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The aggregate market value of voting stock held by non-affiliates of the Registrant was approximately $115,582,409 as of the last business day of the most recently completed second fiscal quarter (June 30, 2005), based upon the closing price on the NASDAQ National Market reported for such date. Shares of Common Stock held by each executive officer and director and by each person who beneficially held more than 5% of the outstanding Common Stock and was deemed to be an affiliate have been excluded. This determination of executive officer or affiliate status is not necessarily a conclusive determination for other purposes.

The information required by Part III of this Report, to the extent not set forth herein, is incorporated herein by reference from the Registrant’s definitive proxy statement relating to the annual meeting of shareholders to be held on May 15, 2006, which definitive proxy statement the Company intends to file with the Securities and Exchange Commission (the “SEC”) within 120 days after the end of the fiscal year to which this Report relates.

This Annual Report on Form 10-K and the documents incorporated herein by reference contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact made in this Annual Report on Form 10-K are forward-looking including but not limited to, statements regarding industry prospects; future results of operations or position; Corillian’s expectations and beliefs regarding future revenue growth; the future capabilities and functionality of Corillian’s products and services; Corillian’s strategies and intentions regarding acquisitions and their integration; the outcome of any litigation to which Corillian is a party; Corillian’s accounting and tax policies; Corillian’s future strategies regarding investments, product offerings, research and development, market share, and strategic relationships and collaboration; Corillian’s dividend policies; Corillian’s future capital requirements; and Corillian’s intentions and expectations regarding credit facilities. These statements relate to future events or Corillian’s future financial performance. In some cases, you can identify forward-looking statements by terminology including “intend,” “could,” “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “future,” or “continue,” the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially from those expressed or implied in such forward-looking statements. In evaluating these statements, you should specifically consider various factors, including the risks described in greater detail in Part 1, Item 1A,“Risk Factors,” Corillian’s registration statements and reports filed with the Securities and Exchange Commission, and contained in Corillian’s press releases from time to time.

Corillian is a leading provider of solutions that enable banks, credit unions, brokers and other financial service providers to rapidly deploy Internet-based financial services. Corillian’s solutions allow consumers to conduct financial transactions, view personal and market financial information, pay bills and access other financial services on the Internet. Corillian provides a set of applications for Internet banking, online fraud prevention, electronic bill presentment and payment, targeted marketing, data aggregation, alerts and online customer relationship management. Corillian’s solutions integrate into existing database applications and systems and enable its customers to monitor transactions across all systems in real time. Corillian’s solutions are also designed to support multiple lines of business, including small business banking, corporate banking and credit card management, and to scale to support millions of users. Current Corillian customers include J.P. Morgan Chase, The Huntington National Bank, Capital One, Wachovia Bank and SunTrust Bank.

You can access information about Corillian on our website on the Investor Relations page. The address is www.corillian.com/investors/. The contents of this website are not intended to be incorporated by reference into this report or any other report we file with the SEC. We make available, free of charge, copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these and other reports filed or furnished by us pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act) as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the SEC. To request a copy, send a written

The Internet has become an integral part of the daily lives of millions of consumers because of the functionality and convenience it offers. In addition to more traditional uses such as email, the Internet is being increasingly used to conduct financial transactions and deliver financial services. Internet users are increasingly demanding more Internet-based financial services, such as the ability to move money into various accounts and to various companies and individuals, to see all of their accounts with a financial institution in one place, and to purchase new products online. The benefits that consumers derive from Internet-based financial services include:

The growth in Internet usage and the popularity of personal finance content have changed the competitive landscape of the financial service industry by requiring financial institutions to compete based on the features they offer in the Internet channel as well as other delivery channels while focusing on lowering the expenses of their technology infrastructure. Within this environment, Corillian believes many financial institutions are recognizing they will require more cost-effective Internet-based financial solutions with greater functionality to help them differentiate their service and product offerings and expand their market share. In addition, financial institutions will need these solutions to easily integrate with disparate systems and applications and provide technological efficiencies and time-to-market advantages.

Significant challenges are involved in deploying Internet finance solutions. Most notably, multiple diverse computing environments, including existing systems, packaged applications, Internet application servers and other emerging technologies, must be integrated and must be able to communicate with each other to provide customers with real-time data and to allow them to conduct financial transactions. In addition, external systems, such as those of credit card companies and bill payment providers, must be integrated with internal systems in a secure and reliable manner. These technical challenges are magnified by the speed with which these services must be brought to market. Most financial institutions do not have the technical skills or resources to rapidly design and deploy these services. In addition, although some financial institutions have the technical skills and resources to develop and deploy Internet finance solutions, they are subject to significant time-to-market competitive pressures. For most of these financial service providers, internally developing and deploying Internet finance solutions can be expensive, take years to complete and require significant ongoing expenses. As a result, many of these financial service providers are realizing that if they want to deploy an Internet-based financial product or service and integrate disparate applications more quickly and efficiently, they need a comprehensive, outsourced packaged software and service solution.

Corillian is a leading provider of solutions that enable financial service providers to deploy Internet-based financial services and to integrate disparate applications across their multiple delivery channels and lines of business. Corillian’s solutions include comprehensive suites of software that may be combined with its professional services to form a complete outsourced solution for offering Internet-based financial services or combined with the personnel of the financial institution to accelerate the deployment of online services and reduce the risks and lower the costs for the financial institution.

Voyager integrates with Corillian’s customers’ existing databases and systems and enables them to monitor transactions across all systems in real time. Corillian has developed software applications for Internet banking, electronic bill presentment and payment, online money movement, identity management, alerts, targeted marketing, data aggregation and online customer relationship management. Corillian can provide its customers with wireless delivery capabilities for all of these applications.

Highly Scalable and Extensible Platform. Corillian’s software platform has been designed to be highly scalable to meet the evolving needs of its customers. Independent laboratory test results indicate that Corillian Voyager can support Internet banking programs for more than ten million users. In addition, Corillian Voyager has been designed using universal standards, including eXtensible Markup Language for communication and Open Financial Exchange for financial transactions. This architecture enables Corillian’s customers to deploy new Internet-based financial services by adding applications to Corillian’s platform at any time and by integrating future applications with any Internet connected point-of-presence.

Flexibility and Control. Corillian offers its customers the ability to take total control of the development and management of Corillian Voyager or to rely on Corillian for these services. Customers can use their own internal personnel for implementation, a combination of Corillian personnel and internal personnel, just Corillian personnel or third parties. In addition, customers have the option of hosting the Corillian Voyager platform on their own premises or having the solutions hosted in our managed facility. Corillian’s customers may request that Corillian host their solution because they lack sufficient resources or the appropriate systems to host the solution on their premises. In addition, Corillian’s customers can reduce their information technology costs by outsourcing application hosting services with Corillian. Corillian offers customers the opportunity to transfer operation of their solution to their own premises at any time. This flexibility provides Corillian’s customers with the option to gain operational control of a deployment over time as their needs and desires change.

Advanced Technology and Continued Innovation. Corillian believes its solutions provide a comprehensive solution with a broad range of applications across multiple lines of business that can be delivered on the desktop or by wireless access. Corillian offers certified Internet financial applications using the Open Financial Exchange data standard, and Corillian has helped to define industry standards through organizations like the Web Services Interoperability Organization.

Reduced Cost of Internet Operations. Corillian’s products lower the costs associated with its customers’ Internet banking operations primarily by reducing the cost of internal development and hardware requirements. Corillian’s software solutions provide all of the functionality for Internet-based financial services in a single comprehensive package. This eliminates the cost of purchasing, integrating and installing separate solution components from multiple vendors.

Increase Market Share. To date, Corillian has focused its sales and marketing efforts to target the largest financial service providers. Corillian intends to continue targeting large, industry-leading financial service providers by increasing its sales and marketing efforts. Corillian has also successfully developed other markets, including small to mid-size financial institutions, and Corillian intends to continue its efforts towards expanding its penetration of these markets.

Expand Breadth of Product and Service Offerings. Corillian’s current financial applications include features for Internet banking, electronic bill presentment and payment, online money movement, identity management, interfacing with personal finance managers through the Open Financial Exchange data standard, consumer banking, small business banking, corporate banking, credit and management, alerts and data aggregation. Corillian recently expanded its product offerings to include cash management and fraud detection, and Corillian intends to expand its product offerings to include new applications, particularly in the area of identity management and fraud prevention.

Leverage and Expand Strategic Relationships. Corillian intends to leverage its relationships with leading systems integrators and value-added resellers to extend its reach and provide our customers with more comprehensive, customized solutions. Corillian intends to continue to expand and build additional relationships with value-added resellers. In addition, Corillian believes that forging relationships with key technology vendors is critical to delivering a comprehensive solution to financial service providers. Corillian’s strategic partners include Microsoft, NCR Corporation and Matrix, one of the leading systems integration firms in Israel. Corillian intends to develop additional relationships to expand the scope of its functionality, and for co-marketing and distribution purposes.

Collaborate with Technology Leaders. Corillian’s products and services adhere to existing industry standards and have been designed to meet the openness and scalability required of Internet solutions. Corillian will continue to collaborate with companies to develop new technologies and to encourage the adoption and implementation of universal standards that can foster and simplify the exchange of financial information through the Internet. Corillian intends to continue investing in research and development to meet the needs of its customers as they evolve their Internet offerings.

Corillian’s solutions enable financial institutions, Internet portals and other Internet financial service providers to offer their customers a variety of financial services over the Internet, including Internet banking, electronic bill presentment and payment, web content management and data aggregation. Corillian also offers a variety of services to support its customers throughout the process of implementing and maintaining Corillian’s solutions. License and professional services accounted for 67% of consolidated revenues in 2005, 70% in 2004 and 76% in 2003. Post-contractual support accounted for 26% of consolidated revenues in 2005, 22% in 2004 and 19% in 2003.

Corillian Voyager is a highly secure and reliable software platform upon which Corillian has built a menu of applications to support multiple lines of business within banking. Corillian Voyager has been designed to be highly scalable to meet the evolving needs of Corillian’s customers. Corillian currently supports more than 15 million users on a single instance of Corillian Voyager for its largest customer and can support even larger volumes. In addition, Corillian Voyager has been designed using universal standards, including eXtensible Markup Language for communication and Open Financial Exchange for financial transactions. This architecture enables Corillian’s customers to deploy new Internet-based financial services by adding applications to Corillian’s platform at any time and by integrating future applications to any Internet connected point-of-presence.

Consumer Banking. Corillian Consumer Banking enables financial institutions to offer their retail customers secure, real-time access to transactional banking services through the Internet. These services can be delivered to the desktop or accessed by wireless devices. Internet users can receive their consolidated account information and transaction history and conduct financial transactions, such as transfers and loan payments, over the Internet 24 hours a day, seven days a week. The financial institutions can choose standard browser-based user interfaces or more customized Internet templates and online screens.

Small Business Banking. Corillian Small Business Banking enables financial institutions to offer their small business customers secure, real-time access to account details and money movement functions through an Internet browser or accounting packages such as QuickBooks. Businesses can control access to business banking features, accounts and transaction levels to provide financial and audit controls for their staff, and can reconcile accounts instantly.

Corporate Banking. Corillian Corporate Banking provides financial institutions a way to deliver a complete set of online money movement services to corporations. Corillian Corporate Banking integrates seamlessly and in real-time with financial institution back-office systems. As a result, corporations can make treasury management decisions based on reliable, up-to-date information, and act on them instantly. Corporate banking customers can transfer funds, view and create information reports, receive alerts on account activity, view positive pay exceptions, access lockbox accounts, manage cash concentration and delegate authority to conduct transactions and view information across complex organizations.

Credit Card Management. Corillian Credit Card Management enables financial institutions to offer their credit card customers secure, real-time access to transactional credit card services through the Internet. These services can be delivered to the desktop or accessed by wireless devices. Credit card users can receive consolidated account information and transaction history, view statements, pay bills and conduct other financial transactions over the Internet 24 hours a day, seven days a week. The financial institutions can choose standard browser-based user interfaces or more customized Internet templates and online screens.

Wealth Management. Corillian Wealth Management provides access to investment accounts within and across financial institutions, and enables planning and financial management based on that information. Wealth Management customers can view their accounts, initiate trades, conduct research, set up watch lists, make payments, and view stock tickers, market data and electronic trade confirmations. Further, Corillian Wealth Management enables advisors, or other authorized representatives, to perform transactions on behalf of their customers.

Corillian Payments. Corillian Payments enables financial service providers to offer their customers electronic bill payment services and to deliver bills to customers through a standard Internet page, through supported personal finance management software, such as Quicken or Microsoft Money, or as a digital image of a scanned paper bill. A financial service provider can choose to deliver its own bills, the bills of direct billing businesses, or the bills of third-party bill presentment providers, such as CheckFree, Princeton eCom or Metavante. By consolidating all bill presentment and payment options, Corillian Payments enables Internet users to pay bills in the same program where they do most of their financial transactions. This application also enables financial institutions to extend their product and service features for their customers and to present bills on behalf of their business customers.

Corillian Alerts. Corillian Alerts enables financial institutions to provide their customers with alerts on various types of activities. Balance alerts allow customers to define account balance thresholds (both high and low) that, if exceeded, will send an alert. Customers can also define notification rules based on transaction type, statement availability, and receipt of a secure message. Enhanced alerting and delivery options allow customers to receive notification for extended transaction types, such as bill payment, Positive Pay, ACH, Wire, and transactions awaiting approval via wireless devices, fax, messenger, and via text-to-speech, with user specified priorities.

Corillian OFX. Corillian OFX enables financial institutions to offer their customers the ability to integrate their financial information with personal financial management software, such as Quicken, QuickBooks and Microsoft Money, or Internet portals such as Yahoo! Finance and MSN MoneyCentral. Each Corillian solution was designed using the Open Financial Exchange data standard. This data specifica-

ACH and Wire Transfers. ACH and wire transfers allow corporate customers to move funds between accounts at any financial institution, collect receivables from customers, or electronically pay suppliers, employees, and others. Receivers and templates improve the ease and efficiency of executing transfers. Customers can also make electronic state and federal tax payments using convenient templates that are kept up-to-date automatically.

Enterprise Entitlements. Corillian Enterprise Access Management provides financial institutions and their customers robust organizational modeling, user management, business rules, approval workflow, audit logging and on-behalf-of capabilities, in a simple, yet extremely powerful, authorization system. Corillian Enterprise Access Management is accessible via Web services for financial institutions seeking a way to centrally manage user access across the enterprise.

Corillian MultiPoint Integrator. Corillian MultiPoint Integrator is an integration platform combined with a suite of applications designed to simplify and enhance integration between multiple applications and legacy systems for financial institutions, service providers, and data processors. Corillian MultiPoint Integrator allows over 300 clients to quickly integrate legacy systems with Web and database applications. The systems process online, real-time transactions through the communications hub of Corillian MultiPoint Integrator for home banking, loan origination, kiosks, teller platforms, call center systems, or electronic funds transfer networks,.

Implementation Services. Corillian’s implementation services begin during the pre-sales process. Corillian’s implementation experts perform an analysis of a potential customer’s product requirements and determine how these products can best be integrated with the customer’s existing host infrastructure. Corillian then develops a site survey and a project plan recommendation. Once Corillian is chosen to install its

applications, Corillian’s professional service team works with the customer to ensure that every solution is integrated with the customer’s existing financial transaction system for delivery over the Internet. If necessary, Corillian writes custom interfaces to handle transaction requests, validate those requests and convert them to a standard format for Internet-based presentation or to the Open Financial Exchange format for delivery to personalized financial management software. Corillian also customizes its Internet templates to provide its customers with a user interface that complements its brand recognition, design elements, color schemes and corporate logos. The implementation process is generally completed in 60 to 270 days, depending on the complexity of the project. The fees for Corillian’s implementation services vary from project to project, depending on the size of the customer and the products and services selected by the customer.

Hosting Services. Corillian offers hosting services to its customers that prefer to have Corillian handle all of their Internet-based financial systems. Under this service option, the customer’s Corillian Voyager servers reside at Corillian’s managed facility, and Corillian’s staff monitors and maintains the servers. Corillian’s services include weekly log auditing, installation and configuration of servers, and staff to help its customers manage system performance and daily operations. Corillian charges a monthly hosting fee that varies based on the needs of the customer, the scope of its online services and the solutions deployed.

Consulting Services. By consulting with Corillian’s staff, Corillian’s customers can select and design an electronic commerce strategy. In addition to consulting with Corillian’s customers on the range of products and services available to them, Corillian helps its customers with product and Internet site design. For customers that lack in-house network security professionals, Corillian helps develop the appropriate network and security protection features to ensure a secure system.

Support Services. Corillian offers several levels of technical and maintenance support for its customers. These levels are designed to meet Corillian’s customers’ needs and those of their customers. Corillian’s support fees vary based on which level of support the customer selects. In addition to technical support, Corillian provides annual maintenance support for each customer. These maintenance services entitle the customer to updates and modifications of Corillian’s solutions.

Directory Management Services. Corillian Directory Management Services enable a financial institution to manage and consolidate the detailed information about billers needed to effectively match and route payments to multiple remittance processors. Directory management tools can be licensed to automate and analyze the directory content allowing the financial institution to obtain the highest possible electronic payment rate. Alternatively, Corillian offers a subscription-based service that forwards a daily update to the financial institution’s biller directory that includes biller adds, changes and deletions from all remittance providers. The service also includes a monthly analysis of paper payments that can route electronically with recommended payee changes, enabling the financial institution to proactively manage its bill payments, continually optimize payment routing and improve electronic payment rates.

Corillian targets large financial institutions, financial portals and other financial service providers that are seeking scalable, reliable and advanced solutions that enable them to offer Internet-based financial services. Corillian has provided its solutions primarily to two major industry groups — large financial institutions (primarily banks) and large credit unions. In 2005, Wachovia Bank represented 10% of Corillian’s consolidated revenues.

The three layers of the Corillian Voyager architecture each have a specific functional focus. The Web Server layer is responsible for presentation interaction with the customer, handling hyper-text mark-up language to the browser or the Open Financial Exchange data standard to the connected financial software or wireless device. The Transaction Processor layer controls the business logic for the user’s request, directs the request to the appropriate host target, and assembles the results. The Host Server layer interprets and formats the transaction for the existing host system, then analyzes and returns the data fields from the response. Optional applications provide incremental services, such as batch processing of bill payment transactions or collection of electronic bills.

Founded in 1999, CashEdge^® provides infrastructure that global financial institutions rely on to extend their online channels and enhance customer profitability. CashEdge delivers secure Online Money Movement and Advanced Account Aggregation platforms that power specialized retail banking and advisor applications. They have flexible deployment models that provide for a customized, rapid implementation of both hosted and onsite solutions. Corillian resells CashEdge solutions as part of an integrated account aggregation and online money movement solution to financial institutions.

CheckFree designs, develops and markets services that enable consumers to make electronic payments and collections, automate paper-based recurring financial transactions and conduct secure transactions on the Internet. CheckFree is Corillian’s primary partner for remittance processing and was a developer with Intuit and Microsoft of the Open Financial Exchange data standard. Corillian has developed a number of Voyager interfaces to CheckFree systems and resells a bill payment service provided by CheckFree called CheckFree Web.

Microsoft is the publisher of the Windows 2000 Server network, the Microsoft Money personal financial management program and Microsoft’s new Money Explorer and MSN Money Professional products and services, and the provider of the MoneyCentral financial portal. In 2001, Corillian and Microsoft signed a multi-year alliance agreement to deliver a joint enterprise eFinance solution to financial institutions worldwide. The agreement spans technology development, marketing, sales and support of solutions based on the Corillian Voyager platform, Microsoft Windows 2000 and 2003 Server network operating systems, and .NET, Microsoft’s platform for XML web services.

In February 2001, Corillian entered into an agreement with NCR Corporation that provides for NCR’s use of the Corillian Voyager platform as its core consumer banking component for mid- to large-sized financial institutions. NCR is a leader in providing Relationship Technology^tm solutions to customers worldwide in the retail, financial, communications, manufacturing, travel and transportation, and insurance markets. NCR customizes the Corillian Voyager software to allow financial institutions greater flexibility in delivering Internet financial services to their customers. NCR’s Internet banking service is run in a managed server model from its secure and high availability data centers in Columbia, Maryland and Dallas, Texas.

In November 2003, Corillian and NCR extended their distribution agreement to provide NCR the right to license the Corillian Voyager platform as a part of a shared-server Internet banking solution to service small-sized financial institutions. Under the terms of the agreement, NCR will market the Voyager-enabled solution to its existing shared-server customer base, as well as new prospects in the United States. The shared-server solution will be hosted by NCR from its secure and high availability data center in Columbia, Maryland.

Since 1984, Princeton eCom has continuously delivered Integrated Payment Solutions, driving growth in the electronic bill payment industry. It offers an end-to-end, hosted solution in Electronic Bill Presentment and Payment (EBPP) and bill pay for online banking and financial services. Currently, over 1,400 financial institutions and 130 billers use Princeton eCom’s hosted solution for bill presentment and electronic payment. Corillian securely integrates with the Princeton eCom bill payment and bill presentment-processing engine, providing Corillian financial services customers a complete Electronic Bill Payment and Presentment solution.

Founded in January 2000, Quova, Inc. is the leading provider of geolocation services to online businesses, including five of the world’s six largest global Internet companies. Quova’s patented technology provides the geographic location of website visitors in real time, enabling businesses to detect fraud, manage digital rights, target content, conduct site analysis and ensure regulatory compliance. Corillian embeds Quova’s technology into its Corillian Fraud Detection System and Intelligent Authentication^(TM) products to help financial institutions proactively detect and prevent online fraud.

In July 2000, Corillian entered into an agreement with Yodlee to develop and market a product that integrates the Corillian Voyager platform with Yodlee’s data aggregation service. Under the terms of the agreement, Corillian and Yodlee will jointly market and sell a new, integrated banking and aggregation solution to global financial institutions. The bundled offering utilizes our expertise with the OFX data standard and Yodlee’s industry-leading data aggregation platform. The service can either be deployed on a hosted basis by Yodlee or through the Corillian Voyager platform.

Corillian sells its software and services primarily through its direct sales organization. As of December 31, 2005, Corillian’s sales force consisted of 29 personnel, including one salesperson operating internationally. Corillian’s direct sales efforts have historically been focused on domestic financial service providers, such as banks and credit unions. Corillian complements its direct sales efforts through joint sales and marketing arrangements with Internet-based technology vendors, such as NCR.

Corillian’s sales process features a multi-tiered approach that requires the involvement of its field sales personnel, its technical professionals and members of Corillian’s senior management. Corillian’s sales process simultaneously targets senior business executives, personnel responsible for Internet-based initiatives and systems engineers. Corillian employs this multi-leveled approach to accelerate the purchasing cycle.

The market for providing solutions to the Internet financial services industry is highly competitive, and Corillian expects that competition will intensify in the future. Corillian competes with a variety of companies in various segments of the Internet-based financial services industry, and Corillian’s competitors vary in size and in the scope and breadth of the products and services they offer. In the area of Internet consumer banking, Corillian primarily competes with other companies that provide outsourced Internet finance solutions to large financial institutions, including S1 and Financial Fusion. Within this market segment, Corillian also competes with companies that offer software platforms designed for internal development of Internet-based financial services software, such as IBM’s WebSphere, and the internal information technology personnel of financial institutions that want to develop their own solutions. In addition, vendors such as Digital Insight, FundsXpress, Fidelity National Information Services and Online Resources and Communications, who primarily target community financial institutions, occasionally compete with Corillian for large financial institutions and compete with Corillian regularly for smaller financial institutions. Several of the vendors offering data processing services to financial institutions, including Fiserv, Jack Henry and Metavante, offer their own Internet banking solutions. Local competition for Internet consumer banking services is provided by many smaller Internet service outsourcing companies located throughout the United States. Corillian’s primary competition for providing the business banking services that financial institutions offer their commercial customers are vendors of cash management systems for large corporations such as FundTech, Digital Insight and Politzer & Haney.

In the market for consumer online banking solutions, Corillian estimates that it routinely competes with six competitors. In terms of providing consumer online banking solutions to the leading financial institutions in the United States and supporting the most consumers performing online banking transactions, Corillian is the leading provider of consumer online banking solutions. In the market for business online banking solutions, Corillian estimates that it routinely competes with seven competitors. Corillian recently entered the market for business online banking solutions and is building its position in this market.

Although Corillian believes its success is more dependent upon its technical expertise than its proprietary rights, Corillian’s future success and ability to compete is dependent in part upon its proprietary technology. Corillian has received trademark registrations for the name Corillian and its logo. None of Corillian’s technology is patented, but we have established an internal patent team of engineers and in-house counsel to monitor and evaluate as part of the new product development cycle Corillian’s technologies and business methods for patentability. Corillian has several patent applications pending in the United States Patent and Trademark Office.

Corillian relies on a combination of contractual rights and copyright, trademark and trade secret laws to establish and protect its proprietary technology. Corillian requires all of its employees to sign an assignment of patents and inventions agreement and generally enter into confidentiality agreements with Corillian’s employees, consultants, resellers, customers and potential customers. Corillian also limits access to and distribution of its source code, and further limits the disclosure and use of other proprietary information. Corillian cannot assure that the steps taken in this regard will be adequate to prevent misappropriation of its technology or that its competitors will not independently develop technologies that are substantially equivalent or superior to Corillian’s technology. Corillian also cannot assure that Corillian will not infringe upon the intellectual property rights of third parties.

Despite Corillian’s efforts to protect its proprietary rights, unauthorized parties may attempt to copy or otherwise obtain or use Corillian’s products or technology. In addition, the laws of some foreign countries do not protect Corillian’s proprietary rights to the same extent as do the laws of the United States. The costs of defending Corillian’s proprietary rights or claims that Corillian infringes on third-party proprietary rights may be high.

Numerous federal agencies have recently adopted rules and regulations protecting consumer privacy and establishing guidelines for financial institutions to follow in selecting technology vendors for solutions such as Corillian’s solutions. Corillian believes its business does not currently subject Corillian to any of these rules or regulations that would adversely affect its business. However, these rules and regulations are new and may be interpreted to apply to Corillian’s business in a manner that could make its business more onerous or costly.

If enacted or deemed applicable to Corillian, some laws, rules or regulations applicable to financial service activities could render Corillian’s business or operations more costly and less viable. The financial services industry is subject to extensive and complex federal and state regulation, and financial institutions operate under high levels of governmental supervision. Corillian’s customers must ensure their services and related products work within the extensive and evolving regulatory requirements applicable to them. Corillian may become subject to direct regulation as the market for its business evolves. Federal, state or foreign authorities could adopt laws, rules or regulations affecting Corillian’s business operations, such as requiring Corillian to comply with data, record keeping and other processing requirements. Any of these laws, rules or regulations, or new laws, rules and regulations affecting Corillian or Corillian’s customers, could lead to increased operating costs and could also reduce the convenience and functionality of Corillian’s services, possibly resulting in reduced market acceptance.

A number of proposals at the federal, state and local level and by the governments of significant foreign countries would, if enacted, expand the scope of regulation of Internet-based financial services and could impose taxes on the sale of goods and services and other Internet activities. Any development that substantially impairs the growth of the Internet or its acceptance as a medium for transaction processing could have a material adverse effect on Corillian’s business, financial condition and operating results.

As of December 31, 2005, Corillian had a backlog of unfilled orders of $43.0 million, as compared to a backlog of $32.4 million as of December 31, 2004. Corillian expects $26.0 million of its backlog as of December 31, 2005 will be filled during fiscal year 2006. Backlog represents contractual customer commitments, including fees for licenses, professional services, maintenance, hosting and subscriptions. Backlog is not necessarily indicative of revenues to be recognized in a specified future period. There are many factors that would impact Corillian’s filling of backlog, such as Corillian’s progress in completing projects for its customers and Corillian’s customers’ meeting anticipated schedules for customer-dependent deliverables. Corillian provides no assurances that any portion of its backlog will be filled during any fiscal year or at all or that its backlog will be recognized as revenues in any given period.

Certain risk factors may affect our business, financial condition, results of operation and cash flows, or may cause our actual results to vary from the forward-looking statements contained in this Annual Report on Form 10-K. You should carefully consider the following factors regarding information included in this Annual Report. The risks and uncertainties described below are not the only ones Corillian faces. Additional risks and uncertainties not presently known to Corillian or that Corillian currently deems immaterial also may impair its business operations. If any of the following risks actually occur, Corillian’s business, financial condition and operating results could be materially adversely affected.

Until fiscal year 2003, Corillian incurred substantial net losses in every quarter since it began operations. Corillian generated net income of approximately $2.7 million, $10.5 million and $5.1 million during the years ended December 31, 2005, 2004 and 2003, respectively; however Corillian incurred minor net losses in the third and fourth quarters of fiscal 2005. As of December 31, 2005, Corillian had an accumulated deficit of approximately $94.8 million. If Corillian does not sign contracts with new customers or provide additional software and services to existing customers, it will incur significant operating losses in future years. Corillian may decide that it is necessary to further reduce its personnel or other expenses to maintain its operations, and such reductions may reduce Corillian’s ability to sell its products and services.

Corillian’s quarterly operating results have varied in the past, and it expects they will continue to vary from quarter to quarter in the future. In future quarters, Corillian’s operating results may be below the expectations of public market analysts and investors, which could cause the price of its common stock to decline. Corillian may also announce that expected financial or operating results for a particular period will be less than it anticipated, which could cause the price of Corillian’s common stock to decline. In addition,

Corillian has difficulty predicting the volume and timing of orders and recognizes a substantial portion of its revenues on a percentage-of-completion basis. Any delays in closing orders or implementation of products or services can cause Corillian’s operating results to fall substantially short of anticipated levels for any quarter. As a result of these and other factors, Corillian believes period-to-period comparisons of its historical results of operations are not necessarily meaningful and are not a good predictor of its future performance.

Corillian derives a significant portion of its revenues from a limited number of customers in each period. Accordingly, if Corillian fails to close a sale with a major potential customer, if a contract is delayed or deferred, or if an existing contract expires or is cancelled and Corillian fails to replace the contract with new business, its revenues would be adversely affected. During the year ended December 31, 2005, one customer individually accounted for 10% of consolidated revenues. During the year ended December 31, 2004, two customers individually accounted for more than 10% of consolidated revenues, and, in total, these two customers accounted for approximately 29% of consolidated revenues. During the year ended December 31, 2003, two customers individually accounted for more than 10% of consolidated revenues, and, in total, these two customers accounted for approximately 28% of consolidated revenues. Corillian expects that a limited number of customers will continue to account for a substantial portion of its revenues in each quarter in the foreseeable future. If a customer terminates a Voyager contract with Corillian early, Corillian would lose ongoing revenue streams from annual maintenance fees, hosting fees, professional service fees and potential additional license and service fees for additional increments of end users and for other Voyager applications.

Corillian’s solutions are complex and must integrate with complex data processing systems. Implementing Corillian’s solutions is a lengthy process, generally taking between 60 and 270 days to complete. In addition, Corillian generally recognizes revenues on a percentage-of-completion basis, so its revenues are often dependent on its ability to complete implementations within the time periods that Corillian establishes for its projects. Corillian relies on a combination of internal and outsourced teams for its implementations. If these teams encounter significant delays in implementing Corillian’s solutions for a customer or fail to implement its solutions effectively or at all, Corillian may not be able to recognize any revenues from the contract or be required to recognize negative revenues from the contract if its revised project estimates indicate that Corillian recognized excess revenues in prior periods. In addition, Corillian may incur monetary damages or penalties if it is not successful in completing projects on schedule.

From time to time, Corillian agrees to penalty provisions in its contracts that require Corillian to make payments to its customers if Corillian fails to meet specified milestones or that permit its customers to terminate their contracts with Corillian if Corillian fails to meet specified milestones. If Corillian fails to perform in accordance with established project schedules, Corillian may be forced to make substantial payments as penalties or refunds and may lose its contractual relationship with the applicable customers.

Under generally accepted accounting principles, Corillian reviews its amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be tested for impairment at least annually. Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill or amortizable intangible assets may not be recoverable include a decline in stock price and market capitalization, future cash flows, and slower growth rates in our industry. Corillian may be required to record a significant charge to earnings in its financial statements during the period in which any impairment of its goodwill or amortizable intangible assets is determined resulting in an impact on its results of operations.

The sale and implementation of Corillian’s products and services are often subject to delays because of its customers’ internal budgets and procedures for approving large capital expenditures and deploying new technologies within their networks. As a result, the time between the date of initial contact with a potential customer and the execution of a contract with the customer typically ranges from three to nine months. In addition, Corillian’s prospective customers’ decision-making processes require Corillian to provide a significant amount of information to them regarding the use and benefits of its products. Corillian may expend substantial funds and management resources during a sales cycle and fail to make the sale.

Almost all of Corillian’s revenue is currently derived from one-time license fees and related annual maintenance fees, hosting fees, and professional service fees. Corillian also derives a small percentage of its revenue from licensing its products and services on a subscription basis. In contrast to one-time license fees, Corillian must recognize fees for subscription licenses over the length of the subscription period. Corillian intends to increase its focus on subscription-based licenses in the future, which may have an adverse effect on revenue in the near term.

To date, Corillian has derived substantially all of its revenues from licenses and professional and support services related to the Corillian Voyager product and its related applications. Corillian expects to add new products by acquisition, partnering or internal development and to develop enhancements to its existing products. New or enhanced products may not be released on schedule and may not achieve market acceptance. New products or upgrades to existing products may contain defects when released, which could damage Corillian’s relationship with its customers or partners and further limit market acceptance of its products and services. If Corillian is unable to ship or implement new or enhanced products and services when planned, or fail to achieve timely market acceptance of its new or enhanced products and services, Corillian may lose sales and fail to achieve anticipated revenues.

Corillian has considered and made strategic acquisitions in the past and in the future may acquire or make investments in complementary companies, products or technologies. In 2005, Corillian acquired InteliData Technologies Corporation and qbt Systems Inc. Corillian may not be able to successfully integrate these companies, products or technologies. Specifically, InteliData Technologies has reported internal control deficiencies without a clear plan to correct those deficiencies, and qbt has not been subject to the internal control standards of a public company. The failure to successfully integrate InteliData and qbt and implement appropriate internal controls and procedures could have a material adverse effect on the results of operations and financial condition of the combined companies. Furthermore, in connection with acquisitions or investments, Corillian could:

Corillian resells products and services from other companies, such as CheckFree, CashEdge, CenterPost and InfoImage. If these vendors are unable to fulfill their contractual obligations as a result of insolvency, a disaster or similar event or are unable to provide the services in a commercially reasonable manner, Corillian may be required to incur additional expenses to provide the services to its customers or to pay penalties to its customers for the suspension or termination of the services.

Corillian’s primary communications and network equipment related to its operations are currently located in Hillsboro, Oregon. Corillian does not currently have an alternate facility that can serve as a center of business operations. Corillian cannot assure that its data center and facility will operate after a disaster. In addition, Corillian may experience problems during the period following a disaster in reestablishing its systems and infrastructure. Although Corillian has a disaster recovery plan in place, Corillian does not currently have the technology or facilities to instantly recover full Internet services if its facility is not functioning. A disaster, such as a fire, an earthquake, a terrorist attack or a flood, at its facility could result in failures or interruptions in providing Corillian’s products and services to its customers. In addition, Corillian’s systems are vulnerable to operational failures, losses in power, telecommunications failure and similar events. Corillian has contracted to provide a certain level of service to its customers and, consequently, a failure or interruption of Corillian’s systems in the future could cause it to refund fees to some of its customers to compensate for decreased levels of service.

The market for Internet-based financial services is intensely competitive and rapidly changing. Corillian expects competition to persist and intensify, which could result in price reductions, reduced gross margins and loss of market share for its products and services. Corillian competes with a number of companies in various segments of the Internet-based financial services industry, and its competitors vary in size and in the scope and breadth of the products and services they offer. Corillian’s primary competitors for software platforms designed to enable financial institutions to offer Internet-based financial services, both domestically and internationally, include S1, Digital Insight, Financial Fusion, Online Resources and Communications and Metavante. Corillian also competes with companies that offer software platforms designed for internal development of Internet-based financial services software, such as IBM’s WebSphere. Within this segment of Corillian’s industry, many companies are consolidating, creating larger competitors with greater resources and a broader range of products.

Corillian also competes with businesses delivering financial services through Internet portals, banks marketing their own Internet-based financial services, and non-bank financial service providers, such as brokerages and insurance companies, seeking to expand the breadth of their Internet product and services offerings. In addition, Corillian’s customers may develop competing products. For example, a customer may choose to develop its own software platform for Internet-based financial services. Several of the vendors offering data processing services to financial institutions, including EDS, Fiserv, Jack Henry and Metavante, also offer Internet banking solutions that compete with Corillian’s solutions.

As a result of the mergers and acquisitions occurring in the banking industry today, some of Corillian’s existing customers could terminate their contracts with Corillian and potential customers could break off negotiations with Corillian. An existing or potential customer may be acquired by or merged with another financial institution that uses competing Internet-based financial products and services or does not desire to continue the relationship with Corillian for some other reason, which could result in the new entity terminating the relationship with Corillian.

In addition, an existing or potential customer may be acquired by or merged with one of Corillian’s existing customers that licenses Corillian’s products under a contract with more favorable terms and that can be applied to the acquired customer’s business operations. This may result in a reduction in Corillian’s anticipated revenues from the acquired customer. In 2004, two of Corillian’s largest customers, J.P. Morgan Chase and Bank One, merged, and one of Corillian’s customers, Charter One Bank, was acquired by Citizens Bank.

Corillian’s success depends largely on the continued contributions of its key management, technical, sales and marketing and professional services personnel, many of whom would be difficult to replace. If one or more of its key employees were to resign, the loss of personnel could result in loss of sales, delays in new product development and diversion of management resources. Corillian does not have employment agreements with its senior managers or other key personnel.

To increase its revenues, Corillian pursued direct international sales opportunities and opened an international office. However, international demand for its products and services did not grow significantly during 2001 or 2002, so Corillian significantly reduced its direct investments internationally and is seeking instead to expand international sales through resellers and selective direct sales efforts. International expansion of its business may be more difficult or take longer than Corillian anticipates, and it may not be able to successfully market, sell, deliver and support its products internationally. Corillian will need to form additional relationships with partners worldwide. These activities require significant investments of time and capital from Corillian. If Corillian is unable to develop international sales on a timely basis or at all, it may not achieve

Corillian has in the past been, and may in the future be, sued for allegedly infringing or misappropriating a third-party’s intellectual property rights. Any intellectual property infringement claims against Corillian, with or without merit, could be costly and time-consuming to defend, divert Corillian’s management’s attention, or cause product delays. Corillian expects that software product developers and providers of Internet-based financial services will increasingly be subject to infringement claims as the number of products and competitors in its industry grows and the functionality of products overlaps. If Corillian’s products were found to infringe a third party’s proprietary rights, Corillian could be required to enter into royalty or licensing agreements in order to be able to sell its products. Royalty and licensing agreements, if required, may not be available on terms acceptable to Corillian or at all.

Corillian has in the past and might in the future experience security incidents involving actual or attempted access to its customers’ systems by unknown third parties. As a result of these types of incidents, Corillian may incur contractual or other legal liabilities. Security risks may also deter financial service providers from purchasing Corillian’s products and deter consumers of financial services from using Corillian’s products or services. Corillian relies on standard Internet security systems, all of which are licensed from third parties, to provide the security and authentication necessary to effect secure transmission of data over the Internet. Corillian’s networks may be vulnerable to unauthorized access, computer viruses and other disruptive problems. In addition, advances in computer capabilities, new discoveries in the field of cryptography or other events or developments may render Corillian’s Internet security measures inadequate.

Someone who is able to circumvent security measures could misappropriate proprietary information or cause interruptions in Corillian’s Internet operations. Corillian may need to expend significant capital or other resources protecting against the threat of security breaches or alleviating problems caused by breaches. Eliminating computer viruses and alleviating other security problems may result in interruptions, delays or cessation of service to users accessing Internet sites that deliver Corillian’s services, any of which could harm Corillian’s business.

Advances in Internet technology or in applications software directed at financial services could lead to new competitive products that have better performance or lower prices than Corillian’s products and could render its products obsolete and unmarketable. Corillian’s Voyager solutions were designed to run on servers using the Windows NT, Windows 2000 and Windows 2003 operating systems. If a new software language or operating system becomes standard or is widely adopted in Corillian’s industry, Corillian may need to rewrite portions of its products in another computer language or for another operating system to remain competitive.

Complex software products like Corillian’s may contain undetected errors or defects that may be detected at any point in the life of the product. Corillian has in the past discovered software errors in its products. After implementation, errors may be found from time to time in Corillian’s new products or services, its enhanced products or services, or products or services Corillian resells for strategic partners, such as Yodlee’s data aggregation service. These errors could cause Corillian to lose revenues or cause a delay in market acceptance of its solutions or could result in liability for damages, injury to Corillian’s reputation or increased warranty costs.

Corillian’s products are often used in transaction processing systems that include other vendors’ products, and, as a result, Corillian’s products must integrate successfully with these existing systems. System errors, whether caused by Corillian’s products or those of another vendor, could adversely affect the market acceptance of its products, and any necessary modifications could cause Corillian to incur significant expenses.

Since Corillian’s products are used to deliver services that are integral to its customers’ businesses, errors, defects or other performance problems could result in financial or other damages to Corillian’s customers. Product liability litigation arising from these errors, defects or problems, even if it were unsuccessful, would be time consuming and costly to defend. Existing or future laws or unfavorable judicial decisions could negate any limitation of liability provisions that are included in Corillian’s license agreements.

Corillian’s future success and ability to compete depends in part upon its proprietary technology, but its protective measures may prove inadequate. Corillian relies on a combination of copyright, trademark, patent and trade secret laws and contractual provisions to establish and protect its proprietary rights. None of Corillian’s technology is patented. Corillian has obtained federal trademark registration for some of its marks and its logo. Corillian has applied for, but has not yet obtained, patents on technology it has developed. If Corillian does not receive approval for these patents, it may be unable to use this technology without restriction or prevent others from using this technology.

competitive to Corillian’s. Corillian’s competitors may independently develop similar technology, duplicate its products or design around Corillian’s intellectual property rights. In addition, the laws of some foreign countries do not protect Corillian’s proprietary rights to as great an extent as do the laws of the United States, and Corillian expects the use of its products will become more difficult to monitor if Corillian increases its international presence.

Corillian may have to litigate to enforce its intellectual property rights, to protect its trade secrets or know-how or to determine their scope, validity or enforceability. Enforcing or defending Corillian’s intellectual property rights is expensive, could cause the diversion of Corillian’s resources and may not prove successful. If Corillian is unable to protect its intellectual property, it may lose a valuable competitive advantage.

Numerous federal agencies have recently adopted rules and regulations protecting consumer privacy and establishing guidelines for financial institutions to follow in selecting technology vendors for solutions such as Corillian’s solutions. Corillian believes its business does not currently subject it to any of these rules or regulations that would adversely affect Corillian’s business. However, these rules and regulations are new and may be interpreted to apply to Corillian’s business in a manner that could make its business more onerous or costly.

If enacted or deemed applicable to Corillian, some laws, rules or regulations applicable to financial service activities could render Corillian’s business or operations more costly and less viable. The financial services industry is subject to extensive and complex federal and state regulation, and financial institutions operate under high levels of governmental supervision. Corillian’s customers must ensure its services and related products work within the extensive and evolving regulatory requirements applicable to them. Corillian may become subject to direct regulation as the market for our business evolves. Federal, state or foreign authorities could adopt laws, rules or regulations affecting Corillian’s business operations, such as requiring Corillian to comply with data, record keeping and other processing requirements. Any of these laws, rules or regulations, or new laws, rules and regulations affecting Corillian’s customers’ businesses, could lead to increased operating costs and could also reduce the convenience and functionality of Corillian’s services, possibly resulting in reduced market acceptance.

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), Share-Based Payment (Statement No. 123(R)) as a revision of Statement No. 123, Accounting for Stock-Based Compensation. Statement No. 123(R) supersedes Accounting Principles Board Opinion (APBO) No. 25, Accounting for Stock issued to Employees, and amends Statement No. 95, Statement of Cash Flows. Statement No. 123(R) requires companies to measure the cost for all employee awards of equity instruments based on the fair value of the award on the grant date and the estimated probability of the award actually vesting. This cost is then recognized over the period during

which an employee is required to provide service in exchange for the award or over the period in which performance based measures are achieved. Pro forma disclosure of the effects of equity based awards is not an alternative once the new standard is adopted. Compliance with Statement No. 123(R) may significantly increase the Company’s expenses for stock-based compensation and therefore could limit the Company’s ability to award employees with equity instruments. If one or more of its key employees were to resign as a result of this, the loss of personnel could result in loss of sales, delays in new product development and diversion of management resources.

Corillian’s corporate headquarters are located in Hillsboro, Oregon. Corillian originally leased approximately 122,000 square feet at its World Campus, and the lease for this space expired in October 2007. In August 2004, Corillian amended the lease on its World Campus. The amendment reduced the space leased effective January 1, 2005 to approximately 100,000 square feet. The amendment also extended the lease through September 2010.

On August 18, 2005, Corillian acquired InteliData Technologies Corporation (InteliData). As part of the acquisition, Corillian assumed all lease obligations from InteliData. Corillian assumed a lease of 33,000 square feet for operations in Reston, Virginia; this lease expires in December 2006 and Corillian intends to renew this lease upon its expiration. Corillian subleases 17,000 square feet at the Reston, Virginia location to a third party. Corillian also assumed a lease of 8,800 square feet for product development and operation facilities in Toledo, Ohio; this lease expires in April 2006 and Corillian intends to renew this lease upon its expiration. Corillian also assumed a lease of 9,200 square feet for its product development and customer service in Omaha, Nebraska; this lease expires in March 2006 and Corillian intends to renew this lease upon its expiration.

On August 8, 2005, Corillian acquired qbt Systems, Inc. (qbt). As part of the acquisition, Corillian assumed all lease obligations from qbt. Corillian assumed a sublease of 5,000 square feet from a third party for operations in New York, New York; this lease expires in September 2007 and Corillian intends to renew this lease upon its expiration. Corillian also assumed a lease of 1,000 square feet for operations in Overland Park, Kansas; this lease expires in July 2006 and Corillian intends to renew this lease upon its expiration.

The following selected financial data and other operating information are derived from Corillian’s audited consolidated financial statements. The tables shown below represent portions of Corillian’s consolidated financial statements and are not complete. This selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Corillian’s audited consolidated financial statements and related notes included elsewhere in this report. Historical results are not necessarily indicative of the results of operations in future periods.

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors, including the risks described in greater detail in Part 1, Item 1A, “Risk Factors,” and elsewhere in this Form 10-K. See Part I, Item 1, “Business — Special Note Regarding Forward Looking Statements.”

Corillian is a leading provider of solutions that enable banks, credit unions, brokers and other financial service providers to rapidly deploy Internet-based financial services. Corillian’s solutions allow consumers to conduct financial transactions, view personal and market financial information, pay bills and access other financial services on the Internet. Corillian provides a set of applications for Internet banking, online fraud prevention, electronic bill presentment and payment, targeted marketing, data aggregation, alerts and online customer relationship management. Corillian’s solutions integrate into existing database applications and systems and enable its customers to monitor transactions across all systems in real time. Corillian’s solutions are also designed to support multiple lines of business, including small business banking and credit card management, and to scale to support millions of users. Current Corillian customers include J.P. Morgan Chase, Wachovia Bank, The Huntington National Bank, Capital One and SunTrust Bank.

Substantially all of Corillian’s revenues are derived from licensing Corillian’s software and performing professional services for its customers, both through direct sales channels and indirect sales partners. These professional services include implementation of software solutions, custom software engineering, consulting, maintenance, training and hosting. In most cases, Corillian recognizes revenues for licenses, implementation, training and custom engineering services using the percentage-of-completion method. Revenues relating to maintenance and hosting services are recognized ratably over the term of the associated maintenance or hosting contract. Revenues derived from consulting services are recognized as the services are performed and revenues from transactional services are recognized as transactions are processed. Corillian generally licenses Corillian applications on an end-user basis, with its initial license fee based on a fixed number of end users. As a customer increases its installed base of end users beyond the initial fixed number of end users, Corillian’s software license requires the customer to pay Corillian an additional license fee to cover additional increments of end users. Revenues from additional seat sales are generally recognized in the period in which the licenses are sold.

The market for new sales of Internet banking solutions was largely challenging in 2004 and 2005 due to various factors, including reluctance on the part of some banks to upgrade their Internet banking platforms or improve their Internet banking websites. New sales of Internet banking solutions improved toward the end of 2005, as Corillian ended the year with a revenue backlog of $43.0 million, the highest in Corillian history. Much of the increase in sales to new customers was attributable to increased sales of Corillian’s new Consumer Banking Application to smaller financial institutions, as well as increased sales of subscription and long-term service contracts. Moving forward, Corillian will continue to focus on developing additional applications to complement its market position within Internet banking and selling products and services to new and existing customers.

On August 8, 2005, Corillian completed its acquisition of qbt Systems, Inc., a leading provider of integration solutions to electronic funds transfer networks and core data processors. qbt’s MultiPoint product is a powerful integration platform that allows financial institutions to integrate all of their delivery channel and account processing systems in one seamless network environment. The acquisition was an investment aimed at expanding Corillian’s product offering and customer base and will allow for a more seamless, real-time integration to the many different systems used in the industry today. These factors, among others, support the

premium paid over the fair market value of individual assets. The total purchase price including merger related transaction costs was $5.4 million. The cost of the acquisition was allocated on the basis of the estimated fair value of assets and liabilities assumed. The purchase accounting allocations resulted in $919,000 net liabilities assumed, goodwill of $5.0 million and intangibles of $1.3 million. Intangibles are being amortized to cost of revenues and sales and marketing over their estimated lives of 1 to 4 years. At the acquisition date, qbt did not have any in-process research and development as qbt was in between major product development cycles. Accordingly, Corillian did not recognize any expense for in-process research and development in its results of operations for the year ended December 31, 2005.

On August 18, 2005, Corillian completed its acquisition of InteliData Technologies Corporation, a leading provider of electronic bill payment and presentment and online banking solutions to the financial services industry. InteliData’s products provide financial institutions with the real-time financial processing infrastructure needed to provide its customers with payment and presentment services and online banking via the Internet and other delivery channels. InteliData’s customers included banks, credit unions, brokerage firms, financial institution processors and credit card issuers. The acquisition was an investment aimed at expanding Corillian’s product offering, customer base and revenue growth. These factors, among others, support the premium paid over the fair market value of individual assets. The total purchase price including merger related transaction costs was $21.2 million. The cost of the acquisition was allocated on the basis of the estimated fair value of assets and liabilities assumed. The purchase accounting allocations resulted in net liabilities assumed of $3.9 million, goodwill of $21.9 million and intangibles of $3.2 million. Intangibles are being amortized to cost of revenues and sales and marketing over their estimated lives of 3 to 6 years. At the acquisition date, InteliData did not have any in-process research and development as InteliData was in between major product development cycles. Accordingly, Corillian did not recognize any expense for in-process research and development in its results of operations for year ended December 31, 2005.

Since incorporation, Corillian has incurred substantial costs to develop and market its technology and to provide professional services. As a result, Corillian has an accumulated deficit of approximately $94.8 million as of December 31, 2005. Corillian has had three consecutive fiscal years, 2003 through 2005, of profitability. However, Corillian did incur minor losses in the third and fourth quarters of 2005 and its operating history makes it difficult to forecast future operating results. As a result of the rapid evolution of Corillian’s business and limited operating history, Corillian believes period-to-period comparisons of its results of operations, including its revenues and cost of revenues and operating expenses as a percentage of revenues are not necessarily indicative of its future performance. In addition, the provisions of the Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (Statement No. 123(R)), which Corillian will adopt in the first quarter of 2006 and requires companies to recognize stock-based compensation expense associated with stock options based on the fair value method, will have a material negative impact on Corillian’s Consolidated Statements of Operations and could result in future operating losses. See Note 2 to the consolidated financial statements for further discussion.

On December 22, 2005, Corillian’s Board of Directors approved the acceleration of vesting of those employee stock options with an exercise price equal to or greater than $5.00. The closing price of Corillian’s common stock as quoted on December 22, 2005 was $2.80 per share. The acceleration applied to all options outstanding as of December 30, 2005 under Corillian’s 2000 Stock Incentive Compensation Plan and 2003 Nonqualified Stock Incentive Compensation Plan. Options to purchase 354,218 shares of Corillian’s common stock, or approximately 0.8% of Corillian’s total outstanding options, with a weighted average exercise price of $5.74 and varying remaining vesting schedules, became immediately vested and exercisable on December 30, 2005. Of these 354,218 options, 200,000 options are held by one Corillian executive officer. No options held by Corillian’s directors were impacted by the acceleration of vesting. Because the affected options had exercise prices significantly in excess of the current price per share of Corillian’s common stock, the options have little or no incentive value. The vesting of these options was accelerated to avoid the recognition of expense with respect to these options under Statement No. 123(R), which Corillian has adopted effective January 1, 2006. Included in the pro forma stock-based compensation expense for 2005 in Note 2 is $1.2 million associated

Management’s discussion and analysis of financial condition and results of operations is based upon Corillian’s audited consolidated financial statements. The preparation of consolidated financial statements in accordance with U.S. generally accepted accounting principles requires Corillian to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Corillian bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates related to software revenue recognition, accrual for contracts in a loss position, valuation of long-lived assets, including intangible assets, which include goodwill and the valuation allowance for deferred tax assets require higher degrees of judgment than others in their application. Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition. Corillian recognizes revenues from software licensing agreements in accordance with the provisions of Statement of Position (SOP) No. 97-2, Software Revenue Recognition, as amended by SOP No. 98-9, Modification of SOP No. 97-2, Software Revenue Recognition, with Respect to Certain Transactions. Corillian’s software arrangements generally include software licenses, implementation and custom software engineering services, post-contractual customer support, training services and may also include hosting services. Corillian’s software licenses are, in general, functionally dependent on implementation, training and certain custom software engineering services; therefore, software licenses and implementation and training services, together with custom software engineering services that are essential to the functionality of the software, are combined and recognized using the percentage-of-completion method of contract accounting in accordance with SOP No. 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts. Corillian has determined that post-contractual customer support and hosting services can be separated from software licenses, implementation, training and custom software engineering services because (a) post-contractual customer support and hosting services are not essential to the functionality of any other element in the arrangement, and (b) sufficient vendor-specific objective evidence exists to permit the allocation of revenue to these service elements. The hosting element can be accounted for separately from the license element, as the customer can take possession of the software without significant penalty, in accordance with Emerging Issues Task Force (EITF) 00-3, Application of AICPA Statement of Position 97-2 to Arrangements that Include the Right to Use Software Stored on Another Entity’s Hardware.

The percentage-of-completion is measured by the percentage of contract hours incurred to date compared to the estimated total contract hours for each contract. Corillian has the ability to make reasonably dependable estimates relating to the extent of progress towards completion, contract revenues and contract costs. Any estimation process, including that used in preparing contract accounting models, involves inherent risk. Profit estimates are subject to revision as the contract progresses towards completion. Revisions in profit estimates are charged to income in the period that the facts giving rise to the revision become known. Corillian reduces the inherent risk relating to revenue and cost estimates in percentage-of-completion models through various approval and monitoring processes and policies. Risks relating to service delivery, usage, productivity and other factors are considered in the estimation process. Cumulative revenues recognized may be less or greater than cumulative billings at any point in time during a contract’s term. The resulting difference is recognized as deferred revenue or revenue in excess of billings, respectively. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.

Vendor-specific objective evidence has been established on post-contractual customer support and hosting services using the renewal rate. Corillian allocates revenue to certain elements in multiple element arrangements using the residual method. The difference between the total software arrangement fee and the amount deferred for post-contractual customer support and hosting services is allocated to software license, implementation, training and custom software engineering services and recognized using contract accounting.

Revenues for post-contractual customer support are recognized ratably over the term of the support services period, generally a period of one year. Services provided to customers under customer support and maintenance agreements generally include technical support and unspecified product upgrades deliverable on a when and if available basis. Revenues from hosting services for transactions processed by Corillian are recognized ratably over the hosting term.

Pursuant to SOP No. 81-1, on projects where reasonable estimates cannot be made due to inherent hazards, but where there is an assurance no loss will be incurred, Corillian limits revenue recognition in the period to the amount of project costs incurred in the same period, and postpones recognition of profits until results can be estimated more precisely. Under this “zero profit” methodology, equal amounts of revenues and costs, measured on the basis of performance during the period, are presented in Corillian’s consolidated statements of operations.

Corillian generally licenses Corillian Voyager on an end-user basis, with its initial license fee based on a fixed number of end users. As a customer increases its installed base of end users beyond the initial fixed number of end users, Corillian’s software license agreements require customers to pay Corillian an additional license fee to cover additional increments of end users. Revenues from additional license seat sales, less any amounts related to maintenance included in the arrangement, are generally recognized in the period in which the licenses are sold.

In arrangements where Corillian does not have an obligation to install its products, but may become involved in the installation of these products, Corillian recognizes non-refundable license fees over the estimated implementation period for the customer or reseller’s project. If Corillian determines that the customer or reseller can successfully install Corillian’s products in a production environment without Corillian’s involvement, Corillian will recognize non-refundable license fees in the period in which delivery occurs, assuming all other SOP No. 97-2 revenue recognition criteria are met.

In certain arrangements, Corillian may defer all revenues and related costs of revenues until delivery is complete and customer acceptance is obtained. These arrangements have certain elements of risk such as an obligation to deliver new products when technological feasibility has not been obtained at the onset of the arrangement or an obligation to deliver software customized to a customer specifications. In arrangements where Corillian is providing customized functionality on a best efforts basis, Corillian generally recognizes revenues as services are performed. Revenue from transactional services are recognized as transactions are processed.

Where Corillian’s customers enter into arrangements to purchase Corillian’s software and services on a subscription basis, Corillian recognizes revenue in accordance with Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition in Financial Statements. Under these arrangements, Corillian defers recognition of the implementation and license revenue and recognizes them ratably over the greater of the initial life of the customer contract or the estimated life of the customer service relationship. Costs associated with implementation are deferred and recognized ratably over the life of the arrangements.

Income Taxes. Corillian has established a valuation allowance for certain deferred tax assets, including those for net operating loss and tax credit carryforwards. Such a valuation allowance is recorded when it is more likely than not that the deferred tax assets will not be realized. This determination was based on an evaluation of positive and negative factors, including Corillian’s history of having net losses, losses in the third and fourth quarter of 2005, future projections and limitations on the use of net operating loss carryforwards. The valuation allowance at December 31, 2005 and 2004 were $34.0 million and $27.8 million, respectively. Corillian will continue to evaluate the need for a valuation allowance in future reporting periods.

Stock-Based Compensation. Through fiscal year 2005, Corillian applied the intrinsic-value-based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including FASB Interpretation (FIN) No. 44, Accounting for Certain Transactions involving Stock Compensation, an interpretation of APB Opinion No. 25, to account for its fixed-plan stock options. Under this method, compensation expense is generally recorded on the date of grant if the current market price of the underlying stock exceeded the exercise price. Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation and Statement No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment of FASB Statement No. 123, established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans. As permitted by existing accounting standards, Corillian elected to continue to apply the intrinsic-value-based method of accounting described above, and adopted only the disclosure requirements of Statement No. 123, as amended. Expense associated with stock-based compensation is amortized on an accelerated basis over the vesting period of the individual stock option awards consistent with the method prescribed in FIN No. 28.

Goodwill and Intangible Assets. Goodwill and intangible assets are accounted for in accordance with Statement No. 141, Business Combinations, and Statement No. 142, Goodwill and Other Intangible Assets. Corillian performed its annual goodwill impairment analysis during the fourth quarter of fiscal year 2005 and identified no impairment. To determine whether or not goodwill is impaired, a test is performed comparing the book value of the “reporting unit” to its trading price. Statement No. 142 requires purchased intangible assets, other than goodwill, to be amortized over their estimated useful lives, unless an asset has an indefinite life. Purchased intangible assets with definite useful lives are carried at cost less accumulated amortization. Amortization expense is recognized over the estimated useful lives, which range from one to six years. Corillian estimates amortization of intangibles to be $1.6 million in 2006.

Recent Accounting Pronouncements. On December 16, 2004, the Financial Accounting Standards Board (FASB) issued Statement No. 123(R), Share-Based Payment, which replaces Statement No. 123, supersedes APB No. 25, Accounting for Stock Issued to Employees, and amends Statement No. 95, Statement of Cash Flow. Currently, Corillian uses the Black-Scholes model for option expense calculation and presents pro forma disclosure of the statements of operations effect in financial statement footnotes only under APB No. 25. However, under Statement No. 123(R), pro forma disclosure of the statements of operations effects of share-based payments will no longer be an alternative and all share-based payments to employees, including grants of employee stock options, will be recognized in the financial statements based on their fair values. In addition, companies must also recognize compensation expense related to any awards that are not fully vested as of the effective date. Compensation expense for the unvested awards will be measured based on the fair value of the awards previously calculated in developing the pro forma disclosures in accordance with the provisions of Statement No. 123. Statement No. 123(R) is effective for public companies with annual periods that begin after June 15, 2005. Corillian believes that the adoption of Statement No. 123(R) will have a material impact on its results of operations; however, Corillian is not able to determine the full effect of the adoption as it is dependant upon future grant activity, Corillian’s stock price, and other variables.

In March 2005, the Securities and Exchange Commission released Staff Accounting Bulletin (SAB) No. 107, to provide guidance on Statement No. 123(R). SAB No. 107 provides the Staff’s view regarding the valuation of share-based payment arrangements for public companies. In particular, this SAB provides guidance related to share-based payment transactions with non-employees, the transition from non-public to public entity status, valuation methods (including assumptions such as expected volatility and expected term), the accounting for certain redeemable financial instruments issued under share-based payment arrangements, the classification of compensation expense, non-GAAP financial measures, first time adoption of Statement No. 123(R), the modification of employee share options prior to the adoption of Statement No. 123(R) and disclosure in Management’s Discussion and Analysis subsequent to adoption of Statement No. 123(R). SAB No. 107 was effective March 29, 2005. The adoption of SAB No. 107 is expected to have a material impact on the Company’s financial statements for the first quarter of 2006. Corillian currently estimates that Statement No. 123(R) and SAB No. 107 will reduce diluted net income per share by approximately $0.06 to $0.10 per share for fiscal 2006. In addition, Corillian’s existing line of credit requires Corillian to maintain

Revenues decreased to $49.2 million in 2005 from $50.8 million in 2004. This decrease in revenues of $1.6 million, or 3%, was primarily due to a $9.9 million decrease in license revenue due to fewer large license sales in 2005, which was partially offset by a $6.9 million increase in professional services in 2005, as compared to 2004, and a $1.7 million increase in maintenance revenue in 2005, as compared to 2004. Professional services increased due to an increase in implementation projects in 2005, as compared to 2004, and the increase in maintenance revenue is due to Corillian’s customer base continuing to increase.

Corillian’s international revenues contributed approximately $1.8 million, or 4%, to Corillian’s consolidated revenues in 2005, compared to $1.1, or 2%, million in 2004. Corillian does not expect its international revenues to be significant in fiscal year 2006. Corillian continues to pursue ways in which to increase international revenues through resellers. Until Corillian’s resellers are successful at distributing and implementing Corillian’s products internationally, Corillian does not anticipate that international revenues will comprise a significant percentage of its consolidated revenues.

Revenues increased to $50.8 million in 2004 from $46.1 million in 2003. This increase in revenues of $4.7 million, or 10%, was primarily due to an increase in maintenance revenues of approximately $2.6 million, as Corillian’s customer base increased from 2003 to 2004. The increase in revenues was also due to an increase in hosting revenues of $1.5 million in 2004, as compared to 2003, primarily related to one significant hosted customer’s service starting in 2004.

Due to certain triggering events included in a customer’s contract, beginning with the three-month period ended September 30, 2002, Corillian applied the “zero profit” methodology discussed above to three existing projects for one customer. Both revenue and expense recognized from these projects accounted for under the “zero profit” methodology during 2003 was approximately $714,000. As all three of this customer’s projects were completed and accepted during 2003, Corillian recognized an additional $1.0 million of revenues related to these projects, which had been previously deferred until completion of the projects, during 2003. Since all cost of revenues associated with these projects had been previously recognized using the “zero profit” methodology, recognition of this deferred revenue resulted in the corresponding recognition of $1.0 million in gross profit during 2003. No further revenues were deferred on these projects as of December 31, 2003.

Backlog represents contractual customer commitments, including fees for licenses, professional services, maintenance, hosting and subscriptions. Backlog is not necessarily indicative of revenues to be recognized in any given future period. There are many factors that could impact Corillian’s filling of backlog, such as Corillian’s progress in completing projects for its customers and Corillian’s customers’ meeting anticipated schedules for customer-dependent deliverables. Corillian provides no assurances that any portion of its backlog will be filled during any fiscal year or at all or that its backlog will be recognized as revenues in any given period.

Cost of revenues increased to $20.3 million in 2005 from $18.4 million in 2004. Gross profit decreased as a percentage of revenues to 58.8% in 2005 from 63.7% in 2004. The decrease in gross profit as a percentage of revenue was primarily due to less high-margin license revenue in 2005, as compared to 2004. Gross profit as a percentage of revenue also decreased due to $579,000 of amortization of intangibles being recorded to cost of revenues in 2005 as a result of the acquisitions of InteliData and qbt in August 2005.

Cost of revenues decreased to $18.4 million in 2004 from $20.5 million in 2003. Gross profit increased as a percentage of revenues to 63.7% in 2004 from 55.6% in 2003. The increase in gross profit as a percentage of revenues during 2004, as compared to 2003, was mainly due to a higher percentage of higher-margin license, maintenance and hosting revenues. License, maintenance and hosting revenues, in dollars and as a percentage of revenues, increased during 2004, while professional service revenues, in dollars and as a percentage of revenues decreased. There are relatively few costs attributed to license revenues, and there were insignificant incremental costs attributed to the increased maintenance and hosting revenues. The decrease in cost of revenue was partially offset by $1.3 million of expenses, related to research and development personnel providing services for one of Corillian’s customers being classified as cost of revenues during 2004.

Sales and marketing expense increased to $7.3 million in 2004 from $6.4 million in 2003. This increase of $900,000, or 14%, was primarily due to the number of personnel in marketing increasing to 10 at the end of 2004 from 7 at the end of 2003, which resulted in an increase of approximately $520,000 of payroll and payroll related expenses in 2004, compared to 2003. Sales and marketing expenses also increased due to consulting expenses increasing approximately $250,000 during 2004.

Research and development expenses increased to $10.8 million in 2005 from $6.7 million in 2004. This increase of $4.1 million, or 61%, was primarily due to increased headcount to 85 at December 31, 2005 from 59 at December 31, 2004, which resulted in an increase of approximately $3.8 million of payroll and payroll related expenses in 2005. The increase in headcount was due to a combination of Corillian increasing its investment in developing new and existing products as well as headcount additions due to business combinations. As of December 31, 2005, 12 of the 85 employees in research and development had been added to headcount as a result of business combinations.

Research and development expenses increased to $6.7 million in 2004 from $6.0 million in 2003. This increase of $700,000, or 12%, was primarily due to the number of personnel in research and development increasing from 46 at the end of 2003 to 59 at the end of 2004. This increase was partially offset by $1.3 million in research and development expenses, related to personnel providing services for one of Corillian’s customers, being classified as cost of revenues in 2004.

Research and development expenses, to a certain extent, could fluctuate in future periods due to the additional funding of Corillian’s research and development activities by customers accounted for under the provisions of the Financial Accounting Standards Board’s (FASB) Statement of Financial Accounting Standards No. 68, Research and Development Arrangements (Statement No. 68), as well as internal funding for the development of new products and enhancements to existing products and the use of Corillian’s research and development personnel to provide services for Corillian’s customers.

General and administrative expenses increased to $8.4 million in 2005 from $6.7 million in 2004. The increase of $1.7 million, or 25%, was due to a $0.7 million increase in general and administrative expenses as a result of the InteliData and qbt acquisitions, as well as a $0.9 million increase of payroll and payroll related expenses due to headcount increasing to 40 at December 31, 2005, as compared to 36 at December 31, 2004.

General and administrative expenses decreased to $6.7 million in 2004 from $6.8 million in 2003. The decrease of $100,000, or 1%, was due to a decrease in severance payments paid to departing officers in 2003. This decrease was partially offset by increased consulting fees related to Sarbanes-Oxley compliance costs and salaries as headcount in general and administrative increased from 30 at the end of 2003 to 36 at the end of 2004.

On November 14, 2003, Steve Sipowicz stepped down as Corillian’s Chief Financial Officer and Secretary. Mr. Sipowicz served as Corillian’s financial advisor for a six-month period following his departure. Mr. Sipowicz received $100,000 as severance and $2,000 per month during the period he served as financial advisor. Corillian recorded a charge of $100,000 related to Mr. Sipowicz’s severance agreement as general and administrative expense during the third quarter of 2003.

Amortization of Deferred Stock-based Compensation. Deferred stock-based compensation represents the difference between the exercise price of stock options granted to employees and the fair value of Corillian’s common stock at the time of the grants. In addition, this amount includes the fair value of stock options granted to non-employees. This amount was being amortized over the respective vesting periods of these options on an accelerated basis. For 2005, 2004 and 2003, amortization of deferred stock-based compensation was $0, $0, and $35,000, respectively. All deferred stock-based compensation was amortized as of March 31, 2003.

Impairment Charges. In the third quarter of 2004, Corillian amended the lease on its corporate headquarters, reducing the space leased from approximately 122,000 square feet to 100,000 square feet effective January 1, 2005. Corillian recorded an impairment charge of $491,000 to write-off the remaining book value of long-lived assets in the space Corillian abandoned and ceased to use during the third quarter of 2004.

Other income (expense), net, consists primarily of interest earned on cash and cash equivalents and short-term investments, interest expense, Corillian’s share of losses in equity investments, and other miscellaneous items. Other income (expense), net, increased to income of $858,000 in 2005 from an expense of $545,000 in 2004. This increase was primarily due to decreases in investment losses and interest expense. Corillian’s proportionate share of the net loss in Synoran, a limited liability company in which Corillian holds a minority investment interest, decreased by $685,000 in 2005, as compared to 2004, and Corillian’s interest expense decreased by $115,000 in 2005 due to Corillian paying off its line of credit in February 2005. Additionally, interest income increased approximately $591,000 in 2005, as compared to 2004, due to increasing interest rates on short-term investments.

Other income (expense), net, decreased to an expense of $545,000 in 2004 from an expense of $1.1 million in 2003. This decrease was mainly due to a $320,000 decrease in Corillian’s proportionate share of Synoran’s net loss during 2004, as compared to 2003, as well as an increase in interest income of approximately $188,000 and a decrease in interest expense of approximately $104,000 during 2004, as compared to 2003.

Corillian was profitable during 2005, 2004 and 2003. Although net operating loss carryforwards were used to offset taxable income for regular tax purposes, Corillian was subject to alternative minimum tax because only 90 percent of taxable income may be offset by net operating loss carryforwards for alternative minimum tax purposes. As a result, Corillian recorded an income tax charge of $61,000, $160,000 and $124,000 during 2005, 2004 and 2003, respectively.

As of December 31, 2005, Corillian had federal and state net operating loss carryforwards of approximately $68.8 million and foreign net operating loss carryforwards of approximately $12.3 million to offset against future taxable income. Additionally, Corillian had alternative minimum tax credits of $254,000 and research and experimentation credits of $3.9 million. These carryforwards expire between 2006 and 2025. Corillian had net deferred tax assets, including Corillian’s net operating loss carryforwards and tax credits, of $34.0 million as of December 31, 2005. A full valuation allowance has been recorded against the net deferred tax asset balance due to uncertainties regarding the realizability of the asset balance.

As of December 31, 2005, Corillian had $25.5 million in cash, cash equivalents and short-term investments, as compared to $39.4 million as of December 31, 2004. Corillian acquired qbt Systems, Inc. on August 8, 2005 and InteliData Technologies on August 18, 2005. These acquisitions resulted in merger related transaction costs and cash paid to shareholders of $3.3 million and $4.5 million for qbt Systems Inc. and InteliData Technologies, respectively. Additionally, net liabilities assumed for qbt Systems Inc. and InteliData Technologies, excluding goodwill and intangibles, were $919,000 and $3.9 million, respectively. The combination of cash paid to shareholders and net liabilities assumed for the respective companies contributed to the decrease in cash, cash equivalents and short-term investments at December 31, 2005, as compared to December 31, 2004.

Cash used in operating activities was $4.9 million for fiscal year 2005. In 2005, cash flow from operations decreased by $4.5 million due to payments of accounts payable and accrued liabilities, which decreased cash flow from operations primarily due to payment of liabilities assumed in business combinations. The timing of cash receipts from accounts receivable resulted in a decrease of cash flow from operations by $2.4 million and changes in deferred revenue decreased cash flow from operations by $1.7 million due to the timing of billings and revenue recognized. These amounts were offset by $4.9 million of net income adjusted for certain non-cash items. Cash used in investing activities was $7.4 million for 2005, which was primarily due to $7.7 million of cash paid for acquisitions. Additionally, cash used to purchase property and equipment decreased cash and cash equivalents by $1.1 million and the net proceeds from the sales of available-for-sale investments increased cash and cash equivalents by $1.4 million. Cash used in financing activities was $141,000 for 2005. This was due to $309,000 of cash used for registration costs associated with business combinations and $911,000 of cash paid on line of credit borrowings, offset by $1.1 million of proceeds from the issuance of common stock related to employee stock option exercises and employee stock purchases.

Cash provided by operating activities was $12.4 million for fiscal year 2004, which was primarily due to $13.9 million of net income adjusted for certain non-cash items and changes in assets and liabilities. Various other items affected Corillian’s cash provided by operating activities in 2004, offsetting this increase. In 2004, Corillian’s deferred revenue balance increased by $1.1 million, primarily due to the timing of billings on large license sales in relation to the periods revenue was recognized. Accounts receivable increased $1.9 million in 2004, as compared to 2003, due to the timing of billings sent and payments received. Cash flows used in investing activities was $968,000 in 2004, primarily due to the purchase of property plant and equipment. Cash flows from financing activities was $795,000 in 2004, primarily due to $2.5 million of proceeds from the issuance of common stock related to employee stock option exercises and employee stock purchases, offset by $1.7 million of cash paid on line of credit borrowings.

Cash provided by operating activities was $11.3 million for fiscal year 2003, which was primarily due to $9.8 million of net income adjusted for certain non-cash items and changes in assets and liabilities. Various other items affected Corillian’s cash provided by operating activities. In 2003, Corillian’s accounts receivable balance increased by $1.9 million due to the timing of billings and receipt of payments on large license sales. Corillian’s deferred revenue balance increased by $1.6 million in 2003 due to the timing of billings on large license sales in relation to the periods the revenue was recognized. During 2003, Corillian also satisfied the contractual requirements that allowed for the release of $1.6 million of escrow funds that Corillian had previously recorded in other receivables and released restrictions on another $1.0 million of cash that Corillian had previously recorded as restricted cash. Cash flows from investing activities was $7.6 million in 2003, which consisted of net purchases in short-term investments of $5.5 million, $1.1 million of property and equipment

In March 2005, Corillian entered into a new one-year revolving line of credit facility with another financial institution that allows Corillian to borrow up to $4.0 million to assist with working capital needs as necessary. Under this line of credit, Corillian must comply with affirmative covenants that require it to maintain a specified tangible net worth value, quick ratio, liabilities to tangible net worth ratio and certain levels of net income. As of December 31, 2005, Corillian had not borrowed from this line of credit.

As of December 31, 2005, Corillian was in violation of the net income requirements under its line of credit agreement. Corillian obtained a waiver from its lender, dated February 8, 2006, that waived the default rights with respect to the breach for the period ending December 31, 2005. If Corillian is unable to amend the covenant requirements of its existing line of credit or renegotiate new terms upon its renewal, the impact of FASB Statement No. 123(R), which will result in increased stock option expenses, may result in future covenant violations.

In May 2000, Corillian entered into a lease for its new corporate headquarters, which is located in Hillsboro, Oregon and consisted of approximately 122,000 square feet. The lease had a term of seven years. In August 2004, Corillian amended the lease, to reduce the space leased effective as of January 1, 2005 to approximately 100,000 square feet. The amendment also extended the lease expiration date to September 2010. Under the terms of the amended lease, monthly rent ranges from approximately $186,000 to approximately $199,000. Corillian records rent expense on a straight-line basis over the lease term in accordance with FASB Statement No. 13, Accounting for Leases. Pursuant to Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities, and Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, Corillian recognized an impairment charge of $491,000 in September 2004 to write off the remaining book value of long-lived assets in the space Corillian has abandoned and ceased to use.

Corillian also leased approximately 21,000 square feet in another office building in Beaverton, Oregon, of which approximately 12,000 square feet were subleased. The lease for this space expired in February 2005. Under the terms of this lease, Corillian’s monthly rent was approximately $29,000 and Corillian received approximately $6,000 per month from subleasing a portion of this office building. Corillian did not renew this lease.

Corillian develops products in the United States and markets its products and services in the United States, and to a lesser extent in Europe, Asia and Australia. As a result, its financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. Because nearly all of its revenue is currently denominated in United States dollars, a strengthening of the United States dollar could make Corillian’s products less competitive in foreign markets.

Corillian does not use derivative financial instruments for speculative purposes. Corillian does not engage in exchange rate hedging or hold or issue foreign exchange contracts for trading purposes. Corillian does have foreign-based operations where transactions are denominated in foreign currencies and are subject to market risk with respect to fluctuations in the relative value of currencies. Currently, Corillian has limited operations in Europe, Asia and Australia and conducts transactions in various local currencies in these locales. To date, the impact of fluctuations in the relative fair value of other currencies has not been material.

As of December 31, 2005 and 2004, Corillian had $25.5 million and $39.4 million, respectively, in cash, cash equivalents and short-term investments. Cash equivalents consist mainly of demand deposit accounts, money market mutual funds and commercial paper with original maturities less than 90 days. Short-term investments consist of taxable government agency bonds with original maturities ranging between 90 and 180 days and taxable municipal bonds, auction rate securities, with original maturities greater than one year. Government agency bonds are classified as held-to-maturity. All auction rate securities are classified as available-for-sale and reported on the balance sheet at par value, which equals market value, as these securities are bought and sold every 28 to 35 days. Corillian is not subject to interest rate risks on its available-for-sale investments as these investments are all bought and sold at par value. Corillian’s short-term held-to-maturity investments are subject to interest rate risk and will decrease in value if market interest rates increase. Corillian manages this risk by maintaining an investment portfolio with high credit quality. Changes in the overall level of interest rates affect our interest income that is generated from our short-term investments. If interest rates increase or decrease equally during 2006, by a total of one percent, Corillian’s interest income would increase or decrease by approximately $160,000, respectively. In 2006, Corillian may

The term “disclosure controls and procedures” (defined in SEC Rule 13a-15(e)) refers to the controls and other procedures of a company that are designed to ensure that the information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods. Corillian’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this annual report (the Evaluation Date). Based on that evaluation, Corillian’s management, with the participation of the Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, such controls and procedures were effective to ensure that information required to be disclosed by Corillian in the reports that it files or submits under the Securities and Exchange Act of 1934 is accumulated and communicated to Corillian’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Corillian Corporation’s management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2005. Management based its assessment on criteria for effective internal control over financial reporting described in Internal Control — Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management’s assessment included an evaluation of the design of Corillian Corporation’s internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Management reviewed the results of its assessment with the board of directors.

We have audited management’s assessment, included in the accompanying Management Report on Internal Control Over Financial Reporting, that Corillian Corporation maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Corillian Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

In our opinion, management’s assessment that Corillian Corporation maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control — Integrated Framework issued by COSO. Also, in our opinion, Corillian Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Corillian Corporation and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2005, and our report dated March 15, 2006 expressed an unqualified opinion on those consolidated financial statements.

Corillian has adopted a code of ethics for its Chief Executive Officer and senior financial officers. Corillian has made the code of ethics available in the Investor Relations section of its website at www.corillian.com. If Corillian waives, or implicitly waives, any material provision of the code, or substantially amends the code, Corillian will disclose that fact in the Investor Relations section of its website at www.corillian.com.


	common stock of the Company as of the end of the immediately preceding fiscal year on a fully-diluted basis; plus any shares subject to outstanding awards under Corillian’s 1997 Stock Option Plan as of the effective date of the 2000 Stock Incentive Compensation Plan that cease to be subject to such awards other than by reason of exercise or payment of such awards. Excludes 400,000 additional shares of common stock that became available for purchase under the 2000 Stock Incentive Compensation Plan on January 1, 2006 pursuant to the evergreen formula. Shares that remain available for purchase under Corillian’s 2000 Stock Incentive Compensation Plan may be granted as stock options, stock awards, restricted stock awards or restricted stock units.

(3)	Includes 57 shares remaining available for issuance under Corillian’s 2000 Employee Stock Purchase Plan. The 2000 Employee Stock Purchase Plan includes an evergreen formula pursuant to which the number of shares authorized for grant will be increased annually by the lesser of (1) 333,333 shares, (2) an amount equal to two percent of the average number of shares of common stock outstanding on a fully diluted basis as of the end of our immediately preceding fiscal year, and (3) a lesser amount determined by our Board of Directors. Excludes 333,333 additional shares of common stock that became available for issuance under the 2000 Employee Stock Purchase Plan on January 1, 2006 pursuant to the evergreen formula.

2003 Nonqualified Stock Incentive Compensation Plan. In May 2003, Corillian’s Board of Directors adopted the 2003 Nonqualified Stock Incentive Compensation Plan and authorized the issuance of 1,000,000 shares of common stock under the plan. This plan was adopted as a retention plan for Corillian’s employees. Because the Company did not obtain shareholder approval for this plan, the Company may not grant stock options under this plan to any existing directors or officers. A significant number of stock options outstanding under Corillian’s previously approved stock option plans had exercise prices that were significantly higher than Corillian’s stock price in May 2003, and Corillian did not anticipate that those stock options would be exercised in the near future or at all, absent extraordinary stock price appreciation. The Board carefully evaluated the alternatives available for providing incentives for and retaining employees and decided to make additional option grants rather than conducting a company-wide option cancellation program or re-pricing. As a result of this decision, the Board decided that it was necessary to adopt this plan. The Board acted to keep the long-term interests of Corillian’s workforce tightly aligned with the long-term interests of shareholders and to counter any financial incentive competitors might offer to Corillian employees. Corillian does not intend to adopt or materially modify any stock compensation plans in the future without shareholder approval.

Corillian’s 2003 Nonqualified Stock Incentive Compensation Plan enhances long-term shareholder value by offering opportunities to its employees, consultants, agents, advisors and independent contractors to participate in Corillian’s growth and success, to encourage them to remain in its service and to own its stock. Corillian’s 2003 Nonqualified Stock Incentive Compensation Plan permits both option and stock grants. Corillian has reserved 1,000,000 shares of common stock for its 2003 Nonqualified Stock Incentive Compensation Plan. The plan administrator will make proportional adjustments to the aggregate number of shares issuable under the 2003 Nonqualified Stock Incentive Compensation Plan and to outstanding awards in the event of stock splits or other capital adjustments.

Unless otherwise provided by the plan administrator, options granted under the 2003 Nonqualified Stock Incentive Compensation Plan vest over a four-year period, and generally will expire on the earliest of ten years from the date of grant; one year after the optionee’s retirement, death or disability; notice to the optionee of termination of employment or service for cause; and three months after other terminations of employment or service.

In the event of a corporate transaction, such as a merger or sale, each outstanding option to purchase shares under the 2003 Nonqualified Stock Incentive Compensation Plan may be assumed or an equivalent option substituted by the buyer. If the successor corporation does not assume or provide an equivalent substitute for the option, the option terminates, but the optionee has the right to exercise the vested and unvested portion of the option immediately before the corporate transaction. Some option agreements may call for accelerated vesting in the event of a corporate transaction even if the successor corporation assumes the option or provides an equivalent substitute for the option if the employee is terminated by the successor corporation within one year after the transaction or if the employee terminates his or her employment with the successor corporation within one year after the transaction for specified reasons, such as a reduction in compensation or title. In addition, the plan administrator has discretion to accelerate the vesting of options in the event of a corporate transaction.

We have audited the accompanying consolidated balance sheets of Corillian Corporation and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2005. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Corillian Corporation and subsidiaries as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2005 in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Corillian Corporation’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 15, 2006 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

Corillian Corporation was incorporated in Oregon in 1997. Corillian is a provider of solutions that enable banks, brokers and other financial service providers to rapidly deploy Internet-based financial services. Corillian’s solutions allow consumers to conduct financial transactions, view personal and market financial information, pay bills and access other financial services on the Internet. Corillian Voyager is a software platform combined with a set of applications for Internet banking, electronic bill presentment and payment, targeted marketing, data aggregation and online customer relationship management. Corillian also offers a variety of services to support its customers throughout the process of implementing and maintaining its solutions.

The preparation of consolidated financial statements in accordance with U.S. generally accepted accounting principles requires Corillian to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Corillian bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates related to software revenue recognition, accrual for contracts in a loss position, valuation of long-lived assets, including intangible assets, which include goodwill and the valuation allowance for deferred tax assets require higher degrees of judgment than others in their application. Actual results may differ from these estimates under different assumptions or conditions.

Corillian recognizes revenues from software licensing agreements in accordance with the provisions of Statement of Position (SOP) No. 97-2, Software Revenue Recognition, as amended by SOP No. 98-9, Modification of SOP No. 97-2, Software Revenue Recognition, with Respect to Certain Transactions. Corillian’s software arrangements generally include software licenses, implementation and custom software engineering services, post-contractual customer support, training services and may also include hosting services. Corillian’s software licenses are, in general, functionally dependent on implementation, training and certain custom software engineering services; therefore, software licenses and implementation and training services, together with custom software engineering services that are essential to the functionality of the software, are combined and recognized using the percentage-of-completion method of contract accounting in accordance with SOP No. 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts. Corillian has determined that post-contractual customer support and hosting services can be separated from software licenses, implementation, training and custom software engineering services because (a) post-contractual customer support and hosting services are not essential to the functionality of any other element in the arrangement, and (b) sufficient vendor-specific objective evidence exists to permit the allocation of revenue to these service elements. The hosting element can be accounted for separately from the license element, as the customer can take possession of the software without significant penalty, in accordance

The percentage-of-completion method is measured by the percentage of contract hours incurred to date compared to the estimated total contract hours for each contract. Corillian has the ability to make reasonably dependable estimates relating to the extent of progress towards completion, contract revenues and contract costs. Any estimation process, including that used in preparing contract accounting models, involves inherent risk. Profit estimates are subject to revision as the contract progresses towards completion. Revisions in profit estimates are charged to income in the period that the facts giving rise to the revision become known. Corillian reduces the inherent risk relating to revenue and cost estimates in percentage-of-completion models through various approval and monitoring processes and policies. Risks relating to service delivery, usage, productivity and other factors are considered in the estimation process. Cumulative revenues recognized may be less or greater than cumulative billings at any point in time during a contract’s term. The resulting difference is recognized as deferred revenue or revenue in excess of billings, respectively. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.

Due to certain triggering events included in a customer’s contract, beginning with the three-month period ended September 30, 2002, Corillian applied the “zero profit” methodology discussed above to three existing projects for one customer. Both revenues and expenses recognized from these projects accounted for under the “zero profit” methodology during the years ended December 31, 2003 and 2002, was approximately $714,000 and $271,000, respectively. As all three of this customer’s projects were completed and accepted during 2003, Corillian recognized an additional $1.0 million of revenue related to these projects, which had been previously deferred until completion of the projects, during the year ended December 31, 2003. Since all costs of revenues associated with these projects had been previously recognized using the “zero profit” methodology, recognition of this deferred revenue resulted in the corresponding recognition of $1.0 million in gross profit during the year ended December 31, 2003. No further revenues were deferred on these projects as of December 31, 2003.

Corillian generally licenses its products on an end-user basis, with its initial license fee based on a fixed number of end users. As a customer increases its installed base of end users beyond the initial fixed number of end users, Corillian’s software license agreements require customers to pay Corillian an additional license fee to cover additional increments of end users. Revenues from additional license seat sales, less any amounts related to maintenance included in the arrangement, are generally recognized in the period in which the

In certain arrangements, Corillian may defer all revenues and related costs of revenues until delivery is complete and customer acceptance is obtained. These arrangements have certain elements of risk such as an obligation to deliver new products when technological feasibility has not been obtained at the onset of the arrangement or an obligation to deliver software customized to a customer specifications. In arrangements where Corillian is providing customized functionality on a best efforts basis, Corillian generally recognizes revenues as services are performed. At December 31, 2005, Corillian applied this methodology to one existing project. Total deferred project costs under the completed contract method were $770,000 at December 31, 2005.

During the third quarter of 2002, Corillian agreed to deposit $1.0 million in cash in a corporate bank account with a customer. This balance was classified as restricted cash as of December 31, 2002, because Corillian was required to maintain the funds on deposit and could not use the funds without violating the agreement. During the second quarter of 2003, Corillian and the customer amended the terms of the contract to remove the requirement that Corillian maintain the funds on deposit with the customer. As a result, these funds became classified as unrestricted during the second quarter of 2003.

Corillian’s short-term investments consist of taxable government agency bonds with original maturities between 90 and 180 days and taxable municipal bonds, auction rate securities, with original maturities of greater than one year. Taxable government agency bonds are classified as held-to-maturity, as the Company has the intent and ability to hold these securities to maturity. All held-to-maturity investments are recorded at amortized cost. Corillian classifies taxable municipal bonds, auction rate securities, with maturities greater than one year as short-term available-for-sale securities and reports them at cost which approximates market. Corillian views its auction rate securities as short-term investments, even though the original maturity dates are greater than one year, as they are bought and sold at par every 28 to 35 days and therefore are available for use in normal operations.

The decline in the market value of any investment that is deemed to be other-than-temporary results in a reduction in carrying amount to fair value. The impairment charge is included in earnings and a new cost basis for the security is established. To determine whether impairment is other-than-temporary, Corillian considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. There have been no impairments of held-to-maturity or available-for-sale securities identified or recorded by Corillian and no securities have been in an unrealized loss position for an extended period of time.

The specific identification method is used to determine the cost of securities sold. Premiums and discounts on held-to-maturity investments are amortized or accreted over the life of the related security as an adjustment to yield using a method that approximates the effective-interest method. Dividend and interest income is recognized when earned. Unrealized holding gains and losses have not been material to date. Realized gains on available-for-sale securities are included in interest and other income in Corillian’s statement of operations.

Goodwill and intangible assets are accounted for in accordance with Statement No. 141, Business Combinations, and Statement No. 142, Goodwill and Other Intangible Assets. Corillian performed its annual goodwill impairment analysis during the fourth quarter of fiscal year 2005 and identified no impairment. To determine whether or not goodwill was impaired, a test was performed comparing the book value of the “reporting unit” to its trading price. Statement No. 142 requires purchased intangible assets, other than goodwill, to be amortized over their estimated useful lives, unless an asset has an indefinite life. Purchased intangible assets with definite useful lives are carried at cost less accumulated amortization. Amortization expense is recognized over the estimated useful lives, which range from one to six years.

In accordance with the provisions of Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, management reviews Corillian’s long-lived assets and definite-lived intangible assets for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Recoverability of long-lived assets is determined by comparing the forecasted undiscounted net cash flows of the asset or asset group to the carrying amount of the asset or asset group. If the operation is determined to be unable to recover the carrying amount of its assets, the assets or asset groups are written down to their estimated fair value. Fair value is determined based on discounted cash flows or appraised values, depending upon the nature of the assets.

Investments in businesses in which Corillian owns less than a 50% interest and can exert significant influence over are accounted for using the equity method of investment accounting. EITF 03-16, Accounting for Investments in Limited Liability Companies, requires that investments in limited partnerships be accounted for using the equity method when the percentage of ownership is greater than 5%. Accordingly, Corillian accounts for its investment in Synoran LLC using the equity method of accounting. Under the equity method, Corillian records an investment in the stock at cost, and adjusts the carrying amount of the investment to recognize its share of the earnings or losses of the business after the date of investment based on its ownership percentage of the business as a whole.

Pursuant to the agreement, Corillian contributed $3.0 million in cash in 2000. Corillian’s ownership percentage of Synoran as of December 31, 2005, was 12.3%. Corillian has one representative on Synoran’s board of managers. Corillian invested an additional $1.0 million in cash in Synoran during 2003. During the years ended December 31, 2005, 2004 and 2003, Corillian recorded $128,000, $813,000 and $1.1 million, respectively, of losses related to its investment in Synoran. As of December 31, 2005, Corillian did not have a remaining investment balance in Synoran. Corillian does not have an obligation to further fund Synoran and has ceased applying the equity method.

Trade accounts receivable are recorded at invoiced amount and do not bear interest. Corillian performs ongoing credit evaluations of its customers’ financial condition. Credit is extended to customers as deemed necessary and generally does not require collateral. Management believes that the risk of loss is significantly reduced due to the quality and financial position of its customers. Management provides an allowance for doubtful accounts based on current customer information and historical statistics. The allowance for doubtful accounts is Corillian’s best estimate of the amount of probable credit losses in its existing accounts receivable. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Corillian does not have any off-balance-sheet credit exposure related to its customers. At December 31, 2005 and 2004, Corillian’s allowance for doubtful accounts receivable was $100,000 and $101,000, respectively.

Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful life of the assets, generally three to five years. Equipment recorded under capital lease agreements are depreciated over the shorter of the estimated useful life of the equipment or the lease term. Leasehold improvements are depreciated over the shorter of the remaining term of the related leases or the estimated economic useful lives of the improvements. Repairs and maintenance are expensed as incurred.

Corillian accounts for software development costs in accordance with Statement No. 86, Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed. Software development costs are capitalized beginning when a product’s technological feasibility has been established by completion of a working model of the product and ending when a product is available for general release to customers.

Internal use software development costs are accounted for in accordance with SOP No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. Costs incurred in the preliminary project stage are expensed as incurred and costs incurred in the application development stage are capitalized and amortized on a straight-line basis over the estimated life of the asset. Capitalized internal use software development costs have not been significant to date.

Results of operations are substantially derived from United States operations and substantially all assets reside in the United States. Banks and other financial institutions accounted for a majority of Corillian’s revenues during the three-year period ended December 31, 2005. A majority of Corillian’s revenues are generated from the financial services industry. Accordingly, Corillian’s near and long-term prospects depend on its ability to attract the technology expenditures of these companies. The market for Internet-based financial services is intensely competitive and rapidly changing. Additionally, the sale and implementation of Corillian’s products and services are often subject to delays because of Corillian’s customers’ internal budgets and procedures for approving large capital expenditures and deploying new technologies within their networks. Corillian’s financial condition, results of operations and liquidity could be materially affected if adverse conditions in the industry developed, such as a reduction in technology expenditures or a delay in the sales or implementation timeline. An inability of Corillian to generate demand for its product, whether as a result of competition, technological change, economic, or other factors, could have a material adverse result on Corillian’s financial condition, results of operations or liquidity.

Corillian is exposed to concentration of credit risk principally from accounts receivable and revenue in excess of billing. As of December 31, 2005, one customer individually accounted for 18% of consolidated accounts receivable. As of December 31, 2004, four customers accounted for more than 10% of consolidated accounts receivable. These customers, in total, accounted for approximately 65% of Corillian’s consolidated accounts receivable balance as of December 31, 2004.

Three customers individually accounted for more than 10% of Corillian’s consolidated revenue in excess of billing balance as of December 31, 2005. These customers accounted for approximately 47% of Corillian’s consolidated revenue in excess of billing balance as of December 31, 2005. One customer individually accounted for more than 10% of Corillian’s consolidated revenue in excess of billing balance as of December 31, 2004. This customer accounted for approximately 49% of Corillian’s consolidated revenue in excess of billing balance as of December 31, 2004.

A substantial portion of Corillian’s revenues are generated from the development and rapid release to market of computer software products and enhancements. In the extremely competitive industry environment in which Corillian operates, such product generation, development and marketing processes are uncertain and complex, requiring accurate prediction of market trends and demand as well as successful management of various risks inherent in such products. Additionally, Corillian’s production strategy relies on certain employees’ ability to deliver implemented products in time to meet critical development and distribution

At December 31, 2005, Corillian had various stock-based compensation plans, including stock option plans and an employee stock purchase plan, which are described more fully in Notes 5 and 6. Corillian applies the intrinsic-value-based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including FASB Interpretation (FIN) No. 44, Accounting for Certain Transactions involving Stock Compensation, an interpretation of APB Opinion No. 25, to account for its fixed-plan stock options. Under this method, compensation expense is generally recorded on the date of grant if the current market price of the underlying stock exceeded the exercise price. Statement No. 123, Accounting for Stock-Based Compensation and Statement No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment of FASB Statement No. 123, established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans. As permitted by existing accounting standards, Corillian has elected to continue to apply the intrinsic-value-based method of accounting described above, and has adopted only the disclosure requirements of Statement No. 123, as amended. Expense associated with stock-based compensation is amortized on an accelerated basis over the vesting period of the individual stock option awards consistent with the method prescribed in FIN No. 28.

Nonqualified Stock Incentive Compensation Plan. Options to purchase 354,218 shares of Corillian’s common stock, or approximately 0.8% of Corillian’s total outstanding options, with a weighted average exercise price of $5.74 and varying remaining vesting schedules, became immediately vested and exercisable on December 30, 2005. Of these 354,218 options, 200,000 options are held by one Corillian executive officer. No options held by Corillian’s directors were impacted by the acceleration of vesting. Because the affected options had exercise prices significantly in excess of the current price per share of Corillian’s common stock, the options have little or no incentive value. The vesting of these options was accelerated to avoid the recognition of expense with respect to these options under Financial Accounting Standards Board Statement No. 123 (revised 2004), Share-Based Payment (Statement No. 123(R)), which Corillian has adopted effective January 1, 2006. Included in the pro forma stock-based compensation expense for 2005 is $1.2 million associated with the acceleration.

Corillian computes net income per share in accordance with Statement No. 128, Earnings Per Share. Under the provisions of Statement No. 128, basic net income per share is computed by dividing the net income for the period by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is computed by dividing net income for the period by the weighted-average number of shares of common stock and potential dilutive common shares outstanding during the period.

Corillian has adopted the provisions of Statement No. 130, Reporting on Comprehensive Income. Comprehensive income (loss) is defined as changes in shareholders’ equity exclusive of transactions with owners. To date, only foreign currency translation adjustments have been reported in comprehensive income (loss) for Corillian. All other amounts have not been material to Corillian’s financial position or results of operations.

Corillian accounts for income taxes in accordance with Statement No. 109, Accounting for Income Taxes. In accordance with Statement No. 109, deferred tax assets and liabilities are recognized for the future tax consequences of events that have been included in the financial statements and tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to be recovered or settled. Valuation allowances are established to reduce deferred tax assets to the amount expected to be realized.

The carrying amounts reported in the balance sheet for cash and cash equivalents, short-term investments, accounts and notes receivable, revenue in excess of billings, and accounts payable approximate fair values due to the short-term nature of those instruments. The carrying amount of long-term debt approximates fair value as the stated interest rates approximate current market rates. Fair value estimates are made at a specific point in time, based on relevant market information about the financial instruments when available. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision.

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued Statement No. 123(R), Share-Based Payment, which replaces Statement No. 123, supersedes APB No. 25, Accounting for Stock Issued to Employees, and amends Statement No. 95, Statement of Cash Flow. Currently, Corillian uses the Black-Scholes model for option expense calculation and presents pro forma disclosure of the statements of operations effect in financial statement footnotes only under APB No. 25. However, under Statement No. 123(R), pro forma disclosure of the statements of operations effects of share-based payments will no longer be an alternative and all share-based payments to employees, including grants of employee stock options, will be recognized in the financial statements based on their fair values. In addition, companies must also recognize compensation expense related to any awards that are not fully vested as of the effective date. Compensation expense for the unvested awards will be measured based on the fair value of the awards previously calculated in developing the pro forma disclosures in accordance with the provisions of Statement No. 123. Statement No. 123(R) is effective for public companies with annual periods that begin after June 15, 2005. Corillian believes that the adoption of Statement No. 123(R) will have a material impact on its results of operations; however, Corillian is not able to determine the full effect of the adoption as it is dependant upon future grant activity, Corillian’s stock price, and other variables.

Corillian has established a valuation allowance for certain deferred tax assets, including those for net operating loss and tax credit carryforwards. Such a valuation allowance is recorded when it is more likely than not that the deferred tax assets will not be realized. This determination was based on an evaluation of positive and negative factors, including Corillian’s history of having net losses, losses in the third and fourth quarter of 2005, future projections and limitations on the use of net operating loss carryforwards. The portion of the valuation allowance for deferred tax assets for which subsequently recognized tax benefits will be applied directly to contributed capital is approximately $2.3 million and directly to goodwill is approximately $6.7 million.

The net change in the total valuation allowance was an increase of approximately $6.2 million for the year ended December 31, 2005 and a decrease of approximately $2.8 million for the year ended December 31, 2004. The increase in the valuation allowance in 2005 was primarily due to the non-taxable stock acquisition of InteliData during 2005 as Corillian recorded a valuation allowance on the acquired net operating loss carryforwards. The decrease in the valuation allowance during 2004 was primarily due to the utilization of federal and state net operating losses.

At December 31, 2005, Corillian had federal and state net operating loss carryforwards of approximately $68.8 million and foreign net operating loss carryforwards of $12.3 million to offset against future income. Additionally, Corillian had alternative minimum tax credits of approximately $254,000 and research and experimentation credits of $3.9 million. These carryforwards expire between 2006 and 2025.

A provision of the Internal Revenue Code requires the utilization of net operating losses and research and experimentation credits to be limited when there is a change of more than 50% in ownership of Corillian or its subsidiaries. Such a change occurred with the acquisition of InteliData Technologies, Inc. in August 2005. Accordingly, the utilization of the InteliData net operating loss carryforwards is limited and has been reduced from $218 million as of the acquisition date to $17.5 million.

In March 2000, the Board of Directors approved the 2000 Employee Stock Purchase Plan (the ESPP) that became effective upon completion of Corillian’s initial public offering on April 12, 2000. In 2005, 2004 and 2003 Corillian issued 393,460, 507,628 and 254,573 shares respectively, under the ESPP. As of December 31, 2005, 57 shares were available for issuance under the ESPP. The ESPP includes an evergreen formula pursuant to which the number of shares authorized for grant will be increased annually by the lesser of (1) 333,333 shares, (2) an amount equal to two percent of the average number of shares of common stock outstanding on a fully diluted basis as of the end of our immediately preceding fiscal year, and (3) a lesser amount determined by our Board of Directors. In January 2006, an additional 333,333 shares of common stock became available for issuance under the ESPP pursuant to the evergreen formula.

Offering periods commence on February 1 and August 1 each year and have a 24-month duration. Each offering period consists of four consecutive purchase periods of six months’ duration. Participants purchase common stock on the last day of each purchase period. The purchase price is the lesser of 85% of the fair market value of the common stock on the first day of an offering period or 85% of the fair market value of the common stock on the purchase date. If the fair market value of Corillian’s common stock on any purchase date of an offering period is less than the fair market value of Corillian’s common stock on the first day of the offering period, then every participant shall automatically (a) be withdrawn from the offering period at the close of the purchase date after the acquisition of the shares of Corillian’s common stock for the purchase period and (b) be enrolled in the offering period commencing on the first business date subsequent to the purchase period.

Corillian updated prior year assumptions used in the Black Scholes option pricing model surrounding the volatility and risk-free interest rates that were not properly reflected in our pro forma expense. The per share weighted-average fair value, as determined by applying the valuation methodology prescribed in FASB Technical Bulletin 97-1, Accounting under Statement 123 for Certain Employee Stock Purchase Plans with a

In 1997, Corillian’s Board of Directors approved and adopted a Stock Option Plan (the 1997 Plan). Options granted pursuant to the 1997 Plan may be either incentive stock options or non-qualified stock options, at the discretion of the Board of Directors. In March 2000, the Board of Directors approved an amendment that capped the 1997 Plan at 3,453,193 shares, which was the number of shares subject to options at that time. Shares under the 1997 Plan generally vest in yearly installments over a period of three or four years following the date of grant. Options under the 1997 Plan generally expire five years from the date of grant, and generally expire three months after termination of employment with Corillian.

In March 2000, the Board of Directors approved the 2000 Stock Incentive Compensation Plan (the 2000 Plan). Options granted pursuant to the 2000 Plan may be either incentive stock options or non-qualified stock options, at the discretion of the Board of Directors. Shares under the 2000 Plan generally vest over a period of four years following the date of grant. Options under the 2000 Plan generally expire ten years from the date of grant, and generally expire three months after termination of employment with Corillian. As of December 31, 2005, 1,030,384 shares remained available for issuance under the 2000 Plan. The 2000 Plan includes an evergreen formula pursuant to which the number of shares authorized for grant will be increased annually by the lesser of (1) 400,000 shares, and (2) an amount equal to one percent of the average outstanding shares of the common stock of the Company as of the end of the immediately preceding fiscal year on a fully-diluted basis; plus any shares subject to outstanding awards under Corillian’s 1997 Plan as of the effective date of the 2000 Plan that cease to be subject to such awards other than by reason of exercise or payment of such awards. In January 2006, an additional 400,000 shares of common stock became available for grant under the 2000 Plan pursuant to the evergreen formula.

In May 2003, Corillian’s Board of Directors adopted the 2003 Nonqualified Stock Incentive Compensation Plan (the 2003 Plan) and authorized the issuance of 1,000,000 shares of common stock under the 2003 Plan. The 2003 Plan was not approved by Corillian’s shareholders. Shares under the 2003 Plan generally vest over a period of four years following the date of grant. Options under the 2003 Plan generally expire ten years from the date of grant or three months after termination of employment with Corillian. As of December 31, 2005, 251,562 shares remained available for issuance under the 2003 Plan.

Corillian updated prior year assumptions used in the Black-Scholes option pricing model surrounding the volatility and risk-free interest rates that were not properly reflected in our pro forma expense. The per share weighted average grant date fair value, as reflected in Note 1, as determined by applying the Black-Scholes option pricing model to stock options granted under the 1997, 2000 and 2003 Stock Option Plans, was $1.86,

Corillian maintains a profit-sharing retirement plan for eligible employees under the provisions of Internal Revenue Code Section 401(k). Participants may defer their compensation on a pre-tax basis, subject to annual maximum limits on contributions set forth by the Internal Revenue Service. Corillian’s contributions are equal to 50% of a participant’s contribution, up to a maximum of 6% of each participant’s annual compensation. Under this plan, Corillian made contributions of approximately $502,000, $348,000 and $460,000 during the years ended December 31, 2005, 2004 and 2003, respectively.

In connection with the acquisition of InteliData, Corillian assumed an environmental clean-up liability associated with prior tenants’ operations at InteliData’s former New Milford, Connecticut property. In January 2000, InteliData sold the property and the building. In connection with the sale, InteliData agreed to undertake limited remediation of the property in accordance with applicable state and federal law. The property is not a listed federal or state Superfund site and InteliData has not been named a “potentially responsible party” at the property. The remediation plan agreed to with the purchaser allowed InteliData to use engineering and institutional controls (e.g., deed restrictions) to minimize the extent and costs of the remediation. Moreover, InteliData obtained environmental insurance, which is now retained by Corillian, to pay for remediation costs up to $6,600,000 in excess of a retained exposure limit of $600,000. As of December 31, 2005, the $600,000 deductible has been exhausted. At December 31, 2005, Corillian has approximately $572,000 recorded as estimated undiscounted future liabilities, of which $280,000 is recorded as

a current liability, and has recorded a receivable of $872,000 due from its insurance provider, of which $589,000 is recorded as a current asset. Corillian considers the collection of these insurance recoveries to be probable. Corillian recorded these amounts in accordance with SOP 96-1, Environmental Remediation Liabilities, and as part of purchase accounting in accordance with Statement No. 141, Business Combinations. Due to the complexity of environmental laws and regulations, the varying costs and effectiveness of alternative clean-up methods and technologies, the uncertainty of insurance coverage, and the unresolved extent of the Corillian’s responsibility, it is difficult to determine the ultimate outcome of these matters, however, any additional liability is not expected to have a material adverse effect on the Company’s financial position, results of operations, or liquidity.

In November 2000, Corillian obtained a $5.0 million equipment line of credit with a financial institution. In June 2003, Corillian refinanced this line of credit to obtain lower interest rates on its remaining debt with this financial institution. As of December 31, 2004, approximately $911,000 was outstanding under this line of credit and no further amounts were available for borrowing. In February 2005, Corillian paid off the remaining balance outstanding under the amended line of credit.

In March 2005, Corillian entered into a new one-year revolving line of credit facility with another financial institution that allows Corillian to borrow up to $4.0 million to assist with working capital needs. As of December 31, 2005, Corillian had not drawn amounts from this line of credit. Under this line of credit, Corillian must comply with affirmative covenants that require it to maintain a specified tangible net worth value, quick ratio, liabilities to tangible net worth ratio and certain levels of net income.

As of December 31, 2005, Corillian was in violation of the net income requirements under its line of credit agreement. Corillian obtained a waiver from its lender, dated February 8, 2006, that waived the default rights with respect to the breach for the period ending December 31, 2005. If Corillian is unable to amend the covenant requirements of its existing line of credit or renegotiate new terms upon its renewal, the impact of Statement No. 123(R) may result in future covenant violations.

Corillian’s product license and services agreements include a limited indemnification provision for claims from third-parties relating to Corillian’s intellectual property. Such indemnification provisions are accounted for in accordance with Statement No. 5, Accounting for Contingencies. The indemnification is limited to the amount paid by the customer. To date, claims under such indemnification provisions have not been significant.

On August 18, 2005, Corillian acquired InteliData Technologies Corporation (InteliData). InteliData’s products provide financial institutions with the real-time financial processing infrastructure needed to provide their customers with payment and presentment services and online banking via the internet and other online delivery channels. InteliData’s customers included banks, credit unions, brokerage firms, financial institution processors and credit card issuers. The acquisition was an investment aimed at expanding Corillian’s product offering, customer base and driving revenue growth which supports the premium paid over the fair market value of individual assets. InteliData has subsequently been renamed Corillian Payment Solutions, Inc.

Corillian acquired all of InteliData’s outstanding common stock for $4.3 million in cash and 4,916,430 shares of Corillian common stock plus merger related costs of $0.2 million. The 4,916,430 shares issued were valued at $3.38 per share, or $16.6 million in the aggregate, based on the average closing price of our stock on the announcement date and the two-day trading period before and after the announcement of the signing of a material agreement, which was March 31, 2005. The purchase price was allocated to the underlying assets acquired and liabilities assumed based on their estimated fair values. Analysis supporting the purchase price allocation includes a valuation of assets and liabilities as of the closing date, a third party valuation of intangible assets and a detailed review of the opening balance sheet to determine other significant adjustments required to recognize assets and liabilities at fair value. The purchase price allocation is subject to further changes.

On August 8, 2005, Corillian acquired qbt Systems, Inc. (qbt), a provider of integration solutions, electronic funds transfer networks and core data processors. qbt’s MultiPoint product is an integration platform that allows financial institutions to integrate their delivery channels and account processing systems in one seamless network environment. qbt’s technology provides a combination of flexibility, reliability, throughput and security. The acquisition was aimed at expanding Corillian’s product offering, increasing revenue growth, and allows for a more seamless, real-time integration to the many different systems in the industry today. These factors, among others, support the premium paid over the fair market value of individual assets.

Corillian acquired all of qbt’s outstanding common stock for $3.2 million in cash and 649,785 shares of Corillian common stock, of which 6,388 shares remain issuable as of December 31, 2005, plus merger related costs and assumed liabilities of $0.2 million. Total shares issuable of 649,785 were valued at $3.20 per share, based on Corillian’s closing stock price on the consummation date, amounting to an aggregate value of $2.1 million. The purchase price was allocated to the underlying assets acquired and liabilities assumed based on their estimated fair values. Analysis supporting the purchase price allocation includes a valuation of assets and liabilities as of the closing date, a third party valuation of intangible assets and a detailed review of the opening balance sheet to determine other adjustments required to recognize assets and liabilities at fair value. The purchase price allocation is subject to further changes.

Prior to the acquisition, Corillian and qbt executed a Proof of Concept whereby Corillian could sub-license and install a qbt MultiPoint adapter at any two of Corillian’s customers. As of the consummation date, Corillian did install one adapter for a customer and all amounts owed related to the implementation were paid in full in accordance with the terms of the agreement. There was no settlement gain or loss associated with this agreement.

Statement No. 131, Disclosures about Segments of an Enterprise and Related Information, establishes standards for reporting information related to operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to shareholders. Statement No. 131 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are defined as components of an enterprise about which separate, discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions about how to allocate resources and assess performance. Corillian’s chief operating decision maker, as defined under Statement No. 131, is its chief executive officer. Corillian operates in a single segment.

Corillian generated revenues from international customers of approximately $1.8 million for fiscal year 2005 and $1.1 million for fiscal years 2004 and 2003, respectively. Corillian pursues international sales primarily through resellers and selective direct sales efforts. Domestic and international revenues were 96% and 4% of total revenues for fiscal year 2005 and 98% and 2% for fiscal years 2004 and 2003, respectively.

Corillian’s chief decision-maker monitors the revenue streams of licenses and various services. There are many shared expenses generated by the various revenue streams. Because management believes that any allocation of the expenses to multiple revenue streams would be impractical and arbitrary, management has not historically made such allocations internally. The chief decision-maker does, however, monitor revenue streams at a more detailed level than those depicted in the accompanying financial statements.

In January 2001, Corillian extended a $300,000 short-term loan to Alex P. Hart to assist him in purchasing a house in Portland, Oregon while he was in the process of selling his house in Bellevue, Washington and relocating to Portland to serve as Corillian’s President. Mr. Hart is currently Corillian’s Chief Executive Officer. The loan was interest-free through February 2004 and is secured by all assets of Mr. Hart. Beginning in March 2004 the loan began accruing interest at four percent. As of December 31, 2005, Mr. Hart has paid $240,000 of the principal amount of the note, and $60,000 of the principal amount remains outstanding. The outstanding principal balance is included in other receivables on Corillian’s consolidated balance sheet at December 31, 2005.

In connection with Ted Spooner’s departure as Chief Executive Officer in October 2002, Corillian entered into an agreement with Mr. Spooner that required Corillian to pay Mr. Spooner a severance payment of approximately $600,000. $300,000 of expense related to this severance agreement was recognized as general and administrative expense during the first quarter of 2003. The remaining $300,000 of expense related to this severance agreement was recognized as general and administrative expense during the fourth quarter of 2002. In April 2003, Corillian paid the severance payment to Mr. Spooner. Effective May 7, 2003, Mr. Spooner was neither a director nor employee of Corillian.

F-29 EX-10.3 2 v17101exv10w3.txt EXHIBIT 10.3 EXHIBIT 10.3 CORILLIAN CORPORATION 1997 STOCK OPTION PLAN (AS AMENDED AND RESTATED OCTOBER 24, 2000) 1. ESTABLISHMENT, PURPOSE AND DEFINITIONS. (a) The Corillian Corporation 1997 Stock Option Plan (the "Plan") was adopted as of October 1, 1997, amended and restated on April 15, 1999 and amended on March 2, 2000, subject to shareholder approval. (b) The purpose of the Plan is to give employees, directors, officers, consultants and advisors of Corillian Corporation (the "Company") and its affiliates an opportunity to purchase shares of the Common Stock of the Company (the "Stock"). It is intended that some of the options granted to employees of the Company will qualify as "incentive stock options" under Section 422 of the Internal Revenue Code as it is now in effect or as it may hereafter be amended (the "Code"). The Plan is adopted in the belief that providing employees, directors, officers, consultants and advisors of the Company with a stake in the Company's successful operation will act as an incentive to them to expand and improve the profit position of the Company and will materially aid the Company in obtaining and retaining such persons. (c) The term "affiliates" means parent or subsidiary corporations as defined in Code Section 425, including parents or subsidiaries which become such after adoption of the Plan. 2. SHARES SUBJECT TO THE PLAN. (a) Options may be granted under the Plan to purchase an aggregate of not more than five million one hundred fifty-two thousand seven hundred eighty-nine (5,152,789) shares of Stock. Shares subject to the unexercised portion of an option which expires, is surrendered or for any other reason ceases to be exercisable may again be made subject to option under the Plan. (b) If there is any change in the Stock through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend or other change in the corporate structure of the Company (other than a Corporate Transaction as set forth below), appropriate adjustments shall be made by the Plan Administrator in the aggregate number of shares subject to the Plan and the number of shares and the price per share subject to outstanding options, to preserve, but not to increase, the benefits of the optionees.(c) In the event of a Corporate Transaction, except as otherwise provided in the instrument evidencing an Option and except as provided in subsection (b) below, each outstanding Option shall be assumed or an equivalent option or right substituted by the surviving corporation, the successor corporation or its parent corporation, as applicable (the "Successor Corporation"). (d) If in the event of a Corporate Transaction the Successor Corporation refuses to assume or substitute for an Option, then each such outstanding Option shall become fully vested and exercisable with respect to 100% of the unvested portion of the Option. In such case, the Plan Administrator shall notify the Participant in writing or electronically that the unvested portion of the Option specified above shall be fully vested and exercisable for a specified time period. At the expiration of the time period, the Option shall terminate, provided that the Corporate Transaction is consummated. (e) For the purposes of this Section 12.3, the Option shall be considered assumed or substituted for if following the Corporate Transaction the option or right confers the right to purchase or receive, for each share of Common Stock subject to the Option immediately prior to the Corporate Transaction, the consideration (whether stock, cash, or other securities or property) received in the Corporate Transaction by holders of Common Stock for each share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the Corporate Transaction is not solely common stock of the Successor Corporation, the Plan Administrator may, with the consent of the Successor Corporation, provide for the consideration to be received upon the exercise of the Option, for each share of Common Stock subject thereto, to be solely common stock of the Successor Corporation substantially equal in fair market value to the per share consideration received by holders of Common Stock in the Corporate Transaction. The determination of such substantial equality of value of consideration shall be made by the Plan Administrator and its determination shall be conclusive and binding. "CORPORATE TRANSACTION" means any of the following events: (i) Consummation of any merger or consolidation of the Company with or into another corporation; or (ii) Consummation of any sale, lease, exchange or other transfer in one transaction or a series of related transactions of all or substantially all the Company's outstanding securities or substantially all the Company's assets other than a transfer of the Company's assets to a majority-owned subsidiary corporation (as defined in Section 422 of the Code) of the Company; or (iii) Acquisition by a person, within the meaning of Section 3(a)(9) or of Section 13(d)(3) (as in effect on the date of adoption of this provision of the Plan) of the Exchange Act of a majority or more of the Company's outstanding voting securities (whether directly or indirectly, beneficially or of record). Ownership of voting securities shall take into account and shall include ownership as determined by applying Rule 13d-3(d)(1)(i) (as in effect on the date of adoption of this provision of the Plan) under the Exchange Act. "RELATED PARTY TRANSACTION" means (a) a merger of the Company in which the holders of shares of Common Stock immediately prior to the merger hold at least a majority of the shares of Common Stock in the surviving corporation immediately after the merger, (b) a mere reincorporation of the Company or (c) a transaction undertaken for the sole purpose of creating a holding company. 3. ELIGIBILITY. (a) The Plan Administrator shall designate those employees, directors, officers, consultants and advisors of the Company who shall be eligible to have granted to them the options provided for by the Plan. The Plan Administrator shall also determine, at the time of grant, which options granted to employees of the Company shall be treated as incentive stock options. (b) The aggregate fair market value (determined at the times the options are granted) of the shares of Stock with respect to which incentive stock options are exercisable for the first time by an optionee during any calendar year (under all incentive stock option plans of the Company and its affiliates) shall not exceed One Hundred Thousand Dollars ($100,000). 4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Plan Administrator. The Plan Administrator shall be the Board of Directors and/or a committee or committees (which term includes subcommittees) appointed by, and consisting of two or more members of, the Board of Directors. The Plan Administrator shall have full power to grant options, construe and interpret the Plan, prescribe, amend and rescind rules and regulations relating to the Plan and make all other determinations necessary or advisable for administration of the Plan. The Plan Administrator shall exercise its powers with respect to incentive stock options only in a manner consistent with the meaning of Code Section 422. All decisions, determinations and interpretations of the Plan Administrator shall be binding on all optionees. 5. TERMS AND CONDITIONS OF OPTIONS. (a) Each option granted pursuant to the Plan shall be evidenced by a written agreement (the "Option Agreement") executed by the Company and the optionee, which shall contain terms and conditions consistent with the terms of the Plan as determined by the Plan Administrator. (b) An option shall be exercisable, during the lifetime of the optionee, only by the optionee and only during the option period set forth in the Option Agreement. The option period for an incentive stock option shall not extend for more than ten (10) years from the date such option is granted; if, however, the optionee currently holds more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, such option period shall not extend for more than five (5) years from the date such incentive stock option is granted. (c) The exercise price of an option shall be not less than the fair market value of the Stock covered by such option on the date such option is granted. However, if the optionee currently holds more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, the purchase price of an incentive stock option shall be not less than one hundred ten percent (110%) of the fair market value of the Stock covered by such incentive stock option on the date such option is granted. (d) Options are not transferable otherwise than by will or the laws of descent and distribution, as set forth in the Option Agreement. 6. USE OF PROCEEDS. Proceeds realized from the sale of Stock upon exercise of options granted under the Plan shall constitute general funds of the Company. 7. SUSPENSION, TERMINATION OR AMENDMENT OF THE PLAN. The Plan Administrator may suspend, terminate or amend the Plan. No action of the Plan Administrator to amend the Plan in any of the following respects shall be effective without prior shareholder approval: (a) to increase the maximum number of shares subject to the Plan (except as provided in Subsection 2(b)); or (b) to make any change in the Plan the effect of which would be to disqualify incentive stock options granted under the Plan from favorable tax treatment as "incentive stock options" under the Code. The Plan shall terminate automatically on September 29, 2007, unless terminated prior to such date. No option may be granted during any suspension or after the termination of the Plan, and no such amendment, suspension or termination of the Plan shall, without the optionee's consent, alter or impair any rights or obligations under any option previously granted under the Plan. EX-10.4 3 v17101exv10w4.txt EXHIBIT 10.4 EXHIBIT 10.4 LEASE between CORILLIAN CORPORATION (Tenant) and CARRAMERICA REALTY CORPORATION (Landlord) MAY 22, 2000 TABLE OF CONTENTS

i C. Insurance Certificates............................................ 14 D. Landlord's Insurance.............................................. 14 E. Waiver of Subrogation............................................. 14 9. FIRE AND OTHER CASUALTY. 14 A. Termination....................................................... 14 B. Restoration....................................................... 15 10. EMINENT DOMAIN. 15 11. RIGHTS RESERVED TO LANDLORD. 15 A. Name.............................................................. 15 B. Signs............................................................. 15 C. Window Treatments................................................. 15 D. Keys.............................................................. 15 E. Access............................................................ 15 F. Preparation for Reoccupancy....................................... 15 G. Heavy Articles.................................................... 16 H. Show Premises..................................................... 16 I. Intentionally Deleted............................................. 16 J. Use of Lockbox.................................................... 16 K. Repairs and Alterations........................................... 16 L. Building Services................................................. 16 M. Other Actions..................................................... 16 12. TENANT'S DEFAULT. 16 A. Rent Default...................................................... 16 B. Certain Performance Default....................................... 16 C. Other Performance Default......................................... 16 D. Credit Default.................................................... 16 E. Vacation or Abandonment Default................................... 17 13. LANDLORD REMEDIES. 17 A. Termination of Lease or Possession................................ 17 B. Lease Termination Damages......................................... 17 C. Possession Termination Damages.................................... 17 D. Landlord's Remedies Cumulative.................................... 17 E. WAIVER OF TRIAL BY JURY........................................... 18 F. Litigation Costs.................................................. 18

ii 14. SURRENDER. 18 15. HOLDOVER. 18 16. SUBORDINATION TO GROUND LEASES AND MORTGAGES. 19 A. Subordination..................................................... 19 B. Termination of Ground Lease or Foreclosure of Mortgage............ 19 C. Security Deposit.................................................. 19 D. Notice and Right to Cure.......................................... 19 E. Definitions....................................................... 19 17. ASSIGNMENT AND SUBLEASE. 19 A. In General........................................................ 19 B. Landlord's Consent................................................ 20 C. Procedure......................................................... 20 D. Change of Management or Ownership................................. 20 E. Excess Payments................................................... 20 F. Recapture......................................................... 20 G. Permitted Transfers............................................... 21 18. CONVEYANCE BY LANDLORD. 21 19. ESTOPPEL CERTIFICATE. 21 20. SECURITY DEPOSIT. 22 A. Use of Security Deposit........................................... 22 B. Letter of Credit.................................................. 22 21. FORCE MAJEURE. 23 22. INTENTIONALLY DELETED. 23 23. NOTICES. 23 A. Landlord.......................................................... 23 B. Tenant............................................................ 24 24. QUIET POSSESSION. 24 25. REAL ESTATE BROKER. 24 26. MISCELLANEOUS. 24 A. Successors and Assigns............................................ 24 B. Date Payments Are Due............................................. 24 C. Meaning of "Landlord", "Re-Entry, "including" and "Affiliate.".... 24 D. Time of the Essence............................................... 25 E. No Option......................................................... 25

iii F. Severability...................................................... 25 G. Governing Law..................................................... 25 H. Lease Modification................................................ 25 I. No Oral Modification.............................................. 25 J. Landlord's Right to Cure.......................................... 25 K. Captions.......................................................... 25 L. Authority......................................................... 25 M. Landlord's Enforcement of Remedies................................ 25 N. Entire Agreement.................................................. 25 O. Landlord's Title.................................................. 25 P. Light and Air Rights.............................................. 25 Q. Singular and Plural............................................... 25 R. No Recording by Tenant............................................ 26 S. Exclusivity....................................................... 26 T. No Construction Against Drafting Party............................ 26 U. Survival.......................................................... 26 V. Rent Not Based on Income.......................................... 26 W. Building Manager and Service Providers............................ 26 X. Late Charge and Interest on Late Payments......................... 26 Y. Tenant's Financial Statements..................................... 26 27. UNRELATED BUSINESS INCOME. 26 28. HAZARDOUS SUBSTANCES. 26 29. EXCULPATION. 27 30. UTILITY DEREGULATION. 27 A. Landlord Controls Selection....................................... 27 B. Tenant Will Provide Access........................................ 27 C. Landlord Not Responsible for Change in Service.................... 27 31. SATELLITE DISHES AND ANTENNAE........................................ 27 32. RIGHTS OF FIRST OFFER................................................ 28

iv ATTACHMENTS Appendix A - Plan of Premises Appendix B - Rules and Regulations Appendix C - Tenant Improvement Agreement Appendix D - Mortgages Currently Affecting the Project Appendix E - Commencement Date Confirmation Appendix F - Legal Description Appendix G - Extension Option Appendix H - Right of First Offer to Lease Appendix I - Right of First Offer to Purchase Appendix J - Naming Rights Appendix K - Janitorial Service Appendix L - Exclusive Parking Stall Locations v LEASE THIS LEASE (the "LEASE") is made as of May 22, 2000 between CARRAMERICA REALTY CORPORATION, a Maryland corporation (the "LANDLORD") and the Tenant as named in the Schedule below. For purposes of this Lease, the term "PROJECT" means the land legally described in Appendix F hereto (the "Land") and Buildings 1, 2 and 3 located thereon. The Project is commonly known as Rock Creek Corporate Center, Hillsboro, Oregon. Phase 1 Premises means approximately 66,198 rentable square feet located in all of Building 2 at 3400 N.W. John Olsen Place, Hillsboro, Oregon 97124. Phase 2 Premises means approximately 44,901 rentable square feet located on the second and third floors of Building 1 at 3600 N.W. John Olsen Place, Hillsboro, Oregon and approximately 11,028 rentable square feet located in all of Building 3 at 3500 N.W. John Olsen Place, Hillsboro, Oregon. Phase 1 Premises and Phase 2 Premises are collectively called herein the "Premises." The Premises are shown on Appendix A. "BUILDING" means Buildings 1, 2 and 3 of the Project. "COMMON AREA" means the sidewalks, halls, passageways, exits, entrances, elevators, corridors, accessways, lobby, and all other public areas of the Building and the Project. The following schedule (the "SCHEDULE") is an integral part of this Lease. Terms defined in this Schedule shall have the same meaning throughout the Lease. SCHEDULE 1. TENANT: Corillian Corporation, an Oregon corporation 2. PREMISES: On the Phase 1 Commencement Date, Landlord shall deliver to Tenant possession of the Phase 1 Premises consisting of approximately 66,198 Rentable Square Feet (as defined in Section 3 below). On the Phase 2 Commencement Date, Landlord shall deliver to Tenant possession of the Phase 2 Premises consisting of approximately 55,929 Rentable Square Feet (as defined in Section 3 below). Beginning on January 1, 2002, Tenant shall pay Operating Cost Share Rent and Tax Share Rent to Landlord in accordance with Section 2A of the Lease. 3. RENTABLE SQUARE FEET OF THE PREMISES: Total Rentable Square Feet is approximately 122,127, subject to final space planning and area calculations. As used herein, "Rentable Square Feet" or "RSF" shall have the same definition as "Floor Rentable Area" as defined in BOMA's Standard Method for Measuring Floor Area in Office Buildings (ANSI/BOMA Z651.1-1996). 4. TENANT'S PROPORTIONATE SHARE: (a) 100% (based upon a total of 66,198 Rentable Square Feet for Building 2, as to all Operating Costs relating to Building 2, as defined in Section 2(c)(1) of the Lease, including, without limitation, HVAC maintenance and repairs, elevator maintenance and repairs, building management fee, any janitorial services and supplies, window cleaning and property insurance; (b) 100% (based upon a total of 11,028 Rentable Square Feet for Building 3, as to all Operating Costs relating to Building 3, as defined in Section 2(c)(1) of the Lease, including, without limitation, HVAC maintenance and repairs, building management fee, any janitorial services and supplies, window cleaning and property insurance; (c) 68.618% (based upon a total of 65,436 Rentable Square Feet for Building 1, as to all Operating Costs relating to Building 1, as defined in Section 2(c)(1) of the lease, including, without limitation, HVAC maintenance and repairs, elevator maintenance and repairs, building management fee, any janitorial services and supplies, window cleaning and property insurance; (d) 85.605% (based upon a total of 142,662 Rentable Square Feet in the Buildings) of all Operating Costs of the Project, excluding all Operating Costs attributable to all or any part of any Building in the Project, including without limitation, landscape costs, parking lot repair and maintenance, Landlord's liability insurance costs; and (e) 85.605% of all Taxes. 5. SECURITY DEPOSIT: $1,000,000 Letter of Credit. See Section 20 of this Lease. 1 6. TENANT'S REAL ESTATE BROKER FOR THIS LEASE: The Mehigan Company 7. LANDLORD'S REAL ESTATE BROKER FOR THIS LEASE: Cushman & Wakefield of Oregon, Inc. 8. TENANT IMPROVEMENTS, IF ANY: See the Tenant Improvement Agreement attached hereto as Appendix C. 9. COMMENCEMENT DATE: The Phase 1 Commencement Date shall be the date Landlord delivers possession of the Phase 1 Premises to the Tenant, which is intended to occur on or about October 1, 2000. The Phase 2 Commencement Date shall be the date Landlord delivers possession of the Phase 2 Premises to Tenant, which is intended to occur on or about January 1, 2001. The parties will use reasonable, diligent efforts to cause the Commencement Dates to occur by the intended dates. Landlord and Tenant shall execute a Commencement Date Confirmation substantially in the form of Appendix E promptly following each Commencement Date. 10. TERMINATION DATE/TERM: Seven (7) years from the Phase 1 Commencement Date Tenant shall have the right to extend the Term for two (2) five-year options on the terms and conditions set forth in Appendix G. 11. GUARANTOR: None 12. BASE RENT:
ANNUAL BASE MONTHLY BASE ANNUAL BASE MONTHS RSF RENT RSF RENT RENT - ------- ------- ----------- ------------ ------------- 1 - 3 66,198 $ 0.00 $ 0.00 N/A 4 - 6 122,127 $ 0.00 $ 0.00 N/A 7 - 12 122,127 $21.00 $213,722.25 N/A 13 - 24 122,127 $21.45 $218,302.01 $2,619,624.12 25 - 36 122,127 $21.95 $223,390.64 $2,680,687.68 37 - 48 122,127 $22.45 $228,479.26 $2,741,751.12 49 - 60 122,127 $22.95 $233,567.89 $2,802,814.68 61 - 72 122,127 $23.45 $238,656.51 $2,863,878.12 73 - 84 122,127 $24.00 $244,254.00 $2,931,048.00
13. MANAGEMENT FEE: The management fee each year is equal to three percent (3%) of the Annual Base Rent. 2 1. LEASE AGREEMENT. On the terms and conditions stated in this Lease, Landlord leases the Premises to Tenant, and Tenant leases the Premises from Landlord, for the Term beginning on the Phase 1 Commencement Date and ending on the Termination Date unless extended or sooner terminated pursuant to this Lease. 2. RENT. A. TYPES OF RENT. Tenant shall pay the following Rent in the form of a check to Landlord at the following address: CarrAmerica Realty Corporation t/a Rock Creek Corporate Center P.O. Box 198268 Atlanta, GA 30384-8268 or by wire transfer as follows: NationsBank, N.A. (South) ABA Number 061-000-052 Account Number 00 326 3038269 or in such other manner as Landlord may notify Tenant. (1) Base Rent in monthly installments in advance, the monthly installment for the first (1st) month payable concurrently with the execution of this Lease and thereafter on or before the first day of each month of the Term in the amount set forth on the Schedule. (2) Operating Cost Share Rent in an amount equal to the Tenant's Proportionate Share of the Operating Costs for the applicable fiscal year of the Lease in excess of the Operating Costs for the calendar year 2001 ("Base Year"), paid monthly in advance in an amount estimated by Landlord. Definition of Operating Costs and the method for billing and payment of Operating Cost Share Rent are set forth in Sections 2B, 2C and 2D. Definition of Tenant's Proportionate Share are set forth in Section 4 of the Schedule. (3) Tax Share Rent in an amount equal to the Tenant's Proportionate Share of the Taxes for the applicable fiscal year of this Lease in excess of the Taxes for the Base Year, paid monthly in advance in an amount estimated by Landlord. A definition of Taxes and the method for billing and payment of Tax Share Rent are set forth in Sections 2B, 2C and 2D. (4) Additional Rent in the amount of all costs, expenses, liabilities, and amounts which Tenant is required to pay under this Lease, excluding Base Rent, Operating Cost Share Rent, and Tax Share Rent, but including any interest for late payment of any item of Rent. (5) Rent as used in this Lease means Base Rent, Operating Cost Share Rent, Tax Share Rent and Additional Rent. Tenant's agreement to pay Rent is an independent covenant, with no right of setoff, deduction or counterclaim of any kind. B. PAYMENT OF OPERATING COST SHARE RENT AND TAX SHARE RENT. (1) Payment of Estimated Operating Cost Share Rent and Tax Share Rent. Landlord shall estimate in good faith the Operating Costs and Taxes of the Project by April 1 of each fiscal year, or as soon as reasonably possible thereafter. Landlord may revise these estimates whenever it obtains more accurate information, such as the final real estate tax assessment or tax rate for the Project. 3 Within thirty (30) days after receiving the original or revised estimate from Landlord, Tenant shall pay Landlord one-twelfth (1/12th) of Tenant's Proportionate Share of this estimate in excess of the Base Year, multiplied by the number of months that have elapsed in the applicable fiscal year to the date of such payment including the current month, minus payments previously made by Tenant for the months elapsed. On the first day of each month thereafter, Tenant shall pay Landlord one-twelfth (1/12th) of Tenant's Proportionate Share of this estimate in excess of the Base Year, until a new estimate becomes applicable. (2) Correction of Operating Cost Share Rent. Landlord shall deliver to Tenant a report for the previous fiscal year (the "Operating Cost Report") by May 15 of each year, or as soon as reasonably possible thereafter, setting forth (a) the actual Operating Costs incurred, (b) the amount of Operating Cost Share Rent due from Tenant, and (c) the amount of Operating Cost Share Rent paid by Tenant. Within thirty (30) days after such delivery, Tenant shall pay to Landlord the amount due minus the amount paid. If the amount paid exceeds the amount due, Landlord shall apply the excess to Tenant's payments of Operating Cost Share Rent next coming due. (3) Correction of Tax Share Rent. Landlord shall deliver to Tenant a report for the previous fiscal year (the "Tax Report") by May 15 of each year, or as soon as reasonably possible thereafter, setting forth (a) the actual Taxes, (b) the amount of Tax Share Rent due from Tenant, and (c) the amount of Tax Share Rent paid by Tenant. Within thirty (30) days after such delivery, Tenant shall pay to Landlord the amount due from Tenant minus the amount paid by Tenant. If the amount paid exceeds the amount due, Landlord shall apply the excess to Tenant's payments of Tax Share Rent next coming due. C. DEFINITIONS. (1) Included Operating Costs. "Operating Costs" means any expenses, costs and disbursements of any kind other than Taxes, paid or incurred by Landlord in connection with the management, maintenance, operation, insurance, repair and other related activities in connection with any part of the Project (including, without limitation, all costs, charges, and expenses incurred by Landlord in connection with any change in the Electric Service Provider or Alternate Service Provider (as defined in Section 30A) then providing electrical services, and the maintenance, repair, installation and service costs associated therewith) and of the personal property, fixtures, machinery, equipment, systems and apparatus used in connection therewith, including the cost of providing those services required to be furnished by Landlord under this Lease. Operating Costs shall also include the cost of any capital improvements which are intended to reduce Operating Costs or improve safety, and those made to keep the Project in compliance with governmental requirements applicable from time to time (collectively, the "Included Capital Items"); provided, that the costs of any Included Capital Item shall be amortized by Landlord, together with an amount equal to interest at ten percent (10%) per annum, over the estimated useful life of such item and such amortized costs will be included in Operating Costs for that portion of the useful life of the Included Capital Item which falls within the Term. If the Project is not fully occupied and utilized during any portion of any fiscal year, Landlord may adjust (an "Equitable Adjustment") Operating Costs to equal what would have been incurred by Landlord had the Project been one-hundred percent (100%) occupied and utilized. This Equitable Adjustment shall apply only to Operating Costs which are variable and therefore increase as occupancy of the Project increases. Landlord will incorporate the Equitable Adjustment in its estimates of Operating Costs. 4 If Landlord does not furnish any particular service whose cost would have constituted an Operating Cost to a tenant other than Tenant who has undertaken to perform such service itself, Operating Costs shall be increased by the amount which Landlord would have incurred if it had furnished the service to such tenant. (2) Excluded Operating Costs. Operating Costs shall not include: (a) costs of alterations of tenant premises; (b) costs of capital improvements other than Included Capital Items; (c) capital expenditures required by Landlord's failure to comply with laws enacted on or before the date of the Building's Temporary Certificate of Occupancy or the equivalent is validly issued; provided, however, the capital expenditures incurred by Landlord and required by laws enacted after the date the building's Temporary Certification of Occupancy or the equivalent is validly issued shall be amortized over the useful life of such capital expenditures; (d) costs, including permit, license and inspection costs, incurred with respect to the installation of tenant improvements made for tenants in the building or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for tenant or other occupants of the Building; (e) except as provided in Section C(1) above, costs of capital nature, including, without limitation, capital improvements, capital repairs, capital equipment and capital tools, all as determined in accordance with generally accepted accounting principles, consistently applied, except as otherwise permitted herein; (f) interest and principal payments on mortgages or any other debt costs, or rental payments on any ground lease of the Project; (g) real estate brokers' leasing commissions; (h) attorney's fees, space planning costs, and other costs and expenses incurred in connection with negotiations or disputes with present or prospective tenant or other occupants of the Building; (i) any cost or expenditure for which Landlord is reimbursed, by insurance proceeds or otherwise, except by Operating Cost Share Rent; (j) the cost of any service furnished to any office tenant of the Project which Landlord does not make available to Tenant; (k) except as provided in Section C(1) above and except on any Included Capital Items, depreciation, amortization and interest payments; (l) costs incurred by Landlord due to violations by Landlord or any tenant (other than Tenant) of the terms and conditions of any lease of space in the Building (m) franchise or income taxes imposed upon Landlord, except to the extent imposed in lieu of all or any part of Taxes; (n) costs of correcting defects in construction of the Building (as opposed to the cost of normal repair, maintenance and replacement expected with the construction materials and equipment installed in the Building in light of their specifications); 5 (o) legal and auditing fees which are for the benefit of Landlord such as collecting delinquent rents, preparing tax returns and other financial statements, and audits other than those incurred in connection with the preparation of reports required pursuant to Section 2B above; (p) the wages of any employee for services not related directly to the management, maintenance, operation and repair of the Building; (q) fines, penalties and interest; (r) any amount in excess of a five percent (5%) increase per year in controllable expenses. Controllable expenses shall include Landlord's corporate overhead and general administrative expenses but in no event shall include Taxes, insurance, utilities, or janitorial costs or expenses; (s) interest, principal, points and fees on debts or amortization on any mortgage or mortgages or any other debt instrument encumbering the Building or the property on which the Building stands; (t) except for making repairs or keeping permanent systems in operation while repairs are being made, rentals and other related expenses incurred in leasing air conditions systems, elevators or other equipment ordinarily considered to be a capital nature, except equipment not affixed to the Building which is used in providing janitorial or similar services; (u) all items and services for which Tenant or any other tenant in the Building reimburses Landlord (other than through Tenant's percentage share or any other tenant(s) percentage share of Operating Expenses), or which Landlord provides selectively to one or more tenants (other than Tenant without reimbursement; (v) advertising and promotional expenditures; (w) electric power costs for which any tenant directly contracts with the local public service company; (x) costs incurred in connection with upgrading the Building or the equivalent is issued; (y) tax penalties incurred as a result of Landlord's negligence or inability or unwillingness to make payments when due; (z) costs for which Landlord has been compensated by a management fee which exceeds the amount of such costs that would have been charged to Landlord from a nonaffiliated entity; and (aa) costs arising from Landlord's charitable or political contributions. Subject to Landlord's right to reconcile pursuant to 2B(2) and (3), Landlord agrees that Landlord will not collect or be entitled to collect Operating Expenses or Taxes from all its tenants in the Project in an amount which is in excess of one hundred percent (100%) of the Operating Expenses or Taxes actually paid (including services actually rendered or provided by Landlord and its officers, employees, agents and contractors) in connection with the operation and ownership of the Project. (3) Taxes. "Taxes" means any and all taxes, assessments and charges of any kind, general or special, ordinary or extraordinary, levied against the Project, which Landlord shall pay or become obligated to pay in connection with the ownership, leasing, renting, 6 management, use, occupancy, control or operation of the Project or of the personal property, fixtures, machinery, equipment, systems and apparatus used in connection therewith. Taxes shall include real estate taxes, personal property taxes, sewer rents, water rents, special or general assessments, transit taxes, ad valorem taxes, and any tax levied on the rents hereunder or the interest of Landlord under this Lease (the "Rent Tax"). Taxes shall also include all fees and other costs and expenses paid by Landlord in reviewing any tax and in seeking a refund or reduction of any Taxes, whether or not the Landlord is ultimately successful. Landlord shall also make an equitable adjustment to the calculation of Taxes for the Project, as appropriate, to reflect the Project as fully assessed taking into account all of the Tenant improvements in the Building. For any year, the amount to be included in Taxes (a) taxes or assessments payable in installments, shall be the amount of the installments (with any interest) due and payable during such year, and (b) all other Taxes, shall at Landlord's election be the amount accrued, assessed, or otherwise imposed for such year or the amount due and payable in such year. Any refund or other adjustment to any Taxes by the taxing authority, shall apply during the year in which the adjustment is made. Taxes shall not include any net income (except Rent Tax), capital, stock, succession, transfer, franchise, gift, estate or inheritance tax, except to the extent that such tax shall be imposed in lieu of any portion of Taxes. Taxes shall also not include any fines, interest or penalties imposed on Landlord by a taxing authority solely as a result of Landlord's negligence or misconduct, or unwillingness to pay. (4) Lease Year. "Lease Year" means each consecutive twelve-month period beginning with the Phase 1 Commencement Date, except that if the Commencement Date is not the first day of a calendar month, then the first Lease Year shall be the period from the Commencement Date through the final day of the twelve months after the first day of the following month, and each subsequent Lease Year shall be the twelve months following the prior Lease Year. (5) Fiscal Year. "Fiscal Year" means the calendar year, except that the first fiscal year and the last fiscal year of the Term may be a partial calendar year. D. COMPUTATION OF BASE RENT AND RENT ADJUSTMENTS. (1) Prorations. If this Lease begins on a day other than the first day of a month, the Operating Cost Share Rent and Tax Share Rent shall be prorated for such partial month based on the actual number of days in such month. If this Lease begins on a day other than the first day, or ends on a day other than the last day, of the fiscal year, Operating Cost Share Rent and Tax Share Rent shall be prorated for the applicable fiscal year. (2) Default Interest. Any sum due from Tenant to Landlord not paid when due shall bear interest from the date due until paid at twelve percent (12%) per annum. (3) Rent Adjustments. The square footage of the Premises and the Building set forth in the Schedule are conclusively deemed to be the actual square footage thereof, without regard to any subsequent remeasurement of the Premises or the Building. If any Operating Cost paid in one fiscal year relates to more than one fiscal year, Landlord may proportionately allocate such Operating Cost among the related fiscal years. (4) Books and Records. Landlord shall maintain books and records reflecting the Operating Costs and Taxes in accordance with sound accounting and management practices. Tenant and its certified public accountant may inspect Landlord's records at Landlord's office upon at least seventy-two (72) hours' prior written notice during normal business hours 7 during the one-hundred twenty (120) days following the respective delivery of the Operating Cost Report or the Tax Report. The results of any such inspection shall be kept strictly confidential, except as required by law, by Tenant and its agents, and Tenant and its certified public accountant must agree, in their contract for such services, to such confidentiality restrictions and shall specifically agree that the results shall not be made available to any other tenant of the Building. Unless Tenant sends to Landlord any written exception to either such report within said one-hundred twenty (120) day period, such report shall be deemed final and accepted by Tenant. Tenant shall pay the amount shown on both reports in the manner prescribed in this Lease, whether or not Tenant takes any such written exception, without any prejudice to such exception. If Tenant makes an exception, Landlord shall cause an independent certified public accountant to issue a final and conclusive resolution of Tenant's exception. Tenant shall pay the cost of such certification unless Landlord's original determination of annual Operating Costs or Taxes overstated the amounts thereof by more than five percent (5%). (5) Miscellaneous. So long as Tenant is in default of any obligation under this Lease, Tenant shall not be entitled to any refund of any amount from Landlord. If this Lease is terminated for any reason prior to the annual determination of Operating Cost Share Rent or Tax Share Rent, either party shall pay the full amount due to the other within thirty (30) days after Landlord's notice to Tenant of the amount when it is determined. Landlord may commingle any payments made with respect to Operating Cost Share Rent or Tax Share Rent, without payment of interest. 3. PREPARATION AND CONDITION OF PREMISES; POSSESSION AND SURRENDER OF PREMISES. A. CONDITION OF PREMISES. Except to the extent of the Tenant Improvements for the Premises identified in Appendix C, if any, Landlord is leasing the Premises to Tenant "as is", without any obligation to alter, remodel, improve, repair or decorate any part of the Premises. Tenant acknowledges that Landlord has no obligation to make any Tenant Improvements to the Premises and that Tenant takes possession of the Premises in "AS IS" condition on the Phase 1 and Phase 2 Commencement Date. B. TENANT'S POSSESSION. Tenant's taking possession of any portion of the Phase 1 Premises or Phase 2 Premises shall be conclusive evidence that the entire Phase 1 or Phase 2 Premises, respectively, was in good order, repair and condition except that Tenant shall have one (1) year after the execution hereof to identify any latent defects to Landlord in writing. If Landlord authorizes Tenant to take possession of any part of the Premises prior to the Phase 1 Commencement Date for purposes of doing business, all terms of this Lease shall apply to such pre-Term possession other than Base Rent. C. MAINTENANCE. Throughout the Term, Tenant shall maintain the Premises in good condition, loss or damage caused by the elements, ordinary wear and tear, and fire and other casualty excepted, and at the termination of this Lease, or Tenant's right to possession, Tenant shall return the Premises to Landlord in broom-clean condition. To the extent Tenant fails to perform its obligations, Landlord may, but need not, restore the Premises to such condition and Tenant shall pay the cost thereof. The cost of any repairs made by Landlord on account of Tenant's default, or on the account of the misuse or neglect by Tenant or its employees, agents, invitees or Contractor's anywhere in the Project, shall become Additional Rent, payable by Tenant immediately upon Landlord's demand. 8 4. PROJECT SERVICES. So long as Tenant is not in default under this Lease, Landlord shall furnish services as follows: A. HEATING AND AIR CONDITIONING. During the normal business hours of 7:00 a.m. to 6:00 p.m., Monday through Friday, and 8:00 a.m. to 12:00 noon on Saturday, Landlord shall furnish heating and air conditioning to provide a comfortable temperature, in Landlord's judgment, for normal business operations, except to the extent Tenant installs additional equipment which adversely affects the temperature maintained by the air conditioning system. Landlord acknowledges that Tenant is in the business of providing software development and services and therefore stipulates that normal business operations include the use of computer hardware and devices necessary for its business. If Tenant installs such additional equipment not necessary for its normal business operations, Landlord may install supplementary air conditioning units in the Premises, and Tenant shall pay to Landlord upon demand as Additional Rent the cost of installation, operation and maintenance thereof. Landlord shall furnish heating and air conditioning after business hours if Tenant provides Landlord reasonable prior written notice, and pays Landlord all charges for such additional heating or air conditioning, to be billed at $25.00 per hour. B. ELEVATORS. Landlord shall provide passenger elevator service during normal business hours to Tenant in common with Landlord and all other tenants. Landlord shall provide limited passenger service at other times, except in case of an emergency. C. ELECTRICITY. Landlord shall provide sufficient electricity to operate office lighting and equipment consistent with the requirements of Tenant as a software developer. Tenant shall not install or operate in the Premises any electrically operated equipment or other machinery, other than business machines and equipment normally employed for such use without obtaining the prior written consent of Landlord. If any or all of Tenant's equipment requires electricity consumption in excess of that which is reasonably necessary to operate such office equipment, such consumption (including consumption for computer or telephone rooms and special HVAC equipment) may be submetered by Landlord at Tenant's expense, and Tenant shall reimburse Landlord as Additional Rent for the cost of its submetered consumption based upon Landlord's average cost of electricity. Such Additional Rent shall be in addition to Tenant's obligations pursuant to Section 2A(2) to pay its Proportionate Share of Operating Costs. D. WATER. Landlord shall furnish hot and cold tap water for drinking and toilet purposes. Tenant shall pay Landlord for water furnished for any other purpose as Additional Rent at rates fixed by Landlord. Tenant shall not permit water to be wasted. E. JANITORIAL SERVICE. Landlord shall furnish janitorial service in the manner described in Appendix J attached hereto. F. INTERRUPTION OF SERVICES. If any of the Building equipment or machinery ceases to function properly for any cause Landlord shall use reasonable diligence to repair the same promptly. Landlord's inability to furnish, to any extent, the Project services set forth in this Section 4, or any cessation thereof resulting from any causes, including any entry for repairs pursuant to this Lease, and any renovation, redecoration or rehabilitation of any area of the Building shall not render Landlord liable for damages to either person or property or for interruption or loss to Tenant's business, nor be construed as an eviction of Tenant, nor work an abatement of any portion of Rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof except to the extent service is interrupted solely as a result of Landlord's negligence or malfeasance. G. PARKING. Landlord shall provide Tenant, within the Project, with four (4) parking stalls per one thousand (1000) square feet of RSF which will be nonexclusive, uncovered and on a 9 first-come, first-serve basis. Landlord further grants to Tenant exclusive right to use the parking stalls shown on attached EXHIBIT L. Tenant acknowledges and agrees that its parking rights are subject to the rights of an existing Tenant, University of Phoenix, that has the right to use up to 220 of the 580 parking stalls available in the Project from 5:30 p.m. until 11:00 p.m. Monday through Friday. H. ACCESS. Subject to appropriate security measures, including card keys or other verification systems that may be installed from time to time in the Project, Tenant and its employees will have access to the Building and the parking facilities 24-hours per day, seven (7) days per week, excepting therefrom such times when the Building and parking facilities need to be closed for repair, maintenance, safety or for causes beyond the reasonable control of Landlord. I. FIBER OPTICS. Fiber optic capacity is presently located in the right-of-way of Tanasbourne Drive directly adjacent to the Project's parking facility. Landlord has existing conduit running from Tanasbourne Drive to the Building. Tenant, at its cost and expense, shall have the right to retain a fiber optic company to pull fiber optic cable through such conduit to the Building. Tenant shall be responsible for any damage caused to the conduit or to the Building by exercising its rights under this Section 4.I. 5. ALTERATIONS AND REPAIRS. A. LANDLORD'S CONSENT AND CONDITIONS. Tenant shall not make any improvements or alterations to the Premises (the "Work") without in each instance submitting in advance plans and specifications for the Work to Landlord, and without obtaining Landlord's prior written consent which shall not be unreasonably withheld or delayed, except that Landlord's consent shall not be required for interior, nonstructural alterations that do not exceed Ten Thousand Dollars ($10,000) in cost per project so long as such Work (a) does not impact the base structural components or systems of the Building, (b) will not impact any other tenant's premises, and (c) is not visible from outside the Premises. Notwithstanding the foregoing, Landlord may withhold its consent in its sole discretion for any Work which (a) impacts the base structural components or the Building systems, (b) impacts any other tenant's premises, or (c) is visible from outside the Premises. All improvements or alterations greater than Ten Thousand Dollars ($10,000) shall be performed by Landlord's contractor or other contractor approved in writing by Landlord prior to commencing such construction. Tenant shall promptly reimburse Landlord for actual costs incurred for review of the plans and all other items submitted by Tenant. Tenant shall pay for the cost of all Work as and when such payment is first due. All Work shall become the property of Landlord upon its installation, except for Tenant's trade fixtures and for items which Landlord requires Tenant to remove at Tenant's cost at the termination of the Lease pursuant to Section 5E. The following requirements shall apply to all Work: (1) Prior to commencement, Tenant shall furnish to Landlord building permits, certificates of insurance satisfactory to Landlord, and, at Landlord's request, security for payment of all costs. (2) Tenant shall schedule and perform all Work so as to maintain peace and harmony among other contractors serving the Project and shall avoid interference with other work to be performed or services to be rendered in the Project. (3) The Work shall be performed in a good and workmanlike manner, meeting the standard for construction and quality of materials in the Building, and shall comply with all insurance requirements and all applicable governmental laws, ordinances and regulations ("Governmental Requirements"). 10 (4) Tenant shall perform all Work so as to minimize or prevent disruption to other tenants, and Tenant shall comply with all reasonable requests of Landlord in response to complaints from other tenants. (5) Tenant shall perform all Work in compliance with Landlord's "Policies, Rules and Procedures for Construction Projects" in effect at the time the Work is performed. (6) Tenant shall permit Landlord to supervise all Work. (7) Landlord shall specify whether Tenant shall be required to remove the Work pursuant to subparagraph (E) herein upon Termination of the Lease. (8) Upon completion, Tenant shall furnish Landlord with contractor's affidavits and full and final statutory waivers of liens, as-built plans and specifications, and receipted bills covering all labor and materials, and all other close-out documentation required in Landlord's "Policies, Rules and Procedures for Construction Projects" which Tenant acknowledges has been delivered to Tenant with this Lease. B. DAMAGE TO SYSTEMS. If any part of the mechanical, electrical or other systems in the Premises are damaged, Tenant shall promptly notify Landlord, and Landlord shall repair such damage. Landlord may also at any reasonable time make any repairs or alterations which Landlord deems necessary for the safety or protection of the Project, or which Landlord is required to make by any court or pursuant to any Governmental Requirement. Tenant shall at its expense make all other repairs necessary to keep the Premises, and Tenant's fixtures and personal property, in good order, condition and repair; to the extent Tenant fails to do so, Landlord may make such repairs itself. The cost of any repairs made by Landlord on account of Tenant's default, or on account of the misuse or neglect by Tenant or its invitees, contractors or agents anywhere in the Project, shall become Additional Rent payable by Tenant on demand. C. NO LIENS. Tenant has no authority to cause or permit any lien or encumbrance of any kind to affect Landlord's interest in the Project; any such lien or encumbrance shall attach to Tenant's interest only. If any mechanic's lien is filed or claim of lien made for work or materials furnished to Tenant, then Tenant shall at its expense within ten (10) days thereafter either discharge or contest the lien or claim. If Tenant contests the lien or claim, then Tenant shall (i) within such ten (10) day period, provide Landlord adequate security for the lien or claim, (ii) promptly contest the lien or claim in good faith by appropriate proceedings that operate to stay its enforcement, and (iii) pay promptly any final adverse judgment entered in any such proceeding. If Tenant does not comply with these requirements, Landlord may discharge the lien or claim, and the amount paid, as well as attorney's fees and other expenses incurred by Landlord, shall become Additional Rent payable by Tenant on demand. D. OWNERSHIP OF IMPROVEMENTS. All Work as defined in this Section 5, all partitions, hardware, equipment, machinery, and all other improvements and fixtures except trade fixtures constructed in the Premises by either Landlord or Tenant and items which Landlord requires Tenant to remove at Tenant's cost (collectively, "Additions"), shall become Landlord's property upon installation without compensation to Tenant, unless Landlord consents otherwise in writing prior to installation. At Landlord's option, all Additions will either be (a) surrendered to Landlord with the Premises at the termination of the Lease or of Tenant's right to possession, or (b) removed in accordance with Subsection 5E below (unless Landlord at the time it gives its consent to the performance of such construction expressly waives in writing the right to require such removal). 11 E. REMOVAL AT TERMINATION. Upon the termination of this Lease or Tenant's right of possession, Tenant shall remove from the Project its trade fixtures, furniture, moveable equipment and other personal property, any Additions which Landlord elects shall be removed by Tenant pursuant to Section 5D, and any Additions to any portion of the Project other than the Premises. Tenant shall promptly repair all damage caused by the installation or removal of any of the foregoing items. If Tenant does not timely remove such property, then Tenant shall be conclusively presumed to have, at Landlord's election (i) conveyed such property to Landlord without compensation or (ii) abandoned such property, and Landlord may dispose of or store any part thereof in any manner at Tenant's sole cost, without waiving Landlord's right to claim from Tenant all expenses arising out of Tenant's failure to remove the property, and without liability to Tenant or any other person. Landlord shall not be a bailee of any such personal property. If Landlord elects abandonment, Tenant shall pay to Landlord, upon demand, any expenses incurred for disposition. 6. USE OF PREMISES. Tenant shall use the Premises only for general office purposes. Tenant shall not allow any use of the Premises which will negatively affect the cost of coverage of Landlord's insurance on the Project. Tenant shall not allow any inflammable or explosive liquids or materials to be kept on the Premises. Tenant shall not allow any use of the Premises which would cause the value or utility of any part of the Premises to diminish or would interfere with any other tenant or with the operation of the Project by Landlord. Tenant shall not permit any nuisance or waste upon the Premises, or allow any offensive noise or odor in or around the Premises. If any governmental authority deems the Premises to be a "place of public accommodation" under the Americans with Disabilities Act or any other comparable law as a result of Tenant's use, then Tenant shall either modify its use and cause such authority to rescind its designation or be responsible for any alterations, structural or otherwise, required to be made to the Building or the Premises under such laws. Landlord represents to Tenant that, to Landlord's commercially reasonable knowledge, on the Phase 1 Commencement Date the Project will comply with applicable building codes, including the Americans with Disabilities Act. 7. GOVERNMENTAL REQUIREMENTS AND BUILDING RULES. Tenant shall comply with all Governmental Requirements applying to its use of the Premises. Tenant shall also comply with all reasonable rules established for the Project from time to time by Landlord. The current rules and regulations are contained in Appendix B. Failure by another tenant to comply with the rules or failure by Landlord to enforce them shall not relieve Tenant of its obligation to comply with the rules or make Landlord responsible to Tenant in any way. Landlord shall use reasonable efforts to apply the rules and regulations uniformly with respect to Tenant and tenants in the Building under leases containing rules and regulations similar to this Lease. In the event of alterations and repairs performed by Tenant, Tenant shall comply with the provisions of Section 5 of this Lease and also Landlord's "Policies, Rules and Regulations for Construction Projects". 8. WAIVER OF CLAIMS; INDEMNIFICATION; INSURANCE. A. INDEMNIFICATION. Tenant shall indemnify, defend and hold harmless Landlord and its officers, directors, employees and agents against any claim by any third party for injury to any person or damage to or loss of any property occurring in the Project and arising from the use of the Premises or from any other act or omission or negligence of Tenant or any of Tenant's employees or agents. Tenant's obligations under this section shall survive the termination of this Lease. 12 Landlord shall indemnify, defend and hold harmless Tenant and its officers, directors, employees and agents against any claim by any third party for damage to person or Premises or from any other act or omission or negligence of Landlord or any of Landlord's employees or agents. Landlord's obligations under this section shall survive the termination of this Lease. LANDLORD AND TENANT AGREE THAT IN ANY CLAIMS FOR PERSONAL INJURY (INCLUDING ALL CONSEQUENTIAL, GENERAL, PUNITIVE AND SPECIAL DAMAGES) BROUGHT AGAINST EITHER OR BOTH OF THEM (WHETHER JOINTLY OR SEVERALLY) BY ANY CLAIMANT, NEITHER LANDLORD NOR TENANT WILL ASSERT ANY DEFENSE BASED ON ANY LIMITATION OF (OR EXCEPTION FROM) LIABILITY BASED ON ANY WORKER'S COMPENSATION LAW, IF THE RESULT OF SUCH DEFENSE WOULD BE TO INCREASE THE LIABILITY OF THE OTHER PARTY TO THE CLAIMANT, OR TO INCREASE THE AMOUNT OF DAMAGES THAT THE OTHER PARTY WOULD HAVE TO PAY OR WOULD LIMIT THE OTHER PARTY'S RIGHT TO SEEK CONTRIBUTION OR INDEMNIFICATION. THIS PROVISION IS FOR THE SOLE BENEFIT OF LANDLORD AND TENANT; IT IS NOT FOR THE BENEFIT OF ANY CLAIMANT. THIS WAIVER HAS BEEN SPECIFICALLY NEGOTIATED BY THE PARTIES AND EACH PARTY HAS CONSULTED WITH INDEPENDENT COUNSEL REGARDING THIS WAIVER. B. TENANT'S INSURANCE. Tenant shall maintain insurance as follows, with such other terms, coverages and insurers, as Landlord shall reasonably require from time to time: (1) Commercial General Liability Insurance, with (a) Contractual Liability including the indemnification provisions contained in this Lease, (b) a severability of interest endorsement, (c) limits of not less than One Million Dollars ($1,000,000) combined single limit per occurrence and not less than Two Million Dollars ($2,000,000) in the aggregate for bodily injury, sickness or death, and property damage, and umbrella coverage of not less than Four Million Dollars ($4,000,000). (2) Property Insurance against "All Risks" of physical loss covering the replacement cost of all improvements, fixtures and personal property. Tenant waives all rights of subrogation, and Tenant's property insurance shall include a waiver of subrogation in favor of Landlord. (3) Workers' compensation or similar insurance in form and amounts required by law, and Employer's Liability with not less than the following limits: ~~Each Accident $500,000 Disease--Policy Limit $500,000 Disease--Each Employee $500,000~~

Such insurance shall contain a waiver of subrogation provision in favor of Landlord and its agents. Tenant's insurance shall be primary and not contributory to that carried by Landlord, its agents, or mortgagee. Landlord, and Landlord's building manager or agent and ground lessor, if any, shall be named as additional insureds in insurance policies required of the Tenant in Section 8B(1). The company or companies writing any insurance which Tenant is required to maintain under this Lease, as well as the form of such insurance, shall at all times be subject to Landlord's approval, and any such company shall be licensed to do business in the state in which the Building is located. Such insurance companies shall have a A.M. Best rating of A:VI or better. 13 Tenant shall cause any contractor of Tenant performing work on the Premises to maintain insurance as follows, with such other terms, coverages and insurers, as Landlord shall reasonably require from time to time: (1) Commercial General Liability Insurance, including contractor's liability coverage, contractual liability coverage, completed operations coverage, broad form property damage endorsement, and contractor's protective liability coverage, to afford protection with limits, for each occurrence, of not less than One Million Dollars ($1,000,000) with respect to personal injury, death or property damage. (2) Workers' compensation or similar insurance in form and amounts required by law, and Employer's Liability with not less than the following limits: ~~Each Accident $500,000 Disease--Policy Limit $500,000 Disease--Each Employee $500,000~~

Such insurance shall contain a waiver of subrogation provision in favor of Landlord and its agents. Tenant's contractor's insurance shall be primary and not contributory to that carried by Tenant, Landlord, their agents or mortgagees. Tenant and Landlord, and if any, Landlord's building manager or agent, mortgagee or ground lessor shall be named as additional insured on Tenant's contractor's insurance policies. C. INSURANCE CERTIFICATES. Tenant shall deliver to Landlord certificates evidencing all required insurance no later than five (5) days prior to the Commencement Date and each renewal date. Each certificate will provide for thirty (30) days prior written notice of cancellation to Landlord and Tenant. D. LANDLORD'S INSURANCE. Landlord shall maintain "All-Risk" property insurance at replacement cost, including loss of rents, on the Building, and Commercial General Liability insurance policies covering the common areas of the Building, each with such terms, coverages and conditions as are normally carried by reasonably prudent owners of properties similar to the Project. E. WAIVER OF SUBROGATION. Landlord and Tenant each waive all claims against the other for property damage to the extent that the claims are or would be covered by the "All-Risk" coverage against property damage that this Lease requires the party suffering the loss to carry. The parties agree that each party bears and will insure against the risk of loss or damage to its own property caused by the negligence of the other party. The respective "All-Risk" coverage property insurance policies carried by Landlord and Tenant shall each contain enforceable waiver of subrogation endorsements. 9. FIRE AND OTHER CASUALTY. A. TERMINATION. If a fire or other casualty causes substantial damage to the Building or the Premises, Landlord shall engage a registered architect to certify within one (1) month of the casualty to both Landlord and Tenant the amount of time needed to restore the Building and the Premises to tenantability, using standard working methods. If the time needed exceeds twelve (12) months from the beginning of the restoration, or two (2) months therefrom if the restoration would begin during the last twelve (12) months of the Lease, then in the case of the Premises, either Landlord or Tenant may terminate this Lease, and in the case of the Building, Landlord may terminate this Lease, by notice to the other party within ten (10) days after the notifying party's receipt of the architect's certificate. The termination shall be effective thirty (30) days from the date of the notice and Rent shall be paid by Tenant to that date, with an abatement for any portion of the Premises which has been untenantable after the casualty. 14 B. RESTORATION. If a casualty causes damage to the Building or the Premises but this Lease is not terminated for any reason, then subject to the rights of any mortgagees or ground lessors, Landlord shall obtain the applicable insurance proceeds and diligently restore the Building and the Premises subject to current Governmental Requirements. Tenant shall replace its damaged improvements, personal property and fixtures. Rent shall be abated on a per diem basis during the restoration for any portion of the Premises which is untenantable, except to the extent that Tenant's negligence caused the casualty. 10. EMINENT DOMAIN. As used herein, "Date of Taking" means the date the party seeking to exercise its right of eminent domain has the right to possession of the property being taken. If a part of the Building is taken by eminent domain or deed in lieu thereof which is so substantial that the Premises cannot reasonably be used by Tenant for the operation of its business, then either party may terminate this Lease effective as of the date of the taking. If any substantial portion of the Project is taken without affecting the Premises, then Landlord may terminate this Lease as of the date of such taking. Rent shall abate from the date of the taking in proportion to any part of the Premises taken. The entire award for a taking of any kind shall be paid to Landlord, and Tenant shall have no right to share in the award. All obligations accrued to the date of the taking shall be performed by the party liable to perform said obligations, as set forth herein. Tenant may pursue a separate award for its trade fixtures and moving expenses in connection with the taking, but only if such recovery does not reduce the award payable to Landlord. 11. RIGHTS RESERVED TO LANDLORD. Landlord may exercise at any time any of the following rights in operating of the Project without liability to the Tenant of any kind: A. NAME. Subject to the provisions of Appendix J attached hereto, to change the name or street address of the Building or the suite number(s) of the Premises. B. SIGNS. To install and maintain any signs on the exterior and in the interior of the Building, and to approve at its sole discretion, prior to installation, any of Tenant's signs in the Premises visible from the common areas or the exterior of the Building. Landlord shall allow Tenant to install interior and exterior signage for the Building in form and location acceptable to Landlord in its sole discretion and subject to all applicable governmental regulations (including, without limitation, the regulations of the City of Hillsboro, the Oregon Department of Transportation and Tanasbourne Corporate Center Protective Covenants) and any conditions, covenants and restrictions affecting the Project. The cost of exterior signage (including installation) shall be at Tenant's sole expense with final location of each sign to be mutually agreed upon by Landlord and Tenant. C. WINDOW TREATMENTS. To approve, at its discretion, prior to installation, any shades, blinds, ventilators or window treatments of any kind, as well as any lighting within the Premises that may be visible from the exterior of the Building or any interior common area. D. KEYS. To retain and use at any time passkeys to enter the Premises or any door within the Premises. Tenant shall not alter or add any lock or bolt. E. ACCESS. To have access to inspect the Premises, and to perform its obligations, or make repairs, alterations, additions or improvements, as permitted by this Lease. F. PREPARATION FOR REOCCUPANCY. To decorate, remodel, repair, alter or otherwise prepare the Premises for reoccupancy at any time after Tenant abandons the Premises, without relieving Tenant of any obligation to pay Rent. 15 G. HEAVY ARTICLES. To approve the weight, size, placement and time and manner of movement within the Building of any safe, central filing system or other heavy article of Tenant's property. Tenant shall move its property entirely at its own risk. H. SHOW PREMISES. To show the Premises to prospective purchasers, tenants, brokers, lenders, investors, rating agencies or others at any reasonable time, provided that Landlord gives prior notice to Tenant and does not materially interfere with Tenant's use of the Premises. I. INTENTIONALLY DELETED. J. USE OF LOCKBOX. To designate a lockbox collection agent for collections of amounts due Landlord. In that case, the date of payment of Rent or other sums shall be the date of the agent's receipt of such payment or the date of actual collection if payment is made in the form of a negotiable instrument thereafter dishonored upon presentment. However, Landlord may reject any payment for all purposes as of the date of receipt or actual collection by mailing to Tenant within twenty-one (21) days after such receipt or collection a check equal to the amount sent by Tenant. K. REPAIRS AND ALTERATIONS. To make repairs or alterations to the Project and in doing so transport any required material through the Premises, to close entrances, doors, corridors, elevators and other facilities in the Project, to open any ceiling in the Premises, or to temporarily suspend services or use of common areas in the Building. Landlord may perform any such repairs or alterations during ordinary business hours, except that Tenant may require any Work in the Premises to be done after business hours if Tenant pays Landlord for overtime and any other expenses incurred. Landlord may do or permit any work on any nearby building, land, street, alley or way. L. BUILDING SERVICES. To install, use and maintain through the Premises, pipes, conduits, wires and ducts serving the Building, provided that such installation, use and maintenance does not unreasonably interfere with Tenant's use of the Premises. M. OTHER ACTIONS. To take any other action which Landlord deems reasonable in connection with the operation, maintenance or preservation of the Building. 12. TENANT'S DEFAULT. Any of the following shall constitute a default by Tenant: A. RENT DEFAULT. Tenant fails to pay any Rent when due, and in the case of only the first such failure during the Term of this Lease, this failure continues for ten (10) days after written notice from Landlord. B. CERTAIN PERFORMANCE DEFAULT. If Tenant, whether by action or inaction, defaults in its obligations under Section 8 (Insurance), Section 17 (Assignment and Sublease), or Section 28 (Hazardous Substances); C. OTHER PERFORMANCE DEFAULT. Tenant fails to perform any other material obligation, individually or in the aggregate, to Landlord under this Lease, and, in the case of only the first two (2) such material failures during the Term of this Lease, this failure continues for ten (10) days after written notice from Landlord, except that if Tenant begins to cure its failure within the ten (10) day period but cannot reasonably complete its cure within such period, then, so long as Tenant continues to diligently attempt to cure its failure, the ten (10) day period shall be extended to sixty (60) days, or such lesser period as is reasonably necessary to complete the cure; D. CREDIT DEFAULT. One of the following credit defaults occurs: (1) Tenant commences any proceeding under any law relating to bankruptcy, insolvency, reorganization or relief of debts, or seeks appointment of a receiver, trustee, custodian or other similar official for the Tenant or for any substantial part of its property, or 16 any such proceeding is commenced against Tenant and either remains undismissed for a period of thirty days or results in the entry of an order for relief against Tenant which is not fully stayed within seven days after entry; (2) Tenant becomes insolvent or bankrupt, does not generally pay its debts as they become due, or admits in writing its inability to pay its debts, or makes a general assignment for the benefit of creditors; (3) Any third party obtains a levy or attachment under process of law against Tenant's leasehold interest. E. VACATION OR ABANDONMENT DEFAULT. Tenant vacates or abandons the Premises. 13. LANDLORD REMEDIES. A. TERMINATION OF LEASE OR POSSESSION. If Tenant defaults, Landlord may elect by notice to Tenant either to terminate this Lease or to terminate Tenant's possession of all or any portion of the Premises without terminating this Lease. In either case, Tenant shall immediately vacate the Premises and deliver possession to Landlord, and Landlord may repossess the Premises and may, at Tenant's sole cost, remove any of Tenant's signs and any of its other property, without relinquishing its right to receive Rent or any other right against Tenant. B. LEASE TERMINATION DAMAGES. If Landlord terminates the Lease, Tenant shall pay to Landlord all Rent due on or before the date of termination, plus Landlord's reasonable estimate of the aggregate Rent that would have been payable from the date of termination through the Termination Date, reduced by the rental value of the Premises calculated as of the date of termination for the same period, taking into account anticipated vacancy prior to reletting, reletting expenses and market concessions, both discounted to present value at the rate of five percent (5%) per annum. If Landlord shall relet any part of the Premises for any part of such period before such present value amount shall have been paid by Tenant or finally determined by a court, then the amount of Rent payable pursuant to such reletting (taking into account vacancy prior to reletting and any reletting expenses or concessions) shall be deemed to be the reasonable rental value for that portion of the Premises relet during the period of the reletting. C. POSSESSION TERMINATION DAMAGES. If Landlord terminates Tenant's right to possession without terminating the Lease and Landlord takes possession of the Premises itself, Landlord may relet any part of the Premises for such Rent, for such time, and upon such terms as Landlord in its sole discretion shall determine, without any obligation to do so prior to renting other vacant areas in the Building. Any proceeds from reletting the Premises shall first be applied to the expenses of reletting, including redecoration, repair, alteration, advertising, brokerage, legal, and other reasonably necessary expenses. If the reletting proceeds after payment of expenses are insufficient to pay the full amount of Rent under this Lease, Tenant shall pay such deficiency to Landlord monthly upon demand as it becomes due. Any excess proceeds shall be retained by Landlord. D. LANDLORD'S REMEDIES CUMULATIVE. All of Landlord's remedies under this Lease shall be in addition to all other remedies Landlord may have at law or in equity. Waiver by Landlord of any breach of any obligation by Tenant shall be effective only if it is in writing, and shall not be deemed a waiver of any other breach, or any subsequent breach of the same obligation. Landlord's acceptance of payment by Tenant shall not constitute a waiver of any breach by Tenant, and if the acceptance occurs after Landlord's notice to Tenant, or termination of the Lease or of Tenant's right to possession, the acceptance shall not affect such notice or termination. Acceptance of payment by Landlord after commencement of a legal proceeding or final judgment shall not affect such proceeding or judgment. Landlord may advance such monies and take such other actions for 17 Tenant's account as reasonably may be required to cure or mitigate any default by Tenant. Tenant shall immediately reimburse Landlord for any such advance, and such sums shall bear interest at the default interest rate until paid. E. WAIVER OF TRIAL BY JURY. EACH PARTY WAIVES TRIAL BY JURY IN THE EVENT OF ANY LEGAL PROCEEDING BROUGHT BY THE OTHER IN CONNECTION WITH THIS LEASE. EACH PARTY SHALL BRING ANY ACTION AGAINST THE OTHER IN CONNECTION WITH THIS LEASE IN A FEDERAL OR STATE COURT LOCATED IN OREGON, CONSENTS TO THE JURISDICTION OF SUCH COURTS, AND WAIVES ANY RIGHT TO HAVE ANY PROCEEDING TRANSFERRED FROM SUCH COURTS ON THE GROUND OF IMPROPER VENUE OR INCONVENIENT FORUM. F. LITIGATION COSTS. In the event of the bringing of any action, including any appeal therefrom, by either party hereto as against the other hereon or hereunder or by reason of the breach of any covenant or condition on the part of the other party or arising out of this Lease, then and in that event the party in whose favor final judgment shall be entered shall be entitled to have and recover of and from the other reasonable attorneys' fees and costs which shall be fixed by the Court. Should Landlord become a party defendant to any litigation concerning this Lease or any part of the Leased Premises by reason of any act or omission of Tenant, its agents, employees or contractors and not because of any act or omission of the Landlord, its agents, employees or contractors, then Tenant shall indemnify, protect, defend and hold Landlord harmless from all claims, demands, liability, or loss by reason thereof and shall pay to Landlord all reasonable attorneys' fees and costs incurred by Landlord in such litigation. In addition, Tenant shall reimburse Landlord for any attorneys' fees or costs reasonably incurred by Landlord, whether or not suit be instituted, with respect to any failure by Tenant to perform any of its duties or obligations under the terms of this Lease. 14. SURRENDER. Upon termination of this Lease or Tenant's right to possession, Tenant shall return the Premises to Landlord in good order and condition, ordinary wear and tear excepted. If Landlord requires Tenant to remove any alterations, then Tenant shall remove the alterations in a good and workmanlike manner and restore the Premises to its condition prior to their installation. Tenant will not be required to modify or reconfigure the Premises from its configuration on the Commencement Date. 15. HOLDOVER. Tenant shall have no right to holdover possession of the Premises after the expiration or termination of this Lease without Landlord's prior written consent, which consent may be withheld in Landlord's sole and absolute discretion. If Tenant retains possession of any part of the Premises after the Term, Tenant shall become a month-to-month tenant for the entire Premises upon all of the terms of this Lease as might be applicable to such month-to-month tenancy, except that Tenant shall pay all of Base Rent, Operating Cost Share Rent and Tax Share Rent at one-hundred fifty percent (150%) of the rate in effect immediately prior to such holdover, computed on a monthly basis for each full or partial month Tenant remains in possession. Tenant shall also immediately pay Landlord all of Landlord's direct and consequential damages. No acceptance of Rent or other payments by Landlord under these holdover provisions shall operate as a waiver of Landlord's right to regain possession or any other of Landlord's remedies. Notwithstanding the foregoing, Tenant shall have the right to holdover possession of the Premises for a period of thirty (30) days at the one-hundred and fifty percent (150%) of the rate in effect immediately prior to such holdover, computed on a monthly basis 18 for such full or partial month Tenant remains in possession and upon all the terms of this Lease as might be applicable to such one-month holdover. 16. SUBORDINATION TO GROUND LEASES AND MORTGAGES. A. SUBORDINATION. This Lease shall be subordinate to any present or future ground lease or mortgage affecting the Project, and any amendments to such ground lease or mortgage, at the election of the ground lessor or mortgagee as the case may be, effected by notice to Tenant in the manner provided in this Lease. The subordination shall be effective upon such notice, but at the request of Landlord or ground lessor or mortgagee, Tenant shall within ten (10) days of the request, execute and deliver to the requesting party any reasonable documents provided to evidence the subordination subject to such ground lessor or mortgagee agreeing not to disturb Tenant's tenancy and to otherwise fulfill and honor such other obligations owed to Tenant as herein provided, so long as Tenant is not in default under this Lease. Any mortgagee has the right, at its option, to subordinate its mortgage to the terms of this Lease, without notice to, nor the consent of, Tenant. B. TERMINATION OF GROUND LEASE OR FORECLOSURE OF MORTGAGE. If any ground lease is terminated or mortgage foreclosed or deed in lieu of foreclosure given and the ground lessor, mortgagee, or purchaser at a foreclosure sale shall thereby become the owner of the Project, Tenant shall attorn to such ground lessor or mortgagee or purchaser without any deduction or setoff by Tenant, and this Lease shall continue in effect as a direct lease between Tenant and such ground lessor, mortgagee or purchaser. The ground lessor or mortgagee or purchaser shall be liable as Landlord only during the time such ground lessor or mortgagee or purchaser is the owner of the Project. At the request of Landlord, ground lessor or mortgagee, Tenant shall execute and deliver within ten (10) days of the request any document furnished by the requesting party to evidence Tenant's agreement to attorn. C. SECURITY DEPOSIT. Any ground lessor or mortgagee shall be responsible for the return of any security deposit by Tenant only to the extent the security deposit is received by such ground lessor or mortgagee. D. NOTICE AND RIGHT TO CURE. The Project is subject to any ground lease and mortgage identified with name and address of ground lessor or mortgagee in Appendix D to this Lease (as the same may be amended from time to time by written notice to Tenant). Tenant will send by registered or certified mail to any ground lessor or mortgagee identified either in such Appendix or in any later notice from Landlord to Tenant a copy of any notice of default sent by Tenant to Landlord. If Landlord fails to cure such default within the required time period under this Lease, but ground lessor or mortgagee begins to cure within ten (10) days after such period and proceeds diligently to complete such cure, then ground lessor or mortgagee shall have such additional time as is necessary to complete such cure, including any time necessary to obtain possession if possession is necessary to cure, and Tenant shall not begin to enforce its remedies so long as the cure is being diligently pursued. E. DEFINITIONS. As used in this Section 16, "mortgage" shall include "deed of trust" and/or "trust deed" and "mortgagee" shall include "beneficiary" and/or "trustee", "mortgagee" shall include the mortgagee of any ground lessee, and "ground lessor", "mortgagee", and "purchaser at a foreclosure sale" shall include, in each case, all of its successors and assigns, however remote. 17. ASSIGNMENT AND SUBLEASE. A. IN GENERAL. Tenant shall not, without the prior consent of Landlord in each case, (i) make or allow any assignment or transfer, by operation of law or otherwise, of any part of Tenant's interest in this Lease, (ii) grant or allow any lien or encumbrance, by operation of law or otherwise, upon any part of Tenant's interest in this Lease, (iii) sublet all or any part of the Premises, or (iv) 19 permit anyone other than Tenant, its employees, and subcontractors to occupy any part of the Premises. Tenant shall remain primarily liable for all of its obligations under this Lease, notwithstanding any assignment, sublease or transfer. No consent granted by Landlord shall be deemed to be a consent to any subsequent assignment or transfer, lien or encumbrance, sublease or occupancy. Tenant shall pay all of Landlord's reasonable attorneys' fees and other reasonable expenses incurred in connection with any consent requested by Tenant or in reviewing any proposed assignment or subletting. Any assignment or transfer, grant of lien or encumbrance, or sublease or occupancy without Landlord's prior written consent shall be void. B. LANDLORD'S CONSENT. Landlord will not unreasonably withhold its consent to any proposed assignment or subletting. It shall be reasonable for Landlord to withhold its consent to any assignment or sublease if (i) Tenant is in default under this Lease, (ii) the financial responsibility, nature of business, and character of the proposed assignee or subtenant are not all reasonably satisfactory to Landlord, (iii) in the reasonable judgment of Landlord the purpose for which the assignee or subtenant intends to use the Premises (or a portion thereof) is not in keeping with Landlord's standards for the Building or are in violation of the terms of this Lease or any other leases in the Project, (iv) the proposed assignee or subtenant is a government entity, or (v) the proposed assignment is for less than the entire Premises or for less than the remaining Term of the Lease. The foregoing shall not exclude any other reasonable basis for Landlord to withhold its consent. C. PROCEDURE. Tenant shall notify Landlord in writing of any proposed assignment or sublease at least fifteen (15) days prior to its proposed effective date. The notice shall include the name and address of the proposed assignee or subtenant, its corporate affiliates in the case of a corporation and its partners in a case of a partnership, an execution copy of the proposed assignment or sublease, and sufficient information to permit Landlord to determine the financial responsibility and character of the proposed assignee or subtenant. As a condition to any effective assignment of this Lease, the assignee shall execute and deliver in form satisfactory to Landlord at least fifteen (15) days prior to the effective date of the assignment, an assumption of all of the obligations of Tenant under this Lease. As a condition to any effective sublease, subtenant shall execute and deliver in form satisfactory to Landlord at least fifteen (15) days prior to the effective date of the sublease, an agreement to comply with all of Tenant's obligations under this Lease, and at Landlord's option, an agreement (except for the economic obligations which subtenant will undertake directly to Tenant) to attorn to Landlord under the terms of the sublease in the event this Lease terminates before the sublease expires. D. CHANGE OF MANAGEMENT OR OWNERSHIP. Any transfer of the direct or indirect power to affect the management or policies of Tenant or direct or indirect change in twenty-five percent (25%) or more of the ownership interest in Tenant shall constitute an assignment of this Lease. The provisions of this Section 17.D. shall not be applicable so long as Tenant's common stock is either listed on the New York Stock Exchange or approved for trading on the Nasdaq National Market System. E. EXCESS PAYMENTS. If Tenant assigns this Lease or sublets any part of the Premises for consideration in excess of the pro-rata portion of Rent applicable to the space subject to the assignment or sublet, then Tenant shall pay fifty percent (50%) of any excess profit to Landlord as Additional Rent immediately upon receipt. F. RECAPTURE. Except as to assignments or subleases to permitted subsidiaries or affiliates as provided in Section 17.G., Landlord may, by giving written notice to Tenant within thirty (30) days after receipt of Tenant's notice of assignment or subletting, terminate this Lease with respect to the space described in Tenant's notice, as of the effective date of the proposed assignment 20 or sublease and all obligations under this Lease as to such space shall expire except as to any obligations that expressly survive any termination of this Lease. G. PERMITTED TRANSFERS. Notwithstanding anything to the contrary in the Lease, Tenant may, without Landlord's prior written consent and without payment of any amount to Landlord, sublet the Premises or assign the Lease to (a) a subsidiary, affiliate, division or corporation controlling, controlled by or under common control with Tenant, (b) a successor corporation related to Tenant by merger, consolidation, nonbankruptcy reorganization, or government action, or (c) a purchaser of substantially all of Tenant's assets located in the Premises, PROVIDED, HOWEVER, that no such assignment or subletting shall release or discharge Tenant from any liability under this Lease or be construed as consent by Landlord to any further assignment or subletting to any person or entity that is not an affiliate of Tenant and provided further that Tenant shall provide a copy of the documentation effecting such permitted transfer as soon as reasonably possible either prior to or after the effective date thereof; and provided further, that in the event of a permitted transfer, the assignee shall be deemed to have assumed all of the obligations of the Tenant hereunder from and after the effective date of the assignment, and in the case of a permitted subletting, the subtenant shall be deemed to have agreed to comply with all of Tenant's obligations under this Lease applicable to the subleased Premises from and after the effective date of the sublease, and, at Landlord's option, will agree to attorn to Landlord under the terms of the sublease in the event this Lease terminates before the sublease expires. Neither the sale or transfer of Tenant's capital stock, including, without limitation, a transfer in connection with the merger, consolidation or nonbankruptcy reorganization of Tenant and any sale through any private or public offering, nor the pledge of or grant of a security interest in any of the Tenant's capital stock shall be deemed an assignment, subletting or other transfer of the Lease or the Premises. For purposes of this section, the term "affiliate" means any corporation, limited liability company, partnership or other entity controlled by, controlling or under common control with Tenant, whether "control" means the ownership of at least fifty-one percent (51%) of the voting stock or other beneficial interest of the controlled entity. 18. CONVEYANCE BY LANDLORD. If Landlord shall at any time transfer its interest in the Building or this Lease, Landlord shall be released of any obligations occurring after such transfer, except the obligation to return to Tenant any security deposit not delivered to its transferee, and Tenant shall look solely to Landlord's successors for performance of such obligations. This Lease shall not be affected by any such transfer. 19. ESTOPPEL CERTIFICATE. Each party shall, within ten (10) business days of receiving a request from the other party, execute, acknowledge in recordable form, and deliver to the other party or its designee a certificate stating, subject to a specific statement of any applicable exceptions, that the Lease as amended to date is in full force and effect, that the Tenant is paying Rent and other charges on a current basis, and that to the best of the knowledge of the certifying party, the other party has committed no uncured defaults and has no offsets or claims. The certifying party may also be required to state the date of commencement of payment of Rent, the Commencement Date, the Termination Date, the Base Rent, the current Operating Cost Share Rent and Tax Share Rent estimates, the status of any improvements required to be completed by Landlord, the amount of any security deposit, and such other matters as may be reasonably requested. Failure to deliver such statement within the time required shall be conclusive evidence against the non-certifying party that this Lease, with any amendments identified by the requesting party, is in full force and effect, that there are no uncured defaults by the requesting party, that not more than one month's Rent has been paid in advance, that 21 the non-certifying party has not paid any security deposit, and that the non-certifying party has no claims or offsets against the requesting party. 20. SECURITY DEPOSIT. A. USE OF SECURITY DEPOSIT. Tenant shall deposit with Landlord on the date of this Lease, security for the performance of all of its obligations in the amount set forth on the Schedule initially in the form of a Letter of Credit described in Section 20.B. If Tenant defaults under this Lease, Landlord may use all or any part of the Security Deposit to make any defaulted payment, to pay for Landlord's cure of any defaulted obligation, or to compensate Landlord for any loss or damage resulting from any default. To the extent any portion of the Security Deposit is used, Tenant shall within five (5) days after demand from Landlord restore the Security Deposit to its then-full amount. Landlord may keep the Security Deposit in its general funds and shall not be required to pay interest to Tenant on the deposit amount, provided that Landlord shall credit against the Base Rent each month an amount equal to the amount of interest that would have been earned using five percent (5%) simple interest on only $200,000 of the cash Security Deposit held by Landlord. If Tenant performs all of its obligations under this Lease and returns the Premises to Landlord at the end of the Term in the condition required by this Lease, then Landlord shall return all of the remaining Security Deposit to Tenant within thirty (30) days after the end of the Term. The Security Deposit shall not serve as an advance payment of Rent or a measure of Landlord's damages for any default under this Lease. If Landlord transfers its interest in the Building or this Lease, Landlord may transfer the Security Deposit to its transferee. Upon such transfer, Landlord shall have no further obligation to return the Security Deposit to Tenant, and Tenant's right to the return of the Security Deposit shall apply solely against Landlord's transferee. B. LETTER OF CREDIT. As used in this Lease, the term "Letter of Credit" shall mean an unconditional and irrevocable letter of credit issued by a federally-insured banking institution acceptable to Landlord (the "Letter of Credit") in the face amount of One Million and No/100 Dollars ($1,000,000.00) in the form and substance acceptable to Landlord, which shall be held by Landlord as the Security Deposit in accordance with the provisions of this Section 20. If the Letter of Credit (or any replacement thereof) is issued for an effective period of time less than the seven (7) year initial Term of this Lease, Tenant shall from time to time, and not later than thirty (30) days prior to the expiration of the Letter of Credit, replace each such expiring Letter of Credit with a new Letter of Credit in the same amount (subject to the reduction referenced in Section 20.D below), and upon the same terms and conditions as the expiring Letter of Credit. The Letter of Credit (and any replacement thereof) may be drawn upon by Landlord under the terms and conditions as provided in this Section 20. Failure of Tenant to renew the Letter of Credit at least thirty (30) days prior to its expiration shall constitute an Event of Default under this Lease and shall entitle Landlord, in addition to the other remedies contained in this Lease, and without any further notice to Tenant, to draw upon the Letter of Credit. If for any reason Landlord shall have failed to draw upon the Letter of Credit prior to its expiration (or if the issuer shall have been rendered unable to honor such draw request for any reason, including due to governmental regulatory intervention or financial deterioration), Tenant shall immediately upon demand from Landlord, deliver to Landlord a replacement Letter of Credit in the same amount as the Letter of Credit that had expired (or had been rendered incapable of being honored). 22 C. At such time as all of the following conditions have been achieved or satisfied, Landlord shall release and deliver to Tenant the Letter of Credit: (a) Tenant has raised at least $48,000,000 in proceeds (net of commissions, finders fees and underwriter's discounts) in one or more public offerings or private placements of its equity securities (including convertible preferred stock); (b) Tenant's common stock is either listed on the New York Stock Exchange or approved for trading on the Nasdaq National Market System; (c) Tenant has reported positive net income for four consecutive quarters as reflected in financial statements, prepared in accordance with generally accepted accounting principles, consistently applied, filed by the Company with the Securities and Exchange Commission; and (d) Tenant has delivered to Landlord the sum of $200,000 in immediately available funds, which shall become the Security Deposit subject to the provisions of this Section 20. D. On each anniversary of the Phase 1 Commencement Date, unless the Letter of Credit has been released by Landlord, the Letter of Credit shall be reduced by an amount equal to one-seventh (1/7th) of the original principal amount (i.e. $142,857.14 for each of the first through the sixth anniversary dates and $142,857.16 on the seventh anniversary date). E. Notwithstanding anything to the contrary contained herein, Tenant hereby knowingly, and upon advice of counsel, waives any right it may have to enjoin, declare or otherwise prohibit the issuer of the Letter of Credit from paying, or Landlord from drawing upon, the Letter of Credit. If Tenant attempts to obtain, or obtains, an injunction or other legal writ which prevents the issuer from paying, or Landlord from drawing upon, the Letter of Credit, Tenant shall, at Landlord's request, either (a) extend the Letter of Credit during the time period ending ten (10) days after expiration of the injunction or other legal writ; or (b) provide Landlord other reasonably satisfactory security. If Landlord prevails in any litigation concerning the Letter of Credit and Landlord's rights thereto, Tenant shall reimburse Landlord its attorneys' fees, court costs, and other expenses related to the litigation. 21. FORCE MAJEURE. Landlord shall not be in default under this Lease to the extent Landlord is unable to perform any of its obligations on account of any strike or labor problem, energy shortage, governmental preemption or prescription, national emergency, or any other cause of any kind beyond the reasonable control of Landlord ("Force Majeure"). 22. INTENTIONALLY DELETED. 23. NOTICES. All notices, consents, approvals and similar communications to be given by one party to the other under this Lease, shall be given in writing, mailed or personally delivered as follows: A. LANDLORD. To Landlord as follows: CarrAmerica Realty Corporation 10785 Willows Road NE, Suite 250 Redmond, WA 98052 Attn: Market Officer 23 with a copy to: CarrAmerica Realty Corporation 1850 K Street, NW Suite 500 Washington, D.C. 20006 Attn: Lease Administration or to such other person at such other address as Landlord may designate by notice to Tenant. B. TENANT. To Tenant as follows: prior to Phase 1 Commencement Date: Corillian Corporation 3855 S.W. 153rd Drive Beaverton, OR 97006 after Phase 1 Commencement Date: Corillian Corporation 3400 N.W. John Olsen Place Hillsboro, OR 97124 or to such other person at such other address as Tenant may designate by notice to Landlord. Mailed notices shall be sent by United States certified or registered mail, or by a reputable national overnight courier service, postage prepaid. Mailed notices shall be deemed to have been given on the earlier of actual delivery or three (3) business days after posting in the United States mail in the case of registered or certified mail, and one business day in the case of overnight courier. 24. QUIET POSSESSION. So long as Tenant shall perform all of its obligations under this Lease, Tenant shall enjoy peaceful and quiet possession of the Premises against any party claiming through the Landlord. 25. REAL ESTATE BROKER. Tenant represents to Landlord that Tenant has not dealt with any real estate broker with respect to this Lease except for any broker(s) listed in the Schedule, and no other broker is in any way entitled to any broker's fee or other payment in connection with this Lease. Tenant shall indemnify and defend Landlord against any claims by any other broker or third party for any payment of any kind in connection with this Lease. 26. MISCELLANEOUS. A. SUCCESSORS AND ASSIGNS. Subject to the limits on Tenant's assignment contained in Section 17, the provisions of this Lease shall be binding on and inure to the benefit of all successors and assigns of Landlord and Tenant. B. DATE PAYMENTS ARE DUE. Except for payments to be made by Tenant under this Lease which are due upon demand or are due in advance (such as Base Rent), Tenant shall pay to Landlord any amount for which Landlord renders a statement of account within ten days of Tenant's receipt of Landlord's statement. C. MEANING OF "LANDLORD", "RE-ENTRY, "INCLUDING" AND "AFFILIATE." The term "Landlord" means only the owner of the Project and the lessor's interest in this Lease from time to time. The words "re-entry" and "re-enter" are not restricted to their technical legal meaning. The words "including" and similar words shall mean "without limitation." The word "affiliate" shall 24 mean a person or entity controlling, controlled by or under common control with the applicable entity. "Control" shall mean the power directly or indirectly, by contract or otherwise, to direct the management and policies of the applicable entity. D. TIME OF THE ESSENCE. Time is of the essence of each provision of this Lease. E. NO OPTION. This document shall not be effective for any purpose until it has been executed and delivered by both parties; execution and delivery by one party shall not create any option or other right in the other party. F. SEVERABILITY. The unenforceability of any provision of this Lease shall not affect any other provision. G. GOVERNING LAW. This Lease shall be governed in all respects by Oregon law, without regard to the principles of conflicts of laws. H. LEASE MODIFICATION. Tenant agrees to modify this Lease in any way requested by a mortgagee which does not cause increased expense to Tenant or otherwise adversely affect Tenant's interests under this Lease. I. NO ORAL MODIFICATION. No modification of this Lease shall be effective unless it is a written modification signed by both parties. J. LANDLORD'S RIGHT TO CURE. If Landlord breaches any of its obligations under this Lease, Tenant shall notify Landlord in writing and shall take no action respecting such breach so long as Landlord promptly begins to cure the breach and diligently pursues such cure to its completion. Landlord may cure any default by Tenant; any expenses incurred shall become Additional Rent due from Tenant on demand by Landlord. K. CAPTIONS. The captions used in this Lease shall have no effect on the construction of this Lease. L. AUTHORITY. Landlord and Tenant each represents to the other that it has full power and authority to execute and perform this Lease. M. LANDLORD'S ENFORCEMENT OF REMEDIES. Landlord may enforce any of its remedies under this Lease either in its own name or through an agent. N. ENTIRE AGREEMENT. This Lease, together with all Appendices, constitutes the entire agreement between the parties. No representations or agreements of any kind have been made by either party which are not contained in this Lease. O. LANDLORD'S TITLE. Landlord's title shall always be paramount to the interest of the Tenant, and nothing in this Lease shall empower Tenant to do anything which might in any way impair Landlord's title. P. LIGHT AND AIR RIGHTS. Landlord does not grant in this Lease any rights to light and air in connection with Project except such rights to install communications devices on the roof of the Premises, as consistent with Tenant's ordinary business operations or requirements. Except as provided herein, Landlord reserves to itself, the Land, the Building below the improved floor of each floor of the Premises, the Building above the ceiling of each floor of the Premises, the exterior of the Premises and the areas on the same floor outside the Premises, along with the areas within the Premises required for the installation and repair of utility lines and other items required to serve other tenants of the Building. Q. SINGULAR AND PLURAL. Wherever appropriate in this Lease, a singular term shall be construed to mean the plural where necessary, and a plural term the singular. For example, if at any 25 time two parties shall constitute Landlord or Tenant, then the relevant term shall refer to both parties together. R. NO RECORDING BY TENANT. Tenant shall not record any memorandum or any portion of this Lease. S. EXCLUSIVITY. Landlord does not grant to Tenant in this Lease any exclusive right except the right to occupy its Premises. T. NO CONSTRUCTION AGAINST DRAFTING PARTY. The rule of construction that ambiguities are resolved against the drafting party shall not apply to this Lease. U. SURVIVAL. All obligations of Landlord and Tenant under this Lease shall survive the termination of this Lease. V. RENT NOT BASED ON INCOME. No rent or other payment in respect of the Premises shall be based in any way upon net income or profits from the Premises. Tenant may not enter into or permit any sublease or license or other agreement in connection with the Premises which provides for a rental or other payment based on net income or profit. W. BUILDING MANAGER AND SERVICE PROVIDERS. Landlord may perform any of its obligations under this Lease through its employees or third parties hired by the Landlord. X. LATE CHARGE AND INTEREST ON LATE PAYMENTS. Without limiting the provisions of Section 12A, if Tenant fails to pay any installment of Rent or other charge to be paid by Tenant pursuant to this Lease within five (5) business days after the same becomes due and payable, then Tenant shall pay a late charge equal to the greater of five percent (5%) of the amount due or $250. In addition, interest shall be paid by Tenant to Landlord on any late payments of Rent from the date due until paid at the rate provided in Section 2D(2). Such late charge and interest shall constitute Additional Rent due and payable by Tenant to Landlord upon the date of payment of the delinquent payment referenced above. Y. TENANT'S FINANCIAL STATEMENTS. Within ten (10) days after Landlord's written request therefor, Tenant shall deliver to Landlord the current unaudited quarterly and audited annual financial statements of Tenant, and annual audited financial statements of the two (2) years prior to the current year's financial statements, each with an opinion of a certified public accountant and including a balance sheet and profit and loss statement, all prepared in accordance with generally accepted accounting principles consistently applied. 27. UNRELATED BUSINESS INCOME. If Landlord reasonably believes at any time that any part of the payments by Tenant to Landlord under this Lease may be characterized as unrelated business income under the United States Internal Revenue Code and its regulations, then Tenant shall enter into any amendment proposed by Landlord to avoid such income, so long as the amendment does not require Tenant to make more payments or accept fewer services from Landlord, than this Lease provides. 28. HAZARDOUS SUBSTANCES. Neither Landlord nor Tenant shall cause or permit any Hazardous Substances to be brought upon, produced, stored, used, discharged or disposed of in or near the Project. "Hazardous Substances" include those hazardous substances described in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et seq., any other applicable federal, state or local law, and the regulations adopted under these laws. If any lender or 26 governmental agency shall require testing for Hazardous Substances in the Premises, Tenant shall pay for such testing. 29. EXCULPATION. Landlord shall have no personal liability under this Lease; its liability shall be limited to its interest in the Project, and shall not extend to any other property or assets of the Landlord. In no event shall any officer, director, employee, agent, shareholder, partner, member or beneficiary of Landlord be personally liable for any of Landlord's obligations hereunder. 30. UTILITY DEREGULATION. A. LANDLORD CONTROLS SELECTION. Landlord has chosen Portland General Electric and Duke Power (each, an "Electric Service Provider") to provide electricity service for the Building. Notwithstanding the foregoing, to the extent permitted by law, Landlord may at any time and from time to time during the Lease Term, either contract for service from a different company or companies providing electricity service (each such company, an "Alternative Service Provider") or continue to contract for service from the Electric Service Provider. B. TENANT WILL PROVIDE ACCESS. Tenant will cooperate with Landlord, the Electric Service Provider, and any Alternative Service Provider at all times and, as reasonably necessary, will allow Landlord, Electric Service Provider, and any Alternative Service Provider reasonable access to the Building's electric lines, feeders, risers, wiring, and any other machinery in the Premises, subject to the other limitations set forth in this Lease. C. LANDLORD NOT RESPONSIBLE FOR CHANGE IN SERVICE. Landlord will have no liability for any loss, damage, or expense Tenant may incur (a) by reason of any change, failure, interference, disruption, or defect in the supply or character of the electric energy furnished to the Premises, or (b) if the quantity or character of the electric energy supplied by the Electric Service Provider or any Alternative Service Provider is no longer available or suitable for Tenant's requirements. No such change, failure, defect, unavailability, or unsuitability will constitute an actual or constructive eviction of Tenant, in whole or in part, entitle Tenant to any abatement or diminution of Rent, or relieve Tenant from any of its obligations under this Lease. 31. SATELLITE DISHES AND ANTENNAE. Tenant's use of the Premises may include Tenant's use of the roof of the Building for the installation, operation and maintenance of satellite dishes, and related antennae, equipment, cabling and utilities (the antennae, equipment and cabling are together referred to as the "Antennae"). Before installing any Antennae, Tenant will deliver plans and specifications for the dish and related equipment and for the installation thereof (together, the "Plans and Specifications") to Landlord, which Landlord may approve in its reasonable discretion. Landlord may require Tenant to design the Antennae and mounting brackets and connections to withstand a 100 mph wind exposure, and to install a backup tether to prevent possible damage caused by the Antennae to other improvements. Tenant shall install the Antennae only in locations reasonably approved by Landlord in advance. Tenant will install the Antennae in strict accordance with the plans and specifications and in good faith, and in accordance with the requirements of the Building's structural engineer to ensure that the structural integrity of the roof and structure of the Building are fully preserved. Tenant shall, at Tenant's sole cost and expense, install and maintain the Antennae in a first class, safe and workmanlike manner, in conformance with sound construction practices, and in accordance with all applicable laws, rules, regulations and conditions of any governmental approvals. Tenant shall obtain all necessary governmental permits and approvals, at Tenant's expense, for the installation, operation and maintenance of the Antennae and shall keep the same in full force and effect. Tenant shall not damage the Building or reduce the structural or design integrity of the Building as a result of the 27 installation, operation and maintenance of Antennae. Tenant shall indemnify and hold harmless Landlord from any and all damages, costs, liabilities, claims of damage, loss and costs arising from any actual or alleged injury to any person or from any actual or alleged loss or damage to property caused by, resulting from, or arising out of the installation, operation or maintenance of the Antennae, excepting therefrom any such injury or damages caused by Landlord's negligence or misconduct. Should the Building or any improvements located thereon be damaged or destroyed by the installation, operation or maintenance of the Antennae, Tenant shall immediately repair such damage or destruction and restore the Building to as good a condition as existed immediately prior to said damage or destruction, and shall compensate Landlord for any and all other damages, including but not limited to the loss of income or business occurring as a result of such damage or destruction. Landlord reserves the right to use the roof of the Building and the Building for any and all purposes not inconsistent with the rights granted to Tenant herein, and further reserves the right to grant any other tenant or third party a license or easement for use of the roof of the Building. Unless Landlord otherwise requests in writing, upon expiration or the sooner termination of the Lease, Tenant shall, at its sole cost and expense, remove the Antennae and repair any damage caused by such removal. 32. RIGHTS OF FIRST OFFER. Tenant shall have a right of first offer to lease and a right of first offer to purchase as provided in Appendix H and I respectively. IN WITNESS WHEREOF, the parties hereto have executed this Lease. LANDLORD: CARRAMERICA REALTY CORPORATION, a Maryland corporation By: ------------------------------------ Print Name: ---------------------------- Print Title: --------------------------- TENANT: CORILLIAN CORPORATION, a Oregon corporation By: ------------------------------------ Print Name: ---------------------------- Print Title: --------------------------- 28 ATTACHMENTS: Appendix A - Plan of Premises Appendix B - Rules and Regulations Appendix C - Tenant Improvement Agreement Appendix D - Mortgages Currently Affecting the Project Appendix E - Commencement Date Confirmation Appendix F - Legal Description Appendix G - Extension Option Appendix H - Right of First Offer to Lease Appendix I - Right of First Offer to Purchase Appendix J - Naming Rights Appendix K - Janitorial Service Appendix L - Exclusive Parking Stall Locations 29 APPENDIX A PLAN OF THE PREMISES (Floor Plans depicting the Premises to be attached) A-1 APPENDIX B RULES AND REGULATIONS 1. Tenant shall not place anything, or allow anything to be placed near the glass of any window, door, partition or wall which may, in Landlord's judgment, appear unsightly from outside of the Project. 2. The Project directory shall be available to Tenant solely to display names and their location in the Project, which display shall be as directed by Landlord. 3. The sidewalks, halls, passages, exits, entrances, elevators and stairways shall not be obstructed by Tenant or used by Tenant for any purposes other than for ingress to and egress from the Premises. Tenant shall lend its full cooperation to keep such areas free from all obstruction and in a clean and sightly condition and shall move all supplies, furniture and equipment as soon as received directly to the Premises and move all such items and waste being taken from the Premises (other than waste customarily removed by employees of the Building) directly to the shipping platform at or about the time arranged for removal therefrom. The halls, passages, exits, entrances, elevators, stairways, balconies and roof are not for the use of the general public and Landlord shall, in all cases, retain the right to control and prevent access thereto by all persons whose presence in the judgment of Landlord, reasonably exercised, shall be prejudicial to the safety, character, reputation and interests of the Project. Neither Tenant nor any employee or invitee of Tenant shall go upon the roof of an building in the Project. 4. The toilet rooms, urinals, wash bowls and other apparatuses shall not be used for any purposes other than that for which they were constructed, and no foreign substance of any kind whatsoever shall be thrown therein, and to the extent caused by Tenant or its employees or invitees, the expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by Tenant. 5. Tenant shall not cause any unnecessary janitorial labor or services by reason of Tenant's carelessness or indifference in the preservation of good order and cleanliness. 6. Tenant shall not install or operate any refrigerating, heating or air conditioning apparatus, or carry on any mechanical business without the prior written consent of Landlord; use the Premises for housing, lodging or sleeping purposes; or permit preparation or warming of food in the Premises (warming of coffee and individual meals with employees and guests excepted). Notwithstanding the foregoing, with the consent of Landlord which will not be unreasonably be withheld, Tenant may build-out a food service facility for its employees in Building 3. Tenant shall not occupy or use the Premises or permit the Premises to be occupied or used for any purpose, act or thing which is in violation of any Governmental Requirement or which may be dangerous to persons or property. 7. Tenant shall not bring upon, use or keep in the Premises or the Project any kerosene, gasoline or inflammable or combustible fluid or material, or any other articles deemed hazardous to persons or property, or use any method of heating or air conditioning other than that supplied by Landlord. 8. Landlord shall have sole power to direct electricians as to where and how telephone and other wires are to be introduced. No boring or cutting for wires is to be allowed without the consent of Landlord. The location of telephones, call boxes and other office equipment affixed to the Premises shall be subject to the approval of Landlord. B-1 9. No additional locks shall be placed upon any doors, windows or transoms in or to the Premises. Tenant shall not change existing locks or the mechanism thereof. Upon termination of the lease, Tenant shall deliver to Landlord all keys and passes for offices, rooms, parking lot and toilet rooms which shall have been furnished Tenant. In the event of the loss of keys so furnished, Tenant shall pay Landlord therefor. Tenant shall not make, or cause to be made, any such keys and shall order all such keys solely from Landlord and shall pay Landlord for any keys in addition to the two sets of keys originally furnished by Landlord for each lock. 10. Tenant shall not install linoleum, tile, carpet or other floor covering so that the same shall be affixed to the floor of the Premises in any manner except as approved by Landlord. 11. No furniture, packages, supplies, equipment or merchandise will be received in the Project or carried up or down in the freight elevator, except between such hours and in such freight elevator as shall be designated by Landlord. Tenant shall not take or permit to be taken in or out of other entrances of the Building, or take or permit on other elevators, any item normally taken in or out through the trucking concourse or service doors or in or on freight elevators. 12. Tenant shall cause all doors to the Premises to be closed and securely locked and shall turn off all utilities, lights and machines before leaving the Project at the end of the day. 13. Without the prior written consent of Landlord, Tenant shall not use the name of the Project or any picture of the Project in connection with, or in promoting or advertising the business of, Tenant, except Tenant may use the address of the Project as the address of its business. 14. Tenant shall cooperate fully with Landlord to assure the most effective operation of the Premises' or the Project's heating and air conditioning, and shall refrain from attempting to adjust any controls, other than room thermostats installed for Tenant's use. Tenant shall keep corridor doors closed. 15. Tenant assumes full responsibility for protecting the Premises from theft, robbery and pilferage, which may arise from a cause other than Landlord's negligence, which includes keeping doors locked and other means of entry to the Premises closed and secured. 16. Peddlers, solicitors and beggars shall be reported to the office of the Project or as Landlord otherwise requests. 17. Tenant shall not advertise the business, profession or activities of Tenant conducted in the Project in any manner which violates the letter or spirit of any code of ethics adopted by any recognized association or organization pertaining to such business, profession or activities. 18. No bicycle or other vehicle and no animals or pets shall be allowed in the Premises, halls, freight docks, or any other parts of the Building except that blind persons may be accompanied by "seeing eye" dogs. Tenant shall not make or permit any noise, vibration or odor to emanate from the Premises, or do anything therein tending to create, or maintain, a nuisance, or do any act tending to injure the reputation of the Building. 19. Tenant acknowledges that Building security problems may occur which may require the employment of extreme security measures in the day-to-day operation of the Project. Accordingly: (a) Landlord may, at any time, or from time to time, or for regularly scheduled time periods, as deemed advisable by Landlord and/or its agents, in their sole discretion, require that persons entering or leaving the Project or the Property identify themselves to watchmen or other employees designated by Landlord, by registration, identification or otherwise. B-2 (b) Tenant agrees that it and its employees will cooperate fully with Project employees in the implementation of any and all security procedures. (c) Such security measures shall be the sole responsibility of Landlord, and Tenant shall have no liability for any action taken by Landlord in connection therewith, it being understood that Landlord is not required to provide any security procedures and shall have no liability for such security procedures or the lack thereof. 20. Tenant shall not do or permit the manufacture, sale, purchase, use or gift of any fermented, intoxicating or alcoholic beverages without obtaining written consent of Landlord. 21. Tenant shall not disturb the quiet enjoyment of any other tenant. 22. Tenant shall not provide any janitorial services or cleaning without Landlord's written consent and then only subject to supervision of Landlord and at Tenant's sole responsibility and by janitor or cleaning contractor or employees at all times satisfactory to Landlord. 23. Landlord may retain a pass key to the Premises and be allowed admittance thereto at all times to enable its representatives to examine the Premises from time to time and to exhibit the same and Landlord may place and keep on the windows and doors of the Premises at any time signs advertising the Premises for Rent. 24. No equipment, mechanical ventilators, awnings, special shades or other forms of window covering shall be permitted either inside or outside the windows of the Premises without the prior written consent of Landlord, and then only at the expense and risk of Tenant, and they shall be of such shape, color, material, quality, design and make as may be approved by Landlord. 25. Tenant shall not, during the Term of this Lease, canvas or solicit other tenants of the Building for any purpose. 26. Tenant shall not install or operate any phonograph, musical or sound- producing instrument or device, radio receiver or transmitter, TV receiver or transmitter, or similar device in the Building, nor install or operate any antenna, aerial, wires or other equipment inside or outside the Building, nor operate any electrical device from which may emanate electrical waves which may interfere with or impair radio or television broadcasting or reception from or in the Building or elsewhere, without in each instance the prior written approval of Landlord. The use thereof, if permitted, shall be subject to control by Landlord to the end that others shall not be disturbed. 27. Tenant shall promptly remove all rubbish and waste from the Premises. 28. Tenant shall not exhibit, sell or offer for sale, rent or exchange in the Premises or at the Project any article, thing or service, except those ordinarily embraced within the use of the Premises specified in Section 6 of this Lease, without the prior written consent of Landlord. 29. Tenant shall list all furniture, equipment and similar articles Tenant desires to remove from the Premises or the Building and deliver a copy of such list to Landlord and procure a removal permit from the Office of the Building authorizing Building employees to permit such articles to be removed. 30. Tenant shall not overload any floors in the Premises or any public corridors or elevators in the Building. 31. Tenant shall not do any painting in the Premises, or mark, paint, cut or drill into, drive nails or screws into, or in any way deface any part of the Premises or the Building, outside or inside, without the prior written consent of Landlord. B-3 32. Whenever Landlord's consent, approval or satisfaction is required under these Rules, then unless otherwise stated, any such consent, approval or satisfaction must be obtained in advance, such consent or approval may be granted or withheld in Landlord's sole discretion, and Landlord's satisfaction shall be determined in its sole judgment. 33. Tenant and its employees shall cooperate in all fire drills conducted by Landlord in the Building. 34. Tenant and its employees shall cooperate with the following parking requirements: (a) Tenant shall not park or permit the parking of vehicles in any parking areas designated by Landlord as areas for parking by visitors to the Project. (b) No overnight or extended term storage of vehicles shall be permitted. (c) Vehicles must be parked entirely within painted stall lines of a single parking stall. (d) All directional signs and arrows must be observed. (e) Parking is prohibited in areas not striped for parking, in aisles, where "no parking" signs are posted, and in such other areas as may be designated by Landlord or Landlord's Parking Operator. (f) Every driver is required to park and lock his own vehicle. All responsibility for damage to vehicles is assumed by the driver. (g) Washing, waxing, cleaning or servicing of any vehicle in any area not specifically reserved for such purpose is prohibited. (h) Landlord reserves the right to establish and change parking fees and to modify and/or adopt such other reasonable and non-discriminatory rules and regulations for the parking facilities as it deems necessary for the operation of the parking facilities, provided that Tenant nor its officers or employees shall be charged parking fees for the use of the parking facilities. Landlord may refuse to permit any person who violates these rules to park in the parking facilities, and any violation of the rules shall subject the car to possible removal. B-4 APPENDIX C TENANT IMPROVEMENT AGREEMENT 1. INITIAL IMPROVEMENTS. Landlord shall cause to be performed the improvements (the "Initial Improvements") in the Premises in accordance with plans and specifications approved by Tenant and Landlord (the "Plans"), which approvals shall not be unreasonably withheld. The Initial Improvements shall be performed at the Tenant's cost, subject to the Landlord's Contribution (hereinafter defined). Landlord will make available a Tenant Improvement allowance of $28.50 per rentable square foot to be applied toward the costs of the Initial Improvements (which amount includes $.50 per rentable square foot for Tenant's architect) ("Landlord's Contribution"). Landlord will also provide, at Landlord's cost (exclusive of Landlord's Contribution), the following items as a part of its shell and core work: (a) 2' x 4' ceiling grid and tegular ceiling tile shall be pre-purchased by landlord and stocked on the floor. (b) Lighting fixtures shall be pre-purchased by Landlord and stocked on the floor. (c) Electrical service distributed to each floor with panels and transformers set within the building core ready for branch circuit wiring to be accomplished under tenant improvement work. (d) Aluminum window sills, aluminum sill extensions and aluminum window head installed. (e) Building columns shall be ready for framing. (f) Sprinkler heads installed in shell and core work in accordance with governing code for unoccupied space. Finished heads will be dropped as part of tenant improvements. (g) Common area fire alarms, smoke detectors and exit lights installed per code and in compliance with the ADA. (h) Building restroom facilities, and exterior spaces shall be finished in accordance with governing codes and ordinances as part of the building shell and core. (i) Horizontal one inch (1") mini-blinds, Levelor or equal, for all perimeter windows shall be pre-purchased and installed by Landlord. (j) Shell and core floor shall be flat and level in accordance with the industry standard for the type and location of the installation. Tenant shall use the Tenant Improvement allowances only for improving the Premises, including but not limited to voice and data cabling, supplemental HVAC, satellite dishes and/or antenna installation, and for preparation of Tenant's space planning, construction documents and permits, including local approval and signage permits. The Tenant Improvement allowances shall also be used to lower sprinkler heads, install lights, install ceiling tile, and complete HVAC duct work. The final Plans for the Initial Improvements shall be prepared by Landlord's licensed architect at Tenant's cost, and shall be mutually agreed upon by the parties as set forth herein. Within two (2) weeks after this Lease is fully executed, Tenant, working with Landlord's or Tenant's space planner, shall furnish its proposed space plan to Landlord for Landlord's review and approval. Landlord shall, within one (1) week after receipt of the proposed space plan either provide Tenant C-1 with comments to the same, or provide Tenant with detailed plans prepared by Landlord's architect incorporating Tenant's proposed space plan and identifying any Landlord comments and/or modifications to the same. If Landlord provides such detailed architectural plans, Tenant shall, within one (1) week after receipt of the same, either provide comments to such plans or approve the same. Tenant shall be deemed to have approved such plans if it does not provide comments within such time period. If instead of architectural plans, Landlord provides Tenant with comments to Tenant's proposed space plan, Tenant shall provided a revised space plan to Landlord incorporating Landlord's comments within one (1) week after receipt of Landlord's comments. Landlord shall, within one (1) week after receipt of the revised space plan, either provide Tenant with comments to the same, or provide Tenant with plans prepared by Landlord's architect based on such revised space plan, including any Landlord comments and/or modifications to the same, and the process described above shall be repeated, if necessary, until the plans have been approved by the parties. Notwithstanding any other term or provisions hereof, the parties agree to cooperate with each other in good faith and to use reasonable efforts to reach agreement so as to enable Landlord to submit the agreed upon plans for permit to the City of Hillsboro no later than May 30, 2000 for Phase 1 and August 3, 2000 for Phase 2. Landlord, using its business expertise and knowledge of the market, and in consultation with Tenant, shall select a contractor to perform the construction of the Initial Improvements at a commercially reasonable cost. Tenant hereby approves Baugh Construction as the general contractor for the Initial Improvements. The general contractor fee shall be three percent (3%) of the actual cost of the Tenant Improvement construction cost plus an amount for contractor's reasonable general conditions. Upon request by Tenant, Tenant shall have the right to consult and mutually approve with Landlord proposed subcontractors performing work on the Initial Improvements. Landlord will choose mechanical and electrical engineers. Landlord shall use commercially reasonable efforts to cause the Initial Improvements to be substantially completed, except for minor "Punch List" items, on or before October 1, 2000 for Phase 1 and January 1, 2001 for Phase 2, subject to Tenant Delay (as defined in Section 4 hereof) and Force Majeure. Landlord, or an agent of Landlord, shall provide project management services in connection with the construction of the Initial Improvements and the Change Orders (hereinafter defined). Such project management services shall be performed, at Tenant's cost, for a fee of three percent (3%) of all costs related to the preparation of the Plans and the construction of the Initial Improvements and the Change Orders. 2. CHANGE ORDERS. If, before the Commencement Date, Tenant wants improvements or changes (individually or collectively, "Change Orders") to the Premises in addition to, revision of, or substitution for the Initial Improvements, Tenant shall deliver to Landlord for its approval plans and specifications for such Change Orders. If Landlord does not approve of the plans for Change Orders, Landlord shall advise Tenant of the revisions required. Tenant shall revise and redeliver the plans and specifications to Landlord within five (5) business days of Landlord's advice or Tenant shall be deemed to have abandoned its request for such Change Orders. Tenant shall pay for all preparations and revisions of plans and specifications, and the construction of all Change Orders, subject to Landlord's Contribution. 3. LANDLORD'S CONTRIBUTION. If the cost of the Tenant Improvements does not equal or exceed the amount of the Landlord's Contribution, the excess will be credited to the payment of Tenant's Base Rent. Landlord has no obligation to pay for costs of the Initial Improvements or Change Orders in excess of Landlord's Contribution, notwithstanding any other provision hereof. If the cost of the Initial Improvements and/or Change Orders exceeds the Landlord's Contribution, Tenant shall pay such overage to Landlord before construction of the Initial Improvements and/or Change Orders begins. C-2 4. COMMENCEMENT DATE DELAY. Phase 1 and Phase 2 Commencement Dates shall be delayed until the Initial Improvements are substantially complete for each Phase ("Phase 1 and Phase 2 Completion Date" and each a "Completion Date"), except to the extent that the delay is caused by any one or more of the following (a "Tenant Delay"): (a) Tenant's request for Change Orders (whether or not any such Change Orders are actually performed); or (b) Contractor's performance of any Change Orders; or (c) Tenant's request for materials, finishes or installations requiring unusually long lead times; or (d) Tenant's delay in reviewing, revising or approving plans and specifications beyond the periods set forth herein; or (e) Tenant's delay in providing information critical to the normal progression of the project. Tenant shall provide such information as soon as reasonably possible, but in no event longer than one week after receipt of such request for information from the Landlord; or (f) Tenant's delay in making payments to Landlord for costs of the Initial Improvements and/or Change Orders in excess of the Landlord's Contribution; or (g) Any other act or omission by Tenant, its agents, contractors or persons employed by any of such persons. If the Commencement Date is delayed for any reason, then Landlord shall cause Landlord's Architect to certify the date on which the Initial Improvements would have been completed but for such Tenant Delay, or were in fact completed without any Tenant Delay. 5. ACCESS BY TENANT PRIOR TO COMMENCEMENT OF TERM. Landlord at its discretion may permit Tenant and its agents to enter the Premises prior to each Commencement Date to prepare the Premises for Tenant's use and occupancy. Any such permission shall constitute a license only, conditioned upon Tenant's: (a) working in harmony with Landlord and Landlord's agents, contractors, workmen, mechanics and suppliers and with other tenants and occupants of the Building; (b) obtaining in advance Landlord's approval of the contractors proposed to be used by Tenant and depositing with Landlord in advance of any work (i) security satisfactory to Landlord for the completion thereof, and (ii) the contractor's affidavit for the proposed work and the waivers of lien from the contractor and all subcontractors and suppliers of material; and (c) furnishing Landlord with such insurance as Landlord may require against liabilities which may arise out of such entry. Landlord shall have the right to withdraw such license for any reason upon twenty-four (24) hours' written notice to Tenant. Landlord shall not be liable in any way for any injury, loss or damage which may occur to any of Tenant's property or installations in the Premises prior to each Commencement Date. Tenant shall protect, defend, indemnify and save harmless Landlord from all liabilities, costs, damages, fees and expenses arising out of the activities of Tenant or its agents, contractors, suppliers or workmen in the Premises or the Building. Any entry and occupation permitted under this Section shall be governed by Section 5 and all other terms of the Lease. Landlord shall not be liable in any way for an injury, loss or damage, which may occur to any of Tenant's property or installations in the Premises prior to each Commencement Date. C-3 6. MISCELLANEOUS. Terms used in this Appendix C shall have the meanings assigned to them in the Lease. The terms of this Appendix C are subject to the terms of the Lease. C-4 APPENDIX D MORTGAGES CURRENTLY AFFECTING THE PROJECT NONE D-1 APPENDIX E COMMENCEMENT DATE CONFIRMATION Landlord: CarrAmerica Realty Corporation, a Maryland corporation Tenant: Corillian Corporation, an Oregon corporation This Commencement Date Confirmation is made by Landlord and Tenant pursuant to that certain Lease dated as of May 22, 2000 (the "Lease") for the following premises: (a) All of Building 2, approximately 66,198 rentable square feet, located at 3400 N.W. John Olsen Place, Hillsboro, Oregon 97124; (b) All of the second floor and all of the third floor of Building 1, approximately 44,901 rentable square feet, located at 3600 N.W. John Olsen Place, Hillsboro, Oregon; (c) All of Building 3, approximately 11,028 rentable square feet, located at 3500 N.W. John Olsen Place, Hillsboro, Oregon This Confirmation is made pursuant to Item 9 of the Schedule to the Lease. LEASE COMMENCEMENT DATE, TERMINATION DATE. Landlord and Tenant hereby agree that the Phase 1 Commencement Date of the Lease for the Phase 1 Premises is October 1, 2000, the Phase 2 Commencement Date of the Lease for the Phase 2 Commencement Date is January 1 and the Termination Date of the Lease is October 1, 2007. ACCEPTANCE OF PREMISES. Tenant has inspected the Premises and affirms that the Premises is acceptable in all respects in its current "as is" condition. INCORPORATION. This Confirmation is incorporated into the Lease, and forms an integral part thereof. This Confirmation shall be construed and interpreted in accordance with the terms of the Lease for all purposes. TENANT: Corillian Corporation, an Oregon corporation By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- [Signatures continue] E-1 LANDLORD: CarrAmerica Realty Corporation, a Maryland corporation By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- (EXHIBIT ONLY - NOT FOR EXECUTION) E-2 APPENDIX F LEGAL DESCRIPTION Lot 11, Tanasbourne Corporate Center in the City of Hillsboro, County of Washington and State of Oregon. F-1 APPENDIX G EXTENSION OPTION EXTENSION OPTION. Subject to Subsection B below, Tenant may at its option extend the Term of this Lease for two (2) successive periods of five (5) years each. Each such period is called a "Renewal Term", and the first such five (5) year period is called the "First Renewal Term" and the second such five (5) year period is called the "Second Renewal Term". Each Renewal Term shall be upon the same terms contained in this Lease (excluding the provisions of Appendix G of this Lease) and except for the payment of Base Rent during the Renewal Term; and any reference in the Lease to the "Term" of the Lease shall be deemed to include any Renewal Term and apply thereto, unless it is expressly provided otherwise. Tenant shall have no additional extension options. A. The Base Rent during the First Renewal Term shall be the greater of (i) the Base Rent applicable to the last day of the final Lease Year prior to the applicable Renewal Term, or (ii) 100% the Market Rate (defined hereinafter) for such space for a term commencing on the first day of the Renewal Term. "Market Rate" shall mean the then prevailing market rate for a comparable term commencing on the first day of the Renewal Term for tenants of comparable size and creditworthiness for comparable space in the Building and other first class office buildings in the vicinity of the Building. For purposes of each Renewal Term, market rate shall also include a tenant improvement (refreshment) allowance comparable to other tenants of similar size and creditworthiness for comparable space in other first-class office buildings in the vicinity of the Building. B. To exercise any option, Tenant must deliver a binding notice to Landlord not less than fourteen (14) months prior to the expiration of the initial Term of this Lease, or the first Renewal Term, as the case may be. The Market Rate for the Renewal Term shall be calculated pursuant to Subsection C below and Landlord shall inform Tenant of the Market Rate. Such calculations shall be final and shall not be recalculated at the actual commencement of the Renewal Term. If Tenant fails to timely give its notice of exercise, Tenant will be deemed to have waived its option to extend. C. Market Rate shall be determined as follows: (i) If Tenant provides Landlord with its binding notice of exercise pursuant to Subsection B above, then at some point between nineteen (19) and seventeen (17) months prior to the commencement of the First Renewal Term (or, at Landlord's election, at an earlier point), Landlord shall calculate and inform Tenant of the Market Rate. If Tenant rejects the Market Rate as calculated by Landlord, Tenant shall inform Landlord of its rejection within ten (10) days after Tenant's receipt of Landlord's calculation, and Landlord and Tenant shall commence negotiations to agree upon the Market Rate. If Tenant fails to timely reject Landlord's calculation of the Market Rate it will be deemed to have accepted such calculation. If Landlord and Tenant are unable to reach agreement within twenty-one (21) days after Landlord's receipt of Tenant's notice of rejection, then the Market Rate shall be determined in accordance with (ii) below. (ii) If Landlord and Tenant are unable to reach agreement on the Market Rate within said twenty-one (21) day period, then within seven (7) days, Landlord and Tenant shall each simultaneously submit to the other in a sealed envelope G-1 its good faith estimate of the Market Rate. If the higher of such estimates is not more than one hundred five percent (105%) of the lower, then the Market Rate shall be the average of the two. Otherwise, the dispute shall be resolved by arbitration in accordance with (iii) and (iv) below. (iii) Within seven (7) days after the exchange of estimates, the parties shall select as an arbitrator an independent MAI appraiser with at least five (5) years of experience in appraising office space in the metropolitan area in which the Project is located (a "Qualified Appraiser"). If the parties cannot agree on a Qualified Appraiser, then within a second period of seven (7) days, each shall select a Qualified Appraiser and within ten (10) days thereafter the two appointed Qualified Appraisers shall select a third Qualified Appraiser and the third Qualified Appraiser shall be the sole arbitrator. If one party shall fail to select a Qualified Appraiser within the second seven (7) day period, then the Qualified Appraiser chosen by the other party shall be the sole arbitrator. (iv) Within twenty-one (21) days after submission of the matter to the arbitrator, the arbitrator shall determine the Market Rate by choosing whichever of the estimates submitted by Landlord and Tenant the arbitrator judges to be more accurate. The arbitrator shall notify Landlord and Tenant of its decision, which shall be final and binding. If the arbitrator believes that expert advice would materially assist him, the arbitrator may retain one or more qualified persons to provide expert advice. The fees of the arbitrator and the expenses of the arbitration proceeding, including the fees of any expert witnesses retained by the arbitrator, shall be paid by the party whose estimate is not selected. Each party shall pay the fees of its respective counsel and the fees of any witness called by that party. D. Tenant's option to extend this Lease is subject to the conditions that: (i) on the date that Tenant delivers its binding notice exercising an option to extend, Tenant is not in default under this Lease after the expiration of any applicable notice and cure periods, and (ii) Tenant shall not have assigned the Lease, or sublet any portion of the Premises under a sublease (as permitted without Landlord's consent as provided for in Section 17.G), which is effective at any time during the final twelve (12) months of the initial Term or the First Renewal Term, as applicable. G-2 APPENDIX H RIGHT OF FIRST OFFER TO LEASE RIGHT OF FIRST OFFER. Subject to Subsection B below, and subject to any expansion or renewal options of any current tenant in the Building (a "Prior Tenant"), or the right of Landlord to extend the Lease of any current tenant in the Building, Landlord hereby grants to Tenant for the term of the Lease a right of first offer to lease any available space in the Building (collectively, the "ROFO Space" including space presently occupied by the University of Phoenix, when that space becomes available), to be exercised in accordance with Subsection A below. A. If and when any ROFO Space becomes available for lease to anyone other than a Prior Tenant, Landlord shall so notify Tenant ("Landlord's ROFO Notice") identifying the available ROFO Space (the "Subject ROFO Space"). Landlord's ROFO Notice may be given in advance of such availability and shall contain the terms upon which Landlord intends to offer the Subject ROFO Space for lease to the market. Tenant shall notify Landlord within ten (10) days of receipt of Landlord's ROFO Notice whether it desires to lease the Subject ROFO Space on the terms set forth in Landlord's ROFO Notice. If Tenant does not notify Landlord within said 10-day period that it will lease the Subject ROFO Space, Tenant shall be deemed to have refused the Subject ROFO Space. After any refusal, Tenant shall have no further right of first offer for such Subject ROFO Space and Landlord shall be free to lease such space to any party for any term and upon any terms it desires. Provided, however, that Landlord will not lease the ROFO space to any other tenant on economic terms which are materially more favorable to such other tenant without again making the space available to Tenant. As used herein, "materially more favorable" shall mean essential economic terms which are more favorable to other tenant by at least 5%. If Tenant exercises its right of first offer with respect to the Subject ROFO Space, such space shall be added to the Premises for all purposes of this lease for the remaining Term of the Lease on (a) the terms specified in Landlord's ROFO Notice, and (b) the terms of this Lease to the extent that they do not conflict with the terms specified in Landlord's ROFO Notice, except that the terms of Landlord's ROFO Notice shall not apply during any Renewal Term, and instead, the terms of the Lease applying to the remainder of the Premises during the Renewal Term shall also apply to the Subject ROFO Space. B. Tenant's right of first offer is subject to the conditions that: (i) on the date that Tenant delivers its notice exercising its right of first offer, Tenant is not in default under this Lease after the expiration of any applicable notice and cure periods, and (ii) Tenant shall not have assigned the Lease, or sublet any portion of the Premises under a sublease which is in effect at any time during the period commencing with Tenant's delivery of its notice and ending on the date the ROFO Space is added to the Premises. C. Promptly after Tenant's exercise of its right of first offer, Landlord shall deliver to Tenant an amendment to the Lease to reflect changes in the Premises, Base Rent, Tenant's Proportionate Share and any other appropriate terms changed by the addition of the ROFO Space. Within 15 days thereafter, Tenant shall execute and return the amendment and Landlord shall promptly execute the amendment and return it to Tenant. Tenant's failure to execute and return the amendment to Landlord shall entitle Landlord to terminate this ROFO upon written notice to Tenant, at Landlord's election. H-1 APPENDIX I RIGHT OF FIRST OFFER TO PURCHASE RIGHT OF FIRST OFFER. Provided that (a) the Lease shall be in full force and effect, (b) Tenant, shall not be in default under the Lease beyond any applicable cure period, and (c) Buyer shall not have assigned its interest in the Lease or sublet any portion of the Premises, except to permitted subsidiaries or affiliates as provided in Section 17.G. Landlord agrees that if Landlord desires to sell the Project separately from any other project then owned by Landlord, Tenant shall have the right of first offer to purchase the Project ("Right of First Offer"), in accordance with the terms hereof. Notwithstanding any other term or provision hereof, Tenant's Right of First Offer shall terminate upon the Termination Date, including any extensions or renewals thereof or any earlier termination of this Lease. (i) Landlord shall give Tenant written notice of Landlord's desire to sell the Project (the "First Offer Notice"), which notice shall include the purchase price and essential business terms upon which Landlord is willing to sell the Project. Tenant shall have ten (10) business days following the effective date of the First Offer Notice within which to accept, by written notice to Landlord, the terms contained therein. (ii) Time is of the essence hereof. If Tenant fails for any reason to respond to the First Offer Notice within such ten business days, the terms contained in the First Offer Notice shall be deemed rejected. If Tenant rejects the terms of the First Offer Notice, Landlord shall be entitled to sell the Project to any third party upon any terms and conditions Landlord deems acceptable in its sole discretion; provided, however, that Landlord shall not sell the Project on economic terms which are materially more favorable than those set forth in the First Offer Notice without again offering the Project to Buyer, in accordance with the terms hereof. (iii) Notwithstanding the remaining terms hereof, the Right of First Offer contained in this paragraph shall not apply in the case of any sale, transfer, or conveyance of the Project to any parent, subsidiary, successor by merger or reorganization, or affiliate of the Seller; provided, however, that in any such instance, the transferee shall take the Project subject to the remaining terms hereof. As used herein, "affiliate" shall mean a person or entity controlling, controlled by, or under common control with Seller. I-1 APPENDIX J NAMING RIGHTS NAMING RIGHTS. Landlord will change the name of the Project to " [TBD] " provided that each of the following have been satisfied or continue to exist at the time of the requested name change by Tenant: (i) The Letter of Credit required by Section 20 has been released by Landlord; (ii) Tenant has not been in default under this Lease beyond any applicable cure period; (iii) Tenant continues to occupy all of the Premises and has not subleased any of the Premises to any third party other than to a subsidiary or affiliated company as described in Section _____; and (iv) [Other conditions] If any of the conditions in (ii), (iii) or (iv) above no longer continue to exist, Landlord shall have the right to change the name of the Project and to replace all signs with a new name in Landlord's sole discretion. The cost of removal of the signs bearing the [TBD] name and the replacement of those signs with new signs shall be performed by Landlord provided that all costs and expenses thereof shall be paid by Tenant upon demand by Landlord. J-1 APPENDIX K JANITORIAL SERVICE Landlord shall furnish janitorial service as described below: DAILY 1. Sweep, dry mop (using treated mops), or vacuum all floor areas (moving light furniture) of resilient wood or carpet, remove matter such as gum and tar which has adhered to the floor. 2. Empty and damp wipe all ashtrays and waste baskets and remove all trash. 3. Dust all horizontal surfaces with treated dust cloth, including furniture, files, equipment, blinds, and louvers that can be reached without a ladder. 4. Spot wash to remove smudges, marks, fingerprints from such areas as walls, equipment, doors, partitions and light switches within reach. 5. Wash and disinfect water fountains and water coolers. 6. Damp mop all non-resilient floors such as concrete, terrazzo and ceramic tile. 7. Empty all waste containers. 8. Dust and rub down elevator doors, walls, and metal work in elevator cabs. TOILET ROOMS 1. Clean mirrors, soap dispensers, shelves, wash basins, exposed plumbing, dispenser and disposal container exteriors using detergent disinfectant and water. Damp wipe all ledges, toilet stalls and doors, spot clean light switchers, doors and walls. 2. Clean toilets and urinals with detergent disinfectant, beginning with seats and working down. Pour one once of bowl cleaner into urinal after cleaning and do not flush. 3. Furnish and refill all soap, toilet, sanitary napkin and towel dispensers. 4. Clean all baseboards. 5. Damp mop floors using detergent disinfectant. WEEKLY 1. Wash all directory board, display, entry door and side light glass as necessary. 2. Spot clean carpet stains. 3. Spot wash interior partition glass and door glass to remove all smudge marks and finger marks from doors, partitions, woodwork, window ledges and window mullions. MONTHLY 1. Sweep stairwells and landings. 2. Wash all uncarpeted areas. 3. High dust all horizontal and vertical surfaces not reached in nightly cleaning, such as pipes, light fixtures, door frames, picture frames and other wall hangings. K-1 QUARTERLY 1. Vacuum all ceilings and wall air supply and exhaust diffusers or grills. 2. Wash all stairwell landings and treads. 3. Clean exterior windows of the building, weather permitting. 4. Scrub, was and buff all tile areas. K-2 APPENDIX L EXCLUSIVE PARKING STALL LOCATIONS L-1 EX-10.5 4 v17101exv10w5.txt EXHIBIT 10.5 EXHIBIT 10.5 LOAN AND SECURITY AGREEMENT CORILLIAN CORPORATION . . . TABLE OF CONTENTS
PAGE ---- 1 ACCOUNTING AND OTHER TERMS 1 2 LOAN AND TERMS OF PAYMENT 1 2.1 Credit Extensions 1 2.2 Overadvance 2 2.3 Interest Rate, Payments 2 2.4 Fees 3 3 CONDITIONS OF LOANS 3 3.1 Conditions Precedent to Initial Credit Extension 3 3.2 Conditions Precedent to all Credit Extensions 3 4 CREATION OF SECURITY INTEREST 3 4.1 Grant of Security Interest 3 5 REPRESENTATIONS AND WARRANTIES 4 5.1 Due Organization and Authorization 4 5.2 Collateral and Other Assets 4 5.3 Litigation 4 5.4 No Material Adverse Change in Financial Statements 4 5.5 Solvency 4 5.6 Regulatory Compliance 5 5.7 Subsidiaries 5 5.8 Full Disclosure 5 6 AFFIRMATIVE COVENANTS 5 6.1 Government Compliance 5 6.2 Financial Statements, Reports, Certificates 5 6.3 Inventory; Returns 6 6.4 Taxes 6 6.5 Insurance 6 6.6 Deposit/Investment Account 6 6.7 Financial Covenants 6 6.8 Further Assurances 7 7 NEGATIVE COVENANTS 7 7.1 Dispositions 7 7.2 Changes in Business, Ownership, Management or Business Locations 7 7.3 Mergers or Acquisitions 7 7.4 Indebtedness 7 7.5 Encumbrance 7 7.6 Distributions; Investments 8 7.7 Transactions with Affiliates 8 7.8 Compliance 8 8 EVENTS OF DEFAULT 8 8.1 Payment Default 8 8.2 Covenant Default 8 8.3 Material Adverse Change 8 8.4 Attachment 8 8.5 Insolvency 9 8.6 Other Agreements 9 8.7 Judgments 9 8.8 Misrepresentations 9
i 9 BANK'S RIGHTS AND REMEDIES 9 9.1 Rights and Remedies 9 9.2 Power of Attorney 10 9.3 Accounts Collection 10 9.4 Bank Expenses 10 9.5 Bank's Liability for Collateral 11 9.6 Remedies Cumulative 11 9.7 Demand Waiver 11 10 NOTICES 11 11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER 11 12 GENERAL PROVISIONS 11 12.1 Successors and Assigns 11 12.2 Indemnification 12 12.3 Time of Essence 12 12.4 Severability of Provision 12 12.5 Amendments in Writing, Integration 12 12.6 Counterparts 12 12.7 Survival 12 12.8 Confidentiality 12 12.9 Attorneys' Fees, Costs and Expenses 13 13 DEFINITIONS 13 13.1 Definitions 13

ii THIS LOAN AND SECURITY AGREEMENT dated November 9, 2000, between SILICON VALLEY BANK ("Bank"), whose address is 3003 Tasman Drive, Santa Clara, California 95054 with a loan production office located at 11000 S. W. Stratus, Suite 170, Beaverton, OR 97008-7113 and CORILLIAN CORPORATION ("Borrower"), whose address is 3855 S.W. 153rd Drive, Beaverton, OR 97006, provides the terms on which Bank will lend to Borrower and Borrower will repay Bank. The parties agree as follows: 1 ACCOUNTING AND OTHER TERMS Accounting terms not defined in this Agreement will be construed following GAAP. Calculations and determinations must be made following GAAP. The term "financial statements" includes the notes and schedules. The terms "including" and "includes" always mean "including (or includes) without limitation," in this or any Loan Document. This Agreement shall be construed to impart upon Bank a duty to act reasonably at all times. 2 LOAN AND TERMS OF PAYMENT 2.1 CREDIT EXTENSIONS. Borrower will pay Bank the unpaid principal amount of all Credit Extensions and interest on the unpaid principal amount of the Credit Extensions. 2.1.1 REVOLVING ADVANCES. (a) Bank will make Advances not exceeding (i) the Committed Revolving Line, minus (ii) the principal balance outstanding under the Committed Equipment Line. However, if Borrower's Adjusted Quick Ratio falls below 3.0:1.0, Advances under the Committed Revolving Line shall not exceed (i) the lesser of the Committed Revolving Line or the Borrowing Base, minus (ii) the principal balance outstanding under the Committed Equipment Line. Amounts borrowed under this Section may be repaid and reborrowed during the term of this Agreement. (b) To obtain an Advance, Borrower must notify Bank by facsimile or telephone by 3:00 p.m. Pacific time on the Business Day the Advance is to be made. Borrower must promptly confirm the notification by delivering to Bank the Payment/Advance Form attached as Exhibit B. Bank will credit Advances to Borrower's deposit account. Bank may make Advances under this Agreement based on instructions from a Responsible Officer or his or her designee or without instructions if the Advances are necessary to meet Obligations which have become due. Bank may rely on any telephone notice given by a person whom Bank believes is a Responsible Officer or designee. Borrower will indemnify Bank for any loss Bank suffers due to such reliance. (c) The Committed Revolving Line terminates on the Revolving Maturity Date, when all Advances are immediately payable. 2.1.2 EQUIPMENT ADVANCES. (a) Through November 9, 2001 (the "Equipment Availability End Date"), Bank will make advances ("Equipment Advance" and, collectively, "Equipment Advances") not exceeding (i) the Committed Equipment Line, minus (ii) the principal balance outstanding under the Committed Revolving Line. The Equipment Advances may be used to finance Eligible Equipment purchased within 120 days of the Equipment Advance and may not exceed 100% of the equipment invoice excluding taxes, shipping, warranty charges, freight discounts and installation expense. The Equipment Advances may also be used to finance Eligible Equipment purchased more than 120 days prior to the date of the Equipment Advance; however, such Equipment Advances may not exceed 75% of the net book value of the applicable equipment. Other Equipment may constitute up to 25% of each Equipment Advance for equipment purchased within 120 days of the date of the Equipment Advance. Equipment Advances shall be in the minimum amount of $250,000. PAGE 1 - LOAN AND SECURITY AGREEMENT (b) Interest accrues from the date of each Equipment Advance at the rate in Section 2.3 (a) and is payable monthly until the Equipment Availability End Date occurs. Equipment Advances shall be repaid as follows: (i) Prime Rate Option: If Borrower selects the Prime Rate pricing option, Borrower shall repay the amount of principal drawn in forty-seven (47) equal monthly payments of principal plus accrued interest and one final payment of all outstanding principal and accrued interest. (ii) Fixed Rate Option: If Borrower selects the fixed rate pricing option, Borrower shall repay the amount of principal drawn in forty-seven (47) equal monthly payments including both principal and interest, and one final payment of all outstanding principal and accrued interest. (c) To obtain an Equipment Advance, Borrower must notify Bank (the notice is irrevocable) by facsimile no later than 3:00 p.m. Pacific time 1 Business Day before the day on which the Equipment Advance is to be made. The notice in the form of Exhibit B (Payment/Advance Form) must be signed by a Responsible Officer or designee and include a copy of the invoice for the Equipment being financed. (d) Bank's obligation to lend the undisbursed portion of the Committed Equipment Line will terminate if, in Bank's sole discretion, there has been a material adverse change in the general affairs, management, results of operation, condition (financial or otherwise) or the prospects of Borrower, whether or not arising from transactions in the ordinary course of business, or there has been any material adverse deviation by Borrower from the most recent business plan of Borrower presented to and accepted by Bank prior to the execution of this Agreement. 2.2 OVERADVANCE. If Borrower's Obligations under Sections 2.1.1 and 2.1.2 together exceed $5,000,000, or the amount available pursuant to Sections 2.1.1 and 2.1.2, Borrower must immediately pay in cash to Bank the excess. 2.3 INTEREST RATE, PAYMENTS. (a) Interest Rate. Advances under the Committed Revolving Line accrue interest on the outstanding principal balance at a per annum rate of 0.50% above the Prime Rate. Equipment Advances under the Committed Equipment Line accrue interest at a per annum rate of (i) 1.00% above the Prime Rate, or (ii) 3.50% above the applicable rate for U.S. Treasury securities of equal maturity. The Borrower shall select the Prime Rate option or fixed rate option at the same time notice is provided pursuant to Section 2.1.4(c). After an Event of Default, Obligations accrue interest at 5.00% above the rate effective immediately before the Event of Default. The interest rate increases or decreases when the Prime Rate changes. Interest is computed on a 360 day year for the actual number of days elapsed. (b) Payments. Interest due on the Committed Revolving Line is payable on the first of each month. Principal and interest due on the Equipment Advances are payable on the first of each month. Payments received after 12:00 noon Pacific time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and additional fees or interest accrue. (c) Permitted Prepayment of Loans. Borrower shall have the option to prepay the Equipment Advances advanced by Bank under this Agreement, provided Borrower (i) provides written notice to Bank of its election to prepay the Equipment Advances at least fifteen (15) days prior to such prepayment, and (ii) pays, on the date of the prepayment (A) all accrued unpaid interest with respect to the Equipment Advances; (B) a prepayment fee equivalent to 3.0% of the amount prepaid in the first twelve (12) months; 2.0% of the amount prepaid in the second twelve (12) months; and 1.0% of the amount prepaid in the third twelve (12) months; and (C) all other sums, if any, that shall have become due and payable hereunder with respect to this Agreement. PAGE 2 - LOAN AND SECURITY AGREEMENT 2.4 FEES. Borrower will pay: (a) Loan Fee. A fully earned, non-refundable loan fee of 0.50% of the Committed Revolving Line ($25,000). (b) Bank Expenses. All Bank Expenses (including reasonable attorneys' fees and reasonable expenses) incurred through and after the date of this Agreement, are payable when due. Attorneys' fees associated with the preparation of this Agreement shall be limited to $3,000; however, Borrower acknowledges that any future attorneys' fees incurred by Bank in connection with the administration or modification of this Agreement shall not be included in this amount. In the event of any action or proceeding arising out of the Loan Documents, attorneys' fees shall be allocated in accordance with Section 12.9 below. 3 CONDITIONS OF LOANS 3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION. Bank's obligation to make the initial Credit Extension is subject to the condition precedent that it receive the agreements, documents and fees it requires. 3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. Bank's obligations to make each Credit Extension, including the initial Credit Extension, is subject to the following: (a) timely receipt of any Payment/Advance Form; and (b) the representations and warranties in Section 5 must be materially true on the date of the Payment/Advance Form and on the effective date of each Credit Extension and no Event of Default may have occurred and be continuing, or result from the Credit Extension. Each Credit Extension is Borrower's representation and warranty on that date that the representations and warranties of Section 5 remain true. 4 CREATION OF SECURITY INTEREST 4.1 GRANT OF SECURITY INTEREST. Borrower grants Bank a continuing security interest in all presently existing and later acquired Collateral to secure all Obligations and performance of each of Borrower's duties under the Loan Documents. Except for Permitted Liens, any security interest will be a first priority security interest in the Collateral. Bank may place a "hold" on any deposit account pledged as Collateral. If this Agreement is terminated, Bank's lien and security interest in the Collateral will continue until Borrower fully satisfies its Obligations. Borrower does not grant Bank a security interest in, or lien on, its Intellectual Property. Borrower agrees not to grant a security interest in its Intellectual Property to any Person, or to sell, transfer, assign, mortgage, pledge, lease or encumber such Intellectual Property, without the prior written consent of Bank so long as this Agreement, as amended or modified, remains in effect. PAGE 3 - LOAN AND SECURITY AGREEMENT 5 REPRESENTATIONS AND WARRANTIES Borrower represents and warrants as follows: 5.1 DUE ORGANIZATION AND AUTHORIZATION. Borrower and each Subsidiary is duly existing and in good standing in its state of formation and qualified and licensed to do business in, and in good standing in, any state in which the conduct of its business or its ownership of property requires that it be qualified, except where the failure to do so could not reasonably be expected to cause a Material Adverse Change. The execution, delivery and performance of the Loan Documents have been duly authorized, and do not conflict with Borrower's formation documents, nor constitute an event of default under any material agreement by which Borrower is bound. Borrower is not in default under any agreement to which or by which it is bound in which the default could reasonably be expected to cause a Material Adverse Change. 5.2 COLLATERAL AND OTHER ASSETS. Borrower has good title to the Collateral, free of Liens except Permitted Liens. The Accounts are bona fide, existing obligations, and the service or property has been performed or delivered to the account debtor or its agent for immediate shipment to and unconditional acceptance by the account debtor. Borrower has no notice of any actual or imminent Insolvency Proceeding of any account debtor whose accounts are an Eligible Account in any Borrowing Base Certificate. All Inventory is in all material respects of good and marketable quality, free from material defects. Borrower is the sole owner of the Intellectual Property, except for non-exclusive licenses granted to its customers in the ordinary course of business. Each Patent is valid and enforceable and no part of the Intellectual Property has been judged invalid or unenforceable, in whole or in part, and no claim has been made that any part of the Intellectual Property violates the rights of any third party, except to the extent such claim could not reasonably be expected to cause a Material Adverse Change. 5.3 LITIGATION. Except as shown in the Schedule, there are no actions or proceedings pending or, to the knowledge of Borrower's Responsible Officers and legal counsel, threatened by or against Borrower or any Subsidiary in which a likely adverse decision could reasonably be expected to cause a Material Adverse Change. 5.4 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS. All consolidated financial statements for Borrower, and any Subsidiary, delivered to Bank fairly present in all material respects Borrower's consolidated financial condition and Borrower's consolidated results of operations. There has not been any material deterioration in Borrower's consolidated financial condition since the date of the most recent financial statements submitted to Bank. 5.5 SOLVENCY. The fair salable value of Borrower's assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; the Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature. PAGE 4 - LOAN AND SECURITY AGREEMENT 5.6 REGULATORY COMPLIANCE. Borrower is not an "investment company" or a company "controlled" by an "investment company" under the Investment Company Act. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations T and U of the Federal Reserve Board of Governors). Borrower has complied in all material respects with the Federal Fair Labor Standards Act. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to cause a Material Adverse Change. None of Borrower's or any Subsidiary's properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally. Borrower and each Subsidiary has timely filed all required tax returns and paid, or made adequate provision to pay, all material taxes, except those being contested in good faith with adequate reserves under GAAP. Borrower and each Subsidiary has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all government authorities that are necessary to continue its business as currently conducted, except where the failure to do so could not reasonably be expected to cause a Material Adverse Change. 5.7 SUBSIDIARIES. Except as shown in the Schedule, Borrower does not own any stock, partnership interest or other equity securities except for Permitted Investments. 5.8 FULL DISCLOSURE. No written representation, warranty or other statement of Borrower in any certificate or written statement given to Bank (taken together with all such written certificates and written statements to Bank) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading. It being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected and forecasted results. 6 AFFIRMATIVE COVENANTS Borrower will do all of the following: 6.1 GOVERNMENT COMPLIANCE. Borrower will maintain its and all Subsidiaries' legal existence and good standing in its jurisdiction of formation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to cause a material adverse effect on Borrower's business or operations. Borrower will comply, and have each Subsidiary comply, with all laws, ordinances and regulations to which it is subject, noncompliance with which could have a material adverse effect on Borrower's business or operations or would reasonably be expected to cause a Material Adverse Change. 6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. (a) Borrower will deliver to Bank: (i) as soon as available, but no later than five (5) days after filing with the Securities and Exchange Commission, Borrower's 10-Q quarterly report and a Compliance Certificate in the form of the attached Exhibit C; (ii) as soon as available, but no later than five (5) days after filing with the Securities and Exchange Commission Borrower's annual 10-K report and a Compliance Certificate in the form of the attached Exhibit C for the quarterly period then ending; (iii) as soon as available, but no later than 120 days after the last day of Borrower's fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, PAGE 5 - LOAN AND SECURITY AGREEMENT together with an unqualified opinion on the financial statements from an independent certified public accounting firm reasonably acceptable to Bank; (iv) a prompt report of any legal actions pending or threatened against Borrower or any Subsidiary that could result in damages or costs to Borrower or any Subsidiary of $100,000 or more; and (v) budgets, sales projections, operating plans or other financial information Bank reasonably requests. (b) If the Borrowing Base applies pursuant to Section 2.1.1, Borrower will deliver to Bank within 20 days of the end of each month (i) a Borrowing Base Certificate in the form of Exhibit D attached, (ii) an accounts receivable aging, (iii) an accounts payable aging, and (iv) within 20 days after the end of each month, Borrower shall deliver to Bank a deferred revenue listing. (c) If more than $500,000 is outstanding under the Committed Revolving Line at any one time, Bank shall have the right to audit Borrower's Collateral annually at Borrower's expense. (d) Within five (5) days of filing with the Securities and Exchange Commission, Borrower shall deliver copies of any filings with the Securities and Exchange Commission not listed in 6.2(a) above. 6.3 INVENTORY; RETURNS. Borrower will keep all Inventory in good and marketable condition, free from material defects. Returns and allowances between Borrower and its account debtors will follow Borrower's customary practices as they exist at execution of this Agreement. Borrower must promptly notify Bank of all returns, recoveries, disputes and claims, that involve more than $100,000. 6.4 TAXES. Borrower will make, and cause each Subsidiary to make, timely payment of all material federal, state, and local taxes or assessments and will deliver to Bank, on demand, appropriate certificates attesting to the payment. 6.5 INSURANCE. Borrower will keep its business and the Collateral insured for risks and in amounts, as Bank may reasonably request. Insurance policies will be in a form, with companies, and in amounts that are satisfactory to Bank in Bank's reasonable discretion. All property policies will have a lender's loss payable endorsement showing Bank as an additional loss payee and all liability policies will show the Bank as an additional insured and provide that the insurer must give Bank at least 20 days notice before canceling its policy. At Bank's request, Borrower will deliver certified copies of policies and evidence of all premium payments. Proceeds payable under any policy will, at Bank's option, be payable to Bank on account of the Obligations. 6.6 DEPOSIT/INVESTMENT ACCOUNT. Borrower will exercise their best efforts to maintain a deposit or investment account with Bank in a minimum amount of $1,000,000. Failure to maintain such an account shall not constitute an Event of Default. 6.7 FINANCIAL COVENANTS. Borrower will maintain as of the last day of each quarter: (i) Adjusted Quick Ratio. A ratio of (i) Quick Assets to (ii) Current Liabilities, less deferred revenue plus the long-term portion of all outstanding Equipment Advances, of at least 2.0:1.0. Once Borrower has maintained a Debt Service Coverage Ratio of 2.0:1.0 for two consecutive quarters, the Adjusted Quick Ratio will be amended to eliminate the long-term portion of all PAGE 6 - LOAN AND SECURITY AGREEMENT Equipment Advances. Concurrently, a Debt Service Coverage Ratio covenant of 2.0:1.0 will be implemented. (ii) Tangible Net Worth. A minimum Tangible Net Worth of not less than $30,000,000. 6.8 FURTHER ASSURANCES. Borrower will execute any further instruments and take further action as Bank reasonably requests to perfect or continue Bank's security interest in the Collateral or to effect the purposes of this Agreement. 7 NEGATIVE COVENANTS Borrower will not do any of the following without Bank's prior written consent, which will not be unreasonably withheld: 7.1 DISPOSITIONS. Convey, sell, lease, transfer or otherwise dispose of (collectively "Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, other than Transfers (i) of Inventory in the ordinary course of business; (ii) of non-exclusive licenses and similar arrangements for the use of the property of Borrower or its Subsidiaries in the ordinary course of business; or (iii) of worn-out or obsolete Equipment. 7.2 CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS. Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower or reasonably related thereto or have a material change in its ownership or management (other than the sale of Borrower's equity securities in a public offering or to venture capital investors approved by Bank) of greater than 25%. Borrower will not, without at least 30 days prior written notice, relocate its chief executive office or add any new offices or business locations. 7.3 MERGERS OR ACQUISITIONS. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person, except where (i) no Event of Default has occurred and is continuing or would result from such action during the term of this Agreement and (ii) such transaction would not result in a decrease of more than 25% of Tangible Net Worth. A Subsidiary may merge or consolidate into another Subsidiary or into Borrower. 7.4 INDEBTEDNESS. Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness. 7.5 ENCUMBRANCE. Create, incur, or allow any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, or permit any Collateral not to be subject to the first priority security interest granted here, subject to Permitted Liens. PAGE 7 - LOAN AND SECURITY AGREEMENT 7.6 DISTRIBUTIONS; INVESTMENTS. Directly or indirectly acquire or own any Person, or make any Investment in any Person, other than Permitted Investments, or permit any of its Subsidiaries to do so. Pay any dividends or make any distribution or payment or redeem, retire or purchase any capital stock. 7.7 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into or permit any material transaction with any Affiliate except transactions that are in the ordinary course of Borrower's business, on terms less favorable to Borrower than would be obtained in an arm's length transaction with a non-affiliated Person. 7.8 COMPLIANCE. Become an "investment company" or a company controlled by an "investment company," under the Investment Company Act of 1940 or undertake as one of its important activities extending credit to purchase or carry margin stock, or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower's business or operations or would reasonably be expected to cause a Material Adverse Change, or permit any of its Subsidiaries to do so. 8 EVENTS OF DEFAULT Any one of the following is an Event of Default: 8.1 PAYMENT DEFAULT. If Borrower fails to pay any of the Obligations within 3 days after their due date. During the additional period the failure to cure the default is not an Event of Default (but no Credit Extension will be made during the cure period); 8.2 COVENANT DEFAULT. If Borrower violates any covenant in Section 7 or does not perform or observe any other material term, condition or covenant in this Agreement, any Loan Documents, or in any agreement between Borrower and Bank and as to any default under a term, condition or covenant that can be cured, has not cured the default within 10 days after it occurs, or if the default cannot be cured within 10 days or cannot be cured after Borrower's attempts within 10 day period, and the default may be cured within a reasonable time, then Borrower has an additional period (of not more than 30 days) to attempt to cure the default. During the additional time, the failure to cure the default is not an Event of Default (but no Credit Extensions will be made during the cure period); 8.3 MATERIAL ADVERSE CHANGE. If there (i) occurs a material impairment in the perfection or priority of the Bank's security interest in the Collateral or in the value of such Collateral which is not covered by adequate insurance or (ii) is a material impairment of the prospect of repayment of any portion of the Obligations. 8.4 ATTACHMENT. If any material portion of Borrower's assets is attached, seized, levied on, or comes into possession of a trustee or receiver and the attachment, seizure or levy is not removed in 10 days, or if Borrower is enjoined, restrained, or prevented by court order from conducting a material part of its business or if a judgment or other claim becomes a Lien on a material portion of Borrower's PAGE 8 - LOAN AND SECURITY AGREEMENT assets, or if a notice of lien, levy, or assessment is filed against any of Borrower's assets by any government agency and not paid within 10 days after Borrower receives notice. These are not Events of Default if stayed or if a bond is posted pending contest by Borrower (but no Credit Extensions will be made during the cure period); 8.5 INSOLVENCY. If Borrower becomes insolvent or if Borrower begins an Insolvency Proceeding or an Insolvency Proceeding is begun against Borrower and not dismissed or stayed within 30 days (but no Credit Extensions will be made before any Insolvency Proceeding is dismissed); 8.6 OTHER AGREEMENTS. If there is a default in any agreement between Borrower and a third party that gives the third party the right to accelerate any Indebtedness exceeding $100,000 or that could cause a Material Adverse Change; 8.7 JUDGMENTS. If a money judgment(s) in the aggregate of at least $50,000 is rendered against Borrower and is unsatisfied and unstayed for 10 days (but no Credit Extensions will be made before the judgment is stayed or satisfied); or 8.8 MISREPRESENTATIONS. If Borrower or any Person acting for Borrower makes any material misrepresentation or material misstatement now or later in any warranty or representation in this Agreement or in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document. 9 BANK'S RIGHTS AND REMEDIES 9.1 RIGHTS AND REMEDIES. When an Event of Default occurs and continues Bank may, without notice or demand, do any or all of the following: (a) Declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank); (b) Stop advancing money or extending credit for Borrower's benefit under this Agreement or under any other agreement between Borrower and Bank; (c) Settle or adjust disputes and claims directly with account debtors for amounts, on terms and in any order that Bank considers advisable; (d) Make any payments and do any acts it considers necessary or reasonable to protect its security interest in the Collateral. Borrower will assemble the Collateral if Bank requires and make it available as Bank designates. Bank may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of Bank's rights or remedies; (e) Apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any amount held by Bank owing to or for the credit or the account of Borrower; (f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Bank is granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower's labels, Patents, Copyrights, Mask Works, rights of use of any name, PAGE 9 - LOAN AND SECURITY AGREEMENT trade secrets, trade names, Trademarks, service marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Bank's exercise of its rights under this Section, Borrower's rights under all licenses and all franchise agreements inure to Bank's benefit; and (g) Dispose of the Collateral according to the Code. 9.2 POWER OF ATTORNEY. Effective only when an Event of Default occurs and continues, Borrower irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's name on any checks or other forms of payment or security; (ii) sign Borrower's name on any invoice or bill of lading for any Account or drafts against account debtors, (iii) make, settle, and adjust all claims under Borrower's insurance policies; (iv) settle and adjust disputes and claims about the Accounts directly with account debtors, for amounts and on terms Bank determines reasonable; and (v) transfer the Collateral into the name of Bank or a third party as the Code permits. Bank may exercise the power of attorney to sign Borrower's name on any documents necessary to perfect or continue the perfection of any security interest regardless of whether an Event of Default has occurred. Bank's appointment as Borrower's attorney in fact, and all of Bank's rights and powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and Bank's obligation to provide Credit Extensions terminates. 9.3 ACCOUNTS COLLECTION. When an Event of Default occurs and continues, Bank may notify any Person owing Borrower money of Bank's security interest in the funds and verify the amount of the Account. Borrower must collect all payments in trust for Bank and, if requested by Bank, immediately deliver the payments to Bank in the form received from the account debtor, with proper endorsements for deposit. 9.4 BANK EXPENSES. If Borrower fails to pay any amount or furnish any required proof of payment to third persons, Bank may make all or part of the payment or obtain insurance policies required in Section 6.5, and take any action under the policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the then applicable rate and secured by the Collateral. No payments by Bank are deemed an agreement to make similar payments in the future or Bank's waiver of any Event of Default. Pursuant to ORS 746.201, following is a statutory notice regarding insurance coverage: WARNING Unless you provide us with evidence of the insurance coverage as required by our contract or loan agreement, we may purchase insurance at your expense to protect our interest. This insurance may, but need not, also protect your interest. If the collateral becomes damaged, the coverage we purchase may not pay any claim you make or any claim made against you. You may later cancel this coverage by providing evidence that you have obtained property coverage elsewhere. You are responsible for the cost of any insurance purchased by us. The cost of this insurance may be added to your contract or loan balance. If the cost is added to your contract or loan balance, the interest rate on the underlying contract or loan will apply to this added amount. The effective date of coverage may be the date your prior coverage lapsed or the date you failed to provide proof of coverage. The coverage we purchase may be considerably more expensive than insurance you can obtain on your own and may not satisfy any need for property damage coverage or any mandatory liability insurance requirements imposed by applicable law. PAGE 10 - LOAN AND SECURITY AGREEMENT 9.5 BANK'S LIABILITY FOR COLLATERAL. If Bank complies with reasonable banking practices and Section 9-207 of the Code, it is not liable for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other person. Borrower bears all risk of loss, damage or destruction of the Collateral. 9.6 REMEDIES CUMULATIVE. Bank's rights and remedies under this Agreement, the Loan Documents, and all other agreements are cumulative. Bank has all rights and remedies provided under the Code, by law, or in equity. Bank's exercise of one right or remedy is not an election, and Bank's waiver of any Event of Default is not a continuing waiver. Bank's delay is not a waiver, election, or acquiescence. No waiver is effective unless signed by Bank and then is only effective for the specific instance and purpose for which it was given. 9.7 DEMAND WAIVER. Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which Borrower is liable. 10 NOTICES All notices or demands by any party about this Agreement or any other related agreement must be in writing and be personally delivered or sent by an overnight delivery service, by certified mail, postage prepaid, return receipt requested, or by telefacsimile to the addresses set forth at the beginning of this Agreement. A party may change its notice address by giving the other party written notice. 11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER Oregon law governs the Loan Documents without regard to principles of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Multnomah County, Oregon. BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY THE BANK AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY US TO BE ENFORCEABLE. 12 GENERAL PROVISIONS 12.1 SUCCESSORS AND ASSIGNS. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assign this Agreement or any rights under it without Bank's prior written consent which may be granted or withheld in Bank's discretion. Bank has the right, without the PAGE 11 - LOAN AND SECURITY AGREEMENT consent of or notice to Borrower, to sell, transfer, negotiate, or grant participation in all or any part of, or any interest in, Bank's obligations, rights and benefits under this Agreement. 12.2 INDEMNIFICATION. Borrower will indemnify, defend and hold harmless Bank and its officers, employees, and agents against: (a) all obligations, demands, claims, and liabilities asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or Bank Expenses incurred, or paid by Bank from, following, or consequential to transactions between Bank and Borrower (including reasonable attorneys fees and expenses), except for losses caused by Bank's gross negligence or willful misconduct. 12.3 TIME OF ESSENCE. Time is of the essence for the performance of all obligations in this Agreement. 12.4 SEVERABILITY OF PROVISION. Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision. 12.5 AMENDMENTS IN WRITING, INTEGRATION. All amendments to this Agreement must be in writing and signed by Borrower and Bank. This Agreement represents the entire agreement about this subject matter, and supersedes prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Agreement merge into this Agreement and the Loan Documents. 12.6 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, are an original, and all taken together, constitute one Agreement. 12.7 SURVIVAL. All covenants, representations and warranties made in this Agreement continue in full force while any Obligations remain outstanding. The obligations of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of limitations for actions that may be brought against Bank have run. 12.8 CONFIDENTIALITY. In handling any confidential information, Bank will exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made (i) to Bank's subsidiaries or affiliates in connection with their business with Borrower, (ii) to prospective transferees or purchasers of any interest in the loans, (iii) as required by law, regulation, subpoena, or other order, (iv) as required in connection with Bank's examination or audit and (v) as Bank considers appropriate exercising remedies under this Agreement. Confidential information does not include information that either: (a) is in the public domain or in Bank's possession when disclosed to Bank, or becomes part of the public domain after disclosure to Bank; or (b) is disclosed to Bank by a third party, if Bank does not know that the third party is prohibited from disclosing the information. PAGE 12 - LOAN AND SECURITY AGREEMENT 12.9 ATTORNEYS' FEES, COSTS AND EXPENSES. In any action or proceeding between Borrower and Bank arising out of the Loan Documents, the prevailing party will be entitled to recover its reasonable attorneys' fees and other reasonable costs and expenses incurred, in addition to any other relief to which it may be entitled. 13 DEFINITIONS 13.1 DEFINITIONS. In this Agreement: "ACCOUNTS" are all existing and later arising accounts, contract rights, and other obligations owed Borrower in connection with its sale or lease of goods (including licensing software and other technology) or provision of services, all credit insurance, guaranties, other security and all merchandise returned or reclaimed by Borrower and Borrower's Books relating to any of the foregoing. "ADVANCE" or "ADVANCES" is a loan advance (or advances) under the Committed Revolving Line. "AFFILIATE" of a Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person's senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person's managers and members. "BANK EXPENSES" are all audit fees and expenses and reasonable costs and expenses (including reasonable attorneys' fees and expenses) for preparing, negotiating, administering, defending and enforcing the Loan Documents (including appeals or Insolvency Proceedings). "BORROWING BASE" is 80% of Eligible Accounts as determined by Bank from Borrower's most recent Borrowing Base Certificate. "BORROWER'S BOOKS" are all Borrower's books and records including ledgers, records regarding Borrower's assets or liabilities, the Collateral, business operations or financial condition and all computer programs or discs or any equipment containing the information. "BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on which the Bank is closed. "CLOSING DATE" is the date of this Agreement. "CODE" is the Oregon Uniform Commercial Code. "COLLATERAL" is the property described on Exhibit A. "COMMITTED EQUIPMENT LINE" is an Equipment Advance of up to $5,000,000 (Equipment Advances reduce availability under the Committed Revolving Line by the principal amount). "COMMITTED REVOLVING LINE" is an Advance for working capital purposes of up to $5,000,000 (Advances reduce availability under the Committed Equipment Line by the principal amount). "CONTINGENT OBLIGATION" is, for any Person, any direct or indirect liability, contingent or not, of that Person for (i) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (ii) any obligations for undrawn letters of credit for the account of that Person; and (iii) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but "Contingent Obligation" does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the PAGE 13 - LOAN AND SECURITY AGREEMENT stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under the guarantee or other support arrangement. "COPYRIGHTS" are all copyright rights, applications or registrations and like protections in each work or authorship or derivative work, whether published or not (whether or not it is a trade secret) now or later existing, created, acquired or held. "CREDIT EXTENSION" is each Advance, Equipment Advance, or any other extension of credit by Bank for Borrower's benefit. "DEBT SERVICE COVERAGE RATIO" means (i) quarterly earnings before interest, depreciation and amortization, divided by (ii) 25% of the current maturities of long-term debt, plus interest for the quarter. "ELIGIBLE ACCOUNTS" are Accounts in the ordinary course of Borrower's business that meet all Borrower's representations and warranties in Section 5.2; but Bank may change eligibility standards by giving Borrower notice. Unless Bank agrees otherwise in writing, Eligible Accounts will not include: (a) Accounts that the account debtor has not paid within 90 days of invoice date; (b) Accounts for an account debtor, 50% or more of whose Accounts have not been paid within 90 days of invoice date; (c) Credit balances over 90 days from invoice date; (d) Accounts for an account debtor, including Affiliates, whose total obligations to Borrower exceed 25% of all Accounts, for the amounts that exceed that percentage, unless the Bank approves in writing; (e) Accounts for which the account debtor does not have its principal place of business in the United States; (f) Accounts for which the account debtor is a federal, state or local government entity or any department, agency, or instrumentality; (g) Accounts for which Borrower owes the account debtor, but only up to the amount owed (sometimes called "contra" accounts, accounts payable, customer deposits or credit accounts); (h) Accounts for demonstration or promotional equipment, or in which goods are consigned, sales guaranteed, sale or return, sale on approval, bill and hold, or other terms if account debtor's payment may be conditional; (i) Accounts for which the account debtor is Borrower's Affiliate, officer, employee, or agent; (j) Accounts in which the account debtor disputes liability or makes any claim and Bank believes there may be a basis for dispute (but only up to the disputed or claimed amount), or if the Account Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or goes out of business; (k) Accounts for which Bank reasonably determines collection to be doubtful. "ELIGIBLE EQUIPMENT" is general purpose computer equipment, office equipment, test and laboratory equipment, furnishings, and, subject to the limitations set forth below, Other Equipment that complies with all of Borrower's representations and warranties to Bank and which is acceptable to Bank in all respects. All Equipment financed with the proceeds of Equipment Advances may be new or used equipment. PAGE 14 - LOAN AND SECURITY AGREEMENT "EQUIPMENT" is all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments in which Borrower has any interest. "EQUIPMENT ADVANCE" is defined in Section 2.1.2. "EQUIPMENT AVAILABILITY END DATE" is defined in Section 2.1.2. "ERISA" is the Employment Retirement Income Security Act of 1974, and its regulations. "FUNDING DATE" is any date on which an Equipment Advance is made to or on account of Borrower. "GAAP" is generally accepted accounting principles. "INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations and (d) Contingent Obligations. "INSOLVENCY PROCEEDING" are proceedings by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief. "INTELLECTUAL PROPERTY" is defined in the attached Exhibit A. "INVENTORY" is present and future inventory in which Borrower has any interest, including merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products intended for sale or lease or to be furnished under a contract of service, of every kind and description now or later owned by or in the custody or possession, actual or constructive, of Borrower, including inventory temporarily out of its custody or possession or in transit and including returns on any accounts or other proceeds (including insurance proceeds) from the sale or disposition of any of the foregoing and any documents of title. "INVESTMENT" is any beneficial ownership of (including stock, partnership interest or other securities) any Person, or any loan, advance or capital contribution to any Person. "LIEN" is a mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance. "LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes or guaranties executed by Borrower or Guarantor, and any other present or future agreement between Borrower and/or for the benefit of Bank in connection with this Agreement, all as amended, extended or restated. "MATERIAL ADVERSE CHANGE" is defined in Section 8.3. "OBLIGATIONS" are debts, principal, interest, Bank Expenses and other amounts Borrower owes Bank now or later, including cash management services, letters of credit and foreign exchange contracts, if any and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank. "OTHER EQUIPMENT" is leasehold improvements, intangible property such as computer software and transferable software licenses, other soft costs, including sales tax, freight, and installation expense, equipment specifically designed or manufactured for Borrower, other intangible property, limited use property and other similar property. Unless otherwise agreed to by Bank: not more than 25% of the Equipment financed with the proceeds of each Equipment Advance shall consist of Other Equipment. "PATENTS" are patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same. PAGE 15 - LOAN AND SECURITY AGREEMENT "PERMITTED INDEBTEDNESS" is: (a) Borrower's indebtedness to Bank under this Agreement or any other Loan Document; (b) Indebtedness existing on the Closing Date and shown on the Schedule; (c) Indebtedness to trade creditors incurred in the ordinary course of business; and (d) Indebtedness secured by Permitted Liens. "PERMITTED INVESTMENTS" are: (a) Investments shown on the Schedule and existing on the Closing Date; and (b) (i) marketable direct obligations issued or unconditionally guaranteed by the United States or its agency or any State maturing within 1 year from its acquisition, (ii) commercial paper maturing no more than 1 year after its creation and having the highest rating from either Standard & Poor's Corporation or Moody's Investors Service, Inc., and (iii) Bank's certificates of deposit issued maturing no more than 1 year after issue. "PERMITTED LIENS" are: (a) Liens existing on the Closing Date and shown on the Schedule or arising under this Agreement or other Loan Documents; (b) Liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which Borrower maintains adequate reserves on its Books, if they have no priority over any of Bank's security interests; (c) Purchase money Liens (i) on Equipment acquired or held by Borrower or its Subsidiaries incurred for financing the acquisition of the Equipment, or (ii) existing on equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the equipment; (d) Licenses or sublicenses granted in the ordinary course of Borrower's business and any interest or title of a licensor or under any license or sublicense, if the licenses and sublicenses permit granting Bank a security interest; (e) Leases or subleases granted in the ordinary course of Borrower's business, including in connection with Borrower's leased premises or leased property; (f) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase. "PERSON" is any individual, sole proprietorship, partnership, limited liability company, joint venture, company association, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency. "PRIME RATE" is Bank's most recently announced "prime rate," even if it is not Bank's lowest rate. "QUICK ASSETS" is on any date, the Borrower's consolidated, unrestricted cash, cash equivalents, net billed accounts receivable and investments with maturities of fewer than 12 months determined according to GAAP. "RESPONSIBLE OFFICER" is each of the Chief Executive Officer, the President, the Chief Financial Officer and the Controller of Borrower. "REVOLVING MATURITY DATE" is November 9, 2001. "SCHEDULE" is any attached schedule of exceptions. PAGE 16 - LOAN AND SECURITY AGREEMENT "SUBSIDIARY" is for any Person, or any other business entity of which more than 50% of the voting stock or other equity interests is owned or controlled, directly or indirectly, by the Person or one or more Affiliates of the Person. "TANGIBLE NET WORTH" is, on any date, the consolidated total assets of Borrower and its Subsidiaries minus, (i) any amounts attributable to (a) goodwill, (b) intangible items such as unamortized debt discount and expense, Patents, trade and service marks and names, Copyrights and research and development expenses except prepaid expenses, and (c) reserves not already deducted from assets, and (ii) Total Liabilities. "TOTAL LIABILITIES" is on any day, obligations that should, under GAAP, be classified as liabilities on Borrower's consolidated balance sheet, including all Indebtedness, and current portion Subordinated Debt allowed to be paid, but excluding all other Subordinated Debt. "TRADEMARKS" are trademark and servicemark rights, registered or not, applications to register and registrations and like protections, and the entire goodwill of the business of Assignor connected with the trademarks. BORROWER: CORILLIAN CORPORATION By: --------------------------------- Name: ------------------------------- Title: ------------------------------ BANK: SILICON VALLEY BANK By: --------------------------------- Name: ------------------------------- Title: ------------------------------ PAGE 17 - LOAN AND SECURITY AGREEMENT EXHIBIT A The Collateral consists of all of Borrower's right, title and interest in and to the following: All goods and equipment now owned or hereafter acquired, including, without limitation, all machinery, fixtures, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing, wherever located; All inventory, now owned or hereafter acquired, including, without limitation, all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products including such inventory as is temporarily out of Borrower's custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the above; All contract rights and general intangibles now owned or hereafter acquired, including, without limitation, goodwill, trademarks, servicemarks, trade styles, trade names, patents, patent applications, leases, license agreements, franchise agreements, blueprints, drawings, purchase orders, customer lists, route lists, infringements, claims, computer programs, computer discs, computer tapes, literature, reports, catalogs, design rights, income tax refunds, payments of insurance and rights to payment of any kind; All now existing and hereafter arising accounts, contract rights, royalties, license rights and all other forms of obligations owing to Borrower arising out of the sale or lease of goods, the licensing of technology or the rendering of services by Borrower, whether or not earned by performance, and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Borrower; All documents, cash, deposit accounts, securities, securities entitlements, securities accounts, investment property, financial assets, letters of credit, certificates of deposit, instruments and chattel paper now owned or hereafter acquired and Borrower's Books relating to the foregoing; All copyright rights, copyright applications, copyright registration and like protections in each work of authorship and derivative work thereof, whether published or unpublished, now owned or hereafter acquired; all trade secret rights, including all rights to unpatented inventions, know-how, operating manuals, license rights and agreements and confidential information, now owned or hereafter acquired; all mask work or similar rights available for the protection of semiconductor chips, now owned or hereafter acquired; all claims for damages by way of any past, present and future infringement of any of the foregoing; and All Borrower's Books relating to the foregoing and any and all claims, rights and interests in any of the above and all substitutions for, additions and accessions to and proceeds thereof. Borrower has agreed not to sell, transfer, assign, mortgage, pledge, lease, grant a security interest in, or encumber any of its Intellectual Property, as defined below, without Bank's prior written consent. Notwithstanding the foregoing, the Collateral shall not be deemed to include any (i) software, documentation, manuals or other works of authorship, ideas, inventions, processes, designs, trademarks, technology, information, and materials created, written or developed by Borrower, either before or after the date of this Agreement; or (ii) any intellectual property rights associated with such works, including without limitation patents, patent rights, copyrights, trademark rights, trade secret rights, trade dress rights, and all rights to use, execute, reproduce, display, perform, distribute copies of, modify and prepare derivative works based on such works (collectively, the "Intellectual Property"), except that the Collateral shall include the proceeds of all the Intellectual Property that are accounts (i.e. accounts receivable) of Borrower, or general intangibles consisting PAGE 1 - EXHIBIT A of rights to payment, if a judicial authority (including a U.S. Bankruptcy Court) holds that a security interest in the underlying Intellectual Property is necessary to have a security interest in such accounts and general intangibles of Borrower that are proceeds of the Intellectual Property, then the Collateral shall automatically, and effective as of the Closing Date, include the Intellectual Property to the extent necessary to permit perfection of Bank's security interest in such accounts and general intangibles of Borrower that are proceeds of the Intellectual Property. PAGE 2 - EXHIBIT A EXHIBIT B LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T. TO: CENTRAL CLIENT SERVICE DIVISION DATE: __________________ FAX#: (408)496-2426 TIME: __________________ FROM: CORILLIAN CORPORATION CLIENT NAME (BORROWER) REQUESTED BY: -------------------------- AUTHORIZED SIGNER'S NAME AUTHORIZED SIGNATURE: ------------------ PHONE NUMBER: __________________________ FROM ACCOUNT # _________________________ TO ACCOUNT # ________________________
REQUESTED TRANSACTION TYPE REQUESTED DOLLAR AMOUNT - -------------------------- ----------------------- PRINCIPAL INCREASE (ADVANCE) $____________________________________________ PRINCIPAL PAYMENT (ONLY) $____________________________________________ INTEREST PAYMENT (ONLY) $____________________________________________ PRINCIPAL AND INTEREST (PAYMENT) $____________________________________________ OTHER INSTRUCTIONS: ____________________________________________________________
All Borrower's representations and warranties in the Loan and Security Agreement are true, correct and complete in all material respects on the date of the telephone request for and Advance confirmed by this Borrowing Certificate; but those representations and warranties expressly referring to another date shall be true, correct and complete in all material respects as of that date. BANK USE ONLY TELEPHONE REQUEST: The following person is authorized to request the loan payment transfer/loan advance on the advance designated account and is known to me. - ------------------------------------- ---------------------------------------- Authorized Requester Phone # - ------------------------------------- ---------------------------------------- Received By (Bank) Phone # ---------------------------------------- Authorized Signature (Bank) PAGE 1 - EXHIBIT B EXHIBIT C COMPLIANCE CERTIFICATE TO: SILICON VALLEY BANK 3003 Tasman Drive Santa Clara, CA 95054 FROM: CORILLIAN CORPORATION The undersigned authorized officer of CORILLIAN CORPORATION ("Borrower") certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is in complete compliance for the period ending ____________ with all required covenants except as noted below and (ii) all representations and warranties in the Agreement are true and correct in all material respects on this date. Attached are the required documents supporting the certification. The Officer certifies that these are prepared in accordance with Generally Accepted Accounting Principles (GAAP) consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The Officer acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES - ------------------ -------- -------- Quarterly 10-Q Report Quarterly within 5 days of filing & Yes No Comp.Cert. Annual (Audited) Financial Statement FYE within 120 days Yes No Annual 10-K Report & Comp. Cert. Annually within 5 days of filing Yes No Deferred Revenue Listing Monthly within 20 days of month-end Yes No All SEC filings other than 10-Q and 10-K Within 5 days of filing Yes No A/R & A/P Agings(1) Monthly within 20 days Yes No A/R Audit(2) Annual Yes No Borrowing Base Certificate(1) Monthly within 20 days Yes No

FINANCIAL COVENANTS REQUIRED ACTUAL COMPLIES - ------------------- ----------- ------ -------- Maintain on a Quarterly Basis: Tangible Net Worth: $30,000,000 Yes No Minimum Adjusted Quick Ratio(3) 2.00:1.00 :1.00 Yes No Minimum Debt Service Coverage Ratio(3) 2.00:1.00 :1.00 Yes No
- ---------- (1) Required when Borrowing Base is applicable. (2) Required if more than $500,000 is outstanding under the Committed Revolving Line at any one time. (3) Once Borrower has maintained a Debt Service Coverage Ratio of 2.0:1.0 for two consecutive quarters, the Adjusted Quick Ratio will be amended to eliminate the principal outstanding under all Equipment Advances. Concurrently, a Debt Service Coverage Ratio covenant of 2.0:1.0 will be implemented. PAGE 1 -- EXHIBIT C PAGE 1 - EXHIBIT C COMMENTS REGARDING EXCEPTIONS: See Attached. Sincerely, CORILLIAN CORPORATION - ------------------------------------- SIGNATURE - ------------------------------------- TITLE - ------------------------------------- DATE BANK USE ONLY Received by: ------------------------ - ------------------------------------- AUTHORIZED SIGNER Date: ------------------------------- Verified: --------------------------- AUTHORIZED SIGNER Date: ------------------------------- Compliance Status: Yes No PAGE 2 - EXHIBIT C EXHIBIT D BORROWING BASE CERTIFICATE Borrower: Corillian Corporation Lender: Silicon Valley Bank 3003 Tasman Drive Santa Clara, CA 95054 Commitment Amount: $5,000,000 ACCOUNTS RECEIVABLE 1. Accounts Receivable Book Value as of _____ $____________________ 2. Additions (please explain on reverse) $____________________ 3. TOTAL ACCOUNTS RECEIVABLE $____________________ ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication) 4. Amounts over 90 days due $____________________ 5. Balance of 50% over 90 day accounts $____________________ 6. Credit balances $____________________ 7. Concentration Limits $____________________ 8. Foreign Accounts $____________________ 9. Governmental Accounts $____________________ 10. Contra Accounts $____________________ 11. Promotion or Demo Accounts $____________________ 12. Intercompany/Employee Accounts $____________________ 13. Other (please explain on reverse) $____________________ 14. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $____________________ 15. Eligible Accounts (#3 minus #14) $____________________ 16. LOAN VALUE OF ACCOUNTS (80% of #15) $____________________ BALANCES 17. Maximum Loan Amount $____________________ 18. Total Funds Available [Lesser of #17 or #16, less Equipment Advances outstanding] $____________________ 19. Present balance owing on Line of Credit $____________________ 20. RESERVE POSITION (#18 minus #19) $____________________

The undersigned represents and warrants that this is true, complete and correct, and that the information in this Borrowing Base Certificate complies with the representations and warranties in the Loan and Security Agreement between the undersigned and Silicon Valley Bank. COMMENTS: Corillian Corporation By: --------------------------------- Authorized Signer BANK USE ONLY Rec'd By: --------------------------- Auth. Signer Date: ------------------------------- Verified: --------------------------- Auth. Signer PAGE 1 - EXHIBIT D Date: ------------------------------- PAGE 2 - EXHIBIT D SCHEDULE Schedule for Section 5.3 1. S1 Corporation vs. Corillian Corporation: Legal proceedings are disclosed in the Borrower's Form 10-Q, filed on August 14, 2000. Schedule for Section 5.7 1. Investment in e-Banc LLC: The Borrower's investment in e-Banc LLC is disclosed in the Borrower's Form 10-Q, filed on August 14, 2000. 2. Warrant to purchase 160,000 shares of Yodlee.com, a privately held entity in the business of data aggregation services. PAGE 1 - SCHEDULE LOAN MODIFICATION AGREEMENT This Loan Modification Agreement is entered into as of December 26, 2000, by and between Corillian Corporation ("Borrower") and Silicon Valley Bank ("Bank"). 1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other documents, a Loan and Security Agreement, dated November 9, 2000, as may be amended from time to time, (the "Loan Agreement"). The Loan Agreement provided for, among other things, a Committed Revolving Line in the original principal amount of Five Million Dollars ($5,000,000). Defined terms used but not otherwise defined herein shall have the same meanings as in the Loan Agreement. Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as the "Indebtedness." 2. DESCRIPTION OF COLLATERAL. Repayment of the Indebtedness is secured by the Collateral as described in the Loan Agreement. In addition, Borrower has agreed not to encumber any of its Intellectual Property pursuant to that certain Negative Pledge Agreement, dated November 9, 2000. Hereinafter, the above-described security documents and guaranties, together with all other documents securing repayment of the Indebtedness shall be referred to as the "Security Documents". Hereinafter, the Security Documents, together with all other documents evidencing or securing the Indebtedness shall be referred to as the "Existing Loan Documents". 3. DESCRIPTION OF CHANGE IN TERMS. A. Modification(s) to Loan Agreement. 1. Subsection 6.2 entitled "Financial Statement, Reports, Certificates" is hereby amended in part to provide that Borrower will provide to Bank, as soon as available, but no later than forty-five (45) days after the last day of each quarter, company prepared consolidated and consolidating balance sheet and income statement covering Borrower's consolidated and consolidating operations during the period, in a form acceptable to Bank and certified by a Responsible Officer. 2. Notwithstanding anything to the contrary contained in Section 7 entitled "Negative Covenants", Bank hereby acknowledges and consents to Borrower's all stock acquisition of Hatcher Association, Inc., which will become a wholly owned subsidiary of Borrower. 3. The following term defined in Section 13.1 entitled "Definitions" is hereby amended as follows: "Tangible Net Worth" is, on any date, the total assets of Borrower minus, (i) any amounts attributable to (a) goodwill, (b) intangible items such as amortized debt discount and expense, Patents, trade and service marks and names, Copyrights and research and development expenses except prepaid expenses, (c) all investments and all loans in Subsidiaries, and (d) reserves not already deducted from assets, and (ii) Total Liabilities. 4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above. 5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing below) agrees that, as of the date hereof, it has no defenses against the obligations to pay any amounts under the Indebtedness. 6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing below) understands and agrees that in modifying the existing Indebtedness, Bank is relying upon Borrower's representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect. Bank's agreement to modifications to the existing Indebtedness pursuant to this Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the Indebtedness. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Indebtedness. It is the intention of Bank and Borrower to retain as liable parties all makers and endorsers of Existing Loan Documents, unless the party is expressly released by Bank in writing. Unless expressly released herein, no maker, endorser, or guarantor will be released by virtue of this Loan Modification Agreement. The terms of this paragraph apply not only to this Loan Modification Agreement, but also to all subsequent loan modification agreements. This Loan Modification Agreement is executed as of the date first written above. BORROWER: BANK CORILLIAN CORPORATION SILICON VALLEY BANK By: By: --------------------------------- ------------------------------------ Name: Name: ------------------------------- ---------------------------------- Title: Title: ------------------------------ --------------------------------- [LOGO] SILICON VALLEY BANK PRO FORMA INVOICE FOR LOAN CHARGES BORROWER: CORILLIAN CORPORATION LOAN OFFICER: RON SHERMAN DATE: DECEMBER 26, 2000 DOCUMENTATION FEE 250.00 TOTAL FEE DUE $250.00 =======

PLEASE INDICATE THE METHOD OF PAYMENT: ( ) A CHECK FOR THE TOTAL AMOUNT IS ATTACHED. ( ) DEBIT DDA # ______ FOR THE TOTAL AMOUNT. ( ) LOAN PROCEEDS - ------------------------------------- BORROWER (DATE) - ------------------------------------- SILICON VALLEY BANK (DATE) ACCOUNT OFFICER'S SIGNATURE EX-10.6 5 v17101exv10w6.txt EXHIBIT 10.6 EXHIBIT 10.6 CORILLIAN CORPORATION NONQUALIFIED STOCK OPTION LETTER AGREEMENT [INCLUDES ACCELERATED VESTING PROVISIONS] TO: _____________ We are pleased to inform you that you have been selected by the Company to receive a stock option (the "Option") to purchase shares (the "Option Shares") of the Company's Common Stock under the Company's 2000 Stock Incentive Compensation Plan (the "Plan"). The terms of the Option are as set forth in this Agreement and in the Plan, a copy of which is attached. The Plan is incorporated by reference into this Agreement, which means that this Agreement is limited by and subject to the express terms and provisions of the Plan. Capitalized terms that are not defined in this Agreement have the meanings given to them in the Plan. The most important terms of the Option are summarized as follows: GRANT DATE: [DATE OF BOARD APPROVAL OF GRANT] NUMBER OF SHARES: ________________ EXERCISE PRICE: $_____ per share EXPIRATION DATE: ________________ VESTING BASE DATE: [TYPICALLY GRANT DATE OR DATE OF HIRE] TYPE OF OPTION: Nonqualified Stock Option ("NSO") VESTING AND EXERCISABILITY: The Option will vest and become exercisable according to the following schedule:
PORTION OF TOTAL OPTION PERIOD OF CONTINUOUS SERVICE FROM VESTING BASE WHICH IS VESTED DATE AND EXERCISABLE - ---------------------------------------------- ----------------------- ~~One year from Vesting Base Date 1/4th Each three-month period completed thereafter An additional 1/16th Four years from Vesting Base Date 100%~~
CORPORATE TRANSACTIONS: For purposes of this section, the following terms shall be defined as follows: "GOOD REASON" means the occurrence of any of the following events or conditions and the failure of the Successor Corporation to cure such event or condition within 30 days after receipt of written notice from the Participant: (a) a change in the Participant's status, title, position or responsibilities (including reporting responsibilities) that, in the Participant's reasonable judgment, represents a substantial reduction in the status, title, position or responsibilities as in effect immediately prior thereto; the assignment to the Participant of any duties or responsibilities that, in the Participant's reasonable judgment, are materially inconsistent with such status, title, position or responsibilities; or any removal of the Participant from or failure to reappoint or reelect the Participant to any of such positions, except in connection with the termination of the Participant's employment for Cause, for Disability or as a result of his or her death, or by the Participant other than for Good Reason; (b) a reduction in the Participant's annual base salary; (c) the Successor Corporation's requiring the Participant (without the Participant's consent) to be based at any place outside a 35-mile radius of his or her place of employment prior to a Corporate Transaction, except for reasonably required travel on the Successor Corporation's business that is not materially greater than such travel requirements prior to the Corporate Transaction; (d) the Successor Corporation's failure to (i) continue in effect any material compensation or benefit plan (or the substantial equivalent thereof) in which the Participant was participating at the time of a Corporate Transaction, including, but not limited to, the Plan, or (ii) provide the Participant with compensation and benefits substantially equivalent (in terms of benefit levels and/or reward opportunities) to those provided for under each material employee benefit plan, program and practice as in effect immediately prior to the Corporate Transaction; (e) any material breach by the Successor Corporation of its obligations to the Participant under the Plan or any substantially equivalent plan of the Successor Corporation; or (f) any purported termination of the Participant's employment or service relationship for Cause by the Successor Corporation that is not in accordance with the definition of Cause under the Plan. "RELATED PARTY TRANSACTION" means (a) a merger of the Company in which the holders of shares of Common Stock immediately prior to the merger hold at least a majority of the shares of Common Stock in the surviving corporation immediately after the merger, (b) a mere reincorporation of the Company or (c) a transaction undertaken for the sole purpose of creating a holding company. Acceleration of vesting of options that are not assumed. In the event of a Corporate Transaction in which this Option is not assumed or continued or an equivalent option or right substituted by the surviving corporation, the successor corporation or its parent corporation, as applicable (the "Successor Corporation"), you shall fully vest in and have the right to exercise this Option as to all of the shares of Common Stock subject thereto, including shares as to which this Option would not otherwise be vested or exercisable provided that, such acceleration will not occur if, in the opinion of the Company's accountants, it would render unavailable "pooling of interest" accounting for a Corporate Transaction that would otherwise qualify for such treatment. If this Option becomes fully vested and exercisable in lieu of assumption or substitution in the event of a Corporate Transaction, the Plan Administrator shall notify you in writing or electronically that this Option shall be fully vested and exercisable for a specified time period after the date of such notice, and this Option shall terminate upon the expiration of such period, in each case conditioned on the consummation of the Corporate Transaction. This Option shall be considered assumed if, following the Corporate Transaction, the option or right confers the right to purchase or receive, for each share of Common Stock subject to this Option, immediately prior to the Corporate Transaction, the consideration (whether stock, cash, or other securities or property) received in the Corporate Transaction by holders of Common Stock for each share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the Corporate Transaction is not solely common stock of the Successor Corporation, the Plan Administrator may, with the consent of the Successor Corporation, provide for the consideration to be received upon the exercise of this Option, for each share of Common Stock subject thereto, to be solely common stock of the Successor Corporation equal in fair market value to the per share consideration received by holders of Common Stock in the Corporate Transaction. This Option shall terminate and cease to remain outstanding immediately following the consummation of the Corporate Transaction, except to the extent assumed by the Successor Corporation. Acceleration upon termination of employment by Successor Corporation. If this Option is assumed or replaced in the Corporate Transaction, other than a Related Party Transaction, and does not otherwise accelerate at that time, it shall be accelerated in the event that your employment or service relationship should subsequently terminate within one year following such Corporate Transaction, unless such employment or service relationship is terminated by the Successor Corporation for Cause or by you voluntarily without Good Reason; provided, that such acceleration shall not occur if, in the opinion of the Company's outside accountants, such acceleration would render unavailable "pooling of interests" accounting treatment for any Corporate Transaction for which pooling of interests accounting treatment is sought by the Company. 2 TERMINATION OF OPTION: The unvested portion of the Option will terminate automatically and without further notice immediately upon termination (voluntary or involuntary) of your employment or service relationship with the Company or a Related Corporation. The vested portion of the Option will terminate automatically and without further notice on the earliest of the following dates: (a) three months after termination of your employment or service relationship with the Company or a Related Corporation for any reason other than Cause, Retirement, Disability or death; (b) one year after termination of your employment or service relationship with the Company or a Related Corporation by reason of Retirement, Disability or death; and (c) the Expiration Date; except, that if the Company or a Related Corporation terminates your services for Cause you will forfeit the unexercised portion of the Option, including vested and unvested shares, on the date you are notified of your termination. If you die while the Option is exercisable, the Option may be exercised until one year after the date of death or the Expiration Date, whichever is earlier. IT IS YOUR RESPONSIBILITY TO BE AWARE OF THE DATE YOUR OPTION TERMINATES. METHOD OF EXERCISE: You may exercise the Option by giving written notice to the Company, in form and substance satisfactory to the Company, which will state the election to exercise the Option and the number of shares of Common Stock for which you are exercising the Option. The written notice must be accompanied by full payment of the exercise price for the number of shares of Common Stock you are purchasing. FORM OF PAYMENT: You may pay the Option exercise price, in whole or in part, in cash, by check or, unless the Plan Administrator determines otherwise, by (a) tendering (either actually or by attestation) mature shares of Common Stock (generally, shares you have held for a period of at least six months) having a fair market value on the day prior to the date of exercise equal to the exercise price (you should consult your tax advisor before exercising the Option with stock you received upon the exercise of an incentive stock option); (b) if and so long as the Common Stock is registered under the Securities Exchange Act of 1934, as amended, delivery of a properly executed exercise notice together with irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds necessary to pay the exercise price all in accordance with the regulations of the Federal Reserve Board; or (c) such other consideration as the Plan Administrator may permit. WITHHOLDING TAXES: As a condition to the exercise of any portion of the Option that is treated as a nonqualified stock option, you must make such arrangements as the Company may require for the satisfaction of any federal, state or local withholding tax obligations that may arise in connection with such exercise. The Company has the right to retain without notice sufficient shares of stock to satisfy the withholding obligation. Unless the Plan Administrator determines otherwise, you may satisfy the withholding obligation by electing to have the Company withhold from the shares to be issued upon exercise that number of shares having a fair market value equal to the amount required to be withheld (up to the minimum required federal tax withholding rate). The Company may also deduct from the shares to be issued upon exercise any other amounts due from you to the Company. LIMITED TRANSFERABILITY: During your lifetime only you can exercise the Option. The Option is not transferable except by will or by the applicable laws of descent and distribution, except that nonqualified stock options may be transferred to the extent permitted by the Plan Administrator. The Plan provides for exercise of the Option by a designated beneficiary or the personal representative of your estate. REGISTRATION: The Company has filed and maintains an effective registration statement with respect to the Option Shares. The Company intends to maintain this registration but has no obligation 3 to do so. In the event that such registration ceases to be effective, you will not be able to exercise the Option unless exemptions from registration under federal and state securities laws are available; such exemptions from registration are very limited and might be unavailable. By accepting the Option, you hereby acknowledge that you have read and understand Section 15.3 of the Plan. BINDING EFFECT: This Agreement will inure to the benefit of the successors and assigns of the Company and be binding upon you and your heirs, executors, administrators, successors and assigns. LIMITATION ON RIGHTS; NO RIGHT TO FUTURE GRANTS; EXTRAORDINARY ITEM OF COMPENSATION: By entering into this Agreement and accepting the grant of the Option evidenced hereby, you acknowledge: (a) that the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (b) that the grant of the Option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (c) that all determinations with respect to any such future grants, including, but not limited to, the times when options will be granted, the number of shares subject to each option, the option price, and the time or times when each option will be exercisable, will be at the sole discretion of the Company; (d) that your participation in the Plan is voluntary; (e) that the value of the Option is an extraordinary item of compensation which is outside the scope of your employment contract, if any; (f) that the Option is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (g) that the vesting of the Option ceases upon termination of employment or service relationship with the Company for any reason except as may otherwise be explicitly provided in the Plan or this Agreement or otherwise permitted by the Plan Administrator; (h) that the future value of the underlying Option Shares is unknown and cannot be predicted with certainty; and (i) that if the underlying Option Shares do not increase in value, the Option will have no value. 4 Please execute the following Acceptance and Acknowledgment and return it to the undersigned. Very truly yours, Corillian Corporation By ------------------------------------- Its ------------------------------------ ACCEPTANCE AND ACKNOWLEDGMENT I, a resident of the State of ________, accept the Option described in this Agreement and in the Plan, and acknowledge receipt of a copy of this Agreement and a copy of the Plan. I have read and understand the Plan. ---------------------------------------- Dated: ------------------------------ ---------------------------------------- Address ---------------------------------------- - ------------------------------------- ---------------------------------------- Taxpayer I.D. Number ---------------------------------------- ---------------------------------------- 5 NOTICE OF EXERCISE OF STOCK OPTION To: Corillian Corporation I, a resident of the State of _____, hereby exercise my Nonqualified Stock Option (check one box) granted by Corillian Corporation (the "Company") on _____, _____, subject to all the terms and provisions thereof and of the 2000 Stock Incentive Compensation Plan referred to therein, and notify the Company of my desire to purchase ___________ shares of Common Stock of the Company (the "Securities") at the exercise price of $________ per share. I hereby represent and warrant that I have been furnished with a copy of the Plan and Plan Summary. ---------------------------------------- Dated: ------------------------------ ---------------------------------------- Address ---------------------------------------- - ------------------------------------- ---------------------------------------- Taxpayer I.D. Number ---------------------------------------- RECEIPT Corillian Corporation hereby acknowledges receipt from _______ in payment for ____ shares of Common Stock of Corillian Corporation, an Oregon corporation, of $_______ in the form of [ ] Cash [ ] Check (personal, cashier's or bank certified) [ ] shares of the Company's Common Stock, fair market value $______ per share, held by the optionee for a period of at least six months [ ] Copy of irrevocable instructions to Broker Date: By: ------------------------------- ------------------------------------ FMV on such date: $_________________ For: Corillian Corporation 2 EX-10.19 6 v17101exv10w19.txt EXHIBIT 10.19 EXHIBIT 10.19 SUMMARY OF KEY TERMS OF NAMED EXECUTIVE OFFICER COMPENSATION ARRANGEMENTS Corillian's CEO and four most highly compensated executive officers (the "named executive officers") are generally compensated pursuant to oral, informal compensation arrangements. Material elements of Corillian's compensation arrangements with its named executive officers consist of a base salary, participation in an incentive cash bonus program and equity compensation awards. The following table sets forth the current base salaries for Corillian's named executive officers.
EXECUTIVE OFFICER CURRENT SALARY - ----------------- -------------- Alex P. Hart $ 280,000 Paul K. Wilde $ 200,000 Christopher L. Brooks $ 200,000 Erich J. Litch $ 190,000 Andre Bouchard $ 185,000
Named executive officers are also eligible to receive discretionary bonuses on a semi-annual basis. The following table sets forth the target bonus amounts for 2005 for the named executive officers as a percentage of base salary.
2005 BONUS EXECUTIVE OFFICER TARGET - ----------------- ---------- Erich J. Litch 105% Andre Bouchard 42% Alex P. Hart 41% Christopher L. Brooks 20% Paul K. Wilde 16%
Corillian's named executive officers are eligible to receive awards under Corillian's equity compensation plans. All option grants to executive officers are approved by the Compensation Committee. Guidelines for the number of options granted to named executive officers have been established, and are reviewed periodically, by the Compensation Committee to ensure competitiveness. The Compensation Committee determines the terms of actual grants based on individual performance and contribution to our strategic success. Options granted to Corillian's named executive officers generally have a term of ten years. Corillian has entered into severance agreements with its named executive officers pursuant to which they will receive certain severance benefits if their employment with Corillian terminates under certain circumstances, including if their employment terminates in certain circumstances within one year following a change in control of Corillian. Occasionally, Corillian reimburses newly hired executives for relocation expenses. Named executive officers also participate in Corillian's other employee benefit plans on the same basis as other employees. EX-10.20 7 v17101exv10w20.txt EXHIBIT 10.20 EXHIBIT 10.20 SUMMARY OF KEY TERMS OF DIRECTOR COMPENSATION Directors who are also employees of Corillian receive no additional compensation for their services as directors. Directors who are not employees of Corillian generally receive cash compensation and equity compensation as described below. The following table sets forth current rates of cash compensation for non-employee directors. The annual retainer rate for Directors was adjusted effective May 9, 2005 and the additional annual retainer rate for the Chairman of the Board was adjusted effective July 26, 2005. Prior to May 9, 2005, Directors were not paid an annual retainer. Annual Retainer $ 15,000 Additional Annual Retainer for Chairman $ 15,000 Board Meeting Attendance Fees $ 1,000 per meeting Committee Meeting Attendance Fees $ 500 per meeting

Corillian generally grants stock options to each non-employee director upon the director's initial election to the Board and grants additional stock options to non-employee directors from time to time. In addition, Corillian generally grants options to the Chairman of the Board for twice the number of shares granted to the other non-employee directors. These stock options are approved by the Board and have a term of ten years. Corillian also reimburses each non-employee director for out-of-pocket expenses incurred in connection with the director's service as a director. EX-21.1 8 v17101exv21w1.txt EXHIBIT 21.1 EXHIBIT 21.1 LIST OF SUBSIDIARIES Corillian International, Ltd., a company organized under the laws of the United Kingdom Corillian South Asia Sdn Bhd, a company organized under the laws of Malaysia Corillian Community Banking Solutions, LLC, an Oregon limited liability company Corillian Payment Solutions, Inc., a Delaware corporation EX-23 9 v17101exv23.txt EXHIBIT 23 Exhibit 23.1 The Board of Directors and Shareholders Corillian Corporation: We consent to the incorporation by reference in the registration statements (Nos. 333-35448, 333-55176, 333-59384, 333-72652, 333-111447, and 333-122401) on Forms S-8 and S-3 of Corillian Corporation of our reports dated March 15, 2006 with respect to the consolidated balance sheets of Corillian Corporation and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of operations, shareholders' equity, and cash flows, for each of the years in the three-year period ended December 31, 2005, management's assessment of the effectiveness of internal control over financial reporting as of December 31, 2005 and the effectiveness of internal control over financial reporting as of December 31, 2005, which reports appear in the December 31, 2005 annual report on Form 10-K of Corillian Corporation. /s/ KPMG LLP Portland, Oregon March 16, 2006 EX-31.1 10 v17101exv31w1.txt EXHIBIT 31.1 EXHIBIT 31.1 CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION I, Alex P. Hart, certify that: 1. I have reviewed this annual report on Form 10-K of Corillian Corporation; 2. Based on my knowledge, this 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 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 registrant's 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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 report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's 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 d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of our annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant's 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 registrant's internal control over financial reporting. Dated: March 16, 2006 /s/ ALEX P. HART Alex P. Hart Chief Executive Officer and President EX-31.2 11 v17101exv31w2.txt EXHIBIT 31.2 EXHIBIT 31.2 CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION I, Paul K. Wilde, certify that: 1. I have reviewed this annual report on Form 10-K of Corillian Corporation; 2. Based on my knowledge, this 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 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 registrant's 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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 report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's 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 d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of our annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant's 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 registrant's internal control over financial reporting. Dated: March 16, 2006 /s/ PAUL K. WILDE Paul K. Wilde Chief Financial Officer EX-32.1 12 v17101exv32w1.txt EXHIBIT 32.1 EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Corillian Corporation (the "Company") on Form 10-K for the year ended December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Form 10-K"), Alex P. Hart, Chief Executive Officer of the Company, and Paul K. Wilde, Chief Financial Officer of the Company, respectively, do each hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Form 10-K fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (2) The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: March 16, 2006 /s/ ALEX P. HART Alex P. Hart Chief Executive Officer and President /s/ PAUL K. WILDE Paul K. Wilde Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----


Oregon		91-1795219
(State or other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

3400 NW John Olsen Place Hillsboro, Oregon (Address of principal executive offices)		97124 (Zip Code)


PART I
Item 1.	Business	2
Item 1A.	Risk Factors	14
Item 1B.	Unresolved Staff Comments	22
Item 2.	Properties	22
Item 3.	Legal Proceedings	23
Item 4.	Submission of Matters to a Vote of Security Holders	23

PART II
Item 5.	Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	23
Item 6.	Selected Financial Data	24
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 8.	Financial Statements and Supplementary Data	37
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	37
Item 9A.	Controls and Procedures	37
Item 9B.	Other Information	40

PART III
Item 10.	Directors and Executive Officers of the Registrant	40
Item 11.	Executive Compensation	40
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	40
Item 13.	Certain Relationships and Related Transactions	42
Item 14.	Principal Accountant Fees and Services	42

PART IV
Item 15.	Exhibits and Financial Statement Schedules	43
EXHIBIT 10.3
EXHIBIT 10.4
EXHIBIT 10.5
EXHIBIT 10.6
EXHIBIT 10.19
EXHIBIT 10.20
EXHIBIT 21.1
EXHIBIT 23
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1


	•	twenty-four hour, real-time, secure access to information and financial services from any Internet device;

	•	convenient and inexpensive money movement tools;

	•	improved personal finance management; and

	•	the presentation of comprehensive consolidated financial data.


	•	Corillian Fraud Detection System. Early Warning system for Internet-based attacks against web sites;

	•	Corillian Intelligent Authentication. Solution designed to provide multi-layered, multi-factor authentication without sacrificing usability;

	•	Web site Investigation & Forensics. Tools and techniques for separating normal from abusive or fraudulent web site activity;

	•	Secure Coding Workshop. Workshop covering state-of-the-art secure coding techniques for web sites;

	•	Delivery System Security Review. Delivery system review to help ensure resistance to security threats; and

	•	Code-level Security Review. Code-level review by Senior Security Engineers for potential security issues (Voyager-Specific).


	•	Scalable Framework. Each of the layers of Corillian Voyager is a software component that can be replicated within the Corillian Voyager configuration for redundancy and scalability. By adding an incremental component, work is distributed among servers across a network.

	•	Flexible Interfaces. Corillian’s solutions are designed to integrate with virtually any existing host system, providing a means for financial service providers to easily bring existing applications to the Internet. Corillian’s host server technology allows multiple simultaneous access to different existing and third-party systems. In addition, browser interfaces are customizable in form and function, allowing the financial service provider to display unique branding, advertising, and extended functionality.

	•	Advanced Architecture. The open architecture of Corillian Voyager enables flexible integration and rapid deployment of Corillian line of business applications, as well as Corillian-certified applications from Corillian partners. Powered by Microsoft^® Windows Server 2003 and Microsoft.NET, Corillian Voyager is built to incorporate emerging Internet finance technology. This architectural standard allows Corillian’s applications to interoperate with other application servers, such as teller and call center platforms and automated teller machine delivery systems.

	•	Open Financial Exchange Data Standard. Corillian’s solutions employ the Open Financial Exchange data standard, which was developed by Microsoft, CheckFree and Intuit to provide a unified specification for the electronic exchange of financial data among financial institutions, businesses and consumers over the Internet. This data specification standardizes the connection to financial data centers and to personal financial management software. By using the Open Financial Exchange data standard, all financial information retrieved from a financial institution can be quickly downloaded to consumer software programs, such as Microsoft Money and Quicken.


	•	Enhancements to Existing Products and Services. Corillian continues to update and modify its solutions to enhance quality, performance and scalability, to extend functionality to address Corillian’s customers’ changing needs, and to take advantage of improved technology within Corillian’s industry.


	•	Developing New Products and Services. Corillian is working to expand its product and service offerings. Corillian intends to expand its product offerings to include new consumer banking functions, as well as applications for wealth management and corporate cash management.

	•	Participating in Technology Testing and Collaboration. Corillian has participated in the development of industry data standards and will continue to collaborate with companies to develop new technologies and to encourage the adoption and implementation of open standards that can foster and simplify the exchange of financial information through the Internet.


	•	Corillian’s market presence with financial service providers;

	•	the reliability, scalability, security, speed and performance of Corillian’s solutions and services;

	•	the comprehensiveness, ease of use and service level of Corillian’s products and services;

	•	Corillian’s ability to continue to interface with financial service providers and their technology;

	•	Corillian’s pricing policies and the pricing policies of its competitors and suppliers;

	•	the timing of introductions of new products and services by Corillian and its competitors; and

	•	Corillian’s ability to meet its customers’ expectations.


	While Corillian Generated Net Income in the Last Three Fiscal Years, Corillian Has a History of Losses and May Incur Losses in Future Periods if it is Not Able to, Among Other Things, Increase Its Sales to New and Existing Customers


	*Corillian’s Quarterly Results Fluctuate Significantly and May Fall Short of Anticipated Levels, Which May Cause the Price of Its Common Stock to Decline*


	A Small Number of Customers Account for a Substantial Portion of Corillian’s Revenues in Each Period; Corillian’s Results of Operations and Financial Condition Could Suffer if it Loses Customers or Fails to Add Additional Customers to Its Customer Base


	*If Corillian, or Its Implementation Partners, Do Not Effectively Implement Corillian’s Solutions, Corillian May Not Achieve Anticipated Revenues or Gross Margins*


	*If Corillian’s Goodwill or Amortizable Intangible Assets Become Impaired Corillian May Be Required to Record a Significant Charge to Earnings*


	*Corillian’s Products’ Lengthy Sales Cycles May Cause Revenues and Operating Results to Be Unpredictable and to Vary Significantly from Period to Period*


	*Subscription-Based Licensing of Corillian Products and Services May Have An Adverse Effect On Near-Term Revenue*


Item 1.	*Business*


	*Corillian Voyager*^(tm)


	*Line of Business Applications*


	*Enterprise Applications*


	*Corillian May Not Achieve Anticipated Revenues If Corillian Does Not Successfully Introduce New Products or Develop Upgrades or Enhancements to Its Existing Products*


	*Acquisitions May Be Costly and Difficult to Integrate, Divert Management Resources or Dilute Shareholder Value*


	•	issue stock that would dilute its current shareholders’ percentage ownership;

	•	incur debt and assume liabilities; and

	•	incur amortization expenses related to intangible assets or incur large impairment charges.


	•	problems combining the purchased operations, technologies or products;

	•	problems integrating the business models of acquisition targets with Corillian’s;


	•	unanticipated costs;

	•	diversion of management’s attention from Corillian’s core business;

	•	adverse effects on existing business relationships with suppliers and customers;

	•	entering markets in which Corillian has no or limited prior experience; and

	•	potential loss of key employees, particularly those of the purchased organization.


	*Corillian Partners May Be Unable to Fulfill Their Service Obligations and Cause Corillian to Incur Penalties or Other Expenses with Its Customers*


	*Corillian’s Facility and Operations May Be Disabled by a Disaster or Similar Event, Which Could Damage Its Reputation and Require Corillian to Incur Financial Loss*


	*Competition in the Market for Internet-Based Financial Services is Intense and Could Reduce Corillian’s Sales and Prevent Corillian from Achieving Profitability*


	•	a longer operating history;

	•	more extensive name recognition and marketing power;

	•	preferred vendor status with Corillian’s existing and potential customers; and

	•	significantly greater financial, technical, marketing and other resources, giving them the ability to respond more quickly to new or changing opportunities, technologies and customer requirements.


	*Consolidation in the Financial Services Industry Could Reduce the Number of Corillian’s Customers and Potential Customers*


	*If Corillian Loses Key Personnel, Corillian Could Experience Reduced Sales, Delayed Product Development and Diversion of Management Resources*


	*If Corillian Does Not Develop International Operations as Expected or Fails to Address International Market Risks, Corillian May Not Achieve Anticipated Sales Growth*


	•	longer accounts receivable collection cycles;

	•	expenses associated with localizing products for foreign markets;

	•	difficulties in managing operations and partners across disparate geographic areas;

	•	difficulties in hiring qualified local personnel, finding qualified partners and complying with disparate labor laws;

	•	foreign currency exchange rate fluctuations;

	•	difficulties associated with enforcing agreements and collecting receivables through foreign legal systems; and

	•	unexpected changes in regulatory requirements that impose multiple conflicting tax laws and regulations.


	*If Corillian Becomes Subject to Intellectual Property Infringement Claims, These Claims Could Be Costly and Time Consuming to Defend, Divert Management Attention or Cause Product Delays*


	*Network or Internet Security Problems Could Damage Corillian’s Reputation and Business*


	*New Technologies Could Render Corillian’s Products Obsolete*


	Defects in Corillian’s Solutions and System Errors in Its Customers’ Data Processing Systems After Installing Corillian’s Solutions Could Result in Loss of Revenues, Delay in Market Acceptance and Injury to Corillian’s Reputation


	*Corillian’s Products and Services Must Interact With Other Vendors’ Products, Which May Not Function Properly*


	*If Corillian Becomes Subject to Product Liability Litigation, it Could be Costly and Time Consuming to Defend*


	*If Corillian is Unable to Protect Its Intellectual Property, Corillian May Lose a Valuable Competitive Advantage or be Forced to Incur Costly Litigation to Protect Its Rights*