SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 0-25346
TRANSACTION SYSTEMS ARCHITECTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 47-0772104
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
330 South 108th Avenue
Omaha, Nebraska 68154
(Address of principal executive offices, including zip code)
(402) 390-7600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No .
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
24,073,431 shares of Class A Common Stock at May 5, 1997
2,171,252 shares of Class B Common Stock at May 5, 1997
TRANSACTION SYSTEMS ARCHITECTS, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
TABLE OF CONTENTS
Page
Part I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Balance Sheets as of March 31, 1997
and September 30, 1996 3
Condensed Consolidated Statements of Operations
for the three and six months ended March 31, 1997 and 1996 4
Condensed Consolidated Statement of Stockholders'
Equity for the six months ended March 31, 1997 5
Condensed Consolidated Statements of Cash Flows
for the six months ended March 31, 1997 and 1996 6
Notes to Condensed Consolidated Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 11
Part II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Index to Exhibits 14
TRANSACTION SYSTEMS ARCHITECTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands)
March 31, September 30,
1997 1996
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 38,153 $ 31,546
Billed receivables, net 38,017 29,851
Accrued receivables 22,875 19,284
Deferred income taxes 1,710 1,671
Other 1,595 1,010
------------ ------------
Total current assets 102,350 83,362
Property and equipment, net 14,027 13,001
Software, net 5,297 5,424
Intangible assets, net 8,860 7,236
Installment receivables 1,210 1,593
Investment and notes receivable 6,494 8,105
Other 2,388 1,761
------------
------------
Total assets $ 140,626 $ 120,482
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 779 $ 1,147
Current portion of capital lease obligations 285 342
Accounts payable 7,346 8,322
Accrued employee compensation 3,036 5,210
Accrued liabilities 9,533 7,631
Income taxes 2,888 1,706
Deferred revenue 25,243 17,987
------------ ------------
Total current liabilities 49,110 42,345
Long-term debt 1,480 1,431
Capital lease obligations 280 256
------------
------------
Total liabilities 50,870 44,032
------------ ------------
Stockholders' equity:
Class A Common Stock 120 119
Class B Common Stock 11 11
Additional paid-in capital 100,350 96,062
Accumulated translation adjustments 71 (236)
Accumulated deficit (10,784) (19,494)
Treasury stock, at cost (12) (12)
------------ ------------
Total stockholders' equity 89,756 76,450
------------ ------------
Total liabilities and stockholders' equity $ 140,626 $ 120,482
============ ============
See notes to condensed consolidated financial statements.
TRANSACTION SYSTEMS ARCHITECTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share amounts)
Three Months Ended March 31, Six Months Ended March 31,
------------------------------------ ------------------------------
1997 1996 1997 1996
------------- ------------- ------------ -----------
Revenues:
Software license fees $ 29,200 $ 19,018 $ 54,451 $ 36,235
Maintenance fees 10,009 8,412 19,970 16,821
Services 11,148 9,169 23,025 17,787
Hardware, net 784 1,063 1,337 2,302
------------- ------------- ------------ -----------
Total revenues 51,141 37,662 98,783 73,145
------------- ------------- ------------ -----------
Expenses:
Cost of software license fees:
Software costs 6,213 4,871 11,610 8,776
Amortization of purchased software 0 785 801 1,573
Cost of maintenance and services 12,019 9,437 24,492 18,208
Research and development 4,475 3,788 8,430 7,325
Selling and marketing 11,523 7,864 21,805 16,268
General and administrative:
General and administrative costs 8,205 6,079 15,871 11,774
Amortization of goodwill and purchased
intangibles 237 145 454 295
------------- ------------- ------------ -----------
Total expenses 42,672 32,969 83,463 64,219
------------- ------------- ------------ -----------
Operating income 8,469 4,693 15,320 8,926
------------- ------------- ------------ -----------
Other income (expense):
Interest income 488 568 915 1,136
Interest expense (24) (51) (82) (81)
Other (227) (84) (544) (128)
------------- ------------- ------------ -----------
Total other 237 433 289 927
------------- ------------- ------------ -----------
Income before income taxes 8,706 5,126 15,609 9,853
Provision for income taxes (3,625) (2,095) (6,723) (3,893)
------------- ------------- ------------ -----------
Net income $ 5,081 $ 3,031 $ 8,886 $ 5,960
============= ============= ============ ===========
Net income per common and equivalent share $ 0.19 $ 0.11 $ 0.33 $ 0.22
============= ============= ============ ===========
Weighted average shares outstanding 26,977 27,024 26,988 26,966
============= ============= ============ ===========
See notes to condensed consolidated financial statements.
TRANSACTION SYSTEMS ARCHITECTS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the six months ended March 31, 1997
(unaudited and in thousands)
Class A Class B Additional Accumulated
Common Common Paid-in Translation Accumulated Treasury
Stock Stock Capital Adjustments Deficit Stock Total
-------- -------- ---------- ---------- ---------- -------- --------
Balance, September 30, 1996 $ 119 $ 11 $ 96,062 $ (236) $ (19,494)$ (12) $ 76,450
Adjustment for Open Systems Solutions,
Inc. pooling of interests 1 5 (176) (170)
Issuance of Class A Common Stock 391 391
Exercise of stock options 363 363
Tax benefit of stock options exercised 981 981
Sale of stock options 2,548 2,548
Net Income 8,886 8,886
Translation adjustments 307 307
-------- -------- ---------- ---------- ---------- -------- --------
Balance, March 31, 1997 $ 120 $ 11 $ 100,350 $ 71 $ (10,784)$ (12) $ 89,756
======== ======== ========== ========== ========== ======== ========
See notes to condensed consolidated financial statements.
TRANSACTION SYSTEMS ARCHITECTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
Six Months Ended March 31,
------------------------------
1997 1996
----------- ----------
Cash flows from operating activities:
Net income $ 8,886 $ 5,960
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,596 2,064
Amortization 2,518 2,885
Increase in receivables, net (11,006) (1,472)
Decrease in other current assets 2,034 415
Decrease in installment receivables 383 848
Increase in other assets (26) (1,090)
Increase (decrease) in accounts payable (1,125) 1,074
Decrease in accrued employee compensation (2,209) (1,009)
Increase (decrease) in accrued liabilities 3,145 (1,288)
Decrease in income tax liabilities (563) (674)
Increase (decrease) in deferred revenue 6,463 (843)
------------ -------------
Net cash provided by operating activities 11,096 6,870
------------ -------------
Cash flows from investing activities:
Purchases of property and equipment (3,503) (3,359)
Additions to software (1,497) (1,551)
Acquisiton of businesses, net of cash acquired (2,385) (1,690)
Additions to investment and notes receivable (3,061) (7,001)
Proceeds from notes receivable repayments 3,680 -
------------ -------------
Net cash used in investing activities (6,766) (13,601)
------------ -------------
Cash flows from financing activities:
Proceeds from issuance of Class A Common Stock 392 -
Purchase of Treasury Stock - (10)
Proceeds from sale and exercise of stock options 2,908 512
Payments of long-term debt (934) (30)
Payments on capital lease obligations (50) (250)
------------ -------------
Net cash provided by financing activities 2,316 222
------------ -------------
Effect of exchange rate fluctuations on cash (39) (126)
------------ -------------
Increase in cash and cash equivalents 6,607 (6,635)
Cash and cash equivalents, beginning of period 31,546 35,512
------------ -------------
Cash and cash equivalents, end of period $ 38,153 $ 28,877
============ =============
See notes to condensed consolidated financial statements.
TRANSACTION SYSTEMS ARCHITECTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Consolidated Financial Statements
The condensed consolidated financial statements at March 31, 1997 and for the
three and six months ended March 31, 1997 and 1996 are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the interim periods. The condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto, together with management's
discussion and analysis of financial condition and results of operations,
contained in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1996. The results of operations for the three and six months ended
March 31, 1997 are not necessarily indicative of the results for the entire
fiscal year ending September 30, 1997.
The condensed consolidated financial statements include all domestic and foreign
subsidiaries which are more than 50% owned and controlled. Investments in
companies less than 20% owned are carried at cost.
2. Net Income Per Common and Equivalent Share
Net income per common and common equivalent share is determined by dividing net
income by the weighted average number of shares of common stock and dilutive
common equivalent shares outstanding during each period using the treasury stock
method.
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 "Earnings Per Share"(SFAS No. 128), which
specifies the computation, presentation and disclosure requirements for earnings
per share. SFAS No. 128 is effective for periods ending after December 15, 1997
and requires retroactive restatement of prior periods earnings per share. The
statement replaces the "primary earnings per share" calculation with a "basic
earnings per share" and redefines the "dilutive earnings per share" computation.
Adoption of the statement is not expected to have a material effect on the
Company's reported income per share.
3. Stock Split
On June 7, 1996, the Company's Board of Directors authorized a two-for-one stock
split effected in the form of a 100% stock dividend to be distributed on July 1,
1996 to shareholders of record on June 17, 1996. All references in the condensed
consolidated financial statements to number of shares and per share amounts have
been restated to retroactively reflect the stock split.
4. Acquisition
On October 8, 1996, the Company completed the acquisition of Open Systems
Solutions, Inc. (OSSI). Stockholders of OSSI received 209,993 shares of TSA
Class A Common Stock in exchange for 100% of OSSI's common stock. The stock
exchange was accounted for as a pooling of interests. OSSI's results of
operations prior to the acquisition were not material.
5. Investment and Notes Receivable
In January 1996, the Company entered into a transaction with Insession, Inc.
(Insession) whereby the Company acquired a 7.5% minority interest in Insession
for $1.5 million. In addition, since January 1996, the Company has loaned
Insession $5.0 million under promissory notes. The promissory notes bear an
interest rate of prime plus 0.25%, are payable in January 1999 ($1.0 million),
January 2000 ($1.0 million) and January 2001 ($1.5 million). The remaining $1.5
million of promissory notes are payable upon demand. The promissory notes are
secured by future royalties owed by the Company to Insession.
In March 1997, the Company revised the terms of the line of credit and purchase
option agreement it has with U.S. Processing, Inc. (USPI). Under the terms of
the revised agreement, the Company received $3.6 million as repayment of
advances made under the previous line of credit. In addition, the Company
converted $1.0 million of prior advances under the line of credit into a 19.9%
ownership interest in USPI. The revised line of credit provides USPI with the
ability to borrow $4.5 million from the Company. As of March 31, 1997, there
were no borrowings under the revised line of credit.
6. Subsequent Event
On April 17, 1997, the Company announced an agreement to purchase Regency Voice
Systems, Inc. and related entities (RVS). RVS develops, markets and supports
financial software products and related services including interactive voice
response and PC-banking products for financial institutions. Under the terms of
the agreement, owners of RVS will receive 1,615,383 shares of TSA Class A Common
Stock in exchange for 100% of RVS's outstanding securities. The exchange will be
accounted for as a pooling of interests. The transaction is expected to close on
or about May 13, 1997.
TRANSACTION SYSTEMS ARCHITECTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth certain financial data and the percentage of total revenues of the Company for the periods indicated:
Three Months Ended March 31, Six Months Ended March 31,
------------------------------------------- -------------------------------------------
1997 1996 1997 1996
------------------------------------------- -------------------------------------------
% of % of % of % of
Amount Revenue Amount Revenue Amount Revenue Amount Revenue
---------- --------- ---------- ---------- -------- ------- --------- --------
Revenues:
Software license fees $ 29,200 57.1% $ 19,018 50.5% $ 54,451 55.1% $ 36,235 49.5%
Maintenance fees 10,009 19.6 8,412 22.3 19,970 20.2 16,821 23.0
Services 11,148 21.8 9,169 24.3 23,025 23.3 17,787 24.3
Hardware, net 784 1.5 1,063 2.8 1,337 1.4 2,302 3.1
---------- ------- ---------- ------ -------- ------- --------- ------
Total revenues 51,141 100.0 37,662 100.0 98,783 100.0 73,145 100.0
---------- ------- ---------- ----- -------- --------- --------- ------
Expenses:
Cost of software license fees:
Software costs 6,213 12.1 4,871 12.9 11,610 11.8 8,776 12.0
Amortization of purchased software 0 0.0 785 2.1 801 0.8 1,573 2.2
Cost of maintenance and services 12,019 23.5 9,437 25.1 24,492 24.8 18,208 24.9
Research and development 4,475 8.8 3,788 10.1 8,430 8.5 7,325 10.0
Selling and marketing 11,523 22.5 7,864 20.9 21,805 22.1 16,268 22.2
General and administrative:
General and administrative costs 8,205 16.0 6,079 16.1 15,871 16.1 11,774 16.1
Amortization of goodwill and
purchased intangibles 237 0.5 145 0.4 454 0.5 295 0.4
---------- ------ ---------- ------ -------- ------- --------- ------
Total expenses 42,672 83.4 32,969 87.5 83,463 84.5 64,219 87.8
---------- ------ ---------- ------ -------- ------- --------- ------
Operating income 8,469 16.6 4,693 12.5 15,320 15.5 8,926 12.2
---------- ------ ---------- ------ -------- -------- --------- ------
Other income (expense):
Interest income 488 1.0 568 1.5 915 0.9 1,136 1.6
Interest expense (24) 0.0 (51) (0.1) (82) (0.1) (81) (0.1)
Other (227) (0.4) (84) (0.2) (544) (0.6) (128) (0.2)
---------- ------ ---------- ------ -------- ------- ------- ------
Total other 237 0.5 433 1.1 289 0.3 927 1.3
---------- ------ ---------- ------ -------- -------- ------- ------
Income before income taxes 8,706 17.0 5,126 13.6 15,609 15.8 9,853 13.5
Provision for income taxes (3,625) (7.1) (2,095) (5.6) (6,723) (6.8) (3,893) (5.3)
---------- ------ ---------- ------ -------- -------- ------- ------
Net income $ 5,081 9.9% $ 3,031 8.0% $ 8,886 9.0% $ 5,960 8.1%
========= ======= ========= ====== ======= ======== ======= ======
Results of Operations (continued)
Revenues
Total revenues for the second quarter of fiscal 1997 increased 35.8% or $13.5
million over the comparable period in fiscal 1996. Of this increase, $10.2
million of the growth resulted from a 53.5% increase in software license fee
revenue, $2.0 million from a 21.6% increase in services revenue and $1.6 million
from a 19.0% increase in maintenance fee revenue.
Total revenues for the first half of fiscal 1997 increased 35.1% or $25.6
million over the comparable period in fiscal 1996. Of this increase, $18.2
million of the growth resulted from a 50.3% increase in software license fee
revenue, $5.2 million from a 29.4% increase in services revenue and $3.1 million
from a 18.7% increase in maintenance fee revenue.
The growth in software license fee revenue is the result of increased demand for
the Company's BASE24 products and continued growth of the installed base of
customers paying monthly license fee (MLF) revenue. Contributing to the strong
demand for the Company's products is the continued world-wide growth of
electronic payment transaction volume and the growing complexity of electronic
payment systems. MLF revenue was $7.5 million in the second quarter of fiscal
1997 compared to $5.0 million in the second quarter of fiscal 1996. MLF revenue
was $14.3 million in the first half of fiscal 1997 compared to $9.5 million in
the first half of fiscal 1996.
The growth in services revenue for the second quarter and first half of fiscal
1997 is the result of increased demand for technical and project management
services which is a direct result of the increased installed base of the
Company's BASE24 products.
The increase in maintenance fee revenue for the second quarter and first half of
fiscal 1997 is a result of the continued growth of the installed base of the
Company's BASE24 products.
Expenses
Total operating expenses for the second quarter of fiscal 1997 increased 29.4%
or $9.7 million over the comparable period in fiscal 1996. Total operating
expenses for the first half of fiscal 1997 increased 30.0% or $19.2 million over
the comparable period in fiscal 1996. The primary reason for the overall
increase in operating expenses is the increase in staff required to support the
increased demand for the Company's products and services. Total staff (including
both employees and independent contractors) increased from 1,120 at March 31,
1996 to 1,452 at March 31, 1997.
The Company's operating margin for the second quarter of fiscal 1997 was 16.6%
as compared to 12.5% for the comparable period in fiscal 1996. Operating margin
for the first half of fiscal 1997 was 15.5% as compared to 12.2% for the first
half of fiscal 1996. These improvements are primarily due to the impact of the
growth in the Company's recurring revenues (MLF's, maintenance and facilities
management fees) and the conclusion in December 1996 of the software
amortization associated with the acquisition of Applied Communications, Inc.
(ACI) and Applied Communications Inc. Limited (ACIL) in December 1993.
The Company's gross margin (total revenues minus cost of software and cost of
maintenance and services) for the second quarter of fiscal 1997 was 64.3% as
compared to 59.9% for the comparable period in fiscal 1996. The gross margin for
the first half of fiscal 1997 was 62.6% as compared to 61.0% for the first half
of fiscal 1996. The improvements are partly due to the conclusion of the
software amortization associated with the acquisitions of ACI and ACIL.
EBITDA
The Company's earnings before interest expense, income taxes, depreciation and
amortization (EBITDA) increased from $7.1 million in the second quarter of
fiscal 1996 to $10.7 million for the second quarter of fiscal 1997. EBITDA was
$20.4 million for the first half of fiscal 1997 as compared to $13.6 million for
the first half of fiscal 1996. The increase in EBITDA can be attributed to the
continued growth in both recurring and non-recurring revenues more than
offsetting the growth in operating expenses. EBITDA is not intended to represent
cash flows for the periods.
Results of Operations (continued)
Income Taxes
The effective tax rate for the second quarter of fiscal 1997 was 41.6% as
compared to 40.9% for the second quarter of fiscal 1996. The effective tax rate
for the first half of fiscal 1997 was 43.1% as compared to 39.5% for the first
half of fiscal 1996. The increase in the effective tax rate is principally the
result of deferred tax assets which were recognized in the first half of fiscal
1996 which reduced the effective tax rate for that period with no corresponding
recognition of deferred tax assets in the first half of fiscal 1997.
As of March 31, 1997, the Company has deferred tax assets of $9.6 million and
deferred tax liabilities of $0.6 million. Each quarter, the Company evaluates
its historical operating results as well as its projections for the next 24
months to determine the realizability of the deferred tax assets. This analysis
indicated that $1.7 million of the deferred tax assets were more likely than not
to be realized. Accordingly, the Company has recorded a valuation allowance of
$7.9 million as of March 31, 1997.
Backlog
As of March 31, 1997 and 1996, the Company had non-recurring revenue backlog of
$24.4 million and $21.3 million in software license fees, respectively, and
$15.6 million and $10.9 million in services, respectively. The Company includes
in its non-recurring revenue backlog all fees specified in contracts which have
been executed by the Company to the extent that the Company contemplates
recognition of the related revenue within one year. There can be no assurance
that the contracts included in non-recurring revenue backlog will actually
generate the specified revenues or that the actual revenues will be generated
within the one year period.
As of March 31, 1997 and 1996, the Company had recurring revenue backlog of
$78.8 million and $57.7 million, respectively. The Company defines recurring
revenue backlog to be all monthly license fees, maintenance fees and facilities
management fees specified in contracts which have been executed by the Company
and its customers to the extent that the Company contemplates recognition of the
related revenue within one year. There can be no assurance, however, that
contracts included in recurring revenue backlog will actually generate the
specified revenues.
Liquidity and Capital Resources
As of March 31, 1997, the Company had working capital of $53.2 million which
includes cash and cash equivalents of $38.2 million. The Company has a $10
million bank line of credit of which there are no borrowings outstanding. The
bank line of credit expires in June 1997.
During the six months ended March 31, 1997, the Company's cash flow from
operations amounted to $11.1 million and cash used in investing activities
amounted to $6.8 million. Of the $6.8 million of cash used in investing
activities, $3.1 million consisted of advances to Insession ($1.0 million) and
USPI ($2.1 million) under promissory notes. USPI repaid advances of $3.6 million
during the second quarter of fiscal 1997.
In the normal course of business, the Company evaluates potential acquisitions
of complementary businesses, products or technologies. In October 1996, the
Company acquired 100% of OSSI in exchange for 209,993 shares of the Company's
Class A Common Stock. In May 1997, the Company anticipates finalizing the
acquisition of Regency Voice Systems, Inc. and related entities (See Footnote 6
to the Condensed Consolidated Financial Statements).
Management believes that the Company's working capital, cash flow generated from
operations and borrowing capacity are sufficient to meet the Company's working
capital requirements for the foreseeable future.
TRANSACTION SYSTEMS ARCHITECTS, INC.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Registrant's annual meeting of shareholders was held on February
25, 1997. Each matter voted upon at such meeting and the number of
shares cast for, against or withheld, and abstained are as follows:
1. Election of Directors
For Withheld
William E. Fisher 20,555,191 49,571
David C. Russell 20,532,402 72,360
Promod Haque 20,559,180 45,582
Frederick L. Bryant 20,559,180 45,582
Charles E. Noell, III 20,559,180 45,582
Jim D. Kever 20,557,624 47,138
Larry G. Fendley 20,558,124 46,638
2. Approval of 1997 Management Stock Option Plan
For: 20,080,885 Against:397,000 Abstain:46,527 Broker Non-vote:80,350
3. Ratification of Appointment of Arthur Andersen LLP as Independent
Auditors for 1997
For: 20,570,725 Against: 23,253 Abstain: 10,784 Broker Non-vote: 0
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.24 Transaction Systems Architects, Inc. 1997
Management Stock Option Plan
27.00 Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 12, 1997
TRANSACTION SYSTEMS ARCHITECTS, INC
(Registrant)
/s/Dwight G. Hanson
------------------------------------
Dwight G. Hanson
Controller
(Principal Accounting Officer)
TRANSACTION SYSTEMS ARCHITECTS, INC.
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- ------------
10.24 Transaction Systems Architects, Inc. 1997 Management
Stock Option Plan
27.00 Financial Data Schedule
TRANSACTION SYSTEMS ARCHITECTS, INC.
1997 Management Stock Option Plan
Section 1. Purpose. The purpose of the Transaction Systems
Architects, Inc. 1997 Management Stock Option Plan (the "Plan") is to provide
long term incentives and rewards to Management of Transaction Systems
Architects, Inc. (the "Company") and its Subsidiaries, by providing an
opportunity to selected Management Employees to purchase Common Stock of the
Company. By encouraging stock ownership, the Company seeks to attract and
retain Management Employees and to encourage their best efforts to work at the
success of the Company.
Section 2. Definitions. For purposes of this Plan, the following
terms used herein shall have the following meanings, unless a different
meaning is clearly required by the context.
2.1. "Board of Directors" shall mean the Board of Directors of
the Company.
2.2. "Code" shall mean the United States Internal Revenue Code of
1986, as amended.
2.3. "Committee" shall mean the committee of the Board of
Directors referred to in Section 5 hereof.
2.4. "Common Stock" shall mean the Class A Common Stock of the
Company.
2.5. "Management Employee" shall mean any person in Management,
who, at the time an Option is granted to such person hereunder, is actively
and customarily employed for 30 hours or more per week by the Company or any
Subsidiary of the Company including, without limitation, employee-officers.
2.6. "Fair Market Value" shall mean the closing bid price on the
date in question, as such price is reported by the National Association of
Securities Dealers on the NASDAQ National Market or any successor system for a
share of Common Stock.
2.7. "Option" shall mean an option granted to a Participant
pursuant to the Plan which is intended to be, and qualifies as, a
"non-qualified stock option" as described in Treasury Regulation Section
1.83-7 and which shall not constitute nor be treated as an "incentive stock
option" as defined in Section 422A(b) of the Code.
2.8. "Participant" shall mean any Management Employee to whom an
Option is granted under this Plan.
2.9. "Subsidiary of the Company" shall have the meaning set forth
in Section 424(f) of the Code.
Section 3. Eligibility. Options may be granted to any Management
Employee. The Committee shall have the sole authority to select the
Management Employees to whom Options are to be granted hereunder, and to
determine whether a Management Employee is to be granted an Option. No
Management Employee shall have any right to participate in the Plan.
Section 4. Common Stock Subject to the Plan.
4.1. The total number of shares of Common Stock for which Options
may be granted under this Plan shall not exceed in the aggregate one-million
fifty-thousand (1,050,000) shares of Common Stock.
4.2. The shares of Common Stock that may be subject to Options
granted under this Plan may be either authorized and unissued shares or shares
reacquired at any time and now or hereafter held as treasury stock as the
Committee may determine. In the event that any outstanding Option expires or
is terminated for any reason, the shares allocable to the unexercised portion
of such Option may again be subject to an Option granted under this Plan. If
any shares of Common Stock acquired pursuant to the exercise of an Option
shall have been repurchased by the Company, then such shares shall again
become available for issuance pursuant to the Plan.
Section 5. Administration of the Plan.
5.1 The Plan shall be administered by the Compensation Committee
of the Board of Directors, or such other committee of the Board as may be
directed by the Board (the "Committee") consisting of no less than two
persons. All members of the committee shall be "disinterested persons" within
the meaning of Rule 16b-3 under the Securities Exchange Act of 1934. The
Committee shall be appointed from time to time by, and shall serve at the
pleasure of, the Board of Directors.
5.2. The Committee shall have the sole authority and discretion
to grant Options under this Plan and, subject to the limitations set forth in
Section 6 hereof, to determine the terms and conditions of all Options,
including, without limitation, (i) selecting the Participants who are to be
granted Options hereunder; (ii) establishing the number of shares of Common
Stock that may be issued under each Option; (iii) determining the time and the
conditions subject to which Options may be exercised in whole or in part; (iv)
determining the form of the consideration that may be used to purchase shares
of Common Stock upon exercise of any Option (including the circumstances under
which the Company's issued and outstanding shares of Common Stock may be used
by a Participant to exercise an Option); (v) imposing restrictions and/or
conditions with respect to shares of Common Stock acquired upon exercise of an
Option; (vi) determining the circumstances under which shares of Common Stock
acquired upon exercise of any Option may be subject to repurchase by the
Company; (vii) determining the circumstances and conditions subject to which
shares acquired upon exercise of an Option may be sold or otherwise
transferred, including without limitation, the circumstances and conditions
subject to which a proposed sale of shares of Common Stock acquired upon
exercise of an Option may be subject to the Company's right of first refusal
(as well as the terms and conditions of any such right of first refusal);
(viii) establishing a vesting provision for any Option relating to the time
(or the circumstance) when the Option may be exercised by a Participant,
including vesting provisions which may be contingent upon the Company meeting
specified financial goals; (ix) requiring as a minimum vesting that no Option
may be exercised during the first year from the date it is granted, that after
one year from the date an Option is granted, it may be exercised as to not
more than 25 percent of the shares optioned, and after the expiration of the
second, third and fourth years from the date the Option is granted, it may be
exercised as to no more than an additional 25 percent of such shares plus any
shares as to which the Option might theretofore have been exercised but shall
not have been exercised; (x) accelerating the time when outstanding Options
may be exercised; (xi) determining the circumstances under which the purchase
price of the Options may be refunded to the Participant in event of death,
disability, or involuntary termination; and (xii) establishing any other
terms, restrictions and/or conditions applicable to any Option not
inconsistent with the provisions of this Plan.
5.3. The Committee shall be authorized to interpret the Plan and
may, from time to time, adopt such rules and regulations, not inconsistent
with the provisions of the Plan, as it may deem advisable to carry out the
purpose of this Plan.
5.4. The interpretation and construction by the Committee of any
provision of the Plan, any Option granted hereunder or any agreement
evidencing any such Option shall be final and conclusive upon all parties.
5.5 Only members of the Committee shall vote on any matter
affecting the administration of the Plan or the granting of Options under the
Plan.
5.6. All expenses and liabilities incurred by the Committee in
the administration of the Plan shall be borne by the Company. The Committee
may employ attorneys, consultants, accountants or other persons in connection
with the administration of the Plan. The Company, and its officers and
directors, shall be entitled to rely upon the advice, opinions or valuations
of any such persons. No member of the Board of Directors (or the Committee)
shall be liable for any action, determination or interpretation taken or made
in good faith with respect to the Plan or any Option granted hereunder.
Section 6. Terms and Conditions of Options.
6.1. The terms and conditions of each Option granted under the
Plan shall be specified by the Committee, in its sole discretion, and shall be
set forth in a written option agreement between the Company and the
Participant in such form as the Committee shall approve. The terms and
conditions of each Option will be such that each Option issued hereunder shall
not constitute nor be treated as an "incentive stock option" as defined in
Section 422A of the Code and will be a "non-qualified stock option" for United
States Federal income tax purposes. The terms and conditions of any Option
granted hereunder need not be identical to those of any other Option granted
hereunder.
The terms and conditions of each Option agreement shall include the
following:
(a) The Option exercise price shall be fixed by the
Committee and will either be equal to or more than 100% of the Fair
Market Value of the shares of Common Stock subject to the Option on
the date such Option is granted. For any Options granted to a
Participant prior to approval of this Plan by the Company's
Stockholders, the Option exercise price will be equal to the Fair
Market Value on the day of Stockholder approval of this Plan.
(b) The Option purchase price which a Participant will
be required to pay to the Company for such Option will be U.S. $3.00
per share and the option purchase price will be payable by the
Participant to the Company within fourteen (14) days after the grant
of such Option. For any Options granted to a Participant prior to
approval of this Plan by the Company's Stockholders, the Option
purchase price will be payable by the Participant to the Company
within fourteen (14) days after the day of Stockholder approval of
this Plan.
(c) The Option vesting period shall be at a minimum a
total of four years from the date of grant of such Options. After
one year from the date an Option is granted, it may be exercised as
to not more than 25 percent of the shares optioned, and after the
expiration of the second, third, and fourth years from the date the
Option is granted, it may be exercised as to no more than an
additional 25 percent of such shares optioned plus any shares as to
which the Option might theretofore have been exercised but shall not
have been exercised.
(d) The Committee shall fix the exercise term of all
Options granted pursuant to the Plan provided, however, that while a
Participant is employed by the Company such term shall in no event
be less than five years from the date on which such Option is granted.
(e) Options shall not be transferable otherwise than by
will or the laws of descent and distribution, and during a
Participant's lifetime an Option shall be exercisable only by the
Participant.
(f) In the event that the Company is required to
withhold any U.S. Federal, state, local or foreign taxes in respect
of any compensation income realized by the Participant in respect of
an Option granted hereunder or in respect of any shares of Common
Stock acquired upon exercise of an Option, the Company shall deduct
from any payments of any kind otherwise due to such Participant the
aggregate amount of such Federal, state, local or foreign taxes
required to be so withheld or, if such payments are insufficient to
satisfy such Federal, state, local or foreign taxes, or if no such
payments are due or to become due to such Participant, then, such
Participant will be required to pay to the Company, or make other
arrangements satisfactory to the Company regarding payment to the
Company of, the aggregate amount of any such taxes. All matters with
respect to the total amount of taxes to be withheld in respect of any
such compensation income shall be determined by the Committee in its
sole discretion.
(g) In the sole discretion of the Committee the terms
and conditions of any Option may (but need not) include any of the
following provisions:
(i) In the event a Participant shall
cease to be a Management Employee of the Company or
Subsidiary of the Company for any reason other than as a
result of his death or "disability" (within the meaning of
Section 22(e)(3) of the Code), the vested and unexercised
portion of any Option held by such Participant at that time
may only be exercised within one month after the date on
which the Participant ceased to be so employed, and only to
the extent that the Participant could have otherwise
exercised such Option as of the date on which he ceased to
be so employed.
(ii) In the event a Participant shall
cease to be a Management Employee of the Company or
Subsidiary of the Company by reason of his "disability"
(within the meaning of Section 22(e)(3) of the Code), the
vested and unexercised portion of any Option held by such
Participant at that time may only be exercised within one
year after the date on which the Participant ceased to be so
employed, and only to the extent that the Participant could
have otherwise exercised such Option if it had been
completely exercisable.
(iii) In the event a Participant shall
die while employed by the Company or Subsidiary of the
Company, the vested and unexercised portion of any Option
held by such Participant at the time of their death may
only be exercised within one year after the date of such
Participant's death, and only to the extent that the
Participant could have otherwise exercised such Option if
it had been completely exercisable. In such event, such
Option may be exercised by the executor or administrator of
the Participant's estate or by any person or persons who
shall have acquired the Option directly from the Participant
by bequest or inheritance.
Section 7. Adjustments.
7.1 In the event that after the adoption of the Plan by the
Board of Directors, the outstanding shares of the Company's Common Stock shall
be increased or decreased or changed into or exchanged for a different number
or kind of shares of stock or other securities of the Company or of another
corporation through reorganization, merger or consolidation, recapitalization,
reclassification, stock split, split-up, combination or exchange of shares or
declaration of any dividends payable in Common Stock, the Board of Directors
shall appropriately adjust (i) the number of shares of Common Stock (and the
option price per share) subject to the unexercised portion of any outstanding
Option (to the nearest possible full share), and (ii) the number of shares of
Common Stock for which Options may be granted under this Plan, as set forth in
Section 4.1 hereof, and such adjustments shall be effective and binding for
all purposes of this Plan.
7.2 Notwithstanding the foregoing, in the event of (i) any offer
to holders of the Company's Common Stock generally relating to the acquisition
of their shares, including, without limitation, through purchase, merger or
otherwise or (ii) any transaction generally relating to the acquisition of
substantially all of the assets or business of the Company, the Committee may
make such adjustment as it deems equitable in respect of outstanding Options
including, without limitation, the revision or cancellation of any outstanding
Options including providing for full vesting for all outstanding options. Any
such determination by the Committee shall be effective and binding for all
purposes of this Plan.
Section 8. Effect of the Plan on Employment Relationship. Neither
this Plan nor any Option granted hereunder to a Participant shall be construed
as conferring upon such Participant any right to continue in the employ of the
Company or the service of the Company or any Subsidiary of the Company as the
case may be, or limit in any respect the right of the Company or any
Subsidiary of the Company to terminate such Participant's employment or other
relationship with the Company or any Subsidiary of the Company, as the case
may be, at any time.
Section 9. Amendment of the Plan. The Board of Directors may amend
the Plan from time to time as it deems desirable; provided, however, that,
without the approval of the holders of a majority of the outstanding stock of
the Company present or represented and entitled to vote thereon at a meeting,
the Board of Directors may not amend the Plan (i) to increase materially the
benefits accruing to participants under the Plan, (ii) to increase materially
(except for increases due to adjustments in accordance with Section 7 hereof)
the aggregate number of shares of Common Stock for which Options may be
granted hereunder or (iii) to modify materially the requirements as to
eligibility for participation in the Plan.
Section 10. Termination of the Plan. The Board of Directors may
terminate the Plan at any time. Unless the Plan shall theretofore have been
terminated by the Board of Directors, the Plan shall terminate ten years after
the date of its initial approval by the stockholders of the Company. No
Option may be granted hereunder after termination of the Plan. The
termination or amendment of the Plan shall not alter or impair any rights or
obligations under any Option theretofore granted under the Plan.
Section 11. Effective Date of the Plan. This Plan shall be effective
as of January 1, 1997.
5
1000
6-MOS
SEP-30-1997
OCT-01-1996
MAR-31-1996
38,153
0
60,892
0
0
102,350
27,515
13,488
140,626
49,110
0
0
0
131
89,625
140,626
98,783
98,783
36,903
83,463
(371)
0
82
15,609
6,723
8,886
0
0
0
8,886
.33
.33
