-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G43qmO/dHMIFjX9NIz3Kny//jhWvFPhUaEz6vXqoNUB7so7jp7JWGQHR4wHY7G9I XewjvhZn730HLbrGThNIMA== 0001045638-98-000036.txt : 19980518 0001045638-98-000036.hdr.sgml : 19980518 ACCESSION NUMBER: 0001045638-98-000036 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPSS INC CENTRAL INDEX KEY: 0000869570 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 362815480 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22194 FILM NUMBER: 98622818 BUSINESS ADDRESS: STREET 1: 444 NORTH MICHIGAN AVE CITY: CHICAGO STATE: IL ZIP: 60611 BUSINESS PHONE: 3123292400 MAIL ADDRESS: STREET 1: 444 N MICHIGAN AVE CITY: CHICAGO STATE: IL ZIP: 60611 10-Q 1 1ST QUARTER 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 1998 Commission file Number: 33-64732 SPSS Inc. (Exact name of registrant as specified in its charter) Delaware 36-2815480 (State or other jurisdiction (IRS Employer Identification No.) of incorporation or organization) 444 N. Michigan Avenue, Chicago, Illinois 60611 (Address of principal executive offices and zip code) Registrant's telephone number including area code: (312)329-2400 Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes X No As of May 6, 1998, there were 9,011,605 shares of common stock outstanding, par value $.01, of the registrant. SPSS Inc. Form 10-Q QUARTER ENDED MARCH 31, 1998 INDEX PART I - FINANCIAL INFORMATION PAGE Item 1. Financial Statements Independent Auditors' Review Report 3 Consolidated Balance Sheets as of December 31, 1997 and March 31, 1998 (unaudited) 4 Consolidated Statements of Income for the three months ended March 31, 1997 (unaudited) and 1998 (unaudited) 5 Consolidated Statements of Comprehensive Income for the three months ended March 31, 1997 (unaudited) and 1998 (unaudited) 6 Consolidated Statements of Cash Flows for the three months ended March 31, 1997 (unaudited) and 1998 (unaudited) 7 Notes to Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II - OTHER INFORMATION Item 1. Legal Proceedings 12 Item 5. Recent Developments 12 Item 6. Exhibits and Reports on Form 8-K 13 - 2 - Item 1. FINANCIAL STATEMENTS Independent Auditors' Review Report ----------------------------------- The Board of Directors SPSS Inc.: We have reviewed the consolidated balance sheet of SPSS Inc. and subsidiaries as of March 31, 1998, and the related consolidated statements of income, comprehensive income, and cash flows for the three-month periods ended March 31, 1997 and 1998. These consolidated financial statements are the responsibility of SPSS Inc.'s management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above, for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of SPSS Inc. and subsidiaries as of December 31, 1997, and the related consolidated statements of income, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 18, 1998, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1997, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ KPMG Peat Marwick LLP Chicago, Illinois April 28, 1998 - 3 - SPSS Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS (in thousands, except for share data)
December 31, March 31, 1997 1998 -------------------- ------------------- (unaudited) CURRENT ASSETS: Cash and cash equivalents $ 8,079 $ 8,735 Accounts receivable, net of allowances 27,872 26,889 Inventories 2,520 3,006 Prepaid expenses and other current assets 2,811 2,457 -------------------- ------------------- Total current assets 41,282 41,087 -------------------- ------------------- EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost: Land and building 1,700 1,735 Furniture, fixtures and office equipment 6,044 6,126 Computer equipment and software 18,032 19,007 Leasehold improvements 2,627 3,449 -------------------- ------------------- 28,403 30,317 Less accumulated depreciation and amortization 18,974 19,852 -------------------- ------------------- Net equipment and leasehold improvements 9,429 10,465 -------------------- ------------------- Capitalized software development costs, net of accumulated amortization 6,703 7,277 Goodwill, net of accumulated amortization 1,062 1,020 Deferred income tax assets 2,588 2,588 Other assets 1,681 1,672 -------------------- ------------------- $ 62,745 $ 64,109 ==================== =================== CURRENT LIABILITIES: Notes payable $ 71 $ -- Accounts payable 5,013 4,790 Accrued royalties 482 392 Accrued rent 428 469 Other accrued liabilities 9,912 7,984 Income taxes and value added taxes payable 1,299 2,477 Customer advances 208 238 Deferred revenues 9,715 8,364 -------------------- ------------------- Total current liabilities 27,128 24,714 -------------------- ------------------- Deferred income taxes 1,936 1,936 Other noncurrent liabilities 1,219 1,188 STOCKHOLDERS' EQUITY: Common stock, $.01 par value; 50,000,000 shares authorized; 8,811,644 and 8,902,513 shares issued and outstanding in 1997 and 1998, respectively 88 89 Additional paid-in capital 44,313 44,679 Accumulated other comprehensive income - cumulative foreign currency translation adjustment (1,065) (849) Accumulated deficit (10,874) (7,648) -------------------- ------------------- Total stockholders' equity 32,462 36,271 -------------------- ------------------- $ 62,745 $ 64,109 ==================== ===================
See accompanying notes to consolidated financial statements. - 4 - SPSS Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME (in thousands, except for share data) (unaudited)
Three Months Ended March 31, ------------------------------------ 1997 1998 ---------------- ----------------- Net revenues: Desktop products $ 19,851 $ 20,615 Large System products 4,327 4,300 Other products and services 3,134 3,585 ---------------- ----------------- Net revenues 27,312 28,500 Cost of revenues 2,589 2,435 ---------------- ----------------- Gross profit 24,723 26,065 ---------------- ----------------- Operating expenses: Sales and marketing 12,682 14,281 Product development 4,345 4,954 General and administrative 3,266 1,785 ---------------- ----------------- Operating expenses 20,293 21,020 Operating income 4,430 5,045 ---------------- ----------------- Other income (expense): Net interest income 109 28 Other expense (22) (162) ---------------- ----------------- Other income (expense) 87 (134) ---------------- ----------------- Income before income taxes 4,517 4,911 Income tax expense 1,603 1,685 ---------------- ----------------- Net income $ 2,914 $ 3,226 ================ ================= Basic earnings per share $ 0.33 $ 0.36 ================ ================= Shares used in computing basic earnings per share 8,735,973 8,843,934 ================ ================= Diluted earnings per share $ 0.30 $ 0.34 ================ ================= Shares used in computing diluted earnings per share 9,611,152 9,517,007 ================ =================
See accompanying notes to consolidated financial statements. - 5 - SPSS INC. and Subsidiaries CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) (unaudited)
Three Months Ended March 31, 1997 1998 ---------- ------ Net income $2,914 $3,226 Other comprehensive income (loss): Foreign currency translation adjustment (58) 216 ---------- ------ Comprehensive income $2,856 $3,442
See accompanying notes to consolidated financial statements. - 6 - SPSS Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Three Months Ended March 31, ------------------------------------- 1997 1998 ----------------- ----------------- Cash flows from operating activities: Net income $ 2,914 $ 3,226 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 1,565 1,454 Changes in assets and liabilities, net of effects of acquisitions: Deferred income taxes (108) - Accounts receivable (1,675) 983 Inventories 302 (486) Accounts payable 1,162 (223) Accrued royalties (120) (90) Accrued expenses (2,412) (1,863) Accrued income taxes (995) 1,178 Other (2,657) (918) ----------------- ----------------- Net cash (used in) provided by operating activities (2,024) 3,261 ----------------- ----------------- Cash flows from investing activities: Capital expenditures, net (505) (1,861) Capitalized software development costs (775) (1,016) Net payments for acquisitions (24) (24) ----------------- ----------------- Net cash used in investing activities (1,304) (2,901) ----------------- ----------------- Cash flows from financing activities: Net borrowings (repayments) on notes payable 1,506 (71) Net proceeds from issuance of common stock 20 253 Income tax benefit from stock option exercises 55 114 ----------------- ----------------- Net cash provided by financing activities 1,581 296 ----------------- ----------------- Net change in cash and cash equivalents (1,747) 656 Cash and cash equivalents at beginning of period 13,491 8,079 ----------------- ----------------- Cash and cash equivalents at end of period $ 11,744 $ 8,735 ================= ================= Supplemental disclosures of cash flow information: Interest paid $ 79 $ 78 Income taxes paid 2,956 843 ================= =================
See accompanying notes to consolidated financial statements. - 7 - SPSS Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Basis of Presentation The accompanying unaudited interim consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the results of the interim periods presented. All such adjustments are of a normal recurring nature. These consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended December 31, 1997, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. Note 2 - Earnings Per Share In the fourth quarter of 1997, the Company adopted SFAS No. 128, "Earnings Per Share," which established new methods for computing and presenting earnings per share ("EPS") and replaced the presentation of primary and fully diluted EPS with basic and diluted EPS. Basic earnings per share is based on the weighted average number of shares outstanding and excludes the dilutive effect of unexercised common stock equivalents. Basic shares outstanding for each period were 8,735,973 for the three months ended March 31, 1997 and 8,843,934 for the comparable period in 1998. Dilutive earnings per share is based on the weighted average number of shares outstanding and includes the dilutive effect of unexercised common stock equivalents. Diluted shares outstanding for each period were 9,611,152 shares for the three months ended March 31, 1997 and 9,517,007 shares for the comparable period in 1998. - 8 - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. The following table sets forth the percentages that selected items in the Consolidated Statements of Income bear to net revenues:
Percentage of Net Revenues ------------------------------------ Three Months Ended March 31, ------------------------------------ 1997 1998 ---------------- ----------------- Statement of Income Data: Net revenues: Desktop products 73% 72% Large System products 16% 15% Other products and services 11% 13% ---------------- ----------------- Net revenues 100% 100% Cost of revenues 9% 9% ---------------- ----------------- Gross profit 91% 91% ---------------- ----------------- Operating expenses: Sales and marketing 46% 50% Product development 16% 17% General and administrative 12% 6% ---------------- ----------------- Operating expenses 74% 73% ---------------- ----------------- Operating income 17% 18% Other income (expense): Net interest income (expense) -- -- Other expense -- (1%) ---------------- ----------------- Other income (expense) -- (1%) ---------------- ----------------- Income before income taxes 17% 17% Income tax expense 6% 6% ---------------- ----------------- Net income 11% 11% ================ =================
Comparison of Three Months Ended March 31, 1997 to Three Months Ended March 31, 1998. Net Revenues. Net Revenues were $27,312,000 and $28,500,000 for the three months ended March 31, 1997 and 1998, respectively, an increase of 4%. Revenues from products designed for desktop computers ("Desktop products") increased $764,000 (4%) over the corresponding period in 1997. In addition, revenues from annual license renewals of Desktop products increased by $500,000, reflecting a $208,000 increase in annual - 9 - license renewals for SPSS for Windows. Revenues from products designed for mainframes, minicomputers, and UNIX workstations ("Large System products") decreased 1% over the corresponding period in 1997. Other products and services revenues increased 14% due to the increase in training revenue and revenues received from publications and student products. Revenues for the first quarter of 1998 were adversely effected by changes in foreign currency exchange rates. Cost of Revenues. Cost of revenues consists of costs of goods sold, amortization of capitalized software development costs, and royalties paid to third parties. Cost of revenues was $2,589,000 and $2,435,000 in the three months ended March 31, 1997 and 1998, respectively, a decrease of 6%. Such costs decreased due to lower publication cost of goods sold and lower royalties paid to third parties. As a percentage of net revenues, cost of revenues remained constant at 9%. Sales and Marketing. Sales and marketing expenses were $12,682,000 and $14,281,000 in the three months ended March 31, 1997 and 1998, respectively, an increase of 13%. This increase was due to the expansion of the domestic and international sales organizations and increased media placement and promotional costs. Such expenses increased from 46% to 50% of net revenues. Product Development. Product development expenses were $4,345,000 and $4,954,000 (net of capitalized software development costs of $403,000 and $516,000) in the three months ended March 31, 1997 and 1998, respectively, an increase of 14%. In the corresponding periods in 1997 and 1998, the Company's expense for amortization of capitalized software and product translations, included in cost of revenues, was $459,000 and $451,000, respectively. The increase in product development expenses was primarily due to the higher cost of development personnel, additions to the product development staff, recruitment expense, and network services expense. As a percentage of net revenues, product development expenses increased from 16% to 17%, respectively. General and Administrative. General and administrative expenses were $3,266,000 and $1,785,000 in the three months ended March 31, 1997 and 1998, respectively, a decrease of 45%. Such expenses decreased primarily due to reduction in administrative staff and other efficiencies gained in connection with the acquisitions of the Quantime Limited and In2itive Technologies A/S entities. As a percentage of net revenues, general and administrative expenses decreased from 12% to 6%. Net Interest Income. Net interest income was $109,000 and $28,000 in the three months ended March 31, 1997 and 1998, respectively, a decrease of 74%. This unfavorable variance was primarily due to lower interest earned on short-term investments resulting from lower cash balances in the three months ended March 31,1998 compared to March 31, 1997. Other (Expense). Other (expense) was ($22,000) and ($162,000) for the three months ended March 31, 1997 and 1998, respectively. Such transactions consist of foreign currency transaction losses. - 10 - Provision for Income Taxes. Provision for income taxes was $1,603,000 and $1,685,000 for the three months ended March 31, 1997 and 1998, respectively, reflecting effective tax rates of 35.5% and 34.3%, respectively. Liquidity and Capital Resources The Company had no long-term debt as of March 31, 1998 and held approximately $8,735,000 in cash and cash equivalents. Funds in the first three months of 1998 were used in operations and for payments related to the Company's acquisition of Quantime Limited and In2itive Technologies A/S. Capital expenditures included, among other things, new computer systems for use in internal product development and leasehold improvements and furnishings for the Company's new office space in the Sears Tower in Chicago, Illinois. The Company currently has an available $5,000,000 unsecured line of credit with Bank of America N.T.S.A. ("B of A"), under which borrowings bear interest at the reference rate (currently 8.50%). As of March 31, 1998, the Company had no borrowings under this line of credit. The Company's credit agreement with B of A requires the Company to comply with certain specified financial ratios and tests, and, among other things, restricts the Company's ability to (i) pay dividends or make distributions, (ii) incur additional indebtedness, (iii) create liens on assets, (iv) make investments, (v) engage in mergers, acquisitions or consolidations, (vi) sell assets and (vii) engage in certain transactions with affiliates. The Company anticipates that amounts available under its line of credit, existing sources of liquidity and cash flows generated from operations will be sufficient to fund the Company's operations and capital requirements for the foreseeable future. However, no assurance can be given that changing business circumstances will not require additional capital for reasons that are not currently anticipated or that the necessary additional capital will then be available to the Company on favorable terms, or at all. - 11 - International Operations Significant growth in the Company's international operations continued during the first quarter of 1998. The portion of revenues attributable to international operations was negatively affected by changes in foreign currency exchange rates. Net corporate revenues increased 4% in the three months ended March 31, 1998, when compared to the three months ended March 31, 1997. Net of the effects of changes in foreign currency rates, the increase would have been approximately 7%. Safe Harbor "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Certain statements in this report constitute "forward-looking statements" within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). Such statements involve known and unknown risks and uncertainties which may cause the Company's actual results, performance or achievements, or industry results, to be materially different than any future results, performance or achievements expressed or implied in or by such forward-looking statements. By way of example and not limitation, known risks and uncertainties include the Company's ability to successfully integrate or improve the performance of acquired businesses, change in market conditions or product demand, competition and currency fluctuations, changes in product release schedules and product acceptance. In light of these and other risks and uncertainties, the inclusion of forward-looking statements in this report should not be regarded as a representation by the Company that any future results, performance or achievements will be attained. PART II - OTHER INFORMATION Item 1. Legal Proceedings Currently there are no material pending legal proceedings to which the Company or any of its subsidiaries is a party or to which any of their property is subject. Item 5. Recent Developments The Company is currently under negotiations to renew its agreement with Prentice-Hall, Inc. -12- Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits (Note: Management contracts and compensatory plans or arrangements are underlined in the following list.)
Incorporation Exhibit by Reference Number Description of Document (if applicable) ------ ----------------------- --------------- 3.1 Certificate of Incorporation of the Company * 3.2 3.2 By-Laws of the Company * 3.4 4.1 Second Amendment to Credit Agreement ** 4.3 10.1 Change of Control Agreement between SPSS Inc. and Jack Noonan 10.2 Change of Control Agreement between SPSS Inc. and Edward Hamburg 10.3 Change of Control Agreement between SPSS Inc. and Louise Rehling 10.4 Change of Control Agreement between SPSS Inc. and Susan Phelan 10.5 Change of Control Agreement between SPSS Inc. and Mark Battaglia 10.6 Change of Control Agreement between SPSS Inc. and Ian Durrell 10.7 Consulting Agreement ** 10.22 15.1 Acknowledgment of Independent Certified Public Accountants Regarding Independent Auditors' Review Report 27.1 Financial Data Schedule 27.1a Financial Data Schedule
- ------------------------------- * Previously filed with Amendment No. 2 to Form S-1 Registration Statement of SPSS Inc. filed on August 4, 1993 (Registration No. 33-64732) ** Previously filed with SPSS' Annual Report on Form 10-K for the Year Ended December 31, 1997 - 13 - (b) Reports on Form 8-K There were no reports on Form 8-K filed by the Company during the fiscal quarter ended March 31, 1998 - 14 - SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SPSS Inc. Date: May 15, 1998 By: /s/ Jack Noonan -------------------- Jack Noonan President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the undersigned, in his capacity as the principal financial officer of the Registrant. Date: May 15, 1998 By: /s/ Edward Hamburg ----------------------- Edward Hamburg Executive Vice-President, Corporate Operations and Chief Financial Officer - 15 - EXHIBIT INDEX
Exhibit Sequential Page Number Description of Document Number - ------ ----------------------- --------------- 10.1 Change of Control Agreement between SPSS Inc. 18 and Jack Noonan 10.2 Change of Control Agreement between SPSS Inc. 25 and Edward Hamburg 10.3 Change of Control Agreement between SPSS Inc. 32 and Louise Rehling 10.4 Change of Control Agreement between SPSS Inc. 39 and Susan Phelan 10.5 Change of Control Agreement between SPSS Inc. 46 and Mark Battaglia 10.6 Change of Control Agreement between SPSS Inc. 53 and Ian Durrell 15.1 Acknowledgement of Independent Certified Public 60 Accountants Regarding Independent Auditors' Review Report 27.1 Financial Data Schedule 61 27.1a Financial Data Schedule 62
- 16 - EX-10 2 EXHIBIT 10.1 EXHIBIT 10.1 SENIOR MANAGEMENT CHANGE OF CONTROL AGREEMENT BETWEEN JACK NOONAN AND SPSS INC. THIS CHANGE OF CONTROL AGREEMENT, dated as of May 1, 1998 (the "Agreement"), is by and between SPSS Inc., a Delaware corporation having its principal offices at 444 N. Michigan Avenue, Chicago, Illinois 60611 ("SPSS" or the "Company"), and Jack_Noonan, a senior management employee of SPSS (the "Employee"). WHEREAS, the Employee is presently serving as the President and Chief Executive Officer of SPSS; and WHEREAS, SPSS desires to continue the Employee's services as President and Chief Executive Officer and to provide the Employee with the benefits set forth herein in consideration of the Employee's continued employment, and the Employee is willing to continue his employment as an employee of SPSS and enter into this Agreement on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and conditions contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Certain Defined Terms. (a) "Cause" shall mean material nonperformance by the Employee of the Employee's duties or material injury or harm to the Company or its successor caused by the Employee. (b) "Change of Control," as used herein, shall mean any one or more of the following: (i) the accumulation, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) not previously owning common stock of the Company, of Fifteen Percent (15%) or more of the shares of the then outstanding common stock of SPSS (the "Outstanding Common Stock"), (ii) a merger or consolidation of SPSS in which SPSS does not survive as an independent public company, (iii) a sale of all or substantially all of the assets of SPSS, (iv) a triggering event under any Rights Agreement of SPSS, as such agreement may exist from time to time, or (v) a liquidation or dissolution of SPSS; provided, however, that the following acquisitions shall not constitute a Change of Control for the purposes of this subsection (a): (i) any acquisition of common stock or securities convertible into common stock directly from SPSS, or (ii) any acquisition of common stock or securities convertible into common stock by any employee benefit plan (or related trust) sponsored or maintained by SPSS. (c) "Constructive Termination," as used herein, shall mean (i) a reduction, for a reason other than Cause, in annualized cash compensation by 20% or more (compared to the cash compensation which the Employee received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control) which occurs during any twelve month period beginning on or after the Effective Date of any Change of Control referred to above and ending on or prior to the later of (x) the second anniversary date of the Effective Date of any Change of Control referred to above or (y) the last day of vesting for any SPSS options then held by the Employee which options have not vested as of the Effective Date of any Change of Control referred to above; or (ii) any action (an "Action"), for a reason other than Cause, by SPSS which results in a diminution in any material respect of the Employee's position, authority, duties or responsibilities as the same existed immediately prior to the Effective Date of the Change of Control referred to above. Further, in order for it to be a Constructive Termination, either (i) or (ii) above must be followed within ninety (90) days with the resignation of the Employee. A change in the Employee's title or a transfer to a different division or subsidiary, whether publicly or privately held, shall not in and of itself constitute an Action. Rather, the focus turns on the substance of the Employee's duties. (d) "Effective Date," as used herein, shall mean the first date during which a Change of Control (as defined in Section 1(b)) occurs. 2. Change of Control in a Transaction with a Private Company. In the event a Change of Control occurs as the result of a transaction between SPSS and a company whose common stock is not publicly traded on a domestic national stock exchange, the NASDAQ national market, or their respective successors or equivalents (a "Private Company"), the Employee shall have the rights and benefits set forth below: (a) Continued Employment. If upon the occurrence of Change of Control between SPSS and a Private Company, the Employee is hired for at least a one-year period, with an employment package equal to or greater than the larger of (i) the total cash compensation received by the Employee in the immediately preceding full fiscal year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, all of Employee stock options shall vest on the Effective Date on which the Change of Control occurs and shall be cashed out at the transaction value on the occurrence of the transaction with the Private Company on or within ninety (90) days following a Change of Control. If Employee shall be hired with an employment package equal to or greater than the larger of (i) the total cash compensation received by Employee in the preceding fiscal year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, Employee - 2 - shall receive an employment agreement which provides for the following upon involuntary termination without cause or Constructive Termination after the Effective Date of the Change of Control and within two (2) years after the Change of Control: (1) a severance package equal to the greater of (i) the aggregate cash compensation received in the immediately preceding fiscal year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year; and (2) in the event of a Constructive Termination, the option to terminate employment while still receiving the severance package referred to in 2(a)(1) above. If Employee is hired for a period of less than one year, the provisions of Constructive Termination apply. (b) Involuntary Termination; Constructive Termination Upon a Change of Control. If upon the occurrence of Change of Control between SPSS and a Private Company, there is either an involuntary termination of Employee without Cause or Constructive Termination, the vesting of all Employee stock options shall be accelerated to the Effective Date on which the Change of Control occurs and shall be cashed out at the transaction value on the occurrence of the transaction with the Private Company on or within ninety (90) days from the occurrence of the Change of Control. Employee shall receive a one (1) year severance package equal to the greater of (i) the Employee's cash compensation received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control or (ii) two times the Employee's base salary received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control. (c) Voluntary Resignation. If upon the occurrence of Change of Control between SPSS and a Private Company, Employee voluntarily resigns, all of Employee's unvested SPSS stock options shall be forfeited and all of Employee's vested options shall be cashed out at the transaction value on the occurrence of the transaction with the Private Company on or within ninety (90) days following a Change of Control. 3. Change of Control in a Transaction With a Public Company. In the event a Change of Control occurs between SPSS and a company whose common stock is publicly traded on the domestic national stock exchange, the NASDAQ national market, or their respective successors and equivalents (a "Public Company"), the Employee shall have the rights and benefits set forth below: (a) Continued Employment. If upon the occurrence of a Change of Control between SPSS and a Public Company, the Employee is hired for at least a one-year period, with an employment package equal to or greater than the larger of (i) the total cash compensation received by the Employee in the immediately preceding year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, all of Employee's stock options shall either (i) vest on the Effective Date on which the Change of Control occurs and shall be cashed out at the transaction value on or within ninety (90) days following a Change of Control; or (ii) shall be converted into stock options of the acquiring Public Company on substantially equivalent economic terms ("Replacement Options"). If Replacement Options are granted, they shall continue to vest at the same rate as under the - 3 - SPSS Option Plan prior to the Change of Control. If Employee shall be hired for at least a one-year period, by the acquiring Public Company with an employment package equal to or greater than the larger of (i) the total cash compensation which Employee received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, Employee shall receive an employment agreement which provides the following upon the occurrence of an involuntary termination without Cause or Constructive Termination after the Effective Date of the Change of Control and within two (2) years after the Change of Control: (1) a severance package equal to the greater of (i) the aggregate cash compensation received in the immediately preceding fiscal year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year; (2) immediate accelerated vesting of all previously unvested Replacement Options; and (3) in the event of a Constructive Termination, the option to terminate employment while still receiving the severance package referred to in 3(a)(i) above. If Employee is hired for a period less than one year, the provisions of Constructive Termination apply. If a Constructive Termination or an involuntary Termination without Cause occurs two (2) years or more after the Effective Date of a Change of Control, the vesting of all previously unvested Replacement Options shall be accelerated to the date on which the Employee is subject to a Constructive Termination or involuntary termination. (b) Involuntary Termination/Constructive Termination Upon a Change of Control. If, upon the occurrence of a Change of Control between SPSS and a Public Company there is either an involuntary termination of an Employee without Cause or a Constructive Termination of Employee, (i) the vesting of all of Employee's stock options shall be accelerated to the Effective Date on which the Change of Control occurs, and shall be cashed out at the Change of Control transaction value or must be exercised by Employee within ninety (90) days from the occurrence of a Change of Control (if there is a Change of Control with no transaction) and (ii) Employee shall receive a one (1) year severance package equal to the greater of (A) the cash compensation received by Employee in the fiscal year immediately preceding the year of the Effective Date of a Change of Control or (B) two times the Employee's base salary received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control. (c) Voluntary Resignation on Change of Control. If upon the occurrence of a Change of Control between SPSS and a Public Company, Employee voluntarily resigns, at the time of the Effective Date of the Change of Control, all unvested SPSS stock options held by Employee shall be forfeited, and all vested options shall be cashed out at the Change of Control transaction value or must be exercised by Employee within ninety (90) days from the occurrence of such Change of Control (if there is a Change of Control with no transaction). 4. Health and Welfare Benefits. Notwithstanding the rights and obligations as outlined in Sections 2 or 3 above, if Employee is involuntarily terminated - 4 - without Cause or is subject to a Constructive Termination on or after the Effective Date of a Change of Control or within the later of two (2) years following the Effective Date of a Change of Control in addition to the benefits set forth above in Sections 2 and 3, the Employee shall continue to receive, at the cost of the employer, the same health and welfare benefits (in effect at any time one hundred twenty (120) days prior to the Effective Date of a Change of Control), but only to the extent each plan which governs the benefits permits participation by terminated employees, for a period of eighteen (18) months following the date of involuntary termination without Cause or Constructive Termination. 5. Non-Compete. (a) Employee hereby covenants and agrees that during the period of time he collects a severance package, he shall not (i) directly or indirectly (whether through a partnership of which the Employee is a partner or through any other individual or entity in which Employee has any interest, legal or equitable), engage in any business competitive with the business of SPSS (ii) directly or indirectly (whether through a partnership of which Employee is a partner or through any other individual or entity in which Employee has any interest, legal or equitable), solicit or otherwise engage with any customers or clients of SPSS, in any transactions which are in direct competition with the software business of SPSS which SPSS did or could have engaged in with those customers or clients, or (iii) directly or indirectly (whether through a partnership of which Employee is a partner or through any other individual or entity in which Employee has any interest, legal or equitable), assist any person in the development, programming, servicing, maintenance, manufacture, sale, licensing, distribution or marketing (including, without limitation, giving away software) of software and related products in competition with SPSS' products, in each case in the United States of America or any country where SPSS, or its subsidiaries or affiliates are doing business with respect to SPSS products and services and in each case excluding passive investment interests of less than two percent (2%) in corporations whose stock is registered under the Securities Exchange Act of 1934, as amended. (b) Employee understands that a breach by him of this Section 5 may cause substantial injury to SPSS, which may be irreparable and/or in amounts difficult or impossible to ascertain, and that in the event Employee breaches this Section 5, SPSS shall have, in addition to all other remedies available in the event of a breach of this Agreement, the right to injunctive or other equitable relief. Further, Employee acknowledges and agrees that the restrictions and commitments set forth in this Agreement are necessary to protect SPSS' legitimate interests and are reasonable in scope, area and time, and that if, despite this acknowledgment and agreement, at the time of the enforcement of any provision of this Agreement a court of competent jurisdiction shall hold that the period or scope of such provision is unreasonable under the circumstances then existing, the maximum reasonable period or scope under such circumstances shall be substituted for the period or scope stated in such provision. - 5 - (c) Should Employee breach this Section 5, all severance payments shall cease immediately, and SPSS shall be entitled to pursue all other available legal or equitable remedies. (d) For purposes of Section 5, where the context admits, the term "SPSS" includes SPSS Inc., its subsidiaries and all of their respective affiliated entities and their successors and assigns. 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois applicable to agreements made and to be performed in Illinois, without giving effect to conflicts of law principles. 7. Headings. The section headings of this Agreement are for reference only and are to be given no effect in the construction or interpretation of this Agreement. 8. Severability. If any part or provision of this Agreement shall be declared invalid or unenforceable by a court of competent jurisdiction, said provision or part shall be ineffective to the extent of such invalidity or unenforceability only, without in any way affecting the remaining parts or provisions of this Agreement. 9. Waiver. Any party may waive compliance by another party with any of the provisions of this Agreement. No waiver of any provision shall be construed as a waiver of any other provision. Any waiver must be in writing. 10. Binding Effect; Assignment. This Agreement shall be binding on and inure to the benefit of the parties and their respective successors and permitted assigns. Nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any person or entity (including any employee or person engaged by SPSS in any capacity) not a party to this Agreement. SPSS will require any successor (whether direct or indirect, by merger, purchase, consolidation or otherwise) of SPSS to make an express assumption of the obligations hereunder and cause any successor (whether direct or indirect, by merger, purchase, consolidation or otherwise) of SPSS to agree to perform all parts and provisions under this Agreement in the same manner and to the same extent that SPSS would be required to perform it if no such succession had taken place. 11. Counterparts. This Agreement may be signed in any number of counterparts and all such counterparts shall be read together and construed as but one and the same document. 12. Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed given when delivered personally, one day after sent by recognized overnight courier, or five (5) days after deposit in the United States mail, postage prepaid, registered or certified mail, return receipt requested, to the parties at the following addresses (or to such other address as a party may have specified by notice duly given to the other party in accordance with this provision): - 6 - If to the Employee: At the Employee's then current business or residence address as shown on the records of SPSS, with a copy to such other person as the Employee may have specified by notice duly given to SPSS in accordance with this provision. If to SPSS: SPSS Inc. 444 N. Michigan Avenue Chicago, Illinois 60611 Attention: Chairman With a copy to: Ross & Hardies 150 N. Michigan Avenue Chicago, Illinois 60601-7567 Attention: Lawrence R. Samuels, Esq. IN WITNESS WHEREOF the parties have executed this Agreement on the date first written above. Employee /s/JACK NOONAN Jack Noonan SPSS Inc. By:/s/NORMAN NIE Name: Norman Nie Its: Chairman - 7 - EX-10 3 EXHIBIT 10.2 EXHIBIT 10.2 SENIOR MANAGEMENT CHANGE OF CONTROL AGREEMENT BETWEEN EDWARD HAMBURG AND SPSS INC. THIS CHANGE OF CONTROL AGREEMENT, dated as of May 1, 1998 (the "Agreement"), is by and between SPSS Inc., a Delaware corporation having its principal offices at 444 N. Michigan Avenue, Chicago, Illinois 60611 ("SPSS" or the "Company"), and Edward Hamburg, a senior management employee of SPSS (the "Employee"). WHEREAS, the Employee is presently serving as the Executive Vice President of SPSS; and WHEREAS, SPSS desires to continue the Employee's services as Executive Vice President and to provide the Employee with the benefits set forth herein in consideration of the Employee's continued employment, and the Employee is willing to continue his employment as an employee of SPSS and enter into this Agreement on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and conditions contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Certain Defined Terms. (a) "Cause" shall mean material nonperformance by the Employee of the Employee's duties or material injury or harm to the Company or its successor caused by the Employee. (b) "Change of Control," as used herein, shall mean any one or more of the following: (i) the accumulation, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) not previously owning common stock of the Company, of Fifteen Percent (15%) or more of the shares of the then outstanding common stock of SPSS (the "Outstanding Common Stock"), (ii) a merger or consolidation of SPSS in which SPSS does not survive as an independent public company, (iii) a sale of all or substantially all of the assets of SPSS, (iv) a triggering event under any Rights Agreement of SPSS, as such agreement may exist from time to time, or (v) a liquidation or dissolution of SPSS; provided, however, that the following acquisitions shall not constitute a Change of Control for the purposes of this subsection (a): (i) any acquisition of common stock or securities convertible into common stock directly from SPSS, or (ii) any acquisition of common stock or securities convertible into common stock by any employee benefit plan (or related trust) sponsored or maintained by SPSS. (c) "Constructive Termination," as used herein, shall mean (i) a reduction, for a reason other than Cause, in annualized cash compensation by 20% or more (compared to the cash compensation which the Employee received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control) which occurs during any twelve month period beginning on or after the Effective Date of any Change of Control referred to above and ending on or prior to the later of (x) the second anniversary date of the Effective Date of any Change of Control referred to above or (y) the last day of vesting for any SPSS options then held by the Employee which options have not vested as of the Effective Date of any Change of Control referred to above; or (ii) any action (an "Action"), for a reason other than Cause, by SPSS which results in a diminution in any material respect of the Employee's position, authority, duties or responsibilities as the same existed immediately prior to the Effective Date of the Change of Control referred to above. Further, in order for it to be a Constructive Termination, either (i) or (ii) above must be followed within ninety (90) days with the resignation of the Employee. A change in the Employee's title or a transfer to a different division or subsidiary, whether publicly or privately held, shall not in and of itself constitute an Action. Rather, the focus turns on the substance of the Employee's duties. (d) "Effective Date," as used herein, shall mean the first date during which a Change of Control (as defined in Section 1(b)) occurs. 2. Change of Control in a Transaction with a Private Company. In the event a Change of Control occurs as the result of a transaction between SPSS and a company whose common stock is not publicly traded on a domestic national stock exchange, the NASDAQ national market, or their respective successors or equivalents (a "Private Company"), the Employee shall have the rights and benefits set forth below: (a) Continued Employment. If upon the occurrence of Change of Control between SPSS and a Private Company, the Employee is hired for at least a one-year period, with an employment package equal to or greater than the larger of (i) the total cash compensation received by the Employee in the immediately preceding full fiscal year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, all of Employee stock options shall vest on the Effective Date on which the Change of Control occurs and shall be cashed out at the transaction value on the occurrence of the transaction with the Private Company on or within ninety (90) days following a Change of Control. If Employee shall be hired with an employment package equal to or greater than the larger of (i) the total cash compensation received by Employee in the preceding fiscal year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, Employee shall receive an employment agreement which provides for the following upon involuntary termination without cause or Constructive Termination after the Effective Date of the Change of Control and within two (2) years after the Change of Control: (1) a severance package equal to the greater of (i) the aggregate cash compensation received in the immediately preceding fiscal year or (ii) two times the Employee's base salary received in the immediately - 2 - preceding fiscal year; and (2) in the event of a Constructive Termination, the option to terminate employment while still receiving the severance package referred to in 2(a)(1) above. If Employee is hired for a period of less than one year, the provisions of Constructive Termination apply. (b) Involuntary Termination; Constructive Termination Upon a Change of Control. If upon the occurrence of Change of Control between SPSS and a Private Company, there is either an involuntary termination of Employee without Cause or Constructive Termination, the vesting of all Employee stock options shall be accelerated to the Effective Date on which the Change of Control occurs and shall be cashed out at the transaction value on the occurrence of the transaction with the Private Company on or within ninety (90) days from the occurrence of the Change of Control. Employee shall receive a one (1) year severance package equal to the greater of (i) the Employee's cash compensation received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control or (ii) two times the Employee's base salary received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control. (c) Voluntary Resignation. If upon the occurrence of Change of Control between SPSS and a Private Company, Employee voluntarily resigns, all of Employee's unvested SPSS stock options shall be forfeited and all of Employee's vested options shall be cashed out at the transaction value on the occurrence of the transaction with the Private Company on or within ninety (90) days following a Change of Control. 3. Change of Control in a Transaction With a Public Company. In the event a Change of Control occurs between SPSS and a company whose common stock is publicly traded on the domestic national stock exchange, the NASDAQ national market, or their respective successors and equivalents (a "Public Company"), the Employee shall have the rights and benefits set forth below: (a) Continued Employment. If upon the occurrence of a Change of Control between SPSS and a Public Company, the Employee is hired for at least a one-year period, with an employment package equal to or greater than the larger of (i) the total cash compensation received by the Employee in the immediately preceding year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, all of Employee's stock options shall either (i) vest on the Effective Date on which the Change of Control occurs and shall be cashed out at the transaction value on or within ninety (90) days following a Change of Control; or (ii) shall be converted into stock options of the acquiring Public Company on substantially equivalent economic terms ("Replacement Options"). If Replacement Options are granted, they shall continue to vest at the same rate as under the SPSS Option Plan prior to the Change of Control. If Employee shall be hired for at least a one-year period, by the acquiring Public Company with an employment package equal to or greater than the larger of (i) the total cash compensation which Employee received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, - 3 - Employee shall receive an employment agreement which provides the following upon the occurrence of an involuntary termination without Cause or Constructive Termination after the Effective Date of the Change of Control and within two (2) years after the Change of Control: (1) a severance package equal to the greater of (i) the aggregate cash compensation received in the immediately preceding fiscal year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year; (2) immediate accelerated vesting of all previously unvested Replacement Options; and (3) in the event of a Constructive Termination, the option to terminate employment while still receiving the severance package referred to in 3(a)(i) above. If Employee is hired for a period less than one year, the provisions of Constructive Termination apply. If a Constructive Termination or an involuntary Termination without Cause occurs two (2) years or more after the Effective Date of a Change of Control, the vesting of all previously unvested Replacement Options shall be accelerated to the date on which the Employee is subject to a Constructive Termination or involuntary termination. (b) Involuntary Termination/Constructive Termination Upon a Change of Control. If, upon the occurrence of a Change of Control between SPSS and a Public Company there is either an involuntary termination of an Employee without Cause or a Constructive Termination of Employee, (i) the vesting of all of Employee's stock options shall be accelerated to the Effective Date on which the Change of Control occurs, and shall be cashed out at the Change of Control transaction value or must be exercised by Employee within ninety (90) days from the occurrence of a Change of Control (if there is a Change of Control with no transaction) and (ii) Employee shall receive a one (1) year severance package equal to the greater of (A) the cash compensation received by Employee in the fiscal year immediately preceding the year of the Effective Date of a Change of Control or (B) two times the Employee's base salary received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control. (c) Voluntary Resignation on Change of Control. If upon the occurrence of a Change of Control between SPSS and a Public Company, Employee voluntarily resigns, at the time of the Effective Date of the Change of Control, all unvested SPSS stock options held by Employee shall be forfeited, and all vested options shall be cashed out at the Change of Control transaction value or must be exercised by Employee within ninety (90) days from the occurrence of such Change of Control (if there is a Change of Control with no transaction). 4. Health and Welfare Benefits. Notwithstanding the rights and obligations as outlined in Sections 2 or 3 above, if Employee is involuntarily terminated without Cause or is subject to a Constructive Termination on or after the Effective Date of a Change of Control or within the later of two (2) years following the Effective Date of a Change of Control in addition to the benefits set forth above in Sections 2 and 3, the Employee shall continue to receive, at the cost of the employer, the same health and welfare benefits (in effect at any time one hundred twenty (120) days prior to the Effective Date of a - 4 - Change of Control), but only to the extent each plan which governs the benefits permits participation by terminated employees, for a period of eighteen (18) months following the date of involuntary termination without Cause or Constructive Termination. 5. Non-Compete. (a) Employee hereby covenants and agrees that during the period of time he collects a severance package, he shall not (i) directly or indirectly (whether through a partnership of which the Employee is a partner or through any other individual or entity in which Employee has any interest, legal or equitable), engage in any business competitive with the business of SPSS (ii) directly or indirectly (whether through a partnership of which Employee is a partner or through any other individual or entity in which Employee has any interest, legal or equitable), solicit or otherwise engage with any customers or clients of SPSS, in any transactions which are in direct competition with the software business of SPSS which SPSS did or could have engaged in with those customers or clients, or (iii) directly or indirectly (whether through a partnership of which Employee is a partner or through any other individual or entity in which Employee has any interest, legal or equitable), assist any person in the development, programming, servicing, maintenance, manufacture, sale, licensing, distribution or marketing (including, without limitation, giving away software) of software and related products in competition with SPSS' products, in each case in the United States of America or any country where SPSS, or its subsidiaries or affiliates are doing business with respect to SPSS products and services and in each case excluding passive investment interests of less than two percent (2%) in corporations whose stock is registered under the Securities Exchange Act of 1934, as amended. (b) Employee understands that a breach by him of this Section 5 may cause substantial injury to SPSS, which may be irreparable and/or in amounts difficult or impossible to ascertain, and that in the event Employee breaches this Section 5, SPSS shall have, in addition to all other remedies available in the event of a breach of this Agreement, the right to injunctive or other equitable relief. Further, Employee acknowledges and agrees that the restrictions and commitments set forth in this Agreement are necessary to protect SPSS' legitimate interests and are reasonable in scope, area and time, and that if, despite this acknowledgment and agreement, at the time of the enforcement of any provision of this Agreement a court of competent jurisdiction shall hold that the period or scope of such provision is unreasonable under the circumstances then existing, the maximum reasonable period or scope under such circumstances shall be substituted for the period or scope stated in such provision. (c) Should Employee breach this Section 5, all severance payments shall cease immediately, and SPSS shall be entitled to pursue all other available legal or equitable remedies. - 5 - (d) For purposes of Section 5, where the context admits, the term "SPSS" includes SPSS Inc., its subsidiaries and all of their respective affiliated entities and their successors and assigns. 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois applicable to agreements made and to be performed in Illinois, without giving effect to conflicts of law principles. 7. Headings. The section headings of this Agreement are for reference only and are to be given no effect in the construction or interpretation of this Agreement. 8. Severability. If any part or provision of this Agreement shall be declared invalid or unenforceable by a court of competent jurisdiction, said provision or part shall be ineffective to the extent of such invalidity or unenforceability only, without in any way affecting the remaining parts or provisions of this Agreement. 9. Waiver. Any party may waive compliance by another party with any of the provisions of this Agreement. No waiver of any provision shall be construed as a waiver of any other provision. Any waiver must be in writing. 10. Binding Effect; Assignment. This Agreement shall be binding on and inure to the benefit of the parties and their respective successors and permitted assigns. Nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any person or entity (including any employee or person engaged by SPSS in any capacity) not a party to this Agreement. SPSS will require any successor (whether direct or indirect, by merger, purchase, consolidation or otherwise) of SPSS to make an express assumption of the obligations hereunder and cause any successor (whether direct or indirect, by merger, purchase, consolidation or otherwise) of SPSS to agree to perform all parts and provisions under this Agreement in the same manner and to the same extent that SPSS would be required to perform it if no such succession had taken place. 11. Counterparts. This Agreement may be signed in any number of counterparts and all such counterparts shall be read together and construed as but one and the same document. 12. Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed given when delivered personally, one day after sent by recognized overnight courier, or five (5) days after deposit in the United States mail, postage prepaid, registered or certified mail, return receipt requested, to the parties at the following addresses (or to such other address as a party may have specified by notice duly given to the other party in accordance with this provision): - 6 - If to the Employee: At the Employee's then current business or residence address as shown on the records of SPSS, with a copy to such other person as the Employee may have specified by notice duly given to SPSS in accordance with this provision. If to SPSS: SPSS Inc. 444 N. Michigan Avenue Chicago, Illinois 60611 Attention: President With a copy to: Ross & Hardies 150 N. Michigan Avenue Chicago, Illinois 60601-7567 Attention: Lawrence R. Samuels, Esq. IN WITNESS WHEREOF the parties have executed this Agreement on the date first written above. Employee /s/EDWARD HAMBURG EDWARD HAMBURG SPSS Inc. By:/s/JACK NOONAN Name: Jack Noonan Its: President and Chief Executive Officer - 7 - EX-10 4 EXHIBIT 10.3 EXHIBIT 10.3 SENIOR MANAGEMENT CHANGE OF CONTROL AGREEMENT BETWEEN LOUISE REHLING AND SPSS INC. THIS CHANGE OF CONTROL AGREEMENT, dated as of May 1, 1998 (the "Agreement"), is by and between SPSS Inc., a Delaware corporation having its principal offices at 444 N. Michigan Avenue, Chicago, Illinois 60611 ("SPSS" or the "Company"), and Louise Rehling, a senior management employee of SPSS (the "Employee"). WHEREAS, the Employee is presently serving as the Executive Vice President Product Development of SPSS; and WHEREAS, SPSS desires to continue the Employee's services as Executive Vice President Product Development and to provide the Employee with the benefits set forth herein in consideration of the Employee's continued employment, and the Employee is willing to continue his employment as an employee of SPSS and enter into this Agreement on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and conditions contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Certain Defined Terms. (a) "Cause" shall mean material nonperformance by the Employee of the Employee's duties or material injury or harm to the Company or its successor caused by the Employee. (b) "Change of Control," as used herein, shall mean any one or more of the following: (i) the accumulation, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) not previously owning common stock of the Company, of Fifteen Percent (15%) or more of the shares of the then outstanding common stock of SPSS (the "Outstanding Common Stock"), (ii) a merger or consolidation of SPSS in which SPSS does not survive as an independent public company, (iii) a sale of all or substantially all of the assets of SPSS, (iv) a triggering event under any Rights Agreement of SPSS, as such agreement may exist from time to time, or (v) a liquidation or dissolution of SPSS; provided, however, that the following acquisitions shall not constitute a Change of Control for the purposes of this subsection (a): (i) any acquisition of common stock or securities convertible into common stock directly from SPSS, or (ii) any acquisition of common stock or securities convertible into common stock by any employee benefit plan (or related trust) sponsored or maintained by SPSS. (c) "Constructive Termination," as used herein, shall mean (i) a reduction, for a reason other than Cause, in annualized cash compensation by 20% or more (compared to the cash compensation which the Employee received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control) which occurs during any twelve month period beginning on or after the Effective Date of any Change of Control referred to above and ending on or prior to the later of (x) the second anniversary date of the Effective Date of any Change of Control referred to above or (y) the last day of vesting for any SPSS options then held by the Employee which options have not vested as of the Effective Date of any Change of Control referred to above; or (ii) any action (an "Action"), for a reason other than Cause, by SPSS which results in a diminution in any material respect of the Employee's position, authority, duties or responsibilities as the same existed immediately prior to the Effective Date of the Change of Control referred to above. Further, in order for it to be a Constructive Termination, either (i) or (ii) above must be followed within ninety (90) days with the resignation of the Employee. A change in the Employee's title or a transfer to a different division or subsidiary, whether publicly or privately held, shall not in and of itself constitute an Action. Rather, the focus turns on the substance of the Employee's duties. (d) "Effective Date," as used herein, shall mean the first date during which a Change of Control (as defined in Section 1(b)) occurs. 2. Change of Control in a Transaction with a Private Company. In the event a Change of Control occurs as the result of a transaction between SPSS and a company whose common stock is not publicly traded on a domestic national stock exchange, the NASDAQ national market, or their respective successors or equivalents (a "Private Company"), the Employee shall have the rights and benefits set forth below: (a) Continued Employment. If upon the occurrence of Change of Control between SPSS and a Private Company, the Employee is hired for at least a one-year period, with an employment package equal to or greater than the larger of (i) the total cash compensation received by the Employee in the immediately preceding full fiscal year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, all of Employee stock options shall vest on the Effective Date on which the Change of Control occurs and shall be cashed out at the transaction value on the occurrence of the transaction with the Private Company on or within ninety (90) days following a Change of Control. If Employee shall be hired with an employment package equal to or greater than the larger of (i) the total cash compensation received by Employee in the preceding fiscal year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, Employee shall receive an employment agreement which provides for the following upon involuntary termination without cause or Constructive Termination after the Effective Date of the Change of Control and within two (2) years after the Change of Control: (1) a severance package equal to the greater of (i) the aggregate cash compensation received in the immediately preceding fiscal year or (ii) two times the Employee's base salary received in the immediately - 2 - preceding fiscal year; and (2) in the event of a Constructive Termination, the option to terminate employment while still receiving the severance package referred to in 2(a)(1) above. If Employee is hired for a period of less than one year, the provisions of Constructive Termination apply. (b) Involuntary Termination; Constructive Termination Upon a Change of Control. If upon the occurrence of Change of Control between SPSS and a Private Company, there is either an involuntary termination of Employee without Cause or Constructive Termination, the vesting of all Employee stock options shall be accelerated to the Effective Date on which the Change of Control occurs and shall be cashed out at the transaction value on the occurrence of the transaction with the Private Company on or within ninety (90) days from the occurrence of the Change of Control. Employee shall receive a one (1) year severance package equal to the greater of (i) the Employee's cash compensation received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control or (ii) two times the Employee's base salary received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control. (c) Voluntary Resignation. If upon the occurrence of Change of Control between SPSS and a Private Company, Employee voluntarily resigns, all of Employee's unvested SPSS stock options shall be forfeited and all of Employee's vested options shall be cashed out at the transaction value on the occurrence of the transaction with the Private Company on or within ninety (90) days following a Change of Control. 3. Change of Control in a Transaction With a Public Company. In the event a Change of Control occurs between SPSS and a company whose common stock is publicly traded on the domestic national stock exchange, the NASDAQ national market, or their respective successors and equivalents (a "Public Company"), the Employee shall have the rights and benefits set forth below: (a) Continued Employment. If upon the occurrence of a Change of Control between SPSS and a Public Company, the Employee is hired for at least a one-year period, with an employment package equal to or greater than the larger of (i) the total cash compensation received by the Employee in the immediately preceding year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, all of Employee's stock options shall either (i) vest on the Effective Date on which the Change of Control occurs and shall be cashed out at the transaction value on or within ninety (90) days following a Change of Control; or (ii) shall be converted into stock options of the acquiring Public Company on substantially equivalent economic terms ("Replacement Options"). If Replacement Options are granted, they shall continue to vest at the same rate as under the SPSS Option Plan prior to the Change of Control. If Employee shall be hired for at least a one-year period, by the acquiring Public Company with an employment package equal to or greater than the larger of (i) the total cash compensation which Employee received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, - 3 - Employee shall receive an employment agreement which provides the following upon the occurrence of an involuntary termination without Cause or Constructive Termination after the Effective Date of the Change of Control and within two (2) years after the Change of Control: (1) a severance package equal to the greater of (i) the aggregate cash compensation received in the immediately preceding fiscal year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year; (2) immediate accelerated vesting of all previously unvested Replacement Options; and (3) in the event of a Constructive Termination, the option to terminate employment while still receiving the severance package referred to in 3(a)(i) above. If Employee is hired for a period less than one year, the provisions of Constructive Termination apply. If a Constructive Termination or an involuntary Termination without Cause occurs two (2) years or more after the Effective Date of a Change of Control, the vesting of all previously unvested Replacement Options shall be accelerated to the date on which the Employee is subject to a Constructive Termination or involuntary termination. (b) Involuntary Termination/Constructive Termination Upon a Change of Control. If, upon the occurrence of a Change of Control between SPSS and a Public Company there is either an involuntary termination of an Employee without Cause or a Constructive Termination of Employee, (i) the vesting of all of Employee's stock options shall be accelerated to the Effective Date on which the Change of Control occurs, and shall be cashed out at the Change of Control transaction value or must be exercised by Employee within ninety (90) days from the occurrence of a Change of Control (if there is a Change of Control with no transaction) and (ii) Employee shall receive a one (1) year severance package equal to the greater of (A) the cash compensation received by Employee in the fiscal year immediately preceding the year of the Effective Date of a Change of Control or (B) two times the Employee's base salary received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control. (c) Voluntary Resignation on Change of Control. If upon the occurrence of a Change of Control between SPSS and a Public Company, Employee voluntarily resigns, at the time of the Effective Date of the Change of Control, all unvested SPSS stock options held by Employee shall be forfeited, and all vested options shall be cashed out at the Change of Control transaction value or must be exercised by Employee within ninety (90) days from the occurrence of such Change of Control (if there is a Change of Control with no transaction). 4. Health and Welfare Benefits. Notwithstanding the rights and obligations as outlined in Sections 2 or 3 above, if Employee is involuntarily terminated without Cause or is subject to a Constructive Termination on or after the Effective Date of a Change of Control or within the later of two (2) years following the Effective Date of a Change of Control in addition to the benefits set forth above in Sections 2 and 3, the Employee shall continue to receive, at the cost of the employer, the same health and welfare benefits (in effect at any time one hundred twenty (120) days prior to the Effective Date of a Change of Control), but only to the extent each plan which governs the benefits permits - 4 - participation by terminated employees, for a period of eighteen (18) months following the date of involuntary termination without Cause or Constructive Termination. 5. Non-Compete. (a) Employee hereby covenants and agrees that during the period of time he collects a severance package, he shall not (i) directly or indirectly (whether through a partnership of which the Employee is a partner or through any other individual or entity in which Employee has any interest, legal or equitable), engage in any business competitive with the business of SPSS (ii) directly or indirectly (whether through a partnership of which Employee is a partner or through any other individual or entity in which Employee has any interest, legal or equitable), solicit or otherwise engage with any customers or clients of SPSS, in any transactions which are in direct competition with the software business of SPSS which SPSS did or could have engaged in with those customers or clients, or (iii) directly or indirectly (whether through a partnership of which Employee is a partner or through any other individual or entity in which Employee has any interest, legal or equitable), assist any person in the development, programming, servicing, maintenance, manufacture, sale, licensing, distribution or marketing (including, without limitation, giving away software) of software and related products in competition with SPSS' products, in each case in the United States of America or any country where SPSS, or its subsidiaries or affiliates are doing business with respect to SPSS products and services and in each case excluding passive investment interests of less than two percent (2%) in corporations whose stock is registered under the Securities Exchange Act of 1934, as amended. (b) Employee understands that a breach by him of this Section 5 may cause substantial injury to SPSS, which may be irreparable and/or in amounts difficult or impossible to ascertain, and that in the event Employee breaches this Section 5, SPSS shall have, in addition to all other remedies available in the event of a breach of this Agreement, the right to injunctive or other equitable relief. Further, Employee acknowledges and agrees that the restrictions and commitments set forth in this Agreement are necessary to protect SPSS' legitimate interests and are reasonable in scope, area and time, and that if, despite this acknowledgment and agreement, at the time of the enforcement of any provision of this Agreement a court of competent jurisdiction shall hold that the period or scope of such provision is unreasonable under the circumstances then existing, the maximum reasonable period or scope under such circumstances shall be substituted for the period or scope stated in such provision. (c) Should Employee breach this Section 5, all severance payments shall cease immediately, and SPSS shall be entitled to pursue all other available legal or equitable remedies. (d) For purposes of Section 5, where the context admits, the term "SPSS" includes SPSS Inc., its subsidiaries and all of their respective affiliated entities and their successors and assigns. - 5 - 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois applicable to agreements made and to be performed in Illinois, without giving effect to conflicts of law principles. 7. Headings. The section headings of this Agreement are for reference only and are to be given no effect in the construction or interpretation of this Agreement. 8. Severability. If any part or provision of this Agreement shall be declared invalid or unenforceable by a court of competent jurisdiction, said provision or part shall be ineffective to the extent of such invalidity or unenforceability only, without in any way affecting the remaining parts or provisions of this Agreement. 9. Waiver. Any party may waive compliance by another party with any of the provisions of this Agreement. No waiver of any provision shall be construed as a waiver of any other provision. Any waiver must be in writing. 10. Binding Effect; Assignment. This Agreement shall be binding on and inure to the benefit of the parties and their respective successors and permitted assigns. Nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any person or entity (including any employee or person engaged by SPSS in any capacity) not a party to this Agreement. SPSS will require any successor (whether direct or indirect, by merger, purchase, consolidation or otherwise) of SPSS to make an express assumption of the obligations hereunder and cause any successor (whether direct or indirect, by merger, purchase, consolidation or otherwise) of SPSS to agree to perform all parts and provisions under this Agreement in the same manner and to the same extent that SPSS would be required to perform it if no such succession had taken place. 11. Counterparts. This Agreement may be signed in any number of counterparts and all such counterparts shall be read together and construed as but one and the same document. 12. Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed given when delivered personally, one day after sent by recognized overnight courier, or five (5) days after deposit in the United States mail, postage prepaid, registered or certified mail, return receipt requested, to the parties at the following addresses (or to such other address as a party may have specified by notice duly given to the other party in accordance with this provision): If to the Employee: At the Employee's then current business or residence address as shown on the records of SPSS, with a copy to such other person as the Employee may have specified by notice duly given to SPSS in accordance with this provision. - 6 - If to SPSS: SPSS Inc. 444 N. Michigan Avenue Chicago, Illinois 60611 Attention: President With a copy to: Ross & Hardies 150 N. Michigan Avenue Chicago, Illinois 60601-7567 Attention: Lawrence R. Samuels, Esq. IN WITNESS WHEREOF the parties have executed this Agreement on the date first written above. Employee /s/LOUISE REHLING LOUISE REHLING SPSS Inc. By:/s/JACK NOONAN Name: Jack Noonan Its: President and Chief Executive Officer - 7 - EX-10 5 EXHIBIT 10.4 EXHIBIT 10.4 SENIOR MANAGEMENT CHANGE OF CONTROL AGREEMENT BETWEEN SUSAN PHELAN AND SPSS INC. THIS CHANGE OF CONTROL AGREEMENT, dated as of May 1, 1998 (the "Agreement"), is by and between SPSS Inc., a Delaware corporation having its principal offices at 444 N. Michigan Avenue, Chicago, Illinois 60611 ("SPSS" or the "Company"), and Susan Phelan, a senior management employee of SPSS (the "Employee"). WHEREAS, the Employee is presently serving as the Executive Vice President Products & Services of SPSS; and WHEREAS, SPSS desires to continue the Employee's services as Executive Vice President Products & Services and to provide the Employee with the benefits set forth herein in consideration of the Employee's continued employment, and the Employee is willing to continue his employment as an employee of SPSS and enter into this Agreement on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and conditions contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Certain Defined Terms. (a) "Cause" shall mean material nonperformance by the Employee of the Employee's duties or material injury or harm to the Company or its successor caused by the Employee. (b) "Change of Control," as used herein, shall mean any one or more of the following: (i) the accumulation, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) not previously owning common stock of the Company, of Fifteen Percent (15%) or more of the shares of the then outstanding common stock of SPSS (the "Outstanding Common Stock"), (ii) a merger or consolidation of SPSS in which SPSS does not survive as an independent public company, (iii) a sale of all or substantially all of the assets of SPSS, (iv) a triggering event under any Rights Agreement of SPSS, as such agreement may exist from time to time, or (v) a liquidation or dissolution of SPSS; provided, however, that the following acquisitions shall not constitute a Change of Control for the purposes of this subsection (a): (i) any acquisition of common stock or securities convertible into common stock directly from SPSS, or (ii) any acquisition of common stock or securities convertible into common stock by any employee benefit plan (or related trust) sponsored or maintained by SPSS. (c) "Constructive Termination," as used herein, shall mean (i) a reduction, for a reason other than Cause, in annualized cash compensation by 20% or more (compared to the cash compensation which the Employee received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control) which occurs during any twelve month period beginning on or after the Effective Date of any Change of Control referred to above and ending on or prior to the later of (x) the second anniversary date of the Effective Date of any Change of Control referred to above or (y) the last day of vesting for any SPSS options then held by the Employee which options have not vested as of the Effective Date of any Change of Control referred to above; or (ii) any action (an "Action"), for a reason other than Cause, by SPSS which results in a diminution in any material respect of the Employee's position, authority, duties or responsibilities as the same existed immediately prior to the Effective Date of the Change of Control referred to above. Further, in order for it to be a Constructive Termination, either (i) or (ii) above must be followed within ninety (90) days with the resignation of the Employee. A change in the Employee's title or a transfer to a different division or subsidiary, whether publicly or privately held, shall not in and of itself constitute an Action. Rather, the focus turns on the substance of the Employee's duties. (d) "Effective Date," as used herein, shall mean the first date during which a Change of Control (as defined in Section 1(b)) occurs. 2. Change of Control in a Transaction with a Private Company. In the event a Change of Control occurs as the result of a transaction between SPSS and a company whose common stock is not publicly traded on a domestic national stock exchange, the NASDAQ national market, or their respective successors or equivalents (a "Private Company"), the Employee shall have the rights and benefits set forth below: (a) Continued Employment. If upon the occurrence of Change of Control between SPSS and a Private Company, the Employee is hired for at least a one-year period, with an employment package equal to or greater than the larger of (i) the total cash compensation received by the Employee in the immediately preceding full fiscal year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, all of Employee stock options shall vest on the Effective Date on which the Change of Control occurs and shall be cashed out at the transaction value on the occurrence of the transaction with the Private Company on or within ninety (90) days following a Change of Control. If Employee shall be hired with an employment package equal to or greater than the larger of (i) the total cash compensation received by Employee in the preceding fiscal year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, Employee shall receive an employment agreement which provides for the following upon involuntary termination without cause or Constructive Termination after the Effective Date of the Change of Control and within two (2) years after the Change of Control: (1) a severance package equal to the greater of (i) the aggregate cash compensation received in the immediately preceding fiscal year or (ii) two times the Employee's base salary received in the immediately - 2 - preceding fiscal year; and (2) in the event of a Constructive Termination, the option to terminate employment while still receiving the severance package referred to in 2(a)(1) above. If Employee is hired for a period of less than one year, the provisions of Constructive Termination apply. (b) Involuntary Termination; Constructive Termination Upon a Change of Control. If upon the occurrence of Change of Control between SPSS and a Private Company, there is either an involuntary termination of Employee without Cause or Constructive Termination, the vesting of all Employee stock options shall be accelerated to the Effective Date on which the Change of Control occurs and shall be cashed out at the transaction value on the occurrence of the transaction with the Private Company on or within ninety (90) days from the occurrence of the Change of Control. Employee shall receive a one (1) year severance package equal to the greater of (i) the Employee's cash compensation received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control or (ii) two times the Employee's base salary received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control. (c) Voluntary Resignation. If upon the occurrence of Change of Control between SPSS and a Private Company, Employee voluntarily resigns, all of Employee's unvested SPSS stock options shall be forfeited and all of Employee's vested options shall be cashed out at the transaction value on the occurrence of the transaction with the Private Company on or within ninety (90) days following a Change of Control. 3. Change of Control in a Transaction With a Public Company. In the event a Change of Control occurs between SPSS and a company whose common stock is publicly traded on the domestic national stock exchange, the NASDAQ national market, or their respective successors and equivalents (a "Public Company"), the Employee shall have the rights and benefits set forth below: (a) Continued Employment. If upon the occurrence of a Change of Control between SPSS and a Public Company, the Employee is hired for at least a one-year period, with an employment package equal to or greater than the larger of (i) the total cash compensation received by the Employee in the immediately preceding year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, all of Employee's stock options shall either (i) vest on the Effective Date on which the Change of Control occurs and shall be cashed out at the transaction value on or within ninety (90) days following a Change of Control; or (ii) shall be converted into stock options of the acquiring Public Company on substantially equivalent economic terms ("Replacement Options"). If Replacement Options are granted, they shall continue to vest at the same rate as under the SPSS Option Plan prior to the Change of Control. If Employee shall be hired for at least a one-year period, by the acquiring Public Company with an employment package equal to or greater than the larger of (i) the total cash compensation which Employee received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, - 3 - Employee shall receive an employment agreement which provides the following upon the occurrence of an involuntary termination without Cause or Constructive Termination after the Effective Date of the Change of Control and within two (2) years after the Change of Control: (1) a severance package equal to the greater of (i) the aggregate cash compensation received in the immediately preceding fiscal year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year; (2) immediate accelerated vesting of all previously unvested Replacement Options; and (3) in the event of a Constructive Termination, the option to terminate employment while still receiving the severance package referred to in 3(a)(i) above. If Employee is hired for a period less than one year, the provisions of Constructive Termination apply. If a Constructive Termination or an involuntary Termination without Cause occurs two (2) years or more after the Effective Date of a Change of Control, the vesting of all previously unvested Replacement Options shall be accelerated to the date on which the Employee is subject to a Constructive Termination or involuntary termination. (b) Involuntary Termination/Constructive Termination Upon a Change of Control. If, upon the occurrence of a Change of Control between SPSS and a Public Company there is either an involuntary termination of an Employee without Cause or a Constructive Termination of Employee, (i) the vesting of all of Employee's stock options shall be accelerated to the Effective Date on which the Change of Control occurs, and shall be cashed out at the Change of Control transaction value or must be exercised by Employee within ninety (90) days from the occurrence of a Change of Control (if there is a Change of Control with no transaction) and (ii) Employee shall receive a one (1) year severance package equal to the greater of (A) the cash compensation received by Employee in the fiscal year immediately preceding the year of the Effective Date of a Change of Control or (B) two times the Employee's base salary received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control. (c) Voluntary Resignation on Change of Control. If upon the occurrence of a Change of Control between SPSS and a Public Company, Employee voluntarily resigns, at the time of the Effective Date of the Change of Control, all unvested SPSS stock options held by Employee shall be forfeited, and all vested options shall be cashed out at the Change of Control transaction value or must be exercised by Employee within ninety (90) days from the occurrence of such Change of Control (if there is a Change of Control with no transaction). 4. Health and Welfare Benefits. Notwithstanding the rights and obligations as outlined in Sections 2 or 3 above, if Employee is involuntarily terminated without Cause or is subject to a Constructive Termination on or after the Effective Date of a Change of Control or within the later of two (2) years following the Effective Date of a Change of Control in addition to the benefits set forth above in Sections 2 and 3, the Employee shall continue to receive, at the cost of the employer, the same health and welfare benefits (in effect at any time one hundred twenty (120) days prior to the Effective Date of a - 4 - Change of Control), but only to the extent each plan which governs the benefits permits participation by terminated employees, for a period of eighteen (18) months following the date of involuntary termination without Cause or Constructive Termination. 5. Non-Compete. (a) Employee hereby covenants and agrees that during the period of time he collects a severance package, he shall not (i) directly or indirectly (whether through a partnership of which the Employee is a partner or through any other individual or entity in which Employee has any interest, legal or equitable), engage in any business competitive with the business of SPSS (ii) directly or indirectly (whether through a partnership of which Employee is a partner or through any other individual or entity in which Employee has any interest, legal or equitable), solicit or otherwise engage with any customers or clients of SPSS, in any transactions which are in direct competition with the software business of SPSS which SPSS did or could have engaged in with those customers or clients, or (iii) directly or indirectly (whether through a partnership of which Employee is a partner or through any other individual or entity in which Employee has any interest, legal or equitable), assist any person in the development, programming, servicing, maintenance, manufacture, sale, licensing, distribution or marketing (including, without limitation, giving away software) of software and related products in competition with SPSS' products, in each case in the United States of America or any country where SPSS, or its subsidiaries or affiliates are doing business with respect to SPSS products and services and in each case excluding passive investment interests of less than two percent (2%) in corporations whose stock is registered under the Securities Exchange Act of 1934, as amended. (b) Employee understands that a breach by him of this Section 5 may cause substantial injury to SPSS, which may be irreparable and/or in amounts difficult or impossible to ascertain, and that in the event Employee breaches this Section 5, SPSS shall have, in addition to all other remedies available in the event of a breach of this Agreement, the right to injunctive or other equitable relief. Further, Employee acknowledges and agrees that the restrictions and commitments set forth in this Agreement are necessary to protect SPSS' legitimate interests and are reasonable in scope, area and time, and that if, despite this acknowledgment and agreement, at the time of the enforcement of any provision of this Agreement a court of competent jurisdiction shall hold that the period or scope of such provision is unreasonable under the circumstances then existing, the maximum reasonable period or scope under such circumstances shall be substituted for the period or scope stated in such provision. (c) Should Employee breach this Section 5, all severance payments shall cease immediately, and SPSS shall be entitled to pursue all other available legal or equitable remedies. - 5 - (d) For purposes of Section 5, where the context admits, the term "SPSS" includes SPSS Inc., its subsidiaries and all of their respective affiliated entities and their successors and assigns. 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois applicable to agreements made and to be performed in Illinois, without giving effect to conflicts of law principles. 7. Headings. The section headings of this Agreement are for reference only and are to be given no effect in the construction or interpretation of this Agreement. 8. Severability. If any part or provision of this Agreement shall be declared invalid or unenforceable by a court of competent jurisdiction, said provision or part shall be ineffective to the extent of such invalidity or unenforceability only, without in any way affecting the remaining parts or provisions of this Agreement. 9. Waiver. Any party may waive compliance by another party with any of the provisions of this Agreement. No waiver of any provision shall be construed as a waiver of any other provision. Any waiver must be in writing. 10. Binding Effect; Assignment. This Agreement shall be binding on and inure to the benefit of the parties and their respective successors and permitted assigns. Nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any person or entity (including any employee or person engaged by SPSS in any capacity) not a party to this Agreement. SPSS will require any successor (whether direct or indirect, by merger, purchase, consolidation or otherwise) of SPSS to make an express assumption of the obligations hereunder and cause any successor (whether direct or indirect, by merger, purchase, consolidation or otherwise) of SPSS to agree to perform all parts and provisions under this Agreement in the same manner and to the same extent that SPSS would be required to perform it if no such succession had taken place. 11. Counterparts. This Agreement may be signed in any number of counterparts and all such counterparts shall be read together and construed as but one and the same document. 12. Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed given when delivered personally, one day after sent by recognized overnight courier, or five (5) days after deposit in the United States mail, postage prepaid, registered or certified mail, return receipt requested, to the parties at the following addresses (or to such other address as a party may have specified by notice duly given to the other party in accordance with this provision): - 6 - If to the Employee: At the Employee's then current business or residence address as shown on the records of SPSS, with a copy to such other person as the Employee may have specified by notice duly given to SPSS in accordance with this provision. If to SPSS: SPSS Inc. 444 N. Michigan Avenue Chicago, Illinois 60611 Attention: President With a copy to: Ross & Hardies 150 N. Michigan Avenue Chicago, Illinois 60601-7567 Attention: Lawrence R. Samuels, Esq. IN WITNESS WHEREOF the parties have executed this Agreement on the date first written above. Employee /s/SUSAN PHELAN SUSAN PHELAN SPSS Inc. By:/s/JACK NOONAN Name: Jack Noonan Its: President and Chief Executive Officer - 7 - EX-10 6 EXHIBIT 10.5 EXHIBIT 10.5 SENIOR MANAGEMENT CHANGE OF CONTROL AGREEMENT BETWEEN MARK BATTAGLIA AND SPSS INC. THIS CHANGE OF CONTROL AGREEMENT, dated as of May 1, 1998 (the "Agreement"), is by and between SPSS Inc., a Delaware corporation having its principal offices at 444 N. Michigan Avenue, Chicago, Illinois 60611 ("SPSS" or the "Company"), and Mark Battaglia, a senior management employee of SPSS (the "Employee"). WHEREAS, the Employee is presently serving as the Executive Vice President Corporate Marketing of SPSS; and WHEREAS, SPSS desires to continue the Employee's services as Executive Vice President Corporate Marketing and to provide the Employee with the benefits set forth herein in consideration of the Employee's continued employment, and the Employee is willing to continue his employment as an employee of SPSS and enter into this Agreement on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and conditions contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Certain Defined Terms. (a) "Cause" shall mean material nonperformance by the Employee of the Employee's duties or material injury or harm to the Company or its successor caused by the Employee. (b) "Change of Control," as used herein, shall mean any one or more of the following: (i) the accumulation, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) not previously owning common stock of the Company, of Fifteen Percent (15%) or more of the shares of the then outstanding common stock of SPSS (the "Outstanding Common Stock"), (ii) a merger or consolidation of SPSS in which SPSS does not survive as an independent public company, (iii) a sale of all or substantially all of the assets of SPSS, (iv) a triggering event under any Rights Agreement of SPSS, as such agreement may exist from time to time, or (v) a liquidation or dissolution of SPSS; provided, however, that the following acquisitions shall not constitute a Change of Control for the purposes of this subsection (a): (i) any acquisition of common stock or securities convertible into common stock directly from SPSS, or (ii) any acquisition of common stock or securities convertible into common stock by any employee benefit plan (or related trust) sponsored or maintained by SPSS. (c) "Constructive Termination," as used herein, shall mean (i) a reduction, for a reason other than Cause, in annualized cash compensation by 20% or more (compared to the cash compensation which the Employee received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control) which occurs during any twelve month period beginning on or after the Effective Date of any Change of Control referred to above and ending on or prior to the later of (x) the second anniversary date of the Effective Date of any Change of Control referred to above or (y) the last day of vesting for any SPSS options then held by the Employee which options have not vested as of the Effective Date of any Change of Control referred to above; or (ii) any action (an "Action"), for a reason other than Cause, by SPSS which results in a diminution in any material respect of the Employee's position, authority, duties or responsibilities as the same existed immediately prior to the Effective Date of the Change of Control referred to above. Further, in order for it to be a Constructive Termination, either (i) or (ii) above must be followed within ninety (90) days with the resignation of the Employee. A change in the Employee's title or a transfer to a different division or subsidiary, whether publicly or privately held, shall not in and of itself constitute an Action. Rather, the focus turns on the substance of the Employee's duties. (d) "Effective Date," as used herein, shall mean the first date during which a Change of Control (as defined in Section 1(b)) occurs. 2. Change of Control in a Transaction with a Private Company. In the event a Change of Control occurs as the result of a transaction between SPSS and a company whose common stock is not publicly traded on a domestic national stock exchange, the NASDAQ national market, or their respective successors or equivalents (a "Private Company"), the Employee shall have the rights and benefits set forth below: (a) Continued Employment. If upon the occurrence of Change of Control between SPSS and a Private Company, the Employee is hired for at least a one-year period, with an employment package equal to or greater than the larger of (i) the total cash compensation received by the Employee in the immediately preceding full fiscal year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, all of Employee stock options shall vest on the Effective Date on which the Change of Control occurs and shall be cashed out at the transaction value on the occurrence of the transaction with the Private Company on or within ninety (90) days following a Change of Control. If Employee shall be hired with an employment package equal to or greater than the larger of (i) the total cash compensation received by Employee in the preceding fiscal year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, Employee shall receive an employment agreement which provides for the following upon involuntary termination without cause or Constructive Termination after the Effective Date of the Change - 2 - of Control and within two (2) years after the Change of Control: (1) a severance package equal to the greater of (i) the aggregate cash compensation received in the immediately preceding fiscal year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year; and (2) in the event of a Constructive Termination, the option to terminate employment while still receiving the severance package referred to in 2(a)(1) above. If Employee is hired for a period of less than one year, the provisions of Constructive Termination apply. (b) Involuntary Termination; Constructive Termination Upon a Change of Control. If upon the occurrence of Change of Control between SPSS and a Private Company, there is either an involuntary termination of Employee without Cause or Constructive Termination, the vesting of all Employee stock options shall be accelerated to the Effective Date on which the Change of Control occurs and shall be cashed out at the transaction value on the occurrence of the transaction with the Private Company on or within ninety (90) days from the occurrence of the Change of Control. Employee shall receive a one (1) year severance package equal to the greater of (i) the Employee's cash compensation received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control or (ii) two times the Employee's base salary received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control. (c) Voluntary Resignation. If upon the occurrence of Change of Control between SPSS and a Private Company, Employee voluntarily resigns, all of Employee's unvested SPSS stock options shall be forfeited and all of Employee's vested options shall be cashed out at the transaction value on the occurrence of the transaction with the Private Company on or within ninety (90) days following a Change of Control. 3. Change of Control in a Transaction With a Public Company. In the event a Change of Control occurs between SPSS and a company whose common stock is publicly traded on the domestic national stock exchange, the NASDAQ national market, or their respective successors and equivalents (a "Public Company"), the Employee shall have the rights and benefits set forth below: (a) Continued Employment. If upon the occurrence of a Change of Control between SPSS and a Public Company, the Employee is hired for at least a one-year period, with an employment package equal to or greater than the larger of (i) the total cash compensation received by the Employee in the immediately preceding year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, all of Employee's stock options shall either (i) vest on the Effective Date on which the Change of Control occurs and shall be cashed out at the transaction value on or within ninety (90) days following a Change of Control; or (ii) shall be converted into stock options of the acquiring Public Company on substantially equivalent economic terms ("Replacement Options"). If Replacement Options are granted, they shall continue to vest at the same rate as under the SPSS Option Plan prior to the Change of Control. If Employee shall be hired for at least a one-year period, by the acquiring Public Company with an employment package equal to or - 3 - greater than the larger of (i) the total cash compensation which Employee received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, Employee shall receive an employment agreement which provides the following upon the occurrence of an involuntary termination without Cause or Constructive Termination after the Effective Date of the Change of Control and within two (2) years after the Change of Control: (1) a severance package equal to the greater of (i) the aggregate cash compensation received in the immediately preceding fiscal year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year; (2) immediate accelerated vesting of all previously unvested Replacement Options; and (3) in the event of a Constructive Termination, the option to terminate employment while still receiving the severance package referred to in 3(a)(i) above. If Employee is hired for a period less than one year, the provisions of Constructive Termination apply. If a Constructive Termination or an involuntary Termination without Cause occurs two (2) years or more after the Effective Date of a Change of Control, the vesting of all previously unvested Replacement Options shall be accelerated to the date on which the Employee is subject to a Constructive Termination or involuntary termination. (b) Involuntary Termination/Constructive Termination Upon a Change of Control. If, upon the occurrence of a Change of Control between SPSS and a Public Company there is either an involuntary termination of an Employee without Cause or a Constructive Termination of Employee, (i) the vesting of all of Employee's stock options shall be accelerated to the Effective Date on which the Change of Control occurs, and shall be cashed out at the Change of Control transaction value or must be exercised by Employee within ninety (90) days from the occurrence of a Change of Control (if there is a Change of Control with no transaction) and (ii) Employee shall receive a one (1) year severance package equal to the greater of (A) the cash compensation received by Employee in the fiscal year immediately preceding the year of the Effective Date of a Change of Control or (B) two times the Employee's base salary received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control. (c) Voluntary Resignation on Change of Control. If upon the occurrence of a Change of Control between SPSS and a Public Company, Employee voluntarily resigns, at the time of the Effective Date of the Change of Control, all unvested SPSS stock options held by Employee shall be forfeited, and all vested options shall be cashed out at the Change of Control transaction value or must be exercised by Employee within ninety (90) days from the occurrence of such Change of Control (if there is a Change of Control with no transaction). 4. Health and Welfare Benefits. Notwithstanding the rights and obligations as outlined in Sections 2 or 3 above, if Employee is involuntarily terminated without Cause or is subject to a Constructive Termination on or after the Effective Date of a Change of Control or within the later of two (2) years following the Effective Date of a - 5 - Change of Control in addition to the benefits set forth above in Sections 2 and 3, the Employee shall continue to receive, at the cost of the employer, the same health and welfare benefits (in effect at any time one hundred twenty (120) days prior to the Effective Date of a Change of Control), but only to the extent each plan which governs the benefits permits participation by terminated employees, for a period of eighteen (18) months following the date of involuntary termination without Cause or Constructive Termination. 5. Non-Compete. (a) Employee hereby covenants and agrees that during the period of time he collects a severance package, he shall not (i) directly or indirectly (whether through a partnership of which the Employee is a partner or through any other individual or entity in which Employee has any interest, legal or equitable), engage in any business competitive with the business of SPSS (ii) directly or indirectly (whether through a partnership of which Employee is a partner or through any other individual or entity in which Employee has any interest, legal or equitable), solicit or otherwise engage with any customers or clients of SPSS, in any transactions which are in direct competition with the software business of SPSS which SPSS did or could have engaged in with those customers or clients, or (iii) directly or indirectly (whether through a partnership of which Employee is a partner or through any other individual or entity in which Employee has any interest, legal or equitable), assist any person in the development, programming, servicing, maintenance, manufacture, sale, licensing, distribution or marketing (including, without limitation, giving away software) of software and related products in competition with SPSS' products, in each case in the United States of America or any country where SPSS, or its subsidiaries or affiliates are doing business with respect to SPSS products and services and in each case excluding passive investment interests of less than two percent (2%) in corporations whose stock is registered under the Securities Exchange Act of 1934, as amended. (b) Employee understands that a breach by him of this Section 5 may cause substantial injury to SPSS, which may be irreparable and/or in amounts difficult or impossible to ascertain, and that in the event Employee breaches this Section 5, SPSS shall have, in addition to all other remedies available in the event of a breach of this Agreement, the right to injunctive or other equitable relief. Further, Employee acknowledges and agrees that the restrictions and commitments set forth in this Agreement are necessary to protect SPSS' legitimate interests and are reasonable in scope, area and time, and that if, despite this acknowledgment and agreement, at the time of the enforcement of any provision of this Agreement a court of competent jurisdiction shall hold that the period or scope of such provision is unreasonable under the circumstances then existing, the maximum reasonable period or scope under such circumstances shall be substituted for the period or scope stated in such provision. (c) Should Employee breach this Section 5, all severance payments shall cease immediately, and SPSS shall be entitled to pursue all other available legal or equitable remedies. - 6 - (d) For purposes of Section 5, where the context admits, the term "SPSS" includes SPSS Inc., its subsidiaries and all of their respective affiliated entities and their successors and assigns. 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois applicable to agreements made and to be performed in Illinois, without giving effect to conflicts of law principles. 7. Headings. The section headings of this Agreement are for reference only and are to be given no effect in the construction or interpretation of this Agreement. 8. Severability. If any part or provision of this Agreement shall be declared invalid or unenforceable by a court of competent jurisdiction, said provision or part shall be ineffective to the extent of such invalidity or unenforceability only, without in any way affecting the remaining parts or provisions of this Agreement. 9. Waiver. Any party may waive compliance by another party with any of the provisions of this Agreement. No waiver of any provision shall be construed as a waiver of any other provision. Any waiver must be in writing. 10. Binding Effect; Assignment. This Agreement shall be binding on and inure to the benefit of the parties and their respective successors and permitted assigns. Nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any person or entity (including any employee or person engaged by SPSS in any capacity) not a party to this Agreement. SPSS will require any successor (whether direct or indirect, by merger, purchase, consolidation or otherwise) of SPSS to make an express assumption of the obligations hereunder and cause any successor (whether direct or indirect, by merger, purchase, consolidation or otherwise) of SPSS to agree to perform all parts and provisions under this Agreement in the same manner and to the same extent that SPSS would be required to perform it if no such succession had taken place. 11. Counterparts. This Agreement may be signed in any number of counterparts and all such counterparts shall be read together and construed as but one and the same document. 12. Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed given when delivered personally, one day after sent by recognized overnight courier, or five (5) days after deposit in the United States mail, postage prepaid, registered or certified mail, return receipt requested, to the parties at the following addresses (or to such other address as a party may have specified by notice duly given to the other party in accordance with this provision): - 7 - If to the Employee: At the Employee's then current business or residence address as shown on the records of SPSS, with a copy to such other person as the Employee may have specified by notice duly given to SPSS in accordance with this provision. If to SPSS: SPSS Inc. 444 N. Michigan Avenue Chicago, Illinois 60611 Attention: President With a copy to: Ross & Hardies 150 N. Michigan Avenue Chicago, Illinois 60601-7567 Attention: Lawrence R. Samuels, Esq. IN WITNESS WHEREOF the parties have executed this Agreement on the date first written above. Employee /s/MARK BATTAGLIA MARK BATTAGLIA SPSS Inc. By:/s/JACK NOONAN Name: Jack Noonan Its: President and Chief Executive Officer - 8 - EX-10 7 EXHIBIT 10.6 EXHIBIT 10.6 SENIOR MANAGEMENT CHANGE OF CONTROL AGREEMENT BETWEEN IAN DURRELL AND SPSS INC. THIS CHANGE OF CONTROL AGREEMENT, dated as of May 1, 1998 (the "Agreement"), is by and between SPSS Inc., a Delaware corporation having its principal offices at 444 N. Michigan Avenue, Chicago, Illinois 60611 ("SPSS" or the "Company"), and Ian Durrell, a senior management employee of SPSS (the "Employee"). WHEREAS, the Employee is presently serving as the Executive Vice President Premier Accounts Group of SPSS; and WHEREAS, SPSS desires to continue the Employee's services as Executive Vice President Premier Accounts Group and to provide the Employee with the benefits set forth herein in consideration of the Employee's continued employment, and the Employee is willing to continue his employment as an employee of SPSS and enter into this Agreement on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and conditions contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Certain Defined Terms. (a) "Cause" shall mean material nonperformance by the Employee of the Employee's duties or material injury or harm to the Company or its successor caused by the Employee. (b) "Change of Control," as used herein, shall mean any one or more of the following: (i) the accumulation, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) not previously owning common stock of the Company, of Fifteen Percent (15%) or more of the shares of the then outstanding common stock of SPSS (the "Outstanding Common Stock"), (ii) a merger or consolidation of SPSS in which SPSS does not survive as an independent public company, (iii) a sale of all or substantially all of the assets of SPSS, (iv) a triggering event under any Rights Agreement of SPSS, as such agreement may exist from time to time, or (v) a liquidation or dissolution of SPSS; provided, however, that the following acquisitions shall not constitute a Change of Control for the purposes of this subsection (a): (i) any acquisition of common stock or securities convertible into common stock directly from SPSS, or (ii) any acquisition of common stock or securities convertible into common stock by any employee benefit plan (or related trust) sponsored or maintained by SPSS. (c) "Constructive Termination," as used herein, shall mean (i) a reduction, for a reason other than Cause, in annualized cash compensation by 20% or more (compared to the cash compensation which the Employee received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control) which occurs during any twelve month period beginning on or after the Effective Date of any Change of Control referred to above and ending on or prior to the later of (x) the second anniversary date of the Effective Date of any Change of Control referred to above or (y) the last day of vesting for any SPSS options then held by the Employee which options have not vested as of the Effective Date of any Change of Control referred to above; or (ii) any action (an "Action"), for a reason other than Cause, by SPSS which results in a diminution in any material respect of the Employee's position, authority, duties or responsibilities as the same existed immediately prior to the Effective Date of the Change of Control referred to above. Further, in order for it to be a Constructive Termination, either (i) or (ii) above must be followed within ninety (90) days with the resignation of the Employee. A change in the Employee's title or a transfer to a different division or subsidiary, whether publicly or privately held, shall not in and of itself constitute an Action. Rather, the focus turns on the substance of the Employee's duties. (d) "Effective Date," as used herein, shall mean the first date during which a Change of Control (as defined in Section 1(b)) occurs. 2. Change of Control in a Transaction with a Private Company. In the event a Change of Control occurs as the result of a transaction between SPSS and a company whose common stock is not publicly traded on a domestic national stock exchange, the NASDAQ national market, or their respective successors or equivalents (a "Private Company"), the Employee shall have the rights and benefits set forth below: (a) Continued Employment. If upon the occurrence of Change of Control between SPSS and a Private Company, the Employee is hired for at least a one-year period, with an employment package equal to or greater than the larger of (i) the total cash compensation received by the Employee in the immediately preceding full fiscal year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, all of Employee stock options shall vest on the Effective Date on which the Change of Control occurs and shall be cashed out at the transaction value on the occurrence of the transaction with the Private Company on or within ninety (90) days following a Change of Control. If Employee shall be hired with an employment package equal to or greater than the larger of (i) the total cash compensation received by Employee in the preceding fiscal year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, Employee shall receive an employment agreement which provides for the following upon involuntary termination without cause or Constructive Termination after the Effective Date of the Change of Control and within two (2) years after the Change of Control: (1) a severance package equal to the greater of (i) the aggregate cash compensation received in the immediately - 2 - preceding fiscal year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year; and (2) in the event of a Constructive Termination, the option to terminate employment while still receiving the severance package referred to in 2(a)(1) above. If Employee is hired for a period of less than one year, the provisions of Constructive Termination apply. (b) Involuntary Termination; Constructive Termination Upon a Change of Control. If upon the occurrence of Change of Control between SPSS and a Private Company, there is either an involuntary termination of Employee without Cause or Constructive Termination, the vesting of all Employee stock options shall be accelerated to the Effective Date on which the Change of Control occurs and shall be cashed out at the transaction value on the occurrence of the transaction with the Private Company on or within ninety (90) days from the occurrence of the Change of Control. Employee shall receive a one (1) year severance package equal to the greater of (i) the Employee's cash compensation received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control or (ii) two times the Employee's base salary received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control. (c) Voluntary Resignation. If upon the occurrence of Change of Control between SPSS and a Private Company, Employee voluntarily resigns, all of Employee's unvested SPSS stock options shall be forfeited and all of Employee's vested options shall be cashed out at the transaction value on the occurrence of the transaction with the Private Company on or within ninety (90) days following a Change of Control. 3. Change of Control in a Transaction With a Public Company. In the event a Change of Control occurs between SPSS and a company whose common stock is publicly traded on the domestic national stock exchange, the NASDAQ national market, or their respective successors and equivalents (a "Public Company"), the Employee shall have the rights and benefits set forth below: (a) Continued Employment. If upon the occurrence of a Change of Control between SPSS and a Public Company, the Employee is hired for at least a one-year period, with an employment package equal to or greater than the larger of (i) the total cash compensation received by the Employee in the immediately preceding year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year, all of Employee's stock options shall either (i) vest on the Effective Date on which the Change of Control occurs and shall be cashed out at the transaction value on or within ninety (90) days following a Change of Control; or (ii) shall be converted into stock options of the acquiring Public Company on substantially equivalent economic terms ("Replacement Options"). If Replacement Options are granted, they shall continue to vest at the same rate as under the SPSS Option Plan prior to the Change of Control. If Employee shall be hired for at least a one-year period, by the acquiring Public Company with an employment package equal to or greater than the larger of (i) the total cash compensation which Employee received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control or - 3 - (ii) two times the Employee's base salary received in the immediately preceding fiscal year, Employee shall receive an employment agreement which provides the following upon the occurrence of an involuntary termination without Cause or Constructive Termination after the Effective Date of the Change of Control and within two (2) years after the Change of Control: (1) a severance package equal to the greater of (i) the aggregate cash compensation received in the immediately preceding fiscal year or (ii) two times the Employee's base salary received in the immediately preceding fiscal year; (2) immediate accelerated vesting of all previously unvested Replacement Options; and (3) in the event of a Constructive Termination, the option to terminate employment while still receiving the severance package referred to in 3(a)(i) above. If Employee is hired for a period less than one year, the provisions of Constructive Termination apply. If a Constructive Termination or an involuntary Termination without Cause occurs two (2) years or more after the Effective Date of a Change of Control, the vesting of all previously unvested Replacement Options shall be accelerated to the date on which the Employee is subject to a Constructive Termination or involuntary termination. (b) Involuntary Termination/Constructive Termination Upon a Change of Control. If, upon the occurrence of a Change of Control between SPSS and a Public Company there is either an involuntary termination of an Employee without Cause or a Constructive Termination of Employee, (i) the vesting of all of Employee's stock options shall be accelerated to the Effective Date on which the Change of Control occurs, and shall be cashed out at the Change of Control transaction value or must be exercised by Employee within ninety (90) days from the occurrence of a Change of Control (if there is a Change of Control with no transaction) and (ii) Employee shall receive a one (1) year severance package equal to the greater of (A) the cash compensation received by Employee in the fiscal year immediately preceding the year of the Effective Date of a Change of Control or (B) two times the Employee's base salary received in the fiscal year immediately preceding the year of the Effective Date of a Change of Control. (c) Voluntary Resignation on Change of Control. If upon the occurrence of a Change of Control between SPSS and a Public Company, Employee voluntarily resigns, at the time of the Effective Date of the Change of Control, all unvested SPSS stock options held by Employee shall be forfeited, and all vested options shall be cashed out at the Change of Control transaction value or must be exercised by Employee within ninety (90) days from the occurrence of such Change of Control (if there is a Change of Control with no transaction). 4. Health and Welfare Benefits. Notwithstanding the rights and obligations as outlined in Sections 2 or 3 above, if Employee is involuntarily terminated without Cause or is subject to a Constructive Termination on or after the Effective Date of a Change of Control or within the later of two (2) years following the Effective Date of a Change of Control in addition to the benefits set forth above in Sections 2 and 3, the Employee shall continue to receive, at the cost of the employer, the same health and welfare - 4 - benefits (in effect at any time one hundred twenty (120) days prior to the Effective Date of a Change of Control), but only to the extent each plan which governs the benefits permits participation by terminated employees, for a period of eighteen (18) months following the date of involuntary termination without Cause or Constructive Termination. 5. Non-Compete. (a) Employee hereby covenants and agrees that during the period of time he collects a severance package, he shall not (i) directly or indirectly (whether through a partnership of which the Employee is a partner or through any other individual or entity in which Employee has any interest, legal or equitable), engage in any business competitive with the business of SPSS (ii) directly or indirectly (whether through a partnership of which Employee is a partner or through any other individual or entity in which Employee has any interest, legal or equitable), solicit or otherwise engage with any customers or clients of SPSS, in any transactions which are in direct competition with the software business of SPSS which SPSS did or could have engaged in with those customers or clients, or (iii) directly or indirectly (whether through a partnership of which Employee is a partner or through any other individual or entity in which Employee has any interest, legal or equitable), assist any person in the development, programming, servicing, maintenance, manufacture, sale, licensing, distribution or marketing (including, without limitation, giving away software) of software and related products in competition with SPSS' products, in each case in the United States of America or any country where SPSS, or its subsidiaries or affiliates are doing business with respect to SPSS products and services and in each case excluding passive investment interests of less than two percent (2%) in corporations whose stock is registered under the Securities Exchange Act of 1934, as amended. (b) Employee understands that a breach by him of this Section 5 may cause substantial injury to SPSS, which may be irreparable and/or in amounts difficult or impossible to ascertain, and that in the event Employee breaches this Section 5, SPSS shall have, in addition to all other remedies available in the event of a breach of this Agreement, the right to injunctive or other equitable relief. Further, Employee acknowledges and agrees that the restrictions and commitments set forth in this Agreement are necessary to protect SPSS' legitimate interests and are reasonable in scope, area and time, and that if, despite this acknowledgment and agreement, at the time of the enforcement of any provision of this Agreement a court of competent jurisdiction shall hold that the period or scope of such provision is unreasonable under the circumstances then existing, the maximum reasonable period or scope under such circumstances shall be substituted for the period or scope stated in such provision. (c) Should Employee breach this Section 5, all severance payments shall cease immediately, and SPSS shall be entitled to pursue all other available legal or equitable remedies. - 5 - (d) For purposes of Section 5, where the context admits, the term "SPSS" includes SPSS Inc., its subsidiaries and all of their respective affiliated entities and their successors and assigns. 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois applicable to agreements made and to be performed in Illinois, without giving effect to conflicts of law principles. 7. Headings. The section headings of this Agreement are for reference only and are to be given no effect in the construction or interpretation of this Agreement. 8. Severability. If any part or provision of this Agreement shall be declared invalid or unenforceable by a court of competent jurisdiction, said provision or part shall be ineffective to the extent of such invalidity or unenforceability only, without in any way affecting the remaining parts or provisions of this Agreement. 9. Waiver. Any party may waive compliance by another party with any of the provisions of this Agreement. No waiver of any provision shall be construed as a waiver of any other provision. Any waiver must be in writing. 10. Binding Effect; Assignment. This Agreement shall be binding on and inure to the benefit of the parties and their respective successors and permitted assigns. Nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any person or entity (including any employee or person engaged by SPSS in any capacity) not a party to this Agreement. SPSS will require any successor (whether direct or indirect, by merger, purchase, consolidation or otherwise) of SPSS to make an express assumption of the obligations hereunder and cause any successor (whether direct or indirect, by merger, purchase, consolidation or otherwise) of SPSS to agree to perform all parts and provisions under this Agreement in the same manner and to the same extent that SPSS would be required to perform it if no such succession had taken place. 11. Counterparts. This Agreement may be signed in any number of counterparts and all such counterparts shall be read together and construed as but one and the same document. 12. Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed given when delivered personally, one day after sent by recognized overnight courier, or five (5) days after deposit in the United States mail, postage prepaid, registered or certified mail, return receipt requested, to the parties at the following addresses (or to such other address as a party may have specified by notice duly given to the other party in accordance with this provision): - 6 - If to the Employee: At the Employee's then current business or residence address as shown on the records of SPSS, with a copy to such other person as the Employee may have specified by notice duly given to SPSS in accordance with this provision. If to SPSS: SPSS Inc. 444 N. Michigan Avenue Chicago, Illinois 60611 Attention: President With a copy to: Ross & Hardies 150 N. Michigan Avenue Chicago, Illinois 60601-7567 Attention: Lawrence R. Samuels, Esq. IN WITNESS WHEREOF the parties have executed this Agreement on the date first written above. Employee /s/IAM DURRELL IAN DURRELL SPSS Inc. By:/s/JACK NOONAN Name: Jack Noonan Its: President and Chief Executive Officer - 7 - EX-15 8 EXHIBIT 15.1 AUDITOR'S ACKNOWLEDGMENT Exhibit 15.1 Acknowledgment of Independent Certified Public Accountants Regarding Independent Auditors' Review Report The Board of Directors SPSS Inc.: With respect to the Registration Statements on Form S-8 (nos. 33-325869, 33-73130, 33- 80799, 33-73120, and 33-74402) of SPSS Inc., we acknowledge our awareness of the use therein of our report dated April 28, 1998 related to our review of interim financial information. Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not considered part of a registration statement prepared or certified by an account or a report prepared or certified by an accountant within the meaning of sections 7 and 11 of the Act. /s/ KPMG Peat Marwick LLP Chicago, Illinois May 13, 1998 EX-27 9 FDS -- EXHIBIT 27.1 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SPSS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AT MARCH 31, 1998 AND CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000869570 SPSS INC. 3-MOS 12-MOS DEC-31-1998 DEC-31-1998 MAR-31-1998 DEC-31-1998 0 8,735 0 0 0 28,768 0 1,879 0 3,006 0 41,087 0 30,317 0 19,852 0 64,109 0 24,714 0 0 0 0 0 0 0 89 0 36,182 0 64,109 28,500 28,500 28,500 28,500 2,435 2,435 2,435 2,435 21,020 21,020 107 107 43 43 4,911 4,911 1,685 1,685 3,226 3,226 0 0 0 0 0 0 3,226 3,226 0.36 0.36 0.34 0.34
EX-27 10 EXHIBIT 27.1A - FINANCIAL DATA SCHEDULE (RESTATED)
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SPSS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AT MARCH 31, 1997 AND CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 0000869570 SPSS INC. 3-MOS 12-MOS DEC-31-1998 DEC-31-1998 MAR-31-1998 DEC-31-1998 0 11,744 0 0 0 25,040 0 1,769 0 1,786 0 39,240 0 26,731 0 16,078 0 62,962 0 28,618 0 0 0 0 0 0 0 87 0 30,729 0 62,962 27,312 27,312 27,312 27,312 2,589 2,589 2,589 2,589 20,293 20,293 26 26 42 42 4,517 4,517 1,603 1,603 2,914 2,914 0 0 0 0 0 0 2,914 2,914 0.33 0.33 0.30 0.30
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