UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
[ X ]
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Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File Number 0-21180
INTUIT INC.
Delaware
77-0034661
(State of incorporation)
(IRS employer identification no.)
2700 Coast Avenue, Mountain View, CA 94043
(650) 944-6000
Indicate by a check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports); and (2) has
been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by a check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2
of the Exchange Act).
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
Approximately 187,432,204 shares of Common Stock, $0.01 par value, as of November 30, 2004
INTUIT INC.
FORM 10-Q
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EXHIBIT 32.02 |
Intuit, the Intuit logo, QuickBooks, Quicken, Quicken.com, TurboTax, ProSeries, Lacerte and Track-It!, among others, are registered trademarks and/or registered service marks of Intuit Inc., or one of its subsidiaries, in the United States and other countries. Intuit MasterBuilder, MRI and Intuit Eclipse, among others, are pending or common-law trademarks and/or service marks of Intuit Inc., or one of its subsidiaries, in the United States and other countries. Other parties marks are the property of their respective owners and should be treated as such.
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PART I
INTUIT INC.
See accompanying notes.
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INTUIT INC.
See accompanying notes.
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INTUIT INC.
See accompanying notes.
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INTUIT INC.
1. Summary of Significant Accounting Policies
Basis of Presentation
The condensed consolidated financial statements include the financial statements of Intuit and its
wholly owned subsidiaries. We have eliminated all significant intercompany balances and
transactions in consolidation. We have reclassified certain other amounts previously reported in
our financial statements to conform to the current presentation. As discussed in Note 5, in August
2004 management formally approved a plan to sell our Intuit Public Sector Solutions business.
Accordingly, we have reclassified our financial statements for all periods presented to reflect
IPSS as discontinued operations. Unless noted otherwise, discussions in these notes pertain to our
continuing operations.
We have included all normal recurring adjustments and the adjustments for discontinued operations
that we considered necessary to give a fair presentation of our operating results for the periods
presented. These condensed consolidated financial statements and accompanying notes should be read
together with the audited consolidated financial statements for the fiscal year ended July 31, 2004
included in Intuits Form 10-K, filed with the Securities and Exchange Commission on September 24,
2004. Results for the three months ended October 31, 2004 do not necessarily indicate the results
we expect for the fiscal year ending July 31, 2005 or any other future period. Our tax and
QuickBooks-Related businesses are highly seasonal, with sales of tax preparation products and
services heavily concentrated in the period from November through April and QuickBooks software
license renewals revenue concentrated around calendar year end. These seasonal patterns mean that
our quarterly total net revenue is usually highest during our second and third fiscal quarters.
Use of Estimates
We make estimates and assumptions that affect the amounts reported in the financial statements and
the disclosures made in the accompanying notes. For example, we use estimates in determining the
appropriate levels of reserves for product returns and rebates, the collectibility of accounts
receivable, the appropriate levels of various accruals, the amount of our worldwide tax provision
and the realizability of deferred tax assets. We also use estimates in determining the remaining
economic lives and carrying values of purchased intangible assets (including goodwill), property
and equipment and other long-lived assets. In addition, we use assumptions when employing the
Black-Scholes valuation model to estimate the fair value of stock options granted for pro forma
disclosures. See Note 1,
Stock-Based Incentive Programs.
Despite our intention to establish
accurate estimates and use reasonable assumptions, actual results may differ from our estimates.
Net Revenue
We derive revenue from the sale of packaged software products, license fees, product support,
professional services, outsourced payroll services, merchant services, transaction fees and
multiple element arrangements that may include any combination of these items. We recognize revenue
for software products and related services in accordance with the American Institute of Certified
Public Accountants Statement of Position, or SOP, 97-2,
Software Revenue Recognition
, as
modified by SOP 98-9. For other offerings, we follow Staff Accounting Bulletin No. 104,
Revenue
Recognition.
We recognize revenue when persuasive evidence of an arrangement exists, we have
delivered the product or performed the service, the fee is fixed or determinable and collectibility
is probable.
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In some situations, we receive advance payments from our customers. We also offer multiple element
arrangements to our customers. We defer revenue associated with these advance payments and the fair
value of undelivered elements until we ship the products or perform the services. Deferred revenue
consisted of the following at the dates indicated:
In accordance with the Financial Accounting Standards Boards Emerging Issues Task Force Issue
No. 01-9,
Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the
Vendors Product
, we account for cash consideration (such as sales incentives) that we give to our
customers or resellers as a reduction of revenue rather than as an operating expense unless we
receive a benefit that we can identify and for which we can reasonably estimate the fair value.
Product Revenue
We recognize revenue from the sale of our packaged software products and supplies when we ship the
products or, in the case of certain agreements, when products are delivered to retailers. We sell
some of our QuickBooks, Consumer Tax and Quicken products on consignment to a limited number of
resellers. We recognize revenue for these consignment transactions only when the end-user sale has
occurred.
We reduce product revenue from distributors and retailers for estimated returns that are based on
historical returns experience and other factors, such as the volume and price mix of products in
the retail channel, return rates for prior releases of the product, trends in retailer inventory
and economic trends that might impact customer demand for our products (including the competitive
environment and the timing of new releases of our product). We also reduce product revenue for the
estimated redemption of rebates on certain current product sales. Our estimated reserves for
distributor and retailer sales incentive rebates are based on distributors and retailers actual
performance against the terms and conditions of rebate programs, which we typically establish
annually. Our reserves for end user rebates are estimated based on the terms and conditions of the
specific promotional rebate program, actual sales during the promotion, the amount of redemptions
received and historical redemption trends by product and by type of promotional program.
Service Revenue
We recognize revenue from outsourced payroll processing and payroll tax filing services as the
services are performed, provided we have no other remaining obligations to these customers. We
generally require customers to remit payroll tax funds to us in advance of the applicable payroll
due date via electronic funds transfer. We include in total net revenue the interest earned on
invested balances resulting from timing differences between when we collect these funds from
customers and when we remit the funds to outside parties.
We offer several technical support plans and recognize support revenue over the life of the plans.
Service revenue also includes Web services such as TurboTax for the Web and electronic tax filing
services in both our Consumer Tax and Professional Tax segments. Service revenue for electronic
payment processing services that we provide to merchants is recorded net of interchange fees
charged by credit card associations because we do not control these fees. Finally, service revenue
includes revenue from consulting and training services, primarily in our Intuit-Branded Small
Business segment. We generally recognize revenue as these services are performed, provided that we
have no other remaining obligations to these customers and that the services performed are not
essential to the functionality of delivered products and services.
Other Revenue
Other revenue consists primarily of revenue from revenue-sharing arrangements with third-party
service providers and from online advertising agreements. We recognize transaction fees from
revenue-sharing arrangements as end-user sales are reported to us by these partners. We typically
recognize revenue from online advertising agreements as the lesser of when the advertisements are
displayed or pro rata based on the contractual time period of the advertisements.
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Multiple Element Arrangements
We enter into certain revenue arrangements for which we are obligated to deliver multiple products
and/or services (multiple elements). For these arrangements, which generally include software
products, we allocate and defer revenue for the undelivered elements based on their vendor-specific
objective evidence, or VSOE, of fair value. VSOE is generally the price charged when that element
is sold separately.
In situations where VSOE exists for all elements (delivered and undelivered), we allocate the total
revenue to be earned under the arrangement among the various elements, based on their relative fair
value. For transactions where VSOE exists only for the undelivered elements, we defer the full fair
value of the undelivered elements and recognize the difference between the total arrangement fee
and the amount deferred for the undelivered items as revenue. If VSOE does not exist for
undelivered items that are services, then we recognize the entire arrangement fee ratably over the
remaining service period. If VSOE does not exist for undelivered elements that are specified
products or features, we defer revenue until the earlier of the delivery of all elements or the
point at which we determine VSOE for these undelivered elements.
We recognize revenue related to the delivered products or services only if: (1) the above revenue
recognition criteria are met; (2) any undelivered products or services are not essential to the
functionality of the delivered products and services; (3) payment for the delivered products or
services is not contingent upon delivery of the remaining products or services; and (4) we have an
enforceable claim to receive the amount due in the event that we do not deliver the undelivered
products or services.
For arrangements where undelivered services are essential to the functionality of delivered
software, we recognize both the product license revenue and service revenue under the percentage of
completion contract method in accordance with the provisions of SOP 81-1,
Accounting for
Performance of Construction Type and Certain Production Type Contracts.
To date, product license
and service revenues recognized pursuant to SOP 81-1 have not been significant.
Shipping and Handling
We record the amounts we charge our customers for the shipping and handling of our software
products as product revenue and we record the related costs as cost of product revenue on our
statement of operations. Product revenue from shipping and handling is not significant.
Per Share Computations
We compute basic income or loss per share using the weighted average number of common shares
outstanding during the period. We compute diluted income or loss per share using the weighted
average number of common and dilutive common equivalent shares outstanding during the period.
Common equivalent shares consist of the shares issuable upon the exercise of stock options under
the treasury stock method and vested restricted stock awards. In loss periods, basic and diluted
loss per share are identical since the effect of common equivalent shares is anti-dilutive and
therefore excluded.
For the three months ended October 31, 2004 and 2003 we excluded 10.0 million and 10.8 million
common equivalent shares from our diluted per share computations because we experienced net losses
in those periods.
Cash Equivalents and Short-Term Investments
We consider highly liquid investments with maturities of three months or less at the date of
purchase to be cash equivalents. Cash equivalents consist primarily of money market funds in all
periods presented. Short-term investments consist of available-for-sale debt securities that we
carry at fair value. We use the specific identification method to compute gains and losses on
short-term investments. We include unrealized gains and losses on short-term investments, net of
tax, in stockholders equity. Available-for-sale debt securities are classified as current assets
based upon our intent and ability to use any and all of these securities as necessary to satisfy
the significant short-term liquidity requirements that may arise from the highly seasonal and
cyclical nature of our businesses. Because of our significant business seasonality, stock
repurchase programs and acquisition opportunities, cash flow requirements may fluctuate
dramatically from quarter to quarter and require us to use a significant amount of the short-term
investments held as available-for-sale securities. See Note 2.
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Funds Held for Payroll Customers and Payroll Customer Fund Deposits
Funds held for payroll customers represent cash held on behalf of our payroll customers that is
invested in cash and cash equivalents and short-term investments. Payroll customer fund deposits
consist primarily of payroll taxes we owe on behalf of our payroll customers.
Goodwill, Purchased Intangible Assets and Other Long-lived Assets
We record goodwill when the purchase price of net tangible and intangible assets we acquire exceeds
their fair value. We amortize the cost of identified intangible assets on a straight-line basis
over periods ranging from two to seven years.
We regularly perform reviews to determine if the carrying values of our long-lived assets are
impaired. In accordance with Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill
and Other Intangible Assets,
we review goodwill and other intangible assets that have indefinite
useful lives for impairment at least annually in our fourth fiscal quarter, or more frequently if
an event occurs indicating the potential for impairment. In accordance with SFAS 144,
Accounting
for the Impairment or Disposal of Long-Lived Assets,
we review intangible assets that have finite
useful lives and other long-lived assets when an event occurs indicating the potential for
impairment. In our reviews, we look for facts or circumstances, either internal or external,
indicating that we may not recover the carrying value of the asset. We measure impairment losses
related to long-lived assets based on the amount by which the carrying amounts of these assets
exceed their fair values. Our measurement of fair value is generally based on a blend of an
analysis of the present value of estimated future discounted cash flows and a comparison of revenue
and operating income multiples for companies of similar industry and/or size. Our analysis is based
on available information and reasonable and supportable assumptions and projections. The discounted
cash flow analysis considers the likelihood of possible outcomes and is based on our best estimate
of projected future cash flows. If necessary, we perform subsequent calculations to measure the
amount of the impairment loss based on the excess of the carrying value over the fair value of the
impaired assets.
Stock-Based Incentive Programs
We provide equity incentives to our employees and to our Board members. We apply the intrinsic
value recognition and measurement principles of Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees
, in accounting for stock-based incentives. Accordingly,
we are not required to record compensation expense when stock options are granted to eligible
participants as long as the exercise price is not less than the fair market value of the stock when
the option is granted. We are also not required to record compensation expense in connection with
our Employee Stock Purchase Plan as long as the purchase price of the stock is not less than 85% of
the lower of the fair market value at the beginning of each offering period or at the end of each
purchase period.
In October 1995 the Financial Accounting Standards Board (FASB) issued SFAS 123,
Accounting for
Stock Based Compensation
, and in December 2002 the FASB issued SFAS 148,
Accounting for
Stock-Based Compensation Transition and Disclosure.
Although these pronouncements allow us to
continue to follow the APB 25 guidelines and not record compensation expense for most employee
stock-based awards, we are required to disclose our pro forma net income or loss and net income or
loss per share as if we had adopted SFAS 123 and SFAS 148. The pro forma impact of applying SFAS
123 and SFAS 148 in the three months ended October 31, 2004 and 2003 does not necessarily represent
the pro forma impact in future quarters or years.
On March 31, 2004 the FASB issued its exposure draft,
Share-Based Payment,
which is a proposed
amendment to SFAS 123. The exposure draft would require all share-based payments to employees,
including grants of employee stock options and purchases under employee stock purchase plans, to be
recognized in the statement of operations based on their fair values. The FASB expects to issue a
final standard late in 2004 that would be effective for public companies for interim and annual
periods beginning after June 15, 2005. We have not yet assessed the impact of adopting this new
standard.
To determine the pro forma impact of applying SFAS 123, we estimate the fair value of our options
using the Black-Scholes option valuation model. This model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully transferable. This
model also requires the input of highly subjective assumptions including the expected stock price
volatility. Our stock options have characteristics significantly
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different from those of traded options, and changes in the subjective input assumptions can
materially affect the fair value estimates.
Assumptions used for the valuation model are set forth below. Prior to the fourth quarter of fiscal
2004, we estimated the volatility factors for stock options and for our Employee Stock Purchase
Plan using the historical volatility of our stock over the most recent five-year period. Beginning
in the fourth quarter of fiscal 2004, we estimated the volatility factor for stock options using
the historical volatility of our stock over the most recent three-year period, which is
approximately equal to the average expected life of our options. Also beginning in the fourth
quarter of fiscal 2004, we estimated the volatility factor for our Employee Stock Purchase Plan
using the historical volatility of our stock over the most recent one-year period, which is equal
to the length of the offering periods under that plan.
The following table illustrates the effect on our net income or loss and net income or loss
per share if we had applied the fair value recognition provisions of SFAS 123 to stock-based
incentives using the Black Scholes valuation model. For purposes of this reconciliation, we add
back to previously reported net income or loss all stock-based incentive expense we have recorded
that relates to acquisitions. We then deduct the pro forma stock-based incentive expense determined
under the fair value method for all awards including those that relate to acquisitions. The pro
forma stock-based incentive expense has no impact on our cash flow. In the future, we may elect or
be required to use a different valuation model, which could result in a significantly different
impact on our pro forma net income or loss.
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Concentration of Credit Risk and Significant Customers and Suppliers
We operate in markets that are highly competitive and rapidly changing. Significant technological
changes, changes in customer requirements, the emergence of competitive products or services with
new capabilities and other factors could negatively impact our operating results.
We are also subject to risks related to changes in the values of our significant balance of
short-term investments and funds held for payroll customers. Our portfolio of short-term
investments consists of investment-grade securities and our funds held for payroll customers
consist of cash and cash equivalents and investment-grade securities. Except for direct obligations
of the United States government, securities issued by agencies of the United States government, and
money market or cash management funds, we diversify our short-term investments by limiting our
holdings with any individual issuer.
We sell a significant portion of our products through third-party retailers and distributors. As a
result, we face risks related to the collectibility of our accounts receivable. To appropriately
manage this risk, we perform ongoing evaluations of customer credit and limit the amount of credit
extended as we deem appropriate but generally do not require collateral. We maintain reserves for
estimated credit losses and these losses have historically been within our expectations. However,
since we cannot necessarily predict future changes in the financial stability of our customers, we
cannot guarantee that our reserves will continue to be adequate.
We sell a significant proportion of our software products directly to many retailers rather than
through a few major distributors. No distributor or individual retailer accounted for 10% or more
of total net revenue in the three months ended October 31, 2004 or 2003, nor did any customer
account for 10% or more of accounts receivable at October 31, 2004 or July 31, 2004. Amounts due
from the purchaser of our former Quicken Loans mortgage business under certain licensing and
distribution agreements comprised 10.3% of accounts receivable at July 31, 2004. Amounts due from
the purchaser of Quicken Loans at October 31, 2004 were nominal.
We rely on three third-party vendors to perform the manufacturing and distribution functions for
our primary retail desktop software products. We also have a key single-source vendor for our
financial supplies business that prints and fulfills orders for all of our checks and most other
products for our financial supplies business. While we believe that relying heavily on key vendors
improves the efficiency and reliability of our business operations, relying on any one vendor for a
significant aspect of our business can have a significant negative impact on our revenue and
profitability if that vendor fails to perform at acceptable service levels for any reason,
including financial difficulties of the vendor.
Recent Accounting Pronouncements
On October 22, 2004 the American Jobs Creation Act of 2004 was signed into law by the President.
This Act included tax relief for domestic manufacturers, which includes producers of computer
software, by providing a tax deduction of 3% for fiscal years beginning after December 31, 2004 and
2005, 6% for fiscal years beginning after December 31, 2006, 2007 and 2008, and 9% for fiscal years
beginning after December 31, 2009. The deduction percentage is applied against the lesser of
qualified production activities income or taxable income. Any tax rate benefit from this law
change will take effect beginning in our fiscal 2006. However, we are
awaiting clarifying guidance from the U.S. Treasury Department to determine if we will qualify for this deduction. The Financial Accounting Standards
Board issued guidance in FASB Staff Position FAS 109-a providing that this deduction should be
accounted for as a special deduction and not as a tax rate reduction. In addition, the Act provided
for a special one-time tax deduction for foreign earnings that are repatriated. We do not expect to
receive any benefit from this portion of the Act.
2. Short-Term Investments and Funds Held for Payroll Customers
As discussed in Note 1,
Concentration of Credit Risk and Significant Customers and Suppliers,
our
portfolio of short-term investments consists of investment-grade securities and our funds held for
payroll customers consist of cash and cash equivalents and investment-grade securities. Except for
direct obligations of the United States government, securities issued by agencies of the United
States government, and money market or cash management funds, we diversify our short-term
investments by limiting our holdings with any individual issuer.
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The following table summarizes our short-term investments and funds held for payroll customers at
the dates indicated.
Gross unrealized gains and losses on our available-for-sale debt securities were as follows at
the dates indicated:
The following table summarizes the fair value and gross unrealized losses related to 114
available-for-sale debt securities, aggregated by type of investment and length of time that
individual securities have been in a continuous unrealized loss position at October 31, 2004:
We periodically review our investment portfolios to determine if any investment is
other-than-temporarily impaired due to changes in credit risk or other potential valuation
concerns. At October 31, 2004 we believe that the investments that we hold are not
other-than-temporarily impaired. While certain available-for-sale debt securities have fair values
that are below cost, we believe that it is probable that principal and interest will be collected
in accordance with contractual terms, and that the decline in market value is due to changes in
interest rates and not due to increased credit risk.
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Gross realized gains and losses on our available-for-sale debt securities were as follows for the
periods indicated:
The following table summarizes our available-for-sale debt securities held in short-term
investments and funds held for payroll customers, classified by the stated maturity date of the
security:
3. Goodwill and Purchased Intangible Assets
Changes in the carrying value of goodwill by reportable segment during the three months ended
October 31, 2004 were as follows. Our reportable segments are described in Note 6.
We summarize the following expenses on the acquisition-related charges line on our statement
of operations:
At October 31, 2004 we expected amortization of our purchased intangible assets by fiscal
period to be as shown in the following table. Amortization of purchased intangible assets is
charged primarily to amortization of purchased
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software in cost of revenue and to acquisition-related charges in operating expenses on our
statement of operations. Future acquisitions could cause these amounts to increase. In addition, if
impairment events occur they could accelerate the timing of charges.
4. Comprehensive Net Income (Loss)
SFAS 130,
Reporting Comprehensive Income,
establishes standards for reporting and displaying
comprehensive net income (loss) and its components in stockholders equity. SFAS 130 requires the
components of other comprehensive income (loss), such as changes in the fair value of
available-for-sale securities and foreign translation adjustments, to be added to our net income
(loss) to arrive at comprehensive net income (loss). Other comprehensive income (loss) items have
no impact on our net income (loss) as presented on our statement of operations.
The components of accumulated other comprehensive income (loss), net of income taxes, were as
follows:
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Comprehensive net loss was as follows for the periods indicated:
5. Discontinued Operations
In August 2004 management formally approved a plan to sell our Intuit Public Sector Solutions
(IPSS) business, which is part of our Intuit-Branded Small Business segment. In accordance with
SFAS 144,
Accounting for the Impairment or Disposal of Long-lived Assets,
we determined that IPSS
became a long-lived asset held for sale in the first quarter of fiscal 2005. SFAS 144 provides that
a long-lived asset classified as held for sale should be measured at the lower of its carrying
amount or fair value less cost to sell. Since the carrying value of IPSS at October 31, 2004
approximated the fair value less cost to sell, no adjustment to the carrying value of this
long-lived asset was necessary during the first quarter of fiscal 2005. In accordance with SFAS
144, we discontinued the amortization of IPSS intangible assets in the first quarter of fiscal
2005.
Also in accordance with the provisions of SFAS 144, we determined that IPSS became a discontinued
operation during the first quarter of fiscal 2005. Consequently, we have segregated the net assets,
operating results and cash flows of IPSS from continuing operations on our balance sheets,
statements of operations and statements of cash flows for all periods presented. Revenue for IPSS
was $2.8 million and $3.2 million for the three months ended October 31, 2004 and 2003. Loss before
income taxes for IPSS was $0.5 million and $0.8 million for the same periods. The net loss from
discontinued operations for the three months ended October 31, 2004 included a $3.4 million income
tax provision for the estimated tax payable in connection with the expected tax gain on the sale of
IPSS.
On December 3, 2004 we sold IPSS to Kintera, Inc., a California software company, for approximately
$11 million. We do not expect a material gain or loss on the sale of IPSS for financial reporting
purposes.
6. Industry Segment and Geographic Information
SFAS 131,
Disclosures about Segments of an Enterprise and Related Information,
establishes
standards for the way in which public companies disclose certain information about operating
segments in their financial reports. Consistent with SFAS 131, we have defined five reportable
segments, described below, based on factors such as how we manage our operations and how our chief
operating decision maker views results. We define the chief operating decision maker as the office
of the chief executive officer, our chief financial officer and our Board of Directors.
QuickBooks-Related product revenue is derived primarily from QuickBooks desktop software products;
QuickBooks do-it-yourself payroll, a family of products sold on a subscription basis offering
payroll tax tables, forms, electronic tax payment and filing, and in some cases QuickBooks software
upgrades to small businesses that prepare their own payrolls; and financial supplies such as paper
checks, envelopes and invoices. QuickBooks-Related service revenue is derived primarily from
QuickBooks Online Edition, QuickBooks support plans and merchant services provided by our
Innovative Merchant Solutions business. Other revenue for this segment consists primarily of
royalties from small business online services.
Intuit-Branded Small Business product revenue is derived from business management software for
information technology and three selected industries: wholesale durable goods; residential,
commercial and corporate property management; and construction. Intuit-Branded Small Business
service revenue is derived from technical support,
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consulting and training services for those software products and from outsourced payroll services.
Service revenue for this segment also includes interest earned on funds held for payroll customers.
Consumer Tax product revenue is derived primarily from TurboTax federal and state consumer desktop
tax return preparation software. Consumer Tax service revenue is derived primarily from TurboTax
for the Web online tax return preparation services and consumer electronic filing services.
Professional Tax product revenue is derived primarily from ProSeries and Lacerte professional tax
preparation software products. Professional Tax service revenue is derived primarily from
electronic filing, bank product transmission and training services.
Other Businesses consist primarily of Quicken and Canada. Quicken product revenue is derived
primarily from Quicken desktop software products. Quicken other revenue consists primarily of fees
from consumer online transactions and from Quicken-branded credit card and bill payment offerings
that we provide through our partners. In Canada, product revenue is derived primarily from
localized versions of QuickBooks and Quicken as well as QuickTax and TaxWiz consumer desktop tax
return preparation software and ProFile professional tax preparation products. Service revenue in
Canada consists primarily of revenue from software maintenance contracts sold with QuickBooks.
Our QuickBooks-Related, Consumer Tax and Professional Tax segments operate solely in the United
States. All of our segments sell primarily to customers located in the United States. International
total net revenue was less than 5% of consolidated total net revenue for all periods presented.
Corporate includes costs such as corporate general and administrative expenses that are not
allocated to specific segments. In addition, corporate includes reconciling items such as
acquisition-related costs, which include acquisition-related charges, impairment of goodwill and
purchased intangible assets, amortization of purchased software and charges for purchased research
and development. Corporate also includes realized net gains or losses on marketable securities and
other investments, and interest and other income.
The accounting policies of the reportable segments are the same as those described in the summary
of significant accounting policies in Note 1. Except for goodwill and purchased intangible assets,
we do not generally track assets by reportable segment and, consequently, we do not disclose assets
by reportable segment.
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The following tables show our financial results by reportable segment for the three months ended
October 31, 2004 and 2003.
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7. Other Current Liabilities
Other current liabilities were as follows at the dates indicated:
8. Long-Term Obligations
Long-term obligations were as follows at the dates indicated:
9. Income Taxes
We compute our provision for or benefit from income taxes by applying the estimated annual
effective tax rate to income or loss from recurring operations and other taxable items. We recorded
income tax benefits on pre-tax losses in the three months ended October 31, 2004 and 2003. Our
effective tax rate for the three months ended October 31, 2004 included benefits received from tax
attributes identified during the quarter and a change in tax law during the quarter related to the
retroactive extension of federal research and experimental credits and to the impact of recognizing
these benefits in a quarter in which we had a net loss.
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The following table reconciles our effective income tax rate to the statutory federal income
tax rate for the three months ended October 31, 2004 and 2003. Although the discrete items for the
three months ended October 31, 2004 all reduced the tax owed, they increased the tax rate for the
quarter because of the quarters pre-tax loss. For the full fiscal year 2005 these items are
expected to reduce our effective tax rate by approximately one percentage point.
10. Stockholders Equity
Stock Repurchase Program
Intuits Board of Directors has initiated a series of common stock repurchase programs. Shares of
common stock repurchased under these programs become treasury shares. During the three months
ended October 31, 2004 we repurchased 3.9 million shares of our common stock for $170.6 million
under these programs. We repurchased 2.2 million shares of our common stock for $103.1 million
under these programs during the three months ended October 31, 2003.
Repurchased shares of our common stock are held as treasury shares until they are reissued or
retired. When we reissue treasury stock, if the proceeds from the sale are more than the average
price we paid to acquire the shares we record an increase in additional paid-in capital.
Conversely, if the proceeds from the sale are less than the average price we paid to acquire the
shares, we record a decrease in additional paid-in capital to the extent of increases previously
recorded for similar transactions and a decrease in retained earnings for any remaining amount.
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Distribution and Dilutive Effect of Options
The following table shows option grants to Named Executives and to all employees for the periods
indicated. Named Executives are defined as the Companys chief executive officer and each of the
four other most highly compensated executive officers during the fiscal periods presented.
We define net option grants as options granted less options canceled or expired and returned
to the pool of options available for grant. Options granted to our Named Executives as a percentage
of the total options granted to all employees may vary significantly from quarter to quarter, due
in part to the timing of annual performance-based grants to Named Executives.
11. Litigation
Muriel Siebert & Co., Inc. v. Intuit Inc., Index No. 03-602942, Supreme Court of the State of New
York, County of New York.
On September 17, 2003, Muriel Siebert & Co., Inc. filed a complaint against Intuit alleging various
claims for breach of contract, breach of express and implied covenants of good faith and fair
dealing, breach of fiduciary duty, misrepresentation and/or fraud, and promissory estoppel. The
allegations relate to Quicken Brokerage powered by Siebert, a strategic alliance between the two
companies. The complaint seeks compensatory, punitive, and other damages. On September 22, 2003,
Intuit filed an arbitration demand against Siebert & Co., Inc. in San Jose, California seeking
arbitration of all claims asserted by both parties. The Appellate Division of the Supreme Court of
the State of New York has ruled that the matter should proceed in the New York state courts, but
the matter is stayed while the court considers Intuits further appeal. Intuit believes this
lawsuit is without merit and intends to defend the litigation vigorously in whichever forum it
ultimately proceeds.
Intuit/Quicken Sunsetting Litigation, Master File No. 1-04-CV-016394, Superior Court of
California, County of Santa Clara (Anthony Flannery v. Intuit Inc., et al, Civil No.
1-04-CV-016394 and Daniel J. Mason v. Intuit Inc., et al, Civil No. 1-04-CV-018345).
On or about March 19, 2004, plaintiff Anthony Flannery, on his behalf and on behalf of a class of
persons allegedly similarly situated, filed a complaint against Intuit in Santa Clara Superior
Court, alleging that Intuits retirement of certain services and live technical support associated
with its Quicken 1998, Quicken 1999 and Quicken 2000 products constituted a breach of express and
implied warranties and violated sections 17200 and 17500 of the California Business and Professions
Code, as well as the Consumer Legal Remedies Act. The complaint sought certification as a class
action, as well as unspecified compensatory and punitive damages, disgorgement of profits,
restitution, injunctive relief and attorneys fees from Intuit.
On or about April 21, 2004, plaintiff Daniel Mason, on his behalf and on behalf of a class of
persons allegedly similarly situated, filed a complaint against Intuit in Santa Clara Superior
Court making allegations virtually identical
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to those of Anthony Flannery. On July 14, 2004, the Court consolidated the two cases pursuant to
stipulation of the parties.
On July 29, 2004, plaintiffs filed a consolidated First Amended Complaint. On October 8, 2004,
Intuit responded to plaintiffs First Amended Complaint by filing demurrers. By Order dated
November 12, 2004, the Court granted the demurrers and dismissed all counts of the First Amended
Complaint, holding that the plaintiffs failed to state a claim upon which relief could be granted.
The Court allowed plaintiffs until December 10, 2004 to file a Second Amended Complaint and counsel
for the plaintiffs has indicated an intent to make such a filing. If plaintiffs file a Second
Amended Complaint, Intuit will defend the litigation vigorously.
Cynthia Belotti v. Intuit Inc., et al, Civil No. 1-04-CV-020277, Superior Court of California,
County of Santa Clara.
On or about May 24, 2004, plaintiff Cynthia Belotti, on her behalf and on behalf of a class of
persons allegedly similarly situated, filed a complaint against the Company in Santa Clara Superior
Court, alleging that Intuits retirement of certain add-on business services and live technical
support associated with its QuickBooks 2001 and QuickBooks 2002 products constituted a breach of
express and implied warranties and violated sections 17200 and 17500 of the California Business and
Professions Code. The complaint sought certification as a class action, as well as damages,
disgorgement of profits, restitution, injunctive relief and attorneys fees from Intuit.
On or about July 13, 2004, plaintiff filed a First Amended Complaint that added Ental Precision
Machining, Inc., as plaintiff; plaintiffs counsel has also dismissed without prejudice all claims
on behalf of Cynthia Belotti. On October 8, 2004, Intuit responded to plaintiffs First Amended
Complaint by filing demurrers. By Order dated November 12, 2004, the Court granted the demurrers
and dismissed all counts of the First Amended Complaint, holding that plaintiff failed to state a
claim upon which relief could be granted. The Court allowed plaintiff until December 10, 2004 to
file a Second Amended Complaint and counsel for the plaintiff has indicated an intent to make such
a filing. If plaintiff files a Second Amended Complaint, Intuit will defend the litigation
vigorously.
Other Litigation Matters
Intuit is subject to certain routine legal proceedings, as well as demands, claims and threatened
litigation, that arise in the normal course of our business, including assertions that we may be
infringing patents or other intellectual property rights of others. We currently believe that the
ultimate amount of liability, if any, for any pending claims of any type (either alone or combined)
will not materially affect our financial position, results of operations or cash flows. We also
believe that we would be able to obtain any necessary licenses or other rights to disputed
intellectual property rights on commercially reasonable terms. However, the ultimate outcome of any
litigation is uncertain and, regardless of outcome, litigation can have an adverse impact on Intuit
because of defense costs, negative publicity, diversion of management resources and other factors.
Our failure to obtain necessary license or other rights, or litigation arising out of intellectual
property claims could adversely affect our business.
12. Related Party Transactions
Loans to Executive Officers and Other Employees
Prior to July 30, 2002, loans to executive officers were generally made in connection with their
relocation and purchase of a residence near their new place of work. Consistent with the
requirements of the Sarbanes-Oxley legislation enacted on July 30, 2002, we have not made or
modified any loans to executive officers since July 30, 2002 and we do not intend to make or modify
any loans to executive officers in the future. At October 31, 2004, no loans were overdue and all
interest payments were current in accordance with the terms of the loan agreements.
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Long-term loans to executive officers and other employees are a separate line item on our balance
sheet. Certain loan amounts are due within twelve months and are therefore classified as prepaid
expenses and other current assets on our balance sheet. Loans to executive officers, including
these current amounts, were as follows at the dates indicated:
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ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We begin our Managements Discussion and Analysis of Financial Condition and Results of Operations
(MD&A) with a discussion of the Critical Accounting Policies that we believe are important to
understanding the assumptions and judgments underlying our financial statements. This is followed
by a discussion of our Results of Operations that begins with an Overview followed by a more
detailed discussion of our revenue and expenses. We then provide an analysis of our Liquidity and
Capital Resources with a discussion of key aspects of our statements of cash flows, changes in our
balance sheets, and our financial commitments. Following these discussions is the section entitled
Risks That Could Affect Future Results,
which details some important factors that may
significantly impact our future financial performance. You should also note that this MD&A
discussion contains forward-looking statements that involve risks and uncertainties. Please see
the section entitled
Caution Regarding Forward-Looking Statements
at the end of this Item 2 for
important information to consider when evaluating such statements.
Our QuickBooks, Consumer Tax and Professional Tax businesses are highly seasonal. Some of our other
offerings are seasonal, but to a lesser extent. Revenue from upgrades for many of our small
business software products, including QuickBooks, tend to be concentrated around calendar year end.
Sales of income tax preparation products and services are heavily concentrated in the period from
November through April. These seasonal patterns mean that our total net revenue is usually highest
during our second quarter ending January 31 and third quarter ending April 30. We typically report
losses in our first quarter ending October 31 and fourth quarter ending July 31, when revenue from
our tax businesses is minimal while operating expenses to develop new products and services
continue at relatively consistent levels.
You should read this MD&A in conjunction with the Condensed Consolidated Financial Statements and
related Notes in Item 1. As discussed below, in August 2004 management formally approved a plan to
sell our Intuit Public Sector Solutions (IPSS) business. In accordance with Statement of Financial
Accounting Standards (SFAS) No. 144, we have classified IPSS as a discontinued operation. We have
segregated the net assets, operating results and cash flows of IPSS from continuing operations on
our balance sheets, statements of operations and statements of cash flows for all periods
presented. Unless otherwise noted, the following discussion pertains only to our continuing
operations.
Critical Accounting Policies
In preparing our financial statements, we make estimates, assumptions and judgments that can have a
material impact on our net revenue, operating income or loss and net income or loss, as well as on
the value of certain assets and liabilities on our balance sheet. We believe that the estimates,
assumptions and judgments involved in the accounting policies described below have the greatest
potential impact on our financial statements, so we consider these to be our critical accounting
policies. Senior management has discussed the selection and development of these critical policies
and their disclosure in this Report with the Audit Committee of our Board of Directors.
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Results of Operations
Overview
Total net revenue increased in the first quarter of fiscal 2005 compared with the first
quarter of fiscal 2004 primarily due to growth in our QuickBooks-Related and Intuit-Branded Small
Business segments. Revenue from merchant services, QuickBooks do-it-yourself payroll and outsourced
payroll was higher in the fiscal 2005 period. Due to the seasonality of the tax business, revenue
from our Consumer Tax and Professional Tax segments is nominal in our first fiscal quarter. The
markets for many of our products are maturing and as a result we believe that our revenue growth is
slowing. While we continue to develop new products and services to mitigate the impact of this
slowing growth in the long term, we expect revenue growth to be in the 6% to 9% range for fiscal
2005.
Loss from continuing operations for the first quarter of fiscal 2005 was lower than in the first
quarter of fiscal 2004 due to the increase in total net revenue that was only partially offset by
higher spending. Net loss (after tax) from continuing operations for the first quarter of fiscal
2005 decreased more than loss from continuing operations due to a higher income tax benefit from
tax attributes identified during the quarter and a change in tax law during the quarter, partially
offset by lower interest and other income. Fiscal 2005 diluted net loss per share from continuing
operations was lower in the first quarter of fiscal 2005 compared with the first quarter of fiscal
2004 for the foregoing reasons partially offset by a net reduction of average shares outstanding
resulting from repurchases of stock under our stock repurchase programs.
At October 31, 2004 our cash, cash equivalents and short-term investments totaled $759.7 million.
In the first quarter of fiscal 2005 we used cash primarily for repurchases of stock under our stock
repurchase program, seasonal operating losses and the payment of accrued annual bonuses. We
generated cash in the first quarter of fiscal 2005 primarily by selling short-term investments and
by issuing common stock under employee stock plans. In the first quarter of fiscal 2005 we bought
3.9 million shares of our common stock under our only active stock repurchase program at an average
price of $43.21 for a total price of $170.6 million. At October 31, 2004, authorized funds of
$329.4 million remained available under this stock repurchase program.
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Total Net Revenue
We operate in five business segments. The following table summarizes the net revenue for those
segments for the first quarter of fiscal 2005 and 2004.
QuickBooks-Related
QuickBooks-Related product revenue is derived primarily from QuickBooks desktop software products;
QuickBooks do-it-yourself payroll, a family of products sold on a subscription basis offering
payroll tax tables, forms, electronic tax payment and filing, and in some cases QuickBooks software
upgrades to small businesses that prepare their own payrolls; and financial supplies such as paper
checks, envelopes and invoices. QuickBooks-Related service revenue is derived primarily from
QuickBooks Online Edition, QuickBooks support plans and merchant services provided by our
Innovative Merchant Solutions business. Other revenue for this segment consists primarily of
royalties from small business online services.
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QuickBooks-Related total net revenue increased in the first quarter of fiscal 2005 compared with
the first quarter of fiscal 2004 due primarily to higher merchant services revenue and QuickBooks
do-it-yourself payroll revenue. The increase in merchant services revenue was due primarily to
three months of Innovative Merchant Solutions activity in the first quarter of fiscal 2005 compared
with one month of activity in the first quarter of fiscal 2004 because we acquired that business in
October 2003; growth in the customer base and higher transaction volume per customer; and our
discontinuation of the outsourcing of certain merchant processing services beginning in the fourth
quarter of fiscal 2004. Although we continued to outsource some of our merchant services during the
first quarter of fiscal 2005, we recognized the full revenue from processing merchant transactions
that were formerly processed through a major bank rather than the smaller profit-sharing fees we
would have received under our prior arrangement with that bank. QuickBooks do-it-yourself payroll
revenue was higher primarily because of growth in the customer base and to a lesser extent because
of price increases.
Intuit-Branded Small Business
Intuit-Branded Small Business product revenue is derived primarily from business management
software for information technology and three selected industries: wholesale durable goods;
residential, commercial and corporate property management; and construction. Intuit-Branded Small
Business service revenue is derived from technical support, consulting and training services for
those software products and from outsourced payroll services. Service revenue for this segment also
includes interest earned on funds held for payroll customers.
Intuit-Branded Small Business total net revenue increased in the first quarter of fiscal 2005
compared with the first quarter of fiscal 2004 due primarily to higher outsourced payroll revenue
that was driven by growth in the number of customers processing payrolls and by price increases.
Consumer Tax
Consumer Tax product revenue is derived primarily from TurboTax federal and state consumer desktop
tax return preparation products. Consumer Tax service revenue is derived primarily from TurboTax
for the Web online tax return preparation services and consumer electronic filing services.
Due to the seasonal nature of our Consumer Tax business, the first fiscal quarter typically
generates only nominal revenue from consumer tax products and services compared with the second and
third fiscal quarters. We do not believe that results for the first quarter of fiscal 2005 are
indicative of revenue trends for the full year. We will not have substantially complete results for
the entire 2004 tax season until late in fiscal 2005.
Professional Tax
Professional Tax product revenue is derived primarily from ProSeries and Lacerte professional tax
preparation software products. Professional Tax service revenue is derived primarily from
electronic filing, bank product transmission and training services.
Due to the seasonal nature of our Professional Tax business, the first fiscal quarter typically
generates only nominal revenue from professional tax products and services compared with the second
and third quarters of the fiscal year. We do not believe that results for the first quarter of
fiscal 2005 are indicative of revenue trends for the full year. We anticipate that revenue from our
Professional Tax electronic filing and bank product transmission services, which we recognize
primarily in our third fiscal quarter, will grow more rapidly than revenue from our Professional
Tax software in fiscal 2005. We will not have substantially complete results for the entire 2004
tax season until late in fiscal 2005.
Other Businesses
Other Businesses consist primarily of Quicken and Canada. Quicken product revenue is derived
primarily from Quicken desktop software products. Quicken other revenue consists primarily of fees
from consumer online transactions and from Quicken-branded credit card and bill payment offerings
that we provide through our partners. In Canada, product revenue is derived primarily from
localized versions of QuickBooks and Quicken as well as QuickTax and TaxWiz consumer desktop tax
return preparation software and ProFile professional tax preparation products. Service revenue in
Canada consists primarily of revenue from software maintenance contracts sold with QuickBooks.
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The increase in Other Businesses total net revenue in the first quarter of fiscal 2005 compared
with the first quarter of fiscal 2004 was due primarily to slightly higher Quicken revenue.
Cost of Revenue
Our cost of revenue has four components: (1) cost of product revenue, which includes the
direct costs of manufacturing and shipping our software products; (2) cost of service revenue,
which reflects direct costs associated with providing services, including data center costs
relating to delivering Internet-based services; (3) cost of other revenue, which includes costs
associated with generating advertising and online transactions revenue; and (4) amortization of
purchased software, which represents the cost of amortizing over their useful lives developed
technologies that we obtained through acquisitions.
The fiscal 2005 decrease in cost of product revenue as a percentage of product revenue was due
primarily to the increase in QuickBooks do-it-yourself payroll revenue, which had minimal
incremental costs.
Cost of service revenue as a percentage of service revenue decreased in the first quarter of fiscal
2005 compared with the first quarter of fiscal 2004 due primarily to growth in our merchant
services and outsourced payroll businesses, which had minimal incremental costs.
Operating Expenses
We define core operating expenses as the controllable costs of running our business. Selling
and marketing expenses include the cost of providing customer service and technical support to
customers who have not purchased support plans. Total core operating expenses increased in the
first quarter of fiscal 2005 compared with the first quarter of fiscal 2004. Selling and marketing
and research and development expenses decreased as a percentage of total net revenue in the first
quarter of fiscal 2005 compared with the first quarter of fiscal 2004 because our revenue grew
faster than our spending. General and administrative expenses increased slightly as a percentage of
total net revenue in the first quarter of fiscal 2005 compared with the first quarter of fiscal
2004 due to higher spending for infrastructure and implementation of our new information systems.
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Segment Operating Income (Loss)
Segment operating income or loss is segment net revenue less segment cost of revenue and operating
expenses. Segment expenses do not include certain costs, such as corporate general and
administrative expenses, that are not allocated to specific segments. In addition, segment expenses
do not include acquisition-related costs, which include acquisition-related charges, amortization
of purchased software and charges for purchased research and development. Segment expenses also do
not include realized net gains or losses on marketable securities and other investments, and
interest and other income. See Note 6 to the financial statements for reconciliations of total
segment operating income or loss to income or loss from continuing operations for each fiscal
period presented.
NM is a non-meaningful comparison.
QuickBooks-Related
QuickBooks-Related segment operating income as a percentage of related revenue was flat in the
first quarter of fiscal 2005 compared with the first quarter of fiscal 2004 due primarily to higher
merchant services and QuickBooks do-it-yourself payroll net revenue offset by higher spending for
QuickBooks product development, technical support, sales and retail merchandising.
Intuit-Branded Small Business
Intuit-Branded Small Business had segment operating income in the first quarter of fiscal 2005
compared with a segment operating loss in the first quarter of fiscal 2004. This was due primarily
to outsourced payroll revenue growth combined with cost of revenue efficiencies, the consolidation
of regional sales facilities and a reorganization of the sales force that resulted in lower
spending in that business in the fiscal 2005 period.
Consumer Tax
Due to the seasonal nature of our Consumer Tax business, we normally experience a segment operating
loss in our first fiscal quarter as revenue from consumer tax products and services is nominal
while operating expenses to develop new products and services continue at relatively consistent
levels. We do not believe that segment operating results for the first quarter of fiscal 2005 are
indicative of trends for the full year.
Professional Tax
Due to the seasonal nature of our Professional Tax business, we normally experience a segment
operating loss in our first fiscal quarter as revenue from professional tax products and services
is nominal while operating expenses to develop new products and services continue at relatively
consistent levels. We do not believe that segment operating results for the first quarter of fiscal
2005 are indicative of trends for the full year.
Other Businesses
Other Businesses segment operating income increased in the first quarter of fiscal 2005 compared
with the first quarter of fiscal 2004 due primarily to a slight revenue increase in Quicken on
relatively stable spending.
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Non-Operating Income and Expenses
Interest and Other Income
Total interest and other income declined in the first quarter of fiscal 2005 compared with the
first quarter of fiscal 2004 primarily due to the decrease in net foreign exchange gains. This
decrease resulted primarily from our conversion of a significant portion of our Canadian
intercompany balances to long-term investments in that subsidiary in the third quarter of fiscal
2004, which reduced our exposure to fluctuations in foreign exchange rates. The interest income
that we earned on our cash and short-term investment balances also decreased in the first quarter
of fiscal 2005 compared with the first quarter of fiscal 2004. This was because average invested
balances were lower in the fiscal 2005 quarter due to continued investment in our stock repurchase
programs.
Income Taxes
We recorded income tax benefits on pre-tax losses in the three months ended October 31, 2004 and
2003. Our effective tax rate for the three months ended October 31, 2004 was 42% and differed from
the federal statutory rate primarily due to the net effect of the benefit received from tax
attributes identified in the quarter and a change in tax law during the quarter related to the
retroactive extension of federal research and experimental credits and to the impact of recognizing
these benefits in a quarter in which we had a net loss, federal research and experimental credits,
tax exempt interest income and various state tax credits offset by state taxes. Our effective tax
rate for the three months ended October 31, 2003 was 34% and differed from the federal statutory
rate primarily due to the net effect of the benefit received from federal research and experimental
credits, tax-exempt interest income and various tax credits offset by state taxes. See Note 9 to
the financial statements.
At October 31, 2004 we had net deferred tax assets of $159.1 million, which included a valuation
allowance of $5.5 million for certain state capital loss carryforwards. We decreased the valuation
allowance by $2.0 million in the first quarter of fiscal 2005 due to the realization of state
capital loss carryforwards that were previously thought to be unrealizable and adjustments made to
foreign net operating loss carryforwards. The allowance reflects managements assessment that we
may not receive the benefit of capital loss carryforwards in certain state jurisdictions. While we
believe our current valuation allowance is sufficient, it may be necessary to increase this amount
if it becomes more likely that we will not realize a greater portion of the net deferred tax
assets. We assess the need for an adjustment to the valuation allowance on a quarterly basis.
Discontinued Operations
In August 2004 management formally approved a plan to sell our Intuit Public Sector Solutions
(IPSS) business, which is part of our Intuit-Branded Small Business segment. In accordance with
SFAS 144,
Accounting for the Impairment or Disposal of Long-lived Assets,
we determined that IPSS
became a long-lived asset held for sale and a discontinued operation in the first quarter of fiscal
2005. Consequently, we have segregated the net assets, operating results and cash flows of IPSS
from continuing operations on our balance sheets, statements of operations and statements of cash
flows for all periods presented. Also in accordance with SFAS 144, we discontinued the amortization
of IPSS purchased intangible assets in the first quarter of fiscal 2005. The net loss from
discontinued operations for the first quarter of fiscal 2005 included a $3.4 million income tax
provision for the estimated tax payable in connection with the expected tax gain on the sale of
IPSS. On December 3, 2004 we sold IPSS to Kintera, Inc., a California software company, for
approximately $11 million. We do not expect a material gain or loss on the sale of IPSS for
financial reporting purposes.
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Liquidity and Capital Resources
Statement of Cash Flows
At October 31, 2004 our cash, cash equivalents and short-term investments totaled $759.7 million, a
decrease of $259.6 million from July 31, 2004. We used cash for our operations during the first
quarter of fiscal 2005, primarily for seasonal operating losses and the payment of accrued annual
bonuses. We generated cash from investing activities during the first quarter of fiscal 2005,
primarily by selling short-term investments. We used cash for financing activities during the first
quarter of fiscal 2005, primarily for the repurchase of stock under our stock repurchase programs.
See
Stock Repurchase Programs
below and Note 10 to the financial statements. This was partially
offset by proceeds that we received from the issuance of common stock under employee stock plans.
Stock Repurchase Programs
Intuits Board of Directors has initiated a series of common stock repurchase programs. Shares of
common stock repurchased under these programs become treasury shares. During the first quarter of
fiscal 2005 we repurchased 3.9 million shares of our common stock for $170.6 million under our only
active stock repurchase program. At October 31, 2004 authorized funds of $329.4 million remained
available under this program.
Loans to Executive Officers and Other Employees
Outstanding loans to executive officers and other employees totaled $17.0 million at October 31,
2004 and $17.1 million at July 31, 2004. Loans to executive officers are primarily relocation loans
that are generally secured by real property and have original maturity dates of up to 10 years. At
October 31, 2004 no loans were overdue and all interest payments were current in accordance with
the terms of the loan agreements. Consistent with the requirements of the Sarbanes-Oxley Act of
2002, no loans to executive officers have been made or modified since July 30, 2002 and we do not
intend to make or modify loans to executive officers in the future. See Note 12 to the financial
statements.
Other
We evaluate, on an ongoing basis, the merits of acquiring technology or businesses, or establishing
strategic relationships with and investing in other companies. We may decide to use cash and cash
equivalents to fund such activities in the future.
We believe that our cash, cash equivalents and short-term investments will be sufficient to meet
anticipated seasonal working capital and capital expenditure requirements for at least the next 12
months.
Reserves for Returns and Rebates
Activity in our reserves for product returns and for rebates during the first quarter of fiscal
2005 and comparative balances at October 31, 2003 were as follows:
Due to the seasonality of our business, we compare our returns and rebate reserve balances at
October 31, 2004 to the reserve balances at October 31, 2003. The fiscal 2005 increase in our
reserve for product returns was due primarily to a higher QuickBooks reserve rate due to expanded
distribution and more product lines, partially offset by a lower Quicken reserve rate that was
driven by improved channel management. The fiscal 2005 increase in our
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reserve for rebates was due primarily to higher redemption rates and more marketing of current year
rebate programs for QuickBooks.
Recent Accounting Pronouncements
On March 31, 2004 the Financial Accounting Standards Board issued its exposure draft,
Share-Based
Payment,
which is a proposed amendment to SFAS 123. The exposure draft would require all
share-based payments to employees, including grants of employee stock options and purchases under
employee stock purchase plans, to be recognized in the statement of operations based on their fair
values. The FASB expects to issue a final standard late in 2004 that would be effective for public
companies for interim and annual periods beginning after June 15, 2005. We have not yet assessed
the impact of adopting this new standard.
On October 22, 2004 the American Jobs Creation Act of 2004 was signed into law by the President.
This Act included tax relief for domestic manufacturers, which includes producers of computer
software, by providing a tax deduction of 3% for fiscal years beginning after December 31, 2004 and
2005, 6% for fiscal years beginning after December 31, 2006, 2007 and 2008, and 9% for fiscal years
beginning after December 31, 2009. The deduction percentage is applied against the lesser of
qualified production activities income or taxable income. Any tax rate benefit from this law
change will take effect beginning in our fiscal 2006. However, we are
awaiting clarifying guidance from the U.S. Treasury Department
to determine if we will qualify for this deduction. The Financial Accounting Standards
Board issued guidance in FASB Staff Position FAS 109-a providing that this deduction should be
accounted for as a special deduction and not as a tax rate reduction. In addition, the Act provided
for a special one-time tax deduction for foreign earnings that are repatriated. We do not expect to
receive any benefit from this portion of the Act.
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RISKS THAT COULD AFFECT FUTURE RESULTS
The factors discussed below are cautionary statements that identify important risks and trends that
could impact our future operating results and could cause actual results to differ materially from
those anticipated in the forward-looking statements in this Report. Our fiscal 2004 Form 10-K and
other SEC filings contain additional details about these risks, as well as other risks that could
affect future results.
We face intense competitive pressures in all of our businesses, potentially from Microsoft in our
QuickBooks-Related business and from H&R Block and federal and state taxing authorities in our
Consumer Tax business, that may negatively impact our revenue, profitability and market position.
We have formidable competitors and we expect competition to remain intense during fiscal 2005 and
beyond. The number, resources and sophistication of the companies with whom we compete has
increased as we continue to expand our product and service offerings. Microsoft Corporation, in
particular, presents a significant threat to a number of our businesses due to its market position,
strategic focus and superior financial resources. Our competitors may introduce new and improved
products and services, bundle new offerings with market-leading products, reduce prices, gain
better access to distribution channels, advertise aggressively or beat us to market with new
products and services. Any of these competitive actions particularly any prolonged price
competition could diminish our revenue and profitability and could affect our ability to keep
existing customers and acquire new customers. Some additional competitive factors that may impact
our businesses are as follows:
QuickBooks-Related
. Losing existing or potential QuickBooks customers to competitors causes us to
lose potential software revenue and limits our opportunities to sell related products and services
such as our financial supplies, QuickBooks do-it-yourself payroll and merchant service offerings.
Many competitors and potential competitors provide, or have expressed significant interest in
providing, accounting and business management products and services to small businesses. For
example, Microsoft currently offers a number of competitive small business offerings and has
indicated part of its growth strategy is to focus on small business offerings. In November 2004
Microsoft announced the impending launch of a number of product and service offerings aimed at
small businesses, including a product named Microsoft Office Small Business Accounting, which is
expected to be integrated with the Microsoft Office product suite. Accordingly, we expect that
competition from Microsoft in the small business area will intensify over time with the
introduction of these and other offerings that directly compete with our QuickBooks and other
offerings. Although we have successfully competed with Microsoft in the past, given its market
position and resources Microsofts small business product and service offerings may have a
significant negative impact on our revenue and profitability.
Consumer Tax
. Our consumer tax business faces significant competition from both the public and
private sector. In the public sector we face the risk of federal and state taxing authorities
developing or contracting to provide software or other systems to facilitate tax return preparation
and electronic filing at no charge to taxpayers.
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Other Segments (Intuit-Branded Small Business, Professional Tax and Other Businesses)
. Our
professional tax offerings face pricing pressure from competitors seeking to obtain our customers
through deep product discounts and loss of customers to competitors offering no-frills offerings at
low prices. This business also faces competition from competitively-priced integrated accounting
solutions that are more complete than our current offerings. The substantial size of our principal
competitors in the outsourced payroll services business and our merchant card processing service
business benefit from greater economies of scale that may result in pricing pressure for our
offerings. In addition, in November 2004 Microsoft announced that it had entered into partnership
agreements with ADP and other service providers to offer payroll-related services that interact
with its products. The growth of electronic banking and other electronic payment systems is
decreasing the demand for checks and consequently causing pricing pressure for our supplies
products as competitors aggressively compete for share of this shrinking market. Our Quicken
products compete both with Microsoft Money, which is aggressively promoted and priced, and with
Web-based electronic banking and personal finance tracking and management tools that are becoming
increasingly available at no cost to consumers. These competitive pressures may result in reduced
revenue and lower profitability for our Quicken product line and related bill payment service
offering.
The growth of our businesses overall is slowing and if we do not continue to introduce new and
enhanced products and services our revenues and margins will decline.
We are seeing a slowdown in the revenue growth rate for some of our businesses as they mature.
This trend causes our product development efforts to be even more critical to our success. Product
and service enhancements are necessary for us to differentiate our offerings from those of our
competitors and to motivate our existing customers to purchase upgrades, or annual licenses in the
case of our tax offerings. A number of our businesses derive a significant amount of their revenue
through one-time upfront license fees and rely on customer upgrades and service offerings that
include upgrades to generate a significant portion of their revenues. As our existing products
mature, encouraging customers to purchase product upgrades becomes more challenging unless new
product releases provide features and functionality that have meaningful incremental value. If we
are not able to develop and clearly demonstrate the value of upgraded products to our customers,
our upgrade and service revenues will be negatively impacted. Similarly, our business will be
harmed if we are not successful in our efforts to develop and introduce new products and services
to retain our existing customers, expand our customer base and increase our revenues per customer.
Our new product and service offerings may not achieve market success or may cannibalize sales of
our existing products, causing our revenues and earnings to decrease.
Our future success depends in large part upon our ability to identify emerging opportunities in our
target markets and our capacity to quickly develop, and sell products and services that satisfy
these demands in a cost effective manner. Successfully predicting demand trends is difficult and
we may expend a significant amount of resources and management attention on products or services
that do not ultimately succeed in their markets. We have encountered difficulty in launching new
products and services in the past. For example, in 2003 we ended our Quicken Brokerage service
offering due to lack of customer acceptance. If we misjudge customer needs, our new products and
services will not succeed and our revenues and earnings will be negatively impacted. In addition,
as we expand our offerings to new customer categories we run the risk of customers shifting from
higher priced and higher margin products to newly introduced lower priced offerings.
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The nature of our products necessitates timely product launches and if we experience significant
product quality problems or delays, it will harm our revenues, operating income and reputation.
All of our tax products, and many of our non-tax products, have rigid development timetables that
increase the risk of errors in our products and the risk of launch delays. Many of our products
are highly complex and require interoperability with other software products and services. Our tax
preparation software product development cycle is particularly challenging due to the need to
incorporate unpredictable tax law and tax form changes each year and because our customers expect
high levels of accuracy and a timely launch of these products to prepare and file their taxes by
April 15th. Due to this complexity and the condensed development cycles under which we operate our
products sometimes contain bugs that can unexpectedly interfere with the operation of the
software. For example, our software may face interoperability difficulties with software operating
systems or programs being used by our customers. When we encounter problems we may be required to
modify our code, distribute patches to customers that had already purchased the product and recall
or repackage existing product inventory in our distribution channels. If we encounter development
challenges or discover errors in our products late in our development cycle it may cause us to
delay our product launch date. Any major defects or launch delays could lead to the following:
If we fail to maintain reliable and responsive service levels for our electronic tax offerings, or
if the IRS or other governmental agencies experience difficulties in receiving customer
submissions, we could lose revenue and customers.
Our Web-based tax preparation and electronic filing services are an important and growing part of
our tax businesses and must effectively handle extremely heavy customer demand during the peak tax
season from January to April. We face significant risks and challenges in maintaining these
services and maintaining adequate service levels, particularly during peak volume service times.
Similarly, governmental entities receiving electronic tax filings must also handle large volumes of
data and may experience difficulties with their systems preventing the receipt of electronic
filings. If customers are unable to file their returns electronically they may elect to make paper
filings. This would result in reduced electronic tax return preparation and filing revenues and
profits and would negatively impact our reputation and ability to keep and attract customers who
demand a reliable electronic filing experience. We have experienced relatively brief unscheduled
interruptions in our electronic filing and/or tax preparation services during past tax years. For
example, on April 15, 2003 we experienced a relatively brief unscheduled interruption in our
electronic filing service during which certain users of our professional tax products were unable
to receive confirmation from us that their electronic filing had been accepted and on April 15,
2002 we reached maximum capacity for processing e-filings for a short period of time. If we
experience any prolonged difficulties with our Web-based tax preparation or electronic filing
service at any time during the tax season, we could lose current and future customers, receive
negative publicity and incur increased operating costs, any of which could have a significant
negative impact on the financial and market success of these businesses and have a negative impact
on our near-term and long-term financial results.
Our revenue and earnings are highly seasonal and our quarterly results fluctuate significantly.
Several of our businesses are highly seasonal causing significant quarterly fluctuations in our
financial results. Revenue and operating results are usually strongest during the second and third
fiscal quarters ending January 31 and April 30 due to our tax businesses contributing most of their
revenue during those quarters and the timing of the release of our small business software
upgrades. We experience lower revenues, and significant operating losses, in the first and fourth
quarters ending October 31 and July 31. For example, in the second and third quarters of our last
two fiscal years we had aggregate revenue of between $558.1 million and $713.0 million while in our
first and fourth fiscal quarters we had aggregate revenue of between $212.9 million and $275.9
million. Our financial results can also fluctuate from quarter to quarter and year to year due to
a variety of factors, including changes in product sales mix that affect average selling prices,
product release dates, the timing of our discontinuance of support for older
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product offerings, the timing of sales of our higher-priced Intuit-Branded Small Business
offerings, our methods for distributing our products, including the shift to a consignment model
for some of our desktop products sold through retail distribution channels, and the timing of
acquisitions, divestitures, and goodwill and purchased intangible asset impairment charges.
As our product and service offerings become more complex our revenue streams become less
predictable.
Our expanding range of products and services generates more varied revenue streams than our
traditional desktop software businesses. The accounting policies that apply to these revenue
streams are more complex than those that apply to our traditional products and services. We expect
this trend to continue as we acquire additional companies and expand our offerings. For example,
as we begin to offer additional features and options as part of multiple-element revenue
arrangements, we could be required to defer a higher percentage of our product revenue at the time
of sale than we do for traditional products. This would decrease recognized revenue at the time
products are shipped, but result in increased recognized revenue in fiscal periods after shipment.
For example, some of our TurboTax offerings provide for both use of our software and filing of
returns electronically, causing some of our revenue to be deferred until the time of the actual
filing of tax returns by our customers. In addition, our Intuit-Branded Small Business segment
businesses offer products and services with significantly higher prices than our traditional core
business software products. Revenue from these offerings tends to be less predictable than revenue
from our traditional desktop products due to longer sales and implementation cycles, which could
cause our quarterly revenue from these businesses to fluctuate.
Acquisition-related costs and impairment charges can cause significant fluctuation in our net
income.
Our recent acquisitions have resulted in significant expenses, including amortization of purchased
software (which is reflected in cost of revenue), as well as charges for in-process research and
development, and amortization and impairment of goodwill, purchased intangible assets and deferred
compensation (which are reflected in operating expenses). Total acquisition-related costs in the
categories identified above were $196.0 million in fiscal 2002, $56.6 million in fiscal 2003 and
$56.6 million in fiscal 2004. Fiscal 2003 and 2004 acquisition-related costs declined primarily
because of a change in the accounting treatment of goodwill. However, we may incur less frequent,
but larger, impairment charges related to the goodwill already recorded and to goodwill arising out
of future acquisitions. We test the impairment of goodwill annually in our fourth fiscal quarter
or more frequently if indicators of impairment arise. The timing of the formal annual test may
result in charges to our statement of operations in our fourth fiscal quarter that could not have
been reasonably foreseen in prior periods. For example, at the end of fiscal 2004 we incurred a
goodwill impairment charge of $18.7 million related to our Intuit Public Sector Solutions business.
At October 31, 2004, we had an unamortized goodwill balance of approximately $659.8 million, which
could be subject to impairment charges in the future. New acquisitions, and any impairment of the
value of purchased assets, could have a significant negative impact on our future operating
results.
If we do not respond promptly and effectively to customer service and technical support inquiries
we will lose customers and our revenues will decline.
The effectiveness of our customer service and technical support operations are critical to customer
satisfaction and our financial success. If we do not respond effectively to service and technical
support requests we will lose customers and miss out on potential revenue opportunities, such as
paid service and new product sales. In our service offerings, such as our merchant card processing
and outsourced payroll businesses, customer service delivery is fundamental to retaining and
maintaining existing customers and acquiring new customers. We occasionally experience customer
service and technical support problems, including longer than expected waiting times for customers
when our staffing and systems are inadequate to handle a higher-than-anticipated volume of
requests. We also risk losing service at any one of our customer contact centers and our
redundancy systems could prove inadequate to provide backup support. Training and retaining
qualified customer service and technical support personnel is particularly challenging due to the
expansion of our product offerings and the seasonality of our tax business. For example, in fiscal
2004 the number of our consumer tax service representatives ranged from 10 during off-season months
to about 750 at the peak of the season. If we do not adequately train our support representatives
our customers will not receive the level of support that they demand and we strive to deliver. To
improve our performance in this area, we must eliminate underlying causes of service and support
requests through product improvements, better order fulfillment processes, more robust self-help
tools, and improved ability to accurately anticipate demand for support. Implementing any of these
improvements can be expensive, time consuming and ultimately prove unsuccessful. If we do not
deliver the high level of support that our customers expect for any of the reasons stated above we
will lose customers and our financial results will suffer.
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If we encounter problems with our third-party customer service and technical support providers our
business will be harmed and margins will decline.
We outsource a substantial portion of our customer support activities to third-party service
providers, most significantly to service providers in India. During fiscal 2004 we greatly
increased the number of third-party customer service representatives working on our behalf and we
expect to continue to rely heavily on third parties in the future. This strategy provides us with
lower operating costs and greater flexibility, but also presents risks to our business, including
the following:
We depend upon a small number of larger retailers to generate a significant portion of our sales
volume for our desktop software products.
We sell most of our desktop software products through our retail distribution channel and a
relatively small number of larger retailers generate a significant portion of our sales volume.
Our principal retailers have significant bargaining leverage due to their size and available
resources. Any change in principal business terms, termination or major disruption of our
relationship with these resellers could result in a potentially significant decline in our revenues
and earnings. For example, the sourcing decisions, product display locations and promotional
activities that retailers undertake can greatly impact the sales of our products. Due to its
seasonal nature, sales of TurboTax are particularly impacted by such decisions and if our principal
distribution sources were to elect to carry or promote competitive products our revenues would
decline. The fact that we also sell our products directly could cause retailers to reduce their
efforts to promote our products or stop selling our products altogether. If any of our retailers
run into financial difficulties we may be unable to collect amounts that we are owed.
Selling new products may be more challenging and costlier than selling our historical products,
causing our margins to decline.
Because our strategy for some of our products involves the routine introduction of new products at
retail, if retailers do not offer our new products we will not be able to grow as planned. An
outcome of our Right for Me marketing approach is the introduction of additional versions of our
products. Retailers may be reluctant to stock unproven products, or products that sell at higher
prices, but more slowly. Retailers may also choose to place less emphasis on software as a
category within their stores. In addition, it may be costlier for us to market and sell some of
our higher priced products due to our need to convey the more customer-specific value of the
products to customers rather than communicating more generalized benefits. This may require us to
develop other marketing programs that supplement our traditional in-store promotional efforts to
sell these products to customers causing our margins to shrink. If retail distribution proves an
ineffective channel for certain of our new offerings it could adversely impact our growth, revenue
and profitability.
If our manufacturing and distribution suppliers execute poorly our business will be harmed.
We have chosen to outsource the manufacturing and distribution of many of our desktop software
products to a small number of third party providers and we use a single vendor to produce and
distribute our check and business forms supplies products. Although our reliance on a small number
of suppliers, or a single supplier, provides us with
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efficiencies and enhanced bargaining power, poor performance by, or lack of effective communication
with, these parties can significantly harm our business. This risk is amplified by the fact that
we carry very little inventory and rely on just-in-time manufacturing processes. We have
experienced problems with our suppliers in the past. For example, during fiscal 2004 one of our
suppliers was unable to fulfill orders for some of our software products for a number of days due
to operational difficulties and communication errors. Although together we were able to mitigate
the impact of that delay with minimal disruption to our business, if we experience longer delays,
delays during a peak demand period or significant quality issues our business will be significantly
harmed.
We are implementing new information systems which we use to manage our business and finance
operations and problems with the design or implementation of these systems could interfere with our
business and operations.
We are in the process of implementing new information systems to replace existing systems that
manage our business and finance operations. Due to the size and complexity of our portfolio of
businesses, the conversion process is very challenging. We migrated to the new information systems
in September 2004 with the upgrade of significant financial systems, order-taking systems,
middleware systems (systems to allow for interoperability of different databases) and network
security systems. Although the upgraded systems appear to be functioning in a stable manner and
performing tasks at acceptable performance levels for our current business demands, we may still
encounter difficulties as our business demands increase and as greater functionality from the
systems is required. For example, the upgraded systems have not yet been subject to, and may not
be able to handle, the demand peaks caused by the seasonal nature of our business. Any disruptions
relating to our ongoing performance and system enhancements, particularly any disruptions impacting
our operations during our second and third fiscal quarters, could adversely impact our ability to
do the following in a timely and accurate manner: take customer orders, ship products, provide
services and support to our customers, bill and track our customers, fulfill contractual
obligations and otherwise run our business. In addition, any enhancements that are necessary may
be more costly than anticipated.
Failure of our information technology systems or those of our service providers could adversely
affect our future operating results.
We rely on a variety of internal technology systems and technology systems maintained by our
outside manufacturing and distribution suppliers to take and fulfill customer orders, handle
customer service requests, host our Web-based activities, support internal operations, and store
customer and company data. These systems could be damaged or interrupted, preventing us or our
service providers from accepting and fulfilling customer orders or otherwise interrupting our
business. In addition, these systems could suffer security breaches, causing company and customer
data to be unintentionally disclosed. Any of these occurrences could adversely impact our
operations. We have experienced system challenges in the past. For example, during fiscal 2004
some of our non-critical systems were interrupted due to computer viruses that caused loss of
productivity and added expense. We also experience computer server failures from time to time. To
prevent interruptions we must continually upgrade our systems and processes to ensure that we have
adequate recoverability both of which are costly and time consuming. While we and our outside
service partners have backup systems for certain aspects of our operations, not all systems upon
which we rely are fully redundant and disaster recovery planning may not be sufficient for all
eventualities.
Possession and use of personal customer information by our businesses presents risks and expenses
that could harm our business.
A number of our businesses possess personal customer information. Possession and use of this
information in conducting our business subjects us to regulatory burdens and potential lawsuits.
We have incurred and will continue to incur significant expenses to comply with mandatory
privacy and security standards and protocols and there is a trend toward greater regulation of
privacy. For example, regulations like the recently created federal Do Not Call List, and
actions by Internet service providers to limit communications with their subscribers may impede our
ability to communicate with our customers and increase our compliance costs. Because our
businesses rely heavily on direct marketing, any limitations on our ability to communicate with our
customers could harm our financial results. In the past we have experienced lawsuits and negative
publicity relating to privacy issues and we could face similar suits in the future. A major breach
of customer privacy or security by Intuit, or even another company, could have serious negative
consequences for our businesses, including direct damages that we may be required to pay as a
result of a breach by us, reduced customer demand for our services and additional regulation by
federal or state agencies. Although we have sophisticated network security, internal control
measures, and physical security procedures to safeguard customer information, there can be no
assurance that a data security breach or theft will not occur resulting in harm to our business and
results of operations.
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If we fail to adequately protect our intellectual property rights, competitors may exploit our
innovations, which could weaken our competitive position and reduce our revenues.
Our success depends upon our proprietary technology. We rely on a combination of copyright, trade
secret, trademark, patent, confidentiality procedures and licensing arrangements to establish and
protect our proprietary rights. As part of our confidentiality procedures, we generally enter into
non-disclosure agreements with our employees, contractors, distributors and corporate partners and
into license agreements with respect to our software, documentation and other proprietary
information. Effectively creating and protecting our proprietary rights is expensive and may
require us to engage in expensive and distracting litigation. Despite these precautions, third
parties could copy or otherwise obtain and use our products or technology without authorization.
Because we outsource significant aspects of our product development, manufacturing and distribution
we are at risk that confidential portions of our intellectual property could become public by
lapses in security by our contractors. We have licensed in the past, and expect to license in the
future, certain of our proprietary rights, such as trademarks or copyrighted material, to others.
These licensees may take actions that diminish the value of our proprietary rights or harm our
reputation. It is also possible that other companies could successfully challenge the validity or
scope of our patents and that our patent portfolio, which is relatively small, may not provide us
with a meaningful competitive advantage. Ultimately, our attempts to secure legal protection for
our proprietary rights may not be adequate and our competitors could independently develop similar
technologies, duplicate our products, or design around patents and other intellectual property
rights. If our intellectual property protection proves inadequate we could lose our competitive
advantage and our financial results will suffer.
We expect copying and misuse of our intellectual property to be a persistent problem causing lost
revenue and increased expenses.
Our intellectual property rights are among our most valuable assets. Policing unauthorized use and
copying of our products is difficult, expensive, and time consuming. Current U.S. laws that
prohibit copying give us only limited practical protection from software piracy and the laws of
many other countries provide very little protection. We may not be able to prevent
misappropriation of our technology. For example, we frequently encounter unauthorized copies of
our software being sold through online auction sites and other online marketplaces. In addition,
efforts to protect our intellectual property may be misunderstood and perceived negatively by our
customers. For example, during 2003 we employed technology to prohibit unauthorized sharing of our
TurboTax products. These efforts were not effectively communicated causing a negative reaction by
some of our customers who misunderstood our actions. Although we continue to evaluate technology
solutions to piracy, and we continue to increase our civil and criminal enforcement efforts, we
expect piracy to be a persistent problem that results in lost revenues and increased expenses.
We do not own all of the software, other technologies and content used in our products and
services.
Many of our products are designed to include intellectual property owned by third parties. We
believe we have all of the necessary licenses from third parties to use and distribute third party
technology and content that we do not own that is used in our current products and services. From
time to time we may be required to renegotiate with these third parties or negotiate with new
third parties to include their technology or content in our existing products, in new versions of
our existing products or in wholly new products. We may not be able to negotiate or renegotiate
licenses on reasonable terms, or at all. If we are unable to obtain the rights necessary to use or
continue to use third-party technology or content in our products and services, we may not be able
to sell the affected products, which would in turn have a negative impact on our revenue and
operating results.
We may unintentionally infringe the intellectual property rights of others, which could expose us
to substantial damages or restrict our business operations.
As the number of our products and services increases and their features and content continue to
expand, and as we acquire technology through acquisitions or licenses, we may increasingly become
subject to infringement claims by third parties. We expect that software products in general will
increasingly be subject to these claims as the number of products and competitors increase, the
functionality of products overlap and as the patenting of software functionality continues to grow.
From time to time, we have received communications from third parties in which the claimant
alleges that a product or service we offer infringes the claimants intellectual property rights.
Occasionally these communications result in lawsuits. In many of these cases, it is difficult to
assess the extent to which the intellectual property right that the claimant asserts is valid or
the extent to which we have any material
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exposure. The receipt of a notice alleging infringement may require us to obtain a costly opinion
of counsel to prevent an allegation of intentional infringement. Future claims could present an
exposure of uncertain magnitude. Existing or future infringement claims or lawsuits against us,
whether valid or not, may be time consuming and expensive to defend and be distracting to our
developers and management. Intellectual property litigation or claims could force us to do one or
more of the following: cease selling, incorporating or using products or services that incorporate
the challenged intellectual property; obtain a license from the holder of the infringed
intellectual property, which may not be available on commercially favorable terms or at all; or
redesign our software products or services, possibly in a manner that reduces their commercial
appeal. Any of these actions may cause material harm to our business and financial results.
Our acquisition activity could disrupt our ongoing business and may present risks not contemplated
at the time of the transactions.
We have acquired and may continue to acquire companies, products and technologies that complement
our strategic direction. For example, over the last three fiscal years we have acquired the stock
or assets of several companies. These acquisitions may involve significant risks and
uncertainties, including:
Acquisitions are inherently risky, we can not be certain that our previous or future acquisitions
will be successful and will not materially adversely affect the conduct, operating results or
financial condition of our business. We have generally paid cash for our recent acquisitions. If
we issue common stock or other equity related purchase rights as consideration in an acquisition,
current shareholders percentage ownership and earnings per share may become diluted.
If we fail to operate our outsourced payroll business effectively our revenue and profitability
will be harmed.
Our payroll business handles a significant amount of dollar and transaction volume. Due to the
size and volume of transactions that we handle effective processing systems and controls are
essential to ensure that transactions are handled appropriately. Despite our efforts, it is
possible that we may make errors or that funds may be misappropriated. In addition to any direct
damages and fines that any such problems would create, which could be substantial, the loss of
customer confidence in our accuracy and controls would seriously harm our business. Our payroll
business has grown largely through acquisitions and our systems are comprised of multiple
technology platforms that are difficult to scale. We must constantly continue to upgrade our
systems and processes to ensure that we process customer data in an accurate, reliable and timely
manner. These upgrades must also meet the various regulatory deadlines associated with
employer-related payroll activities. Any failure of our systems or processes in critical
switch-over times, such as in January when many businesses elect to change payroll service
providers, would be detrimental to our business. If we failed to timely deliver any of our payroll
products, it could cause our current and prospective customers to choose a competitors product for
that years payroll and not to purchase Intuit products in the future. To generate sustained
growth in our payroll business we must successfully develop and manage a more proactive inside and
field sales operation. If these efforts are not successful our revenue growth and profitability
will decline.
Interest income attributable to payroll customer deposits may fluctuate or be eliminated causing
our revenue and profitability to decline.
We currently earn revenue from interest earned on customer deposits that we hold pending payment of
funds to taxing authorities or to customers employees. If interest rates decline, or there are
regulatory changes that diminish the amount of time that we are required or permitted to hold such
funds our interest revenue will decline.
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We face a number of risks in our merchant card processing business that could result in a
reduction in our revenues and profits.
Our merchant card processing service business is subject to the following risks:
Should any of these risks be realized our business could be harmed and our financial results will
suffer.
Increased state tax filing mandates such as the required use of specific technologies could
significantly increase our costs.
We are required to comply with a variety of state revenue agency standards in order to successfully
operate our tax preparation and electronic filing services. Changes in state-imposed requirements
by one or more of the states, including the required use of specific technologies or technology
standards, could significantly increase the costs of providing those services to our customers and
could prevent us from delivering a quality product to our customers in a timely manner.
We may be unable to attract and retain key personnel.
Much of our future success depends on the continued service and availability of skilled personnel,
including members of our executive team, and those in technical, marketing and staff positions.
Experienced personnel in the software and services industries are in high demand and competition
for their talents is intense, especially in the Silicon Valley and San Diego, California, where the
majority of our employees are located. Although we strive to be an employer of choice, we may not
be able to continue to successfully attract and retain key personnel which would cause our business
to suffer.
If actual product returns exceed returns reserves, or if customer rebates exceed historical
amounts, our revenue would be lower.
We ship more desktop software products to our distributors and retailers than we expect them to
sell, in order to reduce the risk that distributors or retailers will run out of products. This is
particularly true for our Consumer Tax products, which have a short selling season and for which
returns occur primarily in our fourth fiscal quarter. Like most software companies, we have
historically accepted significant product returns. We establish reserves against revenue for
product returns in our financial statements, based on estimated future returns of products. We
closely monitor levels of product sales and inventory in the retail channel in an effort to
maintain reserves that are adequate to cover expected returns. In the past, returns have not
generally exceeded these reserves. However, if we do experience actual returns that significantly
exceed reserves, it would result in lower net revenue. For example, if we had increased our fiscal
2004 returns reserves by 1% of non-consignment sales to retailers for QuickBooks, TurboTax and
Quicken, our fiscal 2004 total net revenue would have been approximately $4 million lower. In
addition, our policy of recognizing revenue from distributors and retailers upon delivery of
product for non- consignment sales is predicated upon our ability to reasonably estimate returns. If we do not
continue to demonstrate
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our ability to estimate returns then our revenue recognition policy for
these types of sales may no longer be appropriate. We also offer customer rebates as part of our
selling efforts and establish reserves for payment of rebates. Historically a percentage of
customers do not submit requests for their rebates. If a greater number of eligible customers seek
rebates than for which we have provided reserves, our margins will be adversely affected. If
rebate redemptions for our QuickBooks, TurboTax and Quicken products were to increase by 1%, our
annual total net revenue would decrease by approximately $1 million.
Our insurance policies are costly, may be inadequate and potentially expose us to unrecoverable
risks.
Insurance availability, coverage terms and pricing continue to vary with market conditions. We
endeavor to obtain appropriate insurance coverage for insurable risks that we identify, however, we
may fail to correctly anticipate or quantify insurable risks, we may not be able to obtain
appropriate insurance coverage, and insurers may not respond as we intend to cover insurable events
that may occur. We have observed rapidly changing conditions in the insurance markets relating to
nearly all areas of traditional corporate insurance. Such conditions have resulted in higher
premium costs, higher policy deductibles, and lower coverage limits. For some risks, because of
cost or availability, we do not have insurance coverage. For these reasons, we are retaining a
greater portion of insurable risks than we have in the past at relatively greater cost.
If we are required to account for options under our employee stock plans as a compensation expense,
it would significantly reduce our net income and earnings per share.
Although we are not currently required to record any compensation expense in connection with option
grants to employees that have an exercise price at or above fair market value, it is possible that
future accounting pronouncements will require us to treat all employee stock options as a
compensation expense. The increased compensation expense would significantly reduce our net income
and earnings per share under generally accepted accounting principles.
We are frequently a party to litigation that is costly to defend and consumes the time of our
management.
Due to our financial position and the large number of customers that we serve we are often forced
to defend litigation. For example we are currently being sued in three actions for claims related
to our election to stop supporting certain of our older product offerings. Although we believe
that these cases have no merit and we are defending the matters vigorously, defending such matters
consumes the time of our management and is expensive for Intuit. Even though we often seek
insurance coverage for litigation defense costs, there is no assurance that our defense costs,
which can be substantial, will be covered in all cases. In addition, by its nature, litigation is
unpredictable and we may not prevail even in cases where we strongly believe a plaintiffs case has
no valid claims. If we do not prevail in litigation we may be required to pay substantial monetary
damages or alter our business operations. Regardless of the outcome, litigation is expensive and
consumes the time of our management and may ultimately reduce our income.
Unanticipated changes in our tax rates could affect our future results.
Our future effective tax rates could be favorably or unfavorably affected by unanticipated changes
in the valuation of our deferred tax assets and liabilities, or by changes in tax laws or their
interpretation. In addition, we are subject to the continuous examination of our income tax
returns by the Internal Revenue Service and other tax authorities. We regularly assess the
likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our
provision for income taxes. There can be no assurance that the outcomes from these continuous
examinations will not have an adverse effect on our operating results and financial condition.
Our stock price may be volatile.
Our stock has at times experienced substantial price volatility as a result of variations between
our actual and anticipated financial results and as a result of our announcements and those of our
competitors. In addition, the stock market has experienced extreme price and volume fluctuations
that have affected the market price of many technology companies in ways that have been unrelated
to the operating performance of these companies. These factors, as well as general economic and
political conditions, may materially adversely affect the market price of our stock in the future.
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If we fail to maintain an effective system of internal controls, we may not be able to detect fraud
or report our financial results accurately, which could harm our business and the trading price of
our common stock.
Effective internal controls are necessary for us to provide reliable financial reports and to
detect and prevent fraud. We periodically assess our system of internal controls, and the internal
controls of service providers upon which we rely, to review their effectiveness and identify
potential areas of improvement. These assessments may conclude that enhancements, modifications or
changes to our system of internal controls are necessary. In addition, from time to time we
acquire businesses, many of which have limited infrastructure and systems of internal controls.
Performing assessments of internal controls, implementing necessary changes, and maintaining an
effective internal controls process is expensive and requires considerable management attention,
particularly in the case of newly acquired entities. Internal control systems are designed in part
upon assumptions about the likelihood of future events, and all such systems, however well designed
and operated, can provide only reasonable, and not absolute, assurance that the objectives of the
system are met. Because of these and other inherent limitations of control systems, there can be
no assurance that any design will succeed in achieving its stated goals under all potential future
conditions, regardless of how remote. If we fail to implement and maintain an effective system of
internal controls or prevent fraud, we could suffer losses, could be subject to costly litigation,
investors could lose confidence in our reported financial information and our brand and operating
results could be harmed, which could have a negative effect on the trading price of our common
stock.
We must comply with recently enacted legislation known as Section 404 of the Sarbanes-Oxley Act.
Specifically, we and our independent registered public accounting firm must certify the adequacy of
our internal controls over financial reporting at July 31, 2005. Identification of material
weaknesses in internal controls over financial reporting by us or our independent registered public
accounting firm could adversely affect our competitive position in our business, especially our
outsourced payroll business, and the market price for our common stock.
Business interruptions could adversely affect our future operating results.
Several of our major business operations are subject to interruption by earthquake, fire, power
shortages, terrorist attacks and other hostile acts, and other events beyond our control. The
majority of our research and development activities, our corporate headquarters, our principal
information technology systems, and other critical business operations are located near major
seismic faults. We do not carry earthquake insurance for direct quake-related losses. Our operating
results and financial condition could be materially adversely affected in the event of a major
earthquake or other natural or man-made disaster.
Caution Regarding Forward-Looking Statements
This Report contains forward-looking statements. These forward-looking statements include our
statements regarding the following: the assumptions underlying our Critical Accounting Policies,
including our estimates regarding product rebate and return reserves; our belief that revenue
growth for our products is slowing due to market maturation; our plans to mitigate slowing revenue
by developing and introducing new products and services; our belief that our income tax valuation
allowance is sufficient; our expectation that we may use cash for future acquisitions of technology
and businesses; and our expectation that our cash, cash equivalents and short-term investments will
be sufficient to meet our working capital and capital expenditure needs for the next 12 months.
We caution investors that forward-looking statements are only predictions based on our current
expectations about future events and are not guarantees of future performance. Our actual results,
performance or achievements could differ materially from those expressed or implied by the
forward-looking statements due to risks, uncertainties and assumptions that are difficult to
predict. These risks and uncertainties include the following: the impact of intense competition in
our business; difficulty in developing and introducing new products and services effectively;
failure of customers to adopt our new products as expected; difficulties with suppliers and
distribution channels; challenges associated with upgrading and integrating our information
systems; unanticipated increases in customer rebate and return rates; significant impairment
charges due to past acquisitions; and taxing authorities may challenge our tax positions. In addition, the risks and
uncertainties that are discussed in this Item 2 under the caption
Risks That Could Affect Future
Results
may also impact these forward-looking statements. We encourage you to read that section
carefully along with the other information provided in this Report and in our other filings with
the SEC before deciding to invest in our stock or to maintain or change your investment. We
undertake no obligation to revise or update any forward-looking statement for any reason, except as
required by law.
-44-
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Short-Term Investment and Funds Held for Payroll Customers Portfolio
We do not hold derivative financial instruments in our portfolio of short-term investments and
funds held for payroll customers. Our short-term investments and funds held for payroll customers
consist of instruments that meet quality standards consistent with our investment policy. This
policy specifies that, except for direct obligations of the United States government, securities
issued by agencies of the United States government, and money market or cash management funds, we
diversify our holdings by limiting our short-term investments and funds held for payroll customers
with any individual issuer.
Interest Rate Risk
Our cash equivalents and our portfolio of short-term investments and funds held for payroll
customers are subject to market risk due to changes in interest rates. Interest rate movements
affect the interest income we earn on cash equivalents, short-term investments and funds held for
payroll customers and the value of those investments. Should interest rates increase by 10% from
the levels of October 31, 2004, the value of our short-term investments and funds held for payroll
customers would decline by approximately $0.5 million. Should interest rates increase by 100 basis
points from the levels of October 31, 2004, the value of our short-term investments and funds held
for payroll customers would decline by approximately $3.2 million.
Impact of Foreign Currency Rate Changes
The functional currency of our international operating subsidiaries is the local currency. Assets
and liabilities of our foreign subsidiaries are translated at the exchange rate on the balance
sheet date. Revenue, costs and expenses are translated at average rates of exchange in effect
during the period. We report translation gains and losses as a separate component of stockholders
equity. We include net gains and losses resulting from foreign exchange transactions on our
statement of operations.
Since we translate foreign currencies (primarily Canadian dollars and British pounds) into U.S
dollars for financial reporting purposes, currency fluctuations can have an impact on our financial
results. The historical impact of currency fluctuations has generally been immaterial. We believe
that our exposure to currency exchange fluctuation risk is not significant primarily because our
international subsidiaries invoice customers and satisfy their financial obligations almost
exclusively in their local currencies. Due primarily to the effect of the weakening U.S. dollar on
intercompany balances with our Canadian subsidiary, we recorded foreign currency exchange gains of
$5.4 million in fiscal 2003 and $3.1 million in fiscal 2004. In the third quarter of fiscal 2004,
we converted a significant portion of our Canadian intercompany balances to long-term investments
in that subsidiary, which reduced our exposure to fluctuations in foreign exchange rates. We
recorded a foreign currency exchange gain of $0.4 million in the first quarter of fiscal 2005.
Although the impact of currency fluctuations on our financial results has generally been immaterial
in the past and we believe that for the reasons cited above currency fluctuations will not be
significant in the future, there can be no guarantee that the impact of currency fluctuations will
not be material in the future. As of October 31, 2004 we did not engage in foreign currency hedging
activities.
-45-
ITEM 4 CONTROLS AND PROCEDURES
-46-
CONDENSED CONSOLIDATED BALANCE SHEETS
October 31,
July 31,
(In thousands; unaudited)
2004
2004
$
52,008
$
27,298
707,645
991,971
69,122
90,795
17,536
20,134
31,353
71,600
50,478
977
1,605
939,022
1,193,500
333,098
323,041
1,272,120
1,516,541
236,999
232,654
659,781
659,137
95,439
104,966
138,967
135,711
15,739
15,809
22,783
17,669
13,691
13,691
$
2,455,519
$
2,696,178
$
83,526
$
70,124
72,800
133,733
217,992
219,482
22,159
80,501
83,251
4,976
5,575
459,795
534,324
333,098
323,041
792,893
857,365
16,997
16,394
1,954,354
1,949,226
(1,203,914
)
(1,088,389
)
(17,733
)
(19,434
)
(1,283
)
(3,375
)
914,205
984,391
1,645,629
1,822,419
$
2,455,519
$
2,696,178
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
October 31,
October 31,
(In thousands, except per share amounts; unaudited)
2004
2003
$
160,857
$
157,869
89,604
66,086
15,529
15,367
265,990
239,322
30,187
31,862
39,756
34,792
6,529
6,710
3,354
3,222
133,135
131,775
75,107
70,634
50,843
43,235
4,444
5,752
343,355
327,982
(77,365
)
(88,660
)
3,951
7,490
158
147
(73,256
)
(81,023
)
(30,786
)
(27,520
)
(42,470
)
(53,503
)
(3,666
)
(462
)
$
(46,136
)
$
(53,965
)
$
(0.22
)
$
(0.27
)
(0.02
)
$
(0.24
)
$
(0.27
)
188,346
198,747
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
October 31,
October 31,
(In thousands; unaudited)
2004
2003
$
(46,136
)
$
(53,965
)
3,666
462
(42,470
)
(53,503
)
21,428
19,726
4,444
5,752
3,354
3,222
1,883
1,460
1,625
1,561
(128
)
1,257
3,466
2,578
1,297
(88
)
(158
)
(147
)
7,160
5,153
7,523
(417
)
(3,280
)
6,637
(13,939
)
22,049
12,906
(20,904
)
(20,809
)
(17,391
)
13,131
25,577
(60,981
)
(50,029
)
(1,605
)
4,597
(22,526
)
(34,477
)
(3,407
)
(2,684
)
(95,052
)
(61,501
)
(88,415
)
(75,440
)
(269
)
(760
)
(88,684
)
(76,200
)
(667,184
)
(534,373
)
948,003
798,747
(10,057
)
22,853
(24,407
)
(20,714
)
(4,886
)
(3,892
)
10,057
(22,853
)
(118,025
)
251,526
121,743
595
1,793
30,958
31,935
(170,562
)
(103,072
)
(139,009
)
(69,344
)
877
1,467
24,710
(22,334
)
27,298
169,842
$
52,008
$
147,508
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(UNAUDITED)
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October 31,
July 31,
(In thousands)
2004
2004
$
186,709
$
182,547
31,283
36,935
$
217,992
$
219,482
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Stock Options
Employee Stock Purchase Plan
Three Months Ended
Three Months Ended
October 31,
October 31,
October 31,
October 31,
2004
2003
2004
2003
3.02
3.45
1.00
1.00
42
%
74
%
29
%
76
%
2.50
%
2.35
%
1.79
%
0.97
%
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October 31,
July 31,
(In thousands)
2004
2004
$
19
$
174
(1,267
)
(2,678
)
$
(1,248
)
$
(2,504
)
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Three Months Ended
October 31,
October 31,
(In thousands)
2004
2003
$
160
$
209
(1,457
)
(121
)
$
(1,297
)
$
88
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Three
Months
Ended
Twelve Months Ended
October 31,
July 31,
July 31,
2004
2004
2003
(0.1
%)
2.9
%
2.7
%
0.0
%
7.1
%
8.9
%
0.0
%
0.3
%
0.3
%
13.6
%
12.7
%
11.6
%
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Net Revenue Revenue Recognition
. Intuit derives
revenue from the sale of packaged software products,
license fees, product support, professional services,
outsourced payroll services, transaction fees and
multiple element arrangements that may include any
combination of these items. We follow the appropriate
revenue recognition rules for each type of revenue.
For additional information, see
Net Revenue
in Note
1 to the financial statements. We generally recognize
revenue when persuasive evidence of an arrangement
exists, we have delivered the product or performed
the service, the fee is fixed or determinable and
collectibility is probable. However, determining
whether and when some of these criteria have been
satisfied often involves assumptions and judgments
that can have a significant impact on the timing and
amount of revenue we report. For example, for
multiple element arrangements we must make
assumptions and judgments in order to allocate the
total price among the various elements we must
deliver, to determine whether undelivered services
are essential to the functionality of the delivered
products and services, to determine whether
vendor-specific evidence of fair value exists for
each undelivered element and to determine whether and
when each element has been delivered. If we were to
change any of these assumptions or judgments, it
could cause a material increase or decrease in the
amount of revenue that we report in a particular
period. Amounts for fees collected or
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invoiced and due relating to arrangements where revenue cannot be recognized
are reflected on our balance sheet as deferred revenue and recognized when the
applicable revenue recognition criteria are satisfied.
Net Revenue Return and Rebate Reserves
. As part of
our revenue recognition policy, we estimate future
product returns and rebate payments and establish
reserves against revenue at the time of sale based on
these estimates. Our return policy allows
distributors and retailers, subject to contractual
limitations, to return purchased products. Product
returns by distributors and retailers principally
relate to the return of obsolete products. In
determining our product returns reserves, we consider
the volume and price mix of products in the retail
channel, historical return rates for prior releases
of the product, trends in retailer inventory and
economic trends that might impact customer demand for
our products (including the competitive environment
and the timing of new releases of our products). We
fully reserve for obsolete products in the
distribution channels.
Our rebate reserves include distributor and retailer sales incentive rebates and end-user
rebates. Our estimated reserves for distributor and retailer incentive rebates are based on
distributors and retailers actual performance against the terms and conditions of rebate
programs, which we typically establish annually. Our reserves for end-user rebates are estimated
based on the terms and conditions of the specific promotional rebate program, actual sales
during the promotion, the amount of redemptions received and historical redemption trends by
product and by type of promotional program.
In the past, actual returns and rebates have approximated and not generally exceeded the
reserves that we have established. However, actual returns and rebates in any future period are
inherently uncertain. If we were to change our assumptions and estimates, our revenue reserves
would change, which would impact the net revenue we report. If actual returns and rebates are
significantly greater than the reserves we have established, the actual results would decrease
our future reported revenue. Conversely, if actual returns and rebates are significantly less
than our reserves, this would increase our future reported revenue. For example, if we had
increased our fiscal 2004 returns reserves by 1% of non-consignment sales to retailers for
QuickBooks, TurboTax and Quicken, our fiscal 2004 total net revenue would have been
approximately $4 million lower. If rebate redemptions for our QuickBooks, TurboTax and Quicken
products were to increase by 1%, our annual total net revenue would decrease by approximately $1
million.
Allowance for Doubtful Accounts
. We make ongoing assumptions
relating to the collectibility of our accounts receivable. The
accounts receivable amount on our balance sheet includes a reserve
for accounts that might not be paid. In determining the amount of
the reserve, we consider our historical level of credit losses. We
also make judgments about the creditworthiness of significant
customers based on ongoing credit evaluations, and we assess
current economic trends that might impact the level of credit
losses in the future. Our reserves have generally been adequate to
cover our actual credit losses. However, since we cannot reliably
predict future changes in the financial stability of our
customers, we cannot guarantee that our reserves will continue to
be adequate. If actual credit losses are significantly greater
than the reserve we have established, that would increase our
general and administrative expenses and reduce our reported net
income. Conversely, if actual credit losses are significantly less
than our reserve, this would eventually decrease our general and
administrative expenses and increase our reported net income.
Goodwill, Purchased Intangible Assets and Other Long-Lived Assets
Impairment Assessments
. We make judgments about the
recoverability of purchased intangible assets and other long-lived
assets whenever events or changes in circumstances indicate that
an other-than-temporary impairment in the remaining value of the
assets recorded on our balance sheet may exist. We test the
impairment of goodwill annually in our fourth fiscal quarter or
more frequently if indicators of impairment arise. The timing of
the formal annual test may result in charges to our statement of
operations in our fourth fiscal quarter that could not have been
reasonably foreseen in prior periods. In order to estimate the
fair value of long-lived assets, we typically make various
assumptions about the future prospects for the business that the
asset relates to, consider market factors specific to that
business and estimate future cash flows to be generated by that
business. We evaluate cash flows at the lowest operating level and
the number of reporting units we evaluate may make impairment more
probable than it would be at a company with fewer reporting units
and integrated operations following acquisitions. Based on these
assumptions and estimates, we determine whether we need to record
an impairment charge to reduce the value of the asset on our
balance sheet to reflect its estimated fair value. Assumptions and
estimates about future values and remaining useful lives are
complex and often subjective. They can be affected by a variety of
factors, including external factors such as industry and economic
trends, and internal factors such as changes in our business
strategy and our internal forecasts. Although we believe the
assumptions and estimates we have made in the past have been
reasonable and appropriate, different assumptions and estimates
could materially affect our
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reported financial results. More conservative assumptions of the anticipated future benefits
from these businesses could result in impairment charges, which would decrease net income and
result in lower asset values on our balance sheet. Conversely, less conservative assumptions
could result in smaller or no impairment charges, higher net income and higher asset values. We
recorded impairment charges of $18.7 million in fiscal 2004. At October 31, 2004, we had $659.8
million in goodwill and $95.4 million in net purchased intangible assets on our balance sheet.
Accounting for Stock-Based Incentive Programs
. We currently measure compensation expense
for our stock-based incentive programs using the intrinsic value method prescribed by
Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees.
Under this method, we do not record compensation expense when stock options are granted to
eligible participants as long as the exercise price is not less than the fair market value of
the stock when the option is granted. We also do not record compensation expense in connection
with our Employee Stock Purchase Plan as long as the purchase price of the stock is not less
than 85% of the lower of the fair market value of the stock at the beginning of each offering
period or at the end of each purchase period. In accordance with SFAS 123,
Accounting for
Stock-Based Compensation,
and SFAS 148,
Accounting for Stock-Based Compensation Transition
and Disclosure,
we disclose our pro forma net income or loss and net income or loss per share
as if the fair value-based method had been applied in measuring compensation expense for our
stock-based incentive programs. We have elected to follow APB 25 because the fair value
accounting provided for under SFAS 123 requires the use of option valuation models that were
not developed for use in valuing incentive stock options and employee
stock purchase plan shares.
On March 31, 2004 the Financial Accounting Standards Board (FASB) issued its exposure draft,
Share-Based Payment,
which is a proposed amendment to SFAS 123. The exposure draft would
require all share-based payments to employees, including grants of employee stock options and
purchases under employee stock purchase plans, to be recognized in the statement of operations
based on their fair values. The FASB expects to issue a final standard late in 2004 that would
be effective for public companies for interim and annual periods beginning after June 15, 2005.
We have not yet assessed the impact of adopting this new standard.
We monitor progress at the FASB and other developments with respect to the general issue of
stock-based incentive compensation. We may have to recognize substantially more compensation
expense in future periods if we are required or elect to expense the value of stock-based
incentive compensation or if we decide to alter our current employee compensation programs to
provide other benefits in place of incentive stock options.
Income Taxes Estimates of Effective Tax Rates, Deferred Taxes and Valuation Allowance
.
When we prepare our consolidated financial statements, we estimate our income taxes based on
the various jurisdictions where we conduct business. Significant judgment is required in
determining our worldwide income tax provision. We recognize liabilities for anticipated tax
audit issues in the United States and other tax jurisdictions based on our estimate of
whether, and the extent to which, additional taxes will be due. We record an additional amount
in our provision for income taxes in the period in which we determine that our recorded tax
liability is less than we expect the ultimate tax assessment to be. If in a later period we
determine that payment of this additional amount is unnecessary, we reverse the liability and
recognize a tax benefit in that later period. As a result, our ongoing assessments of the
probable outcomes of the audit issues and related tax positions require judgment and can
materially increase or decrease our effective tax rate as well as impact our operating
results. This also requires us to estimate our current tax exposure and to assess temporary
differences that result from differing treatments of certain items for tax and accounting
purposes. These differences result in deferred tax assets and liabilities, which we show on
our balance sheet. We must then assess the likelihood that our deferred tax assets will be
realized. To the extent we believe that realization is not likely, we establish a valuation
allowance. When we establish a valuation allowance or increase this allowance in an accounting
period, we record a corresponding tax expense on our statement of operations.
Management must make significant judgments to determine our deferred tax assets and liabilities
and any valuation allowance to be recorded against our net deferred tax asset. Our net deferred
tax asset at October 31, 2004 was $159.1 million, net of the valuation allowance of $5.5
million. We recorded the valuation allowance to reflect uncertainties about whether we will be
able to utilize some of our deferred tax assets (consisting primarily of certain state capital
loss carryforwards) before they expire. The valuation allowance is based on our estimates of
taxable income for the jurisdictions in which we operate and the period over which our deferred
tax assets will be realizable. While we have considered future taxable income in assessing the
need for the valuation allowance, we could be required to increase the valuation allowance to
take into account additional deferred tax assets that we may be unable to realize. An increase
in the valuation allowance would have an adverse impact,
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which could be material, on our income tax provision and net income in the period in which we
make the increase.
(Dollars in millions,
Q1
Q1
Q1 %
except per share amounts)
FY05
FY04
Change
$
266.0
$
239.3
11
%
(77.4
)
(88.7
)
(13
%)
(42.5
)
(53.5
)
(21
%)
$
(0.22
)
$
(0.27
)
(19
%)
$
(88.4
)
$
(75.4
)
17
%
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% Total
% Total
Q1
Net
Q1
Net
Q1 %
(Dollars in millions)
FY05
Revenue
FY04
Revenue
Change
$
112.1
$
104.6
31.0
20.2
2.5
5.1
145.6
55
%
129.9
54
%
12
%
15.7
17.0
50.0
41.3
1.0
0.8
66.7
25
%
59.1
25
%
13
%
1.2
2.4
3.6
2.7
0.2
0.1
5.0
2
%
5.2
2
%
(3
%)
7.2
6.4
0.3
0.5
7.5
3
%
6.9
3
%
7
%
24.7
27.5
4.7
1.4
11.8
9.3
41.2
15
%
38.2
16
%
8
%
$
266.0
100
%
$
239.3
100
%
11
%
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Q1
% of Related
Q1
% of Related
Q1 %
(Dollars in millions)
FY05
Revenue
FY04
Revenue
Change
$
30.2
19
%
$
31.9
20
%
(5
%)
39.8
44
%
34.8
53
%
14
%
6.5
42
%
6.7
44
%
(3
%)
3.4
n/a
3.2
n/a
4
%
$
79.9
30
%
$
76.6
32
%
4
%
Q1
% Total Net
Q1
% Total Net
Q1 %
(Dollars in millions)
FY05
Revenue
FY04
Revenue
Change
$
133.1
50
%
$
131.8
55
%
1
%
75.1
28
%
70.6
30
%
6
%
50.8
19
%
43.2
18
%
18
%
259.0
97
%
245.6
103
%
5
%
4.4
2
%
5.8
2
%
(24
%)
$
263.4
99
%
$
251.4
105
%
5
%
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Three Months Ended
October 31,
October 31,
(In millions)
2004
2003
$
2.6
$
3.3
0.6
0.7
0.4
3.3
(0.1
)
(0.1
)
0.5
0.3
$
4.0
$
7.5
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Additions
Balance
Charged
Balance
Balance
July 31,
Against
Returns/
October 31,
October 31,
2004
Revenue
Redemptions
2004
2003
(In thousands)
$
36,877
$
7,209
$
(9,660
)
$
34,426
$
32,734
16,215
7,637
(12,824
)
11,028
8,139
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Federal Government
. Agencies of the U.S. government have made several attempts during
the two most recent presidential administrations to offer taxpayers a form of free tax
preparation software and filing service. However, in October 2002 the U.S. Internal
Revenue Service agreed not to develop or deploy its own competing tax software product or
service so long as participants in an association of private tax preparation software
companies, including Intuit, agreed to provide Web-based federal tax preparation and filing
services at no cost to qualified taxpayers for a period of three years, subject to
recurring two-year extensions. The relationship, called the Free File Alliance, is
intended to serve lower income, disadvantaged and underserved taxpayers with the objective
of making free online tax preparation software and filing services available to at least
60% of taxpayers. Although the Free File Alliance has kept the federal government from
being a direct competitor to our tax offerings, it has caused us to lose revenue
opportunities for a large percentage of the tax base. In addition, a growing number of
competitors are using the Free File Alliance as a free marketing tool by giving away
services at the federal level and attempting to make money from ancillary service
offerings. Further, were the federal government to terminate the Free File Alliance and
elect to provide its own software and electronic filing services available to taxpayers at
no charge it would negatively impact our revenue and profits.
State Governments
. State taxing authorities have also actively pursued strategies to
provide free online tax return preparation and electronic filing services for state
taxpayers. During 2004 at least 15 states participated in Free File Alliance
collaborations with private sector software companies to offer free online tax preparation
and electronic filing services to qualified taxpayers. However, 22 states, including
California, directly offered their own online services to taxpayers. It is possible that
other governmental
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entities that currently do not offer such services will elect to pursue similar competitive
offerings in the future. These publicly sponsored programs have caused us to lose potential
customers to free offerings and have enabled competitors to gain market share at our expense
by using participation in the free alliances as an effective tool to attract customers to
ancillary paid offerings. Given the efficiencies that electronic tax filing provides to
taxing authorities, we anticipate that governmental competition will present a continued
competitive threat to our business for the foreseeable future.
Private Sector
. In the private sector we face intense competition primarily from H&R
Block, the makers of TaxCut software, and increasingly from web-based competitive offerings
where we are subject to significant and increasing pricing pressure. We also compete for
customers with low-cost assisted tax preparation businesses, such as H&R Block.
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loss of customers to competitors, which could also deprive us of future revenue
attributable to repeat purchases, product upgrades and purchases of related services;
negative publicity and damage to our brands;
customer dissatisfaction;
reduced retailer shelf space and product promotions; and
increased operating expenses, such as inventory replacement costs and in our consumer
tax business, expenses resulting from our commitment to reimburse penalties and interest
paid by customers due solely to calculation errors in our consumer tax preparation
products.
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International outsourcing has received considerable negative attention in the media and
there are indications that the U.S. Congress may pass legislation that would impact how we
operate and impact customer perceptions of our service. For example, in Congress
legislators have discussed restricting the flow of personal information to overseas
providers and requiring representatives in foreign jurisdictions to affirmatively identify
themselves by name and location;
Customers may react negatively to providing information to and receiving support from
overseas organizations;
We may not be able to impact the quality of support that we provide as directly as we
are able to in our company-run call centers;
In recent years India has experienced political instability and changing policies that
may impact our operations. In addition, for a number of years India and Pakistan have been
in conflict and an active state of war between the two countries could disrupt our
services; and
We rely on a global communications infrastructure that may be interrupted in a number of
ways. For example, in fiscal 2004 we had to reroute calls to India due to an underwater
cable being cut in the Mediterranean Sea.
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inability to successfully integrate the acquired technology and operations into our
business and maintain uniform standards, controls, policies, and procedures;
distraction of managements attention away from normal business operations;
challenges retaining the key employees of the acquired operation;
insufficient revenue generation to offset liabilities assumed;
expenses associated with the acquisition; and
unidentified issues not discovered in our due diligence process, including product
quality issues and legal contingencies.
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if merchants for whom we process credit card transactions are unable to pay refunds due
to their customers in connection with disputed or fraudulent merchant transactions we may
be required to pay those amounts and our payments may exceed the amount of the customer
reserves we have established to make such payments;
we will not be able to conduct our business if the bank sponsors and card payment
processors and other service providers that we rely on to process bank card transactions
terminate their relationships with us and we are not able to secure or successfully migrate
our business elsewhere;
we could be required to stop providing payment processing services for Visa and
MasterCard if we or our bank sponsors fail to adhere to the standards of the Visa and
MasterCard credit card associations;
we depend on independent sales organizations that do not serve us exclusively to acquire
and retain merchant accounts;
our profit margins will be reduced if for competitive reasons we cannot increase our
fees at times when Visa and MasterCard increase the fees that we pay to process merchant
transactions through their systems;
unauthorized disclosure of merchant and cardholder data, whether through breach of our
computer systems or otherwise, could expose us to protracted and costly litigation; and
we may encounter difficulties scaling our business systems to support our growth as we
continue to migrate users of our QuickBooks Merchant Account Services from third-party
service providers to our own systems.
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(a)
Evaluation of Disclosure Controls and Procedures
Based on our managements evaluation (with the participation of our principal executive
officer and principal financial officer) of our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the
Exchange Act)) as required by Rules 13a-15 and 15d-15 under the Exchange Act, as of the end
of the period covered by this report, our principal executive officer and principal financial
officer have concluded that such disclosure controls and procedures are effective to ensure
that information required to be disclosed by us in reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms.
(b)
Changes in Internal Control Over Financial Reporting
In September 2004 we completed an upgrade of the information systems that we use to accumulate
financial data used in financial reporting. We utilized this new system to generate financial
statements for our fiscal quarter ended October 31, 2004. The upgrade was not made in response
to any deficiency in our internal controls. Other than our system upgrade, which we believe
enhances our system of internal controls, there was no change in our system of internal
control over financial reporting during our first fiscal quarter that has materially affected,
or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II
ITEM 1 LEGAL PROCEEDINGS
Muriel Siebert & Co., Inc. v. Intuit Inc., Index No. 03-602942, Supreme Court of the State of New
York, County of New York.
On September 17, 2003, Muriel Siebert & Co., Inc. filed a complaint against Intuit alleging various
claims for breach of contract, breach of express and implied covenants of good faith and fair
dealing, breach of fiduciary duty, misrepresentation and/or fraud, and promissory estoppel. The
allegations relate to Quicken Brokerage powered by Siebert, a strategic alliance between the two
companies. The complaint seeks compensatory, punitive, and other damages. On September 22, 2003,
Intuit filed an arbitration demand against Siebert & Co., Inc. in San Jose, California seeking
arbitration of all claims asserted by both parties. The Appellate Division of the Supreme Court of
the State of New York has ruled that the matter should proceed in the New York state courts, but
the matter is stayed while the court considers Intuits further appeal. Intuit believes this
lawsuit is without merit and intends to defend the litigation vigorously in whichever forum it
ultimately proceeds.
Intuit/Quicken Sunsetting Litigation, Master File No. 1-04-CV-016394, Superior Court of
California, County of Santa Clara (Anthony Flannery v. Intuit Inc., et al, Civil No.
1-04-CV-016394 and Daniel J. Mason v. Intuit Inc., et al, Civil No. 1-04-CV-018345).
On or about March 19, 2004, plaintiff Anthony Flannery, on his behalf and on behalf of a class of
persons allegedly similarly situated, filed a complaint against Intuit in Santa Clara Superior
Court, alleging that Intuits retirement of certain services and live technical support associated
with its Quicken 1998, Quicken 1999 and Quicken 2000 products constituted a breach of express and
implied warranties and violated sections 17200 and 17500 of the California Business and Professions
Code, as well as the Consumer Legal Remedies Act. The complaint seeks certification as a class
action, as well as unspecified compensatory and punitive damages, disgorgement of profits,
restitution, injunctive relief and attorneys fees from Intuit.
On or about April 21, 2004, plaintiff Daniel Mason, on his behalf and on behalf of a class of
persons allegedly similarly situated, filed a complaint against Intuit in Santa Clara Superior
Court making allegations virtually identical to those of Anthony Flannery. On July 14, 2004, the
Court consolidated the two cases pursuant to stipulation of the parties.
On July 29, 2004, plaintiffs filed a consolidated First Amended Complaint. On October 8, 2004,
Intuit responded to plaintiffs First Amended Complaint by filing demurrers. By Order dated
November 12, 2004, the Court granted the demurrers and dismissed all counts of the First Amended
Complaint, holding that the plaintiffs failed to state a claim upon which relief could be granted.
The Court allowed plaintiffs until December 10, 2004 to file a Second Amended Complaint and counsel
for the plaintiffs has indicated an intent to make such a filing. If plaintiffs file a Second
Amended Complaint, Intuit will defend the litigation vigorously.
Cynthia Belotti v. Intuit Inc., et al, Civil No. 1-04-CV-020277, Superior Court of California,
County of Santa Clara.
On or about May 24, 2004, plaintiff Cynthia Belotti, on her behalf and on behalf of a class of
persons allegedly similarly situated, filed a complaint against the Company in Santa Clara Superior
Court, alleging that Intuits retirement of certain add-on business services and live technical
support associated with its QuickBooks 2001 and QuickBooks 2002 products constituted a breach of
express and implied warranties and violated sections 17200 and 17500 of the California Business and
Professions Code. The complaint sought certification as a class action, as well as damages,
disgorgement of profits, restitution, injunctive relief and attorneys fees from Intuit.
On or about July 13, 2004, plaintiff filed a First Amended Complaint that added Ental Precision
Machining, Inc., as plaintiff; plaintiffs counsel has also dismissed without prejudice all claims
on behalf of Cynthia Belotti. On October 8, 2004, Intuit responded to plaintiffs First Amended
Complaint by filing demurrers. By Order dated November 12, 2004, the Court granted the demurrers
and dismissed all counts of the First Amended Complaint, holding that plaintiff failed to state a
claim upon which relief could be granted. The Court allowed plaintiff until December 10,
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2004 to file a Second Amended Complaint and counsel for the plaintiff has indicated an intent to
make such a filing. If plaintiff files a Second Amended Complaint, Intuit will defend the
litigation vigorously.
Other Litigation Matters
Intuit is subject to certain routine legal proceedings, as well as demands, claims and threatened
litigation, that arise in the normal course of our business, including assertions that we may be
infringing patents or other intellectual property rights of others. We currently believe that the
ultimate amount of liability, if any, for any pending claims of any type (either alone or combined)
will not materially affect our financial position, results of operations or cash flows. We also
believe that we would be able to obtain any necessary licenses or other rights to disputed
intellectual property rights on commercially reasonable terms. However, the ultimate outcome of any
litigation is uncertain and, regardless of outcome, litigation can have an adverse impact on Intuit
because of defense costs, negative publicity, diversion of management resources and other factors.
Our failure to obtain necessary license or other rights, or litigation arising out of intellectual
property claims could adversely affect our business.
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ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Stock repurchase activity during the three months ended October 31, 2004 was as follows:
Notes:
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ITEM 5 OTHER INFORMATION
ADOPTION OF INTUIT INC. 2005 EQUITY INCENTIVE PLAN
Intuits stockholders approved the adoption of the Intuit Inc. 2005 Equity Incentive Plan at
Intuits Annual Meeting of Stockholders held on December 9, 2004. The 2005 Plan became effective
upon stockholder approval. It replaces Intuits 2002 Equity Incentive Plan, 1998 Plan for Mergers
& Acquisitions (a non-stockholder approved plan) and 1996 Directors Stock Option Plan, each of
which terminated when the 2005 Plan was approved by stockholders.
The 2005 Plan reserves 6,500,000 shares of Intuits Common Stock for equity awards granted under
it. The 2005 Plan limits the maximum number of shares that may be issued as discount equity awards
to 2,000,000 over the life of the 2005 Plan. The 2005 Plan has a two year term. This means that
Intuit may grant equity awards under it until December 9, 2006. The 2005 Plan prohibits Intuit
from repricing equity awards without first going to stockholders for approval.
Employees, officers, directors, independent contractors, consultants and advisors of Intuit and its
majority-owned subsidiaries are eligible to receive awards under the 2005 Plan. The Compensation
and Organizational Development Committee determines which eligible individuals receive awards and
the terms and conditions of the awards and may delegate its authority to grant awards. The
Compensation Committee has delegated the authority to grant certain options to the Chief Executive
Officer and certain other officers. Individuals who are granted awards are called participants.
Intuit may grant five types of awards under the 2005 Plan stock options (both incentive and
nonqualified), stock appreciation rights (settled in cash or stock), restricted stock awards,
restricted stock units and stock bonuses.
Intuit may grant both incentive and nonqualified stock options under the 2005 Plan. Intuit may
grant nonqualified stock options (called NQSOs) to any individual eligible to participate in the
2005 Plan. Intuit may grant incentive stock options (called ISOs) only to employees of Intuit or
its majority-owned subsidiaries. Intuit almost exclusively grants NQSOs with exercise prices that
are no less than the fair market value of Intuits Common Stock at the time of grant. The
participant pays Intuit the exercise price when she or he exercises the option. The 2005 Plan
permits several payment methods in addition to cash. It allows a participant to use a broker to
exercise via a same-day-sale transaction.
The options Intuit has granted become exercisable as they vest. Generally, options vest over three
years. If an employee who has been actively employed at Intuit for one year or more dies or becomes
totally disabled, his or her option will become fully vested.
Intuit may grant stock appreciation rights (called SARs) to any individual eligible to
participate in the 2005 Plan. Like stock options, the value to employees of an SAR is the
difference between the trading price of Intuit stock and the exercise price. Unlike
options under which the participant pays the exercise price to receive the shares, on exercise of a
SAR, the participant receives only the difference between the exercise price and the trading price
of the stock in stock or in cash.
Intuit may grant restricted stock units (called RSUs) to any individual eligible to participate
in the 2005 Plan. Intuit may issue stock or cash on settlement of an RSU. This stock or cash is
issued only if the RSU vests. Intuit may grant RSU awards that allow an employee to defer issuance
of the shares or cash to a date after vesting.
Restricted stock awards allow participants to purchase shares of stock from Intuit. Intuit may
impose vesting restrictions on the shares purchased that lapse over time or as certain performance
goals are met.
Stock bonus awards allow participants to receive shares either as compensation for past services to
Intuit or if certain performance goals are met. Intuit can pay stock bonus awards in shares or
cash.
The 2005 Plan contains two provisions that enable it to meet the performance-based exception to the
$1,000,000 deductibility limits on compensation under Section 162(m) of the Internal Revenue Code.
First, no more than 3,000,000 shares may be made subject to awards granted to an individual in the
year of his or her hire. Second, no
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more than 2,000,000 shares may be made subject to awards granted to any individual in any other
year. In addition, the Compensation Committee members who may make awards to officer employees are
all outside directors within the meaning of Section 162(m).
If Intuit were acquired and the acquiring corporation did not assume or replace the awards granted
under the 2005 Plan, all outstanding awards would become fully vested and would terminate at the
time the acquisition closed. If the acquiring corporation assumed the awards and then terminated
the employment of an individual holding an option granted under the 2005 Plan within one year
following the acquisition, the employee would accelerate in one year of vesting. If Intuit were to
liquidate or dissolve, all outstanding options would become fully vested and would then terminate
at the time of the dissolution or liquidation.
The Board or the Compensation Committee may terminate or amend the 2005 Plan. Neither the Board nor
the Compensation Committee may amend the 2005 Plan in a manner requiring stockholder approval under
the Internal Revenue Code or the Securities Exchange Act without first obtaining stockholder
approval. Outstanding awards cannot be amended without the participants consent.
AUTOMATIC STOCK OPTION GRANTS TO NON-EMPLOYEE DIRECTORS UNDER 2005 EQUITY
On December 9, 2004, the date Intuits stockholders approved the 2005
Equity Incentive Plan, Intuit automatically granted three compensatory
stock options pursuant to Section 10 of the Plan entitled Automatic Grants
to Non-Employee Directors. In accordance with the non-discretionary grant
formula set forth in Section 10.3 of the Plan, the following members of
Intuits Board of Directors each received a stock option grant for 15,000
shares: Christopher Brody, L. John Doerr and Michael Hallman. In accordance
with Section 10.7(b) of the Plan, which sets forth the non-discretionary
vesting schedule for these grants, the options become exercisable as they
vest over two years, as to 50% of the shares on December 9, 2005, the first
anniversary of the date of grant and as to an additional 4.1666% of the
shares each month thereafter, so long as the non-employee director
continuously remains a director or consultant of Intuit. The exercise
price per share of the options is the closing price of Intuits common
stock on the NASDAQ National Market on the December 9, 2004 date of grant.
2005 EXECUTIVE DEFERRED COMPENSATION PLAN
Intuit Inc.s Compensation and Organizational Development Committee adopted the 2005 Executive
Deferred Compensation Plan (the Plan) on December 7, 2004. The Plan is effective January 1,
2005.
The Plan is an unfunded plan maintained primarily to provide deferred compensation benefits for a
select group of management or highly compensated employees, within the meaning of Sections 201, 301
and 401 of the Employee Retirement Income Security Act of 1974. The Plan is intended to comply
with Internal Revenue Code Section 409A and any regulatory or other guidance issued under that
section. At the time Intuit adopted the Plan, the Department of Treasury had not yet issued
regulations under Section 409A. Once such guidance is issued, the Plan provides that Intuit will
conform it to the requirements of Section 409A.
U.S. based officers and director level employees with annual targeted cash compensation of at least
$140,000 are eligible to participate in the Plan. The Plan allows these eligible executives to
defer up to 50% of their base salary and up to 100% of their bonus and commissions. The Plan
allows Intuit to make discretionary employer contributions on behalf of an eligible executive.
Intuit may subject these discretionary employer contributions to a vesting schedule.
An eligible executive may make a deferral election for compensation that would otherwise be payable
during a subsequent calendar year by filing a participation agreement on or before a date
established by Intuit. This date must be before the end of the
calendar year that precedes the
calendar year in which compensation would otherwise be paid. The first deferral elections
permitted under the Plan are those made in calendar 2004 for compensation that would otherwise be
payable in calendar year 2005. Executives who become eligible for the Plan during a calendar year
in which the compensation would otherwise be payable will have 30 days in which to file a
participation agreement for that calendar year. The participation agreement will be effective only
with regard to compensation for services performed after Intuit receives the participation
agreement.
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A participant will be fully vested in his deferral account. Deferrals will be part of Intuits
general assets and will generally be informally funded in Intuit owned life insurance policies.
They may be placed in a grantor trust established by Intuit, but all trust assets remain general
assets of Intuit and are subject to the claims of Intuits creditors.
Payments from the Plan will be made in accordance with Section 409A. To that end, distributions
will be made pursuant to the distribution election made by the eligible executive at the time he
makes his deferral election. The individual may elect an in-service withdrawal in one lump sum or
annual payments over four years, with a payment commencement date at least two years from the date
of the deferral. The individual may elect a retirement withdrawal which would provide for payment
in annual installments over two, five or ten years. Retirement is defined as age 55 with five
years of service. The individual may elect a termination withdrawal. Participants with less than
five years of service or an account of under $20,000 will have their accounts distributed in a lump
sum. Participants with five or more years of service will have their accounts distributed in
accordance with their termination election in a lump sum or in annual installments over two or five
years. Distributions following termination of employment may begin no earlier than six months
following the individuals termination date.
The Plan does not permit a participant to change the date payments will be made, unless the
participant has an unforeseeable emergency. The Employee Benefits Administrative Committee of
Intuit is the committee that administers the Plan. If the Committee determines that the
participant has had an unforeseeable emergency, as defined in accordance with Section 409As
requirements, the participant may receive a lump sum distribution limited to the amount needed to
satisfy the unforeseeable emergency.
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ITEM 6 EXHIBITS AND
REPORTS ON FORM 8-K
We have filed the following exhibits as part of this report:
Report(s)
on Form 8-K filed during the first quarter of fiscal 2005:
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Total Number
Approximate
of Shares
Dollar Value of
Total Number
Average
Purchased as
Shares That May
of Shares
Price Paid
Part of Publicly
Yet Be Purchased
Period
Purchased
per Share
Announced Plans
Under the Plans
1,200,032
$
42.03
1,200,000
$
449,565,950
2,747,000
$
43.73
2,747,000
$
329,439,302
$
$
329,439,302
3,947,032
$
43.21
3,947,000
1.
All shares repurchased as part of publicly announced plans during the three months
ended October 31, 2004 were purchased under Repurchase Plan IV. This plan was announced on
May 19, 2004 and expires on May 17, 2007.
2.
On August 31, 2004, we repurchased 32 shares at that days Nasdaq closing price of
$42.29 per share to provide a former officer with funds to satisfy federal and state tax
obligations due to his vesting in 87 shares under our stock
compensation programs. These shares were not repurchased as part of publicly announced plans.
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INCENTIVE PLAN
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Exhibit No.
Exhibit Description
Amendment to Master Agreement between Intuit and Modus Media
International, Inc. dated November 1, 2000
Amendment to Amended and Restated Services Agreement effective
as of September 11, 2001 between Intuit and Ingram Micro Inc.
Intuit Inc. 2002 Plan Option Grant Agreement between Stephen
M. Bennett and Intuit Inc. dated July 31, 2004
Intuit Inc. 2002 Equity Incentive Plan Stock Bonus Agreement
Restricted Stock Units between Stephen M. Bennett and Intuit
Inc. dated July 31, 2004
Intuit Inc. 2005 Equity Incentive Plan
2005 Equity Incentive Plan Form of Non-Qualified Stock Option
New Hire, Promotion or Retention Grant
2005 Equity Incentive Plan Form of Non-Qualified Stock Option
Focal Grant
2005 Equity Incentive Plan Form of Restricted Stock Unit Award
Executive Stock Ownership Program Matching Unit
2005 Equity Incentive Plan Form of Non-Qualified Stock Option
Stephen Bennett Grant
2005 Equity Incentive Plan Form of Non-Employee Director
Option Initial Grant
2005 Equity Incentive Plan Form of Non-Employee Director
Option Succeeding Grant
2005 Equity Incentive Plan Form of Non-Employee Director
Option Committee Grant
Intuit Inc. 2005 Executive Deferred Compensation Plan,
effective January 1, 2005
Rule 13a-14(a) Certification (Chief Executive Officer)*
Rule 13a-14(a) Certification (Chief Financial Officer)*
Section 1350 Certification (Chief Executive Officer)
Section 1350 Certification (Chief Financial Officer)
+
Indicates a management contract or compensatory plan or arrangement
#
We have requested confidential treatment for certain portions of this
document pursuant to an application for confidential treatment sent to
the Securities and Exchange Commission. We omitted such portions from
this filing and filed them separately with the SEC.
*
This certification is not deemed filed for purposes of Section 18 of the Securities
Exchange Act of 1934, or otherwise subject to the liability of that section. Such
certification will not be deemed to be incorporated by reference into any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that
Intuit specifically incorporates it by reference.
1.
On August 18, 2004, Intuit filed a report on Form 8-K to report under
Item 12 its financial results for the quarter and fiscal year
ended July 31, 2004, and to list under Item 7 a press release furnished with the filing. Intuits statement
of operations and balance sheet for the fourth quarter and the
fiscal year were included with the press release that is an exhibit to the report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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INTUIT INC.
(Registrant)
Date: December 10, 2004
By:
/s/ ROBERT B. HENSKE
Robert B. (Brad) Henske
Senior Vice President and Chief Financial Officer
(Authorized Officer and Principal Financial Officer)
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EXHIBIT INDEX
Exhibit
Number
Exhibit Description
Amendment to Master Agreement between Intuit and Modus Media
International, Inc. dated November 1, 2000
Amendment to Amended and Restated Services Agreement effective
as of September 11, 2001 between Intuit and Ingram Micro Inc.
Intuit Inc. 2002 Plan Option Grant Agreement between Stephen
M. Bennett and Intuit Inc. dated July 31, 2004
Intuit Inc. 2002 Equity Incentive Plan Stock Bonus Agreement
Restricted Stock Units between Stephen M. Bennett and Intuit
Inc. dated July 31, 2004
Intuit Inc. 2005 Equity Incentive Plan
2005 Equity Incentive Plan Form of Non-Qualified Stock Option
New Hire, Promotion or Retention Grant
2005 Equity Incentive Plan Form of Non-Qualified Stock Option
Focal Grant
2005 Equity Incentive Plan Form of Restricted Stock Unit Award
Executive Stock Ownership Program Matching Unit
2005 Equity Incentive Plan Form of Non-Qualified Stock Option
Stephen Bennett Grant
2005 Equity Incentive Plan Form of Non-Employee Director
Option Initial Grant
2005 Equity Incentive Plan Form of Non-Employee Director
Option Succeeding Grant
2005 Equity Incentive Plan Form of Non-Employee Director
Option Committee Grant
Intuit Inc. 2005 Executive Deferred Compensation Plan,
effective January 1, 2005
Rule 13a-14(a) Certification (Chief Executive Officer)*
Rule 13a-14(a) Certification (Chief Financial Officer)*
Section 1350 Certification (Chief Executive Officer)
Section 1350 Certification (Chief Financial Officer)
+ | Indicates a management contract or compensatory plan or arrangement | |||
# | We have requested confidential treatment for certain portions of this document pursuant to an application for confidential treatment sent to the Securities and Exchange Commission. We omitted such portions from this filing and filed them separately with the SEC. | |||
* | This certification is not deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that Intuit specifically incorporates it by reference. |
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Exhibit 10.01
Amendment
To Master Agreement
This Amendment to the Master Agreement shall have an effective date of August 22, 2003, and is by and between Intuit Inc. (Intuit) and Modus Media International, Inc. (MMI)
WHEREAS, Intuit and MMI are parties to a Master Agreement dated November 1, 2000 and a Statement of Work (labeled 2001 Intuit & MMI Statement of Work) thereunder (the Original SOW); and
WHEREAS, the 2001 Intuit & MMI Statement of Work was amended by a document dated July 25, 2002, and that statement of work, as amended thereby, is referred to herein as the Existing SOW; and
WHEREAS, Intuit and MMI desire to make certain amendments to the Master Agreement and replace the Existing SOW with a new Statement of Work, as set forth herein,
NOW THEREFORE, Intuit and MMI hereby agree as follows:
1. | Revisions to Master Agreement. The following sections of the Master Agreement are revised as follows: |
(a) | Section 2.4, Quarterly Reviews: Add the following at the end of the first clause: | |||
Both parties agree to a Quarterly Scorecard including a risk/reward compensation plan for evaluating MMI performance with respect to the agreed Six Sigma format set forth in the applicable SOW. As a result of applying the risk/reward plan, additional payments or credits may be due MMI or Intuit. | ||||
(b) | Add the following as Section 2.6, Annual Pricing Review: | |||
Both parties agree to review annually the fees/prices paid by Intuit and to negotiate in good faith any fee/pricing adjustments. MMI agrees to seek continuous improvement in value engineering, vendor sourcing/component procurement processes and equipment to gain efficiency, which could result in downward pricing. | ||||
(c) | Invoicing & Payment, Section 5.1: Delete in its entirety and replace with: |
MODUS MEDIA will invoice INTUIT as services are rendered, but not less than weekly. MODUS MEDIA will provide separate accurate and timely invoices for operations in Carol Stream, Illinois, Lindon, Utah and Raleigh, North Carolina, and any other operating divisions performing services for INTUIT. In addition, MODUS MEDIA will bill and INTUIT will pay for Related Services and such other charges provided for herein as incurred. Charges for Related Services not specifically provided for in this Agreement or the Statement of Work MUST have prior written approval from INTUIT, otherwise INTUIT is under no obligation to pay such charges. INTUIT will pay MODUS MEDIA for goods or services provided satisfactorily, upon the following terms: One percent (1%) early payment discount within ten (10) days of receipt of a valid invoice; net thirty (30) days from receipt of the invoice, unless otherwise set forth in the applicable SOW or supplemental Purchase Order, in the event of a disputed invoice, INTUIT will promptly notify MODUS MEDIA of the dispute. Intuit will promptly pay such disputed invoice once such dispute is resolved to Intuits reasonable satisfaction. |
(d) | Article 11, Provisions: Add the following as a new Section 11.16, Non-Exclusive Agreement: | |||
This Agreement is a nonexclusive agreement. Intuit expressly reserves the right to contract with others for any or all of the products or services that Intuit may require. | ||||
All subsequent Sections have their numbers changed accordingly. |
2. | Master Agreement Term. The term of the Master Agreement (Term) commenced on November 1, 2000, and the parties agree that it shall continue through July 31, 2006 (Initial Term), unless earlier terminated as provided in the Master Agreement. The Master Agreement will automatically extend for successive one (l)-year terms (Extension Terms), unless earlier terminated as provided therein. | |||
3. | First Amendment. The FIRST AMENDMENT TO MASTER AGREEMENT between INTUIT, INC. and MODUS MEDIA INTERNATIONAL, INC. effective August 8, 2001, is deleted in its entirety. Both parties agree that the use of the Ghost Card identified in the First Amendment has terminated effective August 1, 2003. | |||
4. | Statement of Work. The Existing SOW is replaced with the 2003/2004 Intuit & Modus Statement of Work executed as of the date of this Amendment. |
As modified hereby, the Master Agreement shall remain in full force and effect.
(Signature Page Follows)
IN WITNESS WHEREOF, the parties hereto have signed this Amendment to Statement of Work as of the date set forth above:
INTUIT INC.
|
||
By: /s/ SCOTT BETH
|
||
|
||
Name: Scott Beth
|
||
Title: Vice President, Procurement
|
||
|
||
MODUS MEDIA INTERNATIONAL
|
||
By: /s/ DANIEL BECK
|
||
|
||
Name: Daniel Beck
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Title: President, Americas
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Exhibit 10.02
CONFIDENTIAL TREATMENT REQUESTED
AMENDMENT TO AMENDED AND RESTATED SERVICES AGREEMENT
EFFECTIVE AS OF SEPTEMBER 11, 2001 BY AND BETWEEN
INTUIT INC. AND INGRAM MICRO INC. (the Agreement)
The above referenced Agreement is hereby modified and amended as of December 1, 2003, as follows:
Section 6, Reviews, (b) is amended to add the following:
Effective 2/1/04, the maximum amount of Quarterly Review Payouts will be * annually, based on Vendors performance across all SLAs included in the Quarterly Review Form. Quarterly Reviews may also result in monetary penalty to Vendor if performance ratings fall below agreed upon service levels. The maximum penalty to be assessed will be * annually based on Vendors performance across all SLAs Included in the Quarterly Review Form.
Section 8, Term/Termination, (a) is amended: Unless otherwise terminated in accordance with this Agreement, the term of this Agreement shall begin on the Effective Date and will continue thru September 10, 2006,
1. | Exhibit B is deleted and replaced by Exhibit B (December 1, 2003) attached to this Amendment. | |||
2. | Exhibit C is deleted and replaced by Exhibit C (December 1, 2003) attached to this Amendment. | |||
3. | Exhibit D is deleted in its entirety. | |||
4. | Exhibit E is deleted and replaced by Exhibit E (December 1, 2003) attached to this Amendment. |
All other terms and conditions of the Agreement shall remain unchanged.
INGRAM MICRO INC. | INTUIT INC. | |||||||||
By:
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/s/ BRYAN C. MOYNAHAN
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By: |
/s/ M. ROENIGK
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Name:
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Bryan C. Moynahan | Name: | Mark Roenigk | |||||||
Title:
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Vice President/General Manager | Title: | Vice President, Supply Chain | |||||||
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Operations |
We have requested confidential treatment for certain portions of this document pursuant to an application for confidential treatment sent to the Securities and Exchange Commission (SEC). We omitted such portions from this filing and filed them separately with the SEC.
Exhibit B Payments and Fees
(Effective Dec 1, 2003)
Monthly Fixed Cost
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Logistics Program Services and Support | $ | * |
| Program Management | |||
| Order Management/ Customer Service | |||
| IT Project Management | |||
| Inventory Reconciliation Services | |||
| IPMG/ Postponement/ Rework Management | |||
| Program Accounting/ GL/ Reporting Analysis | |||
| Operations Support | |||
| Telephone / Fax |
LEGAL
| Telecom Maintenance | |||
| Occupancy | |||
| Corporate overhead | |||
| Allocations to variable cost |
Variable Cost
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Pick, pack and Ship (per unit) | $ | * | |||
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Pick, pack and Ship (per unit) RUSH | $ | * | |||
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Returns - Software (per unit) | $ | * | |||
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Returns - POS Hardware (per unit) | $ | * | |||
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Product Destruction (per Ib.) | $ | * | |||
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Pallet Storage per month * | * | ||||
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Labor rates for * | |||||
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-Between 8 and 5 p.m. (local time) Mon. thru Fri. | * | ||||
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-Overtime (Greater than 40 hours - Mon. thru Frl., Weekends) | * | ||||
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Other expenses and travel cost for * | Cost * | ||||
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Materials and Corrugate shall be * and shall be | |||||
subject to change. Intuit shall purchase * from Vendor *. |
We have requested confidential treatment for certain portions of this document pursuant to an application for confidential treatment sent to the Securities and Exchange Commission (SEC). We omitted such portions from this filing and filed them separately with the SEC.
We have requested confidential treatment for certain portions of this document pursuant to an application for confidential treatment sent to the Securities and Exchange Commission (SEC). We omitted such portions from this filing and filed them separately with the SEC.
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Page 1 of 2 | Dec. 1, 2003 |
Rework Pricing
Pricing is based on historical rework scenarios fulfilled by IML for Intuit.
Locate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Apply | and | Weight | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Apply | Apply | Apply | Apply | Remove/ | New | Master | Apply | Apply | Display | Remove | Salvage | Locate | Product | |||||||||||||||||||||||||||||||||||||||||||||||||||
Remove | Promo | UPC | Pilfer | Price | Replace | Master | Carton | Velcro | Sensormatic | Pallet | Rebate | Master | Rebate | (internal | ||||||||||||||||||||||||||||||||||||||||||||||||||
Rework Pricing
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Sticker
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Level
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Inserts
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Carton
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Loop
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contents)
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Scenario
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X | X | X | $ | * |
We have requested confidential treatment for certain portions of this document pursuant to an application for confidential treatment sent to the Securities and Exchange Commission (SEC). We omitted such portions from this filing and filed them separately with the SEC.
We have requested confidential treatment for certain portions of this document pursuant to an application for confidential treatment sent to the Securities and Exchange Commission (SEC). We omitted such portions from this filing and filed them separately with the SEC.
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Page 2 of 2 | Dec. 1, 2003 |
Exhibit C
Service Level Commitments
Beginning February 1, 2004, IML shall be required to perform the Services in accordance with the Service Level Commitments described in this Exhibit C.
Order Management & Customer Service
| * of orders will be printed (released to the warehouse) on the same business day received. This calculation will exclude all exception orders such as new store opening, future dated orders, ship completes, backorders, and pallet orders. | |||
| * of all electronic proof of delivery (ePOD) data that is provided by the carriers (that have existing EDI 214 connections with IML) will be delivered to Intuit within * of report availability from carrier to IML. | |||
| * of all manual proof of delivery (POD) information (from those carrier shipments that are not provided in the ePOD report) will be delivered to Intuit within * of delivery notification from carrier to IML. | |||
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IML response to customer shipment claim inquiries (as defined in the
Statement of Work) is no more than *from the time IML receives the customer inquiry as long as total claims
per day does not exceed
* IML will provide fnal resolution (acceptance or denial) on * of all claims within * business days as long as total claims per day does not exceed *. |
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| * of all RMAs created by IML Customer Service, keyed into IMLs system, will be accurate. | |||
| No more than * of order failures within Intuits fiscal month as a result to IML retailer set up. |
Fulfillment Services
| * On-Time Fulfillment: Provided IML has adequate Inventory to fulfill the order, and provided the order is received before the * Cut-Off Time (Warehouse, Local Standard Time) during *, and/or * Cut-Off Time (Warehouse, Local Standard Time) during *, IML will process * of all printed orders on the business day received unless daily volume exceeds * in the * facility and * in the * facility. Printed orders in excess of these amounts will be given an additional business day for processing. This calculation will exclude all exception orders such as new store opening, future dated orders, ship completes, backorders, and pallet orders. * of those orders released after the * (Local Standard Time) Cut-Off Time will be processed by IML by the Cut-Off Time on the following business day. | |||
| * Fulfillment Accuracy: IMLs Shipping Operation will accurately fulfill Orders. Fulfillment accuracy is calculated by adding the total approved short ship units (code SS) + over ship units (code OS) + warehouse picking error units (code WW) and dividing the sum by total units shipped | |||
| * On Time Delivery to Intuits customers * . Exclusions from this calculation are specified in SLA 1.0, On-Time Delivery. |
Schedule of defects for On Time Delivery by number of shipments per month | ||
* On Time Delivery
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= Acceptable | |
* On Time Delivery
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= Corrective Action 1 | |
* On Time Delivery
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= Corrective Action plus * reduction in Freight Savings Gain Share opportunity (ex. *) |
1 Corrective Action means that IML will take the appropriate action described in the Corrective Action Response Process set |
We have requested confidential treatment for certain portions of this document pursuant to an application for confidential treatment sent to the Securities and Exchange Commission (SEC). We omitted such portions from this filing and filed them separately with the SEC.
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Page 1 of 4 | Dec. 1, 2003 |
ERP and IT Integration
| * up time for any IML-operated FTP site used for scheduled business transactions for Intuit and or its business partner(s) | |||
| Turnaround time of no more than * for an EDI997 response to an Intuit EDI850 transaction | |||
| * Advanced Ship Notice (ASN/EDI856) accuracy as measured by Intuit is based on the number of shipping lines on the ASN files each day and the number of errors within those lines of data as transmitted by IML. Intuit will measure this on a monthly basis. | |||
| No more than * within a given month where IML business applications fail to process or send scheduled transactions. | |||
| IML will communicate any IML system failures affecting Intuit, and provide to Intuit updates as to the status of such failures based on the following escalation procedure: |
First Update to | ||||||
Priority Level
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Description
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Escalate After
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Customer
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P1
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Production system is down; unable to conduct business or possibility of immediate severe financial impact to business | * | 1 hour from time of original call | |||
P2
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Production system partially Impacted; business continues; some financial impact possible | * | 2-3 hours from time of original call | |||
P3
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Minimal Impact to production systems | * | Within 24 hours |
* | IML will notify Intuit once per day of all rejected orders on the FTP EDI acknowledgment report (EDP945), which will be posted, to the Intuit/IML FTP site nightly. In addition, IML will notify Intuit within 3 business hours of any order that is rejected the same day it has been received by IML | |||
* | No less than * uptime of online access to IMLs system (IMPulse / IMFirst / Cyclone) during regular business hours due to an IML systemic failure. IML will notify Intuit a minimum of 48 hours prior to any Scheduled Downtime (as defined herein) to IMLs systems (IMPulse / IMFirst / Cyclone). | |||
* | IML will ensure Impulse up time * during the term excluding Scheduled Down time for batching and end of fiscal month activity as follows: |
For purposes of these Service Level Commitments, Scheduled Downtime for IMLs CAPS and the WEB systems include downtimes that affect Intuits access to real time pricing and availability, ordering, order status and RMA status; provided that such downtimes occur during the following times:
Monday thru Friday Midnight to 4 AM PST
Saturday 8 PM to Midnight
PST Sunday All day
Scheduled Downtime shall also include the following times:
IMLs system shuts down on Saturday at 3 PM PST until Monday at 4 AM PST on month end Saturdays, based on a 4-4-5 fiscal calendar. These dates are reflected in the following schedule for IML fiscal year 2004:
January 3, 2004
January 31, 2004
February 28,2004
April 3, 2004
May 1, 2004
May 29, 2004
July 3, 2004
July 31, 2004
August 28, 2004
October 30, 2004
November 27, 2004
We have requested confidential treatment for certain portions of this document pursuant to an application for confidential treatment sent to the Securities and Exchange Commission (SEC). We omitted such portions from this filing and filed them separately with the SEC.
We have requested confidential treatment for certain portions of this document pursuant to an application for confidential treatment sent to the Securities and Exchange Commission (SEC). We omitted such portions from this filing and filed them separately with the SEC.
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Page 2 of 4 | Dec 1, 2003 |
IML will publish scheduled downtime dates for years 2005 & 2006 as they become available.
These additional periods of Scheduled Downtime are necessary because IML performs batch processing for its fiscal month ends and shuts down its systems during these times.
Orders received during downtimes will be queued and processed when the system is available.
| IML must meet a minimum of * on-time for all Small Enhancements and Project Milestones within a month. | |||
| IML must meet a minimum on-time performance of * for all testing per the Testing Category Descriptions as described in SLA 13.0 On-Time Retail Customer Requirements Testing. |
Report Capabilities & Metrics
| * of all reports as described in Attachment G will be provided to Intuit on time. IML will make best faith efforts to provide daily, automated reports per the agreed-upon timing. | |||
| Intuit will rely upon * accuracy for all IML produced reports for all active daily or informational reports as described in Attachment G. IML will perform self-audits to ensure accuracy and inform Intuit immediately of any defects and provide Intuit with a corrective action plan within *. Intuit may conduct random audits to ensure compliance. |
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Intuit Discovered Defects per month | |
*
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= Acceptable | |
*
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= Corrective Action | |
*
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= Corrective Action plus * reduction in
Freight Savings Gain Share opportunity each month |
| Timeliness of reports. Daily FTP files to be available prior to 6:00 AM PST and the weekly FTP files to be available prior to 6:00 AM PST Monday mornings. | |||
| Reports covered by these Service Level Commitments are described in Attachment G of the Statement of Work. |
Warehousing & Inventory Management
| * Product SKUs will be set up accurately All SKUs are set up based on Intuit-provided information/SkU set up documentation. Inaccurate SKU set up includes but is not limited to, incorrect product description, incorrect assignment to vendor code (Intuit Business Unit), and duplicated SKUs (2 or more of the same SKU set up in IMLs system). | |||
| * Inventory Shrinkage Accuracy based on twice yearly physical audits and calculated based on total SKU level net physical Inventory adjustments in units divided by total inventory movement in units from the previous physical inventory date. IML will resolve any Inventory discrepancy within * and report back data, root cause and solution to Intuit. | |||
| * Inventory Accuracy based on daily cycle count/shortages. IML will resolve any Inventory discrepancy within * and report back data, root cause and solution to Intuit. | |||
| No more than * of all Intuits contract manufacturers Less than Truckload (LTL) and Truckload (TL) orders arriving no more than * business days for Replenishment and, upon Intuits request, * for expedited orders from Intuits contract manufacturers facility to IMLs distribution center and as scheduled below. |
| Intuits contract manufacturer located in * | |||
| Intuits contract manufacturer located in * (except *, which will be *) |
We have requested confidential treatment for certain portions of this document pursuant to an application for confidential treatment sent to the Securities and Exchange Commission (SEC). We omitted such portions from this filing and filed them separately with the SEC.
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Page 3 of 4 | Dec 1, 2003 |
Countdown to measure this service level will start *. Shipment date = day 0. Corrective action is as follows in the schedule below. *
Returns Management
| * Warehouse Processing Accuracy on returns reconciliation is calculated on total Intuit-approved return unit discrepancies (code RT) divided by total return unit inventory movement. | |||
| * of all data collection for door logging of all inbound RMAs, inclusive of shipping ID number for audit purposes | |||
| Returns Cycle Time: No more than * business days to process Intuit returns from the date of IMLs receipt of such returns. |
We have requested confidential treatment for certain portions of this document pursuant to an application for confidential treatment sent to the Securities and Exchange Commission (SEC). We omitted such portions from this filing and filed them separately with the SEC.
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Page 4 of 4 | Dec 1, 2003 |
*
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Exhibit E |
We have requested confidential treatment for certain portions of this document pursuant to an application for confidential treatment sent to the Securities and Exchange Commission (SEC). We omitted such portions from this filing and filed them separately with the SEC.
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Page 4 of 4 | Dec 1, 2004 |
Exhibit 10.03
Grant No. 00046129
INTUIT INC. 2002 PLAN OPTION GRANT AGREEMENT
Intuit Inc., a Delaware corporation (the Company), hereby grants you a stock
option (Option), pursuant to the Companys 2002 Equity Incentive Plan, as
amended through July 30, 2003 (the Plan), to purchase shares of the Companys
Common Stock, $0.01 par value per share (Common Stock), as described below.
This Option is subject to all of the terms and conditions of the Plan, which is
incorporated into this Agreement by reference. All capitalized terms in this
Agreement that are not defined in the Agreement have the meanings given to them
in the Plan.
Name of Participant:
Stephen M. Bennett
Employee ID:
Address:
Number of Shares:
225,000
Type of Option:
Non-qualified Stock Option
Exercise Price Per Share:
$37.4400
Date of Grant:
07/31/2004
First Vesting Date:
07/31/2005
Expiration Date:
07/30/2011
Vesting Schedule:
To exercise this Option, you must follow the exercise procedures established by the Company, as described in Section 5.5 of the Plan. This Option may be exercised only with respect to vested shares. Payment of the Exercise Price for the Shares may be made in cash (by check) and/or, if a public market exists for the Companys Common Stock, by means of a Same-Day-Sale Commitment or Margin Commitment from you and an NASD Dealer (as described in Section 8.1 of the Plan). Upon exercise of this Option, you understand that the Company may be required to withhold taxes.
This Agreement (including the Plan, which is incorporated by reference) constitutes the entire agreement between you and the Company with respect to this Option, and supersedes all prior agreements or promises with respect to the Option. Except as provided in the Plan, this Agreement may be amended only by a written document signed by the Company and you. Subject to the terms of the Plan, the Company may assign any of its rights and obligations under this Agreement, and this Agreement shall be binding on, and inure to the benefit of, the successors and assigns of the Company. Subject to the restrictions on transfer of the Option described in Section 11 of the Plan, this Agreement shall be binding on your permitted successors and assigns (including heirs, executors, administrators and legal representatives). All notices required under this Agreement or the Plan must be mailed or hand-delivered to the Company or to you at its or your respective addresses set forth in this Agreement, or at such other address designated in writing by either of the parties to the other.
Additional information about the Plan and this Option (including certain tax consequences of exercising the Option and disposing of the Shares) is contained in the Prospectus for the Plan. A copy of the Prospectus is available on the stock options pages of the Intuit Legal Department intranet web site or by calling Sharon Savatski, the Companys Stock Plan Analyst, at (650) 944-6504.
The Company has signed this Option Agreement effective as the Date of Grant.
INTUIT INC.
2632 Marine Way Mountain View, California 94043 |
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By: | /s/ ROBERT B. HENSKE | |||
Robert B. Henske, Senior Vice President | ||||
and Chief Financial Officer | ||||
1
PARTICIPANTS ACCEPTANCE
I accept this Agreement and agree to the terms and conditions in this Agreement and the Plan. I acknowledge that I have received a copy of the Companys 2002 Equity Incentive Plan, and I understand and agree that this Agreement is not meant to interpret, extend, or change the Plan in any way, nor to represent the full terms of the Plan. If there is any discrepancy, conflict or omission between this Agreement and the provisions of the Plan as interpreted by the Company, the provisions of the Plan shall apply.
Signed: /s/ STEPHEN M. BENNETT
2
Exhibit 10.04
Award No. 00046130
INTUIT INC. 2002 EQUITY INCENTIVE PLAN
STOCK BONUS AGREEMENT
RESTRICTED STOCK UNITS
Intuit Inc., a Delaware corporation (the Company), hereby grants you a Stock
Bonus Award (Award) pursuant to the Companys 2002 Equity Incentive Plan (the
Plan), for the number of shares of the Companys Common Stock, $0.01 par
value per share (Common Stock) set forth below. This Award is subject to all
of the terms and conditions of the Plan, which is incorporated into this
Agreement by reference. All capitalized terms in this Stock Bonus Agreement
(Agreement) that are not defined in this Agreement have the meanings given to
them in the Plan.
Name of Participant:
Stephen M. Bennett
Employee ID:
Address:
Number of Shares:
25,000
Date of Grant:
July 31, 2004
Vesting Date:
July 31, 2007
Vesting Schedule : You will vest as to all of the shares on the Vesting Date set forth above, provided you are continuously employed by the Company through that date.
In the event of your Termination prior to the Vesting Date for any reason, including but not limited to your resignation or termination by the Company, you will immediately stop vesting in this Award and this Award will terminate as to all shares.
Issuance of Shares under this Award : The Company will only issue you shares under this Award in which you have vested (Vested Shares) in accordance with the Vesting Schedule provisions set forth above. The Company will issue you the Vested Shares of the Companys Common Stock on the Vesting Date; provided , however , that you may make a one-time election until July 31, 2005 (or, such earlier date, if so required by a change in the tax law after the Date of Grant) to have the Company issue you the Vested Shares on date following the Vesting Date, such as the first business day of the fiscal year following the fiscal year in which you cease to be both Chief Executive Officer of the Company and a covered employee, as defined in Section 162(m)(3) of the Code. This one-time election must be made in a form and at a time acceptable to the Company.
Withholding Taxes at Vesting : Under payroll withholding tax provisions in effect on the Date of Grant, the vesting of shares under this Award gives rise to a FICA and Medicare withholding obligation on the part of the Company calculated with reference to an amount equal to the Fair Market Value of the shares on the date the shares become Vested Shares. You agree that you will remit cash to the Company (through payroll deduction or otherwise) in an amount sufficient to satisfy any withholding obligation of the Company resulting from the vesting of the shares under this Award. Fair Market Value of the shares shall be determined in accordance with Section 23(m) of the Plan on the date that the amount of tax to be withheld is to be determined.
Withholding Taxes at Issuance of Vested Shares : Under federal and state income and payroll withholding tax provisions in effect on the Date of Grant, the issuance of Vested Shares under this Award gives rise to a federal and state income and employment tax withholding obligation on the part of the Company calculated with reference to an amount equal to the Fair Market Value of the Vested Shares on the date the shares are issued to you by the Company. The Company will withhold from the Vested Shares issued to you a number of whole shares having a Fair Market Value equal to the minimum amount to be withheld to satisfy any tax withholding obligation of the Company resulting from the issuance of the Vested Shares and will transmit the equivalent cash amount to the applicable taxing authorities. Fair Market Value of the shares shall be determined in accordance with Section 23(m) of the Plan on the date that the amount of tax to be withheld is to be determined.
Stockholder Rights : You will have no rights as a stockholder until the Vested Shares are issued to you. After Vested Shares are issued to you, you will have all the rights of a stockholder with respect to the shares. Notwithstanding the foregoing, in the event the Company declares dividends for which the record date occurs after the Date of Grant and prior to the date Vested Shares are issued to you, the Company will issue you consideration in an amount the Company determines is equivalent to such declared dividends at the time the Vested Shares are issued to you.
This Agreement (including the Plan, which is incorporated by reference) constitutes the entire agreement between you and the Company with respect to this Award, and supersedes all prior agreements or promises with respect to the Award. Except as provided in the Plan, this Agreement may be amended only by a written document signed by the Company and you. Subject to the terms of the Plan, the Company may assign any of its rights and obligations under this Agreement, and this Agreement shall be binding on, and inure to the benefit of, the successors and assigns of the Company. Subject to the restrictions on transfer of Awards described in Section 11 of the Plan, this Agreement shall be binding on your permitted successors and assigns (including heirs, executors, administrators and legal representatives). All notices required under this Agreement or the Plan must be mailed or hand-delivered to the Company or to you at its or your respective addresses set forth in this Agreement, or at such other address designated in writing by either of the parties to the other.
The Company has signed this Award Agreement effective as the Date of Grant.
INTUIT INC.
2632 Marine Way Mountain View, California 94043 |
||||
By: | /s/ Robert B. Henske, Chief Financial Officer | |||
Robert B. Henske, Chief Financial Officer | ||||
PARTICIPANTS ACCEPTANCE
I accept this Agreement effective as of the Date of Grant and agree to the terms and conditions in this Agreement and the Plan. I acknowledge that I have received a copy of the Plan, and I understand and agree that this Agreement is not meant to interpret, extend, or change the Plan in any way, or to represent the full terms of the Plan. If there is any discrepancy, conflict or omission between this Agreement and the provisions of the Plan as interpreted by the Company, the provisions of the Plan shall apply.
Signed: /s/ STEPHEN M. BENNETT
Exhibit 10.05
INTUIT INC.
2005 EQUITY INCENTIVE PLAN
1. PURPOSE . The purpose of the Plan is to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company, its Parent or Subsidiaries by offering them an opportunity to participate in the Companys future performance through awards of Options, Restricted Stock, Stock Bonuses, Stock Appreciation Rights (SARs) and Restricted Stock Units. Capitalized terms not defined in the text are defined in Section 26.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and 21, 6,500,000 Shares are available for grant and issuance under the Plan. Shares that are subject to: (a) issuance upon exercise of an Option or SAR granted under this Plan but cease to be subject to the Option or SAR for any reason other than exercise of the Option; (b) an Award granted under this Plan but are forfeited or are repurchased by the Company at the original issue price; or (c) an Award granted under this Plan that otherwise terminates without Shares being issued, will return to the pool of Shares available for grant and issuance under this Plan. No more than 2,000,000 Shares may be made subject to Awards having an Exercise Price or Purchase Price per Share that is less than Fair Market Value on the date of grant. In order that ISOs may be granted under this Plan, no more than 6,500,000 shares shall be issued as ISOs. The Company may issue Shares which are authorized but unissued or treasury shares pursuant to the Awards granted under this Plan. At all times the Company will reserve and keep available a sufficient number of Shares to satisfy the requirements of all outstanding Options and SARs granted under the Plan and all other outstanding but unvested Awards granted under the Plan.
2.2 Adjustment of Shares. If the number of outstanding Shares is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company, without consideration, then (a) the number of Shares reserved for issuance under the Plan set forth in Section 2.1, (b) the Exercise Prices of and number of Shares subject to outstanding Options and SARs, (c) the number of Shares subject to other outstanding Awards, (d) the 6,500,000 maximum number of shares that may be issued as ISOs set forth in Section 2.1; (e) the 2,000,000 and 3,000,000 maximum number of shares that may be issued to an individual in any one calendar year set forth in Section 3; (f) the 2,000,000 Share limit on the aggregate number of Shares that may be made subject to Awards having an Exercise Price or Purchase Price per Share that is less than Fair Market Value on the date of grant; and (g) the number of Shares that are granted as Options to Non-Employee Directors as set forth in Section 10, will be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and compliance with applicable securities laws; provided that fractions of a Share will not be issued but will either be replaced by a cash payment equal to the Fair Market Value of such fraction of a Share or will be rounded up to the nearest whole Share, as determined by the Committee; and provided further that the Exercise Price of any Option may not be decreased to below the par value of the Shares.
3. ELIGIBILITY . ISOs may be granted only to employees (including officers and directors who are also employees) of the Company or of a Parent or Subsidiary. All other Awards may be granted to employees (including officers and directors who are also employees), directors and consultants of the Company or any Parent or Subsidiary; provided that such consultants, contractors and advisors render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction. The Committee (or its designee under 4.1(c)) will from time to time determine and designate among the eligible persons who will be granted one or more Awards under the Plan. A person may be granted more than one Award under the Plan. However, no person will be eligible to receive more than 2,000,000 Shares issuable under Awards granted in any calendar year, other than new employees of the Company or of a Parent or Subsidiary (including new employees who are also officers and directors of the Company or any Parent or Subsidiary), who are eligible to receive up to a maximum of 3,000,000 Shares issuable under Awards granted in the calendar year in which they commence their employment.
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4. ADMINISTRATION.
4.1 Committee Authority. The Plan shall be administered by the Committee or by the Board acting as the Committee. Except for automatic grants to Non-Employee Directors pursuant to Section 10 hereof, and subject to the general purposes, terms and conditions of the Plan, the Committee will have full power to implement and carry out the Plan. Without limiting the previous sentence, the Committee will have the authority to:
(a) | construe and interpret the Plan, any Award Agreement and any other agreement or document executed pursuant to the Plan; | |||
(b) | prescribe, amend and rescind rules and regulations relating to the Plan or any Award, including determining the forms and agreements used in connection with the Plan; provided that the Committee may delegate to the President, the Chief Financial Officer or the officer in charge of Human Resources, in consultation with the General Counsel, the authority to approve revisions to the forms and agreements used in connection with the Plan that are designed to facilitate Plan administration, and that are not inconsistent with the Plan or with any resolutions of the Committee relating to the Plan; | |||
(c) | select persons to receive Awards; provided that the Committee may delegate to one or more Executive Officers (who would also be considered officers under Delaware law) the authority to grant an Award under the Plan to Participants who are not Insiders; | |||
(d) | determine the terms of Awards; | |||
(e) | determine the number of Shares or other consideration subject to Awards; | |||
(f) | determine whether Awards will be granted singly, in combination, or in tandem with, in replacement of, or as alternatives to, other Awards under the Plan or any other incentive or compensation plan of the Company or any Parent or Subsidiary; | |||
(g) | grant waivers of Plan or Award conditions; | |||
(h) | determine the vesting, exercisability, transferability, and payment of Awards; | |||
(i) | correct any defect, supply any omission, or reconcile any inconsistency in the Plan, any Award or any Award Agreement; | |||
(j) | determine whether an Award has been earned; | |||
(k) | amend the Plan; or | |||
(l) | make all other determinations necessary or advisable for the administration of the Plan. |
4.2 Committee Interpretation and Discretion. Except for automatic grants to Non-Employee Directors pursuant to Section 10 hereof, any determination made by the Committee with respect to any Award shall be made in its sole discretion at the time of grant of the Award or, unless in contravention of any express term of the Plan or Award, at any later time, and such determination shall be final and binding on the Company and all persons having an interest in any Award under the Plan. Any dispute regarding the interpretation of the Plan or any Award Agreement shall be submitted by the Participant or Company to the Committee for review. The resolution of such a dispute by the Committee shall be final and binding on the Company and Participant. The Committee may delegate to one or more Executive Officers, the authority to review and resolve disputes with respect to Awards held by Participants who are not Insiders, and such resolution shall be final and binding on the Company and Participant.
5. OPTIONS . The Committee may grant Options to eligible persons and will determine (a) whether the Options will be ISOs or NQSOs; (b) the number of Shares subject to the Option, (c) the Exercise Price of the
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Option, (d) the period during which the Option may be exercised, and (e) all other terms and conditions of the Option, subject to the provisions of this Section 5 and the Plan. Options granted to Non-Employee Directors pursuant to Section 10 hereof shall be governed by that Section.
5.1 Form of Option Grant. Each Option granted under the Plan will be evidenced by a Stock Option Agreement that will expressly identify the Option as an ISO or NQSO. Except as otherwise required by the terms of Options to Non-Employee Directors as provided in the terms of Section 10 hereof, the Stock Option Agreement will be substantially in a form and contain such provisions (which need not be the same for each Participant) that the Committee or an officer of the Company (pursuant to Section 4.1(b)) has from time to time approved, and will comply with and be subject to the terms and conditions of the Plan.
5.2 Date of Grant. The date of grant of an Option will be the date on which the Committee makes the determination to grant the Option, unless a later date is otherwise specified by the Committee. The Stock Option Agreement, and a copy of the Plan and the current Prospectus for the Plan (plus any additional documents required to be delivered under applicable laws), will be delivered to the Participant within a reasonable time after the Option is granted. The Stock Option Agreement, Plan, the Prospectus and other documents may be delivered in any manner (including electronic distribution or posting) that meets applicable legal requirements.
5.3 Exercise Period and Expiration Date. An Option will be exercisable within the times or upon the occurrence of events determined by the Committee and set forth in the Stock Option Agreement governing such Option, subject to the provisions of Section 5.6, and subject to Company policies established by the Committee (or by individuals to whom the Committee has delegated responsibility) from time to time with respect to vesting during leaves of absences. The Stock Option Agreement shall set forth the last date that the Option may be exercised (the Expiration Date); provided that no Option will be exercisable after the expiration of seven years from the date the Option is granted; and provided further that no ISO granted to a Ten Percent Stockholder will be exercisable after the expiration of five years from the date the Option is granted. The Committee also may provide for Options to become exercisable at one time or from time to time, periodically or otherwise (including, without limitation, upon the attainment during a Performance Period of performance goals based on Performance Factors), in such number of Shares or percentage of Shares subject to the Option as the Committee determines.
5.4 Exercise Price. The Exercise Price of an Option will be determined by the Committee when the Option is granted and, subject to the 2,000,000 Share limit of Section 2.1 hereof on the aggregate number of Shares that may be made subject to Awards having an Exercise Price or Purchase Price per Share that is less than Fair Market value on the date of grant, may be less than Fair Market Value (but not less than the par value of the Shares); provided that (i) the Exercise Price of an ISO will not be less than the Fair Market Value of the Shares on the date of grant and (ii) the Exercise Price of any ISO granted to a Ten Percent Stockholder will not be less than 110% of the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased must be made in accordance with Section 11 of the Plan and the Stock Option Agreement.
5.5 Procedures for Exercise. A Participant or Authorized Transferee may exercise Options by following the procedures established by the Companys Stock Administration Department, as communicated and made available to Participants through the stock pages on the Intuit Legal Department intranet web site, and/or through the Companys electronic mail system.
5.6 Termination.
(a) Vesting. Any Option granted to a Participant will cease to vest on the Participants Termination Date, if the Participant is Terminated for any reason other than total disability (as defined in this Section 5.6(a)) or death. Any Option granted to a Participant who is an employee who has been actively employed by the Company or any Subsidiary for one year or more or who is a director, will vest as to 100% of the Shares subject to such Option, if the Participant is Terminated due to total disability or death. For purposes of this Section 5.6(a), total disability shall mean: (i) (A) for so long as such definition is used for purposes of the Companys group life insurance and accidental death and dismemberment plan or group long term disability plan, that the Participant is unable to perform each of the material duties of any gainful occupation for which the Participant is or becomes reasonably fitted by training, education or experience and which total disability is in fact preventing the Participant from engaging in any
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employment or occupation for wage or profit; or, (B) if such definition has changed, such other definition of total disability as determined under the Companys group life insurance and accidental death and dismemberment plan or group long term disability plan; and (ii) the Company shall have received from the Participants primary physician a certification that the Participants total disability is likely to be permanent. Any Option held by an employee who is Terminated by the Company, or any Subsidiary or Parent within one year following the date of a Corporate Transaction, will immediately vest as to such number of Shares as the Participant would have been vested in twelve months after the date of Termination had the Participant remained employed for that twelve month period.
(b) Post-Termination Exercise Period. Following a Participants Termination, the Participants Option may be exercised to the extent vested as set forth in Section 5.6(a):
(i) no later than 90 days after the Termination Date if a Participant is Terminated for any reason except death or Disability, unless a longer time period, not exceeding five years, is specifically set forth in the Participants Stock Option Agreement; provided that no Option may be exercised after the Expiration Date of the Option; or
(ii) no later than (A) twelve months after the Termination Date in the case of Termination due to Disability or (B) eighteen months after the Termination Date in the case of Termination due to death or if a Participant dies within three months of the Termination Date, unless a longer time period, not exceeding five years, is specifically set forth in the Participants Stock Option Agreement; provided that no Option may be exercised after the Expiration Date of the Option.
5.7 Limitations on Exercise. The Committee may specify a reasonable minimum number of Shares that may be purchased on any exercise of an Option; provided that the minimum number will not prevent a Participant from exercising an Option for the full number of Shares for which it is then exercisable.
5.8 Limitations on ISOs. The aggregate Fair Market Value (determined as of the date of grant) of Shares with respect to which ISOs are exercisable for the first time by a Participant during any calendar year (under the Plan or under any other incentive stock option plan of the Company or any Parent or Subsidiary) shall not exceed $100,000. If the Fair Market Value of Shares on the date of grant with respect to which ISOs are exercisable for the first time by a Participant during any calendar year exceeds $100,000, the Options for the first $100,000 worth of Shares to become exercisable in that calendar year will be ISOs, and the Options for the Shares with a Fair Market Value in excess of $100,000 that become exercisable in that calendar year will be NQSOs. If the Code is amended to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISOs, such different limit shall be automatically incorporated into the Plan and will apply to any Options granted after the effective date of the Codes amendment.
5.9 Notice of Disqualifying Dispositions of Shares Acquired on Exercise of an ISO. If a Participant sells or otherwise disposes of any Shares acquired pursuant to the exercise of an ISO on or before the later of (a) the date two years after the Date of Grant, and (b) the date one year after the exercise of the ISO (in either case, a Disqualifying Disposition), the Company may require the Participant to immediately notify the Company in writing of such Disqualifying Disposition.
5.10 Modification, Extension or Renewal. The Committee may modify, extend or renew outstanding Options and authorize the grant of new Options in substitution therefor; provided that any such action may not, without the written consent of Participant, impair any of Participants rights under any Option previously granted; and provided, further that without stockholder approval, the modified, extended, renewed or new Option may not have a lower Exercise Price than the outstanding Option. Any outstanding ISO that is modified, extended, renewed or otherwise altered shall be treated in accordance with Section 424(h) of the Code. The Committee may reduce the Exercise Price of outstanding Options without the consent of Participants affected, by a written notice to them; provided, however, that unless prior stockholder approval is secured, the Exercise Price may not be reduced below that of the outstanding Option.
5.11 No Disqualification. Notwithstanding any other provision in the Plan, no term of the Plan relating to ISOs will be interpreted, amended or altered, and no discretion or authority granted under the Plan will be
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exercised, so as to disqualify the Plan under Section 422 of the Code or, without the consent of the Participant affected, to disqualify any ISO under Section 422 of the Code.
6. RESTRICTED STOCK AWARDS.
6.1 Awards of Restricted Stock. A Restricted Stock Award is an offer by the Company to sell to an eligible person Shares that are subject to restrictions. The Committee will determine to whom an offer will be made, the number of Shares the person may purchase, the Purchase Price, the restrictions under which the Shares will be subject and all other terms and conditions of the Restricted Stock Award, subject to the following:
6.2 Restricted Stock Purchase Agreement. All purchases under a Restricted Stock Award will be evidenced by a Restricted Stock Purchase Agreement, which will be in substantially a form (which need not be the same for each Participant) that the Committee or an officer of the Company (pursuant to Section 4.1(b)) has from time to time approved, and will comply with and be subject to the terms and conditions of the Plan. A Participant accepts a Restricted Stock Award by signing and delivering to the Company a Restricted Stock Purchase Agreement with full payment of the Purchase Price, within thirty days from the date the Restricted Stock Purchase Agreement was delivered to the Participant. If the Participant does not accept the Restricted Stock Award within thirty days, then the offer of the Restricted Stock Award will terminate, unless the Committee determines otherwise.
6.3 Purchase Price. The Purchase Price for a Restricted Stock Award will be determined by the Committee and, subject to the 2,000,000 Share limit of Section 2.1 hereof on the aggregate number of Shares that may be made subject to Awards having an Exercise Price or Purchase Price per Share that is less than Fair Market Value on the date of grant, may be less than Fair Market Value (but not less than the par value of the Shares) on the date the Restricted Stock Award is granted. Payment of the Purchase Price must be made in accordance with Section 11 of the Plan and the Restricted Stock Purchase Agreement, and in accordance with any procedures established by the Companys Stock Administration Department, as communicated and made available to Participants through the stock pages on the Intuit Legal Department intranet web site, and/or through the Companys electronic mail system.
6.4 Terms of Restricted Stock Awards. Restricted Stock Awards will be subject to such restrictions as the Committee may impose. These restrictions may be based on completion of a specified number of years of service with the Company or upon completion of the performance goals based on Performance Factors during any Performance Period as set out in advance in the Participants Restricted Stock Purchase Agreement. Prior to the grant of a Restricted Stock Award, the Committee shall: (a) determine the nature, length and starting date of any Performance Period for the Restricted Stock Award; (b) select from among the Performance Factors to be used to measure performance goals, if any; and (c) determine the number of Shares that may be awarded to the Participant. Prior to the payment for Shares to be purchased under any Restricted Stock Award, the Committee shall determine the extent to which such Restricted Stock Award has been earned. Performance Periods may overlap and a Participant may participate simultaneously with respect to Restricted Stock Awards that are subject to different Performance Periods and having different performance goals and other criteria.
6.5 Termination During Performance Period. If a Participant is Terminated during a Performance Period or vesting period, for any reason, then such Participant will be entitled to payment (whether in Shares, cash or otherwise) with respect to the Restricted Stock Award only to the extent earned as of the date of Termination in accordance with the Restricted Stock Purchase Agreement, unless the Committee will determine otherwise.
7. STOCK BONUS AWARDS.
7.1 Awards of Stock Bonuses. A Stock Bonus Award is an award to an eligible person of Shares (which may consist of Restricted Stock or Restricted Stock Units) for services to be rendered or for past services already rendered to the Company or any Parent or Subsidiary. All Stock Bonus Awards shall be made pursuant to a Stock Bonus Agreement, which shall be in substantially a form (which need not be the same for each Participant) that the Committee or an officer of the Company (pursuant to Section 4.1(b)) has from time to time approved, and will comply with and be subject to the terms and conditions of the Plan. No payment will be required for Shares awarded pursuant to a Stock Bonus Award. Stock Bonus Awards shall be subject to the 2,000,000 share
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limit of Section 2.1 hereof on the aggregate number of Shares that may be made subject to Awards having an Exercise Price or Purchase Price per Share that is less than the Fair Market Value on the date of grant.
7.2 Terms of Stock Bonus Awards. The Committee will determine the number of Shares to be awarded to the Participant under a Stock Bonus Award and any restrictions thereon. These restrictions may be based upon completion of a specified number of years of service with the Company or upon satisfaction of performance goals based on Performance Factors during any Performance Period as set out in advance in the Participants Stock Bonus Agreement. If the Stock Bonus Award is to be earned upon the satisfaction of performance goals, the Committee shall: (a) determine the nature, length and starting date of any Performance Period for the Stock Bonus Award; (b) select from among the Performance Factors to be used to measure performance goals; and (c) determine the number of Shares that may be awarded to the Participant. Prior to the issuance of any Shares or other payment to a Participant pursuant to a Stock Bonus Award, the Committee will determine the extent to which the Stock Bonus Award has been earned. Performance Periods may overlap and a Participant may participate simultaneously with respect to Stock Bonus Awards that are subject to different Performance Periods and different performance goals and other criteria. The number of Shares may be fixed or may vary in accordance with such performance goals and criteria as may be determined by the Committee. The Committee may adjust the performance goals applicable to a Stock Bonus Award to take into account changes in law and accounting or tax rules and to make such adjustments as the Committee deems necessary or appropriate to reflect the impact of extraordinary or unusual items, events or circumstances to avoid windfalls or hardships.
7.3 Form of Payment to Participant. The Committee will determine whether the earned portion of a Stock Bonus Award will be paid to the Participant currently or on a deferred basis with such interest or dividend equivalent, if any, as the Committee may determine. To the extent permissible under law, the Committee may also permit a Participant to defer payment under a Stock Bonus Award to a date or dates after the Stock Bonus Award is earned. Payment may be made in the form of cash, whole Shares, or a combination thereof, based on the Fair Market Value of the Shares earned under a Stock Bonus Award on the date of payment, and in either a lump sum payment or in installments.
7.4 Termination of Participant . In the event of a Participants Termination during a Performance Period or vesting period, for any reason, then such Participant will be entitled to payment (whether in Shares, cash or otherwise) with respect to the Stock Bonus Award only to the extent earned as of the date of Termination in accordance with the Stock Bonus Agreement, unless the Committee determines otherwise.
8. STOCK APPRECIATION RIGHTS.
8.1 Awards of SARs. A Stock Appreciation Right (SAR) is an award to an eligible person that may be settled in cash, or Shares (which may consist of Restricted Stock), having a value equal to the value determined by multiplying the difference between the Fair Market Value on the date of exercise over the Exercise Price and the number of Shares with respect to which the SAR is being settled. The SAR may be granted for services to be rendered or for past services already rendered to the Company, or any Parent or Subsidiary. All SARs shall be made pursuant to a SAR Agreement, which shall be in substantially a form (which need not be the same for each Participant) that the Committee or an officer of the Company (pursuant to Section 4.1(b)) has from time to time approved, and will comply with and be subject to the terms and conditions of this Plan.
8.2 Terms of SARs. The Committee will determine the terms of a SAR including, without limitation: (a) the number of Shares deemed subject to the SAR; (b) the Exercise Price and the time or times during which the SAR may be settled; (c) the consideration to be distributed on settlement of the SAR; and (d) the effect on each SAR of the Participants Termination. The Exercise Price of the SAR will be determined by the Committee when the SAR is granted and, subject to the 2,000,000 Share limit of Section 2.1 hereof on the aggregate number of Shares that may be made subject to Awards having an Exercise Price or Purchase Price per Share that is less than Fair Market value on the date of grant, may be less than Fair Market Value (but not less than the par value of the Shares. A SAR may be awarded upon satisfaction of such performance goals based on Performance Factors during any Performance Period as are set out in advance in the Participants individual SAR Agreement. If the SAR is being earned upon the satisfaction of performance goals, then the Committee will: (x) determine the nature, length
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and starting date of any Performance Period for each SAR; and (y) select from among the Performance Factors to be used to measure the performance, if any. Prior to settlement of any SAR earned upon the satisfaction of performance goals pursuant to a SAR Agreement, the Committee shall determine the extent to which such SAR has been earned. Performance Periods may overlap and Participants may participate simultaneously with respect to SARs that are subject to different performance goals and other criteria. The Exercise Price of an outstanding SAR may not be reduced without stockholder approval.
8.3 Exercise Period and Expiration Date. A SAR will be exercisable within the times or upon the occurrence of events determined by the Committee and set forth in the SAR Agreement governing such SAR. The SAR Agreement shall set forth the last date that the SAR may be exercised (the Expiration Date); provided that no SAR will be exercisable after the expiration of seven years from the date the SAR is granted. The Committee may also provide for SARs to become exercisable at one time or from time to time, periodically or otherwise (including, without limitation, upon the attainment during a Performance Period of performance goals based on Performance Factors), in such number of Shares or percentage of the Shares subject to the SAR as the Committee determines.
8.4 Form and Timing of Settlement. The portion of a SAR being settled may be paid currently or on a deferred basis with such interest or dividend equivalent, if any, as the Committee determines. Payment may be made in the form of cash or whole Shares or a combination thereof, either in a lump sum payment or in installments, as the Committee determines.
9. RESTRICTED STOCK UNITS
9.1 Awards of Restricted Stock Units. A Restricted Stock Unit (RSU) is an award to an eligible person covering a number of Shares that may be settled in cash, or by issuance of those Shares (which may consist of Restricted Stock) for services to be rendered or for past services already rendered to the Company or any Parent or Subsidiary. The Committee may authorize the issuance of RSUs to certain eligible persons who elect to defer cash compensation. All RSUs shall be made pursuant to a RSU Agreement, which shall be in substantially a form (which need not be the same for each Participant) that the Committee or an officer of the Company (pursuant to Section 4.1(b)) has from time to time approved, and will comply with and be subject to the terms and conditions of the Plan. RSUs are subject to the 2,000,000 share limit of Section 2.1 hereof on the aggregate number of Shares that may be made subject to Awards having an Exercise Price or Purchase Price per Share that is less than the Fair Market Value on the date of grant.
9.2 Terms of RSUs. The Committee will determine the terms of a RSU including, without limitation: (a) the number of Shares deemed subject to the RSU; (b) the time or times during which the RSU may be exercised; (c) the consideration to be distributed on settlement, and the effect on each RSU of the Participants Termination. A RSU may be awarded upon satisfaction of such performance goals based on Performance Factors during any Performance Period as are set out in advance in the Participants individual RSU Agreement. If the RSU is being earned upon satisfaction of performance goals, then the Committee will: (x) determine the nature, length and starting date of any Performance Period for the RSU; (y) select from among the Performance Factors to be used to measure the performance, if any; and (z) determine the number of Shares deemed subject to the RSU. Prior to settlement of any RSU earned upon the satisfaction of performance goals pursuant to a RSU Agreement, the Committee shall determine the extent to which such SAR has been earned. Performance Periods may overlap and participants may participate simultaneously with respect to RSUs that are subject to different Performance Periods and different performance goals and other criteria. The number of Shares may be fixed or may vary in accordance with such performance goals and criteria as may be determined by the Committee. The Committee may adjust the performance goals applicable to the RSUs to take into account changes in law and accounting and to make such adjustments as the Committee deems necessary or appropriate to reflect the impact of extraordinary or unusual items, events or circumstances to avoid windfalls or hardships.
9.3 Form and Timing of Settlement. The portion of a RSU being settled may be paid currently or on a deferred basis with such interest or dividend equivalent, if any, as the Committee determines. To the extent permissible under law, the Committee may also permit a Participant to defer payment under a RSU to a
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date or dates after the RSU is earned. Payment may be made in the form of cash or whole Shares or a combination thereof, either in a lump sum payment or in installments, all as the Committee determines.
10. AUTOMATIC GRANTS TO NON-EMPLOYEE DIRECTORS.
10.1 Eligibility. Non-Employee Directors are eligible for options granted pursuant to this Section 11.
10.2 Initial Grant. Each Non-Employee Director who first becomes a member of the Board on or after the Effective Date will automatically be granted an option for 45,000 Shares on the date such Non-Employee Director first becomes a member of the Board. Each Non-Employee Director who became a member of the Board prior to the Effective Date and who did not receive a prior option grant in connection with his or her appointment from the Company, will receive an Initial Grant on the Effective Date. Each Option granted pursuant to this Section 10.2 shall be called an Initial Grant.
10.3 Succeeding Grant. On each anniversary of an Initial Grant under this Plan (or under the Companys 1996 Directors Stock Option Plan) each Non-Employee Director who has served continuously as a member of the Board during that period will automatically be granted an Option for 15,000 Shares; provided that, each Non-Employee Director who became a member of the Board prior to the Effective Date that did not receive a 15,000 share option grant pursuant to Section 6.3 of the Companys 1996 Directors Stock Option Plan in calendar year 2004, will receive a 2004 Succeeding Grant on the Effective Date. Each Option granted pursuant to this Section 10.3 shall be called a Succeeding Grant.
10.4 Audit Committee Grants. Each Non-Employee Director who is appointed a new member to the Audit Committee on or after the Effective Date, will automatically be granted an Option for 5,000 Shares on the day he or she is appointed. On each anniversary of a Non-Employee Directors first grant (a) pursuant to this Section 10.4 or (b) pursuant to 6.4 of the Companys 1996 Directors Stock Option Plan, on which the Non-Employee Director is a member of the Audit Committee, the Non-Employee Director will automatically be granted an Option for 5,000 Shares. Each Option granted pursuant to this Section 10.4 shall be called an Audit Committee Grant.
10.5 Compensation and Organizational Development Committee Grants. Each Non-Employee Director who is appointed a new member to the Compensation and Organizational Development Committee on or after the Effective Date, will automatically be granted an Option for 5,000 Shares on the day he or she is appointed. On each anniversary of a Non-Employee Directors first grant (a) pursuant to this Section 10.5 or (b) pursuant to 6.5 of the Companys 1996 Directors Stock Option Plan, on which the Non-Employee Director is a member of the Compensation and Organizational Development Committee, the Non-Employee Director will automatically be granted an Option for 5,000 Shares. Each Option granted pursuant to this Section 10.5 shall be called a Compensation Committee Grant.
10.6 Nominating & Governance Committee Grants. Each Non-Employee Director who is appointed a new member to the Nominating & Governance Committee on or after the Effective Date, will automatically be granted an Option for 5,000 Shares on the day he or she is appointed. On each anniversary of a Non-Employee Directors first grant (a) pursuant to this Section 10.6 or (b) pursuant to 6.6 of the Companys 1996 Directors Stock Option Plan, on which the Non-Employee Director is a member of the Nominating & Governance Committee, the Non-Employee Director will automatically be granted an Option for 5,000 Shares. Each Option granted pursuant to this Section 10.6 shall be called a Nominating & Governance Committee Grant.
10.7 Vesting and Exercisability
(a) Initial Grants shall become exercisable as they vest as to 25% of the Shares upon the first anniversary of the date such Option is granted and an additional 2.0833% of the shares each month thereafter and become fully vested on the fourth anniversary of the date of grant, so long as the Non-Employee Director continuously remains a director or a consultant of the Company.
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(b) Succeeding Grants shall become exercisable as they vest as to 50% of the Shares upon the first anniversary of the date such Option is granted and an additional 4.1666% of the Shares each month thereafter and become fully vested on the second anniversary of the date of grant, so long as the Non-Employee Director continuously remains a director or a consultant of the Company.
(c) Each Audit Committee Grant, Compensation and Organizational Development Committee Grant and Nominating & Governance Committee Grant shall become exercisable as they vest as to 8.333% of the Shares each month following the date of grant and become fully vested on the first anniversary of the date of grant, so long as the Non-Employee director continuously remains a director or a consultant of the Company.
(d) Any Option granted to a Non-Employee Director will vest as to 100% of the Shares subject to such Option, if the Non-Employee Director ceases to be a member of the Board or a consultant of the Company due to total disability or death. For purposes of this Section 10.7(d), total disability shall mean: (1) (i) for so long as such definition is used for purposes of the Companys group life insurance and accidental death and dismemberment plan or group long term disability plan, that the Non-Employee Director is unable to perform each of the material duties of any gainful occupation for which the Non-Employee Director is or becomes reasonably fitted by training, education or experience and which total disability is in fact preventing the Non-Employee Director from engaging in any employment or occupation for wage or profit or (ii) if such definition has changed, such other definition of total disability as determined under the Companys group life insurance and accidental death and dismemberment plan or group long term disability plan; and (2) the Company shall have received from the Non-Employee Directors primary physician a certification that the Non-Employee Directors total disability is likely to be permanent.
(e) In the event of a Corporate Transaction, the vesting of all Options granted to Non-Employee Directors pursuant to this Section 10 will accelerate and such Options will become exercisable in full prior to the consummation of such event at such time and on such conditions as the Committee determines, and if such Options are not exercised on or prior to the consummation of the corporate transaction, they shall terminate.
10.8 Form of Option Grant. Each Option granted under this Section 10 shall be a NQSO and shall be evidenced by a Non-Employee Director Stock Option Grant Agreement in such form as the Committee shall from time to time approve and which shall comply with and be subject to the terms and conditions of this Plan.
10.9 Exercise Price. Each Option granted under this Section 10 shall be the Fair Market Value of the Share on the date the Option is granted. The Exercise Price of an outstanding Option may not be reduced without stockholder approval.
10.10 Termination of Option. Except as provided in Section 10.7(e) or this Section 10.10, each Option granted under this Section 10 shall expire seven (7) years after its date of grant. The date on which the Non-Employee Director ceases to be a member of the Board or a consultant of the Company shall be referred to as the Non-Employee Director Termination Date for purposes of this Section 10.10. An Option may be exercised after the Non-Employee Director Termination Date only as set forth below:
(a) Termination Generally. If the Non-Employee Director ceases to be a member of the Board or consultant of the Company for any reason except death or Disability, then each Option, to the extent then vested pursuant to Section 10.7 above, then held by such Non-Employee Director may be exercised by the Non-Employee Director within seven months after the Non-Employee Director Termination Date, but in no event later than the Expiration Date.
(b) Death or Disability. If the Non-Employee Director ceases to be a member of the Board or consultant of the Company because of his or her death or Disability, then each Option, to the extent then vested pursuant to Section 10.7 above, then held by such Non-Employee Director may be exercised by the Non-Employee Director or his or her legal representative within twelve months after the Non-Employee Director Termination Date, but in no event later than the Expiration Date.
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11. PAYMENT FOR SHARE PURCHASES.
11.1 Payment. Payment for Shares purchased pursuant to the Plan may be made by any of the following methods (or any combination of such methods) that are described in the applicable Award Agreement and that are permitted by law:
(a) | in cash (by check); | |||
(b) | in the case of exercise by the Participant, Participants guardian or legal representative or the authorized legal representative of Participants heirs or legatees after Participants death, by cancellation of indebtedness of the Company to the Participant; | |||
(c) | by surrender of shares of the Companys Common Stock that either: (1) were obtained by the Participant or Authorized Transferee in the public market; or (2) if the shares were not obtained in the public market, they have been owned by the Participant or Authorized Transferee for more than six months and have been paid for within the meaning of SEC Rule 144 (and, if the shares were purchased from the Company by use of a promissory note, the note has been fully paid with respect to the shares); | |||
(d) | in the case of exercise by the Participant, Participants guardian or legal representative or the authorized legal representative of Participants heirs or legatees after Participants death, by waiver of compensation due or accrued to Participant for services rendered; | |||
(e) | by tender of property; or | |||
(f) | with respect only to purchases upon exercise of an Option, and provided that a public market for the Companys stock exists: |
(1) | through a same day sale commitment from the Participant or Authorized Transferee and an NASD Dealer meeting the requirements of the Companys same day sale procedures and in accordance with law; or | |||
(2) | through a margin commitment from Participant or Authorized Transferee and an NASD Dealer meeting the requirements of the Companys margin procedures and in accordance with law. |
11.2 Issuance of Shares. Upon payment of the applicable Purchase Price or Exercise Price (or a commitment for payment from the NASD Dealer designated by the Participant or Authorized Transferee in the case of an exercise by means of a same-day sale or margin commitment), and compliance with other conditions and procedures established by the Company for the purchase of shares, the Company shall issue the Shares registered in the name of Participant or Authorized Transferee (or in the name of the NASD Dealer designated by the Participant or Authorized Transferee in the case of an exercise by means of a same-day sale or margin commitment) and shall deliver certificates representing the Shares (in physical or electronic form, as appropriate). The Shares may be subject to legends or other restrictions as described in Section 15 of the Plan.
12. WITHHOLDING TAXES.
12.1 Withholding Generally. Whenever Shares are to be issued in satisfaction of Awards granted under the Plan, the Company may require the Participant to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements prior to the delivery of any certificate(s) for the Shares. If a payment in satisfaction of an Award is to be made in cash, the payment will be net of an amount sufficient to satisfy federal, state, and local withholding tax requirements.
12.2 Stock Withholding. When, under applicable tax laws, a Participant incurs tax liability in connection with the exercise or vesting of any Award that is subject to tax withholding and the Participant is
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obligated to pay the Company the amount required to be withheld, the Committee may, in its sole discretion, allow the Participant to satisfy the minimum withholding tax obligation by electing to have the Company withhold from the Shares to be issued that number of whole Shares having a Fair Market Value equal to the minimum amount required to be withheld, determined on the date that the amount of tax to be withheld is to be determined. All elections by a Participant to have Shares withheld for this purpose shall be made in accordance with the requirements established by the Committee and be in writing in a form acceptable to the Committee.
13. PRIVILEGES OF STOCK OWNERSHIP . No Participant or Authorized Transferee will have any rights as a stockholder of the Company with respect to any Shares until the Shares are issued to the Participant or Authorized Transferee. After Shares are issued to the Participant or Authorized Transferee, the Participant or Authorized Transferee will be a stockholder and have all the rights of a stockholder with respect to the Shares including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if the Shares are Restricted Stock, any new, additional or different securities the Participant or Authorized Transferee may become entitled to receive with respect to the Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock; provided further, that the Participant or Authorized Transferee will have no right to retain such dividends or distributions with respect to Shares that are repurchased at the Participants original Exercise Price or Purchase Price pursuant to Section 15.
14. TRANSFERABILITY . No Award and no interest therein, shall be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent and distribution, and no Award may be made subject to execution, attachment or similar process; provided, however that with the consent of the Committee a Participant may transfer a NQSO to an Authorized Transferee. Transfers by the Participant for consideration are prohibited. Without such permission by the Committee, a NQSO shall like all other Awards under the Plan be exercisable (a) during a Participants lifetime only by the Participant or the Participants guardian or legal representative; and (b) after Participants death, by the legal representative of the Participants heirs or legatees.
15. RESTRICTIONS ON SHARES. At the discretion of the Committee, the Company may reserve to itself and/or its assignee(s) in the Award Agreement a right to repurchase all or a portion of a Participants Shares that are not Vested (as defined in the Award Agreement), following the Participants Termination, at any time within ninety days after the later of (a) the Participants Termination Date or (b) the date the Participant purchases Shares under the Plan, for cash or cancellation of purchase money indebtedness with respect to Shares, at the Participants original Exercise Price or Purchase Price; provided that upon assignment of the right to repurchase, the assignee must pay the Company, upon assignment of the right to repurchase, cash equal to the excess of the Fair Market Value of the Shares over the original Purchase Price.
16. CERTIFICATES. All certificates for Shares or other securities delivered under the Plan (whether in physical or electronic form, as appropriate) will be subject to stock transfer orders, legends and other restrictions that the Committee deems necessary or advisable, including without limitation restrictions under any applicable federal, state or foreign securities law, or any rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system on which the Shares may be listed.
17. ESCROW. To enforce any restrictions on a Participants Shares, the Committee may require the Participant to deposit all certificates representing Shares, together with stock powers or other transfer instruments approved by the Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company, to hold in escrow until such restrictions have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificates.
18. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE . An Award shall not be effective unless the Award is in compliance with all applicable state, federal and foreign securities laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system on which the Shares may then be listed, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in the Plan, the Company shall have no obligation to issue or deliver certificates for Shares under the Plan prior to (a) obtaining any approvals from governmental
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agencies that the Company determines are necessary or advisable, and/or (b) completion of any registration or other qualification of such shares under any state, federal or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company shall be under no obligation to register the Shares with the SEC or to effect compliance with the registration, qualification or listing requirements of any state, federal or foreign securities laws, stock exchange or automated quotation system, and the Company shall have no liability for any inability or failure to do so.
19. NO OBLIGATION TO EMPLOY . Nothing in the Plan or any Award granted under the Plan shall confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Parent or Subsidiary or limit in any way the right of the Company or any Parent or Subsidiary to terminate Participants employment or other relationship at any time, with or without cause.
20. REPRICING PROHIBITED; EXCHANGE AND BUYOUT OF AWARDS . The repricing of Options or SARs is prohibited without prior stockholder approval. The Committee may, at any time or from time to time, authorize the Company, with prior stockholder approval, in the case of an Option or SAR exchange, and the consent of the respective Participants, to issue new Awards in exchange for the surrender and cancellation of any or all outstanding Awards. The Committee may at any time buy from a Participant an Option previously granted with payment in cash, Shares or other consideration, based on such terms and conditions as the Committee and the Participant shall agree.
21. CORPORATE TRANSACTIONS.
21.1 Assumption or Replacement of Awards by Successor. In the event of a Corporate Transaction any or all outstanding Awards may be assumed or replaced by the successor corporation, which assumption or replacement shall be binding on all Participants. In the alternative, the successor corporation may substitute equivalent Awards or provide substantially similar consideration to Participants as was provided to stockholders (after taking into account the existing provisions of the Awards). The successor corporation may also issue, in place of outstanding Shares of the Company held by the Participant, substantially similar shares or other property subject to repurchase restrictions no less favorable to the Participant. In the event such successor corporation, if any, refuses to assume or replace the Awards, as provided above, pursuant to a Corporate Transaction or if there is no successor corporation due to a dissolution or liquidation of the Company, such Awards shall immediately vest as to 100% of the Shares subject thereto at such time and on such conditions as the Board shall determine and the Awards shall expire at the closing of the transaction or at the time of dissolution or liquidation.
21.2 Other Treatment of Awards. Subject to any greater rights granted to Participants under Section 21.1, in the event of a Corporate Transaction, any outstanding Awards shall be treated as provided in the applicable agreement or plan of merger, consolidation, dissolution, liquidation or sale of assets.
21.3 Assumption of Awards by the Company. The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either (a) granting an Award under the Plan in substitution of such other companys award, or (b) assuming such award as if it had been granted under the Plan if the terms of such assumed award could be applied to an Award granted under the Plan. Such substitution or assumption shall be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under the Plan if the other company had applied the rules of the Plan to such grant. In the event the Company assumes an award granted by another company, the terms and conditions of such award shall remain unchanged (except that the exercise price and the number and nature of Shares issuable upon exercise of any such option will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the Company elects to grant a new Option rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price.
22. ADOPTION AND STOCKHOLDER APPROVAL. The Plan was adopted by the Compensation and Organizational Development Committee on August 26, 2004. The Plan shall become effective upon approval by stockholders of the Company, consistent with applicable laws.
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23. TERM OF PLAN. The Plan will terminate two years following the date it became effective upon approval by stockholders of the Company.
24. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time terminate or amend the Plan in any respect, including without limitation amendment of any form of Award Agreement or instrument to be executed pursuant to the Plan. Notwithstanding the foregoing, neither the Board nor the Committee shall, without the approval of the stockholders of the Company, amend the Plan in any manner that requires such stockholder approval pursuant to the Code or the regulations promulgated thereunder as such provisions apply to ISO plans, or pursuant to the Exchange Act or any rule promulgated thereunder. In addition, no amendment that is detrimental to a Participant may be made to any outstanding Award without the consent of the Participant.
25. NONEXCLUSIVITY OF THE PLAN; UNFUNDED PLAN. Neither the adoption of the Plan by the Board, the submission of the Plan to the stockholders of the Company for approval, nor any provision of the Plan shall be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock options and bonuses otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases. The Plan shall be unfunded. Neither the Company nor the Board shall be required to segregate any assets that may at any time be represented by Awards made pursuant to the Plan. Neither the Company, the Committee, nor the Board shall be deemed to be a trustee of any amounts to be paid under the Plan.
26. DEFINITIONS. As used in the Plan, the following terms shall have the following meanings:
(a) Authorized Transferee means the permissible recipient, as authorized by this Plan and the Committee, of an NQSO that is transferred during the Participants lifetime by the Participant by gift or domestic relations order. For purposes of this definition a permissible recipient is: (i) a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of the Participant, including any such person with such relationship to the Participant by adoption; (ii) any person (other than a tenant or employee) sharing the Participants household; (iii) a trust in which the persons in (i) or (ii) have more than fifty percent of the beneficial interest; (iv) a foundation in which the persons in (i) or (ii) or the Participant control the management of assets; or (v) any other entity in which the person in (i) or (ii) or the Participant own more than fifty percent of the voting interest.
(b) Award means any award under the Plan, including any Option, Restricted Stock, Stock Bonus, Stock Appreciation Right or Restricted Stock Unit.
(c) Award Agreement means, with respect to each Award, the signed written agreement between the Company and the Participant setting forth the terms and conditions of the Award.
(d) Board means the Board of Directors of the Company.
(e) Code means the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
(f) Committee means the Compensation and Organizational Development Committee of the Board or such other committee appointed by the Board to administer the Plan, or if no committee is appointed, the Board. Each member of the Committee shall be (i) a non-employee director for purposes of Section 16 and Rule 16b-3 of the Exchange Act, and (ii) an outside director for purposes of Section 162(m) of the Code, unless the Board has fewer than two such outside directors.
(g) Company means Intuit Inc., a corporation organized under the laws of the State of Delaware, or any successor corporation.
(h) Corporate Transaction means (a) a merger or consolidation in which the Company is not the surviving corporation (other than a merger or consolidation with a wholly-owned subsidiary, a reincorporation of the Company in a different jurisdiction, or other transaction in which there is no substantial change in the stockholders of
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the Company and the Awards granted under the Plan are assumed or replaced by the successor corporation, which assumption shall be binding on all Participants), (b) a dissolution or liquidation of the Company, (c) the sale of substantially all of the assets of the Company, (d) a merger in which the Company is the surviving corporation but after which the stockholders of the Company immediately prior to such merger (other than any stockholder that merges, or which owns or controls another corporation that merges, with the Company in such merger) cease to own their shares or other equity interest in the Company; or (e) any other transaction which qualifies as a corporate transaction under Section 424(a) of the Code wherein the stockholders of the Company give up all of their equity interest in the Company (except for the acquisition, sale or transfer of all or substantially all of the outstanding shares of the Company).
(i) Disability means a disability within the meaning of Section 22(e)(3) of the Code, as determined by the Committee.
(j) Effective Date means the date stockholders approve the Plan pursuant to Section 22 of the Plan.
(k) Exchange Act means the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder.
(l) Executive Officer means a person who is an executive officer of the Company as defined in Rule 3b-7 promulgated under the Exchange Act.
(m) Exercise Price means the price at which a Participant who holds an Option or SAR may purchase the Shares issuable upon exercise of the Option or SAR.
(n) Fair Market Value means, as of any date, the value of a share of the Companys Common Stock determined as follows:
(1) | if such Common Stock is then quoted on the NASDAQ National Market, its closing price on the NASDAQ National Market on such date or if such date is not a trading date, the closing price on the NASDAQ National Market on the last trading date that precedes such date; | |||
(2) | if such Common Stock is publicly traded and is then listed on a national securities exchange, the last reported sale price on such date or, if no such reported sale takes place on such date, the average of the closing bid and asked prices on the principal national securities exchange on which the Common Stock is listed or admitted to trading; | |||
(3) | if such Common Stock is publicly traded but is not quoted on the NASDAQ National Market nor listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on such date, as reported by The Wall Street Journal, for the over-the-counter market; or | |||
(4) | if none of the foregoing is applicable, by the Board of Directors in good faith. |
(o) Insider means an officer or director of the Company or any other person whose transactions in the Companys Common Stock are subject to Section 16 of the Exchange Act.
(p) ISO means an Incentive Stock Option within the meaning of the Code.
(q) NASD Dealer means broker-dealer that is a member of the National Association of Securities Dealers, Inc.
(r) NQSO means a nonqualified stock option that does not qualify as an ISO.
(s) Option means an Award pursuant to Section 5 of the Plan.
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(t) Non-Employee Director means a member of the Companys Board of Directors who is not a current or former employee of the Company or any Parent or Subsidiary.
(u) Parent means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if at the time of the granting of an Award under the Plan, each of such corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
(v) Participant means a person who receives an Award under the Plan.
(w) Performance Factors means the factors selected by the Committee from among the following measures to determine whether the performance goals established by the Committee and applicable to Awards have been satisfied:
(1) | Net revenue and/or net revenue growth; | |||
(2) | Earnings before income taxes and amortization and/or earnings before income taxes and amortization growth; | |||
(3) | Operating income and/or operating income growth; | |||
(4) | Net income and/or net income growth; | |||
(5) | Earnings per share and/or earnings per share growth; | |||
(6) | Total stockholder return and/or total stockholder return growth; | |||
(7) | Return on equity; | |||
(8) | Operating cash flow return on income; | |||
(9) | Adjusted operating cash flow return on income; | |||
(10) | Economic value added; and | |||
(11) | Individual business objectives. |
(x) Performance Period means the period of service determined by the Committee, not to exceed five years, during which years of service or performance is to be measured for the Award.
(y) Plan means this Intuit Inc. 2005 Equity Incentive Plan, as amended from time to time.
(z) Prospectus means the prospectus relating to the Plan, as amended from time to time, that is prepared by the Company and delivered or made available to Participants pursuant to the requirements of the Securities Act.
(aa) Purchase Price means the price to be paid for Shares acquired under the Plan, other than Shares acquired upon exercise of an Option.
(bb) Restricted Stock Award means an award of Shares pursuant to Section 6 of the Plan.
(cc) Restricted Stock Unit means an Award granted pursuant to Section 9 of the Plan.
(dd) RSU Agreement means an agreement evidencing a Restricted Stock Unit Award granted pursuant to Section 9 of the Plan.
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(ee) SAR Agreement means an agreement evidencing a Stock Appreciation Right granted pursuant to Section 8 of the Plan.
(ff) SEC means the Securities and Exchange Commission.
(gg) Securities Act means the Securities Act of 1933, as amended, and the regulations promulgated thereunder.
(hh) Shares means shares of the Companys Common Stock $0.01 par value, reserved for issuance under the Plan, as adjusted pursuant to Sections 2 and 21, and any successor security.
(ii) Stock Appreciation Right means an Award granted pursuant to Section 8 of the Plan.
(jj) Stock Bonus means an Award granted pursuant to Section 7 of the Plan.
(kk) Stock Option Agreement means the agreement which evidences a Stock Option, granted pursuant to Section 5 of the Plan.
(ll) Subsidiary means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of granting of the Award, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
(mm) Ten Percent Stockholder means any person who directly or by attribution owns more than ten percent of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary.
(nn) Termination or Terminated means, for purposes of the Plan with respect to a Participant, that the Participant has ceased to provide services as an employee, director, consultant, independent contractor or adviser, to the Company or a Parent or Subsidiary; provided that a Participant shall not be deemed to be Terminated if the Participant is on a leave of absence approved by the Committee or by an officer of the Company designated by the Committee; and provided further, that during any approved leave of absence, vesting of Awards shall be suspended or continue in accordance with guidelines established from time to time by the Committee. Subject to the foregoing, the Committee shall have sole discretion to determine whether a Participant has ceased to provide services and the effective date on which the Participant ceased to provide services (the Termination Date). .
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Exhibit 10.06
Grant No. ______________
INTUIT INC. 2005 EQUITY INCENTIVE PLAN GRANT AGREEMENT
Non-Qualified Stock Option
New Hire, Promotion or Retention Grant
Intuit Inc., a Delaware corporation (the Company), hereby grants you a stock option (Option), pursuant to the Companys 2005 Equity Incentive Plan (the Plan), to purchase shares of the Companys Common Stock, $0.01 par value per share (Common Stock), as described below. This Option is subject to all of the terms and conditions of the Plan, which is incorporated into this Agreement by reference. If there is any discrepancy, conflict or omission between this Agreement and the provisions of the Plan, the provisions of the Plan shall apply. All capitalized terms in this Agreement that are not defined in the Agreement have the meanings given to them in the Plan.
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Name of Participant: | |
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Employee ID: | |
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Address: | |
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Number of Shares: | |
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Exercise Price Per Share: | |
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Date of Grant: | |
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First Vesting Date: | |
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Expiration Date: | |
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Vesting Schedule: |
On your Termination, this Option will either cease to vest or, if you have been actively employed by the Company for one year or more and become totally disabled or die as provided in Section 5.6 of the Plan, accelerate in full. Vesting may also be suspended in accordance with Company policies, as described in Section 5.6 of the Plan.
To exercise this Option, you must follow the exercise procedures established by the Company, as described in Section 5.5 of the Plan. This Option may be exercised only with respect to vested shares. Payment of the Exercise Price for the Shares may be made in cash (by check) and/or, if a public market exists for the Companys Common Stock, by means of a Same-Day-Sale Commitment or Margin Commitment from you and an NASD Dealer (as described in Section 11.1 of the Plan). Upon exercise of this Option, you understand that the Company may be required to withhold taxes.
Subject to the exercise procedures established by the Company, the last day this Option may be exercised is seven years from the Date of Grant which is the Expiration Date set forth above. If your Termination Date occurs before the Expiration Date, this Option will expire as to all unvested shares subject to the Option on your Termination Date. Following your Termination Date, this Option may be exercised with respect to vested shares during the post-termination exercise period as provided in Section 5.6 of the Plan. To the extent this Option is not exercised before the end of the post-termination exercise period, in accordance with the exercise procedures established by the Company, the Option will expire as to all shares remaining subject thereto.
This Agreement (including the Plan, which is incorporated by reference) constitutes the entire agreement between you and the Company with respect to this Option, and supersedes all prior agreements or promises with respect to the Option. Except as provided in the Plan, this Agreement may be amended only by a written document signed by the Company and you. Subject to the terms of the Plan, the Company may assign any of its rights and obligations under this Agreement, and this Agreement shall be binding on, and inure to the benefit of, the successors and assigns of the Company. Subject to the restrictions on transfer of the Option described in Section 14 of the Plan, this Agreement shall be binding on your permitted successors and assigns (including heirs, executors, administrators and legal representatives). All notices required under this Agreement or the Plan must be mailed or hand-delivered to the Company or to you at its or your respective addresses set forth in this Agreement, or at such other address designated in writing by either of the parties to the other.
Additional information about the Plan and this Option (including certain tax consequences of exercising the Option and disposing of the Shares) is contained in the Prospectus for the Plan. A copy of the Prospectus accompanies this Grant Agreement and is available on the stock options pages of the Intuit Legal Department intranet web site or by calling Sharon Savatski, the Companys Stock Plan Analyst, at (650) 944-6504.
The Company has signed this Option Agreement effective as the Date of Grant.
INTUIT INC.
2632 Marine Way Mountain View, California 94043 |
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By: | ||||
Robert B. Henske, Senior Vice President | ||||
and Chief Financial Officer | ||||
Exhibit 10.07
Grant No. ______________
INTUIT INC. 2005 EQUITY INCENTIVE PLAN GRANT AGREEMENT
Non-Qualified Stock Option
Focal Grant
Intuit Inc., a Delaware corporation (the Company), hereby grants you a stock option (Option), pursuant to the Companys 2005 Equity Incentive Plan (the Plan), to purchase shares of the Companys Common Stock, $0.01 par value per share (Common Stock), as described below. This Option is subject to all of the terms and conditions of the Plan, which is incorporated into this Agreement by reference. If there is any discrepancy, conflict or omission between this Agreement and the provisions of the Plan, the provisions of the Plan shall apply. All capitalized terms in this Agreement that are not defined in the Agreement have the meanings given to them in the Plan.
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Name of Participant and Number
of Shares as set forth on the accompanying email.
Exercise Price Per Share: |
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Date of Grant: | |
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First Vesting Date: | |
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Expiration Date: | |
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Vesting Schedule: |
On your Termination, this Option will either cease to vest or, if you have been actively employed by the Company for one year or more and become totally disabled or die as provided in Section 5.6 of the Plan, accelerate in full. Vesting may also be suspended in accordance with Company policies, as described in Section 5.6 of the Plan.
To exercise this Option, you must follow the exercise procedures established by the Company, as described in Section 5.5 of the Plan. This Option may be exercised only with respect to vested shares. Payment of the Exercise Price for the Shares may be made in cash (by check) and/or, if a public market exists for the Companys Common Stock, by means of a Same-Day-Sale Commitment or Margin Commitment from you and an NASD Dealer (as described in Section 11.1 of the Plan). Upon exercise of this Option, you understand that the Company may be required to withhold taxes.
Subject to the exercise procedures established by the Company, the last day this Option may be exercised is seven years from the Date of Grant which is the Expiration Date set forth above. If your Termination Date occurs before the Expiration Date, this Option will expire as to all unvested shares subject to the Option on your Termination Date. Following your Termination Date, this Option may be exercised with respect to vested shares during the post-termination exercise period as provided in Section 5.6 of the Plan. To the extent this Option is not exercised before the end of the post-termination exercise period, in accordance with the exercise procedures established by the Company, the Option will expire as to all shares remaining subject thereto.
This Agreement (including the Plan, which is incorporated by reference) constitutes the entire agreement between you and the Company with respect to this Option, and supersedes all prior agreements or promises with respect to the Option. Except as provided in the Plan, this Agreement may be amended only by a written document signed by the Company and you. Subject to the terms of the Plan, the Company may assign any of its rights and obligations under this Agreement, and this Agreement shall be binding on, and inure to the benefit of, the successors and assigns of the Company. Subject to the restrictions on transfer of the Option described in Section 14 of the Plan, this Agreement shall be binding on your permitted successors and assigns (including heirs, executors, administrators and legal representatives). All notices required under this Agreement or the Plan must be mailed or hand-delivered to the Company or to you at its or your respective addresses set forth in this Agreement, or at such other address designated in writing by either of the parties to the other.
Additional information about the Plan and this Option (including certain tax consequences of exercising the Option and disposing of the Shares) is contained in the Prospectus for the Plan. A copy of the Prospectus accompanies this Grant Agreement and is available on the stock options pages of the Intuit Legal Department intranet web site or by calling Sharon Savatski, the Companys Stock Plan Analyst, at (650) 944-6504.
The Company has signed this Option Agreement effective as the Date of Grant.
INTUIT INC.
2632 Marine Way Mountain View, California 94043 |
||||
By: | ||||
Robert B. Henske, Senior Vice President | ||||
and Chief Financial Officer | ||||
Exhibit 10.08
Award No. «GrantNumber»
INTUIT INC. 2005 EQUITY INCENTIVE PLAN GRANT AGREEMENT
Restricted Stock Unit
Executive Stock Ownership Program Matching Unit
Intuit Inc., a Delaware corporation (the Company), hereby grants you a restricted stock unit award (Award) pursuant to the Companys 2005 Equity Incentive Plan (the Plan), for the number of shares of the Companys Common Stock, $0.01 par value per share (Common Stock) set forth below. All capitalized terms in this Grant Agreement (Agreement) that are not defined in this Agreement have the meanings given to them in the Plan. This Award is subject to all of the terms and conditions of the Plan, which is incorporated into this Agreement by reference. This Agreement is not meant to interpret, extend, or change the Plan in any way, or to represent the full terms of the Plan. If there is any discrepancy, conflict or omission between this Agreement and the provisions of the Plan, the provisions of the Plan shall apply.
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Name of Participant: | |
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Employee ID: | |
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Address: | |
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Number of Shares: | |
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Date of Grant: | |
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Vesting Date: |
Vesting : Subject to the forfeiture provisions set forth in this Agreement, this Award will vest as to 100% of the Number of Shares on the Vesting Date set forth above, provided you have remained employed by the Company through that date. The Vesting Date is the fourth anniversary of the Date of Grant.
In the event of your Termination prior to the Vesting Date, the following provisions will govern the vesting of this Award:
Termination due to Resignation or by Company for Cause : In the event of your Termination prior to the Vesting Date due to your resignation or termination of employment by the Company for Cause, this Award will terminate without having vested as to any of the shares subject to this Award and you will have no right or claim to anything under this Award. For purposes of this Award, Cause means (i) you have been convicted of a misdemeanor that involves moral turpitude or the embezzlement of property of the Company or one of its affiliates; (ii) you have been convicted of a felony under the laws of the United States or any state thereof; (iii) your willful misconduct in the performance of your duties as a Company employee; (iv) your gross negligence in the performance of your duties as a Company employee; or (v) you have persistently failed to follow the lawful instructions of your manager relating to an activity within the scope of your duties. In order for a condition identified in (iv) or (v) to constitute Cause, the Company shall first have provided you with (A) at least thirty days written notice of the alleged actions setting forth with specificity the events or failures complained of and (B) an opportunity to remedy to the reasonable satisfaction of your manager such condition within such thirty day period and you shall have failed to remedy such condition.
Termination due to Retirement or by Company for other than Cause : In the event of your Termination prior to the Vesting Date due to your Retirement or termination of employment by the Company for reasons other than Cause, you will vest pro-rata in a percentage of the Number of Shares equal to your number of full months of service since the Date of Grant divided by forty-eight months, rounded down to the nearest whole share of Intuit Common Stock, and the Vesting Date under this Agreement will be your Termination Date. For purposes of this Award, Retirement means the Termination of your employment with the Company after you have reached an age and service requirement determined by the Committee or its delegate.
Termination due to Death or Total Disability : In the event of your Termination prior to the Vesting Date due to your death or Total Disability, this Award will vest as to 100% of the Number of the Shares on your Termination Date, and the Vesting Date under this Agreement will be your Termination Date. For purposes of this Award, Total Disability is defined in Section 5.6(a) of the Plan.
Termination Within One Year Following Corporate Transaction : In the event of your Termination prior to the Vesting Date, but within one year following the date of a Corporate Transaction, this Award will vest as to 100% of the Number of the Shares on your Termination Date, and the Vesting Date under this Agreement will be your Termination Date. For purposes of this Award, Corporate Transaction is defined in Section 26(h) of the Plan.
Forfeiture : You acknowledge and agree that if prior to the date on which you vest fully in this Award you sell, gift or otherwise transfer the shares you purchased that caused the Company to grant you this Award, this Award will terminate and you will forfeit all rights to this Award and any shares subject hereto, unless the Company determines in its sole discretion that you continue to hold other shares of the Companys Common Stock in a number equal to or greater than the number of shares that caused the Company to grant you this Award.
Issuance of Shares under this Award : The Company will issue you the shares subject to this Award on the later of: (1) the Vesting Date; or (2) to the extent permitted under Code Section 409A and the regulations and other authority promulgated thereunder, your Voluntary Deferral of Share Issuance Date. Until the date the shares are issued to you, you will have no rights as a stockholder of the Company and the shares subject to this Award will not count as owned by you under the Companys share ownership requirements.
Withholding Taxes : When the vesting and issuance of the shares under this Award gives rise to a federal or other governmental income or employment tax withholding obligation on the part of the Company, the Company will withhold from the shares issued to you a number of whole shares having a Fair Market Value equal to the minimum amount to be withheld to satisfy the withholding obligation and will transmit the equivalent cash amount to the applicable taxing authorities. If you have made a voluntary deferral of the share issuance to a date later than the Vesting Date in accordance with the provisions set forth in this Agreement, you agree that you will remit cash to the Company (through payroll deduction or otherwise) in an amount sufficient to satisfy any withholding obligation resulting from the vesting of the shares under this Award. (As of the date of this Agreement, federal income tax withholding is not required until share issuance. However, a FICA and Medicare withholding obligation triggers on the Vesting Date even if you have made a voluntary deferral of the share issuance to a date later than the Vesting Date). Fair Market Value of the shares shall be determined in accordance with Section 26(n) of the Plan on the date that the amount of tax to be withheld is to be determined.
Voluntary Deferral of Share Issuance : To the extent permitted under Code Section 409A and the regulations and other authority promulgated thereunder, you may voluntarily elect to defer the issuance of the shares under this Award to a date after the Vesting Date that is no later than the first day of the fiscal year following the date on which you are no longer an employee of the Company (your Voluntary Deferral of Share Issuance Date). You must make this election by filing a voluntary deferral election request in a form acceptable to the Committee or its delegate.
This Agreement (including the Plan, which is incorporated by reference) constitutes the entire agreement between you and the Company with respect to this Award, and supersedes all prior agreements or promises with respect to the Award. Except as provided in the Plan, this Agreement may be amended only by a written document signed by the Company and you. Subject to the terms of the Plan, the Company may assign any of its rights and obligations under this Agreement, and this Agreement shall be binding on, and inure to the benefit of, the successors and assigns of the Company. Subject to the restrictions on transfer of the Option described in Section 14 of the Plan, this Agreement shall be binding on your permitted successors and assigns (including heirs, executors, administrators and legal representatives). All notices required under this Agreement or the Plan must be mailed or hand-delivered to the Company or to you at its or your respective addresses set forth in this Agreement, or at such other address designated in writing by either of the parties to the other.
The Company has signed this Award Agreement effective as the Date of Grant.
INTUIT INC.
2632 Marine Way Mountain View, California 94043 |
||||
By: | ||||
Robert B. Henske, Chief Financial Officer | ||||
Exhibit 10.09
Grant No. ______________
INTUIT INC. 2005 EQUITY INCENTIVE PLAN GRANT AGREEMENT
Non-Qualified Stock Option
Stephen Bennett Grant
Intuit Inc., a Delaware corporation (the Company), hereby grants you a stock option (Option), pursuant to the Companys 2005 Equity Incentive Plan (the Plan), to purchase shares of the Companys Common Stock, $0.01 par value per share (Common Stock), as described below. This Option is subject to all of the terms and conditions of the Plan, which is incorporated into this Agreement by reference. If there is any discrepancy, conflict or omission between this Agreement and the provisions of the Plan, the provisions of the Plan shall apply. All capitalized terms in this Agreement that are not defined in the Agreement have the meanings given to them in the Plan.
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Name of Participant: | |
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Employee ID: | |
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Address: | |
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||
|
Number of Shares: | |
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Exercise Price Per Share: | |
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Date of Grant: | |
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First Vesting Date: | |
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Expiration Date: | |
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Vesting Schedule: |
On your Termination, this Option will cease to vest unless (a) your Termination occurs due to your death or total disability, as provided in Section 5.6 of the Plan, in which case the Option will accelerate in full or (b) your Termination occurs within twelve months following a Corporate Transaction, in which case the Option will accelerate as to an additional twelve months. Following your Termination, you may exercise the Option (1) for a period of one year following the date of your Termination for reasons other than your death or for Cause (as defined in your July 30, 2003 Employment Agreement); (2) for a period of eighteen months following the date of your Termination due to your death or if you die within three months of your Termination; and (3) for a period of ninety days following your Termination for Cause. Vesting may also be suspended in accordance with Company policies, as described in Section 5.6 of the Plan.
To exercise this Option, you must follow the exercise procedures established by the Company, as described in Section 5.5 of the Plan. This Option may be exercised only with respect to vested shares. Payment of the Exercise Price for the Shares may be made in cash (by check) and/or, if a public market exists for the Companys Common Stock, by means of a Same-Day-Sale Commitment or Margin Commitment from you and an NASD Dealer (as described in Section 11.1 of the Plan). Upon exercise of this Option, you understand that the Company may be required to withhold taxes.
Subject to the exercise procedures established by the Company, the last day this Option may be exercised is seven years from the Date of Grant which is the Expiration Date set forth above. If your Termination Date occurs before the Expiration Date, this Option will expire as to all unvested shares subject to the Option on your Termination Date. Following your Termination Date, this Option may be exercised with respect to vested shares during the post-termination exercise period as provided in Section 5.6 of the Plan. To the extent this Option is not exercised before the end of the post-termination exercise period, in accordance with the exercise procedures established by the Company, the Option will expire as to all shares remaining subject thereto.
This Agreement (including the Plan, which is incorporated by reference) constitutes the entire agreement between you and the Company with respect to this Option, and supersedes all prior agreements or promises with respect to the Option. Except as provided in the Plan, this Agreement may be amended only by a written document signed by the Company and you. Subject to the terms of the Plan, the Company may assign any of its rights and obligations under this Agreement, and this Agreement shall be binding on, and inure to the benefit of, the successors and assigns of the Company. Subject to the restrictions on transfer of the Option described in Section 14 of the Plan, this Agreement shall be binding on your permitted successors and assigns (including heirs, executors, administrators and legal representatives). All notices required under this Agreement or the Plan must be mailed or hand-delivered to the Company or to you at its or your respective addresses set forth in this Agreement, or at such other address designated in writing by either of the parties to the other.
Additional information about the Plan and this Option (including certain tax consequences of exercising the Option and disposing of the Shares) is contained in the Prospectus for the Plan. A copy of the Prospectus accompanies this Grant Agreement and is available on the stock options pages of the Intuit Legal Department intranet web site or by calling Sharon Savatski, the Companys Stock Plan Analyst, at (650) 944-6504.
The Company has signed this Option Agreement effective as the Date of Grant.
INTUIT INC.
2632 Marine Way Mountain View, California 94043 |
||||
By: | ||||
Robert B. Henske, Senior Vice President | ||||
and Chief Financial Officer | ||||
Exhibit 10.10
Grant No.
INTUIT INC. 2005 EQUITY INCENTIVE PLAN GRANT AGREEMENT
Non-Qualified Stock Option
Non-Employee Director Initial Grant
Intuit Inc., a Delaware corporation (the Company), hereby grants you a stock option (Option), pursuant to Section 10 of the Companys 2005 Equity Incentive Plan (the Plan), to purchase shares of the Companys Common Stock, $0.01 par value per share (Common Stock), as described below. This Option is subject to all of the terms and conditions of the Plan, which is incorporated into this Agreement by reference. If there is any discrepancy, conflict or omission between this Agreement and the provisions of the Plan, the provisions of the Plan shall apply. All capitalized terms in this Agreement that are not defined in the Agreement have the meanings given to them in the Plan.
Name of Participant:
Address:
Number of Shares:
45,000
Exercise Price Per Share:
Date of Grant:
First Vesting Date:
Expiration Date:
Vesting Schedule:
This Option shall become exercisable as it vests over four
years from the Date of Grant as to 25% of the Shares upon the first
anniversary of the Date of Grant and as to an additional 2.0833% of the
Shares each month thereafter, so long as you continuously remain a
director or a consultant of the Company. On the date you cease to be a
member of the Board or a consultant of the Company (your Termination
Date), this Option will either cease to vest or, if you become totally
disabled or die as provided in Section 10.7(d) of the Plan, accelerate
in full.
This Option may be exercised only with respect to vested shares and in accordance with the Companys stock option exercise procedures. Payment of the Exercise Price for the Shares may be made in cash (by check) and/or, for so long as a public market exists for the Companys Common Stock, by means of a Same-Day-Sale Commitment or Margin Commitment from you and an NASD Dealer (as described in Section 11.1 of the Plan).
Subject to the exercise procedures established by the Company, the last day this Option may be exercised is seven years from the Date of Grant which is the Expiration Date set forth above. If your Termination Date occurs before the Expiration Date, this Option will expire as to all unvested shares subject to the Option on your Termination Date. Following your Termination Date, this Option may be exercised with respect to vested shares during the post-termination exercise period as provided in Section 10.10 of the Plan. To the extent this Option is not exercised before the end of the post-termination exercise period, in accordance with the exercise procedures established by the Company, the Option will expire as to all Shares remaining subject thereto. Notwithstanding the foregoing, in the event of a Corporate Transaction, the vesting of this Option will accelerate and become exercisable in full prior to the consummation of such event at such time and on such conditions as the Committee determines, and if this Option is not exercised on or prior to the consummation of the Corporate Transaction, it will terminate.
This Agreement (including the Plan, which is incorporated by reference) constitutes the entire agreement between you and the Company with respect to this Option, and supersedes all prior agreements or promises with respect to the Option. Except as provided in the Plan, this Agreement may be amended only by a written document signed by the Company and you. Subject to the terms of the Plan, the Company may assign any of its rights and obligations under this Agreement, and this Agreement shall be binding on, and inure to the benefit of, the successors and assigns of the Company. Subject to the restrictions on transfer of the Option described in Section 14 of the Plan, this Agreement shall be binding on your permitted successors and assigns (including heirs, executors, administrators and legal representatives). All notices required under this Agreement or the Plan must be mailed or hand-delivered to the Company or to you at its or your respective addresses set forth in this Agreement, or at such other address designated in writing by either of the parties to the other.
Additional information about the Plan and this Option (including certain tax consequences of exercising the Option and disposing of the Shares) is contained in the Prospectus for the Plan. A copy of the Prospectus accompanies this Grant Agreement and is available by calling Sharon Savatski, the Companys Stock Plan Analyst, at (650) 944-6504.
The Company has signed this Option Agreement effective as the Date of Grant.
INTUIT INC.
2632 Marine Way Mountain View, California 94043 |
||||
By: | ||||
Robert B. Henske, Senior Vice President | ||||
and Chief Financial Officer | ||||
Exhibit 10.11
Grant No.
INTUIT INC. 2005 EQUITY INCENTIVE PLAN GRANT AGREEMENT
Non-Qualified Stock Option
Non-Employee Director Succeeding Grant
Intuit Inc., a Delaware corporation (the Company), hereby grants you a stock option (Option), pursuant to Section 10 of the Companys 2005 Equity Incentive Plan (the Plan), to purchase shares of the Companys Common Stock, $0.01 par value per share (Common Stock), as described below. This Option is subject to all of the terms and conditions of the Plan, which is incorporated into this Agreement by reference. If there is any discrepancy, conflict or omission between this Agreement and the provisions of the Plan, the provisions of the Plan shall apply. All capitalized terms in this Agreement that are not defined in the Agreement have the meanings given to them in the Plan.
Name of Participant:
Address:
Number of Shares:
15,000
Exercise Price Per Share:
Date of Grant:
First Vesting Date:
Expiration Date:
Vesting Schedule:
This Option shall become exercisable as it vests over two
years from the Date of Grant as to 50% of the Shares upon the first
anniversary of the Date of Grant and as to an additional 4.1666% of the
Shares each month thereafter, so long as you continuously remain a
director or a consultant of the Company. On the date you cease to be a
member of the Board or a consultant of the Company (your Termination
Date), this Option will either cease to vest or, if you become totally
disabled or die as provided in Section 10.7(d) of the Plan, accelerate
in full.
This Option may be exercised only with respect to vested shares and in accordance with the Companys stock option exercise procedures. Payment of the Exercise Price for the Shares may be made in cash (by check) and/or, for so long as a public market exists for the Companys Common Stock, by means of a Same-Day-Sale Commitment or Margin Commitment from you and an NASD Dealer (as described in Section 11.1 of the Plan).
Subject to the exercise procedures established by the Company, the last day this Option may be exercised is seven years from the Date of Grant which is the Expiration Date set forth above. If your Termination Date occurs before the Expiration Date, this Option will expire as to all unvested shares subject to the Option on your Termination Date. Following your Termination Date, this Option may be exercised with respect to vested shares during the post-termination exercise period as provided in Section 10.10 of the Plan. To the extent this Option is not exercised before the end of the post-termination exercise period, in accordance with the exercise procedures established by the Company, the Option will expire as to all Shares remaining subject thereto. Notwithstanding the foregoing, in the event of a Corporate Transaction, the vesting of this Option will accelerate and become exercisable in full prior to the consummation of such event at such time and on such conditions as the Committee determines, and if this Option is not exercised on or prior to the consummation of the Corporate Transaction, it will terminate.
This Agreement (including the Plan, which is incorporated by reference) constitutes the entire agreement between you and the Company with respect to this Option, and supersedes all prior agreements or promises with respect to the Option. Except as provided in the Plan, this Agreement may be amended only by a written document signed by the Company and you. Subject to the terms of the Plan, the Company may assign any of its rights and obligations under this Agreement, and this Agreement shall be binding on, and inure to the benefit of, the successors and assigns of the Company. Subject to the restrictions on transfer of the Option described in Section 14 of the Plan, this Agreement shall be binding on your permitted successors and assigns (including heirs, executors, administrators and legal representatives). All notices required under this Agreement or the Plan must be mailed or hand-delivered to the Company or to you at its or your respective addresses set forth in this Agreement, or at such other address designated in writing by either of the parties to the other.
Additional information about the Plan and this Option (including certain tax consequences of exercising the Option and disposing of the Shares) is contained in the Prospectus for the Plan. A copy of the Prospectus accompanies this Grant Agreement and is available by calling Sharon Savatski, the Companys Stock Plan Analyst, at (650) 944-6504.
The Company has signed this Option Agreement effective as the Date of Grant.
INTUIT INC.
2632 Marine Way Mountain View, California 94043 |
||||
By: | ||||
Robert B. Henske, Senior Vice President | ||||
and Chief Financial Officer | ||||
Exhibit 10.12
Grant No.
INTUIT INC. 2005 EQUITY INCENTIVE PLAN GRANT AGREEMENT
Non-Qualified Stock Option
Non-Employee Director Committee Grant
Intuit Inc., a Delaware corporation (the Company), hereby grants you a stock option (Option), pursuant to Section 10 of the Companys 2005 Equity Incentive Plan (the Plan), to purchase shares of the Companys Common Stock, $0.01 par value per share (Common Stock), as described below. This Option is subject to all of the terms and conditions of the Plan, which is incorporated into this Agreement by reference. If there is any discrepancy, conflict or omission between this Agreement and the provisions of the Plan, the provisions of the Plan shall apply. All capitalized terms in this Agreement that are not defined in the Agreement have the meanings given to them in the Plan.
Name of Participant:
Address:
Number of Shares:
5,000
Exercise Price Per Share:
Date of Grant:
First Vesting Date:
Expiration Date:
Vesting Schedule:
This Option shall become exercisable as it vests over one
year from the Date of Grant as to 8.333% of the Shares each month
following the Date of Grant, so long as you continuously remain a
director or a consultant of the Company. On the date you cease to be a
member of the Board or a consultant of the Company (your Termination
Date), this Option will either cease to vest or, if you become totally
disabled or die as provided in Section 10.7(d) of the Plan, accelerate
in full.
This Option may be exercised only with respect to vested shares and in accordance with the Companys stock option exercise procedures. Payment of the Exercise Price for the Shares may be made in cash (by check) and/or, for so long as a public market exists for the Companys Common Stock, by means of a Same-Day-Sale Commitment or Margin Commitment from you and an NASD Dealer (as described in Section 11.1 of the Plan).
Subject to the exercise procedures established by the Company, the last day this Option may be exercised is seven years from the Date of Grant which is the Expiration Date set forth above. If your Termination Date occurs before the Expiration Date, this Option will expire as to all unvested shares subject to the Option on your Termination Date. Following your Termination Date, this Option may be exercised with respect to vested shares during the post-termination exercise period as provided in Section 10.10 of the Plan. To the extent this Option is not exercised before the end of the post-termination exercise period, in accordance with the exercise procedures established by the Company, the Option will expire as to all Shares remaining subject thereto. Notwithstanding the foregoing, in the event of a Corporate Transaction, the vesting of this Option will accelerate and become exercisable in full prior to the consummation of such event at such time and on such conditions as the Committee determines, and if this Option is not exercised on or prior to the consummation of the Corporate Transaction, it will terminate.
This Agreement (including the Plan, which is incorporated by reference) constitutes the entire agreement between you and the Company with respect to this Option, and supersedes all prior agreements or promises with respect to the Option. Except as provided in the Plan, this Agreement may be amended only by a written document signed by the Company and you. Subject to the terms of the Plan, the Company may assign any of its rights and obligations under this Agreement, and this Agreement shall be binding on, and inure to the benefit of, the successors and assigns of the Company. Subject to the restrictions on transfer of the Option described in Section 14 of the Plan, this Agreement shall be binding on your permitted successors and assigns (including heirs, executors, administrators and legal representatives). All notices required under this Agreement or the Plan must be mailed or hand-delivered to the Company or to you at its or your respective addresses set forth in this Agreement, or at such other address designated in writing by either of the parties to the other.
Additional information about the Plan and this Option (including certain tax consequences of exercising the Option and disposing of the Shares) is contained in the Prospectus for the Plan. A copy of the Prospectus accompanies this Grant Agreement and is available by calling Sharon Savatski, the Companys Stock Plan Analyst, at (650) 944-6504.
The Company has signed this Option Agreement effective as the Date of Grant.
INTUIT INC.
2632 Marine Way Mountain View, California 94043 |
||||
By: | ||||
Robert B. Henske, Senior Vice President | ||||
and Chief Financial Officer | ||||
Exhibit 10.13
INTUIT INC.
2005 EXECUTIVE DEFERRED COMPENSATION PLAN
Effective January 1, 2005
TABLE OF CONTENTS
ARTICLE I PURPOSE | 1 | |||||
1.1 |
Purpose of Plan
|
1 | ||||
1.2 |
Tax Compliance
|
1 | ||||
1.3 |
Effective Date
|
1 | ||||
ARTICLE II DEFINITIONS | 1 | |||||
2.1 |
Account Earnings
|
1 | ||||
2.2 |
Beneficiary
|
1 | ||||
2.3 |
Bonus Deferral Commitment
|
1 | ||||
2.4 |
Change of Control
|
1 | ||||
2.5 |
Code
|
2 | ||||
2.6 |
Commission Deferral Commitment
|
2 | ||||
2.7 |
Committee
|
2 | ||||
2.8 |
Company
|
2 | ||||
2.9 |
Company Contribution Account
|
2 | ||||
2.10 |
Compensation
|
2 | ||||
2.11 |
Compensation Committee
|
2 | ||||
2.12 |
Deferral Commitment
|
2 | ||||
2.13 |
Deferral Period
|
2 | ||||
2.14 |
Disabled
|
2 | ||||
2.15 |
Early Withdrawal
|
3 | ||||
2.16 |
Earnings Index or Earnings Indices
|
3 | ||||
2.17 |
Elective Deferral Account
|
3 | ||||
2.18 |
Elective Deferred Compensation
|
3 | ||||
2.19 |
Employer
|
3 | ||||
2.20 |
Participant
|
3 | ||||
2.21 |
Participation Agreement
|
3 | ||||
2.22 |
Plan Benefit
|
3 | ||||
2.23 |
Retirement
|
3 | ||||
2.24 |
Salary Deferral Commitment
|
4 | ||||
2.25 |
Unforeseeable Emergency
|
4 | ||||
ARTICLE III PARTICIPATION AND DEFERRAL COMMITMENTS | 4 | |||||
3.1 |
Eligibility and Participation
|
4 | ||||
3.2 |
Elective Deferrals
|
5 | ||||
3.3 |
Limitations on Deferral Commitments
|
5 | ||||
3.4 |
Modification of Deferral Commitment
|
6 | ||||
ARTICLE IV DEFERRED COMPENSATION ACCOUNTS | 6 | |||||
4.1 |
Accounts
|
6 | ||||
4.2 |
Elective Deferred Compensation
|
6 | ||||
4.3 |
Discretionary Company Contributions
|
6 | ||||
4.4 |
Allocation of Accounts
|
6 | ||||
4.5 |
Account Earnings
|
7 | ||||
4.6 |
Determination of Accounts
|
7 | ||||
4.7 |
Vesting of Accounts
|
7 | ||||
4.8 |
Statement of Accounts
|
8 |
Deferred Compensation Plan | Page i |
ARTICLE V PLAN BENEFITS | 8 | |||||
5.1 |
Distributions
|
8 | ||||
5.2 |
Prior to Separation from Service
|
8 | ||||
5.3 |
After Separation from Service
|
9 | ||||
5.4 |
Form of Benefit Payment
|
9 | ||||
5.5 |
Commencement of Benefit Payment
|
11 | ||||
5.6 |
Election Regarding Form of Payment Irrevocable
|
11 | ||||
5.7 |
Tax Withholding
|
11 | ||||
5.8 |
Valuation and Settlement
|
11 | ||||
5.9 |
Payment to Guardian
|
11 | ||||
ARTICLE VI BENEFICIARY DESIGNATION | 11 | |||||
6.1 |
Beneficiary Designation
|
11 | ||||
6.2 |
Changing Beneficiary
|
12 | ||||
6.3 |
Community Property
|
12 | ||||
6.4 |
No Beneficiary Designation
|
12 | ||||
ARTICLE VII ADMINISTRATION | 12 | |||||
7.1 |
Committee
|
12 | ||||
7.2 |
Agents
|
12 | ||||
7.3 |
Binding Effect of Decisions
|
12 | ||||
7.4 |
Indemnification of Committee
|
13 | ||||
ARTICLE VIII CLAIMS PROCEDURE | 13 | |||||
8.1 |
Claim
|
13 | ||||
8.2 |
Review of Claim
|
13 | ||||
8.3 |
Notice of Denial of Claim
|
13 | ||||
8.4 |
Reconsideration of Denied Claim
|
13 | ||||
8.5 |
Employer to Supply Information
|
14 | ||||
ARTICLE IX AMENDMENT AND TERMINATION OF PLAN | 14 | |||||
9.1 |
Amendment
|
14 | ||||
9.2 |
Right to Terminate Plan
|
14 | ||||
ARTICLE X MISCELLANEOUS | 15 | |||||
10.1 |
Unfunded Plan
|
15 | ||||
10.2 |
Unsecured General Creditor
|
15 | ||||
10.3 |
Trust Fund
|
15 | ||||
10.4 |
Nonalienability
|
15 | ||||
10.5 |
Not a Contract of Employment
|
16 | ||||
10.6 |
Protective Provisions
|
16 | ||||
10.7 |
Governing Law
|
16 | ||||
10.8 |
Validity
|
16 | ||||
10.9 |
Notice
|
16 | ||||
10.10 |
Successors
|
16 |
ii
INTUIT INC.
2005 EXECUTIVE DEFERRED COMPENSATION PLAN
ARTICLE I
PURPOSE AND EFFECTIVE DATE
1.1 Purpose of Plan. The purpose of this 2005 Executive Deferred Compensation Plan (this Plan) is to provide current tax planning opportunities as well as supplemental funds for the retirement or death of certain select key employees of Intuit Inc., a Delaware corporation (the Company). It is intended that the Plan will aid the Company in retaining and attracting employees of exceptional ability.
1.2 Tax Compliance. This Plan is intended to comply with Code Section 409A and any regulatory or other guidance issued under such Section. At the time the Company adopted this Plan, the Department of Treasury had not yet issued regulations under Code Section 409A. It is the Companys intention that any terms of this Plan that conflict with such future guidance shall be null and void and that any terms that are missing from the Plan which such guidance would require the Plan contain to comply with the requirements of Code Section 409A shall be incorporated into the Plan. To that end, once such guidance is issued, the Company shall conform the Plan to the requirements of Code Section 409A and the regulations and other interpretive authority promulgated thereunder.
1.3 Effective Date. This Plan shall be effective as of January 1, 2005.
ARTICLE II
DEFINITIONS
For purposes of this Plan, the following terms shall have the meanings indicated, unless the context clearly indicates otherwise:
2.1 Account Earnings. Account Earnings means the amount to be credited to the Participants Elective Deferral Account and Company Contribution Account pursuant to Section 4.5.
2.2 Beneficiary. Beneficiary means the person, persons or entity entitled under Article VI to receive any Plan benefits payable after a Participants death.
2.3 Bonus Deferral Commitment. Bonus Deferral Commitment means the bonus deferral made pursuant to Section 3.2(b).
2.4 Change of Control. Change of Control shall mean a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, as defined by the Secretary of the Treasury in regulations to be issued under Section 409A of the Code.
Deferred Compensation Plan | Page 1 |
2.5 Code. Code means the Internal Revenue Code, as amended from time to time.
2.6 Commission Deferral Commitment. Commission Deferral Commitment means the commission deferral made pursuant to Section 3.2(c).
2.7 Committee. Committee means the Employee Benefits Administrative Committee. The Committee shall be responsible for administering the Plan.
2.8 Company. Company means Intuit Inc., a Delaware Corporation, or any successor to the business thereof.
2.9 Company Contribution Account. Company Contribution Account means the Account maintained in accordance with Article IV with respect to Company contributions pursuant to Section 4.3 of this Plan. The Company Contribution Account shall be utilized solely as a device for the determination and measurement of the amounts to be paid to the Participant pursuant to this Plan. The Company Contribution Account shall not constitute or be treated as a trust fund of any kind.
2.10 Compensation. Compensation means the salary, bonus, and commissions payable to a Participant during the calendar year and considered to be wages for purposes of federal income tax withholding, before reduction for amounts deferred under this Plan, salary reduction contributions under Section 401(k) of the Code, or any other deferral arrangements. Compensation also includes payroll deduction amounts a Participant elects to make to the Companys Employee Stock Purchase Plan. Compensation does not include expense reimbursements, severance wages, any form of non-cash compensation or benefits, including short and long term disability payments, group life insurance premiums, income from the exercise of stock options or other receipt of Company stock, or any other payments or benefits other than normal compensation.
2.11 Compensation Committee. Compensation Committee means the Compensation and Organizational Development Committee of the Board of Directors of the Company.
2.12 Deferral Commitment. Deferral Commitment means an election to defer Compensation made by a Participant pursuant to Article III and for which the Participant has submitted a separate Participation Agreement to the Committee.
2.13 Deferral Period. Deferral Period means the period over which a Participant has elected to defer a portion of his Compensation. Each calendar year shall be a separate Deferral Period. However, for the initial Deferral Period under the Plan or for a newly eligible employee, the Deferral Period shall be the portion of the calendar year following timely submission of the Participation Agreement to the Committee.
2.14 Disabled. For purposes of this Plan, a Participant shall be considered disabled if the Participant
(a) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected
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to result in death or can be expected to last for a continuous period of not less than 12 months, or
(b) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Participants employer.
2.15 Early Withdrawal. Early Withdrawal means a distribution from a Participants Elective Deferral Account pursuant to Section 5.2(a).
2.16 Earnings Index or Earnings Indices. Earnings Index or Earnings Indices means the portfolios or funds selected by the Committee to be used in calculating Account Earnings. Each Earnings Index shall be treated as a phantom investment fund that shall be credited with earnings (whether a gain or loss) according to the performance of the actual fund or portfolio.
2.17 Elective Deferral Account. Elective Deferral Account means the Account maintained by the Company in accordance with Article IV with respect to any elective deferral of Compensation pursuant to Section 4.2 of this Plan. A Participants Elective Deferral Account shall be utilized solely as a device for the determination and measurement of the amounts to be paid to the Participant pursuant to this Plan and shall not constitute or be treated as a trust fund of any kind.
2.18 Elective Deferred Compensation. Elective Deferred Compensation means the amount of Compensation that a Participant elects to defer pursuant to a Deferral Commitment.
2.19 Employer. Employer means the Company and any affiliated or subsidiary entities designated by the Committee.
2.20 Participant. Participant means any individual who is participating in this Plan as provided in Article III and any individual who has a Plan Benefit under this Plan.
2.21 Participation Agreement. Participation Agreement means the Deferral Commitment agreement submitted by a Participant to the Committee pursuant to Sections 3.1(b) and 3.1(c).
2.22 Plan Benefit. Plan Benefit means the benefit payable to a Participant as calculated in Article V.
2.23 Retirement. Retirement means termination from employment with the Employer after the attainment of:
(a) Age 55, and
(b) Five years of service with the Employer. A Participant shall be credited with a year of service, for purposes of this Section and Section 5.4(b), for
2005 Executive Deferred Compensation Plan | Page 3 |
each full year in which the Participant remains employed by the Employer, beginning on the Participants initial hire date and ending on the date the Participant terminates employment with the Employer. If a Participant is an employee as a result of the Companys or one of its subsidiaries acquisition of or merger with the Participants prior employer, the Participants years of service shall include the time the Participant was employed by such prior employer.
2.24 Salary Deferral Commitment. Salary Deferral Commitment means the salary deferral made pursuant to Section 3.2(a).
2.25 Unforeseeable Emergency. Unforeseeable Emergency means a severe financial hardship to the participant resulting from an illness or accident of the Participant, the Participants spouse, or a dependent (as defined in Code Section 152(a)) of the Participant, loss of the Participants property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.
ARTICLE III
PARTICIPATION AND DEFERRAL COMMITMENTS
3.1 Eligibility and Participation.
(a) Eligibility. An employee of the Employer shall be eligible to participate in this Plan if the employee is a management or highly compensated employee and is named by the Companys CEO or his designee to be a Participant in this Plan. To be considered for participation in a year, the Participant must have projected base salary, target incentive compensation, and target commissions equal to at least $140,000 and be employed in a position at the director level or above. Notwithstanding the foregoing, an employee who has participated in the Plan as a director whose position has been reduced to below that of director may be eligible to participate in this Plan provided he continues to have projected base salary, target incentive compensation, and target commissions equal to at least $140,000 and is named by the Companys CEO or his designee to be a Participant in this Plan.
(b) Participation. An eligible employee may elect to participate in this Plan with respect to any Deferral Period by submitting a Participation Agreement to the Committee, prior to the date established by the Committee, in the calendar year immediately preceding the Deferral Period.
(c) Partial Year Participation. In the event that an employee first becomes eligible to participate during a calendar year, a Participation Agreement must be submitted to the Committee no later than thirty (30) days following the employee first becoming eligible to participate in the Plan. Such Participation Agreement shall be effective only with regard to Compensation for services to be performed subsequent to the receipt of the Participation Agreement by the Committee.
2005 Executive Deferred Compensation Plan | Page 4 |
3.2 Elective Deferrals. A Participant may elect Deferral Commitments in the Participation Agreement as follows:
(a) Salary Deferral Commitment. A Salary Deferral Commitment shall be related to the salary payable by the Company to the Participant for services performed during the Deferral Period. The amount to be deferred shall be stated as a percentage of the salary to be paid during the Deferral Period, as a flat dollar amount for the Deferral Period, or in such other form as allowed by the Committee. Such Salary Deferral Commitment shall be obtained from each Participant prior to the close of the calendar year preceding the year in which the services will be performed or in such other time and manner that complies with Code Section 409A and any regulatory or other guidance issued thereunder.
(b) Bonus Deferral Commitment. Bonus Deferral Commitments are intended to conform to the requirements of Code Section 409A. The amount to be deferred shall be stated as a percentage of any bonus payable during the Deferral Period, as a flat dollar amount from any bonus payable during the Deferral Period, or in such other form as allowed by the Committee consistent with the requirements of Code Section 409A. Each such Bonus Deferral Commitment shall be obtained by a Participant in a time and manner that complies with Code Section 409A and any regulatory or other guidance issued thereunder.
(c) Commission Deferral Commitment. Commission Deferral Commitments are intended to conform to the requirements of Code Section 409A. The amount to be deferred shall be stated as a percentage of any commissions payable during the Deferral Period, as a flat dollar amount from any commissions payable during the Deferral Period, or in such other form as allowed by the Committee consistent with the requirements of Code Section 409A. Each such Commission Deferral Commitment shall be obtained by a Participant in a time and manner that complies with Code Section 409A and any regulatory or other guidance issued thereunder.
3.3 Limitations on Deferral Commitments. The following limitations shall apply to Deferral Commitments:
(a) Minimum. The minimum deferral amount for a Salary and Bonus Deferral Commitment shall be two thousand dollars ($2,000) per Deferral Period. If the Deferral Commitment is a Bonus Deferral Commitment or a Commission Deferral Commitment, the $2,000 minimum shall be calculated as a percentage of targeted incentive bonus or commissions.
(b) Maximum. The maximum deferral amount for a Salary Deferral Commitment shall be fifty percent (50%). The maximum deferral amount for a Bonus Deferral Commitment or a Commission Deferral Commitment shall be one hundred percent (100%) of any such bonus, or commission to be paid or payable during the Deferral Period.
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(c) Changes in Minimum or Maximum. The Committee may amend the Plan to change the minimum or maximum deferral amounts from time to time by giving written notice to all Participants. No such change may affect a Deferral Commitment made prior to the Committees action unless otherwise required by law.
3.4 Modification of Deferral Commitment. A Deferral Commitment shall be irrevocable except that the Committee shall permit a Participant to reduce the amount to be deferred, or waive the remainder of the Deferral Commitment upon a finding that the Participant has suffered an Unforeseeable Emergency. If the Committee grants the application, the Participant will not be allowed to enter into a new Deferral Commitment for the remainder of the Deferral Period in which the reduction or waiver of the Deferral Commitment occurs and the following Deferral Period. Any resumption of the Participants deferrals under this Plan shall be made only at the election of the Participant in accordance with this Article III.
ARTICLE IV
DEFERRED COMPENSATION ACCOUNTS
4.1 Accounts. For record keeping purposes only, separate accounts shall be maintained for each Participant to reflect his or her Elective Deferral Account and Company Contribution Account (collectively referred to herein as Accounts). Separate sub-accounts shall be maintained to the extent necessary to properly reflect the Participants election of Earnings Indices and vesting of Company contributions under Sections 4.4 and 4.7.
4.2 Elective Deferred Compensation. A Participants Elective Deferred Compensation shall be credited to the Participants Elective Deferral Account as the corresponding non-deferred portion of the Compensation becomes or would have become payable. Any withholding of taxes or other amounts which is required by state, federal or local law with respect to deferred Compensation shall be withheld from the Participants non-deferred Compensation to the maximum extent possible with any excess reducing the amount deferred.
4.3 Discretionary Company Contributions. The Company may make discretionary Company contributions to the Participants Company Contribution Account. Discretionary Company contributions shall be credited at such times and in such amounts as the Committee in its sole discretion shall determine. The Committee shall notify Participants of contributions to their Company Contribution Account under this Section 4.3.
4.4 Allocation of Accounts. A Participant shall allocate the Accounts among the Earning Indices selected by the Committee. Such allocations shall be made in whole percentage increments. The Committee may change the Earnings Indices at any time. The Elective Deferral Account and Company Contribution Account shall be treated as if invested in the Earnings Indices chosen by the Participant. The Participants initial allocation shall be set forth in the Participation Agreement. If no allocation is made in the Participation Agreement, the Participants entire account shall be initially allocated to the money market fund. A change in
2005 Executive Deferred Compensation Plan | Page 6 |
allocation among Earning Indices will be allowed once each day in the form and manner prescribed by the Committee. Changes made while the New York Stock Exchange is open will be effective at the end of the day on which the change was made. Changes made when the New York Stock Exchange is closed will be effective at the end of the next day on which the New York Stock Exchange is open.
4.5 Account Earnings. The Accounts of each Participant shall be credited with earnings as if such Accounts were actually invested in the Earnings Indices elected by the Participant pursuant to Section 4.4.
4.6 Determination of Accounts. Each Participants Elective Deferral Account as of each day shall consist of the balance of such account as of the immediately preceding day, plus (a) the Participants Elective Deferred Compensation credited during the day, and (b) the applicable Account Earnings, minus the amount of any distributions from such account made during the day. Each Participants Company Contribution Account as of each day shall consist of the balance of such account as of the immediately preceding day, plus (a) any discretionary Company contributions credited during the day, and (b) the applicable Account Earnings, minus the amount of any distributions from such account made during the day. The specific method of valuing the Accounts shall be under the sole discretion of the Committee.
4.7 Vesting of Accounts. Participants shall be vested in their Accounts as follows:
(a) Each Participants Elective Deferral Account, including earnings thereon, shall be 100% vested at all times.
(b) Each discretionary Company contribution credited to each Participants Company Contribution Account under Section 4.3 and earnings thereon shall be vested according to the sole discretion of the Committee. The vesting schedule applied to each Discretionary Company Contribution shall be communicated to the Participant at the same time that the Participant is informed of such Discretionary Company Contribution. To the extent permitted under Code Section 409A, the Committee may later accelerate vesting of a Discretionary Company Contribution in its sole discretion. Notwithstanding the vesting schedule established by the Committee with respect to a Discretionary Company Contribution, such Discretionary Company Contribution and the earnings thereon shall become 100% vested on the occurrence of any of the following events to the extent permitted under Code Section 409A:
(i) | The Participants Disability, | |||
(ii) | The Participants death, or | |||
(iii) | A Change of Control of the Company. |
2005 Executive Deferred Compensation Plan | Page 7 |
4.8 Statement of Accounts. The Committee shall submit to each Participant, within ninety (90) days after the close of each calendar year and at such other time as determined by the Committee, a statement setting forth the balance of and the credits to the Accounts maintained for such Participant.
ARTICLE V
PLAN BENEFITS
5.1 Distributions. Distributions under this Plan may only be made in accordance with the requirements of Code Section 409A and to that end may not be distributed earlier than:
(a) Separation from service as determined by the Secretary of the Treasury in regulations to be issued under Section 409A of the Code.
(b) The date the Participant becomes Disabled.
(c) The Participants death.
(d) A specified time (or pursuant to a fixed schedule) specified under the plan at the date of the deferral of such compensation.
(e) Upon a change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets of the corporation, to the extent provided by the Secretary of the Treasury in regulations to be issued under Section 409A of the Code.
(f) Upon the occurrence of an Unforeseeable Emergency.
5.2 Prior to Separation of Service. Consistent with the requirements of Code Section 409A, a Participants Elective Deferral Account and the vested portion of a Participants Company Contribution Account may be distributed to the Participant prior to termination of employment as follows:
(a) Specified Time or Fixed Schedule.
(i) Elective Deferral Account. A Participant may elect in a Participation Agreement to receive a distribution of all of the amount deferred by that Participation Agreement, and the earnings thereon, as of a date specified in the Participation Agreement. Such date shall not be sooner than two (2) years after the date the Deferral Period commences. Such election shall be made at the time the Deferral Commitment is made and shall be irrevocable.
(ii) Company Contribution Account. A Participant may elect to withdraw all or any portion of a vested Company contribution and the earnings thereon, as of a specified date, not
2005 Executive Deferred Compensation Plan | Page 8 |
sooner than two (2) years after the date the Company contribution is credited to the Participants Company Contribution Account. Such election shall be made in a manner that satisfies Section 409A of the Code with regard to the timing of participant elections.
(b) Distributions due to Unforeseen Emergency. Upon a finding that a Participant has suffered an Unforeseeable Emergency as defined under Section 2.25 of the Plan, the Committee may, in its sole discretion, make distributions from the Participants Elective Deferral Account and the vested portion of the Participants Company Contribution Account. A Participant requesting a distribution as a result of an Unforeseeable Emergency shall apply in writing to the Committee and shall provide such additional information as the Committee may require. The amount of the withdrawal shall be limited to the amount necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the participants assets (to the extent the liquidation of such assets would not itself cause severe financial hardship). Upon requesting a distribution due to an Unforeseeable Emergency, the Participant shall be required to change the investment direction of the Participants Accounts to the money market fund. Immediately following a distribution due to an Unforeseeable Emergency, or the determination by the Committee not to authorize the distribution, the Participant may change the investment direction pursuant to Section 4.4. If a distribution is made due to an Unforeseeable Emergency in accordance with this Section 5.2(b), the Participants deferrals under this Plan shall cease for the remainder of the Deferral Period in which the distribution occurs and the following Deferral Period. Any resumption of the Participants deferrals under this Plan shall be made only at the election of the Participant in accordance with Article III herein.
5.3 After Separation from Service. Upon a Participants separation from service with the Employer for any reason, the Participant shall become entitled to receive the payment of the Participants Elective Deferral Account and the vested portion of the Participants Company Contribution Account in a form and manner consistent with the requirements of Code Section 409A. The benefit will be paid in the form set forth in Section 5.4.
5.4 Form of Benefit Payment. Subject to the requirements of Code Section 409A, benefits payable under Sections 5.2 and 5.3 shall be payable in the following form:
(a) Distributions Prior to Termination. Early Withdrawals under Section 5.2(a)(i) will be paid as a lump sum or over four (4) years, pursuant to Section 5.5, as elected by the Participant in the Participation Agreement. Early Withdrawals under Section 5.2(a)(ii) will be paid, pursuant to Section 5.5, as elected by the Participant in the Participation Agreement. Distributions due to an Unforeseeable Emergency under Section 5.2(b) will be paid in a lump sum within thirty (30) days after the Committees decision.
2005 Executive Deferred Compensation Plan | Page 9 |
(b) Termination Prior to Retirement, Disability, or Change of Control. Benefits payable as a result of separation from service for any reason other than the Participants Retirement or Disability or prior to a Change of Control of the Company shall be paid in a lump sum. Provided, however, that a Participant who terminates after having five (5) years of service with the Company shall be entitled to elect in the Participation Agreement to receive the benefit as a lump sum, or in substantially equal annual installments over two (2) or five (5) years. For purposes of this Section 5.4(b), years of service will be determined pursuant to Section 2.26(b).
(c) Termination Due to Retirement, Disability, or After Change of Control. Benefits payable as a result of termination due to the Participants Retirement or Disability or after a Change of Control of the Company shall be paid in the form selected by the Participant at the time of the Deferral Commitment. Options for the form of benefit payment shall include:
(i) A lump sum payment, or
(ii) Substantially equal annual installments of the Account over a period of two (2), five (5) or ten (10) years. Account Earnings shall continue to accrue during the payment period on the unpaid balance in the Participants Accounts.
(d) Death Benefits.
(i) Upon the death of the Participant prior to termination of employment, the Company shall pay to the Participants Beneficiary, as designated in Article VI, an amount equal to the balance of the Participants Elective Deferral Account and Company Contribution Amount in the form selected by the Participant at the time of the Deferral Commitment. Options for the form of benefit payment shall include a lump sum payment or substantially equal annual installments of the Participants Accounts over a period of two (2), five (5) or ten (10) year years; provided, however, that any benefits payable hereunder to a trust or estate shall be paid in a lump sum. Account Earnings shall continue to accrue during the payment period on the unpaid balance of the Participants Accounts. The Committee may, in its sole discretion, pay any death benefit hereunder in the form of a lump sum.
(ii) Upon the death of a Participant after benefit payments have commenced, the Participants Beneficiary shall receive the remaining unpaid balance in the Participants Accounts in the same manner as the Participant was being paid prior to the Participants death; provided, however, that any benefits payable hereunder to a trust or estate shall be made in a lump sum. The
2005 Executive Deferred Compensation Plan | Page 10 |
Committee may, in its sole discretion, pay any death benefit hereunder in the form of a lump sum.
(e) Small Account(s). Notwithstanding any provision of this Section 5.4 to the contrary, after a Participant becomes entitled to receive benefit payments, if the total amount of the Participants Accounts is less than twenty thousand dollars ($20,000) on a payment date, the Accounts shall be paid in a lump sum.
5.5 Commencement of Benefit Payment.
(a) Except for distributions as a result of an Unforeseeable Emergency under Section 5.2(b), benefits payable in a lump sum and the first installment of any benefits payable in installments shall be paid as soon as practicable after the first January 1 or July 1 of the year after the Participants termination of employment which is at least 6 months after such termination. Future annual installment benefits shall be paid annually as soon as practicable after January 1 of each following year.
5.6 Election Regarding Form of Payment Irrevocable. Elections under Section 5.2(a) shall be irrevocable and may not be changed for any reason.
5.7 Tax Withholding. To the extent required by federal, state, or local law in effect at the time payments are made, the Employer shall withhold from any amount that is included in the Participants income hereunder any taxes required to be withheld by such law(s).
5.8 Valuation and Settlement. For distributions other than those as a result of Unforeseeable Emergency under Section 5.2(b), the amount of a lump sum payment and the amount of installments shall be based on the value of the Participants Accounts as of June 30 for payments made as of July 1 or December 31 for payments made as of January 1, as applicable.
5.9 Payment to Guardian. The Committee may direct payment to the duly appointed guardian, conservator, or other similar legal representative of a Participant or Beneficiary to whom payment is due. In the absence of such a legal representative, the Committee may, in its sole and absolute discretion, make payment to a person having the care and custody of a minor, incompetent or person incapable of handling the disposition of property upon proof satisfactory to the Committee of incompetence, minority, or incapacity. Such distribution shall completely discharge the Committee from all liability with respect to such benefit.
ARTICLE VI
BENEFICIARY DESIGNATION
6.1 Beneficiary Designation. Subject to Section 6.3, each Participant shall have the right, at any time, to designate one (1) or more persons or an entity as Beneficiary (both primary
2005 Executive Deferred Compensation Plan | Page 11 |
as well as secondary) to whom benefits under this Plan shall be paid in the event of such Participants death prior to complete distribution of the Participants Accounts. Each Beneficiary designation shall be in a written form prescribed by the Committee and shall be effective only when filed with the Committee during the Participants lifetime.
6.2 Changing Beneficiary. Subject to Section 6.3, any Beneficiary designation, other than the Participants spouse, may be changed by a Participant without the consent of the previously named Beneficiary by the filing of a new Beneficiary designation with the Committee. The filing of a new properly completed Beneficiary designation shall cancel all Beneficiary designations previously filed.
6.3 Community Property. If the Participant resides in a community property state, any Beneficiary designation shall be valid or effective only as permitted under applicable law.
6.4 No Beneficiary Designation. If any Participant fails to designate a Beneficiary in the manner provided in Section 6.1 and subject to Section 6.3, if the Beneficiary designation is void, or if the Beneficiary designated by a deceased Participant dies before the Participant or before complete distribution of the Participants Accounts, the Participants Beneficiary shall be the person in the first of the following classes in which there is a survivor:
(a) The Participants spouse;
(b) The Participants children in equal shares, except that if any of the children predeceases the Participant but leaves issue surviving, then such issue shall take, by right of representation, the share the parent would have taken if living; or
(c) The Participants estate.
ARTICLE VII
ADMINISTRATION
7.1 Committee. This Plan shall be administered by the Committee. The Committee shall have the discretionary authority to interpret and enforce all appropriate rules and regulations for the administration of this Plan and decide or resolve any and all questions, including interpretations of this Plan, as may arise. A majority vote of the Committee members shall control any decision. Members of the Committee may be Participants under this Plan.
7.2 Agents. The Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit, and may, from time to time, consult with counsel who may be counsel to the Company.
7.3 Binding Effect of Decisions. The decision or action of the Committee with respect to any question arising out of or in connection with the administration, interpretation and
2005 Executive Deferred Compensation Plan | Page 12 |
application of this Plan and the rules and regulations promulgated hereunder shall be final, conclusive and binding upon all persons having any interest in this Plan.
7.4 Indemnification of Committee. The Company shall indemnify and hold harmless the members of the Committee against any and all claims, loss, damage, expense or liability arising from any action or failure to act with respect to this Plan on account of such members service on the Committee, except in the case of gross negligence or willful misconduct by such member or as expressly provided by statute.
ARTICLE VIII
CLAIMS PROCEDURE
8.1 Claim. The Committee shall establish rules and procedures to be followed by Participants and Beneficiaries in (a) filing claims for benefits, and (b) for furnishing and verifying proofs necessary to establish the right to benefits in accordance with this Plan, consistent with the remainder of this Article VIII. Such rules and procedures shall require that claims and proofs be made in writing and directed to the Committee.
8.2 Review of Claim. The Committee or its designee shall review all claims for benefits. Upon receipt by the Committee of such a claim, it shall determine all facts which are necessary to establish the right of the claimant to benefits under the provisions of this Plan and the amount thereof as herein provided within ninety (90) days of receipt of such claim. If prior to the expiration of the initial ninety (90) day period, the Committee determines additional time is needed to come to a determination on the claim, the Committee shall provide written notice to the Participant, Beneficiary or other claimant of the need for the extension, not to exceed a total of one hundred eighty (180) days from the date the application was received.
8.3 Notice of Denial of Claim. In the event that any Participant, Beneficiary or other claimant claims to be entitled to a benefit under this Plan, and the Committee determines that such claim should be denied, in whole or in part, the Committee shall, in writing, notify such claimant that the claim has been denied, in whole or in part, setting forth the specific reasons for such denial. Such notification shall be written in a manner reasonably expected to be understood by such claimant, shall refer to the specific sections of this Plan relied on, shall describe any additional material or information necessary for the claimant to perfect the claim, shall provide an explanation of why such material or information is necessary, and, where appropriate, shall include an explanation of how the claimant can obtain reconsideration of such denial.
8.4 Reconsideration of Denied Claim.
(a) Within sixty (60) days after receipt of the notice of the denial of a claim, such claimant or duly authorized representative may request, by mailing or delivery of such written notice to the Committee, a reconsideration by the Committee of the decision denying the claim. If the claimant or duly authorized representative fails to request such a reconsideration within such sixty (60) day
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period, it shall be conclusively determined for all purposes of this Plan that the denial of such claim by the Committee is correct. If such claimant or duly authorized representative requests a reconsideration within such sixty (60) day period, the claimant or duly authorized representative shall have thirty (30) days after filing a request for reconsideration to submit additional written material in support of the claim, review pertinent documents, and submit issues and comments in writing.
(b) After such reconsideration request, the Committee shall determine within sixty (60) days of receipt of the claimants request for reconsideration whether such denial of the claim was correct and shall notify such claimant in writing of its determination. The written notice of the Committees decision shall be in writing and shall include specific reasons for the decision, shall be written in a manner reasonably calculated to be understood by the claimant, and shall identify specific references to the pertinent Plan provisions on which the decision is based. In the event of special circumstances determined by the Committee, the time for the Committee to make a decision may be extended by an additional sixty (60) days upon written notice to the claimant prior to the commencement of the extension.
8.5 Employer to Supply Information. To enable the Committee to perform its duties, the Employer shall supply full and timely information to the Committee of all matters relating to the Retirement, Disability, death, or other cause for termination of employment of all Participants, and such other pertinent facts as the Committee may require.
ARTICLE IX
AMENDMENT AND TERMINATION OF PLAN
9.1 Amendment. The Committee may at any time amend this Plan by written instrument, notice of which is given to all Participants and to any Beneficiaries to whom a benefit is due. No amendment shall reduce the amount accrued in any Accounts as of the date such notice of the amendment is given. Material changes to this Plan will be effective immediately, but must be ratified and approved at the Compensation Committee meeting immediately following the effective date of such amendment. After a Change of Control of the Company, this Plan may not be amended without the consent of at least 75% of the Participants, unless otherwise required to conform with Code Section 409A or other provisions of law.
9.2 Right to Terminate Plan. The Compensation Committee may at any time partially or completely terminate this Plan if, in its judgment, the tax, accounting, or other effects of the continuance of this Plan would not be in the best interests of the Employer.
(a) Partial Termination. The Compensation Committee may partially terminate this Plan by instructing the Committee not to accept any additional Deferral Commitments. If such a partial termination occurs, this Plan shall
2005 Executive Deferred Compensation Plan | Page 14 |
continue to operate and be effective with regard to Deferral Commitments entered into prior to the effective date of such partial termination.
(b) Complete Termination. The Compensation Committee may completely terminate this Plan by choosing not to accept any additional Deferral Commitments, and by terminating all ongoing Deferral Commitments. If such a complete termination occurs, this Plan shall cease to operate and the Employer shall pay out all Accounts. Payment shall be made in a lump sum within sixty (60) days after the Compensation Committee terminates this Plan.
(c) Termination After Change of Control. After a Change of Control of the Company, this Plan may not be completely or partially terminated without the consent of at least 75% of the Participants, unless otherwise required to conform with Section 409A or other provisions of law.
ARTICLE X
MISCELLANEOUS
10.1 Unfunded Plan. This Plan is an unfunded plan maintained primarily to provide deferred compensation benefits for a select group of management or highly compensated employees within the meaning of Sections 201, 301 and 401 of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and, therefore, is exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA.
10.2 Unsecured General Creditor. Participants and Beneficiaries shall be unsecured general creditors, with no secured or preferential right to any assets of the Company or any other party for payment of benefits under this Plan. Any insurance contracts, mutual fund shares, stocks, bonds or other property purchased by the Company in connection with this Plan shall remain the Companys general, unpledged, and unrestricted assets. The Companys obligation under this Plan shall be an unfunded and unsecured promise to pay money in the future.
10.3 Trust Fund. At its discretion, the Company may establish one (1) or more trusts, with such trustees as the Committee may approve, for the purpose of providing for the payment of benefits owed under this Plan. Although such a trust shall be irrevocable, its assets shall be held for payment of all the Companys general creditors in the event of the Companys insolvency or bankruptcy. To the extent any benefits provided under this Plan are paid from any such trust, the Company shall have no further obligation to pay them. If not paid from the trust, such benefits shall remain the obligation of the Company. After the occurrence of a Change of Control, the Company will deposit an amount in trust at least equal to the amount necessary to cause the trusts assets to equal the total of all Accounts under this Plan. Thereafter, the Company will make additional deposits, no less often than monthly, as required to maintain trust assets at a level at least equal the total of all Accounts under this Plan.
10.4 Nonalienability. The Committee may recognize the right of an alternate payee named in a domestic relations order to receive all or a portion of a Participants benefit under this
2005 Executive Deferred Compensation Plan | Page 15 |
Plan, provided that (a) the domestic relations order would be a qualified domestic relations order within the meaning of Code Section 414(p) if Code Section 414(p) were applicable to this Plan; (b) the domestic relations order does not purport to give the alternate payee any right to assets of the Company or its affiliates; and (c) the domestic relations order does not purport to give the alternate payee any right to receive payments under this Plan before the Participant is eligible to receive such payments. If the domestic relations order purports to give the alternate payee a share of a benefit to which the Participant currently has a contingent or nonvested right, the alternate payee shall not be entitled to receive any payment from this Plan with respect to the benefit unless the Participants right to the benefit becomes nonforfeitable. Except as set forth in the preceding two sentences with respect to domestic relations orders, and except as required under applicable federal, state, or local laws concerning the withholding of tax, rights to benefits payable under this Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, attachment or other legal process, or encumbrance of any kind. Any attempt to alienate, sell, transfer, assign, pledge, or otherwise encumber any such supplemental benefit, whether currently or thereafter payable, shall be void.
10.5 Not a Contract of Employment. This Plan shall not constitute a contract of employment between the Employer and the Participant. Nothing in this Plan shall give a Participant the right to be retained in the service of the Employer or to interfere with the right of the Employer to discipline or discharge a Participant at any time. Employment with the Employer is at will.
10.6 Protective Provisions. A Participant shall cooperate with the Employer by furnishing any and all information and taking other actions as requested by the Employer in order to facilitate the administration of this Plan and the payment of benefits hereunder.
10.7 Governing Law. The provisions of this Plan shall be construed and interpreted according to the laws of the state of California, except as preempted by federal law.
10.8 Validity. In case any provision of this Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision had never been inserted herein.
10.9 Notice. Any notice required or permitted under this Plan shall be sufficient if in writing and hand delivered or sent by registered or certified mail. Such notice shall be deemed as given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Mailed notice to the Committee shall be directed to the Companys address. Mailed notice to a Participant or Beneficiary shall be directed to the individuals last known address in the Employers records.
10.10 Successors. The provisions of this Plan shall bind and inure to the benefit of the Company and its successors and assigns. The term successors as used herein shall include any corporate or other business entity which shall, whether by merger, consolidation, purchase or otherwise, acquire all or substantially all of the business and assets of the Company, and successors of any such corporation or other business entity.
2005 Executive Deferred Compensation Plan | Page 16 |
Exhibit 31.01
I, Stephen M. Bennett, President and Chief Executive Officer of Intuit Inc.,
certify that:
Date: December 10, 2004
By:
/s/ STEPHEN M. BENNETT
EXCHANGE ACT RULE 13 a-
14(a)
/15D-14(a)
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
1.
I have reviewed this quarterly report on Form 10-Q of Intuit Inc.;
2.
Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3.
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4.
The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
a.
Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b.
Evaluated the effectiveness of the registrants disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such
evaluation; and
c.
Disclosed in this report any change in the registrants
internal control over financial reporting that occurred during the
registrants most recent fiscal quarter (the registrants fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrants internal control over financial reporting; and
5.
The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
a.
All significant deficiencies and material weaknesses in the
design or operation of internal controls over financial reporting
which are reasonably likely to adversely affect the registrants
ability to record, process, summarize and report financial
information; and
b.
Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls.
Stephen M. Bennett
President and Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.02
I, Robert B. Henske, Senior Vice President and Chief Financial Officer of
Intuit Inc., certify that:
Date: December 10, 2004
By:
/s/ ROBERT B. HENSKE
EXCHANGE ACT RULE 13 a-14(a)/15D-14(a)
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
1.
I have reviewed this quarterly report on Form 10-Q of Intuit Inc.;
2.
Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3.
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4.
The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
a.
Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b.
Evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
c.
Disclosed in this report any change in the registrants
internal control over financial reporting that occurred during
the registrants most recent fiscal quarter (the registrants
fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrants internal control over financial
reporting; and
5.
The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
a.
All significant deficiencies and material weaknesses in
the design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and report
financial information; and
b.
Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls.
Robert B. Henske
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
EXHIBIT 32.01
In connection with the Quarterly Report of Intuit Inc. (the Company) on Form
10-Q for the fiscal quarter ended October 31, 2004 as filed with the Securities
and Exchange Commission on the date hereof (the Report), Stephen M. Bennett,
President and Chief Executive Officer of the Company, certifies pursuant to 18
U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002,
that:
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(1)
The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
the Company.
/s/ STEPHEN M. BENNETT
Stephen M. Bennett
President and Chief Executive Officer
Date: December 10, 2004
EXHIBIT 32.02
In connection with the Quarterly Report of Intuit Inc. (the Company) on Form
10-Q for the fiscal quarter ended October 31, 2004 as filed with the Securities
and Exchange Commission on the date hereof (the Report), Robert B. Henske,
Senior Vice President and Chief Financial Officer of the Company, certifies
pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the
Sarbanes-Oxley Act of 2002, that:
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(1)
The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
the Company.
/s/ ROBERT B. HENSKE
Robert B. Henske
Senior Vice President and Chief Financial Officer
Date: December 10, 2004