
(3.12
)
$
(1.72
)
$
0.03
692
1,101
1,232
692
1,101
34,711
Year Ended December 31,
2007
2008
2009
(Unaudited)
$
103
$
763
3,206
9,496
10,076
11,003
As of December 31,
As of December 31, 2009
Pro Forma
2008
2009
Pro Forma
As Adjusted
(Unaudited)
$
3,715
$
5,931
$
5,931
3,995
4,973
4,973
4,471
2,694
2,694
65,964
65,778
(61,844
)
(60,466
)
5,312
(1)
Includes stock-based compensation
expense as follows:
Year Ended December 31,
2007
2008
2009
$
2
$
19
$
53
33
60
91
2
4
4
9
74
80
$
46
$
157
$
228
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(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:
Year Ended December 31,
2007
2008
2009
(Unaudited)
$
(2,156
)
$
(1,895
)
$
1,162
1,758
1,988
1,455
439
419
270
16
94
91
57
606
2,978
46
157
228
$
103
$
763
$
3,206
(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.
7
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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.
8
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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;
9
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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.
10
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11
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12
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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.
13
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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.
14
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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.
15
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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;
16
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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.
17
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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;
divide our board of directors into three classes;
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.
18
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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.
19
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| repay approximately $69,000 of indebtedness under equipment term loans that bear interest at a rate of 12.0% per annum and mature in the year ending December 31, 2010; | |
| repay approximately $346,000 of indebtedness under equipment term loans that bear interest at rates between 11.9% and 12.5% per annum and mature in the year ending December 31, 2011; and | |
| repay approximately $179,000 of indebtedness under equipment term loans that bear interest at a rate of 11.8% per annum and mature on January 1, 2012. |
20
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 December 31, 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 $594,000 of
indebtedness under our equipment term loans, as if each had
occurred as of December 31, 2009.
As of December 31, 2009
Pro Forma
Actual
Pro Forma
As Adjusted
(In thousands, except share data)
$
5,931
$
5,931
$
11,290
11,290
5,317
5,317
37,676
20,658
7,444
65,778
1
32
5,185
70,932
(65,652
)
(65,652)
(60,466
)
5,312
$
21,919
$
21,919
$
21
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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
reserved for issuance under our 2010 Equity Incentive Plan,
subject to increase on an annual basis and subject to increase
for shares subject to awards under our prior equity plans that
expire unexercised or otherwise do not result in the issuance of
shares; and
the shares
of common stock subject to the underwriters over-allotment
option.
22
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$
$
$
$
$
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;
23
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an aggregate
of shares
reserved for issuance under our 2010 Equity Incentive Plan,
subject to increase on an annual basis and subject to increase
for shares subject to awards under our prior equity plans that
expire unexercised or otherwise do not result in the issuance of
shares; and
the
shares of common stock subject to the underwriters
over-allotment option.
24
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26
Year Ended December 31,
2005
2006
2007
2008
2009
(In thousands, except per share data)
$
13,827
$
19,859
$
25,198
$
30,697
$
37,746
3,823
5,219
6,379
9,258
11,715
10,004
14,640
18,819
21,439
26,031
5,034
8,098
11,636
12,493
13,506
2,129
3,190
3,546
3,640
4,305
3,180
4,199
5,458
6,716
6,339
10,343
15,487
20,640
22,849
24,150
(339
)
(847
)
(1,821
)
(1,410
)
1,881
(299
)
(558
)
(439
)
(419
)
(270
)
(15
)
108
120
28
(358
)
(314
)
(450
)
(319
)
(391
)
(628
)
(23
)
(4
)
(16
)
(94
)
(91
)
$
(676
)
$
(1,301
)
$
(2,156
)
$
(1,895
)
$
1,162
$
(1.78
)
$
(2.93
)
$
(3.12
)
$
(1.72
)
$
0.94
$
(1.78
)
$
(2.93
)
$
(3.12
)
$
(1.72
)
$
0.03
379
444
692
1,101
1,232
379
444
692
1,101
34,711
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As of December 31, 2009
As of December 31,
Pro
Pro Forma
2005
2006
2007
2008
2009
Forma
As Adjusted
(In thousands)
(Unaudited)
$
1,609
$
1,942
$
6,117
$
3,715
$
5,931
$
5,931
(234)
(647)
4,535
3,995
4,973
4,973
6,767
12,228
20,687
19,197
21,919
21,919
2,719
5,167
5,550
5,950
5,317
5,317
2,675
5,018
4,992
4,471
2,694
2,694
56,072
58,520
65,964
65,964
65,778
$
(56,758)
$
(58,046)
$
(60,111)
$
(61,844)
$
(60,466)
$
5,312
Year Ended December 31,
2005
2006
2007
2008
2009
(Unaudited; Adjusted EBITDA in thousands)
$
385
$
748
$
103
$
763
3,206
6,056
7,940
9,496
10,076
11,003
(1)
Includes stock-based compensation expense as follows:
Year Ended December 31,
2005
2006
2007
2008
2009
(In thousands)
$
$
$
2
$
19
$
53
33
60
91
2
4
4
6
9
74
80
$
$
6
$
46
$
157
$
228
(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)
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,
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
Table of Contents
capital structure and the method by which assets were acquired.
The following table provides a reconciliation of net income
(loss) to Adjusted EBITDA:
Year Ended December 31,
2005
2006
2007
2008
2009
(Unaudited; in thousands)
$
(676
)
$
(1,301
)
$
(2,156
)
$
(1,895
)
$
1,162
739
1,481
1,758
1,988
1,455
299
558
439
419
270
23
4
16
94
91
385
742
57
606
2,978
6
46
157
228
$
385
$
748
$
103
$
763
$
3,206
(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.
27
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RESULTS OF OPERATIONS
28
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29
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Year Ended December 31,
2007
2008
2009
(Unaudited; in thousands)
$
(2,156)
$
(1,895)
$
1,162
1,758
1,988
1,455
439
419
270
16
94
91
57
606
2,978
46
157
228
$
103
$
763
$
3,206
30
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31
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Year Ended December 31,
2007
2008
2009
4.4%
4.0%
2.7% - 4.0%
8
7
4-7
52%
53%
49%-53%
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.
32
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Number of
Per Share
Fair Value(s)
Black-Scholes
Options
Exercise
Estimate
Value(s) per
Granted
Price(s)
per Share
Valuation Date(s)
Share
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
3,000
$
0.99
$
0.99
October 22, 2009
$
2.00
(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)
On July 23, 2009, we unilaterally amended the terms of
890,364 stock options granted to 17 employees and one
director 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
33
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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;
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.
34
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), ($134,000) 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 ($134,000), ($287,000) and
($54,000).
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
35
Table of Contents
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.
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
income (loss) for each of the three most recently completed
quarters were ($287,000), ($54,000) and $657,000.
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
36
Table of Contents
committee nor the board of directors had held any substantive
discussions with potential underwriters 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.
Results of Operations:
Our cash and cash
equivalents and short-term investments balances of
$5.8 million as of September 30, 2009 were not
sufficient to sustain long-term growth and provide cash to
invest in operations. Our revenues grew from $8.1 million
for the three months ended September 30, 2008 to
$9.6 million for the three months ended September 30,
2009. At the same time, our income (loss) for each of the three
most recently completed quarters was ($54,000), $657,000 and
$346,000.
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, 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. In early October 2009, the
board of directors received feedback from potential underwriters
that we were a potentially viable candidate for an initial
public offering, but the board was unsure if it would proceed
with such an offering and therefore did not change any of the
Key Valuation Considerations at that time.
37
Table of Contents
38
Table of Contents
Year Ended December 31,
2007
2008
2009
(In thousands)
$
25,198
$
30,697
$
37,746
6,379
9,258
11,715
18,819
21,439
26,031
11,636
12,493
13,506
3,546
3,640
4,305
5,458
6,716
6,339
20,640
22,849
24,150
(1,821
)
(1,410
)
1,881
(439
)
(419
)
(270
)
120
28
(358
)
(319
)
(391
)
(628
)
(16
)
(94
)
(91
)
$
(2,156
)
$
(1,895
)
$
1,162
Year Ended December 31,
2007
2008
2009
100%
100%
100%
25
30
31
75
70
69
46
41
36
14
12
11
22
22
17
82
75
64
(7)
(5)
5
(2)
(1)
(1)
(1)
(2)
(1)
(2)
(9)%
(6)%
3%
39
Table of Contents
40
Table of Contents
41
Table of Contents
Three Months Ended
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
September 30,
December 31,
2008
2008
2008
2008
2009
2009
2009
2009
(Unaudited; in thousands)
$
6,957
$
7,586
$
8,074
$
8,080
$
8,531
$
9,600
$
9,634
$
9,981
1,986
2,199
2,435
2,638
2,837
2,896
3,009
2,973
4,971
5,387
5,639
5,442
5,694
6,704
6,625
7,008
marketing (1)
3,162
3,240
3,101
2,990
3,075
3,397
3,533
3,501
949
954
875
862
1,044
1,059
1,123
1,079
1,639
1,669
1,684
1,724
1,652
1,514
1,505
1,668
5,750
5,863
5,660
5,576
5,771
5,970
6,161
6,248
(779
)
(476
)
(21
)
(134
)
(77
)
734
464
760
(112
)
(106
)
(104
)
(97
)
(89
)
(75
)
(61
)
(45
)
(21
)
29
(6
)
26
123
(2
)
(8
)
(471
)
(133
)
(77
)
(110
)
(71
)
34
(77
)
(69
)
(516
)
(7
)
(2
)
(3
)
(82
)
(11
)
(49
)
(31
)
$
(919
)
$
(555
)
$
(134
)
$
(287
)
$
(54
)
$
657
$
346
$
213
$
(259
)
$
76
$
504
$
442
$
536
$
1,103
$
861
$
706
42
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,
2008
2008
2008
2008
2009
2009
2009
2009
(Unaudited; in thousands)
$
4
$
4
$
4
$
7
$
12
$
11
$
20
$
10
14
15
15
16
15
17
42
17
1
1
1
1
1
1
1
1
17
17
17
23
20
21
16
23
$
36
$
37
$
37
$
47
$
48
$
50
$
79
$
51
(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,
2008
2008
2008
2008
2009
2009
2009
2009
(Unaudited; in thousands)
$
(919
)
$
(555
)
$
(134
)
$
(287)
$
(54
)
$
657
$
346
$
213
505
486
494
503
442
321
326
366
112
106
104
97
89
75
61
45
7
2
3
82
11
49
31
(295
)
39
467
395
488
1,053
782
655
36
37
37
47
48
50
79
51
$
(259
)
$
76
$
504
$
442
$
536
$
1,103
$
861
$
706
43
Table of Contents
Three Months Ended
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
September 30,
December 31,
2008
2008
2008
2008
2009
2009
2009
2009
(Unaudited)
100
%
100
%
100
%
100
%
100
%
100
%
100
%
100
%
29
29
30
33
33
30
31
30
71
71
70
67
67
70
69
70
45
43
38
37
36
35
37
35
14
13
11
11
12
11
12
11
24
22
21
21
19
16
16
17
83
77
70
69
68
62
64
63
(11
)
(6
)
(2
)
(1
)
8
5
7
(2
)
(1
)
(1
)
(1
)
(1
)
(1
)
(1
)
1
(5
)
(2
)
(1
)
(1
)
(1
)
(1
)
(1
)
(5
)
(1
)
(1
)
(13
)%
(7
)%
(2
)%
(4
)%
(1
)%
7
%
4
%
2
%
44
Table of Contents
45
Table of Contents
46
Table of Contents
Payments Due by Period
Less Than
More Than
Total
1 Year
1-3 Years
3-5 Years
5 Years
(In thousands)
$
732
$
499
$
233
$
$
$
460
338
122
$
2,229
776
1,453
$
4,135
$
7,556
$
1,613
$
1,808
$
$
(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.
47
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
.
48
Table of Contents
49
| 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, |
50
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. |
51
| More reliable and faster integration with retailers by leveraging our expertise to comply with retailers rule book requirements; |
52
| 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. | |
| 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. |
53
| 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. | |
| Supplier Sales. We employ a team of supplier sales representatives based in North America. We also maintain an office in China with sales representatives and opened direct sales offices in the United Kingdom and France in February 2010. Our 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. |
54
| 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. As part of this plan, we opened direct sales and support offices in the United Kingdom and France in February 2010. We 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. | |
| 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. |
55
| breadth of pre-built connections to retailers, third-party logistics providers and other trading partners; |
56
| 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. |
57
58
Name
|
Age
|
Position
|
||||
Archie C. Black
|
47 | Chief Executive Officer, President and Director | ||||
Kimberly K. Nelson
|
42 | Executive Vice President and Chief Financial Officer | ||||
James J. Frome
|
45 | Executive Vice President and Chief Strategy Officer | ||||
Michael J. Gray
|
50 | Executive Vice President of Operations | ||||
David J. Novak, Jr.
|
41 | Executive Vice President of Business Development | ||||
Steve A. Cobb
|
38 | Chairman of the Board of Directors | ||||
Michael B. Gorman
|
44 | Director | ||||
Martin J. Leestma
|
52 | Director | ||||
George H. Spencer, III
|
46 | Director | ||||
Sven A. Wehrwein
|
59 | Director | ||||
Murray R. Wilson
|
48 | Director |
59
60
| The Class I directors will be Messrs. Gorman and Wilson and their terms will expire at the annual meeting of stockholders to be held in 2011; | |
| The Class II directors will be Messrs. Black and Spencer and their terms will expire at the annual meeting of stockholders to be held in 2012; and | |
| The Class III directors will be Messrs. Cobb, Leestma and Wehrwein and their terms will expire at the annual meeting of stockholders to be held in 2013. |
Nominating and Governance
|
||||
Audit Committee | Committee | Compensation Committee | ||
Sven A. Wehrwein, Chairperson
|
Steve A. Cobb, Chairperson | George H. Spencer, III, Chairperson | ||
Martin J. Leestma
|
Sven A. Wehrwein | Michael B. Gorman | ||
George H. Spencer, III
|
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. |
61
Option Awards (1)
|
Total
|
|||||||
Name
|
($) | ($) | ||||||
Steve A. Cobb
|
| | ||||||
Michael B. Gorman
|
| | ||||||
Martin J. Leestma
|
| | ||||||
George H. Spencer, III
|
| | ||||||
Murray R. Wilson
|
| | ||||||
Sven A. Wehrwein
|
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 G 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. |
62
Committee Chair
|
Annual Cash Fee | |||
Audit
|
$ | 11,000 | ||
Compensation
|
$ | 8,000 | ||
Nominating and Governance
|
$ | 5,000 |
Non-Chair
|
||||
Committee Members
|
Annual Cash Fee | |||
Audit
|
$ | 5,000 | ||
Compensation
|
$ | 4,000 | ||
Nominating and Governance
|
$ | 2,000 |
63
64
65
66
Non-Equity
|
||||||||||||||||||||||||||||
Option
|
Incentive Plan
|
All Other
|
||||||||||||||||||||||||||
Salary
|
Bonus
|
Awards
|
Compensation
|
Compensation
|
Total
|
|||||||||||||||||||||||
Name and Principal Position
|
Year | ($) | ($) | ($) | ($) | ($)(1) | ($) | |||||||||||||||||||||
Archie C. Black
|
2009 | 276,000 | 29,728 | | 100,579 | 2,827 | 409,134 | |||||||||||||||||||||
Chief Executive Officer and President
|
||||||||||||||||||||||||||||
Kimberly K. Nelson
|
2009 | 215,000 | 23,625 | 22,550 | (2) | 79,931 | 3,110 | 344,216 | ||||||||||||||||||||
Executive Vice President and Chief Financial Officer
|
||||||||||||||||||||||||||||
James J. Frome
|
2009 | 215,000 | 24,800 | 28,431 | (2) | 83,908 | 3,123 | 355,262 | ||||||||||||||||||||
Executive Vice President and Chief Strategy Officer
|
||||||||||||||||||||||||||||
Michael J. Gray
|
2009 | 184,000 | 15,000 | 113,790 | (3) | 50,750 | | 363,540 | ||||||||||||||||||||
Executive Vice President of Operations
|
||||||||||||||||||||||||||||
David J. Novak, Jr.
|
2009 | 215,000 | 23,625 | | 79,931 | 1,745 | 320,301 | |||||||||||||||||||||
Executive Vice President of Business Development
|
(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 G 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 G to the financial statements in this prospectus. |
67
All Other
|
||||||||||||||||||||||||||
Option
|
||||||||||||||||||||||||||
Awards:
|
||||||||||||||||||||||||||
Estimated Future Payouts
|
Number
|
Exercise or
|
Grant Date
|
|||||||||||||||||||||||
Under Non-Equity Incentive
|
Securities
|
Base Price
|
Fair Value
|
|||||||||||||||||||||||
Plans |
Underlying
|
of Option
|
of Stock
|
|||||||||||||||||||||||
Threshold
|
Target
|
Maximum
|
Options
|
Awards
|
and Option
|
|||||||||||||||||||||
Name
|
Grant Date
|
($) | ($) | ($) | (#) | ($/Sh) | Awards | |||||||||||||||||||
Archie C. Black
|
January 30, 2009 | 38,151 | 99,093 | 130,307 | | | | |||||||||||||||||||
Kimberly K. Nelson
|
January 30, 2009 | 30,319 | 78,750 | 103,556 | | | | |||||||||||||||||||
July 23, 2009 | | | | 500,000 | (1) | 0.81 | 22,500 | |||||||||||||||||||
James J. Frome
|
January 30, 2009 | 31,827 | 82,668 | 108,709 | | | | |||||||||||||||||||
July 23, 2009 | | | | 140,364 | (1) | 0.81 | 28,431 | |||||||||||||||||||
Michael J. Gray
|
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 | |||||||||||||||||||
David J. Novak, Jr.
|
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. |
68
Number of
|
Number of
|
|||||||||||||
Securities
|
Securities
|
|||||||||||||
Underlying
|
Underlying
|
|||||||||||||
Unexercised
|
Unexercised
|
Option
|
||||||||||||
Options (#)
|
Options (#)
|
Exercise
|
||||||||||||
Name
|
Exercisable (1) | Unexercisable (1) | Price ($)(1) |
Option Expiration Date
|
||||||||||
Archie C. Black
|
162,500 | | 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) | |||||||||||
144,000 | | 0.10 | December 31, 2014(6) | |||||||||||
404,938 | 36,832 | 0.10 | March 31, 2016(7) | |||||||||||
Kimberly K. Nelson
|
250,000 | 250,000 | 0.81 | November 27, 2017(8) | ||||||||||
James J. Frome
|
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) | |||||||||||
Michael J. Gray
|
| 300,000 | 0.65 | March 31, 2019(14) | ||||||||||
David J. Novak, Jr.
|
302,802 | 197,198 | 0.78 | June 30, 2017(15) |
(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. |
69
(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
|
|||||||
Name
|
Acquired on Exercise (#) | on Exercise ($) | ||||||
Archie C. Black
|
25,000 | 22,250(1 | ) |
(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. |
70
71
Salary, Bonus &
|
Health
|
Vesting of Unvested
|
||||||||||
Triggering Event
|
Unused Vacation | Benefits(1) | Stock Options | |||||||||
Termination Without Cause or for Good Reason
|
$ | 302,538 | $ | 6,212 | | |||||||
Permanent Disability
|
| $ | 6,212 | | ||||||||
Change in Control Without Related Termination
|
$ | 45,600 | | $ | 16,390 | |||||||
Change in Control With Related Termination
|
$ | 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. |
Vesting of Unvested
|
||||||||
Triggering Event
|
Salary | Stock Options | ||||||
Termination Without Cause or for Good Reason Unrelated to Change
in Control
|
$ | 107,500 | | |||||
Termination Without Cause or for Good Reason Related to Change
in Control
|
$ | 215,000 | | |||||
Change in Control Without Related Termination
|
| 22,500 | ||||||
Change in Control With Related Termination
|
| 45,000 |
72
Vesting of Unvested
|
||||||||
Triggering Event
|
Salary & Bonus | Stock Options | ||||||
Termination Without Cause or for Good Reason
|
$ | 107,500 | | |||||
Termination Without Cause or for Good Reason Related to Change
in Control
|
$ | 215,000 | | |||||
Change in Control Without Related Termination
|
$ | 46,000 | $ | 939 | ||||
Change in Control With Related Termination
|
$ | 46,000 | $ | 1,878 |
Vesting of Unvested
|
||||||||
Triggering Event
|
Salary | Stock Options | ||||||
Termination Without Cause or for Good Reason
|
$ | 92,000 | | |||||
Termination Without Cause or for Good Reason Related to Change
in Control
|
$ | 184,000 | | |||||
Change in Control Without Related Termination
|
| 51,000 | ||||||
Change in Control With Related Termination
|
| 102,000 |
Vesting of Unvested
|
||||||||
Triggering Event
|
Salary | Stock Options | ||||||
Termination Without Cause or for Good Reason
|
$ | 107,500 | | |||||
Termination Without Cause or for Good Reason Related to Change
in Control
|
$ | 215,000 | | |||||
Change in Control Without Related Termination
|
| $ | 20,706 | |||||
Change in Control With Related Termination
|
| $ | 41,412 |
73
| 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 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 |
74
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. |
75
76
77
78
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
79
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80
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82
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
)
%
%
%
81
Table of Contents
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)
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
(12
)
%
%
%
*
Indicates ownership of less than 1%.
(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
Table of Contents
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
special consultant to 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.
(12)
Includes shares
held by Ronald Karlsberg as trustee for the benefit of R.P.
Karlsberg Cardiovascular Medical Group of Southern California
401K Profit Sharing Plan, dated 1/1/1989.
83
Table of Contents
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.
84
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85
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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.
provide for our board of directors to be divided into three
classes with staggered three-year terms, with only one class of
directors being elected at each annual meeting of our
stockholders and the other classes continuing for the remainder
of their respective three-year terms;
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
86
Table of Contents
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.
87
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88
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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.
89
Table of Contents
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;
90
Table of Contents
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.
91
Table of Contents
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.
92
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.
93
Table of Contents
Total
Without
Without
Per Share
Over-Allotment
Over-Allotment
$
$
$
94
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95
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96
Table of Contents
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-23
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
December 31,
2007
2008
2009
$
25,198
$
30,697
$
37,746
6,379
9,258
11,715
18,819
21,439
26,031
11,636
12,493
13,506
3,546
3,640
4,305
5,458
6,716
6,339
20,640
22,849
24,150
(1,821
)
(1,410
)
1,881
(439
)
(419
)
(270
)
120
28
(358
)
(319
)
(391
)
(628
)
(16
)
(94
)
(91
)
$
(2,156
)
$
(1,895
)
$
1,162
$
(3.12
)
$
(1.72
)
$
0.94
$
(3.12
)
$
(1.72
)
$
0.03
692
1,101
1,232
692
1,101
34,711
F-4
Table of Contents
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS DEFICIT
(In thousands, except share amounts)
Redeemable Convertible Preferred Stock
Stockholders Deficit
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
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
)
228
228
58,580
2
2
(266,406
)
(186
)
(186
)
(73,679
)
(14
)
(14
)
1,162
1,162
4,322,708
$
37,676
21,303,838
$
20,658
4,687,500
$
7,444
$
65,778
1,225,459
$
1
$
5,185
$
(65,652
)
$
(60,466
)
F-5
Table of Contents
STATEMENTS OF CASH FLOWS
(In thousands)
For the Year Ended
December 31,
2007
2008
2009
$
(2,156
)
$
(1,895
)
$
1,162
1,729
1,963
1,445
151
396
439
29
25
10
46
157
228
68
45
381
57
33
(800
)
(811
)
(641
)
54
232
(655
)
(6
)
(8
)
(6
)
(2,885
)
(1,659
)
(98
)
520
(319
)
541
(101
)
(4
)
(34
)
1,849
1,526
844
82
28
658
(510
)
1,121
(65
)
27
(112
)
49
(87
)
505
(803
)
(807
)
5,158
(1,123
)
(884
)
(1,000
)
1,263
(1,263
)
(2,386
)
379
(1,000
)
3,125
10,425
16,325
(2,875
)
(10,125
)
(16,125
)
756
855
(432
)
(721
)
(730
)
(553
)
(621
)
(679
)
45
5
2
(117
)
(529
)
(534
)
6,152
(201
)
6,101
(711
)
(1,942
)
2,912
(1,139
)
2,216
1,942
4,854
3,715
$
4,854
$
3,715
5,931
$
512
$
374
$
285
$
1,407
$
166
$
$
1,292
$
$
F-6
Table of Contents
NOTE A
BUSINESS
DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
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)
Years Ended December 31,
2007
2008
2009
$
(2,156
)
$
(1,895
)
$
1,162
691,700
1,100,628
1,232,395
2,963,650
30,514,762
691,700
1,100,628
34,710,807
$
(3.12
)
$
(1.72
)
$
0.94
$
(3.12
)
$
(1.72
)
$
0.03
Years Ended December 31,
2007
2008
2009
4,646,144
4,448,079
71,221
30,580,451
30,580,451
356,447
256,185
F-10
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
December 31,
2008
2009
Carrying
Accumulated
Carrying
Accumulated
Amount
Amortization
Net
Amount
Amortization
Net
$
1,930
$
1,822
$
108
$
1,930
$
1,930
$
580
242
338
580
290
290
$
2,510
$
2,064
$
446
$
2,510
$
2,220
$
290
F-11
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
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.
Total
Level 1
Level 2
Level 3
$
5,931
$
5,931
$
$
$
569
$
$
$
569
$
143
45
188
381
$
569
F-12
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.
F-13
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
December 31,
2008
2009
$
114
$
119
(106
)
(115
)
$
8
$
4
December 31,
2008
2009
$
$
318
804
1,027
$
804
$
1,345
December 31,
2008
2009
$
$
377
567
694
$
567
$
1,071
F-14
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
2007
2008
2009
$
16
$
12
$
63
82
28
$
16
$
94
$
91
2007
2008
2009
$
(728
)
$
(612
)
$
420
(68
)
(52
)
52
47
16
13
16
53
67
23
15
129
729
614
(805
)
54
100
36
(3
)
60
25
$
16
$
94
$
91
F-15
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
2008
2009
$
125
$
115
252
285
377
400
(377
)
(400
)
$
$
$
19,867
$
19,096
530
761
789
527
21,186
20,384
(21,268
)
(20,494
)
$
82
$
110
F-16
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
December 31,
2008
2009
$
697
$
1,462
732
$
2,159
$
732
(18
)
2,141
732
(1,409
)
(499
)
$
732
$
233
499
224
9
$
732
F-17
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
December 31,
2008
2009
$
1,664
$
1,664
(795
)
(892
)
$
869
$
772
366
125
491
(31
)
460
338
$
122
776
787
666
$
2,229
F-18
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
F-19
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
Weighted-
Average
Options
Exercise
Outstanding
Price
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
1,270,364
0.76
(58,580
)
0.10
(984,739
)
2.10
4,675,124
$
0.40
F-20
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
Aggregate
Fair
Intrinsic
Number of
Per Share
Value(s)
Value of
Options
Exercise
Estimate
Options
Valuation
Granted
Price(s)
Per Share
Granted
Date(s)
309,000
$
0.92
$
0.92
$
664
February 10, 2009
374,000
$
0.65-$0.68
$
0.65-$0.68
$
903
April 1, 2009 and
April 22, 2009
893,364
$
0.81
$
0.81
$
2,019
July 23, 2009
3,000
$
0.99
$
0.99
$
6
October 22, 2009
(1)
On July 23, 2009, 890,364 options were modified to lower
the per share exercise price to $0.81.
Weighted-
Average
Weighted-
Weighted-
Remaining
Average
Average
Options
Contractual
Exercise
Options
Exercise
Outstanding
Life
Price
Exercisable
Price
2,819,424
4.3
$
0.10
2,796,952
$
0.10
1,784,479
7.6
0.76
825,886
0.78
70,540
1.7
2.05
70,540
2.05
100
0.8
60.00
100
60.00
581
0.2
102.40
581
102.40
4,675,124
5.5
$
0.40
3,694,059
$
0.31
2007
2008
2009
52.0
%
53.0
%
49% - 53%
0.0
%
0.0
%
0.0%
8.0
7.0
4.0 - 7.0
4.4
%
4.0
%
2.71% - 4.01%
F-21
Table of Contents
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share amounts)
F-22
Table of Contents
Charged to
Balance at
Revenue,
Beginning of
Cost or
Balance at
Period
Expenses
Deductions
End of Period
(In thousands)
$
241
$
150
$
(193
)
$
198
$
198
$
396
$
(286
)
$
308
$
308
$
439
$
(521
)
$
226
F-23
Table of Contents
,
2010
William
Blair & Company
Needham & Company, LLC
Table of Contents
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
*
common stock
December 22, 2009
25,000
$
2,500.00
*
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)
March 5, 2010
Executive Vice President and Chief Financial Officer
(principal financial and accounting officer)
March 5, 2010
Director
March 5, 2010
Director
March 5, 2010
Director
March 5, 2010
Director
March 5, 2010
Director
March 5, 2010
Director
March 5, 2010
*
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
Form of At-will Confidentiality Agreement Regarding Certain
Terms and Conditions of Employment for Kimberly K. Nelson, James
J. Frome, Michael J. Gray and David J. Novak, Jr.**
II-7
Table of Contents
10
.22
Warrant to Purchase Stock issued by the Company to Silicon
Valley Bank as of May 20, 2004
10
.23
Warrant issued by the Company to Ritchie Capital Finance, L.L.C.
as of February 3, 2006
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
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Very truly yours,
|
||||
26
SPS Commerce, Inc.
|
||||
By: | ||||
Name: | Kimberly Nelson | |||
Title: | Chief Financial Officer | |||
[Names of Selling Stockholders]
|
||||
By: | ||||
Name: | ||||
Title: | ||||
Thomas Weisel Partners LLC
|
||||
By: | ||||
Name: | ||||
Title: | ||||
SPS Commerce, Inc.: By-laws | Page 1 |
SPS Commerce, Inc.: By-laws | Page 2 |
SPS Commerce, Inc.: By-laws | Page 3 |
SPS Commerce, Inc.: By-laws | Page 4 |
SPS Commerce, Inc.: By-laws | Page 5 |
SPS Commerce, Inc.: By-laws | Page 6 |
SPS Commerce, Inc.: By-laws | Page 7 |
SPS Commerce, Inc.: By-laws | Page 8 |
SPS Commerce, Inc.: By-laws | Page 9 |
SPS Commerce, Inc.: By-laws | Page 10 |
SPS Commerce, Inc.: By-laws | Page 11 |
DE THIS CERTIFICATE IS TRANSFERABLE INCORPORATED UNDER THE LAWS OF THE STATE OF DALAWARE SEE REVERSE SIDE IN SOUTH SAINT PAUL, MN. FOR CERTAIN DEFINITIONS CUSIP 78463M 10 7 THIS CERTIFIES THAT is the owner of FULLY PAID AND NON-ASSESSABLE COMMON SHARES, $0.001 PAR VALUE, OF SPS COMMERCE, INC. transferable on the books of the Corporation by the holder hereof in person or by Attorney upon surrender of this certificate properly endorsed. This certificate is not valid until countersigned and registered by the Transfer Agent and Registrar. IN WITNESS WHEREOF, the said Corporation has caused this certificate to be signed by facsimile signatures of its duly authorized officers. Dated: SIG TO COME SIG TO COME TITLE TITLE COUNTERSIGNED AND REGISTERED: WELLS FORGO BANK, N.A. BY /s/ Illigeble TRANSFER AGENT AND REGISTRAR AUTHORIZED SIGNATURE AMERICAN FINANCIAL PRINTING INCORPORATED MINNEAPOLIS |
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM as tenants in common UTMA Custodian (Cust) (Minor) TEN ENT as tenants by entireties under Uniform Transfers to Minors JT TEN as joint tenants with right of survivorship Act and not as tenants in common (State) Additional abbreviations may also be used though not in above list. For value received hereby sell, assign, and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE) Shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint Attorney to transfer the said stock on the books of the within-named Corporation with full power of substitution in the premises. Dated X X NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. SIGNATURE GUARANTEED ALL GUARANTEES MUST BE MADE BY A FINANCIAL INSTITUTION (SUCH AS A BANK OR BROKER) WHICH IS A PARTICIPANT IN THE SECURITIES TRANSFER AGENTS MEDALLION PROGRAM (STAMP), THE NEW YORK STOCK EXCHANGE, INC. MEDALLION SIGNATURE PROGRAM (MSP), OR THE STOCK EXCHANGES MEDALLION PROGRAM (SEMP) AND MUST NOT BE DATED. GUARANTEES BY A NOTARY PUBLIC ARE NOT ACCEPTABLE. |
2010 Equity Incentive Plan | Page 1 |
2010 Equity Incentive Plan | Page 2 |
2010 Equity Incentive Plan | Page 3 |
2010 Equity Incentive Plan | Page 4 |
2010 Equity Incentive Plan | Page 5 |
2010 Equity Incentive Plan | Page 6 |
2010 Equity Incentive Plan | Page 7 |
2010 Equity Incentive Plan | Page 8 |
2010 Equity Incentive Plan | Page 9 |
2010 Equity Incentive Plan | Page 10 |
2010 Equity Incentive Plan | Page 11 |
2010 Equity Incentive Plan | Page 12 |
2010 Equity Incentive Plan | Page 13 |
2010 Equity Incentive Plan | Page 14 |
Name of Optionee:
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No. of Shares Covered:
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Date of Grant: , 20 | |
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Exercise Price Per Share: $
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Expiration Date: , 20 | |
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Vesting and Exercise Schedule:
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Dates
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Portion of Covered Shares as to Which
Option Becomes Vested and Exercisable |
OPTIONEE: | SPS COMMERCE, INC. | ||||
By: | |||||
Title: | |||||
Incentive Stock Option Agreement (2010 Equity Incentive Plan) | Page 1 |
1. | Incentive Stock Option . This Option is intended to be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code (the Code) and will be interpreted accordingly. To the extent that, for any reason, the Option does not qualify as an incentive stock option under Code Section 422, the Option will be treated as a non-statutory stock option, subject to the tax consequences applicable to such options. |
2. | Vesting and Exercise Schedule . This Option will vest and become exercisable as to the number of Shares and on the dates specified in the Vesting and Exercise Schedule on the cover page to this Agreement, so long as your Service to the Company does not end. The Vesting and Exercise Schedule is cumulative, meaning that to the extent the Option has not already been exercised and has not expired, terminated or been cancelled, you or the person otherwise entitled to exercise the Option as provided in this Agreement may at any time purchase all or any portion of the Shares that may then be purchased under that Schedule. |
**[Notwithstanding the foregoing, if and to the extent this Option is continued, assumed or replaced in connection with a Change in Control that constitutes a Corporate Transaction, and if within one year after the Corporate Transaction you experience an involuntary termination of Service for reasons other than Cause, then this Option shall immediately become exercisable in full and shall remain exercisable for one year following your termination of Service.] |
In addition, vesting and exercisability of this Option may be accelerated during the term of the Option under the circumstances described in Section 12(c) of the Plan, and at the discretion of the Committee in accordance with Section 3(b)(2) of the Plan. |
3. | Expiration . This Option will expire and will no longer be exercisable at 5:00 p.m. Central Time on the earliest of: |
(a) | The expiration date specified on the cover page of this Agreement; | ||
(b) | Upon your termination of Service for Cause; | ||
(c) | Upon the expiration of any applicable period specified in Section 6(e) of the Plan or Section 2 of this Agreement during which this Option may be exercised after your termination of Service; or | ||
(d) | The date (if any) fixed for termination or surrender of this Option pursuant to Sections 12(b)(3), (c) or (d) of the Plan. |
4. | Service Requirement . Except as otherwise provided in Section 6(e) of the Plan or Section 2 of this Agreement, this Option may be exercised only while you continue to provide Service to the Company or any Affiliate, and only if you have continuously provided such Service since the date this Option was granted. |
* | 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. |
Incentive Stock Option Agreement (2010 Equity Incentive Plan) | Page 2 |
5. | Exercise of Option . Subject to Section 4, the vested and exercisable portion of this Option may be exercised at any time during the Option term by delivering a written notice of exercise to the Company at its principal executive office, and by providing for payment of the exercise price of the Shares being acquired and any related withholding taxes. The notice of exercise, in the form attached to this Agreement, shall be provided to the Companys Chief Financial Officer. The notice shall state the number of Shares to be purchased, and shall be signed by the person exercising the Option. If you are not the person exercising the Option, the person submitting the notice also must submit appropriate proof of his/her right to exercise the Option. |
6. | Payment of Exercise Price . When you submit your notice of exercise, you must include payment of the exercise price of the Shares being purchased through one or a combination of the following methods: |
(a) | Cash (including personal check, cashiers check or money order); | ||
(b) | To the extent permitted by the Committee, by means of a broker-assisted cashless exercise in which you irrevocably instruct your broker to deliver proceeds of a sale of all or a portion of the Shares to be issued pursuant to the exercise to the Company in payment of the exercise price of such Shares; or | ||
(c) | By delivery to the Company of Shares (by actual delivery or attestation of ownership in a form approved by the Company) already owned by you that are not subject to any security interest and that have an aggregate Fair Market Value on the date of exercise equal to the exercise price of the Shares being purchased. |
However, if the Committee determines, in any given circumstance, that payment of the exercise price with Shares is undesirable for any reason, you will not be permitted to pay any portion of the exercise price in that manner. |
7. | Tax Consequences . You hereby acknowledge 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 this 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 you pursuant to an incentive stock option as defined in the Code. You agree to promptly agree to notify the Company if you sell any Shares received upon the exercise of this Option within the time periods specified in the previous sentence. The Company shall not be liable to you if this Option for any reason is deemed not to be an incentive stock option within the meaning of the Code. |
8. | Delivery of Shares . As soon as practicable after the Company receives the notice and exercise price provided for above, and has determined that all conditions to exercise, including Sections 7 and 9 of this Agreement, have been satisfied, it shall deliver to the person exercising the Option, in the name of such person, the Shares being purchased, as evidenced by issuance of a stock certificate or certificates, electronic delivery of such Shares to a brokerage account designated by such person, or book-entry registration of such Shares with the Companys transfer agent. 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. |
9. | Compliance with Laws . This Option may be exercised only if the issuance of Shares upon such exercise complies with all applicable legal requirements, including compliance with the provisions of applicable federal and state securities laws. |
Incentive Stock Option Agreement (2010 Equity Incentive Plan) | Page 3 |
10. | Transfer of Option . During your lifetime, only you (or your guardian or legal representative in the event of legal incapacity) may exercise this Option. You may not assign or transfer this Option except for a transfer upon your death in accordance with your will, by the laws of descent and distribution or pursuant to a beneficiary designation submitted in accordance with Section 6(d) of the Plan. The Option held by any such transferee will continue to be subject to the same terms and conditions that were applicable to the Option immediately prior to its transfer and may be exercised by such transferee as and to the extent that the Option has become exercisable and has not terminated in accordance with the provisions of the Plan and this Agreement. |
11. | No Stockholder Rights Before Exercise . Neither you nor any permitted transferee of this Option will have any of the rights of a stockholder of the Company with respect to any Shares subject to this Option until a certificate evidencing such Shares has been issued, electronic delivery of such Shares has been made to your designated brokerage account, or an appropriate book entry in the Companys stock register has been made. No adjustments shall be made for dividends or other rights if the applicable record date occurs before your stock certificate has been issued, electronic delivery of your Shares has been made to your designated brokerage account, or an appropriate book entry in the Companys stock register has been made, except as otherwise described in the Plan. |
12. | Governing Plan Document . This Agreement and Option are subject to all the provisions of the Plan, and to all interpretations, rules and regulations which may, from time to time, be adopted and promulgated by the Committee pursuant to the Plan. If there is any conflict between the provisions of this Agreement and the Plan, the provisions of the Plan will govern. |
13. | Choice of Law . This Agreement will be interpreted and enforced under the laws of the state of Delaware (without regard to its conflicts or choice of law principles). |
14. | Binding Effect . This Agreement will be binding in all respects on your heirs, representatives, successors and assigns , and on the successors and assigns of the Company. |
15. | Other Agreements . You agree that in connection with the exercise of this Option, you will execute such documents as may be necessary to become a party to any stockholder, voting or similar agreements as the Company may require. |
16. | Restrictive Legends . The Company may place a legend or legends on any certificate representing Shares issued upon the exercise of this Option summarizing transfer and other restrictions to which the Shares may be subject under applicable securities laws, other provisions of this Agreement, or other agreements contemplated by Section 15 of this Agreement. You agree that in order to ensure compliance with the restrictions referred to in this Agreement, the Company may issue appropriate stop transfer instructions to its transfer agent. |
Incentive Stock Option Agreement (2010 Equity Incentive Plan) | Page 4 |
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Name: | |
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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 Which
the Option is Hereby Exercised: |
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Total Exercise Price: | |
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o | Enclosed with this Notice is a check, cashiers check or money order in the amount of the Total Exercise Price. | ||
o | Enclosed with this Notice is a copy of my irrevocable instruction to my broker, , to deliver to the Company proceeds of the sale of some or all of the Shares being acquired in an amount equal to the Total Exercise Price. | ||
o | Enclosed with this Notice is a certificate evidencing unencumbered Shares (duly endorsed in blank) having an aggregate Fair Market Value (as defined in the Plan) equal to or in excess of the Total Exercise Price or an affidavit of ownership (in the form of Exhibit A attached hereto) attesting to my ownership of unencumbered Shares having an aggregate Fair Market Value (as defined in the Plan) equal to or in excess of the Total Exercise Price. |
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Issue a certificate (the Certificate) for the Shares in the name of the person(s) indicated below and deliver the Certificate to the address indicated: |
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Name(s) in Which to Issue Certificate: | |||
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Address to Which Certificate | |||
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Should be Delivered: | |||
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Principal Mailing Address for | |||
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Holder of the Certificate (if | |||
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Electronic delivery of the Shares to my brokerage account as indicated below: |
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Name of Brokerage Firm: | |||
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My Account Number: | |||
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Brokerage Firm DWAC Participant Number: | |||
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Create a book-entry registration of the Shares in the name of the person(s) indicated below: |
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Name(s) in Which to Create Book-Entry Registration: | |||
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Mailing Address for Book-Entry Holders: | |||
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Very truly yours,
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Signature
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Name, please print
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Social Security Number
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1. | I beneficially own shares of Company common stock (the Swap Shares ) as of the date hereof. These Swap Shares are: |
o | Held in my name individually and a photocopy of the stock certificate evidencing my ownership is attached. | ||
o | Held in my name and as joint tenants and a photocopy of the stock certificate evidencing ownership is attached. | ||
o | Held in a brokerage account in the name of . A photocopy of a brokerage statement of account, dated within the preceding two months and showing evidence of ownership of Company stock, is attached. (The option holder may block out information not relevant to Company stock ownership on the account statement.) |
2. | The Swap Shares are held by me as described above and are not held for my benefit by a Trustee or custodian in the SPS Commerce, Inc. 401(k) Retirement Savings Plan, in an IRA account or in any other type of employee benefit or tax deferral plan. |
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Date | Signature |
Name of Optionee: | ||||||||
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No. of Shares Covered:
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Date of Grant: | , 20 | ||||||
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Exercise Price Per Share:
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$ | Expiration Date: | , 20 | |||||
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Vesting and Exercise Schedule: | ||||||||
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Portion of Shares as to Which | ||||||||
Dates | Option Becomes Vested and Exercisable |
OPTIONEE: | SPS COMMERCE, INC. | |||||||
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By: | |||||||
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Title: | |||||||
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Non-Statutory Stock Option Agreement-Employee (2010 Equity Incentive Plan) | Page 1 |
1. | Non-Qualified Stock Option . This Option is not intended to be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code and will be interpreted accordingly. | |
2. | Vesting and Exercise Schedule . This Option will vest and become exercisable as to the number of Shares and on the dates specified in the Vesting and Exercise Schedule on the cover page to this Agreement, so long as your Service to the Company does not end. The Vesting and Exercise Schedule is cumulative, meaning that to the extent the Option has not already been exercised and has not expired, terminated or been cancelled, you or the person otherwise entitled to exercise the Option as provided in this Agreement may at any time purchase all or any portion of the Shares that may then be purchased under that Schedule. | |
** [ For Executive Officers: Notwithstanding the foregoing, if and to the extent this Option is continued, assumed or replaced in connection with a Change in Control that constitutes a Corporate Transaction, and if within one year after such Corporate Transaction you experience an involuntary termination of Service for reasons other than Cause, then this Option shall immediately become exercisable in full and shall remain exercisable for one year following your termination of Service.] | ||
In addition, vesting and exercisability of this Option may be accelerated during the term of the Option under the circumstances described in Section 12(c) of the Plan, and at the discretion of the Committee in accordance with Section 3(b)(2) of the Plan. | ||
3. | Expiration . This Option will expire and will no longer be exercisable at 5:00 p.m. Central Time on the earliest of: |
(a) | The expiration date specified on the cover page of this Agreement; | ||
(b) | Upon your termination of Service for Cause; | ||
(c) | Upon the expiration of any applicable period specified in Section 6(e) of the Plan or Section 2 of this Agreement during which this Option may be exercised after your termination of Service; or | ||
(d) | The date (if any) fixed for termination or surrender of this Option pursuant to Sections 12(b)(3), (c) or (d) of the Plan. |
4. | Service Requirement . Except as otherwise provided in Section 6(e) of the Plan or Section 2 of this Agreement, this Option may be exercised only while you continue to provide Service to the Company or any Affiliate, and only if you have continuously provided such Service since the date this Option was granted. | |
5. | Exercise of Option . Subject to Section 4, the vested and exercisable portion of this Option may be exercised at any time during the Option term by delivering a written notice of exercise to the Company at its principal executive office, and by providing for payment of the exercise price of the |
* | 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. |
Non-Statutory Stock Option Agreement-Employee (2010 Equity Incentive Plan) | Page 2 |
Shares being acquired and any related withholding taxes. The notice of exercise, in the form attached to this Agreement, shall be provided to the Companys Chief Financial Officer. The notice shall state the number of Shares to be purchased, and shall be signed by the person exercising the Option. If you are not the person exercising the Option, the person submitting the notice also must submit appropriate proof of his/her right to exercise the Option. | ||
6. | Payment of Exercise Price . When you submit your notice of exercise, you must include payment of the exercise price of the Shares being purchased through one or a combination of the following methods: |
(a) | Cash (including personal check, cashiers check or money order); | ||
(b) | To the extent permitted by the Committee, by means of a broker-assisted cashless exercise in which you irrevocably instruct your broker to deliver proceeds of a sale of all or a portion of the Shares to be issued pursuant to the exercise to the Company in payment of the exercise price of such Shares; or | ||
(c) | By delivery to the Company of Shares (by actual delivery or attestation of ownership in a form approved by the Company) already owned by you that are not subject to any security interest and that have an aggregate Fair Market Value on the date of exercise equal to the exercise price of the Shares being purchased; or | ||
(d) | By authorizing the Company to retain, from the total number of Shares as to which the Option is being exercised, that number of Shares having a Fair Market Value on the date of exercise equal to the exercise price for the total number of Shares as to which the Option is being exercised. |
However, if the Committee determines, in any given circumstance, that payment of the exercise price with Shares or by authorizing the Company to retain Shares is undesirable for any reason, you will not be permitted to pay any portion of the exercise price in that manner. | ||
7. | Withholding Taxes . You may not exercise this Option in whole or in part unless you make arrangements acceptable to the Company for payment of any federal, state, local or foreign withholding taxes that may be due as a result of the exercise of this Option. You hereby authorize the Company (or any Affiliate) to withhold from payroll or other amounts payable to you any sums required to satisfy such withholding tax obligations, and otherwise agree to satisfy such obligations in accordance with the provisions of Section 14 of the Plan. If you wish to satisfy some or all of such withholding tax obligations by delivering Shares you already own or by having the Company retain a portion of the Shares being acquired upon exercise of the Option, you must make such a request which shall be subject to approval by the Company. Delivery of Shares upon exercise of this Option is subject to the satisfaction of applicable withholding tax obligations. | |
8. | Delivery of Shares . As soon as practicable after the Company receives the notice and exercise price provided for above, and has determined that all conditions to exercise, including Sections 7 and 9 of this Agreement, have been satisfied, it shall deliver to the person exercising the Option, in the name of such person, the Shares being purchased, as evidenced by issuance of a stock certificate or certificates, electronic delivery of such Shares to a brokerage account designated by such person, or book-entry registration of such Shares with the Companys transfer agent. 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. |
Non-Statutory Stock Option Agreement-Employee (2010 Equity Incentive Plan) | Page 3 |
9. | Compliance with Laws . This Option may be exercised only if the issuance of Shares upon such exercise complies with all applicable legal requirements, including compliance with the provisions of applicable federal and state securities laws. | |
10. | Transfer of Option . During your lifetime, only you (or your guardian or legal representative in the event of legal incapacity) may exercise this Option except in the case of a transfer described below. You may not assign or transfer this Option except (i) for a transfer upon your death in accordance with your will, by the laws of descent and distribution or pursuant to a beneficiary designation submitted in accordance with Section 6(d) of the Plan, (ii) pursuant to a qualified domestic relations order, or (iii) with the prior written approval of the Company, by gift, in a form accepted by the Company, to a permitted transferred under General Instruction A(5) to Form S-8 under the Securities Act. The Option held by any such transferee will continue to be subject to the same terms and conditions that were applicable to the Option immediately prior to its transfer and may be exercised by such transferee as and to the extent that the Option has become exercisable and has not terminated in accordance with the provisions of the Plan and this Agreement. | |
11. | No Stockholder Rights Before Exercise . Neither you nor any permitted transferee of this Option will have any of the rights of a stockholder of the Company with respect to any Shares subject to this Option until a certificate evidencing such Shares has been issued, electronic delivery of such Shares has been made to your designated brokerage account, or an appropriate book entry in the Companys stock register has been made. No adjustments shall be made for dividends or other rights if the applicable record date occurs before your stock certificate has been issued, electronic delivery of your Shares has been made to your designated brokerage account, or an appropriate book entry in the Companys stock register has been made, except as otherwise described in the Plan. | |
12. | Governing Plan Document . This Agreement and Option are subject to all the provisions of the Plan, and to all interpretations, rules and regulations which may, from time to time, be adopted and promulgated by the Committee pursuant to the Plan. If there is any conflict between the provisions of this Agreement and the Plan, the provisions of the Plan will govern. | |
13. | Choice of Law . This Agreement will be interpreted and enforced under the laws of the state of Delaware (without regard to its conflicts or choice of law principles). | |
14. | Binding Effect . This Agreement will be binding in all respects on your heirs, representatives, successors and assigns , and on the successors and assigns of the Company. | |
15. | Other Agreements . You agree that in connection with the exercise of this Option, you will execute such documents as may be necessary to become a party to any stockholder, voting or similar agreements as the Company may require. | |
16. | Restrictive Legends . The Company may place a legend or legends on any certificate representing Shares issued upon the exercise of this Option summarizing transfer and other restrictions to which the Shares may be subject under applicable securities laws, other provisions of this Agreement, or other agreements contemplated by Section 15 of this Agreement. You agree that in order to ensure compliance with the restrictions referred to in this Agreement, the Company may issue appropriate stop transfer instructions to its transfer agent. |
Non-Statutory Stock Option Agreement-Employee (2010 Equity Incentive Plan) | Page 4 |
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Name: | |||
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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 Which the Option is Hereby Exercised: | |||
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Total Exercise Price: | |||
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o | Enclosed with this Notice is a check, cashiers check or money order in the amount of the Total Exercise Price. | ||
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o | Enclosed with this Notice is a copy of my irrevocable instruction to my broker, , to deliver to the Company proceeds of the sale of some or all of the Shares being acquired in an amount equal to the Total Exercise Price. | ||
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o | Enclosed with this Notice is a certificate evidencing unencumbered Shares (duly endorsed in blank) having an aggregate Fair Market Value (as defined in the Plan) equal to or in excess of the Total Exercise Price or an affidavit of ownership in the form of Exhibit A attached hereto attesting to my ownership of unencumbered Shares having an aggregate Fair Market Value (as defined in the Plan) equal to or in excess of the Total Exercise Price. | ||
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o | I elect to pay the Total Exercise Price through a reduction in the number of Shares to be delivered to me upon this exercise of the Option. |
| I will provide for the payment to the Company, in a manner agreed to by the Company, of the amount of any required withholding taxes in connection with this exercise as provided in Section 14 of the Plan. | ||
| I am the owner of all Shares delivered with this Notice or attested to on the attached affidavit of ownership, free and clear of all liens, security interests and other restrictions or encumbrances. |
o | Issue a certificate (the Certificate) for the Shares in the name of the person(s) indicated below and deliver the Certificate to the address indicated: | |||||||
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Name(s) in Which to Issue | |||||||
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Certificate: |
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Address to Which Certificate | |||||||
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o | Electronic delivery of the Shares to my brokerage account as indicated below: | |||||||
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Name of Brokerage Firm: | |||||||
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My Account Number: |
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Brokerage Firm DWAC Participant Number: |
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o | Create a book-entry registration of the Shares in the name of the person(s) indicated below: | |||||||
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Name(s) in Which to Create | |||||||
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Book-Entry Registration: |
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Mailing Address for Book- | |||||||
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Entry Holders: |
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Very truly yours, | |||
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1. | I beneficially own shares of Company common stock (the Swap Shares ) as of the date hereof. These Swap Shares are: | |||
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[ ] | Held in my name individually and a photocopy of the stock certificate evidencing my ownership is attached. | ||
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[ ] | Held in my name and as joint tenants and a photocopy of the stock certificate evidencing ownership is attached. | ||
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[ ] | Held in a brokerage account in the name of . A photocopy of a brokerage statement of account, dated within the preceding two months and showing evidence of ownership of Company stock, is attached. (The option holder may block out information not relevant to Company stock ownership on the account statement.) | ||
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2. | The Swap Shares are held by me as described above and are not held for my benefit by a Trustee or custodian in the SPS Commerce, Inc. 401(k) Retirement Savings Plan, in an IRA account or in any other type of employee benefit or tax deferral plan. |
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SPS COMMERCE, INC. | ||||||||||
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EMPLOYEE | EMPLOYER | |||||||||
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By:
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/s/ Archie C. Black | By: | /s/ Kimberly K. Nelson | |||||||
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Its: | Chief Financial Officer | ||||||||
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Date: November 4, 2008 | Date: November 4, 2008 |
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(A) | A person or organization involved solely in a business substantially different from those in which Employee was engaged, and about which Employee obtained no confidential information while employed by Employer; or | ||
(B) | A person or organization involved in a business similar to that in which Employee was engaged while employed by Employer but which markets and sells exclusively to persons or organizations: (i) which have not purchased any product, process or service from Employer within two (2) years prior to Employees separation from employment; and (ii) about which Employee obtained no confidential information while employed by Employer. |
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Corporation:
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SPS COMMERCE, INC., a Delaware corporation | |
Initial Number of Shares:
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20,435 | |
Class of Stock:
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Series B Convertible Preferred Stock, par value $0.001 per share (the Series B Preferred Stock) | |
Initial Exercise Price:
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$0.97875 per share | |
Issue Date:
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As of May 20, 2004 | |
Expiration Date:
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May 20, 2011 |
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COMPANY | ||||||
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SPS COMMERCE INC. | ||||||
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By:
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/s/ Thomas C. Velin
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Title: | CEO | ||||
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HOLDER | ||||||
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SILICON VALLEY BANK | ||||||
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By:
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/s/ Patrick McCarthy
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Title: | Senior Vice President |
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Y * (A B)
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X = | the number of shares of Series B Convertible Preferred Stock to be issued to the Holder | |||
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Y = | the number of shares of Series B Convertible Preferred Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being canceled (at the date of such calculation) | |||
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A = | the fair market value of one share of the Companys Series B Convertible Preferred Stock (at the date of such calculation) | |||
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B = | Exercise Price (as adjusted to the date of such calculation) |
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RITCHIE CAPITAL FINANCE, L.L.C. | SPS COMMERCE, INC. | |||||||
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By:
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/s/ Mary J. Caulfield
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By: |
/s/ Thomas C. Velin
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Title: President | Title: Chief Financial Officer |
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SPS COMMERCE, INC. |
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Date:
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Name of Assignee | Address | No. of Shares |
Name:
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Dated:
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B-1
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C-1
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Signatory of Adopting Party |
D-1