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As filed with the Securities and Exchange Commission on October 6, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-8/S-3
REGISTRATION STATEMENT UNDER
(including registration of shares for resale by means of a Form S-3 Prospectus)
THE SECURITIES ACT OF 1933
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BLUESTONE SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-2964141
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
BLUESTONE SOFTWARE, INC.
1000 BRIGGS ROAD
MOUNT LAUREL, NEW JERSEY 08054
(Address of principal executive offices)
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BLUESTONE SOFTWARE, INC.
1996 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
(Full title of the Plan)
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P. KEVIN KILROY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BLUESTONE SOFTWARE, INC.
1000 BRIGGS ROAD
MOUNT LAUREL, NEW JERSEY 08054
(Name and address of agent for service)
(856) 727-4600
(Telephone number, including area code of agent for service)
copy to:
William A. Scari, Esquire
Paul T. Porrini, Esquire
Pepper Hamilton LLP
1235 Westlakes Drive, Suite 400
Berwyn, PA 19312
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES TO AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
BE REGISTERED REGISTERED(1) SHARE PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, par value $0.001
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Underlying outstanding options
granted under the 1996 Incentive
and Non-Qualified Stock Option
Plan 573,936 $ 2.24(2) $ 1,285,617(2) $ 357
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1,514,499 $ 3.07(2) $ 4,649,512(2) $1,293
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34,375 $ 4.13(2) $ 141,969(2) $ 39
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516,997 $ 8.70(2) $ 4,497,874(2) $1,250
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6,266 $ 9.60(2) $ 60,154(2) $ 17
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58,935 $ 9.92(2) $ 584,635(2) $ 163
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6,055 $10.91(2) $ 66,060(2) $ 18
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180,776 $15.00(2) $ 2,711,640(2) $ 754
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Subject to future grants or issued
and outstanding as a result of the
exercise of options granted under
the 1996 Incentive and Non-
Qualified Stock Option Plan 398,489(3) $19.94(4) $ 7,945,867(4) $2,209
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TOTAL 3,290,328 $21,943,328 $6,100
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(1) Pursuant to Rule 416, this Registration Statement shall also cover
any additional shares of the Registrant's Common Stock that become
issuable by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the
receipt of consideration that increases the number of the
Registrant's outstanding shares of Common Stock.
(2) Estimated solely for the purposes of calculating the registration
fee in accordance with Rule 457(h) under the Securities Act of
1933, as amended, on the basis of the price at which the options
may be exercised.
(3) Comprised of (i) 387,089 shares of Common Stock available for
future grants under the 1996 Incentive and Non-Qualified Stock
Option Plan and (ii) 11,400 shares of Common Stock issued as a
result of the exercise of options.
(4) Estimated solely for the purposes of calculating the registration
fee in accordance with Rule 457(c) under the Securities Act of
1933, as amended, based on a share price of $19.94, the average
of the high and low prices of the Registrant's Common Stock as
reported on the Nasdaq National Market on September 29, 1999.
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REOFFER PROSPECTUS COPY NO.
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[LOGO]
11,400 SHARES
COMMON STOCK
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This prospectus relates to 11,400 shares of the common stock of
Bluestone Software, Inc., which may be offered and resold from time to time by
selling stockholders identified on page 13 of this prospectus for their own
accounts. It is anticipated that the selling stockholders will offer shares for
sale at prevailing prices on the Nasdaq National Market on the date of sale. We
will receive no part of the proceeds from sales made under this prospectus. The
selling stockholders will bear all sales commissions and similar expenses. Any
other expenses incurred by us in connection with the registration and offering
and not borne by the selling stockholders will be borne by us.
Each selling stockholder and any broker executing selling orders on
behalf of them may be deemed to be an "underwriter" within the meaning of the
Securities Act, in which event commissions received by such broker may be deemed
to be underwriting commissions under the Securities Act.
Our common stock is traded on the Nasdaq National Market under the
symbol "BLSW." On October 5, 1999, the last reported sale price of our common
stock on the Nasdaq National Market was $28.25 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 TO READ ABOUT CERTAIN RISKS THAT
YOU SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this prospectus is October 6, 1999
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TABLE OF CONTENTS
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Bluestone........................................................................ 3
Forward-Looking Statements....................................................... 3
Risk Factors..................................................................... 3
Selling Stockholders............................................................. 13
Plan of Distribution............................................................. 14
Information Incorporated by Reference............................................ 14
Indemnification and the SEC'S Position on Enforceability......................... 15
Where You Can Find More Information About Bluestone.............................. 15
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BLUESTONE
We are a leading provider of software for enterprise interaction
management, which enables businesses to extend information over the World
Wide Web in a controlled manner and to support high volumes of users and
interactions. Our flagship product, Sapphire/Web, is a framework for JAVA Web
application services and allows broad access to stored corporate information
and applications to a variety of users, including customers, suppliers and
employees via the Web. In January 1999, we released Bluestone XML-Server,
which represents a new generation of specialized Web applications server
focused on commerce via the Internet.
Our principal executive and administrative offices are located at 1000
Briggs Road, Mount Laurel, New Jersey 08054, telephone: (856) 727-4600.
Information contained on our website at www.bluestone.com does not constitute a
part of this prospectus.
FORWARD-LOOKING STATEMENTS
Some statements in this prospectus constitute forward-looking
statements. Forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause our actual results,
performance or achievements or industry results to be materially different
from any future results, performance or achievements expressed or implied by
these forward-looking statements. Such factors include those described in
"Risk Factors." The forward-looking statements included in this prospectus
may prove to be inaccurate. In light of the significant uncertainties
inherent in these forward-looking statements, you should not consider this
information to be a guarantee by us or any other person that our objectives
and plans will be achieved.
RISK FACTORS
THIS SECTION HIGHLIGHTS SPECIFIC RISKS WITH RESPECT TO AN INVESTMENT IN
OUR BUSINESS. INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. WE
ALSO CAUTION YOU THAT THIS PROSPECTUS INCLUDES FORWARD-LOOKING STATEMENTS THAT
ARE BASED ON MANAGEMENT'S BELIEFS AND ASSUMPTIONS AND ON INFORMATION CURRENTLY
AVAILABLE TO MANAGEMENT. YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW
AND THE OTHER INFORMATION IN THIS PROSPECTUS BEFORE PURCHASING THE COMMON STOCK.
WE HAVE HAD RECENT LOSSES AND MAY INCUR FUTURE LOSSES THAT MAY DEPRESS OUR STOCK
PRICE.
We have incurred significant net losses since 1996, including losses of
approximately $3.8 million and $11.6 million for the years ended December 31,
1997 and 1998, respectively and $7.5 million for the six months ended June 30,
1999. Our losses have resulted in an accumulated deficit of approximately $26.4
million as of June 30, 1999. Any significant shortfall of revenues in relation
to our expectations or any material delay of
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customer orders would have an immediate adverse effect on our business,
operating results and financial condition. We may not be profitable in any
future period. Our future operating results will depend on many factors,
including:
- the overall growth rate for the markets in which we compete;
- the level of market acceptance of, and demand for, our software
products;
- the level of product and price competition;
- our ability to establish strategic marketing relationships,
develop and market new and enhanced products, and control costs;
- our ability to expand our direct sales force and indirect
distribution channels;
- our ability to integrate acquired businesses and product lines;
- our ability to develop and maintain awareness of our brands; and
- our ability to attract, train and retain consulting, technical and
other key personnel.
LACK OF GROWTH OR DECLINE IN INTERNET USAGE OR THE LACK OF ACCEPTANCE OF
COMMERCE CONDUCTED VIA THE INTERNET COULD BE DETRIMENTAL TO OUR FUTURE OPERATING
RESULTS.
Our products enhance companies' ability to transact business and
conduct operations utilizing the Internet. Therefore, our future sales and any
future profits are substantially dependent upon the widespread acceptance and
use of the Internet as an effective medium of commerce by consumers and
businesses. Rapid growth in the use of the Internet and other online services is
a recent development and we are unsure whether that acceptance and use will
continue to develop or that a sufficiently broad base of consumers will adopt
and continue to use the Internet and other online services as a medium of
commerce. To be successful, we must rely on consumers and businesses, who have
historically used traditional means of commerce to purchase products, accepting
and utilizing new ways of conducting business and exchanging information over
the Internet.
In addition, the Internet may not be accepted as a viable commercial
marketplace for a number of reasons, including potentially inadequate
development of the necessary network infrastructure or delayed development of
enabling technologies and Web performance improvements. If the Internet
continues to experience significant growth in the number of users, frequency of
use or an increase in bandwidth requirements, the Internet's infrastructure may
not be able to support the demands placed upon it. In addition, the Internet
could lose its viability due to delays in the development or adoption of new
standards and protocols required to handle increased levels of Internet
activity, or due to increased governmental regulation. If Congress, or other
governing bodies both within and outside the United States, decides to alter
materially the current approach to, and level of, regulation of the Internet, we
may need to adapt our technology. Any required adaptation could cause us to
spend significant amounts of time and money. If use of the Internet does not
continue to grow or grows more slowly than expected, if the infrastructure for
the Internet does not effectively support growth that may occur, if government
regulations change, or if the Internet does not become a viable commercial
marketplace, our business could suffer.
WE DEPEND ON OUR SAPPHIRE/WEB PRODUCTS AND IF THE MARKET FOR THESE PRODUCTS DOES
NOT CONTINUE TO GROW, OUR BUSINESS COULD BE MATERIALLY ADVERSELY AFFECTED.
Software license revenues from our Sapphire/Web software were $3.4
million or 42% of total revenues in 1998 and $4.7 million or 72% of total
revenues in the first six months of 1999. We expect to continue to be
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dependent upon the Sapphire/Web software products in the future, and any
factor adversely affecting the market for Web application server software in
general, or our software in particular, would adversely affect our ability to
generate revenues. The market for Web application server software is
competitive, highly fragmented and characterized by rapid technological
change. Our future financial performance will depend in large part on the
successful development, introduction and customer acceptance of our new
products and product enhancements in a timely and cost effective manner.
We expect to commit significant resources to market and further develop the
Sapphire/Web software products and enhance the brand awareness of
Sapphire/Web products. The market for our software may not continue to grow
or may grow at a slower rate than we expect. Furthermore, the market may not
accept our products. If this market fails to grow or grows more slowly than
we anticipate, or if the market fails to accept our products, our business
could suffer.
IF THE MARKET'S ACCEPTANCE AND ADOPTION OF JAVA AND XML SERVER TECHNOLOGIES DOES
NOT CONTINUE, OUR FUTURE RESULTS MAY SUFFER.
Our Sapphire/Web product is 100% Pure JAVA. JAVA is a programming
language developed by Sun Microsystems. Therefore, the continued acceptance of
our products in the marketplace depends on JAVA's acceptance as a standard
programming language. If Sun Microsystems were to make significant changes to
the JAVA language or fail to correct defects and limitations in its products,
our ability to continue to improve and ship our products could be impaired. In
the future, our customers may also require the ability to deploy our products on
platforms for which technically acceptable JAVA implementations either do not
exist or are not available on commercially reasonable terms.
In January 1999, we introduced a product based on a document format for
the Web called XML, or extensible mark-up language. We cannot be sure that XML
technology will be adopted as a standard, that XML-based products will achieve
broad market acceptance, that our XML products will be accepted or that other
superior technologies will not be developed. The failure of XML technology to
become a standard or the failure of our XML products to achieve broad acceptance
could adversely affect our ability to generate revenues. The XML server
technology is one of several competing technologies used in information exchange
and Internet commerce. We intend to continue to invest substantial resources in
our XML products.
INTENSE COMPETITION AND INCREASING CONSOLIDATION IN OUR INDUSTRY COULD CREATE
STRONGER COMPETITORS AND HARM OUR BUSINESS.
The market for our products is intensely competitive, highly
fragmented, characterized by rapid technological change and significantly
affected by new product introductions. Recent acquisitions of several of our
competitors by large software companies and other market activities of industry
participants have increased the competition in our market. Our competitors
consist of a number of private and public companies including, among others: BEA
Systems which acquired WebLogic; IBM; Microsoft; Oracle; and Sun Microsystems,
which acquired NetDynamics and the rights to Netscape's Application Server. In
addition, we face competition from in-house software developers who may develop
some or all of the functionality that our products provide. Many of our
competitors have longer operating histories, significantly greater financial,
technical, marketing and other resources, greater name recognition, a broader
range of products to offer and a larger installed base of customers than us, any
of which could provide them with a significant competitive advantage.
We expect to face increased competition in the future from our current
competitors. In addition, new competitors, or alliances among existing and
future competitors, may emerge and rapidly gain significant market share. We
also may face increased competition from existing large business application
software vendors that may broaden their product offerings to include Web
application server software. Their significant installed customer bases and
abilities to offer a broad solution and price these new products as incremental
add-ons to existing systems could provide them with a significant competitive
advantage.
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OUR CUSTOMERS ARE CONCENTRATED AND THE LOSS OF ONE OF OUR LARGEST CUSTOMERS
COULD CAUSE OUR REVENUES TO DROP QUICKLY AND UNEXPECTEDLY.
Our top ten customers for the year ended December 31, 1998 and the six
months ended June 30, 1999 in the aggregate accounted for approximately 39% and
66%, respectively, of our revenues. Hewlett-Packard accounted for more than 10%
of our revenues for the year ended December 31, 1998 and OpenConnect accounted
for more than 10% of our revenues for the six months ended June 30, 1999. We
expect that a small number of customers will continue to account for a
substantial portion of revenues in any given quarter in the foreseeable future,
although it is unusual for the same customer to account for a substantial amount
of revenues in each of several quarters. As a result, our inability to secure
major customers during a given period or the loss of any one major customer
could cause our revenues to drop quickly and unexpectedly.
IF WE FAIL TO DEVELOP NEW PRODUCTS AND SERVICES IN THE FACE OF OUR INDUSTRY'S
RAPIDLY EVOLVING TECHNOLOGY, OUR FUTURE RESULTS MAY BE ADVERSELY AFFECTED.
Due to the recent emergence of the Internet and the Web as a forum for
conducting business, the market for Web application server systems in which we
participate is subject to rapid technological change, changing customer needs,
frequent new product introductions and evolving industry standards that may
render existing products and services obsolete. Our growth and future operating
results will depend in part upon our ability to enhance existing applications
and develop and introduce new applications or components that:
- meet or exceed technological advances in the marketplace;
- meet changing customer requirements;
- achieve market acceptance;
- integrate successfully with third party software; and
- respond to competitive products.
Our product development and testing efforts have required, and are
expected to continue to require, substantial investment. We may not possess
sufficient resources to continue to make the necessary investments in
technology. In addition, we may not successfully identify new software
opportunities and develop and bring new software to market in a timely and
efficient manner. If we are unable, for technological or other reasons, to
develop and introduce new and enhanced software in a timely manner, we may lose
existing customers and fail to attract new customers, resulting in a decline in
revenues.
OUR STOCK HAS NOT TRADED PUBLICLY, AND AFTER THIS OFFERING ITS MARKET PRICE MAY
FLUCTUATE WIDELY.
The market price of our common stock could fluctuate substantially
due to:
- quarterly fluctuations in operating results;
- announcements of new products or product enhancements by us or our
competitors;
- technological innovations by us or our competitors;
- general market conditions or market conditions specific to our or
our customers' industries; and
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- changes in earnings estimates or recommendations by analysts.
Stock prices of Internet-related companies have been highly volatile.
Our initial public offering price may not be indicative of the price of our
stock that will prevail in the trading market. In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has at times been instituted against that company. If we
become subject to securities litigation, we could incur substantial costs and
experience a diversion of management's attention and resources.
THE UNPREDICTABILITY OF OUR QUARTERLY OPERATING RESULTS MAY ADVERSELY AFFECT THE
TRADING PRICE OF OUR COMMON STOCK.
Quarterly fluctuations in operating results may be caused by:
- changes in the growth rate of Internet usage;
- fluctuations in the demand for our products and services;
- the level of product and price competition in our markets;
- the timing and market acceptance of new product introductions and
upgrades by us or our competitors;
- our success in expanding our customer support and marketing and
sales organizations;
- the size and timing of individual transactions;
- delays in, or cancellations of, customer implementations;
- customers' budget constraints;
- the level of product development expenditures;
- our ability to control costs; and
- general economic conditions.
Many of these factors are not in our control. In addition, we also
experience seasonality which causes us to typically recognize a
disproportionately greater amount of our revenues for any fiscal year in our
fourth quarter and a disproportionately lesser amount in our first quarter, due
largely to sales force quota practices in the software industry and to customer
budgeting processes.
WE NEED TO MANAGE OUR GROWTH EFFECTIVELY OR WE MAY NOT SUCCEED.
We are a growing company. Our ability to manage our growth will depend
in large part on our ability to generally improve and expand our operational and
sales and marketing capabilities, to develop the management skills of our
managers and supervisors, many of whom have been employed by us for a relatively
short time, and to train, motivate and manage both our existing employees and
the additional employees that may be required. Additionally, we may not
adequately anticipate all of the demands that growth may impose on our systems,
procedures and structure. Any failure to adequately anticipate and respond to
these demands or manage our growth effectively would have a material adverse
effect on our future prospects.
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THE DEVELOPMENT OF INTERNATIONAL OPERATIONS WILL CAUSE US TO FACE ADDITIONAL
RISKS.
We expect to expand our international operations and international
sales and marketing efforts, initially, by opening regional sales and support
offices in Europe and Asia Pacific within the next twelve months. We have
limited experience in marketing, selling and distributing our products and
services internationally. International operations, including operations in
those regions that we are targeting, are subject to the following risks:
- recessions in foreign economies;
- political and economic instability;
- fluctuations in currency exchange rates;
- difficulties and costs of staffing and managing foreign
operations;
- potentially adverse tax consequences;
- reduced protection for intellectual property rights in some
countries; and
- changes in regulatory requirements.
OUR FAILURE TO MAINTAIN ONGOING SALES THROUGH A LIMITED NUMBER OF INDIRECT
CHANNELS MAY RESULT IN LOWER REVENUES.
We derive over 75% of our license revenues through a limited number of
independent software vendors, systems integrators, distributors and resellers.
Although we intend to increase our marketing and direct sales efforts, we expect
that a limited number of these indirect channels will continue to account for a
significant portion of our revenues in any given quarter in the foreseeable
future. To be successful, we must continue to foster and maintain our existing
indirect channels, as well as develop new relationships. The loss of, or
reduction in orders through, existing indirect channels or the failure to
develop new indirect channel relationships could cause our revenues to decline
and have a material adverse effect on our business.
IF WE LOSE OUR KEY PERSONNEL, OR FAIL TO ATTRACT AND RETAIN ADDITIONAL
PERSONNEL, THE SUCCESS AND GROWTH OF OUR BUSINESS MAY SUFFER.
A significant portion of our senior management team has been in place
for a relatively short period of time. Our success will depend to a significant
extent on their ability to gain the trust and confidence of our other employees
and to work effectively as a team.
Our future success will also depend significantly on our ability to
attract, integrate, motivate and retain additional highly skilled technical,
managerial, sales, marketing, and services personnel. Competition for skilled
personnel is intense, and we may not be successful in attracting, motivating and
retaining the personnel required to grow and operate profitably. Failure to
attract, integrate, motivate and retain highly skilled personnel could adversely
affect our business, especially our ability to develop new products and enhance
existing products.
THE LENGTHY AND VARIABLE SALES CYCLES OF OUR SAPPHIRE/WEB PRODUCT COULD CAUSE
SIGNIFICANT FLUCTUATION IN OUR QUARTERLY RESULTS.
Our Sapphire/Web software is generally used for mission-critical or
enterprise-wide purposes and involves a significant commitment of resources
by our customers. A customer's decision to license our Sapphire/Web
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software generally involves the evaluation of the available alternatives by a
significant number of personnel in various functional and geographic areas,
each often having specific and conflicting requirements. Accordingly, we
typically must expend substantial resources educating prospective customers
about the value of our Sapphire/Web software solutions. For these reasons,
the length of time between the date of initial contact with the potential
customer and the execution of a software license agreement typically ranges
from three to six months, and is subject to delays over which we have little
or no control. As a result, our ability to forecast the timing and amount of
specific sales is limited and the delay or failure to complete one or more
large license transactions could cause our operating results to vary
significantly from quarter to quarter.
THE FAILURE TO IMPLEMENT SUCCESSFULLY OUR SAPPHIRE/WEB SOFTWARE COULD RESULT IN
DISSATISFIED CUSTOMERS AND DECREASED SALES.
Implementation of our Sapphire/Web software often involves a
significant commitment of financial and other resources by our customers. The
customer's implementation cycle can be lengthy due to the size and complexity of
their systems and operations. In addition, our customers rely heavily on third
party systems integrators to assist them with the installation of the
Sapphire/Web software. Our failure or the failure of our alliance partners, our
customers or our third party integrators to implement successfully our
Sapphire/Web software could result in dissatisfied customers which could
adversely affect our reputation.
WE MAY REQUIRE FUTURE ADDITIONAL FUNDING TO STAY IN BUSINESS.
Over time, we may require additional financing for our operations.
Additionally, we periodically review other companies' product lines and
technologies for potential acquisition. Any material acquisitions or joint
ventures could require additional financing. This additional financing may not
be available to us on a timely basis if at all, or, if available, on terms
acceptable to us. Moreover, additional financing may cause dilution to existing
stockholders.
CAPACITY RESTRICTIONS COULD REDUCE THE DEMAND AND UTILITY OF OUR PRODUCTS.
Concurrency restrictions can limit Internet deployment and use
capacity. The boundaries of our Sapphire/Web software and Bluestone XML server
capacity, in terms of numbers of concurrent users or interactions, are unknown
because, to date, no customer or testing environment has reached these
boundaries. The Sapphire/Web software's or the Bluestone XML server's capacity
boundaries may, at some future time, be reached and, when reached, may be
insufficient to enable our customers to achieve their desired levels of
information deployment and exchange. We may lose customers or fail to gain new
customers if either of the Sapphire/Web software's or the Bluestone XML server's
capacity boundary limits the ability of our customers to achieve expected levels
of information deployment and exchange or Internet commerce transactions.
OUR LIMITED ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS COULD IMPAIR OUR
ABILITY TO COMPETE EFFECTIVELY.
Our success and ability to compete are substantially dependent on our
internally developed technologies and trademarks, which we protect through a
combination of copyright, trademark and trade secret laws, confidentiality
procedures and contractual provisions.
Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or obtain and use
information that we regard as proprietary. Policing unauthorized use of our
products is difficult and, though we are unable to determine the extent to which
piracy of our software products exists, we expect software piracy to be a
problem. In addition, the laws of some foreign countries do not protect our
proprietary rights to the same extent as the laws of the United States.
Furthermore, our competitors may independently develop technology similar to
ours.
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The number of intellectual property claims in our industry may increase
as the number of competing products grows and the functionality of products in
different industry segments overlaps. Although we are not aware that any of our
products infringe upon the proprietary rights of third parties, there can be no
assurance that third parties will not claim infringement by us with respect to
current or future products. Any of these claims, with or without merit, could be
time consuming to address, result in costly litigation, cause product shipment
delays or require us to enter into royalty or license agreements. These royalty
or license agreements might not be available on terms acceptable to us or at
all, which could have a material adverse effect on our business.
OUR FAILURE TO OBTAIN OR MAINTAIN THIRD PARTY LICENSES COULD HARM OUR BUSINESS.
We have in the past and may in the future, resell, under license,
certain third party software that enables our software to interact with other
software systems or databases. In addition, we license certain software
technology used to develop our software. The loss or inability to maintain any
of these software licenses could result in delays or reductions in product
shipments until equivalent software could be identified and licensed or
compiled, which could adversely affect our business.
WE MAY BE SUBJECT TO FUTURE PRODUCT LIABILITY CLAIMS AND OUR PRODUCTS'
REPUTATIONS MAY SUFFER.
Many of our installations involve projects that are critical to the
operations of our customers' businesses and provide benefits that may be
difficult to quantify. Any failure in a customer's system could result in a
claim for substantial damages against us, regardless of our responsibility for
the failure. Although our license agreements with our customers typically
contain provisions designed to limit contractually our liability for damages
arising from negligent acts, errors, mistakes or omissions, it is possible that
these provisions will not be enforceable in certain instances or would otherwise
not protect us from liability for damages. Although we maintain general
liability insurance coverage, this coverage may not continue to be available on
reasonable terms or at all, or may be insufficient to cover one or more large
claims.
We have entered into and plan to continue to enter into agreements with
strategic alliance partners whereby we license our software products for
integration with the alliance partners' software. If an alliance partner's
software fails to meet customer expectations or causes a failure in its
customer's systems, the reputation of our software products could be materially
and adversely affected even if our software products performed in accordance
with their functional specifications.
YEAR 2000 PROBLEMS MAY DISRUPT OUR BUSINESS.
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date field. Beginning in the year
2000, these date fields will need to accept four digit entries to distinguish
twenty-first century dates from twentieth century dates. As a result, over the
next several months, computer systems and/or software used by many companies may
need to be upgraded to comply with these "Year 2000" requirements. Significant
uncertainty exists in the software industry concerning the potential effects
associated with compliance. While our software products are not time/date
sensitive, many of the third party software applications run by our customers
are time/date sensitive. In addition, we have in the past resold third party
software that may not be Year 2000 compliant.
We may experience unanticipated problems and costs caused by undetected
errors or defects in the software used in our internal systems related to the
Year 2000 transition. If our internal computer systems are not Year 2000
compliant then we or our customers may suffer system failures or miscalculations
that could cause disruptions of operations.
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In addition, we believe that the purchasing patterns of customers and
potential customers may be affected by Year 2000 issues in a variety of ways.
Many companies are expending significant resources to correct or patch their
current software systems for Year 2000 compliance. These expenditures may result
in reduced funds available to purchase software products such as those offered
by us.
Our reasonable worst case scenarios include:
- exposure to potential business disruption and resulting claims,
whether with or without merit;
- temporary inability to process transactions internally, to send
invoices to vendors and customers or to engage in similar normal
business activities; and
- postponed or delayed sales because existing and potential
customers may choose to defer purchasing, or reduce funds
available to purchase, software products such as those offered by
us.
Our insurance coverage may not cover or be adequate to offset these and
other business risks related to the Year 2000.
OUR EXECUTIVE OFFICERS AND DIRECTORS AND THEIR AFFILIATES WILL OWN A LARGE
PERCENTAGE OF OUR VOTING STOCK AND WILL HAVE THE ABILITY TO MAKE DECISIONS THAT
COULD ADVERSELY AFFECT OUR STOCK PRICE.
Our executive officers, directors and their affiliates beneficially own
more than a majority of the outstanding shares of our common stock. As a result,
these stockholders are able to control all matters requiring stockholder
approval and, thereby, our management and affairs. Matters that require
stockholder approval include:
- election of directors;
- approval of mergers or consolidations; and
- sale of all or substantially all of our assets.
This concentration of ownership may delay, deter or prevent acts that
would result in a change of control of Bluestone, which in turn could reduce the
market price of our common stock.
OUR CHARTER AND BYLAWS AND DELAWARE LAW CONTAIN PROVISIONS THAT COULD DISCOURAGE
A TAKEOVER EVEN IF BENEFICIAL TO STOCKHOLDERS.
Our charter and our bylaws, in conjunction with Delaware law, contain
provisions that could make it more difficult for a third party to obtain control
of Bluestone even if doing so would be beneficial to stockholders. For example,
our charter provides for a classified board of directors and restricts the
ability of stockholders to call a special meeting. Our bylaws allow the board of
directors to expand its size and fill any vacancies without stockholder
approval.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.
The market price of our common stock could decline as a result of sales
by our existing stockholders or the perception that those sales may occur. These
sales could also make it more difficult for us to raise funds through equity
offerings in the future at a time and at a price that we think is appropriate.
-11-
<PAGE>
The current holders of most of our common stock, as well as the holders
of outstanding warrants, will be entitled to registration rights with respect to
their common stock or the common stock underlying their convertible securities.
If these holders, by exercising their registration rights, cause a large number
of securities to be registered and sold in the public market, these sales could
have an adverse effect on the market price for our common stock. If we were to
include, in a registration statement initiated by us, shares held by these
holders pursuant to the exercise of their registration rights, these sales may
have an adverse effect on our ability to raise needed capital.
-12-
<PAGE>
SELLING STOCKHOLDERS
The selling stockholders acquired beneficial ownership of all the
shares listed below through stock options granted under our 1996 Incentive and
Non-Qualified Stock Option Plan. None of the selling stockholders are affiliates
of Bluestone. The following table shows the names of the selling stockholders
and the number of shares of common stock that they may sell from time to time
under this prospectus. To our knowledge, the selling stockholders do not
beneficially own any other securities of Bluestone.
We may amend or supplement this prospectus from time to time in the
future to update or change this list of selling stockholders and shares which
may be resold.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF SELLING STOCKHOLDER OF COMMON STOCK
<S> <C>
MARK ALMEIDA....................................................................... 468
CHRIS BENEDETTO.................................................................... 586
NICHOLAS BROOKS.................................................................... 135
TIM CLAAR.......................................................................... 820
MITCH COLEMAN...................................................................... 157
KEITH FOX.......................................................................... 476
YOSSI HAZOREF...................................................................... 235
CAROL JANSEN....................................................................... 118
MEHALINGHAM JEGANNATHAM........................................................... 352
TOM MACCARIELLA.................................................................... 357
BOB MOOTZ.......................................................................... 3,594
KEVIN MULLEN....................................................................... 468
SHEILA POTTER...................................................................... 500
KEN SHARP.......................................................................... 352
DAVID SINGER....................................................................... 235
BALAJI SRINIVASAN.................................................................. 235
MARK VEVERA........................................................................ 224
ZINHONG WANG....................................................................... 134
JEFFREY WHITNEY.................................................................... 1,954
TOTAL 11,400
</TABLE>
-13-
<PAGE>
PLAN OF DISTRIBUTION
The selling stockholders may, from time to time, elect to sell all or a
portion of the shares offered under this prospectus in the Nasdaq National
Market. Sales are anticipated to be made at prices prevailing in the Nasdaq
National Market at the times of such sales. The selling stockholders may also
make private sales directly or through a broker or brokers, who may act as agent
or principal. Further, they may choose to dispose of the shares offered under
this prospectus by gift to third party or as a donation to a charitable or other
non-profit entity. In connection with any sales, the selling stockholders and
any brokers participating in such sales may be deemed to be underwriters
within the meaning of the Securities Act. The amount of securities to be
reoffered or resold by means of this prospectus, by each person, and any
other person with whom he or she is acting in concert for the propose of
selling our securities, may not exceed, during any three month period, the
amount specified in Rule 144(e) under the Securities Act.
Any broker-dealer participating in such transactions as agent may
receive commissions from the selling stockholders (and, if such broker acts as
agent for the purchaser of such shares, for such purchaser). Usual and customary
brokerage fees will be paid by the selling stockholders. Broker-dealers may
agree with them to sell a specified number of shares at a stipulated price per
share, and, to the extent such a broker-dealer is unable to do so acting as
agent for the selling stockholders, to purchase as principal any unsold shares
at the price required to fulfill the broker-dealer commitment to them.
Broker-dealers who acquire shares as principal may thereafter resell such shares
from time to time in transactions (which may involve crosses and block
transactions and which may involve sales to and through other broker-dealers,
including transactions of the nature described above) in the Nasdaq National
Market or any other over the counter market or stock exchange, if any, in which
our shares are traded, in negotiated transactions or otherwise at market prices
prevailing at the time of sale or at negotiated prices, and in connection with
such resales may pay to or receive commissions from the purchasers of such
shares.
We have advised the selling stockholders that the anti-manipulation
rules of Regulation M under the Exchange Act may apply to sales of shares in the
market and to the activities of the selling shareholders and their affiliates.
In addition, we will make copies of this prospectus available to the selling
stockholders and have informed them of the possible need for delivery of copies
of this prospectus to purchasers on or prior to sales of the shares offered
under this prospectus. The selling stockholders may indemnify any broker-dealer
that participates in transactions involving the sale of the shares against
certain liabilities, including liabilities arising under the Securities Act. Any
commissions paid or any discounts or concessions allowed to any such broker, and
any profits received on the resale of such shares, may be deemed to be
underwriting discounts and commissions under the Securities Act if any such
broker-dealers purchase shares as principal.
Any securities covered by this prospectus which qualify for sale
pursuant to Rules 144 and 701 under the Securities Act may be sole under those
rules rather than pursuant to this prospectus.
There can be no assurance that the selling stockholders will sell any
or all of the shares of common stock offered under this prospectus.
INFORMATION INCORPORATED BY REFERENCE
This prospectus incorporates by reference the following documents and
information:
1. Our final prospectus filed on September 24, 1999 with the SEC
pursuant to Rule 424(b)(4); and
2. The description of our common stock contained in our Registration
Statement on Form 8-A filed under the Exchange Act with the SEC on
July 7, 1999, including all amendments or reports filed for the
purpose of updating such description.
-14-
<PAGE>
Unless we have filed a post-effective amendment to the registration
statement, of which this prospectus is a part, under the Securities Act
indicating that all of the shares have been sold or which deregisters all
shares then remaining unsold, all documents which we subsequently file under
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act shall be deemed to be
incorporated by reference in this prospectus and to be a part of this
prospectus from the date of filing of such documents.
We will provide without charge to each person to whom a copy of this
prospectus is delivered, upon written or oral request, a copy of the information
that has bene or may be incorporated by reference in this prospectus. Direct any
request for such copies by writing or telephoning us at the following address:
Bluestone Software, Inc. 1000 Briggs Road, Mount Laurel, New Jersey 08054, Attn:
Chief Financial Officer.
INDEMNIFICATION AND THE SEC'S POSITION ON ENFORCEABILITY
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
us pursuant to the foregoing provisions, we have been informed that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
Section 145 of the Delaware General Corporation Law permits each
Delaware business corporation to indemnify its directors, officers, employees
and agents against liability for each such person's acts taken in his or her
capacity as a director, officer, employee or agent of the corporation if such
actions were taken in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the corporation, and
with respect to any criminal action, if he or she had no reasonable cause to
believe his or her conduct was unlawful. Our bylaws provide that we, to the full
extent permitted by Section 145 of the Delaware General Corporation Law, shall
indemnify all of our past and present directors, officers, employees and agents
who were or are parties or are threatened to be made parties to or are involved
in any action, suit or proceeding against all expenses, liability and losses in
connection with such proceeding. Such expenses may be paid by us in advance of
the final disposition of the action upon receipt of an undertaking to repay the
advance if it is ultimately determined that such person is not entitled to
indemnification.
As permitted by Section 102(b)(7) of the Delaware General
Corporation Law, our certificate of incorporation provides that none of our
directors shall be liable to us for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to us or our stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing a violation
of law, (iii) for the unlawful payment of dividends on or redemption of our
capital stock, or (iv) for any transaction from which the director derived an
improper personal benefit.
WHERE YOU CAN FIND MORE INFORMATION ABOUT BLUESTONE
We are subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, file reports and other information with the SEC. The registration
statement, including this prospectus, and the exhibits forming a part of the
registration statement and the reports and other information filed by us with
the SEC in accordance with the Exchange Act may be inspected without charge at
the public reference facilities maintained by the SEC at 450 Fifty Street, N.W.,
Washington, D.C. 20549 and at the following regional offices of the SEC: 7 World
Trade Center, Suite 1300, New York, New York 10048; and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of these materials may also be obtained from the Public Reference Room of
the SEC, 450 Fifty Street, N.W., Washington, D.C. 20549, at prescribed rates.
You may obtain information regarding the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet Web
site at http://www.sec.gov that contains reports, proxy statements and other
information.
-15-
<PAGE>
REGISTRATION STATEMENT ON FORM S-8
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
ITEM 1. PLAN INFORMATION.
The document(s) containing the information specified in Part I of Form
S-8 will be sent or given to participants in the Bluestone Software, Inc. (the
"Registrant") 1996 Incentive and Non-Qualified Stock Option Plan (the "Plan") as
specified by Rule 428(b)(1) promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act").
Such documents are not being filed with the SEC, but constitute (along
with the documents incorporated by reference into this Registration Statement
pursuant to Item 3 of Part II hereof) a prospectus that meets the requirements
of Section 10(a) of the Securities Act.
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION.
The Registrant will furnish without charge to each person to whom the
prospectus is delivered, on the written or oral request of such person, a copy
of any and all of the documents incorporated by reference, other than exhibits
to such documents (unless such exhibits are specifically incorporated by
reference to the information that is incorporated). Requests should be directed
to Bluestone Software, Inc., 1000 Briggs Road, Mount Laurel, New Jersey 08054,
Attention: S. Craig Huke, Senior Vice President and Chief Financial Officer,
telephone number: (856) 727-4600.
-16-
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.
The Registrant and the Plan hereby incorporate by reference in
this Registration Statement the following documents:
(a) The Registrant's prospectus filed with the SEC on
September 24, 1999 pursuant to Rule 424(b)(4) under
the Securities Act;
(b) The description of the Registrant's Common Stock, which
is incorporated by reference from the Registrant's
Registration Statement on Form 8-A filed under the
Exchange Act with the SEC on July 7, 1999, including all
amendments or reports filed for the purpose of updating
such description.
All reports and other documents subsequently filed by the
Registrant with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act, after the date hereof, and prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which deregisters all securities then remaining unsold hereunder, shall be
deemed incorporated by reference into this Registration Statement and to be a
part thereof from the date of the filing of such documents.
All information appearing in this Registration Statement and
the prospectus is qualified in its entirety by the detailed information,
including financial statements, appearing in the documents incorporated herein
or therein by reference.
ITEM 4. DESCRIPTION OF SECURITIES.
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits each
Delaware business corporation to indemnify its directors, officers, employees
and agents against liability for each such person's acts taken in his or her
capacity as a director, officer, employee or agent of the corporation if such
actions were taken in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the corporation, and
with respect to any criminal action, if he or she had no reasonable cause to
believe his or her conduct was unlawful. The Registrant's bylaws provides that
the Registrant to the full extent permitted by Section 145 of the Delaware
General Corporation Law, shall indemnify all past and present directors,
officers, employees and agents of the Registrant who were or are parties or are
threatened to be made parties to or are involved in any action, suit or
proceeding against all expenses, liability and losses in connection with such
proceeding. Such expenses may be paid by the Registrant in advance of the final
disposition of the action upon receipt of an undertaking to repay the advance if
it is ultimately determined that such person is not entitled to indemnification.
As permitted by Section 102(b)(7) of the Delaware General Corporation
Law, the Registrant's certificate of incorporation provides that no director of
the Registrant shall be liable to the Registrant for monetary damages for breach
of fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the
-17-
<PAGE>
Registrant or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
the unlawful payment of dividends on or redemption of the Registrant's capital
stock, or (iv) for any transaction from which the director derived an improper
personal benefit.
The Registrant has obtained a policy insuring it and its directors and
officers against certain liabilities, including liabilities under the Securities
Act.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable.
ITEM 8. EXHIBITS.
The following exhibits are filed as part of this Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
<S> <C>
10.1 1996 Incentive and Non-Qualified Stock Option
Plan of Bluestone Software, Inc. (incorporated by
reference to the corresponding exhibit number in the
Registrant's Registration Statement on Form S-1 (File
No. 333-82213) filed with the Securities and Exchange
Commission on July 2, 1999.
5 Opinion of Pepper Hamilton LLP.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Pepper Hamilton LLP (included in Exhibit
5).
24 Power of Attorney (included on the Signature Page).
</TABLE>
ITEM 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
PROVIDED, HOWEVER, that paragraph (a)(1)(i) and (a)(1)(ii) above do not apply if
the Registration Statement is on Form S-3 or S-8 and the information required to
be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to section 13 or section 15(d)
of the Exchange Act that are incorporated by reference in the Registration
Statement.
(2) That for the purpose of determining any liability under the
Securities Act, each such post- effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
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<PAGE>
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
-19-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in Mount Laurel, New Jersey on the date indicated.
BLUESTONE SOFTWARE, INC.
Date: October 6, 1999 By: /s/ P. Kevin Kilroy
-------------------------------
P. Kevin Kilroy, President and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints P. Kevin Kilroy and S. Craig
Huke and each of them, his true and lawful attorney-in-fact and agent with full
power of substitution or resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this Form
S-8 and other registration statements related to this Form S-8 by virtue of
General Instruction E thereto, and to file the same, with all exhibits thereto,
and other documentation in connection therewith, with the SEC, granting unto
said attorney-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof
Pursuant to the requirements of the Securities Act, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the 6th day of October, 1999.
<TABLE>
<CAPTION>
NAME TITLE
<S> <C>
/s/ P. Melan Baiada Chairman of the Board of Directors
- ----------------------------------
P. Melan Baiada
President and Chief Executive Officer and
/s/ P. Kevin Kilroy
- ----------------------------------
P. Kevin Kilroy Director (Principal Executive Officer)
/s/ S. Craig Huke Senior Vice President and Chief Financial
- ---------------------------------- Officer (Principal Financial and
S. Craig Huke Accounting Officer)
/s/ Gregory M. Case Director
- ----------------------------------
Gregory M. Case
Director
- ----------------------------------
William C. Hulley
Director
- ----------------------------------
Anton Simunovic
Director
- ----------------------------------
Andrew J. Filipowski
/s/ Paul E. Blondin Director
- ----------------------------------
Paul E. Blondin
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBERS DESCRIPTION
<S> <C>
5 Opinion of Pepper Hamilton LLP.
23.1 Consent of Arthur Andersen LLP.
</TABLE>
<PAGE>
Exhibit 5
[PEPPER HAMILTON LLP LETTERHEAD]
October 6, 1999
Bluestone Software, Inc.
1000 Briggs Road
Mount Laurel, New Jersey 08054
Re: Registration Statement on Form S-8
--------------------------------------
Dear Sir/Madam:
We have acted as counsel to Bluestone Software, Inc., a
Delaware corporation (the "Company"), in connection with a Registration
Statement on Form S-8 filed with the Securities and Exchange Commission on
the date hereof (the "Registration Statement"), relating to (i) the offer and
sale of up to 3,290,328 shares of Common Stock, $.001 par value per share, of
the Company (the "Common Stock"), issuable by the Company pursuant to awards
granted or available for grant under the Company's 1996 Incentive and
Non-Qualified Stock Option Plan as amended and restated (the "Plan") and (ii)
the offer and sale of up to 11,400 shares of Common Stock issued by the
Company as a result of the exercise by certain optionees of options awarded
under the Plan (collectively, the "Shares").
In rendering this opinion, we have examined the Registration
Statement, including the exhibits thereto, the Company's Amended and Restated
Articles of Incorporation and By-Laws as currently in effect, the Plan and such
other documents as we have deemed appropriate. We have not performed any
independent investigation other than the document examination described above.
In the foregoing examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals and the
authenticity of all documents submitted to us as copies of originals.
Based on the foregoing, we are of the opinion that the shares
of Common Stock of the Company issued as a result of the exercise of options
granted under the Plan are, and the shares of Common Stock issuable pursuant to
awards granted or available for grant under the Plan will be, when issued and
paid for in accordance with the terms of the Plan and any underlying option
award agreements or letters, validly issued, fully paid and non- assessable.
The opinion set forth above is limited to the General
Corporation Law of the State of Delaware, as amended.
We hereby consent to the filing of this opinion as Exhibit 5
to the Registration Statement.
The opinion expressed herein is solely for your benefit and
may be relied upon only by you.
Very truly yours,
/s/ Pepper Hamilton LLP
-----------------------
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
[ARTHUR ANDERSEN LLP LETTERHEAD]
As independent public accountants, we hereby consent to the
use of our reports (and all references to our Firm) included in or made part of
this registration statement.
/s/ ARTHUR ANDERSEN LLP
-----------------------
Philadelphia, Pennsylvania
October 5, 1999
