ESPS INC, S-1, 1999-03-31

ESPS INC
S-1, 1999-03-31

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<PAGE>

As filed with the Securities and Exchange Commission on March 31, 1999
Registration Statement No. 333-

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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933

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ESPS, INC.
(Exact name of Registrant as specified in its charter)

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Delaware 7373 24-2845135
(State or other (Primary Standard (IRS Employee
jurisdiction of Industrial Classification Identification Number)
incorporation or Code No.)
organization)

1300 Virginia Drive, Suite 125
Fort Washington, PA 19034
215/619-6000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)

----------------

TERRENCE P. BRENNAN
President and Chief Executive Officer
ESPS, Inc.
1300 Virginia Drive
Suite 125
Fort Washington, PA 19034
215/619-6000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

----------------

Copies to:
Stephen M. Goodman, Esq. Alexander D. Lynch, Esq.
James W. McKenzie, Jr., Esq. Luci Staller Altman, Esq.
Morgan, Lewis & Bockius LLP Brobeck, Phleger & Harrison LLP
1701 Market Street 1633 Broadway, 47th Floor
Philadelphia, PA 19103 New York, NY 10019
215/963-5000 212/581-1600

Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.

If the only securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Proposed Maximum
Title of each Class of Aggregate Offering Amount of
Securities to be Registered Price(1) the Registration Fee
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<S> <C> <C>
Common Stock, par value $.001 per
share................................ $46,000,000 $12,788
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933, as amended.

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to such
Section 8(a), may determine.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. +
+Underwriters may not confirm sales of these securities until the registration +
+statement filed with the Securities and Exchange Commission becomes +
+effective. This prospectus is not an offer to sell these securities and it is +
+not soliciting offers to buy these securities in any state where the offer or +
+sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 31, 1999

PROSPECTUS

ESPS, Inc.

[LOGO]

Common Stock

This is an initial public offering of common stock by ESPS, Inc. Of the
shares of common stock being sold in this offering, shares are being sold
by ESPS and shares are being sold by the selling stockholders. ESPS will not
receive any of the proceeds from the sale of shares by the selling
stockholders. The estimated initial public offering price will be between $
and $ per share.

---------

There is no public market for the common stock. We have applied for listing
of the shares of common stock on the Nasdaq National Market under the symbol
ESPS.

---------

<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial public offering price................................... $ $
Underwriting discounts and commissions.......................... $ $
Proceeds to ESPS, before expenses............................... $ $
Proceeds to selling stockholders, before expenses............... $ $
</TABLE>

ESPS and certain selling stockholders have granted the underwriters an option
for a period of 30 days to purchase up to additional shares of common
stock.

---------

Investing in the common stock involves a high degree of risk.
See "Risk Factors" beginning on page 6.

---------

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.

Hambrecht & Quist
BancBoston Robertson Stephens
U.S. Bancorp Piper Jaffray
Charles Schwab & Co., Inc.

, 1999
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary................................................... 3

Risk Factors......................................................... 6

Forward-Looking Statements........................................... 17

Use of Proceeds...................................................... 18

Dividend Policy...................................................... 18

Capitalization....................................................... 19

Dilution............................................................. 20

Selected Financial Data.............................................. 21

Management's Discussion and Analysis of
Financial Condition and Results of Operations....................... 23

Our Business......................................................... 34

Management........................................................... 48

Certain Transactions................................................. 54

Principal and Selling Stockholders................................... 55

Description of Capital Stock......................................... 56

Shares Eligible for Future Sale...................................... 59

Underwriting......................................................... 60

Legal Matters........................................................ 62

Experts.............................................................. 62

Additional ESPS Information.......................................... 62

Financial Statements................................................. F-1
</TABLE>

CoreDossier(R) is a registered U.S. trademark of ESPS. ESPS(TM), CADDY
Compiler(TM), CDER Compiler(TM), DAMOS Compiler(TM), CoreDocket(TM) and the
ESPS logo are also trademarks of ESPS. This prospectus also contains trademarks
and tradenames of other companies.
<PAGE>

PROSPECTUS SUMMARY

This prospectus summary highlights selected information contained elsewhere
in this prospectus. This summary may not contain all of the information that
you should consider before investing in our common stock. You should read the
entire prospectus carefully, especially the "Risk Factors" section and the
financial statements, before making an investment decision.

ESPS

ESPS is a leading provider of enterprise compliance management solutions to
businesses in highly regulated industries. Our solution, which consists of the
CoreDossier family of software products and related services, enables users
throughout an enterprise to collaborate in the authoring, compilation,
distribution and publishing of compliance information and regulatory
submissions. We designed our CoreDossier software products to utilize advanced
technologies, such as corporate intranets and the Internet, and to meet
emerging electronic compliance requirements and standards. We believe our
solution enables our customers to realize a return on their investment by
reducing the cost and burden of compliance while also reducing the time
required to bring new products and services to market.

Businesses throughout the world are subject to rules, regulations and
standards imposed by federal, state and foreign regulatory agencies. As part of
their oversight of these businesses, regulatory agencies typically require that
businesses compile information to demonstrate their compliance with specific
regulations, such as those governing product safety, environmental protection,
fair business practices and manufacturing processes. This process often
requires participation by numerous individuals throughout an organization and
can often be very time consuming and costly. For example, the U.S. Office of
Management and Budget reported that in 1997, an estimated 115.6 million hours
were required for mandated record keeping and compliance reporting to the U.S.
Environmental Protection Agency.

Traditionally, businesses have used a manual process to create paper-based
compliance documentation and submissions. In an effort to address the growing
complexity of regulatory compliance and to reduce the costs associated with the
compliance process, businesses are increasingly adopting electronic compliance
processes. We believe the initial systems and approaches used for electronic
compliance have not adequately addressed the need for a flexible, enterprise-
wide solution that can effectively manage the complex compliance process.

ESPS provides:

.A scalable enterprise-wide solution;

.Industry-specific compliance expertise;

.A modular product offering and pre-defined publication templates;

.Intranet and Internet capabilities;

.Multiple file format input and output capabilities; and

.Rapid deployment.

The CoreDossier product family includes the CoreDossier platform, industry-
specific modules and the CoreDossier application program interfaces, or APIs.
Our products comprise a modular system that may be configured in a variety of
ways to meet customers' industry-specific compliance requirements. The
CoreDossier platform provides the foundation for managing compliance processes
throughout an enterprise. The industry-specific modules work with the
CoreDossier platform to perform compliance functions designed to meet the
regulatory requirements of particular industries. The CoreDossier APIs enable
third parties to develop custom applications and extend access to additional
external information sources.

3
<PAGE>

As of February 28, 1999 we have licensed versions of our CoreDossier
products to 44 customers in the pharmaceutical and biotechnology industry, the
chemical industry and the utilities industry. Our customers include Pfizer
Inc., Glaxo-Wellcome Inc., Rhone-Poulenc Rorer Pharmaceuticals Inc., Bayer
Corporation, and Baltimore Gas & Electric.

Our headquarters are located at 1300 Virginia Drive, Suite 125, Fort
Washington, PA 19034. Our telephone number is 215/619-6000. We were
incorporated in Delaware in April 1994 under the name Electronic Submission
Publishing Systems, Inc. We changed our name to ESPS, Inc. on March 30, 1999.
We maintain a World Wide Web site at www.ESPS.com. Information contained on our
Web site does not constitute a part of this prospectus.

The Offering

<TABLE>
<S> <C>
Common stock offered by ESPS....... shares

Common stock offered by selling
stockholders...................... shares

Common stock to be outstanding
after this offering............... shares

Use of proceeds.................... For working capital and other general
corporate purposes, including increased
domestic and international sales and
marketing expenditures, product development
expenditures, professional services
organization expenditures and capital
expenditures. See "Use of Proceeds."

Proposed Nasdaq National Market
symbol............................ ESPS
</TABLE>

------------

Unless otherwise noted, the information in this prospectus takes into
account the conversion of all outstanding shares of Series A Preferred Stock
into shares of common stock upon the consummation of this offering. In
addition, unless otherwise indicated, the information included in this
prospectus does not take into account the possible sale of additional shares of
common stock to the underwriters pursuant to their over-allotment option. All
references to fiscal years refer to the twelve-month period ended March 31 of
that year.

Please see "Capitalization" for a more complete discussion regarding the
outstanding shares of ESPS common stock and options to purchase ESPS common
stock and other related matters.

4
<PAGE>

Summary Financial Data
(in thousands, except per share data)

This table summarizes our statement of operations data and our balance sheet
data. The pro forma balance sheet data and pro forma as adjusted balance sheet
data below reflect the conversion of all outstanding shares of preferred stock
into common stock at the consummation of the offering. The pro forma as
adjusted balance sheet data also reflect the sale of shares of common stock
in the offering by ESPS and the receipt and application of the net proceeds of
the offering.

<TABLE>
<CAPTION>
Nine Months
Period from Ended
April 29, 1994 Fiscal Years Ended March 31, December 31,
(inception) -------------------------------- ----------------
to March 31, 1995 1996 1997 1998 1997 1998
----------------- --------- ---------- --------- ------- -------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Total revenues........ $ 102 $ 753 $ 1,068 $ 8,646 $ 5,094 $12,339
Income (loss) from
operations........... (440) (772) (2,774) 2,309 970 2,028
Income tax provision
(benefit)............ -- -- -- (514) (1,025) 836
Net income (loss)..... (435) (754) (2,813) 2,875 2,033 1,319
Earnings (loss) per
share:
Basic............... $(0.44) $ (1.11) $ (5.09) $ 5.53 $ 5.07 $ 0.80
Diluted............. (0.44) (1.11) (5.09) 0.37 0.28 0.13
Shares used in
computation of
earnings (loss) per
share:
Basic............... 1,000 682 553 520 401 1,658
Diluted............. 1,000 682 553 7,859 7,333 9,949
Pro forma earnings per
share:
Basic............... $ 0.44 $ 0.17
Diluted............. 0.37 0.13
Shares used in
computation of pro
forma earnings per
share:
Basic............... 6,520 7,658
Diluted............. 7,859 9,949
</TABLE>

<TABLE>
<CAPTION>
December 31, 1998
(unaudited)
-----------------------------
Pro Forma
Actual Pro Forma As Adjusted
------- --------- -----------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents....................... $ 3,142 $ 3,142
Working capital................................. 4,865 4,865
Total assets.................................... 10,297 10,297
Preferred stock................................. 6 --
Stockholders' equity............................ 6,496 6,496
</TABLE>

5
<PAGE>

RISK FACTORS

You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. Any of the
following risks could adversely affect our business, financial condition and
results of operations and could result in a complete loss of your investment.
The risks and uncertainties described below are not the only ones we face.
Additional risks and uncertainties not presently known to us or that we
currently deem immaterial also may impair our business operations.

Risks Related to Our Business

Fluctuations in our operating results, particularly compared to the
expectations of market analysts and investors, could cause volatility in our
common stock price

Our operating results have varied greatly in the past, and we expect that
they will continue to vary in the future as a result of a number of factors,
many of which are beyond our control. We believe that period-to-period
comparisons of our historical results are not necessarily meaningful. Our
operating results may not follow any past trends. You should not rely on our
historical results as an indication of future results.

It is difficult to predict the timing or amount of our software license
revenues because:

. Our sales cycles are lengthy and variable, typically ranging between
three months and six months from our initial contact with a potential
customer to the signing of a license agreement; and

. We have historically recognized a substantial portion of our software
license revenues in the last month of a quarter, and often in the last
weeks or days of a quarter.

If a large number of orders or several large orders do not occur in a quarter
or are deferred, our revenue in that quarter could be substantially reduced.
This may harm our operating results and could impair our business in future
periods. Because we do not know when, or if, our potential customers will place
orders and finalize contracts, we cannot accurately predict our revenue and
operating results for future quarters.

We base our decisions regarding operating expenses on anticipated revenue
trends. Since many of our expenses are fixed, a delay in recognizing revenues
from even a limited number of licensing transactions could cause our operating
results to vary significantly from quarter to quarter and could result in
reduced income from operations or operating losses. We anticipate that our
fixed expenses will progressively increase as we expand our operations. To the
extent these expenses are not followed by increased revenues, our operating
results will suffer. For example, our net income for the quarter ended December
31, 1998 decreased as a result of increased operating expenses.

Our future operating results will depend on many factors, including:

. Demand for our products and services;

. Product and price competition;

. Variability in the mix of our software license revenues and services and
maintenance revenues;

. Variability in the mix of services that we perform and those performed by
third-party service providers;

. Success in expanding our direct sales force and professional services
organization and implementing indirect distribution channels;

. Our ability to develop and market new and enhanced products on a timely
basis;

. Timing of our new product introductions and product enhancements or those
of our competitors;

6
<PAGE>

. Continued purchases by our existing customers, including additional
licenses and services and maintenance contracts;

. International sales;

. The loss of any key employees and timing of our new hires;

. Significant downturns in the software industry, particularly when general
economic conditions decline and spending on management information
systems decreases;

. The fiscal or quarterly budget cycles of our customers;

. The efforts of our direct sales force to meet or exceed quarterly or
fiscal year-end sales quotas; and

. The effects of Year 2000 issues on customers' purchasing decisions.

Seasonal trends may harm our quarterly operating results. We experience
significant seasonality in software license revenues and expect seasonal trends
to continue in the future. In recent years, our revenues in the fourth quarter
of our fiscal year have generally been higher than our revenues in each of the
prior three quarters of such fiscal year and higher than our revenues in the
first quarter of the following fiscal year. We believe that the efforts of our
direct sales force to meet or exceed fiscal year-end sales quotas as well as
customer buying patterns and budgeting cycles are the primary causes of these
fluctuations.

As a result of these factors, our annual or quarterly results of operations
may not meet the expectations of securities analysts and investors, which would
likely cause the price of our common stock to decline. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

We have a limited operating history and face significant risks often faced by
early stage companies, which could harm our business, financial condition and
results of operations

We commenced operations in April 1994 and commercially released the initial
version of CoreDossier in November 1995. As a result of our limited operating
history, we face significant risks and uncertainties related to the early stage
of our company. To address these risks and uncertainties, we must, among other
things:

. Successfully implement our sales and marketing strategy;

. Respond to competitive developments in the marketplace;

. Expand into targeted industries;

. Attract, retain and motivate qualified personnel; and

. Develop and upgrade our products and technologies more rapidly than our
competitors.

If we are unsuccessful in our efforts in any or all of these areas, our
business, financial condition and results of operations could be harmed. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

A small number of our license agreements account for a large portion of our
total revenues

We derive a significant portion of our software license revenues from a
small number of license agreements. For example, three customers accounted for
100% of the total revenues for the fiscal year ended March 31, 1997, three
customers accounted for 46% of total revenues for the fiscal year ended March
31, 1998 and one customer accounted for 10% of total revenues for the nine
months ended December 31, 1998. We expect that a significant portion of our
revenues will continue to be derived from a limited number of customers which
may vary from year to year. Our operating results could be harmed if we are
unable to complete one or more substantial license sales in any future period.

7
<PAGE>

Because we rely and will continue to rely on our CoreDossier product family for
substantially all of our revenues, difficulties relating to CoreDossier will
harm our business, financial condition and results of operations

Factors that adversely affect the pricing of, or demand for, the CoreDossier
product family, such as competition or technological change, will harm our
business, financial condition and results of operations. As of December 31,
1998, substantially all of our revenues were generated from the sale of
CoreDossier products and related maintenance, training and implementation
services. We expect revenues from the sale of CoreDossier products and services
to continue to account for substantially all of our revenues for the forseeable
future. Our future growth will depend upon broader market acceptance of the
CoreDossier family of products.

If we are unable, for technological or other reasons, to develop and
introduce new and improved CoreDossier products in a timely manner, our
business, financial condition and results of operations would be harmed. In
particular, we may experience delays in introducing new versions of our
CoreDossier products. Our future financial performance will substantially
depend on our ability to successfully deploy current versions of our
CoreDossier products and to develop, introduce and gain market acceptance of
new and enhanced versions of our CoreDossier products. Competition,
technological change or other factors could decrease demand for, or market
acceptance of, CoreDossier. Any decrease in demand or market acceptance or
increase in competition will harm our business, financial condition and results
of operations. See "Our Business--Products."

We may not be able to successfully market and sell our products and services in
our targeted industries

We have historically sold most of our products and services to businesses in
the pharmaceutical and biotechnology industry. We have recently begun selling
our products and services to businesses in the chemical industry and the
utilities industry. Our business strategy includes targeting industries in
which we do not currently sell products and services, such as the financial
services, insurance, and discrete manufacturing industries. We may not
experience the same level of sales in these industries as in the pharmaceutical
and biotechnology industry.

Our success in these industries will depend upon many factors, including:

. Our ability to obtain expertise in these industries;

. Our ability to develop industry-specific modules for these industries;
and

. Market acceptance of our products and services in these industries.

If we are unable to adequately address these factors we may not successfully
market and sell our products and services in these targeted industries.
Consequently, our business and results of operations would be harmed. In
addition, as we develop new industry-specific products, we may begin competing
with companies we have not competed against in the past. These companies may
have greater experience and expertise in these industries. If we are unable to
compete successfully against these new competitors our business and results of
operations would be harmed. See "Our Business--Strategy."

The success of our products depends upon the continued adoption of the Windows
NT platform, the expansion of the capabilities of the Windows NT platform and
the release of new or enhanced Windows NT products

We designed our products to operate exclusively on the Windows NT platform.
If the market for Windows NT fails to grow or grows more slowly than we
currently expect, or if this market is affected by delays in the release of new
or enhanced products, our business could be harmed. In addition, we must adapt
our product to work with new or enhanced Windows NT products. We market our
products exclusively to customers who have developed their enterprise computing

8
<PAGE>

systems around the Windows NT platform. Acceptance of the Windows NT platform
may not continue to increase in the future. The adoption of new operating
systems and computing platforms, and the market for software applications that
run on those platforms, has in the past been significantly affected by the
timing of new product releases and enhancements to these platforms.

In addition, the performance of our products partly depends on the technical
capabilities of the Windows NT platform. If the Windows NT platform does not
meet the technical demands of our products, the performance of our products may
be limited and, as a result, our business may be harmed. See "Our Business--
Products."

We may be unable to expand our sales and professional services organizations,
which may hinder our ability to grow and meet customer demands

If we fail to expand our direct sales force or establish other distribution
channels, or if we fail to expand our professional services organization, our
business could be harmed. We sell our products primarily through our direct
sales force and support our customers with our professional services
organization. Our future revenue growth will depend, in large part, on
recruiting and training additional personnel for our sales and professional
services organizations. We have experienced, and may continue to experience,
difficulty in recruiting qualified sales and professional services personnel.
We may be unable to successfully expand our direct sales force or other
distribution channels. Even if we do expand, any such expansion may not result
in increased revenues. The complexity of our products and the large-scale
deployments anticipated by our customers will require us to hire a number of
highly trained professional services personnel, and, if we are unable to do so,
we may be unable to meet customer demands for services. This may harm our
business and limit our ability to sell our products.

We are growing rapidly and effectively managing our growth may be difficult

We have significantly increased our employee base to meet increasing demand
for our products and services. Our revenues have increased from $753,000 for
the fiscal year ended March 31, 1996 to $8.6 million for the fiscal year ended
March 31, 1998. As we expand into targeted new industries, we expect to
continue increasing our employee base. Our management and operations have been
strained by this growth and will continue to be strained should rapid growth
continue. To compete effectively and to manage future growth, we must continue
to improve our financial and management controls, reporting systems and
procedures on a timely basis. We must also expand, train and manage our
employee base. If we are not successful managing our growth, our business may
be harmed. See "Our Business--Sales and Marketing."

Several key executive officers have recently joined our management team and
they may not successfully work together to meet our business objectives

Our current management team has been in place for only a relatively short
period of time. Our Chief Financial Officer joined us in October 1998, our Vice
President of Marketing joined us in June 1998 and our Vice President of
Professional Services joined us in October 1998. Accordingly, each of these
individuals has limited experience with our operating activities. Our success
will depend to a significant extent on the ability of our new executive
officers to integrate themselves into our daily operations, to gain the trust
and confidence of other employees and to work effectively as a team. See "Our
Business--Management."

We may be unable to attract and retain key personnel

Our future performance will depend largely on the efforts and abilities of
our senior executives, key technical, professional services, sales and
marketing and managerial personnel. Our success will depend on our ability to
attract and retain these key employees in the future. The employment of our key
employees, including our senior executives, is at will. The market for such
persons is extremely competitive. We may not find qualified replacements for
personnel who leave us. In the past, we have experienced difficulty in hiring
qualified technical, professional services, sales, marketing and

9
<PAGE>

managerial personnel. In addition, we do not maintain key person life insurance
on any of our key personnel, and have no plans to do so. The loss of any of our
key personnel may harm our business.

We face risks from expansion of our international operations, which may harm
our business, financial condition and results of operations

We intend to substantially expand our international operations and enter new
international markets. This expansion will require significant management
attention and financial resources to successfully translate our software
products into various languages, to develop compliance expertise relating to
international regulatory agencies and to develop direct and indirect
international sales and support channels. We may be unable to establish,
maintain or increase international market demand for the CoreDossier product
family and, if we are unable to do so, international sales may be limited, and
our business, financial condition and results of operations may be harmed.

International operations are subject to inherent risks, including:

. The difficulties and costs of staffing and managing foreign operations;

. The impact of possible adverse political or economic conditions;

. The costs of adapting products to foreign markets;

. Longer receivables collection periods and greater difficulty in accounts
receivable collection as compared to those experienced in our domestic
operations;

. Unexpected changes in regulatory requirements;

. Reduced protection for intellectual property rights in some countries;

. Fluctuations in the value of the U.S. dollar relative to other
currencies;

. Potentially adverse tax consequences; and

. Seasonal reductions in business activities.

Any of these factors could harm our international expansion. If we do not
realize our expected results from international operations, our business,
financial condition and results of operations may be harmed.

We rely on our relationships with service vendors, the loss or failure of which
may harm our business

We have established relationships with a number of service vendors that are
important to the worldwide implementation, integration, development and
promotion of our products. Our business may be harmed if:

. We are unable to develop and retain effective, long-term relationships
with these service vendors;

. We are unable to adequately train a sufficient number of service vendors;

. Our service vendors do not have or do not devote the resources necessary
to facilitate implementation of our products; or

. Our service vendors endorse a product or technology other than ours.

We expect our relationships with these service vendors to provide marketing
and sales opportunities for our direct sales force and expand the distribution
of our products. If we are unable to successfully maintain our existing
relationship, or develop new relationships, our business may be harmed.

10
<PAGE>

We rely on technology licensed from a third party, the loss of which may harm
our ability to sell our products

We incorporate software licensed from Versant Object Technology Corporation
into our products. The license agreement expires in December 1999, subject to
automatic yearly renewal, unless otherwise terminated by either party. Our
inability to maintain this license on commercially favorable terms could impair
our ability to sell our products. We will need to replace the technology if we
lose this license, which may take time and may be costly. In addition, we
depend on Versant's ability to deliver and support reliable products. Versant
must enhance their current products, develop new products on a timely and cost-
effective basis, and respond to emerging industry standards and other
technological changes. We may need to replace this software if Versant fails to
update its product, or its product becomes obsolete or incompatible with future
versions of our products. Our sales may be reduced if we are unable to replace
the functionality provided by Versant's software. See "Our Business--Products."

We may be unable to adequately protect our proprietary rights, which could
result in their unauthorized use

Our success depends on our ability to protect our proprietary rights. We
rely primarily on:

. Copyright, trade secret and trademark laws;

. Confidentiality agreements with employees and third parties; and

. Protective contractual provisions such as those contained in license
agreements with consultants, vendors and customers, although we have not
signed such agreements in every case.

Despite our efforts to protect our proprietary rights, unauthorized parties
may copy aspects of our products and obtain and use information we regard as
proprietary. Other parties may breach confidentiality agreements and other
protective contracts. We may not become aware of these breaches or have
adequate remedies available. We may need to litigate claims against third
parties who infringe our intellectual property rights, which could be costly.

We have not secured registration of all our marks in the United States and
have not pursued registration in any foreign country. The laws of some foreign
countries do not protect our proprietary rights to the same extent as do the
laws of the United States. Effective copyright, trademark and trade secret
protection may not be available in other jurisdictions. If we cannot adequately
protect our proprietary rights, our business may be harmed.

Our products may infringe proprietary rights of others, which may subject us to
costly claims and impair our ability to sell our products

In the computer software market, there is frequent and substantial
intellectual property litigation. In addition, many parties are actively
developing collection, publication and distribution technologies, and are
seeking protection for these technologies, including seeking patent protection.
As a result, we believe that disputes over the ownership of these technologies
are likely to arise in the future. Furthermore, former employers of our present
and future employees may assert claims that these employees improperly
disclosed confidential or proprietary information to us. We cannot assure you
that our products do not infringe valid patents, copyrights or other
proprietary rights of third parties. Therefore, we may be subject to legal
proceedings and claims, including claims of alleged infringement of third-party
proprietary rights.

In addition, we rely on technology that we license from third parties,
including software that is integrated with internally developed software and
used in our products. Although we are generally indemnified against claims that
such third-party technology infringes the proprietary rights of others,

11
<PAGE>

such indemnification is not always available, and in some cases the scope of
such indemnification is limited. Even if we receive broad indemnification,
third-party indemnitors may not be adequately capitalized and may not be able
to indemnify us in the event of infringement, resulting in substantial
exposure. Infringement or invalidity claims arising from the incorporation of
third-party technology, and claims for indemnification from our customers
resulting from such claims, may be asserted against us.

Any claims relating to the infringement of third-party proprietary rights,
even if not meritorious, could result in costly litigation, divert management's
attention and resources, product redevelopment, or delays in product shipments.
In addition, we could be required to pay damages or enter into license
agreements. We may be unable to obtain any required licenses on commercially
favorable terms, if at all, or unable to avoid litigation or settle without
substantial expense and damage awards. Any of these results may harm our
business and ability to sell our products.

Our products are complex and may contain defects or errors

Software products as complex as ours frequently contain undetected errors or
defects, especially when first introduced or when new versions are released.
Our new products or releases may not be free from errors after commercial
shipment. In some cases, we have provided product enhancements to correct
errors in released products. Any errors discovered after commercial release
could result in loss of revenues or delay in market acceptance of our products,
diversion of development resources, damage to our reputation, lawsuits or
increased service costs, all of which could harm our business.

We may face product liability claims, which may harm our financial condition

We may face product liability claims in connection with current products and
future products. A successful product liability claim brought against us could
harm our financial condition. Even if unsuccessful, any product liability claim
could result in costly litigation and divert management's attention and
resources. Any provisions in our license agreements designed to limit our
exposure to potential product liability claims and any product liability
insurance may not be adequate to protect us from such claims.

Any future acquisitions may be difficult and disruptive, and we may not realize
the expected benefits

We may seek to acquire companies, assets or technologies, which may require
the following, any of which could harm our results of operations or harm the
market price of our common stock:

. Issuances of equity securities that may dilute your ownership interest in
ESPS;

. Cash payments to or assumption of debt or other liabilities of the
companies we acquire;

. Large write-offs and amortization expenses related to goodwill and other
intangible assets; and

. Adverse changes to our financial model.

In addition, acquisitions involve many risks and challenges that we might
not successfully overcome, including:

. Difficulties in assimilating technologies, products, personnel and
operations;

. Diversion of management's attention;

. Risks of entering markets in which we have no or limited prior
experience; and

. Loss of key employees of acquired organizations.

12
<PAGE>

We may be unable to successfully integrate any of the technologies,
products, personnel or operations of the businesses we acquire. If we fail to
do so, our financial condition and operating results may be harmed and the
price of our common stock could decline.

Potential "Year 2000" problems could harm our business

Many computer systems are not capable of distinguishing 21st century dates
from 20th century dates. As a result, beginning on January 1, 2000, computer
systems and software used by many companies and organizations in a wide variety
of industries will produce erroneous results or fail unless they have been
modified or upgraded to process date information correctly. Significant
uncertainty exists in the software industry and other industries concerning the
scope and magnitude of problems associated with the century change. Based on
our assessment to date, we believe the current versions of our software
products are "Year 2000 compliant," that is, they are capable of adequately
distinguishing 21st century dates from 20th century dates. However, our
products are generally integrated into enterprise systems involving
sophisticated hardware and complex software products that may not be Year 2000
compliant.

We may face claims based on Year 2000 problems in other companies' products,
or issues arising from the integration of multiple products within an overall
system. We also need to ensure Year 2000 compliance of our own internal
computer systems. We do not expect the total cost of Year 2000 compliance to be
material to our business. However, we and our customers and suppliers may not
identify and remediate all significant Year 2000 problems on a timely basis.
Remediation efforts may involve significant time and expense and unremediated
problems could harm our business.

In addition, we may experience reduced sales of our products as potential
customers reduce their budgets for software due to increased expenditures on
their own Year 2000 compliance efforts. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Year 2000
Compliance."

Risks Related to the Enterprise Compliance Management Market

We may be unable to compete successfully in the rapidly evolving enterprise
compliance management market

The market for enterprise compliance management solutions is rapidly
changing. Today, we primarily compete against the internal information
technology departments of customers and potential customers. We also compete
against desktop publishing tools and service providers who compile submissions
without the use of software. In addition, we compete against software vendors
who provide very specific solutions, such as Document Solutions Group of Xerox
and Interleaf. As the market changes, new businesses and solutions will enter
the market, creating new competition. We may be unable to compete successfully
in this market and, as a result, our business may be harmed. We expect that
competition will increase as other established and emerging companies enter the
enterprise compliance management market and as new products and technologies
are introduced. Increased competition may result in price reductions, lower
gross margins and loss of our market share, any of which could harm our
business. See "Our Business--Competition."

If the relatively new enterprise compliance management market does not develop
and grow as we anticipate, our business will be harmed

The market for enterprise compliance management solutions is still emerging,
and continued growth in demand for and acceptance of compliance management
products in general and our products and services in particular remains
uncertain. Sales of our products and services depend upon the growth of the
enterprise compliance management market. If the enterprise compliance
management market does not grow or grows more slowly than we currently
anticipate, sales of our products and services may suffer. Even if this market
grows, businesses may purchase our

13
<PAGE>

competitors' products or develop their own compliance management solutions. We
believe that many of our potential customers are not fully aware of the
availability or benefits of our enterprise compliance management solution. We
have spent, and will continue to spend, considerable resources to educate
potential customers about our products and our software solutions in general.
However, even with these educational efforts, our products and services may not
achieve market acceptance.

In addition, the anticipated growth of the enterprise compliance management
market may depend on the growth of the Internet. Increased use of the Internet
largely depends upon available Internet security, bandwidth and reliability. If
use of the Internet by businesses does not increase, the market for our
products and services may not grow as we expect and our business may be harmed.

If we are unable to respond to changes in the enterprise compliance management
market, our results of operations may be harmed

Our market is characterized by rapid technological change, frequent new
product introductions, changes in compliance regulation, changes in customer
demands and evolving industry standards. Existing products can become obsolete
and unmarketable as new technologies are introduced, compliance regulations
change and new industry standards emerge. As a result, we cannot estimate the
life cycles of our products. We may need to modify our products when third
parties modify the software that we integrate into our products. To be
successful, we must continue to enhance our current product line and develop
new products that successfully respond to these developments. Our business may
be harmed if we delay release of our products and product enhancements or if
these products and product enhancements fail to achieve market acceptance when
released. In addition, customers may defer or forego purchases of products if
we, our competitors or major hardware, systems or software vendors introduce or
announce new products or product enhancements. Such events could harm our
results of operations.

Risks Related to this Offering

Our stock price may be volatile and you may be unable to resell your shares at
or above the initial public offering price

Prior to this offering, no public market existed for our common stock. The
initial public offering price of our common stock will be determined through
negotiations among us, the selling stockholders and the representatives of the
underwriters. The market price for our shares of common stock is likely to be
volatile and, if you decide to purchase our shares, you may be unable to resell
your shares at or above the initial public offering price due to a number of
factors, including:

. Actual or anticipated variations in quarterly operating results;

. The loss of significant orders;

. Changes in earnings estimates by analysts;

. Announcements of technological innovations or new products by our
competitors;

. General conditions in the software and computer industries; and

. Other events or factors that negatively affect the stock market in
general.

In addition, the stock market has experienced extreme price and volume
fluctuations that affected the market price of many companies in the software
industry and that have been unrelated to these companies' operating
performances. These broad market fluctuations could reduce the market price of
our common stock.

14
<PAGE>

Our officers, directors and affiliates will be able to control matters
requiring stockholder approval and may have interests that differ from yours

Following the closing of this offering, our officers, directors and
affiliated entities together will beneficially own approximately % of the
outstanding shares of our common stock, % if the underwriters' over-allotment
option is exercised in full. As a result, these stockholders will be able to
control all matters requiring stockholder approval and, thereby, our management
and affairs. These stockholders may have interests that differ from yours.
Matters that typically require stockholder approval include:

. Election of directors;

. Approval of a merger or consolidation; and

. Approval of a sale of all or substantially all of our assets.

In addition, this concentration of ownership may delay, deter or prevent
acts that would result in a change of control, which in turn could reduce the
market price of our common stock. See "Principal and Selling Stockholders."

We will have broad discretion as to use of proceeds from this offering

Our primary purpose for this offering is to create a public market for our
common stock. As of the date of this prospectus, we do not plan to use the
proceeds from this offering other than for working capital and general
corporate purposes. We may also use the proceeds in future strategic
acquisitions of, or investments in, businesses that offer products, services
and technologies that further our ability to provide products and services to
businesses or increase our ability to sell our products and services to new
markets. Until the need arises to use the proceeds from this offering, we plan
to invest the net proceeds in investment grade, interest-bearing securities.
See "Use of Proceeds."

Future sales of our common stock may depress our stock price

Sales of a substantial number of shares of common stock in the public market
following this offering could reduce the market price of our common stock. All
the shares sold in this offering will be freely tradable. The remaining shares
of common stock outstanding after this offering will be available for sale in
the public market as follows:

<TABLE>
<CAPTION>
Number of Shares Date of Availability for Sale
- ---------------- -----------------------------
<S> <C>
shares.............. , 1999 (date of this prospectus)
shares.............. , 1999 (90 days after the date of this prospectus)
shares.............. , 1999 (180 days after the date of this prospectus)
shares.............. At various times thereafter upon the expiration of holding periods
</TABLE>

See "Shares Eligible for Future Sale" and "Underwriting."

New investors in our common stock will experience immediate and substantial
dilution

The initial public offering price is substantially higher than the book
value per share of our common stock. Investors purchasing our common stock in
this offering will, therefore, incur immediate dilution of $ in net tangible
book value per share of our common stock. This dilution figure deducts the
estimated underwriting discounts and commissions and estimated offering
expenses payable by ESPS from the initial public offering price. Investors will
incur additional dilution upon the exercise of outstanding stock options. See
"Dilution."

15
<PAGE>

Our undesignated preferred stock may deter potential acquisition bids for our
business, including bids which may be beneficial to our stockholders

Although we do not currently plan to issue any shares of preferred stock,
our board of directors may issue up to 5,000,000 shares of preferred stock in
one or more series. The board of directors can fix the price, rights,
preferences, privileges and restrictions of such preferred stock without any
further vote or action by our stockholders. The issuance of shares of preferred
stock may delay or prevent a change in control transaction without further
action by our stockholders. As a result, the market price of our common stock
and the voting and other rights of the holders of our common stock may be
harmed. The issuance of preferred stock may result in the loss of voting
control to others. See "Description of Capital Stock."

Provisions in our charter documents may deter potential acquisition bids for
our business, including bids which may be beneficial to our stockholders

Provisions in our charter documents specify procedures for nominating
directors and submitting proposals for consideration at stockholder meetings.
These provisions could discourage potential acquisition proposals and could
delay or prevent a change in control transaction. They could also discourage
others from making tender offers for our shares. As a result, these provisions
may prevent the market price of our common stock from reflecting the effects of
actual or rumored takeover attempts. These provisions may also prevent changes
in our management. See "Description of Capital Stock."

Delaware law may deter potential acquisition bids for our business, including
bids which may be beneficial to our stockholders

Delaware law may deter potential bids for our business. We are subject to
the anti-takeover provisions of the Delaware General Corporation Law, which
regulate corporate acquisitions. Delaware law prevents us from engaging in a
"business combination" with any "interested stockholder" for three years
following the date that the stockholder became an interested stockholder. For
purposes of Delaware law, a "business combination" includes a merger or
consolidation involving us and the interested stockholder and the sale of more
than 10% of our assets. In general, Delaware law defines an "interested
stockholder" as any entity or person beneficially owning more than 15% or more
of the outstanding voting stock of a corporation and any entity or person
affiliated with or controlling or controlled by such entity or person. Under
Delaware law, a Delaware corporation may opt out of the anti-takeover
provisions. We do not intend to opt out of these anti-takeover provisions. See
"Description of Capital Stock."

16
<PAGE>

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that address, among
other things, market acceptance of our products and services, expansion into
new targeted industries, product development, sales and marketing strategies,
development and maintenance of strategic alliances, technological advancement,
global expansion, use of proceeds, the costs and timing of our Year 2000
compliance program, projected capital expenditures, liquidity, and availability
of additional funding sources. These statements may be found in the sections of
this prospectus entitled "Prospectus Summary," "Risk Factors," "Use of
Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Our Business" and in this prospectus generally. Our
actual results could differ materially from those anticipated in these forward-
looking statements as a result of various factors, including all the risks
discussed in "Risk Factors" and elsewhere in this prospectus. We undertake no
obligation to update publicly any forward-looking statements for any reason,
even if new information becomes available or other events occur in the future.

17
<PAGE>

USE OF PROCEEDS

We expect to receive approximately $ million in net proceeds from the
sale of the shares of common stock in this offering, assuming that the
initial public offering price is $ per share, the underwriters' discount is
$ and our offering expenses are $ . We expect to receive approximately
$ million if the underwriters' over-allotment option is exercised in full.
We will not receive any proceeds from the sale of common stock by the selling
stockholders.

We intend to use the net proceeds of this offering for working capital and
other general corporate purposes, including increased domestic and
international sales and marketing expenditures, product development
expenditures, expenditures related to the expansion of our professional
services organization and capital expenditures made in the ordinary course of
business. We may also use a portion of the net proceeds to acquire additional
businesses, products and technologies or to establish joint ventures that we
believe will complement our current or future business. However, we have no
specific plans, agreements or commitments, oral or written, to do so. We are
not currently engaged in any negotiations for any acquisition or joint venture.
The amounts that we actually expend for working capital purposes will vary
significantly depending on a number of factors, including future revenue
growth, if any, the amount of cash we generate from operations and the progress
of our product development efforts. As a result, we will retain broad
discretion in the allocation of the net proceeds of this offering. Pending the
uses described above, we will invest the net proceeds in short-term, interest-
bearing, investment-grade securities.

DIVIDEND POLICY

We have never paid cash dividends on our common stock. We currently intend
to retain any future earnings to fund the development and growth of our
business. Therefore, we do not anticipate paying any cash dividends in the
future.

18
<PAGE>

CAPITALIZATION

The following table sets forth our capitalization as of December 31, 1998.
We present capitalization:

. On an actual basis;

. On a pro forma basis to give effect to the automatic conversion of all
outstanding shares of preferred stock into common stock upon the
consummation of the offering; and

. On a pro forma as adjusted basis to give effect to the automatic
conversion of all outstanding shares of preferred stock into common stock
upon the consummation of the offering and to reflect the sale of the
shares in the offering and our receipt of the estimated net proceeds from
the sale of shares of common stock offered in the offering at an
assumed initial public offering price of $ per share, after deducting
underwriting discounts and commissions and estimated offering expenses.

<TABLE>
<CAPTION>
December 31, 1998
(unaudited)
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- ----------- -----------
(in thousands)
<S> <C> <C> <C>
Stockholders' equity:
Preferred stock, $.001 par value, 6,000,000
shares authorized; 6,000,000 shares issued
and outstanding actual; no shares issued
and outstanding pro forma and pro forma as
adjusted................................... $ 6 $ -- $
Common stock, $.001 par value, 11,000,000
shares authorized, 1,989,674 shares issued
and outstanding actual; 7,989,674 shares
issued and outstanding pro forma; and
issued and outstanding pro forma as
adjusted................................... 2 8
Additional paid-in capital.................. 6,550 6,550
Retained earnings........................... 192 192
Deferred stock compensation................. (254) (254)
------ ------ ---
Total stockholders' equity................ 6,496 6,496
------ ------ ---
Total capitalization...................... $6,496 $6,496 $
====== ====== ===
</TABLE>

This table is based on the number of outstanding shares as of December 31,
1998 and does not include the following:

. 375,975 shares available for issuance under our 1995 Stock Incentive
Plan;

. 2,634,351 shares of common stock issuable upon the exercise of
outstanding options at a weighted average exercise price of $0.72 per
share, of which options to purchase 260,636 shares of common stock were
exercisable at a weighted average exercise price of $0.10 per share; and

. 246,886 shares issuable upon the exercise of options granted after
December 31, 1998 at a weighted average exercise price of $10.26 per
share.

Please read the capitalization table together with the sections of this
prospectus entitled "Selected Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements and related notes included in this prospectus.

19
<PAGE>

DILUTION

As of December 31, 1998, our net tangible book value on a pro forma basis
giving effect to the conversion of our preferred stock into common stock upon
consummation of this offering was approximately $6.5 million or $0.81 per share
of common stock. "Net tangible book value" per share represents the amount of
our total tangible assets reduced by the amount of our total liabilities,
divided by the number of shares of common stock outstanding. As of December 31,
1998, our net tangible book value, on a pro forma basis as adjusted for the
sale of shares of common stock by ESPS, based on an assumed initial public
offering price of $ per share and after deducting the underwriting discounts
and commissions and other estimated offering expenses, would have been
approximately $ per share. This represents an immediate increase of $ per
share to existing stockholders and an immediate dilution of $ per share to
new investors. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................. $
Pro forma net tangible book value per share at December 31,
1998.......................................................... $0.81
Pro forma increase per share attributable to new investors.....
Pro forma net tangible book value per share after the offering.
----
Dilution per share to new investors.............................. $
====
</TABLE>

The following summarizes on a pro forma basis as of December 31, 1998, the
differences between the total consideration paid and the average price per
share paid by the existing stockholders and the new investors with respect to
the number of shares of common stock purchased from us based on an assumed
initial public offering price of $ per share.

This table is based on the number of outstanding shares as of December 31,
1998 and does not include the following:

. 375,975 shares available for issuance under our 1995 Stock Incentive
Plan;

. 246,886 shares issuable upon the exercise of options granted after
December 31, 1998 at a weighted average exercise price of $10.26 per
share.

<TABLE>
<CAPTION>
Total
Shares Purchased Consideration Average
----------------- ------------------ Price
Number Percent Amount Percent Per Share
--------- ------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders............ 7,989,674 % $6,172,000 % $0.77
New investors....................
--------- --- ---------- ---
Total.......................... % %
========= === ========== ===
</TABLE>

20
<PAGE>

SELECTED FINANCIAL DATA
(in thousands, except per share data)

The tables that follow present portions of our Financial Statements and are
not complete. You should read the following selected financial data in
conjunction with our Financial Statements and related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus. We derived the statement of operations
data for the fiscal years ended March 31, 1996, 1997 and 1998, and the balance
sheet data as of March 31, 1997 and 1998 from our Financial Statements that
have been audited by Ernst and Young LLP, independent auditors, which are
included elsewhere in this prospectus. We derived the statement of operations
data for the period from inception, April 24, 1994, to March 31, 1995 and the
balance sheet data as of March 31, 1995 and 1996 from audited Financial
Statements, that are not included in this prospectus. We derived the statement
of operations data for the nine months ended December 31, 1997 and 1998 and the
balance sheet as of December 31, 1998 from unaudited Financial Statements and
they include all adjustments, consisting of normal recurring accruals, that we
consider necessary for a fair presentation of our financial position and
operating results for that period. Operating results for the nine months ended
December 31, 1997 and 1998 are not necessarily indicative of the results that
may be expected for the entire year. Pro forma balance sheet data reflects the
automatic conversion of all outstanding shares of preferred stock into common
stock upon consummation of this offering. You should not rely on our historical
results as an indicator of our future results. See Note 11 of Notes to
Financial Statements for an explanation of the method used to calculate pro
forma basic and diluted earnings per share.

<TABLE>
<CAPTION>
Nine Months
Period from Fiscal Years Ended Ended
April 24, 1994 March 31, December 31,
(inception) ----------------------- ----------------
to March 31, 1995 1996 1997 1998 1997 1998
----------------- ------ ------- ------ ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues:
Software licenses..... $ 100 $ 721 $ 648 $6,814 $ 4,013 $ 9,461
Services and
maintenance.......... 2 32 420 1,832 1,081 2,878
----- ------ ------- ------ ------- -------
Total revenues...... 102 753 1,068 8,646 5,094 12,339
Cost of revenues:
Software licenses..... -- -- 68 258 142 272
Services and
maintenance.......... -- 72 506 1,589 1,021 2,021
----- ------ ------- ------ ------- -------
Total cost of
revenues........... -- 72 574 1,847 1,163 2,293
----- ------ ------- ------ ------- -------
Gross profit.......... 102 681 494 6,799 3,931 10,046
Operating expenses:
Research and
development.......... 208 725 1,407 1,978 1,393 2,778
Sales and marketing... 32 95 714 1,283 774 3,026
General and
administrative....... 302 633 1,147 1,229 794 2,214
----- ------ ------- ------ ------- -------
Total operating
expenses........... 542 1,453 3,268 4,490 2,961 8,018
----- ------ ------- ------ ------- -------
Income (loss) from
operations........... (440) (772) (2,774) 2,309 970 2,028
Interest, net......... 5 18 (39) 52 38 127
----- ------ ------- ------ ------- -------
Income (loss) before
income taxes......... (435) (754) (2,813) 2,361 1,008 2,155
Income tax provision
(benefit)............ -- -- -- (514) (1,025) 836
----- ------ ------- ------ ------- -------
Net income (loss)..... $(435) $ (754) $(2,813) $2,875 $ 2,033 $ 1,319
===== ====== ======= ====== ======= =======
</TABLE>

21
<PAGE>

<TABLE>
<CAPTION>
Nine Months
Period from Ended
April 24, 1994 Fiscal Years Ended March 31, December 31,
(inception) ------------------------------- ------------
to March 31, 1995 1996 1997 1998 1997 1998
----------------- --------- --------- --------- ----- ------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>

Earnings (loss) per
share:
Basic................. $ (0.44) $(1.11) $(5.09) $ 5.53 $5.07 $ 0.80
Diluted............... (0.44) (1.11) (5.09) 0.37 0.28 0.13
Shares used in
computation of earnings
(loss) per share:
Basic................. 1,000 682 553 520 401 1,658
Diluted............... 1,000 682 553 7,859 7,333 9,949
Pro forma earnings per
share:
Basic................. $ 0.44 $ 0.17
Diluted............... 0.37 0.13
Shares used in
computation of pro
forma earnings per
share:
Basic................. 6,520 7,658
Diluted............... 7,859 9,949
</TABLE>

<TABLE>
<CAPTION>
March 31, December 31, 1998
-------------------------- -----------------
1995 1996 1997 1998 Actual Pro Forma
---- ------ ------ ------- ------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........ $435 $ 871 $2,311 $ 4,558 $ 3,142 $ 3,142
Working capital.................. 409 429 1,608 4,119 4,865 4,865
Total assets..................... 602 1,262 3,211 10,017 10,297 10,297
Preferred stock.................. 1 2 6 6 6 --
Stockholders' equity............. 547 786 1,962 4,896 6,496 6,496
</TABLE>

22
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section of this prospectus includes a number of forward-looking
statements that reflect our current views with respect to future events and
financial performance. We use words such as "anticipate," "believe," "expect,"
"future," and similar expressions to identify forward-looking statements. You
should not unduly rely on these forward-looking statements, which apply only as
of the date of this prospectus. These forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from historical results or our predictions. For a description of
these risks, see "Risk Factors."

Overview

Our History of Operations

ESPS was founded in April 1994. In our first fiscal year of operation, ended
March 31, 1995, we focused primarily on research and development activities.
From early in the fiscal year ended March 31, 1996 through the fiscal year
ended March 31, 1997, we began to recruit personnel, purchase operating assets,
market our products, build a direct sales force and expand our services
business. We commercially released CoreDossier in November 1995. Our revenues
totaled $753,000 in the fiscal year ended March 31, 1996 and $1.1 million in
the fiscal year ended March 31, 1997. We generated net losses of $754,000 in
the fiscal year ended March 31, 1996 and $2.8 million in the fiscal year ended
March 31, 1997.

In the fiscal year ended March 31, 1997, we substantially expanded our
operations to capitalize on our opportunity within the rapidly emerging
enterprise compliance management market. We decided to accelerate our
investments in marketing, sales, professional services, product development and
our general and administrative infrastructure. As a result, from March 31, 1996
to February 28, 1999, we have:

. Added more than 110 employees;

. Opened two domestic field sales offices;

. Entered the European market by opening a direct sales office in the
United Kingdom; and

. Released three major upgrades to CoreDossier and two industry-specific
modules.

We believe these investments have been critical to our growth to date. Our
revenues were $8.6 million for the fiscal year ended March 31, 1998,
representing an increase of 710% from the fiscal year ended March 31, 1997.
During the nine months ended December 31, 1998, our revenues were $12.3
million, representing an increase of 142% compared to the period ended December
31, 1997. Although these investments have significantly increased our operating
expenses, we have seen our income from operations increase to $2.0 million for
the nine months ended December 31, 1998, an increase of 109% from the $970,000
reported for the same period of 1997. We have been profitable for the last five
consecutive quarters and, as of December 31, 1998, had retained earnings of
$192,000. We anticipate that our operating expenses will increase substantially
for the foreseeable future as we continue to expand our product development,
sales and marketing, professional services and administrative staff.

23
<PAGE>

Source of Revenues and Revenue Recognition Policy

We generate revenues through software licenses and services and maintenance.
Software licenses revenues are generated from licensing the rights to use our
products. Services and maintenance revenues are generated from sales of
customer support services contracts and consulting and training services
performed for customers that license our products.

Revenues from the sale of software licenses are recognized upon shipment of
software when persuasive evidence of an agreement exists, collection is
probable, the fee is fixed or determinable, and vendor-specific objective
evidence exists to allocate the total fee to elements of the arrangement.
Vendor-specific objective evidence is typically based on the price charged when
an element is sold separately, or, in the case of an element not yet sold
separately, the price established by authorized management, if it is probable
that the price, once established by authorized management, will not change
before market introduction. Elements included in multiple element arrangements
could consist of software products, upgrades, enhancements, customer support
services, or consulting services. If an acceptance period is required, revenues
are recognized upon the earlier of customer acceptance or the expiration of the
acceptance period.

Revenues from maintenance are recognized ratably over the term of the
customer support contract, typically one year. Consulting revenues are
primarily related to implementation services performed on a time-and-materials
basis under separate service arrangements related to the installation of our
software products. Revenues from consulting and training services are
recognized as services are performed. If a transaction includes both license
and service elements, license fee revenues are recognized on shipment of the
software, provided services do not include significant customization or
modification of the base product, and the payment terms for licenses are not
subject to acceptance criteria.

Our revenue recognition policy is in accordance with American Institute of
Certified Public Accountants' Statement of Position 97-2, "Software Revenue
Recognition."

Our Results of Operations

We believe that period-to-period comparisons of our operating results are
not meaningful. You should not rely on them to predict our future performance.
You should consider our prospects in light of the risks, expenses and
difficulties frequently encountered by companies in new and rapidly evolving
markets. However, we may not be able to successfully address such risks and
difficulties. In addition, although we have experienced significant revenue
growth recently, this revenue growth may not continue, and we may not maintain
profitability in the future. Our future operating results will depend on many
factors, including:

. Demand for our products and services;

. Product and price competition;

. Variability in the mix of our software licenses revenues and services and
maintenance revenues;

. Variability in the mix of services that we perform and those performed by
third-party service providers;

. Success in expanding our direct sales force and professional services
organization and implementing indirect distribution channels;

. Our ability to develop and market new and enhanced products on a timely
basis;

. Timing of our new product introductions and product enhancements or those
of our competitors;

. Continued purchases by our existing customers, including additional
software licenses and services and maintenance contracts;

24
<PAGE>

. International sales;

. The loss of any key employees and timing of our new hires;

. Significant downturns in the software industry, particularly when general
economic conditions decline and spending on management information
systems decreases;

. The fiscal or quarterly budget cycles of our customers;

. The efforts of our direct sales force to meet or exceed quarterly or
fiscal year-end sales quotas; and

. The effects of Year 2000 issues on customers' purchasing decisions.

The following table presents certain statement of operations data for the
periods indicated as a percentage of total revenues:

<TABLE>
<CAPTION>
Percentage of Revenues
---------------------------------------
Nine Months
Fiscal Years Ended
Ended March 31, December 31,
----------------------- --------------
1996 1997 1998 1997 1998
------ ------ ----- ------ ------
(unaudited)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Software licenses.................. 95.8% 60.7% 78.8% 78.8% 76.7%
Services and maintenance........... 4.2 39.3 21.2 21.2 23.3
------ ------ ----- ------ ------
Total revenues................... 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Software licenses.................. -- 6.4 3.0 2.8 2.2
Services and maintenance........... 9.6 47.4 18.4 20.0 16.4
------ ------ ----- ------ ------
Total cost of revenues........... 9.6 53.8 21.4 22.8 18.6
------ ------ ----- ------ ------
Gross profit......................... 90.4 46.2 78.6 77.2 81.4
Operating expenses:
Research and development........... 96.3 131.7 22.9 27.3 22.5
Sales and marketing................ 12.6 66.9 14.8 15.2 24.5
General and administrative......... 84.1 107.4 14.2 15.6 17.9
------ ------ ----- ------ ------
Total operating expenses......... 193.0 306.0 51.9 58.1 64.9
------ ------ ----- ------ ------
Income (loss) from operations........ (102.6) (259.8) 26.7 19.1 16.5
Interest, net........................ 2.4 (3.7) 0.6 0.7 1.0
------ ------ ----- ------ ------
Income (loss) before income taxes.... (100.2) (263.5) 27.3 19.8 17.5
Income tax provision (benefit)....... -- -- (6.0) (20.1) 6.8
------ ------ ----- ------ ------
Net income (loss).................... (100.2)% (263.5)% 33.3% 39.9% 10.7%
====== ====== ===== ====== ======
</TABLE>

Comparison of Nine Months Ended December 31, 1997 to Nine Months Ended December
31, 1998

Revenues

Total revenues consist of software licenses revenues and services and
maintenance revenues. Services and maintenance revenues include professional
consulting, training and customer support services. Total revenues increased
142% from $5.1 million for the nine months ended December 31, 1997 to $12.3
million for the nine months ended December 31, 1998. For the nine months ended
December 31, 1997, one customer accounted for 19% of revenues. For the nine
months ended December 31, 1998, one customer accounted for 10% of revenues.

25
<PAGE>

Software licenses revenues increased 136% from $4.0 million for the nine
months ended December 31, 1997 to $9.5 million for the nine months ended
December 31, 1998. We attribute this increase to both increased market
acceptance of CoreDossier and $1.1 million of license fees from Adobe Systems,
Incorporated. In November 1997, we first delivered release 3.0 of CoreDossier.
In June 1998, we first delivered release 3.1 of CoreDossier and the CDER
Compiler Module specific to the pharmaceutical industry. In October 1998, we
first delivered the CADDY Compiler Module specific to the chemical industry.

Services and maintenance revenues increased 166% from $1.1 million for the
nine months ended December 31, 1997 to $2.9 million for the nine months ended
December 31, 1998. This increase resulted primarily from an increase in
customer support revenues as our customer base continued to grow and, to a
lesser extent, increases in consulting and training services. We expect the
proportion of services and maintenance revenues to total revenues to fluctuate
in the future, depending in part on our customers' direct use of third-party
consulting and implementation service providers and the ongoing renewals of
customer support contracts.

Revenues outside of the United States were $79,000 for the nine months ended
December 31, 1997, and increased to $2.3 million for the nine months ended
December 31, 1998. This increase resulted primarily from the sale of our
products and services to existing customers with operations outside the United
States.

We do not believe that we can sustain the historical percentage growth rates
of software licenses and services and maintenance revenues.

Cost of Revenues

Cost of software licenses revenues. Cost of software licenses revenues
consists primarily of royalties for third-party technology incorporated into
our CoreDossier products. Cost of software licenses revenues increased 92% from
$142,000 for the nine months ended December 31, 1997 to $272,000 for the nine
months ended December 31, 1998. This increase resulted primarily from an
increase in the sale of our CoreDossier products. Cost of software licenses
revenues as a percentage of software licenses revenues was 4% for the nine
months ended December 31, 1997 and 3% for the nine months ended December 31,
1998.

Cost of services and maintenance revenues. Cost of services and maintenance
revenues consists primarily of personnel costs related to professional services
and customer support.

Cost of services and maintenance revenues increased 98% from $1.0 million
for the nine months ended December 31, 1997 to $2.0 million for the nine months
ended December 31, 1998. This increase resulted primarily from the hiring and
training of professional services and customer support personnel to support our
increased customer base. Cost of services and maintenance revenues as a
percentage of services and maintenance revenues was 94% for the nine months
ended December 31, 1997 and 70% for the nine months ended December 31, 1998.
The cost of services and maintenance revenues as a percentage of services and
maintenance revenues may vary among periods because of the mix of services we
provide which have different cost structures. The decrease in cost of services
and maintenance revenues as a percentage of services and maintenance revenues
resulted primarily from increased customer support revenues, which have higher
margins than the other services.

Operating Expenses

Research and development. Research and development expenses consist
primarily of salaries, benefits and equipment for:

. Software developers;

26
<PAGE>

. Quality assurance personnel; and

. Program managers and technical writers.

Research and development expenses increased 99% from $1.4 million for the
nine months ended December 31, 1997 to $2.8 million for the nine months ended
December 31, 1998. This increase resulted from an increase in the number of
software developers and quality assurance personnel to support our product
development and testing activities. Research and development expenses
represented 27% of our total revenues for the nine months ended December 31,
1997 and 23% for the nine months ended December 31, 1998. The decrease in
research and development expenses as a percentage of total revenues primarily
reflects the more rapid growth of our revenues compared to the investment in
our research and development activities during this period. We believe that we
need to significantly increase our research and development investment to
expand our market position and continue to expand our product line and
penetrate other targeted industries. Accordingly, we anticipate that research
and development expenses will increase in future periods.

Sales and marketing. Sales and marketing expenses consist primarily of:

. Salaries, commissions and bonuses earned by sales and marketing
personnel;

. Travel and promotional expenses; and

. Communication costs related to direct sales efforts.

Sales and marketing expenses increased 291% from $774,000 for the nine
months ended December 31, 1997 to $3.0 million for the nine months ended
December 31, 1998. This increase resulted primarily from our increased
investment in sales and marketing infrastructure, both domestically and
internationally. The investments included significant personnel-related
expenses, recruiting fees, travel expenses, and related facility and equipment
costs. In addition, we increased marketing activities, including trade shows,
public relations, direct mail campaigns and other promotional activities. Sales
and marketing expenses represented 15% of our total revenues for the nine
months ended December 31, 1997 and 25% for the nine months ended December 31,
1998. We believe that we will need to significantly increase our sales and
marketing expenses to expand our market position, and further increase our
penetration and acceptance of our products in other targeted industries.
Accordingly, we anticipate that sales and marketing expenses will increase in
future periods.

General and administrative. General and administrative expenses consist
primarily of salaries, benefits and related costs for executive, finance,
administrative, and information services personnel. These expenses also include
fees for legal, accounting, and consulting services.

General and administrative expenses increased 179% from $794,000 for the
nine months ended December 31, 1997 to $2.2 million for the nine months ended
December 31, 1998. This increase resulted primarily from the addition of
executive, finance and administrative personnel to support the growth of our
business and the amortization of deferred stock compensation expense as
described below. General and administrative expenses represented 16% of our
total revenues for the nine months ended December 31, 1997 and 18% for the nine
months ended December 31, 1998. We believe our general and administrative
expenses will continue to increase as we expand our administrative staff,
domestically and internationally, and incur expenses associated with becoming a
public company. We expect these expenses to include annual and other public
reporting costs, directors' and officers' liability insurance, investor
relations programs and legal, accounting and consulting fees.

Deferred stock compensation expense increased from $0 for the nine months
ended December 31, 1997 to approximately $168,000 for the nine months ended
December 31, 1998. Total deferred stock compensation at December 31, 1998 of
$254,000 will be amortized over the vesting periods of the options.

27
<PAGE>

Interest, net. Interest, net is derived from interest income earned on our
cash and cash equivalents. Interest income increased 234% from $38,000 for the
nine months ended December 31, 1997 to $127,000 for the nine months ended
December 31, 1998. This increase resulted from an increase in cash and cash
equivalents.

Income taxes. Income taxes increased from a benefit of $1.0 million for the
nine months ended December 31, 1997 to a provision of $836,000 for the nine
months ended December 31, 1998. This increase resulted primarily from the
reversal of a valuation allowance for the nine months ended December 31, 1997
for income tax benefits related to our net operating losses in prior periods.
The income tax provision for the nine months ended December 31, 1998 yielded an
effective rate of 39%.

Comparison of Fiscal Years Ended March 31, 1996, March 31, 1997 and March 31,
1998

Revenues

Total revenues increased 42% from $753,000 for the fiscal year ended March
31, 1996 to $1.1 million for the fiscal year ended March 31, 1997. Total
revenues for the fiscal year ended March 31, 1998 increased 710% to $8.6
million. During fiscal 1996, one customer accounted for 86% of total revenues.
During fiscal 1997, three customers accounted for 100% of total revenues.
During fiscal 1998, three customers accounted for 46% of total revenues.

Software licenses revenues decreased 10% from $721,000 for the fiscal year
ended March 31, 1996 to $648,000 for the fiscal year ended March 31, 1997.
Software licenses revenues increased 952% to $6.8 million for the fiscal year
ended March 31, 1998. The decrease in software licenses revenues from fiscal
1996 to fiscal 1997 resulted primarily from a decline in the average
transaction size. The increase in software licenses revenues from fiscal 1997
to fiscal 1998 primarily resulted from increased market acceptance of
CoreDossier.

Services and maintenance revenues increased from $32,000 for the fiscal year
ended March 31, 1996 to $420,000 for the fiscal year ended March 31, 1997, and
increased 336% to $1.8 million for the fiscal year ended March 31, 1998. The
increase in services and maintenance revenues from fiscal 1996 to fiscal 1997
resulted primarily from the increase in customer support services associated
with the overall growth of our installed base of customers. The increase in
services and maintenance revenues from fiscal 1997 to fiscal 1998 resulted
primarily from the increase in consulting, customer support and training
services associated with increased sales of our software applications and
overall growth of our installed base of customers.

Revenues outside of the United States were insignificant for fiscal 1996 and
fiscal 1997. Revenues outside of the United States were $1.2 million for fiscal
1998.

Cost of Revenues

Cost of software licenses revenues. Cost of software licenses revenues
increased from $0 for the fiscal year ended March 31, 1996 to $68,000 for the
fiscal year ended March 31, 1997. Cost of software licenses revenues increased
279% to $258,000 for the fiscal year ended March 31, 1998. Cost of software
licenses revenues as a percentage of software licenses revenues was 11% for
fiscal 1997 and 4% for fiscal 1998. The increase in cost of software licenses
revenues from fiscal 1996 to fiscal 1998 resulted primarily from an increase in
the sale of CoreDossier products.

Cost of services and maintenance revenues. Cost of services and maintenance
revenues were $72,000 for the fiscal year ended March 31, 1996 and increased
603% to $506,000 for the fiscal year ended March 31, 1997. Cost of services and
maintenance revenues increased 214% to $1.6 million for the fiscal year ended
March 31, 1998. Cost of services and maintenance revenues as a percentage of
services and maintenance revenues was 225% for fiscal 1996, 121% for fiscal
1997 and 87% for fiscal

28
<PAGE>

1998. The increase in cost of services and maintenance revenues for fiscal 1996
and fiscal 1997 resulted primarily from the hiring and training of customer
support personnel. The increase from fiscal 1997 to fiscal 1998 resulted from
the hiring and training of professional services and customer support personnel
to support our growing customer base. The decrease in cost of services and
maintenance revenues as a percentage of services and maintenance revenues from
fiscal 1996 to fiscal 1998 primarily reflected increased revenues both in
maintenance and consulting services.

Operating Expenses

Research and development. Research and development expenses increased 94%
from $725,000 for the fiscal year ended March 31, 1996 to $1.4 million for the
fiscal year ended March 31, 1997 and increased 41% to $2.0 million for the
fiscal year ended March 31, 1998. The increases in research and development
expenses from fiscal 1996 to fiscal 1998 related primarily to the increase in
the number of software developers and quality assurance personnel needed to
support our product development and testing activities. Research and
development costs represented 96% of our total revenues for fiscal 1996, 132%
for fiscal 1997 and 23% for fiscal 1998. The increase in research and
development expenses as a percentage of total revenues from fiscal 1996 to
fiscal 1997 resulted primarily from increased investment in research and
development infrastructure. The decrease in research and development expenses
as a percentage of total revenues from fiscal 1997 to fiscal 1998 primarily
reflect the growth of our revenues in this period, which increased from $1.1
million for fiscal 1997 to $8.6 million for fiscal 1998.

Sales and marketing. Sales and marketing expenses increased 652% from
$95,000 for the fiscal year ended March 31, 1996 to $714,000 for the fiscal
year ended March 31, 1997 and increased 80% to $1.3 million for the fiscal year
ended March 31, 1998. The increases in sales and marketing expenses from fiscal
1996 to fiscal 1998 resulted primarily from our investment in sales and
marketing infrastructure, which included significant personnel-related
expenses, recruiting fees, travel expenses, and related facility and equipment
costs, as well as increased marketing activities, including trade shows, public
relations, direct mail campaigns and other promotional expenses. Sales and
marketing expenses represented 13% of our total revenues for fiscal 1996, 67%
for fiscal 1997 and 15% for fiscal 1998. The increase in sales and marketing
expenses as a percentage of total revenues from fiscal 1996 to fiscal 1997
resulted primarily from increased investment in sales and marketing
infrastructure. The decrease in sales and marketing expenses as a percentage of
total revenues from fiscal 1997 to fiscal 1998, reflects the growth of our
revenues in this period from $1.1 million for fiscal 1997 to $8.6 million for
fiscal 1998.

General and administrative. General and administrative expenses increased
81% from $633,000 for the fiscal year ended March 31, 1996 to $1.1 million for
the fiscal year ended March 31, 1997 and increased 7% to $1.2 million for the
fiscal year ended March 31, 1998. The increase in general and administrative
expenses for fiscal 1996 to fiscal 1997 resulted primarily from the addition of
executive, finance and administrative personnel to support the growth of our
business during these periods. The increase in general and administrative
expenses for fiscal 1997 to fiscal 1998 resulted primarily for increased
compensation and consulting expenses. General and administrative costs
represented 84% of our total revenues for fiscal 1996, 107% for fiscal 1997 and
14% for fiscal 1998.

Interest, net. Interest, net decreased from $18,000 of interest income for
the fiscal year ended March 31, 1996 to $39,000 of interest expense for the
fiscal year ended March 31, 1997. This decrease resulted from interest expense
incurred in connection with bridge loans. Interest, net increased from $39,000
of interest expense to $52,000 of interest income for the fiscal year ended
March 31, 1998. The increase in fiscal 1998 resulted primarily from increases
in interest income resulting from higher average cash and cash equivalents.

29
<PAGE>

Income taxes. We had no provision for income taxes for the fiscal years
ended March 31, 1996 and March 31, 1997. As a result of the reversal of a
valuation allowance for income tax benefits related to the use of our net
operating losses in prior years, we realized a tax benefit of $514,000 in the
fiscal year ended March 31, 1998. See Note 6 of Notes to Financial Statements.

Quarterly Results of Operations

The following table presents our unaudited quarterly results of operations
for the last eight fiscal quarters ended December 31, 1998. You should read the
following table in conjunction with our Financial Statements and related notes
thereto included elsewhere in this prospectus. We have prepared this unaudited
information on the same basis as the audited Financial Statements. This table
includes all adjustments, consisting only of normal recurring adjustments, that
we consider necessary for a fair presentation of our financial position and
operating results for the quarters presented. You should not draw any
conclusions about our future results from the results of operations for any
quarter.

<TABLE>
<CAPTION>
Quarters Ended
--------------------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1997 1997 1997 1997 1998 1998 1998 1998
-------- -------- --------- -------- -------- -------- --------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues:
Software licenses...... $ 303 $ 900 $ 909 $2,205 $2,800 $2,040 $3,684 $3,737
Services and
maintenance........... 188 286 296 499 751 915 865 1,098
----- ------- ------ ------ ------ ------ ------ ------
Total revenues........ 491 1,186 1,205 2,704 3,551 2,955 4,549 4,835
Cost of revenues:
Software licenses...... 26 28 44 70 116 70 92 110
Services and
maintenance........... 203 211 303 507 568 587 553 881
----- ------- ------ ------ ------ ------ ------ ------
Total cost of
revenues............. 229 239 347 577 684 657 645 991
----- ------- ------ ------ ------ ------ ------ ------
Gross profit........... 262 947 858 2,127 2,867 2,298 3,904 3,844
Operating expenses:
Research and
development........... 392 393 446 555 584 701 894 1,183
Sales and marketing.... 221 187 203 384 509 587 963 1,476
General and
administrative........ 268 220 275 299 435 549 686 979
----- ------- ------ ------ ------ ------ ------ ------
Total operating
expenses............. 881 800 924 1,238 1,528 1,837 2,543 3,638
----- ------- ------ ------ ------ ------ ------ ------
Income (loss) from
operations............ (619) 147 (66) 889 1,339 461 1,361 206
Interest, net.......... (15) 4 24 11 14 50 37 40
----- ------- ------ ------ ------ ------ ------ ------
Income (loss) before
income taxes.......... (634) 151 (42) 900 1,353 511 1,398 246
Income tax provision
(benefit)............. -- (1,349) (16) 340 511 198 543 95
----- ------- ------ ------ ------ ------ ------ ------
Net income (loss)...... $(634) $ 1,500 $ (26) $ 560 $ 842 $ 313 $ 855 $ 151
===== ======= ====== ====== ====== ====== ====== ======
</TABLE>

30
<PAGE>

The following table sets forth unaudited quarterly results of operations as
a percentage of revenues:
<TABLE>
<CAPTION>
Quarters Ended
--------------------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1997 1997 1997 1997 1998 1998 1998 1998
-------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues:
Software licenses...... 61.7% 75.9% 75.4% 81.5% 78.9% 69.0% 81.0% 77.3%
Services and
maintenance........... 38.3 24.1 24.6 18.5 21.1 31.0 19.0 22.7
------- ------ ----- ----- ----- ----- ----- -----
Total revenues......... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Software licenses...... 5.3 2.4 3.7 2.6 3.3 2.4 2.0 2.3
Services and
maintenance........... 41.3 17.8 25.1 18.8 16.0 19.9 12.2 18.2
------- ------ ----- ----- ----- ----- ----- -----
Total cost of revenue.. 46.6 20.2 28.8 21.4 19.3 22.3 14.2 20.5
------- ------ ----- ----- ----- ----- ----- -----
Gross profit............ 53.4 79.8 71.2 78.6 80.7 77.7 85.8 79.5
Operating expenses:
Research and
development........... 79.8 33.1 37.0 20.5 16.4 23.7 19.7 24.5
Sales and marketing.... 45.0 15.8 16.8 14.2 14.3 19.9 21.2 30.5
General and
administrative........ 54.6 18.5 22.8 11.1 12.3 18.6 15.1 20.2
------- ------ ----- ----- ----- ----- ----- -----
Total operating
expenses.............. 179.4 67.4 76.6 45.8 43.0 62.2 56.0 75.2
------- ------ ----- ----- ----- ----- ----- -----
Income (loss) from
operations............. (126.0) 12.4 (5.4) 32.8 37.7 15.5 29.8 4.3
Interest, net........... (3.1) 0.3 2.0 0.4 0.4 1.7 0.8 0.8
------- ------ ----- ----- ----- ----- ----- -----
Income (loss) before
income taxes........... (129.1) 12.7 (3.4) 33.2 38.1 17.2 30.6 5.1
Income tax provision
(benefit).............. -- (113.7) (1.3) 12.6 14.4 6.7 11.9 2.0
------- ------ ----- ----- ----- ----- ----- -----
Net (loss) income....... (129.1)% 126.4% (2.1)% 20.6% 23.7% 10.5% 18.7% 3.1%
======= ====== ===== ===== ===== ===== ===== =====
</TABLE>

The discussions relating to the fiscal year comparisons of the results of
operations and the comparisons of the results of operations for the nine month
periods ended December 31, 1997 and 1998 generally apply to the comparison of
results of operations for the eight quarters ended December 31, 1998.

Our quarterly operating results have varied widely in the past, and we
expect that they will continue to fluctuate in the future as a result of a
number of factors, many of which are outside our control. Although historically
we have not experienced any significant delays or defects, new products or
upgrades may not be released according to schedule, or may contain defects when
released. Either of these situations could result in adverse publicity, loss of
revenues, delay in market acceptance or claims by customers brought against us,
any of which could harm our business. In addition, the timing of individual
sales has been difficult for us to predict, and large individual sales have, in
some cases, occurred in quarters subsequent to those in which we originally
anticipated they would occur. The loss or deferral of one or more significant
sales could harm our quarterly operating results.

We experienced, and expect to continue to experience, significant
seasonality with respect to software licenses revenues. We believe that these
fluctuations are primarily caused by the efforts of our direct sales force to
meet or exceed fiscal year-end sales quotas as well as customer buying patterns
and budgetary cycles. In recent years, there have been greater sales of our
products in our fourth fiscal quarter than in each of the first three quarters
of our fiscal year. For example, in the fiscal year ended March 31, 1998, 41%
of total revenues were recognized in the fourth quarter, compared to 31% in the
third quarter, 14% in the second quarter, and 14% in the first quarter. In
addition, we subsequently experienced lower total revenues in the first quarter
of fiscal 1999. We expect that seasonal trends will continue for the
foreseeable future.

Liquidity and Capital Resources

Since our inception, we have primarily financed our operations through
private placements of our preferred stock and cash from operations. Through
December 31, 1998, proceeds from private placements of preferred stock totaled
$6.0 million.

31
<PAGE>

As of December 31, 1998, we had cash and cash equivalents of $3.1 million, a
decrease of $1.4 million from cash and cash equivalents held at March 31, 1998.
Our working capital at December 31, 1998 was $4.9 million, compared to $4.1
million at March 31, 1998.

Our operating activities resulted in net cash outflow of $222,000 for the
fiscal year ended March 31, 1996, $2.3 million for the fiscal year ended March
31, 1997 and $433,000 for the nine months ended December 31, 1998. We had $2.7
million of net cash inflows for the fiscal year ended March 31, 1998. The
sources of cash in that fiscal year were primarily income from operations,
increases in accounts payable and accrued liabilities and increases in deferred
revenues, partially offset by increases in accounts receivable, and other
current assets. The operating cash outflows for fiscal 1996 and fiscal 1997
resulted from significant investments in sales, marketing and product
development, which led to operating losses. The cash outflows from operating
losses, increases in accounts receivable, and other current assets were
partially offset by increases in accounts payable and accrued liabilities and
deferred revenues. The operating cash outflows for the nine months ended
December 31, 1998 resulted primarily from increases in accounts receivable and
decreases in deferred revenues partially offset by increases in accounts
payable and accrued expenses.

Investing activities used cash of $335,000 for the fiscal year ended March
31, 1996, $224,000 for the fiscal year ended March 31, 1997, $547,000 for the
fiscal year ended March 31, 1998 and $1.1 million for the nine months ended
December 31, 1998, for the purchase of property and equipment.

Financing activities provided cash of $992,000 for the fiscal year ended
March 31, 1996 and $4.0 million for the fiscal year ended March 31, 1997. The
source of cash from financing activities for the fiscal years ended March 31,
1996 and 1997 was through the issuance of preferred stock and financing from
bridge loans. Financing activities provided cash of $59,000 for the fiscal year
ended March 31, 1998 and $113,000 for the nine months ended December 31, 1998,
which represents proceeds from the exercise of stock options.

We anticipate that we will continue to experience significant growth in our
operating expenses. Operating expenses will consume a material amount of our
cash resources, including a portion of the net proceeds of this offering. We
believe that the net proceeds of this offering, together with our existing cash
and cash equivalents, will be sufficient to meet our anticipated cash needs for
working capital and capital expenditures for at least the next twelve months.
Thereafter, we may require additional funds to support our working capital
requirements or for other purposes and may seek to raise such additional funds
through public or private equity financing, bank debt financing or from other
sources. We may not be able to obtain adequate or favorable financing at that
time. Any equity financing may dilute your ownership interest in ESPS.

Year 2000 Compliance

Year 2000 Issue

Many currently installed computer systems are not capable of distinguishing
21st century dates from 20th century dates. As a result, beginning on January
1, 2000, computer systems and software used by many companies and organizations
in a wide variety of industries including technology, transportation,
utilities, finance and telecommunications will produce erroneous results or
fail unless they have been modified or upgraded to process date information
correctly. Significant uncertainty exists in the software industry and other
industries concerning the scope and magnitude of problems associated with the
century change. We recognize the need to ensure that our operations will not be
harmed by Year 2000 software failures. We are assessing the potential overall
impact of the impending century change on our business, financial condition and
operating results.

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Software Products

Based on our assessment to date, we believe the current versions of our
software products are "Year 2000 compliant"--that is, they are capable of
adequately distinguishing 21st century dates from 20th century dates. We have
substantially completed the testing of the current version of our software. We
are currently assessing the need to test the older versions of our software
which may still be used on a limited basis. This assessment is expected to be
complete by late 1999.

Internal Information Systems

We have preliminarily assessed our internal management information and other
systems to identify any products, services or systems that are not Year 2000
compliant and to plan for corrective action. To date, we have not encountered
any material Year 2000 problems with our computer systems or any other
equipment that might be subject to such problems. We presently believe that
with modifications to existing software and conversions to new software, the
Year 2000 problem will not pose a significant operational problem for our
computer systems. We expect to complete our testing of the internal information
systems by late 1999.

We plan to verify compliance by external vendors that supply us with
software and information systems and to communicate with significant suppliers
to determine the readiness of third parties' remediation of their own Year 2000
issues. As part of our assessment, we are evaluating the level of validation we
will require of third parties to ensure their Year 2000 readiness. Our
verification should be complete by late 1999. If third parties cannot provide
us with products, services or systems that meet the Year 2000 requirements on a
timely basis, our business, financial condition and results of operations could
be harmed.

Our products are generally integrated into enterprise systems involving
sophisticated hardware and complex software products that may not be Year 2000
compliant. We may face claims based on Year 2000 problems in other companies'
products, or issues arising from the integration of multiple products within an
overall system. Although we have not been a party to any litigation or
arbitration proceeding to date involving our products or services related to
Year 2000 compliance issues, we may be required to defend our products or
services in such proceedings, or to negotiate resolutions of claims based on
Year 2000 issues. The costs of defending and resolving Year 2000-related
disputes, regardless of the merits of such disputes, and any liability we may
have for Year 2000-related damages, including consequential damages, could harm
our business, financial condition and results of operations. In addition, we
believe that the purchasing patterns of customers and potential customers may
be affected by Year 2000 issues as companies expend significant resources to
correct or upgrade their current software systems for Year 2000 compliance.
These expenditures may result in reduced funds available to purchase software
products such as those we offer. To the extent Year 2000 issues cause a
significant delay in, or cancellation of, decisions to purchase our products or
services, our business, financial condition and results of operations would be
harmed.

To date we have not incurred any material costs directly associated with our
Year 2000 compliance efforts as they relate to both our software products and
our internal information systems. We do not expect the total cost of these Year
2000 compliance activities to be material to our business, financial condition
and results of operations. These costs and the timing with which we plan to
complete our Year 2000 modifications and testing processes are based on our
estimates. However, we may not identify and remediate all significant Year 2000
problems on a timely basis. Remediation efforts may involve significant time
and expense and unremediated problems could harm our business, financial
condition and results of operations.

We are currently developing our business continuation contingency plans and
expect to have our plans in place by late 1999.

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OUR BUSINESS

Industry Overview

Overview of Regulation and Compliance

Virtually every business in the world is subject to rules, regulations and
standards imposed by various regulatory agencies. As part of their oversight,
regulatory agencies typically require businesses to compile information to
document their compliance with specific regulations and to maintain compliance
records. In addition, regulatory agencies often require businesses to make
periodic or event-driven submissions. Periodic submissions demonstrate a
business's compliance with regulations relating to its ongoing operations.
Event-driven submissions are required in connection with a specific business
event, such as the introduction of a new product or service or a change in
customer rates.

In the United States, federal and state regulatory agencies are responsible
for ensuring that businesses comply with various regulations. The following
table provides examples of major federal regulatory agencies and each agency's
estimate of the number of hours required for mandated record keeping and
compliance reporting, or burden hours, as reported to the Office of Management
and Budget for 1997 under the Paperwork Reduction Act of 1995.

<TABLE>
<CAPTION>
Compliance
Agency Burden Hours
------ -------------
<S> <C>
Environmental Protection Agency, or EPA........................... 115.6 million
Federal Energy Regulatory Commission, or FERC..................... 5.2 million
Nuclear Regulatory Commission, or NRC............................. 10.3 million
Securities and Exchange Commission, or SEC........................ 148.9 million
</TABLE>

Significant state regulatory agencies in the United States include public
utility commissions and insurance commissions. Similar regulatory environments
exist throughout the world, requiring many businesses with international
operations to comply with regulations in most nations in which they operate.

Three examples of highly-regulated industries include the pharmaceutical and
biotechnology industry, the chemical industry and the utilities industry.

. Pharmaceutical and biotechnology industry. The pharmaceutical and
biotechnology industry includes over 4,000 companies worldwide, many of
which market their products in a number of different countries. Because
of the potential risks associated with newly-developed drugs and medical
devices, regulatory agencies typically require pharmaceutical and
biotechnology companies to extensively document their research,
development and manufacturing processes. In addition, pharmaceutical and
biotechnology companies generally must

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demonstrate the safety and efficacy of a drug or medical device to a
regulatory agency prior to its commercialization. This process often
requires the collection of data that takes years to compile and the
preparation of submissions that consist of hundreds of thousands of
pages.

. Chemical industry. The chemical industry includes over 4,000 companies
worldwide, many of which sell products around the world. Similar to
companies in the pharmaceutical and biotechnology industry, chemical
companies are, in many cases, required to receive regulatory approval
prior to the introduction of new products. In addition, the chemical
industry faces more significant regulation than most other industries
relating to environmental protection and the transportation of hazardous
materials.

. Utilities industry. The utilities industry includes over 3,000 companies
worldwide, including electric utilities, gas transmission and
distribution companies and telecommunications companies. Utilities face
significant regulation with regard to expanding their infrastructure and
setting and changing customer rates. Additionally, the global trend
toward deregulation in the utilities industry is increasing the volume of
regulatory filings, since an increasing number of companies are entering
the market and existing utility companies are entering territories in
which they were previously not permitted to compete.

The Compliance Process

Companies must undertake a complex process to comply with regulations
imposed by the regulatory agencies that oversee their operations. The
compliance process requires significant time and effort from personnel in
various departments within a company. The major aspects of the compliance
process include:

. Authoring the information. Various persons within and outside a business
organization, including scientists, researchers, technical personnel,
consultants, financial analysts and regulatory affairs personnel, who are
often in different geographic locations, conduct studies and capture and
analyze data over a period of time. Individuals then author information
detailing their studies, analyses and conclusions.

. Collecting and compiling the information from multiple authors and in
various formats. Regulatory affairs personnel collect from various
authors information, which often exists in a variety of formats,
including paper files, faxes, phone messages, e-mails, word processing
files, spreadsheets, graphics programs, and the company's own proprietary
software. This information is then compiled by teams of regulatory
affairs and clerical personnel who are dedicated to the compliance
process.

. Publishing a comprehensive document. The compliance teams publish the
information in a form or document that complies with the specifications
of a regulatory agency. This often involves scanning and copying a large
number of voluminous files. The document must then be formatted for
publication, which includes conforming the different numbering schemes,
footnotes and technical terms used in the various narratives.

. Circulating the document for review and revision. The initial document is
distributed to numerous scientists, researchers, technical personnel,
consultants, financial analysts, management and outside advisors for
their review and comments. The comments are then integrated by the
regulatory affairs group into a revised compliance document. The revised
document is then distributed again for review. This process is repeated,
often multiple times, until all parties are satisfied with the document.

. Publication of the final compliance document. Once the compliance process
is complete, final versions of the document are published and archived
for ongoing compliance purposes and, if required, submitted to a
regulatory agency.

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Many companies incur significant costs relating to compliance activities.
Direct costs include the cost of personnel, such as scientists, technical
personnel, accountants, lawyers and management, and other administrative costs
related to the compliance process. Indirect costs include lost revenues and
market share resulting from delays in introducing new products, fees and
expenses resulting from penalties imposed by regulatory agencies for non-
compliance and monetary damages and legal fees resulting from legal actions
brought by agencies or other third parties. In addition to delays relating to
the company's compliance process, regulatory agencies may experience difficulty
in working with various electronic filing formats and voluminous paper filings,
resulting in lengthy review time for compliance filings. As regulatory
environments become more complex and the number of companies subject to
regulation increases, we expect compliance costs to grow and the need for
access to information to increase.

The Emergence of Electronic Compliance

Historically, businesses have used a manual process to create paper-based
documentation and submissions that demonstrate compliance with regulatory
requirements. In recent years, the emergence of new technologies and the
increase in the complexity of regulatory compliance have caused businesses to
reevaluate how they assemble, compile, share, review and revise compliance
information.

At the same time, regulatory agencies around the world are analyzing the
benefits of electronic compliance and submissions and are moving toward
implementing electronic compliance standards. In the United States, the federal
government has encouraged regulatory agencies to adopt electronic compliance
standards and to use technology to improve productivity, efficiency and
effectiveness by reducing the burden of collecting, disseminating and reviewing
information. Recently, regulatory agencies have begun to implement electronic
compliance and reporting standards. Examples of the increasing adoption of
electronic compliance in the United States and abroad include:

. The FDA has announced its intention to support all electronic filings by
2002;

. The EPA has announced its intention to support all electronic filings by
2000;

. FERC has announced an electronic filing initiative to improve processing
and distribution of filings;

. BfArM, the Bundesinstitut fur Arzneimittel und Medizinprodukte, a German
regulatory agency, has announced its intention to support electronic
submissions; and

. The European Union has adopted an electronic filing standard for
pesticide registrations, known as CADDY.

The Impact of Intranet and Internet Technology

Intranets and the Internet are quickly emerging as the medium of choice for
collecting, publishing and distributing information. These networks provide a
relatively low cost and widely dispersed communication, collaboration and data
transmission platform. We believe that businesses are seeking to use corporate
intranets and the Internet to manage complex business processes, such as
compliance management. As businesses attempt to reengineer their complex
business processes to utilize these networks, they are faced with the challenge
of accessing and integrating large amounts of data that are often in various
formats and stored in different locations throughout the enterprise.

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The Need for Enterprise Compliance Management Solutions

As businesses move toward implementing electronic compliance processes, a
variety of approaches have emerged that attempt to address the requirements and
to realize the benefits of electronic compliance. These approaches include:

. Internally-developed systems. Systems developed by internal information
technology departments tend to be highly customized and are designed to
meet the specific regulatory requirements at the time of development. As
regulations change and technology advances, these systems are
increasingly costly and difficult to maintain due to their lack of
flexibility. Furthermore, many of these systems were not specifically
designed to take advantage of intranet and Internet technologies.

. Document management systems. Document management systems are designed to
scan, store, secure and archive documents. These systems are not designed
to support the compliance management function and generally lack the
capability to support complex document publication, automatic cross-
referencing and different pre-defined forms and formats.

. Point solutions. Point solutions are software tools designed to address a
very specific compliance requirement. These tools generally do not have
the breadth to address all of the compliance management needs of
businesses that are required to comply with the complex regulations of
multiple agencies.

. Desktop publishing tools. Desktop publishing tools are typically word
processing tools that are used to create individual pieces of a
compliance-related document. These tools often lack the features and
functions required to enable a business to create much larger and more
complex compliance documents.

. Outsourcing. Businesses sometimes hire third parties to prepare
regulatory submissions. This approach can be costly and time-consuming
and may limit the ability of businesses to reuse the information that has
been prepared.

We believe that businesses, in an effort to significantly improve their
compliance processes, are seeking an enterprise-wide compliance management
solution that has the following characteristics:

. Enterprise scalability. The ability to access information and collaborate
on publications by an increasing number of users in multiple departments
throughout an enterprise.

. Industry-specific compliance expertise. Expertise in the complex and
rapidly changing compliance requirements of particular industries.

. Multiple-industry applicability. Ability to meet the compliance
requirements of customers operating in various industries.

. Leading technology foundation. Support for the most advanced technology
platforms, such as intranets and the Internet, as well as an architecture
that allows for changes in technology.

. Support multiple information formats. Ability to collect information
stored in various formats, including spreadsheets, desktop publishing and
database applications, as well as the ability to output to the various
formats supported by regulatory agencies in each industry.

. Rapid implementation. Ability to be rapidly implemented throughout the
enterprise.

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We believe that an enterprise-wide application which exhibits these
characteristics will enable businesses to deploy effective compliance
management systems to reduce compliance costs and the time required to bring
new products and services to market.

Our Solution

Our solution, which consists of the CoreDossier family of software products
and related services, enables users throughout an enterprise to collaborate in
the authoring, compilation, distribution and publishing of compliance
information and regulatory submissions. We designed our CoreDossier software
products to utilize advanced technologies, such as corporate intranets and the
Internet, and to meet emerging electronic compliance requirements and
standards. We believe our solution reduces the risks associated with the
deployment of in-house and other customized compliance management solutions and
enables companies in highly regulated industries to realize a return on their
investment through direct cost savings. Furthermore, we believe our solution
enables companies to reduce the time required to bring new products and
services to market. We also offer our solution to regulatory agencies to
provide them with more effective and efficient access to compliance filings,
thereby decreasing the time required for regulatory review and response.

Our solution provides our customers with the following key advantages:

Scalable enterprise-wide solution. Our solution extends throughout an
enterprise, providing multiple departments in various locations throughout the
world with the ability to collaborate in the authoring, assembling,
distributing and publishing of compliance information. We also designed our
solution to support the growth of our customers as they add new users and
process an increasing amount of compliance information.

Domain expertise. We designed our solution around our expertise in meeting
the specific compliance needs of each industry in which our customers compete.
Our professionals possess industry expertise and in-depth knowledge of specific
compliance requirements. This domain expertise enables us to provide an
enterprise compliance management solution that effectively addresses the
requirements, changes and subtleties of regulations that are unique to each
specific industry.

Modular product architecture. Our solution addresses the compliance
requirements of customers in various industries through the use of industry-
specific modules to enhance the functionality of the CoreDossier platform.
Furthermore, our solution enables large diversified businesses that operate in
numerous industries to address various regulatory requirements with a single
compliance solution.

Intranet and Internet capabilities. We designed our systems architecture to
be adaptable to advancing intranet and Internet technologies. We believe that
corporate intranets and the Internet will become increasingly important in the
compliance management process as companies continue to rapidly adopt these
communication platforms.

Multiple input and output capabilities. We designed our solution to enable
users to input information in different formats, including paper files, faxes,
phone messages, e-mails, word processing files, spreadsheets, graphics
programs, and the company's own proprietary software. In addition, CoreDossier
supports older formats such as WordStar and Wang Office. CoreDossier also
enables users to output information in numerous formats, including those most
commonly used in the compliance submission process, such as HTML, PDF, TIFF and
paper.

Rapid deployment. We designed our solution to be quickly implemented
throughout a customer's enterprise. Since our solution is tailored to meet the
specific compliance requirements of our targeted industries, it requires
minimal customization.

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Our Strategy

Our goal is to be the leading provider of enterprise compliance management
solutions that enable businesses to author, compile, distribute and publish
complex compliance documents. To achieve this objective we intend to:

Enhance our Technology Leadership and Product Functionality. We believe that
our products provide the most advanced solution to meet enterprise compliance
requirements in our targeted markets. Our solution incorporates leading
technologies, such as intranet and Internet technologies. We intend to maintain
and enhance our position as a technology leader by continuing to invest in
product development to:

. Expand the base functionality of the CoreDossier platform;

. Support emerging publishing standards and formats;

. Enhance existing industry-specific modules; and

. Develop industry-specific modules to target new industries.

In addition, we encourage third parties to develop industry-specific modules
that will further enhance the functionality of CoreDossier through the use of
application programming interfaces.

Target Other Industries. We have focused our product development,
consulting, sales and marketing efforts on specific industries, particularly
the pharmaceutical and biotechnology industry and, more recently, the chemical
and utilities industries. We believe that companies in other industries could
benefit from our solution and we intend to utilize our experience in compliance
management to rapidly penetrate these industries. We intend to:

. Leverage the comprehensive compliance technology contained in the
CoreDossier platform to quickly develop new modules that provide
industry-specific compliance functionality; and

. Utilize and expand our cross-functional sales and marketing teams, which
combine industry specific compliance expertise with knowledge of product
development, to quickly penetrate targeted industries.

The additional industries we are currently targeting include the financial
services, insurance and discrete manufacturing industries.

Enhance our Domain Expertise. We believe our industry expertise and
knowledge of specific compliance requirements enables us to more effectively
tailor our solutions to the specific needs of businesses in the industries we
target. Furthermore, our domain expertise enables us to provide our customers
with access to critical and constantly changing compliance-related information.
We intend to continue to enhance our industry-specific domain expertise to
accelerate our entrance into other industries and to quickly establish a
leadership position in such industries.

Promote Use of Intranet and Internet Technologies for Compliance
Management. We actively promote the use of intranet and Internet technologies
for compliance management by hosting informational seminars and demonstrating
the capabilities of our technology through installations at regulatory
agencies. We have participated in several of the first Web-based regulatory
submissions. We believe that a better understanding by businesses and
regulatory agencies of the benefits of using intranets and the Internet for
compliance management will enhance our position as a leader in the use of these
emerging technologies.

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Expand our Professional Services Organization. We have recently established
a professional services organization to enhance our customers' ability to
realize maximum return on their investment in CoreDossier. In addition to
helping customers realize this return, our professional services organization
is designed to assist them in addressing other requirements and functions
within their business such as record keeping and internal compliance.

Expand and Capitalize on our Strategic Alliances. We believe that our
strategic alliances with leading systems integration firms, information
technology consulting firms and technology companies enable us to promote
awareness of our products and services, expand territorial coverage and provide
value-added implementation services to end-users. We intend to maintain and
strengthen these relationships, as well as establish new relationships with
leaders in the information technology industry.

Enhance our International Presence. We intend to increase our international
presence and further enhance our solution to address the needs of companies
operating in various countries throughout the world. We believe that
significant opportunities exist for enterprise compliance management software
that is designed for businesses subject to compliance requirements in various
worldwide regulatory environments. We currently maintain an office in London,
England and intend to add sales personnel, develop domain expertise and
establish additional offices to further address international markets.

Products

The CoreDossier product family includes the CoreDossier platform, industry-
specific modules and the CoreDossier Application Program Interfaces, or APIs.
Our software products comprise a modular system that may be configured in a
variety of ways to meet customers' industry-specific requirements. The
CoreDossier platform provides the foundation for enabling our customers to
collaborate in the authoring, compiling, distributing and publishing of
compliance information. Our industry-specific modules are easy-to-install
software products that perform compliance functions designed to meet the
regulatory requirements of a particular industry. The CoreDossier APIs enable
third parties to develop custom applications and extend access to additional
external information sources.

The CoreDossier family of products is priced on a per-server basis.
Depending upon the functionality and industry-specific modules chosen by a
customer, the license fee for the CoreDossier solution generally ranges from
$200,000 to $400,000 per-server, with multiple site licenses costing in excess
of $1.0 million. Customers can purchase additional industry-specific modules,
which range from $40,000 to $75,000 per module and are sold on a per-server
basis. The license fees for CoreDossier do not include fees for implementation,
technical support and training.

The CoreDossier Platform

The CoreDossier platform is the base product used by our customers. The
CoreDossier platform addresses the following aspects of compliance management:

Support for multiple file format inputs. Many documents and other
information required for a regulatory submission exist in both paper and
electronic formats. CoreDossier supports over 100 file formats, enabling
businesses to utilize information in its existing formats without the
complications generally associated with file conversion. Electronic formats
include:

. Current word processing formats, such as Microsoft Word, WordPerfect and
Interleaf, and older word processing formats such as Wang Office and
WordStar;

. Spreadsheet formats, such as Excel, Lotus 1-2-3 and SAS;

. Graphic formats, such as TIFF, BMP and Illustrator;

. Desktop publishing tools, such as Quark, Photoshop and Pagemaker; and

. Communication formats, such as e-mail and facsimile.

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In addition, CoreDossier supports a variety of file and document management
systems, including Documentum, PC DOCS and FileNet. In our next product
release, we intend to support Extensible Markup Language, or XML, which will
enable CoreDossier to better support other external information sources.

Publication design. CoreDossier allows customers to define, create and reuse
publication templates. These templates provide a standardized structure for
resulting publications, which contains documents, document templates, standards
for headers and footers, tables of contents and finishing options. As a result,
customers can quickly create new publications that meet predefined internal or
external compliance requirements using an old template. This also allows
companies to utilize information contained in previous publications to create
new publications.

Support for multiple file format outputs. CoreDossier supports output in
standardized formats and languages such as HTML, PDF, TIFF and paper. In our
next product release, we intend to support XML and additional output formats to
better address our customers' needs. The ability to support multiple outputs is
essential for many of our customers, as many regulatory agencies require that
companies publish both in electronic formats and in paper format. In addition,
the ability to publish in multiple output formats provides companies with the
ability to reuse compliance information for other purposes, including quality
assurance, record-keeping and internal compliance.

Server-to-server communications. CoreDossier servers installed in different
departments of a business can share compliance and publication information. As
a result, a CoreDossier user in one department, such as product development,
can share information and collaborate with a user in another department, such
as regulatory affairs.

The CoreDossier platform is comprised of the:

. CoreDossier Server, which manages publication information and maintains
data integrity in response to requests from the CoreDossier Assemblers.

. CoreDossier Generator, which is responsible for converting source
documents into PDF renditions and document data. The PDF renditions are
stored within the original source documents. The document data, such as
cross-references and table of contents information, are stored in the
CoreDossier Server. The CoreDossier Generator is also responsible for
servicing publishing requests from the CoreDossier Assemblers.

. CoreDossier Assembler, which is the main interface for the publication
manager. The CoreDossier Assembler enables multiple users to create and
modify a publication simultaneously, allowing for a collaborative
publication creation process.

. CoreDossier Web Server, which enables access to publications on corporate
intranets and the Internet.

. CoreDossier Document Management Interface, which enables CoreDossier to
communicate with a user's document management system. Through this
interface, CoreDossier can access documents in Documentum, FileNet, PC
DOCS and shared file systems. Interfaces are planned for Open Text and
Lotus Notes in the future.

CoreDossier is written in C++ and supports Windows 95, Windows 98 and
Windows NT operating systems. The CoreDossier Server and the CoreDossier
Generator run on Windows NT. The CoreDossier Web Server runs on Windows NT and
was created using HTML, XML, PDF and Java programming languages. We anticipate
that future versions of the CoreDossier Web Server will run on a variety of
UNIX platforms.

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Industry-Specific Modules

We have developed customized modules for the CoreDossier platform to meet
the specific needs of our targeted industries. Because of the modular
architecture of the CoreDossier solution, we have been able to develop and
introduce these industry-specific modules quickly and efficiently. These
industry-specific modules extend the core capabilities of the CoreDossier
platform by providing additional user interfaces, processes and output formats
that are designed specifically for a particular industry's compliance
requirements.

Existing modules and modules currently under development include:

. CDER Compiler Module. This module enables our customers in the
pharmaceutical and biotechnology industry to produce electronic
submissions for new drug applications that comply with the FDA's
specifications. These electronic submissions enable our customers to
reduce time required for the assembly and review process for a new drug
application. Currently, we offer a CDER Compiler Module and a collection
of pharmaceutical templates.

. CADDY Compiler Module. This module enables our customers to produce
electronic submissions for global agrochemical product registrations. The
CADDY Compiler Module was used to prepare the first submission that
complied with the current specifications for agrochemical electronic
filings with the Canadian Pest Management Regulatory Agency. Currently,
we offer a CADDY Compiler Module and one agrochemical template.

. DAMOS Compiler Module. This module enables our customers to produce
electronic submissions for pharmaceutical product registrations. The
DAMOS Compiler has been used to prepare submissions to BfArM, a
regulatory agency that oversees the pharmaceutical industry in Germany.
Currently, we offer a DAMOS Compiler Module and three pharmaceutical
templates.

. CoreDocket Module. The first release of the CoreDocket Module is targeted
for mid-1999. This module is designed to enable utilities companies to
collect and organize information from multiple sources quickly for
regulatory filings. One distinct feature of CoreDocket is that utilities
can use their existing e-mail and authoring systems in automating the
process of responding to compliance-related requests from the regulatory
agencies.

CoreDossier Application Programming Interfaces

The CoreDossier APIs are used to extend the functionality of the CoreDossier
platform. Using software development kits, customers can utilize the APIs to
link our solution to other business information systems, such as imaging
systems, authoring systems and other legacy systems. Customers can also use the
CoreDossier APIs to customize their CoreDossier software to meet their specific
needs and support additional input and output formats.

Professional Services

Our professional services organization provides customers with on-site
product implementation and consulting, technical support and training services.
Our services include:

Implementation and Consulting. Our service professionals implement the
CoreDossier software for our customers at a single site or multiple sites. As
part of our implementation services offering, we work with clients to customize
our solution to effectively meet their specific business needs. We provide
ongoing consulting services to assist our customers in optimizing the use of
our solution to realize a return on their investment as quickly as possible. We
price our implementation services on a time and materials basis.

Technical support. We have implemented a comprehensive technical support
program to assist customers in using our products and to identify, analyze and
solve problems that may arise. The

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support program includes worldwide e-mail support, which is available 24 hours
a day, seven days a week, and telephone support, which is globally available
during the normal business hours of the countries in which our products are
used. We provide technical support to our customers as part of our maintenance
program, which is typically priced based on a percentage of the then-current
software license list price.

Training. We offer a number of educational classes in conjunction with our
products, including end-user training and in-depth technical training covering
the implementation and management of our solution. Training services are priced
on a per class basis, as well as incremental time and materials charges for
customized on-site training.

Strategic Alliances

We have established a number of relationships with service vendors for the
implementation of our software to our customers. We have also entered into
marketing and sales alliances with leading technology companies and consulting
firms. Through our alliances, we seek to develop and nurture long-term third-
party alliances to promote awareness of our products and services, expand
geographic coverage, contribute to our product solutions and provide value-
added implementation services to the end-user. We frequently participate in
joint sales and marketing efforts with our strategic partners. Our strategic
alliances are classified in three categories:

CorePartner Solution Integrators. Solution integrators provide services
ranging from project management to installation, systems integration and
application development. These solution integrators include Computer Sciences
Corporation, First Consulting Group-ISCG, PricewaterhouseCoopers LLP and
Science Applications International Corp.

CorePartner Technology Alliances. Through technology alliances, independent
software vendors and service providers create new products and integrate
product lines to be compatible with CoreDossier. These technology alliance
partners include Documentum, FileNet and Versant Object Technology Corporation.

CorePartner Strategic Alliances. Through strategic alliances, we seek to
promote awareness of our enterprise compliance management solution and gain
strategic support for our overall marketing, sales and development programs. We
currently have a strategic alliance partnership with Adobe Systems
Incorporated.

We intend to maintain and strengthen these relationships while establishing
new relationships to increase awareness of our products and services and
increase the quality of our solutions.

Customers and Markets

Our targeted customers are mid- to -large-sized businesses and divisions of
large companies that operate in highly regulated industries. We believe that
these enterprises have the greatest compliance burden and are likely to
implement new technology as a means of gaining a competitive advantage. We
initially focused on the pharmaceutical and biotechnology industry.
Consequently, the majority of our existing customers are pharmaceutical and
biotechnology companies. We recently introduced the CADDY Compiler Module for
the chemical industry and we intend to release the CoreDocket Module for the
utilities industry in mid-1999.

As of February 28, 1999, we licensed versions of our CoreDossier products to
over 44 customers. For the fiscal year ended March 31, 1998, three of our
customers accounted for approximately 46% of our total revenues. Our agreement
with Glaxo-Wellcome Inc. accounted for approximately 17.3% of total revenues
for fiscal year 1998. Our agreement with Hoechst Marion Roussel accounted for
approximately 15.0% of total revenues for fiscal year 1998 and our agreement
with Rhone-Poulenc Rorer Pharmaceuticals Inc. accounted for approximately 13.7%
of total revenues for fiscal year 1998.

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Below is a representative list of customers who have licensed our software
as of February 28, 1999:

Pharmaceutical and Biotechnology Industry

Abbott Laboratories Immunex Corp.
Alcon Laboratories, Inc. Ligand Pharmaceuticals Incorporated
Allergan, Inc. Molecular Biosystems, Inc.
Athena Neurosciences, Inc. NPS Pharmaceuticals, Inc.
Baxter Healthcare Corp. (a subsidiary of Organon Laboratories, Ltd. (a
Baxter International Inc.) subsidiary of Akzo Noble Pharma
Biogen, Inc. B.V.)
Coulter Pharmaceutical, Inc. Otsuka America Pharmaceutical, Inc.
DuPont Pharmaceuticals Company Pfizer, Inc.
Dura Pharmaceuticals Inc. PharmaNet, Inc.
G.D. Searle & Co. Quintiles, Inc.
Glaxo-Wellcome Inc. (a subsidiary of Rhone-Poulenc Rorer Pharmaceuticals
Glaxo Wellcome PLC) Inc. (a subsidiary of Rhone-Poulenc
Health Decisions, Inc. Rorer Inc.)
IBAH, Inc. Schering AG
Sequus Pharmaceuticals, Inc.
TAP Holdings, Inc.
Warner Lambert Company

Chemical Industry

Utilities Industry

Bayer Corporation (Agriculture Division) Baltimore Gas & Electric

In addition, we intend to market our enterprise compliance management
solution to regulatory agencies and industry groups. We currently have
installed test versions of our solution at several federal regulatory agencies
for use and review by these agencies. We believe that this increased exposure
will encourage the adoption of electronic compliance standards and the use of
our solution.

44
<PAGE>

Sales and Marketing

We market our products and services primarily through our direct sales
organization. We deploy teams comprised of sales, marketing, regulatory
compliance, professional services and software development professionals that
are focused on specific industries. These cross-functional sales and marketing
teams, referred to as "Tiger Teams," are responsible for identifying and
quantifying new markets, identifying new applications for CoreDossier within
industries already served by our solution, generating new opportunities and
capitalizing on those opportunities. Sales efforts are typically targeted at
senior regulatory compliance officers. For larger projects, purchase approval
is often required from more senior company executives. While the sales cycle
varies substantially from customer to customer, the initial sales cycle
typically ranges from three to six months.

We have initiated a branding and marketing strategy designed to broaden
market awareness of the ESPS name and to solidify our position as a leading
provider of enterprise compliance management solutions in the pharmaceutical
and biotechnology, chemical and utilities industries. We have also initiated
marketing strategies targeted at the financial services, insurance and discrete
manufacturing industries. We are also leveraging our expertise to sell our
products to additional departments of our current customers.

As of February 28, 1999, we employed 30 people in sales and marketing in the
U.S., and seven people in sales and marketing in Europe.

Product Development

We have substantially invested in the development of our CoreDossier
platform and our industry-specific modules. Our product development department
is responsible for the design, development, testing and release of our software
products and is organized in four areas:

. Software development;

. Quality assurance;

. Product documentation; and

. Program management.

Along with a product manager from our marketing department, members from
each of these areas form product teams that work closely with other
organizations, customers and prospective customers to better understand their
compliance management needs.

The software development and quality assurance groups are further divided
into platform development and industry-specific module development groups. The
platform group extends and develops the CoreDossier platform by creating
additional functions and features that can be used by customers in various
industries. Each industry group works closely with the marketing managers from
each of the marketing teams to design and deliver industry-specific modules and
applications. As a result of this structure the industry-specific module
development groups are able to develop new modules independent of the
development cycles of the CoreDossier platform.

In addition to developing our own software, we incorporate third-party
technologies into our products. We believe this approach significantly shortens
our product development time without compromising our competitive position or
the quality of our products.

As of February 28, 1999, we employed 46 people in our product development
department. Our research and development expenses were $725,000 in the fiscal
year ended March 31, 1996, $1.4

45
<PAGE>

million in the fiscal year ended March 31, 1997 and $2.0 million in the fiscal
year ended March 31, 1998.

Competition

The market for enterprise compliance management solutions is new and rapidly
evolving. As the market develops, we expect competition to increase. We
primarily compete against the internal information technology departments of
our customers and potential customers. These information technology departments
may develop their own compliance management software. We also compete against
desktop publishing tools and service providers who compile submissions to
regulatory agencies manually, without the use of compliance software. In each
industry, we also face competition from software vendors who provide compliance
assistance to specific divisions of our current and potential customers and
point solutions, such as the Document Solutions Group of Xerox and Interleaf,
Inc. We believe that the principal competitive factors in the enterprise
compliance management market are product flexibility, domain expertise,
customer support, scalability and price.

Intellectual Property and Other Proprietary Rights

We rely primarily on a combination of copyright, trade secret and trademark
laws, confidentiality agreements with employees and third parties, and
protective contractual provisions contained in license agreements with
consultants, vendors and customers to protect our proprietary rights.

We have registered the trademark CoreDossier in the United States. In
addition, we use a number of common law trademarks and service marks,
including:

. ESPS;

. CDER Compiler;

. CADDY Compiler;

. DAMOS Compiler; and

. CoreDocket.

We believe the strength of our trademarks and service marks benefits our
business and we intend to continue to protect our registered and common law
trademarks and service marks in the United States and abroad. We have not
secured registration of all of our marks in the United States and have not
pursued registration in any foreign country.

We also protect our proprietary rights by requiring employees to agree not
to reveal any sensitive information to our competitors and to sign a
confidentiality agreement. Employees are required to execute a non-competition
agreement which may restrict them from working for a competitor for one year
after employment terminates. However, we may not obtain these agreements in
every case.

We incorporate technology from third parties into our software. We currently
have a material license agreement with Versant Object Technology Corporation
for the use of technology which is embedded in CoreDossier. Under the terms of
the license agreement, we have the right to use and copy Versant's software to
develop and combine Versant's technology with our software products to create
applications. Our license is non-exclusive, non-transferable and non-
assignable. We currently pay Versant royalty fees based on sales of our
products. The agreement, which is effective until December 31, 1999, will
automatically renew for additional one-year periods. Unless we negotiate
otherwise, at the end of the initial term, the royalty fees will substantially
increase.

46
<PAGE>

Employees

As of February 28, 1999, we had a total of 111 employees in the U.S.,
including 46 people engaged in product development, 30 people in sales and
marketing, 20 people in professional services and 15 people in general and
administrative services. We also employed a total of 20 people in Europe
including seven people in sales and marketing, 10 people in professional
services and three people in general and administrative services. Our employees
are not represented by any collective bargaining agreement, and we have never
experienced a work stoppage. We believe our relations with our employees are
good.

Facilities

Our principal administrative, sales, marketing, technical support and
product development facilities are located at our headquarters in Fort
Washington, Pennsylvania. We currently occupy approximately 30,300 square feet
of office space in the Fort Washington facility under a lease which terminates
October 31, 2003.

We also lease office space for sales and marketing in La Jolla and San Jose,
California, and in the United Kingdom.

Legal Proceedings

ESPS is not currently a party to any legal proceedings.

47
<PAGE>

MANAGEMENT

The following table contains information about our executive officers and
directors as of February 28, 1999.

Executive Officers and Directors

<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Terrence P. Brennan........ 47 President, Chief Executive Officer and Director
Leonard W. von Vital....... 48 Chief Financial Officer
Bradley R. Burget.......... 37 Vice President, Professional Services
Michael T. Hoey............ 32 Vice President, Research and Development
Kevin E. Leininger......... 34 Vice President, Marketing
George B. Pearcy........... 52 Vice President, Finance and Administration
Jeffrey C. Sager........... 32 Vice President, Sales
Charles O. Heller (a)(b)... 63 Director
Christopher B. Hollenbeck
(a)(b).................... 31 Director
</TABLE>
- ---------------------
(a) Member of Audit Committee
(b) Member of Compensation Committee

Terrence P. Brennan has served as the President, Chief Executive Officer and
as a member of the board of directors of ESPS since October 1995. From February
1995 until October 1995, Mr. Brennan was an independent consultant to the
pharmaceutical industry. From January 1994 until February 1995, Mr. Brennan was
President and Chief Executive Officer of Bio-Imaging Technologies, Inc., a
service organization providing image processing and management services to
pharmaceutical and biotechnology companies. From September 1986 until January
1994, Mr. Brennan served as President of Research Data Corporation, a
pharmaceutical information management company developing electronic submissions
to the FDA. From October 1982 until September 1986, Mr. Brennan held the
position of Senior Product Manager with Carter-Wallace Pharmaceuticals. From
April 1976 until October 1982, Mr. Brennan was a Product Manager with Zeneca
Pharmaceuticals. Mr. Brennan holds a B.S. in business administration and an
M.B.A. from the University of Dayton.

Leonard W. von Vital has served as Chief Financial Officer of ESPS since
October 1998. From May 1998 until October 1998, Mr. von Vital was Vice
President of Finance, Vending Operations for Real Time Data, Inc., a
consolidator of vending businesses and a provider of technology to the vending
industry. From May 1997 until May 1998, Mr. von Vital was Senior Vice President
of Product Management for Astea International Inc., a developer and vendor of
enterprise customer relationship management software, and from November 1993 to
May 1997, he was Chief Financial Officer of that company. Mr. von Vital is a
certified public accountant and holds a B.S. in accounting from St. Francis
College.

Bradley R. Burget has served as Vice President of Professional Services of
ESPS since October 1998. From November 1996 until October 1998, Mr. Burget was
Regional Manager of Consulting for Baan Supply Chain Solutions, a software
company, developing enterprise resource planning software. From December 1995
until November 1996, Mr. Burget served as Client Project Manager at SSI, Inc.,
a contract consulting and resources company. From December 1993 until December
1995, Mr. Burget was Client Service Manager for Information Network Systems, a
developer of software used to process compliance of warranty claims in consumer
electronics manufacturing. Mr. Burget holds a B.S. in physics from Iowa State
University.

Michael T. Hoey has served as Vice President of Research and Development of
ESPS since March 1996. From June 1990 until March 1996, Mr. Hoey was a
Technology Manager with Andersen Consulting. Mr. Hoey holds a B.S. and an M.S.
in electrical engineering from Syracuse University.

Kevin E. Leininger has served as Vice President of Marketing of ESPS since
June 1998. From March 1997 until June 1998, Mr. Leininger was Vice President of
Business Development and

48
<PAGE>

Marketing for NeoMedia Technologies, Inc, formerly DevTech Associates, Inc., a
developer of document systems and intelligent document software and products.
From June 1994 to March 1997, Mr. Leininger was Managing Director and Head of
Marketing of DevTech, and was Director of Open Systems for DevTech from
September 1991 to June 1994. Mr. Leininger holds a B.S. in physics and
mathematics from Iowa State University and an M.B.A. in international business
and finance from the University of Chicago.

George B. Pearcy joined ESPS in November 1995 and currently holds the
position of Vice President of Finance and Administration. From October 1992
until November 1995, Mr. Pearcy was the Vice President of Finance for
Northeastern Analytical Corporation and TTI Environmental Services, an
environmental analytical laboratory and an underground storage tank company.
From September 1985 to October 1992, Mr. Pearcy was Director of Financial and
Commercial Operations for International Computaprint Corporation, a division of
Reed Elsevier which provides database management and pre-press services to the
publishing industry. Mr. Pearcy holds a B.S./B.A. in accounting and an M.B.A.
from the University of Missouri.

Jeffrey C. Sager has served as Vice President of Sales of ESPS since January
1996. From April 1994 to December 1995, Mr. Sager was Director of Market
Development for Etak Inc., a developer of computerized mapping software systems
and products. From January 1992 until April 1994, Mr. Sager was Manager of
Marketing and Corporate Development and Western Regional Sales Representative
for Geographic Data Technology, Inc., a developer of digital mapping databases.
Mr. Sager holds a B.S. in business from the University of Delaware.

Charles O. Heller has served as a member of the board of directors of ESPS
since May 1995. Since February 1990, Dr. Heller has served as Director of the
Dingman Centre for Entrepreneurship at the University of Maryland. Since
February 1994, he has served as Chairman and President of the Baltimore-
Washington Venture Group, a private investor network. Since June 1986, he has
served as President of the Annapolis Consulting Group, a management consulting
firm. Since January 1998, Dr. Heller has served as President of the Bahamas
Venture Capital Fund. Dr. Heller currently is a member of the board of
directors of several privately held companies, including Klein Technologies,
Inc., Avatech Solutions, Inc., InterSOURCE, Inc., the Baltimore-Washington
Venture Group, Annapolis Consulting Group, and the Bahamas Venture Capital
Fund. Dr. Heller holds a B.S. and an M.S. in civil engineering from Oklahoma
State University and a Ph.D. in engineering from the Catholic University of
America.

Christopher B. Hollenbeck has served as a member of the board of directors
of ESPS since July 1997. Mr. Hollenbeck is a principal of H&Q Venture
Associates L.L.C., a venture capital firm, where he has been an Investment
Manager for the Adobe Ventures Funds since July 1998. From June 1996 until June
1998, Mr. Hollenbeck served as a Vice President in the venture capital
department of Hambrecht & Quist L.L.C. From April 1991 until September 1995,
Mr. Hollenbeck held various positions in the investment banking department of
Hambrecht & Quist LLC. Mr. Hollenbeck is a member of the board of directors of
several privately held companies, including AvantGo, Inc., Glyphica and HAHT
Software, Inc. Mr. Hollenbeck holds a B.A. in American Studies from Stanford
University.

Board Committees

We have established an audit committee and a compensation committee. The
compensation committee:

. Reviews and approves the compensation and benefits for our executive
officers and grants stock options under our stock option plans; and

. Makes recommendations to the board of directors regarding such matters.

49
<PAGE>

The audit committee:

. Reviews the results and scope of the audit and other services provided by
our independent auditors; and

. Reviews and evaluates our audit and control functions.

Compensation Committee Interlocks and Insider Participation

The compensation committee is responsible for determining salaries,
incentives and other forms of compensation for directors, officers and other
employees of ESPS and administering various incentive compensation and benefit
plans. The compensation committee consists of Charles O. Heller and Christopher
B. Hollenbeck. Terrence P. Brennan, President, Chief Executive Officer and a
director of ESPS, participates in all discussions and decisions regarding
salaries and incentive compensation for all employees and consultants of ESPS,
except that he is excluded from discussions regarding his own salary, incentive
compensation and option grants to officers and directors. No interlocking
relationship exists between any member of ESPS's compensation committee and any
member of any other company's board of directors or compensation committee.

Director Compensation

We reimburse each member of our board of directors for out-of-pocket
expenses incurred in connection with attending board meetings. We intend to pay
each member of our board who is not an employee a director fee for attending
meetings of the board of directors and committee meetings.

We granted Dr. Heller options to purchase shares of our common stock
pursuant to option grant agreements. In May 1995, we granted Dr. Heller an
option to purchase 40,000 shares of our common stock at an exercise price of
$0.10 per share. In April 1996, we granted Dr. Heller an option to purchase
20,000 shares of our common stock at an exercise price of $0.10 per share. In
December 1996, we granted Dr. Heller an option to purchase 90,000 shares of
common stock at an exercise price of $0.10 per share. Under the terms of the
option agreements, 25% of the options became exercisable on the first
anniversary of the grant date and 6.25% become exercisable on the last day of
each quarter thereafter. Mr. Hollenbeck is not currently compensated as a
member of our board of directors.

Executive Compensation

The table below summarizes information concerning the compensation awarded
to, earned by, or paid for services rendered to ESPS in all capacities during
the fiscal year ended March 31, 1998 by:

. Our Chief Executive Officer;

. Our four most highly compensated executive officers as of March 31, 1998
whose total salary and bonus for the fiscal year ended March 31, 1998
exceeded $100,000.

We did not pay any executive officer named in the Summary Compensation Table
any fringe benefits, perquisites or other compensation in excess of 10% of his
salary and bonus during the fiscal year ended March 31, 1998.

50
<PAGE>

Summary Compensation Table

<TABLE>
<CAPTION>
Annual Long-Term Compensation
Compensation Awards
---------------- --------------------------
Fiscal Earned Securities
Name and Principal Position Year Salary Bonus Underlying Options (#)
- --------------------------- ------ -------- ------- ----------------------
<S> <C> <C> <C> <C> <C>
Terrence P. Brennan.......... 1998 $150,000 $38,000 --
President and Chief
Executive Officer

Michael T. Hoey.............. 1998 119,166 30,000 150,000
Vice President, Research and
Development

George B. Pearcy............. 1998 117,499 30,000 50,000
Vice President, Finance and
Administration

Jeffrey C. Sager............. 1998 102,244 30,000 20,000
Vice President, Sales

William Collom............... 1998 120,000 30,000 --
Former Vice President,
Regulatory Customer
Operations
</TABLE>

Amounts set forth in the Earned Bonus column represent bonuses which were
earned in the fiscal year ended March 31, 1998, but were not paid until the
subsequent fiscal year.

Option Grants During Fiscal Year Ended March 31, 1998

The following table contains information regarding options granted in the
fiscal year ended March 31, 1998 to the executive officers named in the Summary
Compensation Table above. The potential realizable value over the terms of the
options is based on assumed rates of stock appreciation in compliance with the
rules of the SEC and do not represent our estimate of future stock price.
Actual gains, if any, on stock option exercises will be dependent on the future
performance of ESPS common stock. For the fiscal year ended March 31, 1998, we
granted options to acquire up to an aggregate of 510,000 shares to employees
and directors, all under the 1995 Stock Incentive Plan and all at an exercise
price equal to not less than the fair market value of our common stock on the
date of grant as determined in good faith by the board of directors. We also
granted options to acquire 114,000 shares to employees at a price that was
lower than the estimated fair value of the common stock. Optionees may pay the
exercise price by cash, check, promissory note, delivery of already-owned
shares of our common stock or pursuant to a cashless exercise procedure.
Options under the 1995 Stock Incentive Plan generally vest over four years with
25% of the shares subject to option vesting on the first anniversary of the
grant date, and the remaining option shares vesting 6.25% for every calendar
quarter thereafter. We may modify the standard vesting schedule.

<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Number of % of Stock Price
Securities Total Options Appreciation for
Underlying Granted to Exercise Option Term
Options Employees in Price Expiration ---------------------
Name Granted Fiscal Year Per Share Date 5% 10%
- ---- ---------- ------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Terrence P. Brennan..... -- -- -- --
Michael T. Hoey......... 150,000 24.0% $0.10 3/17/03
George B. Pearcy........ 50,000 8.0 0.10 9/29/02
Jeffrey C. Sager........ 20,000 3.2 0.10 12/04/02
William Collom.......... -- -- -- --
</TABLE>

51
<PAGE>

Aggregated Option Exercises in Fiscal Year Ended March 31, 1998
and Fiscal Year End Option Values

The following table sets forth information containing the value realized
upon exercise of options during the fiscal year ended March 31, 1998 and the
number and value of unexercised options held by the executive officers named in
the Summary Compensation Table above. As of March 31, 1998, there was no public
market for the common stock. The "Value of Unexercised In-the-Money Options at
Fiscal Year End" is based upon a value of $ per share, the assumed initial
public offering price, minus the per share exercise price, multiplied by the
number of shares underlying the option.

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired Value Options at Fiscal Year End at Fiscal Year End
On Exercise Realized ------------------------------ -------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ------------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Terrence P. Brennan..... 481,250 $52,938 68,750 550,000
Michael T. Hoey......... -- -- 140,100 309,900
George B. Pearcy........ -- -- 80,938 149,062
Jeffrey C. Sager........ -- -- 41,250 68,750
William Collom.......... -- -- 32,500 67,500
</TABLE>

Employee Benefit Plans

1995 Stock Incentive Plan. Our board of directors and stockholders adopted
and approved the 1995 Stock Incentive Plan in April 1996. The 1995 Plan
provides for grants of incentive stock options, non-qualified stock options and
stock awards to employees, directors, consultants and advisors. Members of the
non-employee director administrative committee are not eligible to receive
options and awards. We may issue options to purchase a maximum of 4,634,600
shares of common stock under the 1995 Plan. The board of directors may not
increase the maximum number of shares without obtaining the approval of the
stockholders. No options or awards may be granted under the 1995 Plan after
April 2005.

The 1995 Plan may be administered by the board of directors or a committee
of non-employee directors. The plan administrator has the power to determine
the persons to whom, the times at which, and the price at which the options and
awards shall be granted, and to determine the type of option or award to be
granted and the number of shares subject to options and awards.

The plan administrator determines the option price for options. For a non-
qualified stock option, the price shall be at least equal to 85% of the fair
market value of the shares on the date the option is granted. For an incentive
stock option, the price shall be at least 100% of the fair market value on the
date the option is granted. If a recipient of an incentive stock option owns
shares possessing more than 10% of the total voting power of all classes of
stock, the option price shall be at least 110% of the fair market value on the
grant date.

Options expire not later than ten years after the date of the grant, or five
years after the date of grant if the recipient owns shares possessing more than
10% of the combined voting power of all classes of stock. Options expire thirty
days from the date the recipient's employment or service with the company
terminates or twelve months after termination which is due to disability or
death, unless the grant agreement or plan administrator provides otherwise.
Options are not transferable during the lifetime of the recipient, except that
a non-qualified stock option may be transferred pursuant to the terms of a
domestic relations order, or otherwise as provided in the grant agreement.

The 1995 Plan provides that in the event of a change of control, the plan
administrator may take any appropriate action with respect to options,
including terminating options with 15 days' notice, or causing options to
become immediately exercisable in full. In the event of a merger of the Company
into another company or a sale of all or substantially all of the assets of the
Company, options shall become immediately exercisable unless the successor
company agrees to assume the options or provide equivalent options.

52
<PAGE>

Awards of stock granted pursuant to the 1995 Plan shall be in the form of
written award agreements approved by the plan administrator. The plan
administrator may impose appropriate restrictions and forfeiture conditions on
stock awards.

In the event that the outstanding shares are modified by reason of a
reorganization, merger, consolidation, recapitalization, reclassification,
stock split, combination or exchange of shares, the plan administrator shall
make appropriate adjustments to the aggregate number of shares available under
the 1995 Plan and the number of shares and price per share of outstanding
options.

401(k) Profit Sharing Plan. We have adopted a tax-qualified employee savings
and retirement plan, the 401(k) Profit Sharing Plan, for eligible U.S.
employees. Eligible employees may elect to defer a portion of their eligible
compensation, subject to the statutorily prescribed annual limit. We may make
matching contributions on behalf of all participants who have elected to make
deferrals to the 401(k) Profit Sharing Plan in an amount determined annually by
ESPS. Any contributions to the plan by us or the participants are paid to a
trustee. The contributions made by ESPS, if any, are subject to a vesting
schedule; all other contributions are fully vested at all times. The 401(k)
Profit Sharing Plan, and the accompanying trust, is intended to qualify under
Sections 401(k) and 501 of the Internal Revenue Code, so that contributions by
us or by employees and income earned (if any) on plan contributions are not
taxable to employees until withdrawn and contributions by us, if any, will be
deductible by us when made. At the direction of each participant, the trustee
invests the contributions made to the 401(k) Profit Sharing Plan in any number
of investment options.

Limitations on Liability of Directors and Officers and Indemnification

Limitation of Liability

Our certificate of incorporation provides that our officers and directors
will not be personally liable to us or our stockholders for monetary damages
resulting from a breach of fiduciary duty, to the maximum extent permitted by
Delaware law. Under Delaware law, directors of a corporation will not be
personally liable for monetary damages for breach of their fiduciary duties as
directors, except for:

. Any breach of the duty of loyalty to the corporation or its stockholders;

. Acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

. Unlawful payments of dividends or unlawful stock repurchases or
redemptions; or

. Any transaction from which the director derived an improper personal
benefit.

This limitation of liability does not apply to non-monetary remedies that
may be available, such as injunctive relief or rescission, nor does it relieve
our officers and directors from complying with federal or state securities
laws.

Indemnification

Our certificate of incorporation provides that we will indemnify our
directors and executive officers, and may indemnify our other corporate agents,
to the fullest extent permitted by law. This provision deters transactions not
approved by the board, including transactions which may offer a premium over
market price for shares of common stock. An officer or director shall not be
entitled to indemnification if:

. The officer or director did not act in good faith and in a manner
reasonably believed to be in, or not opposed to our best interests; or

. The officer or director is subject to criminal action or proceedings and
had reasonable cause to believe the conduct was unlawful.

53
<PAGE>

CERTAIN TRANSACTIONS

Agreement with Adobe Systems Incorporated

In November 1997, we signed a license and marketing agreement with Adobe
Systems Incorporated. Adobe System Incorporated is a majority partner of a
limited partnership of which Adobe Ventures L.P., our largest stockholder is a
limited partner. Under this agreement, we customized software for Adobe Systems
Incorporated and granted Adobe an exclusive, non-transferable, world-wide
license to use the customized software.

We received license fees of $1.8 million for the use of the customized
software. We are also entitled to receive royalty fees based on sales of the
Adobe software product which incorporates our technology. We have not received
any royalty payments to date.

Issuance of Preferred Stock to Significant Stockholders

In March 1997, we issued additional shares of preferred stock to H&Q ESPS
Investors L.P., and to Adobe Ventures, L.P., two of our significant
stockholders. Under the terms of the stock purchase agreement, Adobe Ventures
L.P. purchased 2,500,000 shares of preferred stock, and H&Q ESPS Investors L.P.
purchased 1,500,000 shares of preferred stock, at a price of $1.00 per share.
These shares of preferred stock will convert into shares of common stock upon
consummation of the offering. Partial payment for the shares sold to Adobe
Ventures L.P. was in the form of cancellation of promissory notes. We have also
entered into a rights agreement with these two stockholders, which grants them
rights to require registration of their shares of preferred stock or the common
stock into which it is convertible. See "Description of Capital Stock--
Registration Rights."

Promissory Notes Payable to Adobe Ventures L.P.

In July 1996, we issued a promissory note payable to Adobe Ventures L.P. in
the amount of $500,000 with interest at a rate of 6.04% per year. In September
1996, we issued a promissory note payable to Adobe Ventures L.P. in the amount
of $500,000 with interest at a rate of 6.02% per year. In November 1996, we
issued a promissory note payable to Adobe Ventures L.P. in the amount of
$500,000 with interest at a rate of 5.96%. The amount due was convertible into
shares of preferred stock, and the loans were fully paid by the issuance of
preferred stock to Adobe Ventures L.P. in March 1997.

Relationship Between a Director and Significant Stockholder

Christopher B. Hollenbeck, a member of our board of directors, is an
investment manager of Adobe Venture Funds, an affiliate of Adobe Ventures,
L.P., a significant stockholder of ESPS.

54
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table contains information regarding the beneficial ownership
of the common stock of ESPS as of February 28, 1999 by:

. Each person or entity who is known by us to own beneficially more than 5%
of our outstanding common stock;

. Each of the executive officers and the former executive officer named in
the Summary Compensation Table;

. Each director of ESPS;

. All directors and executive officers as a group; and

. All other selling stockholders.

Except as otherwise indicated, and subject to applicable community property
laws, the persons named in the table have sole voting and investment power over
all shares of common stock held by them. Applicable percentage ownership in the
following table is based on 8,160,857 shares of common stock outstanding as of
February 28, 1999 and shares outstanding immediately following the
completion of this offering. The number of options represents stock options
that are exercisable within 60 days of February 28, 1999. When shares are
issued upon exercise of options, warrants or other rights to acquire our
capital stock, there will be further dilution to new public investors.

<TABLE>
<CAPTION>
Prior To Offering Number of After Offering
----------------------------------- Shares ----------------------------
Name Shares Options Total Percent Being Offered Shares Options Total Percent
---- ------ ------- ----- ------- ------------- ------ ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5% Stockholders
Adobe Ventures L.P...... 4,000,000 -- 4,000,000 49.0%
One Bush Street
San Francisco, CA 94104
H&Q ESPS Investors LP... 2,000,000 -- 2,000,000 24.5%
One Bush Street
San Francisco, CA 94104

Executive Officers,
Former Executive
Officer and Directors
Terrence P. Brennan..... 756,250 68,750 825,000 10.0%
Michael T. Hoey......... 140,100 110,211 250,311 3.0%
George B. Pearcy........ 40,000 104,688 144,688 1.8%
Jeffrey C. Sager........ 41,250 30,000 71,250 0.9%
William Collom.......... 51,250 -- 51,250 0.6%
Charles O. Heller....... 101,875 9,375 111,250 1.4%
Christopher B.
Hollenbeck(1).......... 6,000,000 -- 6,000,000 73.5%
All directors and
executive officers as a
group (9 persons)...... 1,091,975 323,024 1,414,999 92.2%

Other Selling
Stockholders
</TABLE>
- ---------------------
(1) Consists of (i) 4,000,000 shares of common stock issuable upon conversion
of shares of Series A Preferred Stock owned and held by Adobe Ventures L.P.
and (ii) 2,000,000 shares of common stock issuable upon conversion of
shares of Series A Preferred Stock owned and held by H&Q ESPS Investors LP.
Mr. Hollenbeck is a member of H&Q Adobe Ventures Management L.P., a general
partner of Adobe Ventures L.P., and as such may be deemed to share voting
and investment power with respect to the shares held by Adobe Ventures L.P.
Mr. Hollenbeck has a pecuniary interest in H&Q ESPS Investment Management
Co. LLC, a general partner of H&Q ESPS Investors LP. Mr. Hollenbeck
disclaims beneficial ownership of the shares held by Adobe Ventures L.P.
and the shares held by H&Q ESPS Investors, LP., except to the extent of his
pecuniary interest.

55
<PAGE>

DESCRIPTION OF CAPITAL STOCK

General

At the closing of the offering our authorized capital stock will consist of
50,000,000 shares of common stock, par value $.001 per share, and 5,000,000
shares of preferred stock, par value $.001 per share. Prior to the closing of
the offering, there will be 6,000,000 shares of Series A Preferred Stock issued
and outstanding. These shares of Series A Preferred Stock will automatically
convert into common stock upon consummation of this offering. After the
offering there will be no preferred stock issued and outstanding.

The following description of our capital stock does not purport to be
complete and is subject to and qualified in its entirety by our certificate of
incorporation and bylaws and by the applicable provisions of Delaware law.

Our certificate of incorporation and bylaws contain certain provisions that
are intended to enhance the likelihood of continuity and stability in the
composition of the board of directors and which may have the effect of
delaying, deferring, or preventing a future takeover or change in control of
ESPS unless such takeover or change in control is approved by the board of
directors.

Common Stock

As of February 28, 1999, there were 2,160,857 shares of common stock
outstanding which were held of record by 52 stockholders.

Holders of common stock are entitled to one vote per share on all matters to
be voted upon. Holders of common stock do not have cumulative voting rights.
Holders of common stock are entitled to receive dividends as may be declared
from time to time by the board of directors out of funds legally available for
the payment of dividends, subject to the preferences that apply to any
outstanding preferred stock. See "Dividend Policy." Upon a liquidation,
dissolution or winding up of ESPS, the holders of common stock are entitled to
share proportionately in all assets remaining after payment of liabilities,
after we carry the distribution rights of then outstanding preferred stock. The
common stock has no preemptive or conversion rights and no additional
subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are
fully paid and nonassessable. The shares issued in this offering will be fully
paid and nonassessable.

Preferred Stock

Our certificate of incorporation authorizes the board of directors, without
stockholder action, to designate and issue preferred stock. The board may
designate the price, rights, preferences and privileges of the preferred
shares, which may be greater than the rights of the common stock. It is not
possible to state the actual effect of the issuance of any shares of preferred
stock upon the rights of holders of common stock until the board determines the
specific rights of the preferred stock. However, possible effects of issuing
preferred stock with voting and conversion rights include:

. Restricting dividends on common stock;

. Diluting the voting power of common stock;

. Impairing the liquidation rights of the common stock;

. Delaying or preventing a change of control of ESPS without stockholder
action; and

. Harming the market price of common stock.

We have no present plans to issue any shares of preferred stock.

56
<PAGE>

Registration Rights

Shares of our Series A Preferred Stock convert into shares of our common
stock. The common stock which these preferred shares convert into is
unregistered. We granted registration rights to holders of our Series A
Preferred Stock. In addition, we granted registration rights to Larry D.
Tindell, Ronald M. Swartz and Mark Gavin, who hold unregistered shares of our
common stock. These registration rights are provided under the terms of an
agreement between us and the holders of the registrable securities. The
agreement grants three types of registration rights:

. Requested Registration. The holders of the registrable securities may
require us to use our best efforts to prepare a registration statement
and other related documents which would permit the sale of the
registrable securities. We only to need to prepare the registration
statement and related documents if at least 25% of the registrable
securities are to be registered, or if the aggregate offering price will
be least $5,000,000. We shall bear the expenses incurred in a requested
registration.

. ESPS Registration. If we elect to register any of our shares of common
stock in a public offering, the holders of the registrable securities are
entitled to include their shares in the registration, subject to our
right to reduce the number of shares to be registered in view of market
conditions. We shall bear the expenses incurred in an ESPS registration.

. Registration on Form S-3. Holders of the registrable securities may
require that we register their shares for public resale on Form S-3,
provided that we are eligible to use Form S-3 and that the value of the
securities to be registered is at least $500,000. We are only required to
make one requested S-3 registration in any six month period. The
requesting holders shall bear the expenses incurred in a "Registration on
Form S-3."

Delaware Anti-Takeover Law and Provisions in Our Charter and Bylaws

Provisions of Delaware law, our certificate of incorporation and bylaws
could make the acquisition of ESPS by proxy contest or otherwise and the
removal of incumbent officers and directors more difficult. These provisions
are intended to discourage coercive takeover practices and inadequate takeover
bids and to encourage persons seeking to control ESPS to first negotiate with
us. We believe that the benefits provided to ESPS by allowing us to negotiate
with an unfriendly or unsolicited acquiror outweigh the disadvantages of
discouraging such proposals since we will have the opportunity to negotiate
improved terms. These provisions deter transactions not approved by the board,
and could have the effect of discouraging tender offers which may provide a
premium over market price for shares of common stock. Consequently, the
provisions may also inhibit fluctuations in the market price of our shares
resulting from actual or rumored takeover attempts.

Delaware Law. We are subject to Section 203 of the Delaware General
Corporation Law, or the anti-takeover law, which regulates corporate
acquisitions. The anti-takeover law prohibits a publicly-held Delaware
corporation from engaging in a "business combination" with any "interested
stockholder" for three years following the date the person became an interested
stockholder, unless the transaction is approved in a prescribed manner.

. A "business combination" includes a merger, consolidation, asset or stock
sale, or other transaction resulting in a financial benefit to the
interested stockholder.

. An "interested stockholder" is a person or entity who, together with
affiliates and associates, owns, or within three years prior to the
determination of interested stockholder status, did own, 15% or more of
the corporation's voting stock.

Our Charter Documents. Our Certificate of Incorporation eliminates the right
of stockholders to act by written consent without a duly called annual or
special meeting. Our Certificate of

57
<PAGE>

Incorporation and Bylaws do not provide for cumulative voting in the election
of directors. The authorization of undesignated preferred stock makes it
possible for the board of directors to issue preferred stock with voting or
other rights or preferences that could impede the success of any attempt to
change control of ESPS. These and other provisions are intended to enhance
continuity and stability in the composition of the board of directors and to
reduce the vulnerability to unsolicited or hostile takeovers, and could delay
changes in the control or management of ESPS. The amendment of any of these
provisions requires approval by holders of 66 2/3% of the outstanding common
stock.

Transfer Agent

The transfer agent and registrar for the common stock is StockTrans, Inc.,
Ardmore, Pennsylvania.

58
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of common stock in the public market following
the offering could adversely affect the market price of the common stock and
adversely affect our ability to raise capital at a time and on terms favorable
to us.

Of the shares to be outstanding after the offering assuming that the
underwriters do not exercise their over-allotment option, shares of common
stock will be freely tradeable. After the offering 7,091,975 shares will be
held by "affiliates," as that term is defined in Rule 144(a) under the
Securities Act of 1933. For purposes of Rule 144, an "affiliate" of an issuer
is a person that, directly or indirectly through one or more intermediaries,
controls, or is controlled by or is under common control with, such issuer. The
shares held by affiliates are "restricted securities" under the Securities Act
of 1933 and may be sold in the public market upon the expiration of certain
holding periods under Rule 144, subject to the volume, manner of sale and other
limitations of Rule 144.

In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares for at least two years, including an "affiliate," as
that term is defined in the Securities Act, is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of:

. one percent of the then outstanding shares of our common stock
(approximately shares immediately following the offering), or

. the average weekly trading volume during the four calendar weeks
preceding filing of notice of such sale. Sales under Rule 144 are also
subject to certain manner of sale provisions, notice requirements and
the availability of current public information about us. A shareholder
who is deemed not to have been an "affiliate" of ours at any time during
the 90 days preceding a sale, and who has beneficially owned restricted
shares for at least two years, would be entitled to sell such shares
under Rule 144(k) without regard to the volume, limitations, manner of
sale provisions or public information requirements.

All of our affiliates have agreed to further restrict their shares by
entering into lock-up arrangements discussed below.

We have granted options to purchase shares of our common stock under our
1995 Stock Incentive Plan. As of February 28, 1999, options to purchase 331,753
shares of our common stock were fully vested and exercisable. An additional
385,111 shares were reserved for issuance under the 1995 Stock Incentive Plan.
We intend to register the shares of common stock issuable or reserved for
issuance under the plan within 180 days after the date of this prospectus.

Lock-up Arrangements

Our officers and directors, employees and other stockholders have agreed not
to sell or otherwise dispose of any shares of common stock for a period of 180
days after the date of this prospectus without the prior written consent of
Hambrecht & Quist LLC. Upon the expiration of these lock-up agreements,
additional shares will be available for sale in the public market.

59
<PAGE>

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below, through their representatives, Hambrecht & Quist LLC,
BancBoston Robertson Stephens, Inc. U.S. Bancorp Piper Jaffray Inc. and Charles
Schwab & Co., Inc. have severally agreed to purchase from ESPS and the selling
stockholders the following respective number of shares of common stock:

<TABLE>
<CAPTION>
Number of
Name Shares
---- ---------
<S> <C>
Hambrecht & Quist LLC............................................
BancBoston Robertson Stephens, Inc. .............................
U.S. Bancorp Piper Jaffray Inc...................................
Charles Schwab & Co., Inc........................................
---
Total..........................................................
===
</TABLE>

The underwriting agreement provides that the obligations of the underwriters
are subject to certain conditions that we and the selling stockholders must
satisfy, including the absence of any material adverse change in our business
and the receipt of certain certificates, opinions and letters from us, the
selling stockholders, counsel and the independent auditors. The underwriters
are obligated to purchase shares of common stock offered in this prospectus if
any of the shares are purchased.

The underwriters propose to offer the shares of common stock directly to the
public at the initial public offering price set forth on the cover page of this
prospectus and to dealers at the initial public offering price less a
concession not in excess of $ per share. The underwriters may allow and the
dealers may reallow, a concession not in excess of $ per share to brokers
and dealers. After the initial public offering of the shares, the underwriters
may change the offering price and other selling terms.

The following table shows the per share and total underwriting discounts and
commissions to be paid to the underwriters by us and the selling stockholders
in connection with this offering. These amounts are shown assuming both no
exercise and full exercise of the underwriters' option to purchase additional
shares of common stock.

<TABLE>
<CAPTION>
Paid by Us Paid by Selling Stockholders
------------------------- ----------------------------------
No Exercise Full Exercise No Exercise Full Exercise
----------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
Per share...............
Total...................
</TABLE>

We will pay the offering expenses, estimated to be $ million.

We and certain selling stockholders have granted to the underwriters an
option, exercisable no later than 30 days after the date of this prospectus, to
purchase up to additional shares of common stock at the initial public
offering price, less the underwriting discount set forth on the cover page of
this prospectus. To the extent that the underwriters exercise this option, each
of the underwriters will have a firm commitment to purchase a number of shares
that approximately reflects the same percentage of total shares the underwriter
purchased in the above table. We will be obligated, pursuant to the option, to
sell shares to the underwriters to the extent the option is exercised. The
underwriters may exercise such option only to cover over-allotments made in
connection with the sale of shares of common stock offered in this prospectus.

60
<PAGE>

The offering of the shares is made for delivery when, as and if accepted by
the underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.

We and the selling stockholders have agreed to indemnify the underwriters
against liabilities, including liabilities under the Securities Act, and to
contribute to payments the underwriters may be required to make in respect
thereof.

The selling stockholders and certain other stockholders of ours, including
executive officers and directors, who will own in the aggregate shares of
our common stock after the offering, have agreed that they will not, without
the prior written consent of Hambrecht & Quist LLC, offer, sell or otherwise
dispose of any shares of our common stock, options or warrants to acquire
shares of our common stock or securities exchangeable or convertible into
shares of our common stock owned by them during the 180-day period following
the date of this prospectus. We have agreed that we will not, without the prior
written consent of Hambrecht & Quist LLC, offer, sell or otherwise dispose of
any shares of our common stock, options or warrants to acquire shares of our
common stock or securities exchangeable for or convertible into shares of our
common stock during the 180-day period following the date of this prospectus,
except that we may issue shares upon the exercise of options granted prior to
the date of this prospectus, and may grant additional options under our stock
option plans, provided that, without the prior written consent of Hambrecht &
Quist LLC, the additional options shall not be exercisable during the 180-day
period.

Certain persons participating in this offering may over-allot or effect
transactions which stabilize, maintain or otherwise affect the market price of
our common stock at levels above those which might otherwise prevail in the
open market, including by entering stabilizing bids, effecting syndicate
covering transactions or imposing penalty bids. A stabilizing bid means the
placing of any bid or effecting of any purchase, for the purpose of pegging,
fixing or maintaining the price of our common stock. A syndicate covering
transaction means the placing of any bid on behalf of the underwriting
syndicate or the effecting of any purchase to reduce a short position created
in connection with the offering. A penalty bid means an arrangement that
permits the underwriters to reclaim a selling concession from a syndicate
member in connection with the offering when shares of common stock sold by the
syndicate member are purchased in syndicate covering transactions. These
transactions may be effected on the Nasdaq National Market, in the over-the
counter market, or otherwise. Stabilizing, if commenced, may be discontinued at
any time.

Prior to this offering, there has been no public market for our common
stock. The initial public offering price for our common stock will be
determined by negotiation among us, the selling stockholders and the
representatives. Among the factors to be considered in determining the initial
public offering price are prevailing market and economic conditions, our
revenues and earnings, market valuations of other companies engaged in
activities similar to ours, estimates of our business potential and prospects,
the present state of our business operations, our management and other factors
deemed relevant. The estimated initial public offering price range set forth on
the cover of this preliminary prospectus is subject to change as a result of
market conditions or other factors.

We have applied for quotation of our common stock on the Nasdaq National
Market under the symbol "ESPS."

H&Q ESPS Investors, L.P. holds 2,000,000 shares of Series A Preferred Stock,
which will automatically convert into 2,000,000 shares of common stock upon
consummation of this offering. H&Q ESPS Investors, L.P. is a Delaware limited
partnership with two general partners. One of the general partners is a wholly-
owned subsidiary of Hambrecht & Quist California and the other is a limited
liability company the members of which are unaffiliated with the Hambrecht &
Quist LLC. In

61
<PAGE>

addition, certain of the limited partners of H&Q ESPS Investors, L.P. are
employees of Hambrecht & Quist LLC or directors of Hambrecht & Quist Group, the
parent corporation of Hambrecht & Quist California. Hambrecht & Quist LLC, one
of the underwriters in this offering, is wholly owned by Hambrecht & Quist
California.

Adobe Ventures L.P. holds 4,000,000 shares of Series A Preferred Stock which
will automatically convert into 4,000,000 shares of common stock upon
consummation of this offering. H&Q Adobe Ventures Management L.P. is a general
partner of Adobe Ventures L.P. Adobe Ventures Management Inc., a limited
partner of H&Q Adobe Ventures Management L.P., is a wholly-owned subsidiary of
Hambrecht & Quist California. Hambrecht & Quist LLC, one of the underwriters in
this offering, is wholly owned by Hambrecht & Quist California.

LEGAL MATTERS

Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania will provide ESPS an
opinion relating to the validity of the common stock issued in this offering.
Brobeck, Phleger & Harrison LLP, New York, New York will provide the
Underwriters an opinion related to other matters in this offering.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our financial
statements at March 31, 1998 and 1997, and for each of the three years in the
period ended March 31, 1998, as set forth in their report. We have included our
financial statements in the prospectus and elsewhere in the registration
statement in reliance on Ernst & Young LLP's report, given on their authority
as experts in accounting and auditing.

ADDITIONAL ESPS INFORMATION

We have filed with the SEC a registration statement on Form S-1 with respect
to the common stock offered hereby. This prospectus, which constitutes a part
of the registration statement, does not contain all of the information set
forth in the registration statement or the exhibits and schedules which are
part of the registration statement. For further information with respect to
ESPS and the common stock, reference is made to the registration statement and
the exhibits and schedules thereto. You may read and copy any document we file
at the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information about the public reference rooms. Our SEC filings are also
available to the public from the SEC's Web site at http://www.sec.gov. Upon
completion of this offering, we will become subject to the information and
periodic reporting requirements of the Securities Exchange Act and, in
accordance therewith, will file periodic reports, proxy statements and other
information with the SEC. Such periodic reports, proxy statements and other
information will be available for inspection and copying at the SEC's public
reference rooms and the Web site of the SEC referred to above.

62
<PAGE>

ESPS, INC.

FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 1998 AND 1997 (UNAUDITED)
AND FOR THE YEARS ENDED MARCH 31, 1996, 1997, AND 1998

CONTENTS

<TABLE>
<S> <C>
Report of Independent Auditors........................................ F-2
Audited Financial Statements
Balance Sheets........................................................ F-3
Statements of Operations.............................................. F-4
Statements of Stockholders' Equity.................................... F-5
Statements of Cash Flows.............................................. F-6
Notes to Financial Statements......................................... F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
ESPS, Inc.

We have audited the accompanying balance sheets of ESPS, Inc. as of March
31, 1998 and 1997, and the related statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended March
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ESPS, Inc. at March 31,
1998 and 1997, and the results of its operations and its cash flows for each of
the three years in the period ended March 31, 1998, in conformity with
generally accepted accounting principles.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
April 23, 1998
except for Note 12, as to
which the date is
March 30, 1999

F-2
<PAGE>

ESPS, INC.

BALANCE SHEETS
(In thousands)

<TABLE>
<CAPTION>
Pro forma
Stockholders'
March 31, Equity at
---------------- December 31, December 31,
1997 1998 1998 1998
------- ------- ------------ -------------
(Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....... $ 2,311 $ 4,558 $ 3,142
Accounts receivable, net of
allowance of $0, $50 and $150,
respectively................... 370 3,616 4,904
Accounts receivable--related
party.......................... -- 323 75
Deferred income taxes........... -- 650 304
Other current assets............ 45 49 241
------- ------- -------
Total current assets.......... 2,726 9,196 8,666
Property and equipment, net....... 410 763 1,603
Other assets...................... 75 58 28
------- ------- -------
Total assets.................. $ 3,211 $10,017 $10,297
======= ======= =======
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable................ $ 50 $ 30 $ 335
Accrued expenses................ 268 1,045 1,473
Deferred revenues--current...... 800 2,802 1,393
Deferred revenues--related
party.......................... -- 1,200 600
------- ------- -------
Total current liabilities..... 1,118 5,077 3,801
Deferred revenue, less current
portion.......................... 131 44 --
Stockholders' equity:
Series A Preferred Stock, $0.001
par value:
Authorized shares--6,000
Issued and outstanding
shares--6,000
(liquidation preference of
$6,000)...................... 6 6 6 --
Common stock, $0.001 par value:
Authorized shares--50,000
Issued and outstanding
shares--366, 909, and 1,990
at March 31, 1997 and 1998
and December 31, 1998,
respectively................. -- 1 2 8
Additional paid-in capital...... 5,958 6,123 6,550 6,550
Retained earnings (accumulated
deficit)....................... (4,002) (1,127) 192 192
Deferred stock compensation..... -- (107) (254) (254)
------- ------- ------- -------
Total stockholders' equity.... 1,962 4,896 6,496 6,496
------- ------- ------- -------
Total liabilities and
stockholders' equity......... $ 3,211 $10,017 $10,297 $10,297
======= ======= ======= =======
</TABLE>

See accompanying notes.

F-3
<PAGE>

ESPS, INC.

STATEMENTS OF OPERATIONS
(In thousands, except per share data)

<TABLE>
<CAPTION>
Nine months ended
Years ended March 31, December 31,
----------------------- -------------------
1996 1997 1998 1997 1998
------ ------- ------ -------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses.............. $ 721 $ 648 $6,814 $ 4,013 $ 9,461
Services and maintenance....... 32 420 1,832 1,081 2,878
------ ------- ------ -------- ---------
Total revenues............... 753 1,068 8,646 5,094 12,339
Cost of revenues:
Software licenses.............. -- 68 258 142 272
Services and maintenance....... 72 506 1,589 1,021 2,021
------ ------- ------ -------- ---------
Total cost of revenues....... 72 574 1,847 1,163 2,293
------ ------- ------ -------- ---------
Gross profit..................... 681 494 6,799 3,931 10,046
Operating expenses:
Research and development....... 725 1,407 1,978 1,393 2,778
Sales and marketing............ 95 714 1,283 774 3,026
General and administrative..... 633 1,147 1,229 794 2,214
------ ------- ------ -------- ---------
Total operating expenses..... 1,453 3,268 4,490 2,961 8,018
------ ------- ------ -------- ---------
Income (loss) from operations.... (772) (2,774) 2,309 970 2,028
Interest, net.................... 18 (39) 52 38 127
------ ------- ------ -------- ---------
Income (loss) before income
taxes........................... (754) (2,813) 2,361 1,008 2,155
Income tax provision (benefit)... -- -- (514) (1,025) 836
------ ------- ------ -------- ---------
Net income (loss)................ $ (754) $(2,813) $2,875 $ 2,033 $ 1,319
====== ======= ====== ======== =========
Earnings (loss) per share:
Basic.......................... $(1.11) $ (5.09) $ 5.53 $ 5.07 $ 0.80
Diluted........................ $(1.11) $ (5.09) $ 0.37 $ 0.28 $ 0.13
Shares used in computation of
earnings (loss) per share:
Basic.......................... 682 553 520 401 1,658
Diluted........................ 682 553 7,859 7,333 9,949
Pro forma earnings per share:
Basic.......................... $ 0.44 $ 0.17
Diluted........................ $ 0.37 $ 0.13
Shares used in computation of pro
forma earnings per share:
Basic.......................... 6,520 7,658
Diluted........................ 7,859 9,949
</TABLE>

See accompanying notes.

F-4
<PAGE>

ESPS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)

<TABLE>
<CAPTION>
Series A Retained
Preferred Stock Common Stock Additional Earnings Deferred Total
----------------- -------------- Paid-In (Accumulated Stock Stockholders'
Shares Amount Shares Amount Capital Deficit) Compensation Equity
-------- ------- ------ ------ ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31,
1995................... 1,000 $ 1 1,000 $ 1 $ 980 $ (435) $ -- $ 547
Issuance of Series A
Preferred Stock....... 1,000 1 -- -- 999 -- -- 1,000
Stock issuance costs... -- -- -- -- (7) -- -- (7)
Repurchase of common
stock................. -- -- (411) (1) -- -- -- (1)
Net loss............... -- -- -- -- -- (754) -- (754)
-------- ------- ----- ---- ------ ------- ----- -------
Balance at March 31,
1996................... 2,000 2 589 -- 1,972 (1,189) -- 785
Issuance of Series A
Preferred Stock....... 4,000 4 -- -- 3,996 -- -- 4,000
Stock issuance costs... (10) -- (10)
Repurchase of common
stock................. (223) -- -- -- --
Net loss............... -- -- -- -- -- (2,813) -- (2,813)
-------- ------- ----- ---- ------ ------- ----- -------
Balance at March 31,
1997................... 6,000 6 366 -- 5,958 (4,002) -- 1,962
Exercise of stock
options............... -- -- 543 1 58 -- -- 59
Deferred stock
compensation.......... -- -- -- -- 107 -- (107) --
Net income............. -- -- -- -- -- 2,875 -- 2,875
-------- ------- ----- ---- ------ ------- ----- -------
Balance at March 31,
1998................... 6,000 6 909 1 6,123 (1,127) (107) 4,896
Exercise of stock
options (unaudited)... -- -- 1,081 1 112 -- -- 113
Deferred stock
compensation
(unaudited)........... -- -- -- -- 315 -- (315) --
Amortization of
deferred stock
compensation
(unaudited)........... -- -- -- -- -- -- 168 168
Net income (unaudited). -- -- -- -- -- 1,319 -- 1,319
-------- ------- ----- ---- ------ ------- ----- -------
Balance at December 31,
1998 (unaudited)....... 6,000 $ 6 1,990 $ 2 $6,550 $ 192 $(254) $ 6,496
======== ======= ===== ==== ====== ======= ===== =======
</TABLE>

See accompanying notes.

F-5
<PAGE>

ESPS, INC.

STATEMENTS OF CASH FLOWS
(In thousands)

<TABLE>
<CAPTION>
Nine months ended
Years ended March 31, December 31,
------------------------ ------------------
1996 1997 1998 1997 1998
------ ------- ------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income (loss)............... $ (754) $(2,813) $ 2,875 $ 2,033 $ 1,319
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization. 102 170 223 127 278
Deferred income taxes......... -- -- (650) (1,083) 346
Provision for losses on
accounts receivables......... -- -- 50 -- 100
Amortization of deferred stock
compensation................. 168
Changes in assets and
liabilities:
Accounts receivable......... -- (370) (3,619) (3,445) (1,139)
Other assets................ 7 (85) (16) (59) (185)
Accounts payable and accrued
expenses................... 170 93 757 527 733
Deferred revenue............ 253 679 3,115 2,252 (2,053)
------ ------- ------- -------- --------
Net cash provided by (used
in) operating activities. (222) (2,326) 2,735 352 (433)

Investing activities:
Purchase of property and
equipment...................... (335) (224) (547) (374) (1,096)

Financing activities:
Proceeds from issuance of bridge
loan........................... -- 1,500 -- -- --
Proceeds from the issuance of
preferred stock................ 1,000 2,500 -- -- --
Stock issuance costs............ (7) (10) -- -- --
Repurchase of common stock...... (1) -- -- -- --
Proceeds from exercise of stock
options........................ -- -- 59 2 113
------ ------- ------- -------- --------
Net cash provided by
financing activities..... 992 3,990 59 2 113
------ ------- ------- -------- --------
Net increase (decrease) in cash
and cash equivalents........... 435 1,440 2,247 (20) (1,416)
Cash and cash equivalents,
beginning of period............ 436 871 2,311 2,311 4,558
------ ------- ------- -------- --------
Cash and cash equivalents, end
of period...................... $ 871 $ 2,311 $ 4,558 $ 2,291 $ 3,142
====== ======= ======= ======== ========
Supplemental disclosures of cash
flow information:
Conversion of bridge loan to
preferred stock................ $ -- $ 1,500 $ -- $ -- $ --
====== ======= ======= ======== ========
</TABLE>

See accompanying notes.

F-6
<PAGE>

ESPS, INC.

NOTES TO FINANCIAL STATEMENTS

1. Business

ESPS, Inc. (formerly Electronic Submission Publishing Systems, Inc.) (the
"Company"), a Delaware corporation, is a leading provider of enterprise
compliance management solutions to businesses in highly regulated industries.
The Company's solution, which consists of the CoreDossier family of software
products and related services, enables users throughout an enterprise to
collaborate in the authoring, compilation, distribution and publishing of
compliance information and regulatory submissions. The Company designed its
CoreDossier software products to utilize advanced technologies, such as
corporate intranets and the Internet, and to meet emerging electronic
compliance requirements and standards. The Company believes its solution
enables its customers to realize a return on their investment by reducing the
cost and burden of compliance while also reducing the time required to bring
new products and services to market. The Company's initial concentration has
been directed to the pharmaceutical industry.

The interim financial statements of the Company for the nine months ended
December 31, 1998 and 1997, included herein, have been prepared by the Company,
without audit, pursuant to the rules and regulations of the SEC.

In the opinion of management, the accompanying unaudited interim financial
statements reflect all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the results of the Company's
operations and its cash flows for the nine months ended December 31, 1998 and
1997. The accompanying unaudited interim financial statements are not
necessarily indicative of full year results.

2. Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Revenue Recognition

Statement of Position 97-2, "Software Revenue Recognition" (SOP 97-2), was
issued in October 1997 by the American Institute of Certified Public
Accountants (AICPA) and was amended by Statement of Position 98-4 (SOP 98-4).
The Company adopted SOP 97-2 in fiscal 1998. Based upon their interpretation of
SOP 97-2 and SOP 98-4, the Company believes its current revenue recognition
policies and practices are consistent with SOP 97-2 and SOP 98-4. However, full
implementation guidelines for this standard have not yet been issued.

Additionally, the AICPA recently issued SOP 98-9, which provides certain
amendments to SOP 97-2, which is effective for transactions entered into
beginning April 1, 1999. This pronouncement is not expected to materially
impact the Company's revenue recognition practices.

The Company generates revenues through software licenses and services and
maintenance. Software licenses revenues are generated from licensing the rights
to use the Company's products. Services and maintenance revenues are generated
from sales of customer support services contracts and consulting and training
services performed for customers that license the Company's products.

F-7
<PAGE>

ESPS, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

2. Accounting Policies (continued)

Revenues from the sale of software licenses are recognized upon shipment of
software when persuasive evidence of an arrangement exists, collection is
probable, the fee is fixed or determinable, and vendor-specific objective
evidence exists to allocate the total fee to elements of the arrangement.
Vendor-specific objective evidence is typically based on the price charged when
an element is sold separately, or, in the case of an element not yet sold
separately, the price established by authorized management, if it is probable
that the price, once established, will not change before market introduction.
Elements included in multiple element arrangements could consist of software
products, upgrades, enhancements, customer support services, or consulting
services. If an acceptance period is required, revenues are recognized upon the
earlier of customer acceptance or the expiration of the acceptance period.

Revenues from maintenance are recognized ratably over the term of the
customer support contract, typically one year. Consulting revenues are
primarily related to implementation services performed on a time-and-materials
basis under separate service arrangements related to the installation of the
Company's software products. Revenues from consulting and training services are
recognized as services are performed. If a transaction includes both license
and service elements, license fee revenues are recognized on shipment of the
software, provided services do not include significant customization or
modification of the base product, and the payment terms for licenses are not
subject to acceptance criteria.

Revenues from three customers each exceeding 10% of total revenues accounted
for approximately 46% of total revenues in 1998. Amounts due from these
customers amounted to approximately $193,000 at March 31, 1998. Revenues from
three customers each exceeding 10% of total revenues accounted for 100% of
total revenues during the year ended March 31, 1997. Revenues from one customer
exceeded 10% of total revenues and accounted for approximately 86% of total
revenues during the year ended March 31, 1996. Revenues from one customer
exceeded 10% of total revenues and accounted for approximately 19% and 10% of
revenues for the nine months ended December 31, 1997 and 1998, respectively.

Cash and Cash Equivalents

The Company considers as cash equivalents all highly liquid investments with
an original maturity of three months or less.

Fair Value of Financial Instruments

At December 31, 1998, the Company has the following financial instruments:
cash and cash equivalents, accounts receivable, accounts payable and accrued
liabilities. The carrying value of cash and cash equivalents, accounts
receivable, accounts payable and accrued liabilities approximates their fair
value based on the liquidity of these financial instruments or based on their
short-term nature.

Concentration of Credit Risk and Major Customers

Financial instruments that potentially subject the Company to a
concentration of credit risk consist principally of accounts receivable. The
Company's customer base is mainly in North America and Europe and consists of
companies in the pharmaceutical, chemical and utility industries. The Company
does not require collateral or other security to support credit sales, but
provides an allowance for bad debts based on historical experience and
specifically identified risks.

F-8
<PAGE>

ESPS, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

2. Accounting Policies (continued)

Property and Equipment

Property and equipment is recorded at cost. Depreciation is computed using
accelerated methods over the estimated useful lives of the related assets which
range from five to seven years.

Research and Development

Research and development costs, which consist primarily of software
development costs, are expensed as incurred. Financial accounting standards
provide for the capitalization of certain software development costs after
technological feasibility of the software is established. Under the Company's
current practice of developing new products and enhancements, the technological
feasibility of the underlying software is not established until substantially
all product development is complete, including the development of a working
model. No such costs have been capitalized because the impact of capitalizing
such costs would not be material.

Accounting for Stock-Based Compensation

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation," (SFAS No. 123) provides companies with a choice to follow
the provisions of SFAS No. 123 in determination of stock-based compensation
expenses or to continue with the provisions of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," (APB No. 25). The
Company continues to follow APB No. 25 and has provided pro forma disclosures
as required by SFAS No. 123.

Earnings (Loss) Per Share and Pro Forma Earnings Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution of securities by
including other common stock equivalents, including stock options and
convertible preferred stock in the weighted average number of common shares
outstanding for a period, if dilutive.

Pro forma earnings per share is computed by dividing net income by the
weighted average number of common shares outstanding and the weighted average
convertible preferred stock outstanding as if such shares were converted into
common stock at the time of issuance.

Derivatives

In June 1998, SFAS No. 133, "Accounting for Derivatives and Hedging
Activities," was issued which establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded
in other contracts (collectively referred to as derivatives), and for hedging
activities. Because the Company has never used nor currently intends to use
derivatives, management does not anticipate that the adoption of this new
standard will have a significant effect on earnings or the financial position
of the Company. SFAS No. 133 is effective for fiscal years beginning after June
15, 1999.

F-9
<PAGE>

ESPS, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

3. Property and Equipment

Property and equipment consists of the following (amounts in thousands):

<TABLE>
<CAPTION>
March 31,
------------- December 31,
1997 1998 1998
----- ------ ------------
(Unaudited)
<S> <C> <C> <C>
Computer equipment............................... $ 450 $ 760 $1,151
Computer software................................ 90 173 211
Furniture, fixtures, and office equipment........ 157 311 977
----- ------ ------
697 1,244 2,339
Accumulated depreciation......................... (287) (481) (736)
----- ------ ------
Total property and equipment................... $ 410 $ 763 $1,603
===== ====== ======
</TABLE>

4. Accrued Expenses

Accrued expenses consist of the following (amounts in thousands):

<TABLE>
<CAPTION>
March 31,
----------- December 31,
1997 1998 1998
---- ------ ------------
(Unaudited)
<S> <C> <C> <C>
Income taxes........................................ $ -- $ 136 $ 338
Sales taxes......................................... 108 241 356
Payroll and related................................. 60 397 517
Other............................................... 100 271 262
---- ------ ------
Total accrued expenses............................ $268 $1,045 $1,473
==== ====== ======
</TABLE>

5. Capital Stock

The holders of the Series A Preferred Stock are entitled to noncumulative
dividends at a rate of $.08 per share prior to any payment of dividends on
common stock.

Each share of preferred stock is convertible into one share of common stock,
subject to adjustment in certain circumstances, and has a liquidation
preference of $1.00 per share. Conversion is at the option of the stockholders
until such time, if ever, that the Company consummates a public offering at a
designated price and from which the Company receives proceeds of at least
$10,000,000 at which time such conversion becomes mandatory. The preferred
stock has voting rights equal to its common stock conversion ratio.

Stock Options

The Company has a stock option plan whereby the Company may grant either
incentive or nonqualified stock options to purchase shares of the Company's
common stock. Twenty-five percent of the options are exercisable on the first
anniversary of the date of grant or the participant's hire date, whichever is
earlier. The additional amounts become exercisable at varying rates from 6.25%
to 9.40% on the last day of each quarter thereafter. The Company has authorized
4,634,600 shares to be issued under the plan.

F-10
<PAGE>

ESPS, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

5. Capital Stock (continued)

The incentive stock options may be granted at no less than the fair market
value of the shares at the date of grant, and the nonqualified stock options
are to be granted at no less than eighty-five percent of the fair market value
of the shares at the date of grant. The fair market value of the Company's
common stock is determined by the Board of Directors based on Company specific
objective evidence, including periodic outside independent valuations. Under
APB No. 25, if the exercise price of the Company's employee stock options
equals the fair value of the underlying stock on the date of grant, no
compensation expense is recognized. During the year ended March 31, 1998 and
during the nine months ended December 31, 1998, the Company determined that
certain common stock options were issued at a price that was lower than the
estimated fair value of the common stock, resulting in deferred compensation
expense of $107,000 and $315,000, respectively. The deferred compensation is
being amortized over the vesting period of the underlying options. Amortization
expense of $168,000 was recognized in the nine months ended December 31, 1998.
Amortization of the deferred stock-based compensation balance of approximately
$254,000 at December 31, 1998 will approximate $50,000 for the three months
ending March 31, 1999 and $116,000, $62,000, and $26,000 for the fiscal years
ending March 31, 2000, 2001, 2002, respectively.

The following table summarizes information about stock options outstanding
at December 31, 1998:

<TABLE>
<CAPTION>
Outstanding Exercisable
------------------------------------------------ --------------------------
Weighted Average
Per Share Number of Weighted Average Remaining Contractual Number of Weighted Average
Prices Shares Per Share Price Life (years) Shares Per Share Price
--------- --------- ---------------- --------------------- --------- ----------------
<S> <C> <C> <C> <C> <C>
$0.10-0.11 2,079,851 $0.10 3.3 260,636 $0.10
0.50 31,500 0.50 4.5 -- --
3.00 487,500 3.00 4.7 -- --
6.00 35,500 6.00 4.9 -- --
--------- -------
2,634,351 260,636
========= =======
</TABLE>

FASB No. 123 requires pro forma information regarding net income as if the
Company had accounted for its employee stock options under the fair value
method of that statement. The fair value for these options was estimated at the
date of grant using the minimum value method option pricing model with the
following weighted average assumptions for all periods presented: risk-free
interest rate of 5.2%, dividend yield of 0%, weighted average expected life of
the option of 4 years, and minimum value volatility.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information is as follows (in thousands except per share data):

<TABLE>
<CAPTION>
Nine months ended
Year ended March 31, December 31,
----------------------- -----------------
1996 1997 1998 1997 1998
------ ------- ------ -------- --------
<S> <C> <C> <C> <C> <C>
Net income (loss):
As reported.................... $ (754) $(2,813) $2,875 $ 2,033 $ 1,319
SFAS No. 123 pro forma......... (2,815) 2,870 2,028 1,203
Diluted earnings (loss) per
share:
As reported--diluted........... (1.11) (5.09) 0.37 0.28 0.13
SFAS No. 123 pro forma......... (5.09) 0.37 0.28 0.12
</TABLE>

F-11
<PAGE>

ESPS, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

5. Capital Stock (continued)

The weighted average fair value of options granted during the years ended
March 31, 1996, 1997, and 1998, and the nine months ended December 31, 1997 and
1998 for which the estimated fair value of the stock equaled the exercise price
is $0.08, $0.08, $0.08, $0.08, and $2.67, respectively. The weighted average
fair value of options granted during the year ended 1998 and the nine months
ended December 31, 1998 for which the stock price exceeded the exercise price
is $0.08 and $0.79, respectively.

Stock Option Activity

A summary of stock option activity follows:

<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise Price
Shares per share
----------- --------------
<S> <C> <C>
Outstanding at March 31, 1995.................... 101,000 $0.10
Granted........................................ 1,025,000 0.11
Exercised...................................... -- --
Canceled....................................... (93,875) 0.10
----------- -----
Outstanding at March 31, 1996.................... 1,032,125 0.10
Granted........................................ 1,994,000 0.10
Exercised...................................... --
Canceled....................................... (50,000) 0.10
----------- -----
Outstanding at March 31, 1997.................... 2,976,125 0.10
Granted........................................ 624,000 0.10
Exercised...................................... (542,875) 0.11
Canceled....................................... (78,875) 0.10
----------- -----
Outstanding at March 31, 1998.................... 2,978,375 0.10
Granted........................................ 836,500 2.18
Exercised...................................... (1,081,399) 0.10
Canceled....................................... (99,125) 1.10
----------- -----
Outstanding at December 31, 1998................. 2,634,351 $0.72
=========== =====
</TABLE>

In January 1999, the Company granted options to purchase 70,500 shares of
common stock at an exercise price of $6.00 per share. Additionally in February
1999, the Company granted options to purchase 176,386 shares of common stock at
an exercise price of $12.00 per share.

F-12
<PAGE>

ESPS, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

6. Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's net deferred income taxes are as follows (amounts in
thousands):

<TABLE>
<CAPTION>
March 31,
-------------- December 31,
1997 1998 1998
------- ----- ------------
(Unaudited)
<S> <C> <C> <C>
Current deferred tax assets:
Deferred revenue.............................. $ 48 $ 18 $--
Depreciation and amortization................. 10 5 --
Bad debt reserves............................. -- 20 60
Stock compensation and vacation pay........... -- -- 109
Other accrued liabilities..................... 34 40 18
Tax credits................................... 20 60 34
Net operating loss carryforwards.............. 1,451 664 83
------- ----- ----
Total deferred tax asset.................... 1,563 807 304
Less: valuation allowance....................... (1,563) (157) --
------- ----- ----
Net deferred tax asset...................... $ -- $ 650 $304
======= ===== ====
</TABLE>

A reconciliation of income tax provision to amounts computed using federal
statutory rates is as follows (amounts in thousands):

<TABLE>
<CAPTION>
Nine months ended
Years ended March 31, December 31,
------------------------ -------------------
1996 1997 1998 1997 1998
------- ------- -------- --------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Federal statutory rate........ $ (256) $ (957) $ 791 $ 343 $ 733
Change in valuation allowance. 256 951 (1,406) (1,406) (157)
State income taxes, net....... -- -- 90 55 142
Other......................... -- 6 11 (17) 118
------ ------ -------- --------- -------
Income tax provision
(benefit).................. $ -- $ -- $ (514) $ (1,025) $ 836
====== ====== ======== ========= =======
Income tax provision
(benefit):
Current:
Federal................... $ -- $ -- $ -- $ -- $ 350
State..................... -- -- 136 58 142
------ ------ -------- --------- -------
-- -- 136 58 492
Deferred:
Federal................... -- -- (598) (1,109) 292
State..................... -- -- (52) 26 52
------ ------ -------- --------- -------
$ -- $ -- $ (514) $ (1,025) $ 836
====== ====== ======== ========= =======
</TABLE>

For federal income tax purposes, the Company utilized approximately
$1,295,000 of net operating loss carryforwards to reduce taxable income for the
nine-month period ended December 31, 1998. In addition, during the same period
the Company utilized $1,000,000 of net operating losses for state tax purposes.
For state income tax purposes, the Company has approximately $1,270,000 of
operating losses which begin to expire in 2006.

F-13
<PAGE>

ESPS, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

7. Commitments

The Company leases its office space under an operating lease. Future minimum
lease payments for the twelve month periods from December 31, 1998 are as
follows: $362,000 in 1999, $413,000 in 2000, $379,000 in 2001, $379,000 in
2002, $306,000 in 2003 and $54,000 thereafter.

Rent expense was approximately $43,000, $77,000 and $96,000 during the years
ended March 31, 1996, 1997, and 1998, respectively. Rent expense was
approximately $414,000 during the nine months ended December 31, 1998 and
$72,000 during the nine months ended December 31, 1997.

8. Related Party Transaction

During fiscal 1998, the Company signed a $1,800,000 license agreement with a
related party which required the Company to customize software and grant an
exclusive, non-transferable worldwide license to use the customized software.
In conjunction with the agreement, the Company received approximately $900,000
in cash during fiscal 1998 and had a receivable of $300,000 as of March 31,
1998 relating to license fees. As of March 31, 1998, the Company deferred all
revenue relating to this contract, as delivery of the product had not occurred
as of March 31, 1998.

The Company is recognizing the revenue related to this contract after
delivery occurred in June of 1998 over the period that services are being
performed. During the nine months ended December 31, 1998, the Company
recognized revenue of $1,200,000.

The agreement also includes a royalty arrangement in which the Company will
receive royalties based on future sales of the software product. No royalties
were recorded during the nine months ended December 31, 1998.

9. Employee Benefit Plan

The Company maintains a profit-sharing retirement plan for eligible
employees under the provisions of Internal Revenue Code Section 401(k).
Participants may defer a portion of their annual compensation on a pretax
basis, subject to maximum limits on contributions prescribed by law.
Contributions by the Company are at the discretion of the Board of Directors.
No discretionary contributions have been made by the Company to date.

10. International Operations

The Company licenses and markets its products through direct channels
throughout the world. Information regarding revenues in different geographic
regions is as follows (amounts in thousands):

<TABLE>
<CAPTION>
Nine months ended
Year ended March 31, December 31,
--------------------- ------------------
1996 1997 1998 1997 1998
------------- ------- -------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
United States....................... $ 752 $ 1,068 $ 7,449 $ 5,015 $ 10,089
Rest of world....................... -- -- 1,197 79 2,250
----- ------- ------- -------- ---------
Total revenue..................... $ 752 $ 1,068 $ 8,646 $ 5,094 $ 12,339
===== ======= ======= ======== =========
</TABLE>

F-14
<PAGE>

ESPS, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

11. Earnings (Loss) Per Share

The following table sets forth the computation of basic and diluted earnings
(loss) per share (in thousands except per share data):

<TABLE>
<CAPTION>
Nine months
ended
Years ended March 31, December 31,
----------------------- -------------
1996 1997 1998 1997 1998
------ ------- ------ ------ ------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net income (loss)...................... $ (754) $(2,813) $2,875 $2,033 $1,319
====== ======= ====== ====== ======
Weighted average number of common
shares................................ 682 553 520 401 1,658
Effect of dilutive securities:
Stock options........................ 1,339 932 2,291
Series A Preferred Stock............. 6,000 6,000 6,000
------ ------- ------ ------ ------
Adjusted weighted average shares
and assumed conversions........... 682 553 7,859 7,333 9,949
====== ======= ====== ====== ======
Pro forma adjustment to weighted
average number of common shares for
the conversion of Series A Preferred
Stock................................. 6,000 6,000
------ ------
Pro forma weighted average shares:
Basic................................ 6,520 7,658
====== ======
Diluted.............................. 7,859 9,949
====== ======
Earnings (loss) per share:
Basic................................ $(1.11) $ (5.09) $ 5.53 $ 5.07 $ 0.80
Diluted.............................. $(1.11) $ (5.09) $ 0.37 $ 0.28 $ 0.13
Pro forma earnings per share:
Basic................................ $ 0.44 $ 0.17
Diluted.............................. $ 0.37 $ 0.13
</TABLE>

Due to their antidilutive effects, Series A Preferred Stock and outstanding
stock options to purchase shares of common stock were excluded from the
computation of diluted earnings (loss) per share for the years ended March 31,
1996 and 1997, respectively.

12. Initial Public Offering

On March 30, 1999, the Company increased the number of authorized shares of
common stock to 50,000,000 and changed its name to ESPS, Inc.

On March 30, 1999, the Board of Directors of the Company authorized
management to pursue an underwritten sale of shares of the Company's common
stock in an initial public offering ("IPO") pursuant to the Securities Act of
1933. Upon closing of the IPO, all outstanding shares of the Series A Preferred
Stock will automatically convert into an aggregate of 6,000,000 shares of
common stock.

F-15
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

[ESPS LOGO]

Common Stock

--------------

PROSPECTUS

--------------

Hambrecht & Quist

BancBoston Robertson Stephens

U.S. Bancorp Piper Jaffray

Charles Schwab & Co., Inc.

--------------

, 1999

--------------

You should rely only on information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock.

No action is being taken in any jurisdiction outside the United States to
permit a public offering of the common stock or possession or distribution of
this prospectus in any such jurisdiction. Persons who come into possession of
this prospectus in jurisdictions outside the United States are required to
inform themselves about and to observe any restrictions as to this offering and
the distribution of this prospectus applicable to that jurisdiction.

Until , 1999, all dealers that buy, sell or trade in our common stock,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The expenses (other than underwriting discounts and commissions and the
underwriters' non-accountable expense allowance) payable in connection with the
sale of the common stock offered in this Registration Statement are as follows:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................. $12,788
NASD filing fee..................................................... 5,100
Nasdaq filing fee................................................... *
Printing and engraving expenses..................................... *
Legal fees and expenses............................................. *
Accounting fees and expenses........................................ *
Blue Sky fees and expenses (including legal fees)................... *
Transfer agent and rights agent and registrar fees and expenses..... *
Miscellaneous....................................................... *
-------
Total........................................................... $ *
=======
</TABLE>
- ---------------------
* To be filed by amendment

All expenses are estimated except for the SEC fee and the NASD fee.

Item 14. Indemnification of Directors and Officers

The Company's certificate of incorporation permits indemnification to the
fullest extent permitted by Delaware law. The Company's bylaws require the
Company to indemnify any person who was or is an authorized representative of
the Company, and who was or is a party or is threatened to be made a party to
any corporate proceeding, by reason of the fact that such person was or is an
authorized representative of the Company, against expenses, judgments,
penalties, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such third party proceeding if such
person acted in good faith and in a manner such person reasonably believed to
be in, or not opposed to, the best interests of the Company and, with respect
to any criminal third party proceeding (including any action or investigation
which could or does lead to a criminal third party proceedings had no
reasonable cause to believe such conduct was unlawful. The Company shall also
indemnify any person who was or is an authorized representative of the Company
and who was or is a party or is threatened to be made a party to any corporate
proceeding by reason of the fact that that such person was or is an authorized
representative of the Company, against expenses actually and reasonably
incurred by such person in connection with the defense or settlement of such
corporate action if such person acted in good faith and in a manner reasonably
believed to be in, or not opposed to, the best interests of the Company, except
that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the Company
unless and only to the extent that the Delaware Court of chancery or the court
in which such corporate proceeding was pending shall determine upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, such authorized representative is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper. Such indemnification is mandatory under
the Company's bylaws as to expenses actually and reasonably incurred to the
extent that an authorized representative of the Company had been successful on
the merits or otherwise in defense of any third party or corporate proceeding
or in defense of any claim, issue or matter therein. The determination of
whether an individual is entitled to indemnification may be made by a majority
of disinterested directors, independent legal counsel in a written legal
opinion or

II-1
<PAGE>

]the stockholders. Delaware law also permits indemnification in connection with
a proceeding brought by or in the right of the Company to procure a judgment in
its favor. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is therefore unenforceable. The Company expects to obtain a
directors and officers liability insurance policy prior to the effective date
of this Registration Statement.

The Underwriting Agreement provides that the underwriter is obligated, under
certain circumstances, to indemnify directors, officers, and controlling
persons of the Company against certain liabilities, including liabilities under
the Securities Act of 1933. Reference is made to Section 7 of the form of
Underwriting Agreement which will be filed by amendment as Exhibit 1.1 to this
Registration Statement.

Item 15. Recent Sales of Unregistered Securities

In the preceding three years, the Company has issued the following
securities that were not registered under the Securities Act of 1933:

In March 1997, the Company sold 4,000,000 shares of Series A Preferred Stock
par value $.001 per share at a purchase price of $1.00 per share. All of such
sales were made under the exemption from registration provided under Section
4(2) of the Securities Act of 1933.

Since inception, the Company has granted options to purchase a total of
4,249,490 shares of common stock at a weighted average exercise price of $0.84
per share under its 1995 Incentive Stock Plan. In the past three years the
Company issued an aggregate of 2,160,857 shares of common stock par value $.001
per share upon the exercise of options granted under the 1995 Stock Incentive
Plan as follows:

<TABLE>
<CAPTION>
Shares Exercise Price Per Share
------ ------------------------
<S> <C>
1,404,607 $0.10
756,250 $0.11
</TABLE>

For a more detailed description of this plan, see "Management--Employee
Benefit Plans" in this registration statement. In granting the options and
selling the underlying securities upon exercise of the options, the Company is
relying upon exemptions from registration set forth in Rule 701 and Section
4(2) of the Securities Act of 1933.

II-2
<PAGE>

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits:

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Form of Second Amended and Restated Certificate of Incorporation of
the Company.
3.2* Form of Second Amended and Restated Bylaws of the Company.
5.1* Opinion of Morgan, Lewis & Bockius LLP.
10.1 1995 Stock Incentive Plan.
10.2 Lease between Maplewood Center Limited Partnership and the Company
dated June 10, 1998.
10.3* ESPS Rights Agreement dated July 5, 1994.
10.4 License and Marketing Agreement between Adobe Systems Incorporated
and the Company dated November 6, 1997.
10.5*# Value Added Reseller License Agreement between Versant Object
Technology and the Company dated December 31, 1996.
10.6 Convertible Promissory Note between Adobe Ventures L.P. and the
Company dated July 29, 1996.
10.7 Convertible Promissory Note between Adobe Ventures L.P. and the
Company dated September 18, 1996.
10.8 Convertible Promissory Note between Adobe Ventures L.P. and the
Company dated November 6, 1996.
10.9 Series A Stock Purchase Agreement between Adobe Ventures L.P., H&Q
Investors L.P. and the Company.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Morgan, Lewis & Bockius LLP (to be included in Exhibit
5.1).
24.1 Power of Attorney (included on signature page).
27.1 Financial Data Schedule.
</TABLE>
- --------------------
* To be filed by amendment.
# We intend to request confidential treatment of certain portions of this
exhibit pursuant to Rule 406 of the Securities Act of 1933. The entire
agreement will be filed separately with the Securities and Exchange
Commission.

(b) Financial Statement Schedules

All information for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission is either included in
the financial statements or is not required under the related instructions or
are inapplicable, and therefore have been omitted.

Item 17. Undertakings.

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 of 1933;

(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. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the

II-3
<PAGE>

the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and

(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.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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.

(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.

Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to provisions described in Item 14 above, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the 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 Act and will be governed by the final
adjudication of such issue.

The undersigned registrant hereby undertakes (1) to provide to the
underwriter at the closing specified in the standby underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser; (2) that for
purposes of determining any liability under the Act, the information omitted
from the form of prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be
deemed to be part of this registration statement as of the time it was declared
effective; and (3) that for the purpose of determining any liability under the
Act, each post-effective amendment that contains a form of prospectus 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.

The undersigned registrant hereby undertakes to supplement the prospectus,
after the expiration of the subscription period, to set forth the results of
the subscription offer, the transactions by the underwriters during the
subscription period, the amount of unsubscribed securities to be purchased by
the underwriters, and the terms of any subsequent reoffering thereof. If any
public offering by the underwriters is to be made on terms differing from those
set forth on the cover page of the prospectus, a post-effective amendment will
be filed to set forth the terms of such offering.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Fort Washington, Pennsylvania, on
March 31, 1999.

ESPS, Inc.

/s/ Terrence P. Brennan
By: _________________________________
Terrence P. Brennan
Chief Executive Officer

Know All Men By These Presents, that each person whose signature appears
below constitutes and appoints Terrence P. Brennan and Leonard W. von Vital or
either of them acting alone, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and revocation, for him or her and in
his or her name, place and stead, in any and all capacities, to sign (i) any
and all amendments (including post-effective amendments) to this Registration
Statement and to file the same with all exhibits thereto, and other documents
in connection therewith and (ii) any registration statement and any and all
amendments thereto, relating to the offer covered hereby filed pursuant to Rule
462(b) under the Securities Act of 1933, with the Securities and Exchange
Commission, 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 as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or his or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ Terrence P. Brennan President, Chief Executive March 31, 1999
______________________________________ Officer and Director
Terrence P. Brennan (Principal Executive
Officer)

/s/ Leonard W. von Vital Chief Financial Officer March 31, 1999
______________________________________ (Principal Financial and
Leonard W. von Vital Accounting Officer)

/s/ Charles O. Heller Director March 31, 1999
______________________________________
Charles O. Heller

/s/ Christopher B. Hollenbeck Director March 31, 1999
______________________________________
Christopher B. Hollenbeck
</TABLE>

II-5
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Form of Second Amended and Restated Certificate of Incorporation of
the Company.
3.2* Form of Second Amended and Restated Bylaws of the Company.
5.1* Opinion of Morgan, Lewis & Bockius LLP.
10.1 1995 Stock Incentive Plan.
10.2 Lease between Maplewood Center Limited Partnership and the Company
dated June 10, 1998.
10.3* ESPS Rights Agreement dated July 5, 1994.
10.4 License and Marketing Agreement between Adobe Systems Incorporated
and the Company dated November 6, 1997.
10.5*# Value Added Reseller License Agreement between Versant Object
Technology and the Company dated December 31, 1996.
10.6 Convertible Promissory Note between Adobe Ventures L.P. and the
Company dated July 29, 1996.
10.7 Convertible Promissory Note between Adobe Ventures L.P. and the
Company dated September 18, 1996.
10.8 Convertible Promissory Note between Adobe Ventures L.P. and the
Company dated November 6, 1996.
10.9 Series A Stock Purchase Agreement between Adobe Ventures L.P., H&Q
Investors L.P. and the Company.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Morgan, Lewis & Bockius LLP (to be included in Exhibit
5.1).
24.1 Power of Attorney (included on signature page).
27.1 Financial Data Schedule.
</TABLE>
- ---------------------
* To be filed by amendment.
# We intend to request confidential treatment of certain portions of this
exhibit pursuant to Rule 406 of the Securities Act of 1933. The entire
agreement will be filed separately with the Securities and Exchange
Commission.

II-6

<PAGE>

Exhibit 10.1

ELECTRONIC SUBMISSION PUBLISHING SYSTEMS, INC.

1995 STOCK INCENTIVE PLAN

1. Purpose. Electronic Submission Publishing Systems, Inc. (the "Company")
-------
hereby adopts the Electronic Submission Publishing Systems, Inc. 1995 Stock
Incentive Plan (the "Plan"). The Plan is intended to recognize the contributions
made to the Company by the members of its Board of Directors (whether or not
such members of the Board of Directors are employed by the Company or an
Affiliate, as defined below), employees, consultants and advisors of the Company
or any Affiliate, to provide such persons with additional incentive to devote
themselves to the future success of the Company or an Affiliate, and to improve
the ability of the Company or an Affiliate to attract, retain, and motivate
individuals upon whom the Company's sustained growth and financial success
depend, by providing such persons with an opportunity to acquire or increase
their proprietary interest in the Company through receipt of rights to acquire
the Company's Common Stock, par value $0.001 per Share (the "Common Stock") and
through the transfer or issuance of Common Stock subject to conditions of
forfeiture.

2. Definitions. Unless the context clearly indicates otherwise, the
-----------
following terms shall have the following meanings:

(a) "Affiliate" means a corporation which is a parent corporation or
a subsidiary corporation with respect to the Company within the meaning of
Section 424(e) or (f) of the Code.

(b) "Award" shall mean a transfer of Common Stock subject to
conditions of forfeiture made pursuant to the terms of the Plan.
<PAGE>

(c) "Award Agreement" shall mean the agreement between the Company
and a Grantee with respect to an Award made pursuant to the Plan.

(d) "Awardee" shall mean a person to whom an Award has been granted
pursuant to the Plan.

(e) "Board of Directors" means the Board of Directors of the Company.

(f) "Change of Control" shall have the meaning as set forth in
Section 9 of the Plan.

(g) "Code" means the Internal Revenue Code of 1986, as amended.

(h) "Committee" shall have the meaning set forth in Section 3 of the
Plan.

(i) "Company" means Electronic Submission Publishing Systems, Inc., a
Delaware corporation .

(j) "Disability" shall have the meaning set forth in Section 22(e)(3)
of the Code.

(k) "Disinterested Director" shall mean a member of the Board of
Directors of the Company who is "disinterested" within the meaning of
Rule 16b-3.

(l) "Fair Market Value" shall have the meaning set forth in
Subsection 8(b) of the Plan.

2
<PAGE>

(m) "Grantee" shall mean a person to whom an Option or an Award has
been granted pursuant to the Plan.

(n) "ISO" means an Option granted under the Plan which is intended to
qualify as an "incentive stock option" within the meaning of Section 422(b) of
the Code.

(o) "Non-qualified Stock Option" means an Option granted under the
Plan which is not intended to qualify, or otherwise does not qualify, as an
"incentive stock option" within the meaning of Section 422(b) of the Code.

(p) "Option" means either an ISO or a Non-qualified Stock Option
granted under the Plan.

(q) "Optionee" means a person to whom an Option has been granted
under the Plan, which Option has not been exercised and has not expired or
terminated.

(r) "Option Document" means the document described in Section 8 of
the Plan, as applicable, which sets forth the terms and conditions of each grant
of Options.

(s) "Option Price" means the price at which Shares may be purchased
upon exercise of an Option, as calculated pursuant to Subsection 8(b) of the
Plan.

(t) "Restricted Stock" means Common Stock, subject to conditions of
forfeiture and transfer, granted to any person pursuant to an Award under the
Plan.

(u) "Rule 16b-3" means Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended.

3
<PAGE>

(v) "Section 16 Officer" means any person who is an "officer" within
the meaning of Rule 16a-1(f) promulgated under the Securities Exchange Act of
1934, as amended, or any successor rule.

(w) "Shares" means the shares of Common Stock of the Company which
are the subject of Options or granted as Awards under the Plan.

3. Administration of the Plan. The Plan shall be administered by the Board
--------------------------
of Directors of the Company, provided, however, that the Board of Directors may
designate a committee composed of two or more of directors, each of whom is a
Disinterested Director (the "Disinterested Director Committee"), to operate and
administer the Plan in its stead with respect to all persons eligible to
participate in the Plan other than the members of the Disinterested Director
Committee.

(a) Meetings. The Committee shall hold meetings at such times and
--------
places as it may determine, shall keep minutes of its meetings, and shall adopt,
amend and revoke such rules or procedures as it may deem proper; provided,
however, that it may take action only upon the agreement of a majority of the
whole Committee. Any action which the Committee shall take through a written
instrument signed by a majority of its members shall be as effective as though
it had been taken at a meeting duly called and held. The Committee shall report
all actions taken by it to the Board of Directors.

(b) Grants and Awards. The Committee shall from time to time at its
-----------------
discretion direct the Company to grant Options or Awards pursuant to the terms
of the Plan. The Committee shall have plenary authority to (i) determine the
persons to whom, the times at which, and the price at which Options shall be
granted, (ii) determine the type of Option to be granted and

4
<PAGE>

the number of Shares subject thereto, (iii) determine the persons to whom, and
the times at which, Awards of Restricted Stock shall be granted, the number of
Shares awarded, and the purchase price per Share, if any, and (iv) approve the
form and terms and conditions of the Option Documents and Award Agreements; all
subject, however, to the express provisions of the Plan. In making such
determinations, the Committee may take into account the nature of the Grantee's
services and responsibilities, the Grantee's present and potential contribution
to the Company's success and such other factors as it may deem relevant. The
interpretation and construction by the Committee of any provisions of the Plan
or of any Option or Award granted under it shall be final, binding and
conclusive.

(c) Exculpation. No member of the Board of Directors shall be
-----------
personally liable for monetary damages for any action taken or any failure to
take any action in connection with the administration of the Plan or the
granting of Options or Awards under the Plan, provided that this Subsection 3(c)
shall not apply to (i) any breach of such member's duty of loyalty to the
Company, an Affiliate, or the Company's stockholders, (ii) acts or omissions not
in good faith or involving intentional misconduct or a knowing violation of law,
(iii) acts or omissions that would result in liability under Section 174 of the
General Corporation Law of the State of Delaware, as amended, and (iv) any
transaction from which the member derived an improper personal benefit.

(d) Indemnification. Service on the Committee shall constitute
---------------
service as a member of the Board of Directors of the Company. Each member of the
Committee shall be entitled, without further act on his or her part, to
indemnity from the Company and limitation of liability to the fullest extent
provided by applicable law and by the Company's Certificate of Incorporation
and/or By-laws in connection with or arising out of any action, suit or
proceeding with respect to

5
<PAGE>

the administration of the Plan or the granting of Options and Awards thereunder
in which he or she may be involved by reason of his or her being or having been
a member of the Committee, whether or not he or she continues to be such member
of the Committee at the time of the action, suit or proceeding.

4. Options and Awards under the Plan. Options under the Plan may be in the
---------------------------------
form of a Non-qualified Stock Option, an ISO, or a combination thereof, at the
discretion of the Committee. Awards under the Plan shall be in the form of
Restricted Stock.

5. Eligibility. All employees of the Company or any Affiliate, members of
-----------
the Board of Directors (whether or not employees of the Company or an Affiliate)
and consultants and advisors of the Company or its Affiliates shall be eligible
to receive Options and Awards hereunder, provided, however that only employees
shall be eligible to receive ISOs under the Plan. Notwithstanding anything to
the contrary contained herein, members of the Disinterested Director Committee
are not eligible to receive Options or Awards. The Committee, in its sole
discretion, shall determine whether an individual qualifies as an employee.

6. Shares Subject to Plan. The aggregate maximum number of Shares for which
----------------------
Awards or Options may be granted pursuant to the Plan is One Million
(1,000,000), subject to adjustment as provided in Section 10 of the Plan. The
Shares shall be issued from authorized and unissued Common Stock or Common Stock
held in or hereafter acquired for the treasury of the Company. If an Option
terminates or expires without having been fully exercised for any reason, or if
Shares granted pursuant to an Award have been conveyed back to the Company
pursuant to the terms of an Award Agreement, the Shares for which the Option was
not exercised or the Shares

6
<PAGE>

that were conveyed back to the Company may again be the subject of one or more
Options or Awards granted pursuant to the Plan.

7. Term of the Plan. The Plan is effective as of April 6, 1995, the date on
----------------
which it was adopted by the Board of Directors, subject to the approval of the
Plan on or before April 6, 1996 by a majority of the votes cast at a duly called
meeting of the stockholders at which a quorum representing a majority of all
outstanding voting stock of the Company is, either in person or by proxy,
present and voting, by the unanimous consent in writing of the stockholders, or
by a method and in a degree that would be treated as adequate under applicable
state law in the case of an action requiring stockholder approval. No Option or
Award may be granted under the Plan after April 6, 2005. If the Plan is not so
approved on or before April 6, 1996, all Options and Awards granted under the
Plan shall be null and void.

8. Option Documents and Terms. Each Option granted under the Plan shall be
--------------------------
a Non-qualified Stock Option unless the Option shall be specifically designated
at the time of grant to be an ISO for federal income tax purposes. To the extent
any Option designated an ISO is determined for any reason not to qualify as an
incentive stock option within the meaning of Section 422 of the Code, such
Option shall be treated as a Non-qualified Stock Option for all purposes under
the provisions of the Plan. Options granted pursuant to the Plan shall be
evidenced by the Option Documents in such form as the Committee shall from time
to time approve, which Option Documents shall comply with and be subject to the
following terms and conditions and such other terms and conditions as the
Committee shall from time to time require which are not inconsistent with the
terms of the Plan.

7
<PAGE>

(a) Number of Option Shares. Each Option Document shall state the
-----------------------
number of Shares to which it pertains. An Optionee may receive more than one
Option, which may include Options which are intended to be ISO's and Options
which are not intended to be ISO's, but only on the terms and subject to the
conditions and restrictions of the Plan.

(b) Option Price. Each Option Document shall state the Option Price
------------
which shall be determined at the discretion of the Committee, provided, however
that, for a Non-qualified Stock Option, such Option Price shall be at least
equal to 85% of the Fair Market Value of the Shares on the date the Option is
granted and, for an ISO, shall be at least 100% of the Fair Market Value of the
Shares on the date the Option is granted as determined by the Committee in
accordance with this Subsection 8(b); and provided further that with respect to
any Option granted to an Optionee who then owns, directly or by attribution
under Section 424(d) of the Code, shares possessing more than ten percent of the
total combined voting power of all classes of stock of the Company or an
Affiliate, the Option Price shall be at least 110% of the Fair Market Value of
the Shares on the date the Option is granted. For purposes of the Plan, the Fair
Market Value of the Common Stock shall be determined as follows: If the Common
Stock is traded in a public market, then the Fair Market Value per share shall
be, if the Common Stock is listed on a national securities exchange or included
in the NASDAQ National Market System, the last reported sale price thereof on
the relevant date, or, if the Common Stock is not so listed or included, the
mean between the last reported "bid" and "asked" prices thereof on the relevant
date, as reported on NASDAQ or, if not so reported, as reported by the National
Daily Quotation Bureau, Inc. or as reported in a customary financial reporting
service, as applicable and as the Committee determines. If the Common Stock is
not traded in a public market, the Fair Market Value per share shall be
established by means of

8
<PAGE>

the good-faith determination of the Committee, taking into account all relevant
facts and circumstances.

(c) Exercise. No Option shall be deemed to have been exercised prior
to the receipt by the Company of written notice of such exercise and of payment
in full of the Option Price for the Shares to be purchased. Each such notice
shall specify the number of Shares to be purchased and shall (unless the Shares
are covered by a then current registration statement or a Notification under
Regulation A under the Securities Act of 1933, as amended (the "Act")), contain
the Optionee's acknowledgement in form and substance satisfactory to the Company
that (a) such Shares are being purchased for investment and not for distribution
or resale (other than a distribution or resale which, in the opinion of counsel
satisfactory to the Company, may be made without violating the registration
provisions of the Act), (b) the Optionee has been advised and understands that
(i) the shares have not been registered under the Act and are "restricted
securities" within the meaning of Rule 144 under the Act and are subject to
restrictions on transfer and (ii) the Company is under no obligation to register
the Shares under the Act or to take any action which would make available to the
Optionee any exemption from such registration, (c) such Shares may not be
transferred without compliance with all applicable federal and state securities
laws, and (d) an appropriate legend referring to the foregoing restrictions on
transfer and any other restrictions imposed under the Option Documents may be
endorsed on the certificates. Notwithstanding the foregoing, if the Company
determines that issuance of Shares should be delayed pending (A) registration
under federal or state securities laws, (B) the receipt of an opinion of counsel
satisfactory to the Company that an appropriate exemption from such registration
is available, (C) the listing or inclusion of the Shares on any securities
exchange or an automated quotation system or (D) the consent or approval of any
governmental regulatory body whose consent or approval is

9
<PAGE>

necessary in connection with the issuance of such Shares, the Company may defer
exercise of any Option granted hereunder until any of the events described in
this sentence has occurred.

(d) Medium of Payment. An Optionee shall pay for Shares (i) in cash,
-----------------
(ii) by certified or cashier's check payable to the order of the Company, or
(iii) by such other mode of payment as the Committee may approve, including
payment through a broker in accordance with procedures permitted by Regulation T
of the Federal Reserve Board. Furthermore, the Committee may provide in an
Option Document that payment may be made in whole or in part in shares of the
Company's Common Stock held by the Optionee. If payment is made in whole or in
part in shares of the Company's Common Stock, then the Optionee shall deliver to
the Company certificates registered in the name of such Optionee representing
the shares owned by such Optionee, free of all liens, claims and encumbrances of
every kind and having an aggregate Fair Market Value on the date of delivery
that is at least as great as the Option Price of the Shares (or relevant portion
thereof) with respect to which such Option is to be exercised by the payment in
shares of Common Stock, endorsed in blank or accompanied by stock powers duly
endorsed in blank by the Optionee. In the event that certificates for shares of
the Company's Common Stock delivered to the Company represent a number of shares
of Common Stock in excess of the number of shares of Common Stock required to
make payment for the Option Price of the Shares (or relevant portion thereof)
with respect to which such Option is to be exercised by payment in shares of
Common Stock, the stock certificate issued to the Optionee shall represent (i)
the Shares in respect of which payment is made, and (ii) such excess number of
shares of Common Stock. Notwithstanding the foregoing, the Committee may impose
from time to time such limitations and prohibitions on the use of shares of the
Common Stock to exercise and Option as it deems appropriate.

10
<PAGE>

(e) Termination of Options.
----------------------
(i) No Option shall be exercisable after the first to occur of
the following:

(A) Expiration of the Option term specified in the Option
Document, which, in the case of an ISO, shall not occur after (1) ten years from
the date of grant, or (2) five years from the date of grant of an ISO if the
Optionee on the date of grant owns, directly or by attribution under Section
424(d) of the Code, shares possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of an Affiliate;

(B) Except to the extent otherwise provided in an
Optionee's Option Document, expiration of thirty (30) days from the date the
Optionee's employment or service with the Company or its Affiliates terminates
for any reason other than Disability or death;

(C) Except to the extent otherwise provided in an
Optionee's Option Document, expiration of twelve months from the date such
employment or service with the Company or its Affiliates terminates due to the
Optionee's Disability or due to Optionee's death;

(D) Except to the extent otherwise provided in an
Optionee's Option Document, a finding by the Committee, after full consideration
of the facts presented on behalf of both the Company and the Optionee, that the
Optionee has breached his or her employment or service contract with the Company
or an Affiliate, or has been engaged in disloyalty to the Company or an
Affiliate, including, without limitation, fraud, embezzlement, theft,

11
<PAGE>

commission of a felony or proven dishonesty in the course of his or her
employment or service, or has disclosed trade secrets or confidential
information of the Company or an Affiliate. In such event, in addition to
immediate termination of the Option, the Optionee shall automatically forfeit
all Shares for which the Company has not yet delivered the share certificates
upon refund by the Company of the Option Price. Notwithstanding anything herein
to the contrary, the Company may withhold delivery of share certificates pending
the resolution of any inquiry that could lead to a finding resulting in a
forfeiture; or

(E) The date, if any, set by the Board of Directors as an
accelerated expiration date in the event of the liquidation or dissolution of
the Company; or

(F) The occurrence of such other event or events as may
be set forth in the Option Document as causing an accelerated expiration of the
Option.

(ii) Notwithstanding the foregoing, the Committee may extend
the period during which all or any portion of an Option may be exercised to a
date no later than the Option term specified in the Option Document pursuant to
Subsection 8(e)(i)(A), provided that any change pursuant to this Subsection
8(e)(ii) which would cause an ISO to become a Non-qualified Stock Option may be
made only with the consent of the Optionee.

(iii) Except to the extent otherwise provided in an Optionee's
Option Document, no Option shall be exercisable to any greater extent than such
Option was exercisable on the date of Optionee's termination of service or
employment with the Company or its Affiliates, except with respect to Options
that were held by an Optionee whose death or Disability occurs while still in
the employ or service of the Company or an Affiliate, in which case such Options
shall be exercisable to the same extent that they would be exercisable had such

12
<PAGE>

Optionee continued to be employed or in the service of the Company or an
Affiliate until the six (6) month anniversary of such Optionee's death or
termination of employment due to Disability.

(iv) Notwithstanding anything to the contrary contained in the
Plan or an Option Document, an ISO shall be treated as a Non-qualified Stock
Option to the extent such ISO is exercised at any time after the expiration of
the time period permitted under the Code for the exercise of an ISO.

(f) Transfers. No Option granted under the Plan may be transferred,
---------
except by will or by the laws of descent and distribution. During the lifetime
of the person to whom an Option is granted such Option may be exercised only by
such person. Notwithstanding the foregoing, a Non-qualified Stock Option may be
transferred pursuant to the terms of a "qualified domestic relations order,"
within the meaning of Sections 401(a)(13) and 414(p) of the Code or within the
meaning of Title I of the Employee Retirement Income Security Act of 1974, as
amended, and may be transferred in accordance with such provisions as may be
incorporated into the Option Document.

(g) Limitation on ISO Grants. To the extent that the aggregate Fair
------------------------
Market Value of stock with respect to which ISOs issued under the Plan and
incentive stock options issued under any other incentive stock option plan of
the Company or its Affiliates are exercisable for the first time by any
individual during any calendar year exceeds $100,000, such ISOs shall be treated
as Non-qualified Stock Options issued under the Plan. For purposes for this
Subsection 8(g), the Fair Market Value of stock shall be determined as of the
date of grant of the ISO or other incentive stock option.

13
<PAGE>

(h) Other Provisions. Subject to the provisions of the Plan, the
----------------
Option Documents shall contain such other provisions including, without
limitation, provisions authorizing the Committee to accelerate the
exercisability of all or any portion of an Option granted pursuant to the Plan,
additional restrictions upon the exercise of the Option or additional
limitations upon the term of the Option, as the Committee shall deem advisable.

(i) Amendment. Subject to the provisions of the Plan, the Committee
shall have the right to amend Option Documents issued to an Optionee, subject to
the Optionee's consent if such amendment is not favorable to the Optionee,
except that the consent of the Optionee shall not be required for any amendment
made pursuant to Subsection 8(e)(i)(E) or Section 9 of the Plan, as applicable.

9. Change of Control. In the event of a Change of Control, the Committee
-----------------
may take whatever action it deems necessary or desirable with respect to the
Options and Awards outstanding, including, without limitation, accelerating the
expiration or termination date in the respective Option Documents to a date no
earlier than fifteen (15) days after notice of such acceleration is given to the
Optionees. In addition to the foregoing, in the event of a Change of Control,
the Committee may, in the exercise of its sole discretion, cause the Options
granted pursuant to the Plan and held by Optionees who are employees or members
of the Board of Directors at the time of such Change of Control to become
immediately exercisable in full and cause the restrictions applicable to
Restricted Stock awarded to Awardees who are employees or members of the Board
of Directors at the time of a Change of Control immediately to lapse and the
Restricted Stock held by the Company shall, in such event, be delivered to the
Grantees. In the event there is a Change of Control as a result of either a sale
of all or substantially all of the assets of the Company to another company, or
the merger of the Company into another company (such

14
<PAGE>

other company being referred to hereafter as the "Successor Company"), the
Committee shall cause the Options granted pursuant to the Plan and held by
Optionees who are employees or members of the Board of Directors at the time of
such Change of Control to become immediately exercisable in full and shall cause
the restrictions applicable to Restricted Stock awarded to Awardees who are
employees or members of the Board of Directors at the time of a Change of
Control immediately to lapse unless the Successor Company agrees to assume all
outstanding Options granted under the Plan or to provide equivalent options as a
substitute for such Options, and agrees to substitute appropriate restricted
stock in the Successor Company for such Restricted Stock as has been awarded
under the Plan. Any amendment to this Section 9 which diminishes the rights of
Optionees, other than the acceleration of the expiration or termination date to
a date no earlier than fifteen (15) days after notice of such acceleration,
shall not be effective with respect to Options outstanding at the time of
adoption of such amendment, whether or not such outstanding Options are then
exercisable.

A "Change of Control" shall be deemed to have occurred upon the earliest to
occur of the following events: (i) the date the stockholders of the Company (or
the Board of Directors, if stockholder action is not required) approve a plan or
other arrangement pursuant to which the Company will be dissolved or liquidated,
or (ii) the date the stockholders of the Company (or the Board of Directors, if
stockholder action is not required) approve a definitive agreement to sell or
otherwise dispose of substantially all of the assets of the Company, or (iii)
the date the stockholders of the Company (or the Board of Directors, if
stockholder action is not required) and the stockholders of the other
constituent corporation (or its board of directors, if stockholder action is not
required) have approved a definitive agreement to merge or consolidate the
Company with or into such other corporation, other than, in either case, a
merger or consolidation of the Company in

15
<PAGE>

which holders of shares of the Company's Common Stock immediately prior to the
merger or consolidation will have at least a majority of the ownership of common
stock of the surviving corporation (and, if one class of common stock is not the
only class of voting securities entitled to vote on the election of directors of
the surviving corporation, a majority of the voting power of the surviving
corporation's voting securities) immediately after the merger or consolidation,
which common stock (and, if applicable, voting securities) is to be held in the
same proportion as such holders' ownership of Common Stock of the Company
immediately before the merger or consolidation.

10. Adjustments on Changes in Capitalization.
----------------------------------------
(a) In the event that the outstanding Shares are changed by reason of
a reorganization, merger, consolidation, recapitalization, reclassification,
stock split-up, combination or exchange of Shares and the like (not including
the issuance of Common Stock on the conversion of other securities of the
Company which are outstanding on the date of grant and which are convertible
into Common Stock) or dividends payable in Shares, an equitable adjustment shall
be made by the Committee in the aggregate number of shares available under the
Plan and in the number of Shares and price per Share subject to outstanding
Options. Unless the Committee makes other provisions for the equitable
settlement of outstanding Options, if the Company shall be reorganized,
consolidated, or merged with another corporation, or if all or substantially all
of the assets of the Company shall be sold or exchanged, an Optionee shall at
the time of issuance of the stock under such corporate event be entitled to
receive upon the exercise of his or her Option the same number and kind of
shares of stock or the same amount of property, cash or securities as he or she
would have been entitled to receive upon the occurrence of any such corporate
event as if he or

16
<PAGE>

she had been, immediately prior to such event, the holder of the number of
shares covered by his or her Option.

(b) Any adjustments under this Section 10 in the number of Shares
subject to Options shall apply proportionately to only the unexercised portion
of any Option granted hereunder. If fractions of a Share would result from any
such adjustment, the adjustment shall be revised to the next lower whole number
of Shares.

(c) The Committee shall have authority to determine the adjustments
to be made under this Section, and any such determination by the Committee shall
be final, binding and conclusive.

11. Terms and Conditions of Awards. Awards granted pursuant to the Plan
------------------------------
shall be evidenced by written Award Agreements in such form as the Committee
shall from time to time approve, which Award Agreements shall comply with and be
subject to the following terms and conditions and such other terms and
conditions which the Committee shall from time to time require which are not
inconsistent with the terms of the Plan. The Committee may, in its sole
discretion, shorten or waive any term or condition with respect to all or any
portion of any Award. Notwithstanding the foregoing, all restrictions shall
lapse or terminate with respect to Restricted Stock upon the death or Disability
of the Awardee.

(a) Number of Shares. Each Award Agreement shall state the number of
----------------
shares of Common Stock to which it pertains.

(b) Purchase Price. Each Award Agreement shall specify the purchase
--------------
price, if any, which applies to the Award. If the Board specifies a purchase
price, the Awardee

17
<PAGE>

shall be required to make payment on or before the date specified in the Award
Agreement. An Awardee shall pay for such Shares (i) in cash, (ii) by certified
check payable to the order of the Company, or (iii) by such other mode of
payment as the Committee may approve.

(c) In the case of an Award which provides for a transfer of Shares
without any payment by the Grantee, the transfer shall take place on the date
specified in the Award Agreement. In the case of an Award which provides for a
payment, the transfer shall take place on the date the initial payment is
delivered to the Company, unless the Committee or the Award Agreement otherwise
specifies. Stock certificates evidencing Shares transferred pursuant to an Award
shall be issued in the sole name of the Grantee. Notwithstanding the foregoing,
as a precondition to a transfer, the Company may require an acknowledgement by
the Grantee as required with respect to Options under Section 8.

(d) Forfeiture Conditions. The Committee may specify in an Award
Agreement any conditions under which the Grantee of that Award shall be required
to convey to the Company the Shares covered by the Award. Upon the occurrence of
any such specified condition, the Grantee shall forthwith surrender and deliver
to the Company the certificates evidencing such Shares as well as completely
executed instruments of conveyance. The Committee, in its discretion, may
provide that certificates for Shares transferred pursuant to an Award be held in
escrow by the Company's Treasurer, together with an undated stock power executed
by the Awardee Company or an appropriate officer of the Company until such time
as each and every forfeiture condition has lapsed and that the Grantee be
required, as a condition of the transfer, to deliver to such escrow agent stock
powers covering the transferred Shares duly endorsed by the Grantee. Stock
certificates evidencing Shares subject to forfeiture shall bear a legend to the
effect that the Common Stock evidenced thereby is subject to repurchase or

18
<PAGE>

conveyance to the Company in accordance with an Award made under the Plan and
that the Shares may not be sold or otherwise transferred.

(e) Lapse of Conditions. Upon termination or lapse of each and every
-------------------
forfeiture condition, the Company shall cause certificates without the legend
referring to the Company's repurchase right (but with any other legends that may
be appropriate) evidencing the Shares covered by the Award to be issued to the
Grantee upon the Grantee's surrender of the legended certificates held by him to
the Company.

(f) Rights as Stockholder. Upon payment of the purchase price, if
---------------------
any, for Shares covered by an Award and compliance with the acknowledgment
requirement of subsection 11(c), the Grantee shall have all of the rights of a
stockholder with respect to the Shares covered thereby, including the right to
vote the Shares and receive all dividends and other distributions paid or made
with respect thereto, except to the extent otherwise provided by the Committee
or in the Award Agreement.

(g) Lapse of Restrictions. Upon the expiration or termination of the
---------------------
Restricted Period and the satisfaction of any other conditions prescribed by the
Committee time as provided for in the Plan, the restrictions applicable to the
Restricted Stock shall lapse and a stock certificate for the number of shares of
Common Stock with respect to which the restrictions have lapsed shall be
delivered, free of all such restrictions, except any that may be imposed by law
or pursuant to any stockholders' agreement then in effect, to the Awardee or the
beneficiary or estate, as the case may be. The Company shall not be required to
deliver any fractional share of Common Stock but will pay, in lieu thereof, the
fair market value (determined as of the date the restrictions lapse) of such
fractional share to the Awardee or the Awardee's beneficiary or estate, as the
case

19
<PAGE>

may be. The Award may provide for the lapse of restrictions on transfer and
forfeiture conditions in installments.

(h) Section 83(b) Elections. An Awardee who files an election with
-----------------------
the Internal Revenue Service to include the Fair Market Value of any Restricted
Stock in gross income while they are still subject to restrictions shall
promptly furnish the Company with a copy of such election together with the
amount of any federal, state, local or other taxes required to be withheld to
enable the Company to claim an income tax deduction with respect to such
election.

(i) Upon a finding by the Committee, after full consideration of the
facts presented on behalf of both the Company and the Awardee, that the Awardee
has breached his or her employment or service contract with the Company or an
Affiliate, or has been engaged in disloyalty to the Company or an Affiliate,
including, without limitation, fraud, embezzlement, theft, commission of a
felony or proven dishonesty in the course of his or her employment or service,
or has disclosed trade secrets or confidential information of the Company or an
Affiliate, Awardee shall automatically forfeit all Restricted Stock for which
(i) the Company has not yet delivered the Share certificates to the Awardee;
(ii) the Restricted Period has not expired or (iii) any restrictions applicable
to the Restricted Stock have not lapsed. Notwithstanding anything herein to the
contrary, the Company may withhold delivery of Restricted Stock certificates
pending the resolution of any inquiry that could lead to a finding resulting in
a forfeiture.

(j) Amendment. Subject to the provisions of the Plan, the Committee
shall have the right to amend Awards issued to an Awardee, subject to the
Awardee's consent if such amendment is not favorable to the Awardee, except that
the consent of the Awardee shall not be required for any amendment made pursuant
to Section 9 of the Plan.

20
<PAGE>

12. Amendment of the Plan. The Board of Directors of the Company may amend
---------------------
the Plan from time to time in such manner as it may deem advisable.
Nevertheless, the Board of Directors of the Company may not change the class of
individuals eligible to receive an ISO or increase the maximum number of shares
as to which Options may be granted without obtaining approval, within twelve
months before or after such action, by vote of a majority of the votes cast at a
duly called meeting of the stockholders at which a quorum representing a
majority of all outstanding voting stock of the Company is, either in person or
by proxy, present and voting on the matter, by the unanimous consent in writing
of the stockholders, or by a method and in a degree that would be treated as
adequate under applicable state law in the case of an action requiring
stockholder approval. No amendment to the Plan shall adversely affect any
outstanding Option or Award, however, without the consent of the Grantee.

13. No Commitment to Retain. The grant of an Option or Award pursuant to
-----------------------
the Plan shall not be construed to imply or to constitute evidence of any
agreement, express or implied, on the part of the Company or any Affiliate to
retain the Grantee in the employ of the Company or an Affiliate and/or as a
member of the Company's Board of Directors or in any other capacity.

14. Withholding of Taxes. Whenever the Company proposes or is required to
--------------------
deliver or transfer Shares in connection with the exercise of an Option or
Award, the Company shall have the right to (a) require the recipient to remit or
otherwise make available to the Company an amount sufficient to satisfy any
federal, state and/or local withholding tax requirements prior to the delivery
or transfer of any certificate or certificates for such Shares or (b) take
whatever other action it deems necessary to protect its interests with respect
to tax liabilities. The Company's obligation to make any delivery or transfer of
Shares shall be conditioned on the Grantee's compliance, to the Company's
satisfaction, with any withholding requirement.

21
<PAGE>

15. Interpretation. The Plan is intended to enable transactions under the
--------------
Plan with respect to directors and officers (within the meaning of Section 16(a)
under the Securities Exchange Act of 1934, as amended) to satisfy the conditions
of Rule 16b-3; to the extent that any provision of the Plan would cause a
conflict with such conditions or would cause the administration of the Plan as
provided in Section 3 to fail to satisfy the conditions of Rule 16b-3, such
provisions shall be deemed null and void to the extent permitted by applicable
law. This section shall not be applicable if no class of the Company's equity
securities is then registered pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended.

<PAGE>

L E A S E
---------
1. PARTIES. This Lease is made this 10th day of June, 1998, by and
-------
between MAPLEWOOD OFFICE CENTER LIMITED PARTNERSHIP, a Pennsylvania Limited
Partnership, hereinafter called "Landlord", and ELECTRONIC SUBMISSION PUBLISHING
SYSTEMS, INC., a Delaware corporation, hereinafter called "Tenant."

Tenant by Lease dated June 1, 1994, which Lease was amended by First
Amendment of Lease dated October 24, 1995 (together, the "215 Lease"), leased
certain premises comprising 5,547 rentable square feet of space in the building
known as 1300 Virginia Avenue, Fort Washington, PA (hereinafter, along with
adjacent land, called the "Building") as outlined on the diagram attached hereto
as Exhibit A and designated as "Suite 215".
---------

Tenant by Lease dated September 10, 1997 (the "240 Lease"), leased
certain premises comprising 2,520 rentable square feet of space in the Building
as outlined on the diagram attached hereto as Exhibit A and designated as "Suite
---------
240".

Tenant desires to lease in the Building certain premises comprising
(a) 2,034 rentable square feet of space, designated as "Suite 120", (b) 3,390
rentable square feet of space, designated as "Suite 122", (c) 889 rentable
square feet of space, designated as "Suite 123", (d) 2,306 rentable square feet
of space, designated as "Suite 128", (e) 1,454 rentable square feet of space,
designated as "Suite 140", and (f) 3,600 rentable square feet of space,
designated as "Suite 220", each as outlined on the diagram attached hereto as
Exhibit A.
- ---------

Landlord and Tenant desire to enter into a new lease agreement with
respect to Suite 215, to be effective July 15, 1999, to amend and restate in its
entirety the 240 Lease, to be effective January 1, 1999, and to enter into a new
lease agreement with respect to Suites 120, 122, 123, 128, 140 and 220, to be
effective as of the Commencement Date (as hereinafter defined) applicable to
each such Suite.

As used herein, the term the "Premises" shall include each of Suites
215, 240, 120, 122, 123, 128, 140 and 220, as of the Commencement Date
applicable to each Suite.

Suites 215, 240, 120, 122, 123, 128, 140 and 220 are sometimes
referred to herein individually as a "Suite" and collectively as the "Suites".

2. PREMISES. Landlord, for and in consideration of the rent to be
--------
paid and the covenants and agreements to be performed by Tenant, as hereinafter
set forth, does hereby lease, demise and let unto Tenant the Premises, together
with the non-exclusive use of the Building common areas, as described in
Article 9, on the terms and conditions set forth in this Lease.
- ---------

3. TERM. The term of this Lease and Tenant's obligation to pay rent
----
hereunder shall commence as follows:

(a) With respect to Suite 215, on July 15, 1999;
(b) With respect to Suite 240, on January 1, 1999; and

1
<PAGE>

(c) With respect to Suites 120, 122, 123, 128, 140 and 220, upon
(i) the date when each such Suite is ready for occupancy, or (ii) the date when
Tenant shall take possession and occupy each such Suite, whichever of said dates
shall occur first. A Suite shall be deemed ready for occupancy when Landlord has
substantially completed the Landlord's Work (as defined in Exhibit B attached
hereto). The term "substantial completion" or "substantially complete" as used
in this Lease shall be construed to mean such completion as shall enable Tenant
to reasonably and conveniently use and occupy such Suite for the conduct of its
ordinary business even though minor details, decorations and mechanical
adjustments remain to be completed by Landlord. Landlord will give Tenant
written notice of at least ten (10) days in advance of the date when Landlord
expects each Suite to be ready for occupancy by Tenant.

Each date of commencement as defined above is hereinafter called
the "Commencement Date", and as to each of Suites 120, 122, 123, 128, 140 and
220 shall be confirmed by Landlord and Tenant by the execution of the
Confirmation of Lease Term attached hereto as Exhibit D.

The term of this Lease shall end on the last day of the 60th month
following the month in which the latest Commencement Date occurs, unless sooner
terminated as hereinafter provided.

4. CONSTRUCTION OF PREMISES. Landlord shall, without cost to Tenant
------------------------
(except as otherwise provided in Exhibit B hereto), and in a good and
workmanlike manner, do that portion of the construction and other items of work
in certain Suites designated as "Landlord's Work" in Exhibit B which is attached
hereto and made a part hereof. All of Landlord's Work will be warranted against
defects for a period of one-year after the Commencement Date applicable to each
such Suite.

5. BASE RENT.
---------

(a) Base Rent During the term hereof, Tenant shall pay to
Landlord as rent, the annual rentals for each Suite specified in this paragraph
---------
5(a) ("Base Rent"), payable in advance without set off or deduction on the first
- ----
business day of each calendar month in equal monthly installments, beginning on
the Commencement Date applicable to such Suite and continuing until the
expiration of the Lease. In the event the Commencement Date is a day other than
the first day of a calendar month, the Tenant shall pay to the Landlord, on or
before the Commencement Date, a pro rata portion of the monthly installment of
rent, such pro rata portion to be based on the number of days remaining in such
partial month after the Commencement Date. Base Rent for each Suite payable
during the term hereof is as follows:

Suite 215 $8,251.00 per month
Suite 240 $3,392.00 per month
Suite 120 $2,965.00 per month
Suite 122 $4,944.00 per month
Suite 123 $1,296.00 per month
Suite 128 $3,363.00 per month
Suite 140 $2,120.00 per month
Suite 220 $5,250.00 per month

2
<PAGE>

(b) Additional Rent Whenever under the terms of this Lease any sum
of money is required to be paid by Tenant in addition to the Base Rent herein
reserved, and said additional amount so to be paid is not designated as
"Additional Rent", then said amount shall nevertheless, at the option of
Landlord, if not paid when due, be deemed "Additional Rent" and be collectible
as such with any installment of Base Rent thereafter falling due hereunder, but
nothing herein contained shall be deemed to suspend or delay the payment of any
sum at the time the same became due and payable hereunder, or limit any other
remedy of Landlord.

(c) All Base Rent and Additional Rent shall be paid when due without
demand at the office of Maplewood Office Center Limited Partnership, c/o BR
Management, Inc., 1500 Market Street, Suite 3000, Philadelphia, PA 19103, or at
such other place as Landlord may from time to time direct. All checks shall be
made payable to Maplewood Office Center Limited Partnership.

(d) Security Deposit--Landlord acknowledges receipt on or before the
date of the execution hereof from Tenant of the sum of $11,721.00, to be held,
along with the amount of $19,860.00 previously deposited with Landlord, as
collateral security for the payment of any rentals and other sums of money
payable by Tenant under this Lease, and for the faithful performance of all
other covenants and agreements of Tenant hereunder; the amount of said deposit,
without interest, to be repaid to Tenant after the termination of this Lease and
any renewal thereof, provided Tenant shall have made all such payments and
performed all such covenants and agreements. Upon any default by Tenant
hereunder, all or part of said deposit may, at Landlord's sole option, be
applied on account of such default, and thereafter Tenant shall promptly restore
the resulting deficiency in said deposit to be held by Landlord.

6. OPERATION AND MAINTENANCE COSTS AND ADDITIONAL RENT.
---------------------------------------------------

(a) The costs and expenses of the operation, maintenance and repair
of the Building (hereinafter referred to as "Operation and Maintenance Costs")
shall include, without limitation, the actual, reasonable cost and expense to
Landlord of the following items:

(1) All wages, salaries and fees of all employees and agents
engaged in the management, operation, repair, replacement, maintenance and
security of the Building, including taxes, insurance and all other employee
benefits relating thereto;

(2) All supplies and materials used in the management,
operation, repair, replacement, maintenance and security of the Building;

(3) All utilities consumed by the Building and the servicing
thereof, including but not limited to electricity (except such as is paid by
tenants in connection with use of their respective premises and such other
measured usage paid separately by Tenant as set forth in paragraph 13(a)(2)),
-------------------
including, without limitation, gas, water and sewer.

(4) All maintenance repair and replacement costs for the
operation, repair, replacement, maintenance, and security of the Building
including, without limitation, sidewalks, landscaping, snow removal, signs
(other than tenant signs), service areas,

3
<PAGE>

mechanical rooms, parking and plaza areas, Building exterior, driveways,
including any assessments against the Building pursuant to any covenants,
conditions or restrictions, reciprocal easement agreements, tenancy in common
agreements or similar restrictions or agreements, painting, decorating and
furbishing of the Building and repairing, restriping and resurfacing the parking
facilities and parking areas of the Building, window cleaning, security system,
heating, ventilating and air-conditioning system, fire sprinkler system,
elevator and landscaping for the Building;

(5) All fire and extended coverage (with all risk coverage)
insurance and comprehensive general liability insurance for the Building
(including all common areas) and Landlord's personal property and fixtures used
in connection therewith;

(6) All cleaning and janitorial services for the Building;

(7) Depreciation on window blinds and flooring in public
corridors and common areas provided by Landlord;

(8) The cost of any capital improvements made for the purpose
of reducing operating expenses or which may be required by governmental
authority under any governmental law or regulation that was not applicable to
the Building as of the date of this Lease, which cost shall be amortized over
such reasonable period as Landlord shall determine, together with interest on
the unamortized balance at the rate of two (2%) percent per annum in excess of
the Prime Rate being charged by Mellon Bank, NA as of the date on the first
invoice presented by the contractor performing the capital improvements;

(9) All other costs and expenses necessarily and reasonably
incurred by Landlord in the proper operation and maintenance of a first class
office building; provided, however, that the following shall be excluded from
the term "Operation and Maintenance Costs": (i) expenses for any capital
improvements made to the Building, except as provided in paragraph 6(a)(8); (ii)
-----------------
expenses for repairs or other work occasioned by fire, windstorm or other
insured casualty; (iii) expenses incurred in leasing or procuring new tenants
(e.g., for lease commissions, advertising expenses and expenses of renovating
space for new or existing tenants); (iv) legal expenses in enforcing the terms
of any lease; and (v) interest or amortization payments on any mortgage or
mortgages.

(b) "Real Estate Taxes", for the purposes of this Article 6, shall
---------
mean all gross real property taxes, charges and assessments (including any
special assessments) which are levied, assessed or imposed by any governmental
authority with respect to the land and the Building and any improvements,
fixtures and equipment and all other property of Landlord, real or personal,
located in or on the Building and used in connection with the operation of the
Building and any tax which shall be levied or assessed in addition to and/or in
lieu of such real or personal property taxes (including, without limitations,
any municipal income tax, any license fees, tax measured by or imposed upon
rents, or other tax or charge upon Landlord's business of leasing the Building),
but shall not include any federal or state income tax, or franchise, capital
stock, estate or inheritance taxes. In the event that the tax statement from the
taxing authority does not allocate assessments with respect to the Building and
assessments relating to any other

4
<PAGE>

improvements located upon the land upon which the Building is situated, Landlord
shall make a reasonable determination of the proper allocation of such
assessment.

(2) "Comparison Year" shall be defined as each calendar year
(or part thereof) following the Base Year and included in the term of this
Lease, including any renewal thereof; and

(3) "Tenant's Percentage" shall be as set forth below, which
is the ratio that the rentable square foot area of each Suite bears to the total
rentable square foot area of office space in the Building (i.e., 100,234
rentable square feet).

Suite 215 5.53%
Suite 240 2.51%
Suite 120 2.03%
Suite 122 3.38%
Suite 123 0.89%
Suite 128 2.30%
Suite 140 1.45%
Suite 220 3.59%

(d) For each Comparison Year, Tenant shall pay Landlord, as
Additional Rent, Tenant's Percentage of:

(1) increase in the Real Estate Taxes for such Comparison Year
over the Real Estate Any Taxes for the Base Year; and

(2) Any increase in Operating and Maintenance Costs for such
Comparison Year over the Operation and Maintenance Costs for the Base Year.

(e) During each Comparison Year, Landlord and Tenant agree that
Tenant shall pay monthly, in advance, an amount equal to one-twelfth of Tenant's
estimated annual Operation and Maintenance Costs and Real Estate Taxes
Additional Rent due for such Comparison Year. For each comparison Year, Landlord
shall make an estimate of Tenant's Operation and Maintenance Costs and Real
Estate Taxes Additional Rent and notify Tenant as to such estimate on or about
December 15th of the preceding year.

(f) On or about May 1 of each Comparison Year commencing with the
2nd Comparison Year, Landlord shall submit to Tenant a statement setting forth
the actual Operation and Maintenance Costs and Real Estate Taxes for the
Building for the preceding Comparison Year and Tenant's Percentage of the
increase thereof above the Operation and Maintenance Costs and Real Estate Taxes
for the Base Year. Within thirty (30) days after delivery of such statement to
Tenant, any necessary adjustment shall thereupon be made between Landlord and
Tenant to reflect any difference between Tenant's estimated payments under
paragraph 6(e) above and Tenant's Percentage of the increase in the actual
- --------------
Operation and

5
<PAGE>

Maintenance Costs and Real Estate Taxes for the preceding Comparison Year above
the Operation and Maintenance Costs for the Base Year. In no event, however,
shall the monthly rent paid by Tenant be less than the Base Rent set forth in
paragraph 5(a).
- --------------

(g) All sums due under this Article 6 shall be appropriately
---------
apportioned and prorated for any portion of the year during which this Lease
shall be in force. In the event that this Lease shall expire at any time other
than at the end of a calendar year, then within thirty (30) days after receipt
of written statements reflecting the actual Operation and Maintenance Costs and
Real Estate Taxes for the year in which such expiration occurs are submitted by
Landlord to Tenant, either Landlord or Tenant shall pay to the other party the
adjustment sum due. The provisions of this paragraph 6(g) shall survive the
--------------
expiration of this Lease.

(h) If the Building is less than 95% occupied during any portion or
all of the Base Year or any Comparison Year, then Landlord shall adjust the
Operation and Maintenance Costs for any such Year to an amount which reasonably
reflects what the Operation and Maintenance Costs would have been for such Year
had the Building been 95% occupied through such Year.

(i) The Additional Rent due under the terms and conditions of this
Article 6 shall be payable by Tenant without any setoff or deduction and shall
- ---------
be prorated as aforesaid during the first and last calendar years of the term,
including any renewal thereof.

7. LATE PAYMENT. In the event that any payment required by Tenant under
------------
the provisions hereof shall not be paid when due or within ten (10) days after
its due date, Tenant shall, upon demand, pay a late charge to Landlord of $.10
for each dollar so overdue and such late charge shall be deemed "Additional
Rent" for all purposes under this Lease.

8. USE OF PREMISES. Tenant shall use and occupy the Premises for purposes
---------------
of software development and executive and administrative offices, and ancillary
uses reasonably related thereto. Suite 120 shall be used as a software training
facility. Tenant shall not use or occupy the Premises for any other purpose or
business without the prior written consent of Landlord. Tenant shall observe and
comply with the Rules and Regulations attached hereto as Exhibit C and made part
hereof. All such Rules and Regulations shall apply to Tenant and its employees,
agents, licensees, invitees, subtenants and contractors.

9. COMMON AREAS. All parking areas, walkways, elevators, stairs,
------------
driveways, alleys, public corridors and fire escapes, and other areas,
facilities and improvements as may be provided by Landlord from time to time for
the general use, in common, of Tenant and other tenants, their employees,
agents, invitees and licensees, shall at all times be subject to the exclusive
control and management of Landlord, and Landlord shall have the right from time
to time to establish, modify and enforce reasonable rules and regulations with
respect to all such areas, facilities and improvements.

6
<PAGE>

10. ALTERATIONS AND TRADE FIXTURES, REMOVAL.
---------------------------------------

(a) Except as expressly set forth to the contrary herein, Tenant
has examined the Premises and agrees to accept them in their present "as is"
condition, and Tenant agrees that neither Landlord nor Agent has made any
representation as to the present or future condition of said Premises. Except as
expressly set forth to the contrary herein, all work to be done or performed in
or about the Premises shall be done by Tenant, at Tenant's sole cost and expense
and in accordance with the provisions of this Article 10.
----------

(b) Tenant shall not do any work in or about the Premises or make
any alterations or additions thereto without the written consent of Landlord
first had and obtained. All work consented to by Landlord, to be done or
performed in or about the Premises by Tenant, whether prior to the Commencement
Date or thereafter, shall comply with Landlord's design criteria and be
consistent with the architectural and mechanical requirements of the Building,
and shall be performed (i) at Tenant's sole cost and expense, (ii) in accordance
with the plans and specifications prepared by and at the expense of Tenant and
approved by Landlord, (iii) by contractors, subcontractors and materialmen
approved by Landlord, and (iv) pursuant to bids approved by Landlord in its
reasonable discretion. Upon completion of any such work, Tenant shall pay to
Landlord an amount equal to five (5%) percent of the cost of such work, to
reimburse Landlord for the cost of coordination and final inspection of the
work. This 5% fee does not apply to Landlord's Work. During the course of
performance of said work, Tenant will carry or cause to be carried such
insurance as may from time to time be required by Landlord naming the Landlord
and Landlord's agent as additional insureds and further providing that such
insurance cannot be cancelled without thirty (30) days prior written notice to
Landlord and Landlord's agent. Landlord shall require a guarantee by each of
Tenant's prime contractors and materialmen for the benefit of the Landlord,
Tenant and such other parties as Landlord shall designate that all work
performed and materials and equipment furnished by such contractors will conform
to the requirements of the plans and specifications as to the kind, quality,
function of the equipment and characteristics of material and workmanship and
will remain so for a period of at least one year from the date that the work has
been completed, and in the event any deficiency, defects, faults or
imperfections of materials, equipment or workmanship shall appear prior to the
expiration of such one-year period, the contractor, upon receiving written
notice thereof from Landlord or Tenant, will immediately correct and repair the
same at the expense of such contractor; said guarantees to be effective whether
or not any part of the aforesaid work has been subcontracted by the contractor.

(c) Any consent by Landlord permitting Tenant to do any or cause
any work to be done in or about the Premises shall be and hereby is conditioned
upon work being performed by workmen and mechanics working in harmony and not
interfering with labor employed by Landlord, Landlord's mechanics or their
contractors or by any other tenant or its contractors. If at any time any of the
workmen or mechanics performing any of Tenant's work shall be unable to work in
harmony or shall interfere with any labor employed by Landlord, other tenants or
their respective mechanics and contractors, then the permission granted by
Landlord to Tenant permitting Tenant to do or cause any work to be done in or
about the Premises, may be withdrawn by Landlord upon forty-eight (48) hours
written notice to Tenant.

7
<PAGE>

(d) All alterations, interior decorations, improvements or
additions made to the Premises by Tenant, except for moveable furniture and
trade fixtures, shall immediately become Landlord's property. So long as Tenant
is not in default hereunder, Tenant shall have the right but, except as stated
in the succeeding sentence, not the obligation to remove all moveable furniture
and trade fixtures installed by Tenant in the Premises, except lighting fixtures
and air-conditioning equipment, providing that Tenant repairs any damage caused
to the Premises by said removal. Landlord, by notice to Tenant in writing at
least one (1) month prior to the expiration of the Lease term, including any
renewal thereof, may request that Tenant remove any of said movable furniture
and trade fixtures caused to be installed by Tenant, and, if Landlord makes such
request, Tenant shall remove on or before said expiration date such of said
movable furniture and trade fixtures as are stated in such request and repair
any damage caused to the Premises by said removal. In the event that Landlord
request such removal and Tenant fails to remove same and repair any damage
caused thereby on or before said expiration date, Tenant agrees to reimburse and
pay Landlord, including reasonable charges for overhead, for the cost of
removing same and repairing any damage to the Premises caused by said removal.
All of said movable furniture and trade fixtures remaining on the Premises after
said expiration date, or at such sooner termination date due to any default of
Tenant, shall become the property of Landlord.

11. MECHANICS' LIENS AND INSURANCE. Prior to Tenant performing any
------------------------------
construction or other work on or about the Premises for which a lien could be
filed against the Premises or the Building, Tenant shall supply Landlord in
every case with satisfactory evidence of the following items: (a) the
procurement of all necessary permits and authorizations from the various
governmental authorities having jurisdiction over the Premises; (b) the due
filing of a satisfactory waiver against mechanics' liens executed by the
contractor; and (c) workmen's compensation insurance, public liability
insurance, and property damage insurance in amounts, form and content, and with
companies satisfactory to Landlord. Notwithstanding the foregoing, if any
mechanics' or other lien shall be filed against the Premises or the Building
purporting to be for labor or material furnished or to be furnished at the
request of the Tenant, then Tenant shall at its expense cause such lien to be
discharged by payment, bond or otherwise, within ten (10) days after the filing
thereof. If Tenant shall fail to cause such lien to be discharged of record
within such ten-day period, Landlord may cause such lien to be discharged by
payment, bond or otherwise, without investigation as to the validity thereof or
as to any offsets or defenses thereto. Tenant shall indemnify, defend and hold
Landlord harmless against any and all claims, costs, damages, liabilities and
expenses (including attorney fees) which may be brought or imposed against or
incurred by Landlord by reason of any such lien or discharge.

12. CONDITION OF PREMISES. Tenant acknowledges and agrees that,
---------------------
except as expressly set forth in this Lease, there have been no representations
or warranties made by or on behalf of Landlord with respect to the Premises or
the Building or with respect to the suitability of either for the conduct of
Tenant's business. The taking of possession of the Premises by Tenant shall
conclusively establish that the Premises and the Building were at such time
substantially complete and in satisfactory condition, order and repair, subject
to agreed upon punchlist items and latent defects.

8
<PAGE>

13. BUILDING SERVICES.
-----------------

(a) Landlord shall provide, within its standards in existence as of
the date hereof on each item, and at Landlord's expense, subject to Tenant's
obligations specified in this Lease, the following services and facilities:

(1) Air conditioning, ventilation and heating ("HVAC") from 8:00
AM to 6:00 PM Monday through Friday and from 8:00 AM to 6:00 PM Saturday,
excluding all holidays observed by the State or Federal Government. Tenant
agrees to cooperate fully with Landlord and to abide by all the regulations and
requirements which Landlord may reasonably prescribe for the proper functioning
and protection of the HVAC systems. In the event Tenant shall desire HVAC at any
time other than as required under the Lease ("Overtime HVAC"), Tenant shall
notify Landlord in writing at least forty-eight (48) hours prior to the
commencement of such Overtime HVAC. Landlord shall provide such Overtime HVAC
and Tenant shall pay, as additional rent, Landlord's then current charge for
Overtime HVAC, within ten (10) days after receiving a bill therefor from
Landlord, such bill to specify the time period to which it is applicable.

(2) Furnish electricity for normal office use in the Premises,
including lighting, telecommunications, personal computers and computer networks
reasonably necessary for normal office use, for the use of Tenant in the
Premises. Landlord shall install and maintain, at Landlord's expense, such
meters as Landlord shall deem necessary to measure, respectively, consumption by
Tenant and each other tenant of the Building of electrical energy in the
respective areas of the Building leased to tenants or, alternatively, may
estimate such consumption by other reasonable methods. Landlord shall not be
liable in any way to Tenant for failure or defect in the supply or character of
electric energy furnished to the Premises or to the Building by reason of any
requirement, act or omission of the public utility serving the Building with
electricity or for any other reason whatsoever not attributable to Landlord.
Tenant agrees, to the extent, if any, in the future there is a requirement by
the Pennsylvania Public Utility Commission or federal or state law as a
necessary condition to the supply of electric energy to the Premises, to become
an individually metered customer of such public utility, in which event, upon
receipt of each bill to Tenant from such public utility for electric service to
the Premises, Tenant shall pay directly to the public utility company the amount
as may be determined owing, from time to time, based on a reading of such
meters. Until such time as said public utility assumes direct billing
responsibility, Tenant shall purchase all electricity used by Tenant, as
measured by such meters or estimated by Landlord and pay for it, as "Additional
Electric Rent," within ten (10) days after receiving bills therefor from
Landlord, such bills to be submitted to Tenant by Landlord monthly and each bill
to specify the time period to which it is applicable.

The charge to Tenant for all electricity used in the Premises shall be
equal to an equitable portion of the charges paid by Landlord for such
electricity, plus reasonable administrative and billing charges.

Tenant's use of electric energy in the Premises shall not at any time
exceed the capacity of any of the electrical conductors and equipment in or
otherwise serving the Premises. In the event that Tenant shall require electric
energy for use in the Premises in excess of that

9
<PAGE>

required for normal office use, and if, in Landlord's sole judgment, Landlord's
facilities are inadequate for such additional requirements and if electric
energy for such additional requirements is available to Landlord, Landlord, upon
written request and at the sole cost and expense of Tenant, will furnish and
install such additional wires, risers, conduits, feeders and switchboards as
reasonably may be required to supply such additional requirements of Tenant,
provided (i) that the same shall be permitted by applicable laws and insurance
regulations; (ii) that, in Landlord's reasonable judgment, the same are
reasonably necessary to satisfy Tenant's additional requirements and will not
cause permanent damage or injury to the Building or the Premises or cause or
create a dangerous hazardous condition or entail unreasonable alterations or
repairs or interfere with or disturb other lessees or occupants of the Building
and (iii) that Tenant, at Tenant's expense, shall concurrently with the making
of such written request, execute and deliver to Landlord Tenant's written
undertaking, with a surety and in form and substance reasonably satisfactory to
Landlord, obligating Tenant to fully and promptly pay the entire cost and
expense of so furnishing and installing any such additional wires, risers,
conduits, feeders and/or switchboards.

Tenant shall not install any equipment of any kind or nature
whatsoever which would or might necessitate any changes, replacements or
additions to any of the heating, ventilating, air-conditioning, electric,
sanitary, elevator or other systems serving the Premises or any portion of the
Building, or to any of the services required of Landlord under this Lease,
without the prior written consent of Landlord, which shall not be unreasonably
withheld, and in the event such consent is granted, such replacements, changes
or additions shall be paid for by Tenant. At the expiration or earlier
termination of the term hereof, Tenant shall pay Landlord's costs of restoring
such systems to their condition prior to such replacements, changes or
additions.

(3) Maintenance of service of the public toilet rooms in the
Building;

(4) Maintenance of floor coverings in the common area;

(5) Cleaning of outside and inside of exterior window panes;

(6) Cleaning and maintenance of common areas in the Building;

(7) Continuous passenger elevator service during regular
business days and hours, and service via at least one car at all other times;

(8) Janitor service, including cleaning of space, dusting of
furniture, desks and pictures, vacuuming, and removal of normal office trash. No
janitor service shall be provided to computer rooms and storage rooms;

(9) Tenant shall reimburse Landlord for all additional cleaning
expenses incurred, including, but not limited to garbage and trash removal
expense, over and above the normal cleaning provided by Landlord due to the
presence of a lunch room within the Premises or the installation of food and
beverage dispensing machines. No food or beverage

10
<PAGE>

dispensing machines shall be installed by Tenant without the prior consent of
Landlord, which consent shall not be unreasonably withheld, so long as there is
no other food or beverage service available to Tenant within the Building.

(b) Landlord does not warrant that the services provided for in
paragraph 13(a) hereof shall be free from any slowdown, interruption or stoppage
- ---------------
pursuant to voluntary agreement by and between Landlord and governmental bodies
and regulatory agencies, or caused by the maintenance, repair, substitution,
renewal, replacement or improvements of any of the equipment involved in the
furnishing of any such services, or caused by changes of services, alterations,
strikes, lockouts, labor controversies, fuel shortages, accidents, acts of God
or the elements or any other cause beyond the reasonable control of Landlord;
and specifically, no such slowdown, interruption or stoppage of any of such
services shall ever be construed as an eviction, actual or constructive, or
Tenant, nor shall same cause any abatement of Base Rent or Additional Rent
payable hereunder or in any manner or for any purpose relieve Tenant from any of
its obligations hereunder, and in no event shall Landlord be liable for damage
to persons or property or be in default hereunder as a result of such slowdown,
interruption or stoppage. Landlord agrees to use reasonable diligence to resume
the service upon any such slowdown, interruption or stoppage.

14. ASSIGNMENT AND SUBLETTING.
-------------------------
(a) Except as expressly permitted pursuant to this Article 14, Tenant
----------
shall not, without the prior written consent of Landlord, assign or hypothecate
this Lease or any interest herein or sublet the Premises or any part thereof.
Any of the foregoing acts without such consent shall be void and shall, at the
option of Landlord by notice to Tenant, terminate this Lease. This Lease shall
not, nor shall any interest herein, be assignable as to the interest of Tenant
by operation of law without the written consent of the Landlord. Notwithstanding
the foregoing, a corporate Tenant may, without consent of the Landlord, assign
this Lease to its parent or subsidiary in connection with a consolidation or
merger of the Tenant, provided the same assignee assumes, in full, the
obligation of Tenant under the Lease, and such assignment shall not relieve the
assignor of its obligations under this Lease.

(b) If at any time or from time to time during the term of this Lease
Tenant desires to assign this Lease or sublet all or any part of the Premises,
Tenant shall give notice to Landlord of such intent. Landlord shall have the
option, exercisable by notice given to Tenant within twenty (20) days after
receipt of Tenant's notice, of terminating this Lease (in the case of a proposed
assignment) or of reacquiring the portion of the Premises proposed to be sublet
and terminating the Lease with respect thereto (in the case of a proposed
subletting). If the Landlord does not exercise such option, Tenant shall be free
to sublet such space or assign this Lease to any third party subject to the
following conditions:

(1) Consent of Landlord shall be obtained, which consent shall
not be unreasonably withheld;

(2) If the space or Lease is not subleased or assigned within
ninety (90) days from the expiration of Landlord's option as set forth above, or
any subsequent

11
<PAGE>

option as provided in this paragraph 14(b)(2), Tenant shall, prior to entering
------------------
into a sublease or an assignment, once again give Landlord notice and Landlord
shall have twenty (20) days after the receipt thereof of terminating this Lease
or reacquiring the applicable portion of the Premises and terminating the lease
with respect thereto;

(3) No sublease or assignment shall be valid and no subtenant or
assignee shall take possession of the premises subleased or assigned until an
executed counterpart of its assignment or sublease has been delivered to
Landlord; and

(4) No subtenant or assignee shall have a right further to
sublet or assign.

(c) One-half of any sums or other economic consideration received by
Tenant as a result of any subletting or assignment (except rental or other
payments received which are attributable to the amortization of the cost of
leasehold improvements made to the sublet or assigned portion of the Premises by
Tenant for the subtenant or assignee, and other reasonable expenses incident to
the subletting or assignment, including standard leasing commissions) whether
denominated rentals under the assignment, sublease or otherwise, which exceed,
in the aggregate, the total sums which Tenant is obligated to pay Landlord under
this Lease (prorated to reflect obligations allocable to that portion of the
Premises subject to such sublease or assignment) shall be payable to Landlord as
Additional Rent under this Lease without affecting or reducing any other
obligation of Tenant hereunder. If such subleasing or assignment has been made
without the consent of the Landlord as provided herein, Landlord shall be
entitled to all economic consideration received by Tenant in accordance with the
provisions of this paragraph 14(c), but the receipt of such monies shall
---------------
not be deemed to be a waiver of the provisions of this Article 14 with respect
----------
to assignment and subletting, or the acceptance of such assignee or subtenant as
Tenant hereunder.

(d) Regardless of Landlord's consent, no subletting or assignment
shall release Tenant of Tenant's obligation or alter the primary liability of
Tenant to pay the rental and to perform all other obligations to be performed by
Tenant hereunder. The acceptance of rental by Landlord from any other person
shall not be deemed to be a waiver by Landlord of any provision hereof. Consent
to one subletting or assignment shall not be deemed consent to any subsequent
assignment or subletting. In the event of default by any assignee of Tenant or
any successor of Tenant in the performance of any of the terms hereof, Landlord
may proceed directly against Tenant without the necessity of exhausting remedies
against such assignee or successor. Landlord may consent to subsequent
subletting or assignment of this Lease or amendments or modifications to this
Lease with assignees of Tenant, without notifying Tenant, or any successor of
Tenant, and without obtaining its or their consent thereto and such action shall
not relieve Tenant of liability under this Lease. Tenant agrees, in the event
that (i) all or any part of the Premises are to be sublet by Tenant, or (ii)
this Lease is to be assigned by Tenant, that the agent then authorized by
Landlord to lease space in the Building shall (aa) have the exclusive right to
act as agent of the Tenant in any such subletting or assignment, and (bb) be
entitled to collect from Tenant the customary commissions for such services;
provided, however, that in no such event shall Landlord be liable for the
payment of any such commissions.

12
<PAGE>

(e) In the event that (i) the Premises or any part thereof are sublet
and Tenant is in default under this Lease pursuant to the provisions of Article
-------
25, or (ii) this Lease is assigned by Tenant, then, Landlord may collect rent
- --
from the assignee or subtenant and apply the net amount collected to the rent
herein reserved; but no such collection shall be deemed a waiver of the
provisions of this Article 14 with respect to assignment and subletting, or the
----------
acceptance of such assignee or subtenant as Tenant hereunder, or a release of
Tenant from further performance of the covenants herein contained.

15. ACCESS TO PREMISES. Landlord, its employees and agents shall have the
------------------
right to enter the Premises at all reasonable times during normal business hours
and at any time in case of an emergency for the purpose of examining or
inspecting the same, showing the same to prospective purchasers, mortgagees or
tenants of the Building, and making such alterations, repairs, improvements or
additions to the Premises or to the Building as Landlord may deem necessary or
desirable. If representatives of Tenant shall not be present to open and permit
entry into the Premises at any time when such entry by Landlord is necessary or
permitted hereunder, Landlord may enter by means of a master key (or forcibly in
the event of an emergency) without liability to Tenant and without such entry
constituting an eviction of Tenant or termination of this Lease.

16. REPAIRS.
-------
(a) Landlord shall make, at its sole cost and expense, all repairs
necessary to maintain the Building structure, roof, foundation, footings, common
areas, plumbing, heating, air conditioning and electrical systems, windows,
floors (except carpeting) and all items which constitute a part of the Premises
and are installed or furnished by Landlord; provided, however, that Landlord
shall not be obligated for any of such repairs until the expiration of a
reasonable period of time after written notice from Tenant that such repair is
needed. In no event shall Landlord be obligated under this Article 16 to repair
----------
any damage caused by any act, omission, accident or negligence of the Tenant or
its employees, agents, invitees, licensees, subtenants, or contractors.

(b) Except as the Landlord is obligated for repairs as provided in
paragraph 16(a), Tenant shall make, at its sole cost and expense, all repairs
- ---------------
necessary to maintain the Premises and shall keep the Premises and the fixtures
therein in neat and orderly condition. If the Tenant refuses or neglects to make
such repairs, or fails to diligently prosecute the same to completion, after
written notice from Landlord of the need therefor, Landlord may make such
repairs at the expense of Tenant and such expense shall be collectible as
Additional Rent, along with a ten (10%) percent service charge.

(c) Landlord shall not be liable by reason of any injury to or
interference with Tenant's business arising from the making of any repairs,
alterations, additions or improvements in accordance with this Article 16 in or
----------
to the Premises or the Building or to any appurtenances or equipment therein,
except to the extent repairs are necessitated by the gross negligence or willful
misconduct of Landlord. Landlord shall use good faith efforts to interfere as
little as reasonably practicable with the conduct of Tenant's business. There
shall be no abatement of rent because of such repairs, alterations, additions or
improvements, except as

13
<PAGE>

provided in Article 21, and, except to the extent repairs are necessitated by
----------
the gross negligence or willful misconduct of Landlord.

17. INDEMNIFICATION AND LIABILITY INSURANCE.
---------------------------------------

(a) Tenant shall indemnify, hold harmless and defend Landlord from
and against any and all costs, expenses (including reasonable counsel fees),
liabilities, losses, damages, suits, actions, fines, penalties, claims or
demands of any kind asserted by or on behalf of any person or governmental
authority, arising out of or in any way connected with, and Landlord shall not
be liable to Tenant on account of, (i) any failure by Tenant to perform any of
the agreements, terms, covenants or conditions of this Lease required to be
performed by Tenant, (ii) any failure by Tenant to comply with any statutes,
ordinances, regulations or orders of any governmental authority, or (iii) any
accident, death or personal injury, or damage to or loss or theft of property,
which shall occur in or about the Premises occasioned wholly or in part by
reason of any act or omission of Tenant, its agents, contractors, invitees or
employees, except to the extent occasioned by the gross negligence or willful
misconduct of Landlord, its agents, contractors or employees.

(b) During the term of this Lease, including any renewal thereof,
Tenant shall obtain and promptly pay all premiums for Comprehensive General
Liability Insurance with broad form extended coverage including Contractual
Liability Insurance against claims occurring upon in or about Premises with a
minimum coverage of a combined single limit of $1,000,000.00, and all such
policies and renewals thereof shall name the Landlord, Landlord's agent and the
Tenant as insureds. All policies of insurance shall provide (i) that no material
change or cancellation of said policies shall be made without ten (10) days
prior written notice to Landlord and Tenant, and (ii) that any loss shall be
payable notwithstanding any act or negligence of the Tenant or the Landlord
which might otherwise result in the forfeiture of said insurance. On or before
the Commencement Date applicable to each Suite, or such earlier date as Tenant
shall be afforded access to the Premises, and thereafter not less than fifteen
(15) days prior to the expiration dates of said policy or policies, Tenant shall
provide copies of policies or certificates of insurance evidencing coverages
required by this Lease. All the insurance required under this Lease shall be
issued by insurance companies authorized to do business in the State of
Pennsylvania with a financial rating of at least an A- as rated in the most
recent edition of Best's Insurance Reports and in business for the past five
years. The aforesaid insurance limits may be reasonably increased from time to
time by Landlord.

(c) Tenant and Landlord, respectively, hereby release each other from
any and all liability or responsibility to the other for all claims of anyone
claiming by, through or under it or them by way of subrogation or otherwise for
any loss or damage to property covered by the Pennsylvania Standard Form of Fire
Insurance Policy with extended coverage endorsement, whether or not such
insurance is maintained by the other party. Tenant and Landlord agree to notify
their respective insurers of the release of the subrogation claims.

18. WAIVER OF CLAIMS. Except to the extent arising from their gross
----------------
negligence or willful misconduct, and subject to Article 4, Landlord and
---------
Landlord's agents, servants, and employees shall not be liable for, and Tenant
hereby releases and relieves

14
<PAGE>

Landlord, its agents, servants, and employees from, all liability in connection
with any and all loss of life, personal injury, damage to or loss of property,
or loss or interruption of business occurring to Tenant, its agents, servants,
employees, invitees, licensees, visitors, or any other person, firm, corporation
or entity, in or about or arising out of the Premises, from, without limitation,
(a) any fire, other casualty, accident, occurrence or condition in or upon the
Premises or the Building; (b) any defect in or failure of (i) plumbing,
sprinkling, electrical, heating or air conditioning systems or equipment, or any
other systems and equipment of the Premises and the Building, and (ii) the
elevators, stairways, railings or walkways of the Building; (c) any steam, gas,
oil, water, rain or snow that may leak into, issue or flow from any part of the
Premises or the Building from the drains, pipes or plumbing, sewer or other
installation of same, or from any other place or quarter; (d) the breaking or
disrepair of any installations and equipment; (e) the falling of any fixture or
any wall or ceiling materials; (f) broken glass; (g) latent or patent defects;
(h) the exercise of any rights by Landlord under the terms and conditions of
this Lease; (i) any acts or omissions of the other tenants or occupants of the
Building or of nearby buildings; (j) any acts or omissions of other persons; (k)
any acts or omissions, including negligence, of Landlord, its agents, servants
and employees; and (l) theft, Act of God, public enemy, injunction, riot,
strike, insurrection, war, court order, or any order of any governmental
authorities having jurisdiction over the Premises.

19. QUIET ENJOYMENT. Tenant's right to quiet possession of the Premises
---------------
shall not be disturbed by Landlord so long as Tenant shall pay rent and observe
and perform all of the provisions of this Lease to be observed and performed by
Tenant, unless this Lease is terminated pursuant to the provisions contained
herein (e.g., Article 21 or 23).
---- ---------- --

20. NEGATIVE COVENANTS OF TENANT. Tenant agrees that it will not do or
----------------------------
suffer to be done, any act, matter or thing objectionable to the fire insurance
companies whereby the fire insurance or any other insurance now in force or
hereafter to be placed on the Premises or any part thereof, or on the Building,
shall become void or suspended, or whereby the same shall be rated as a more
hazardous risk than at the date when Tenant receives possession hereunder. In
case of a breach of this covenant, in addition to all other remedies of Landlord
hereunder, Tenant agrees to pay to Landlord as Additional Rent, any and all
increase or increases in premiums on insurance carried by Landlord on the
Premises, or any part thereof, or on the Building, caused in any way by the
occupancy of Tenant.

21. FIRE OR OTHER CASUALTY.
----------------------

(a) If the Premises are damaged by fire or other casualty, the
damages shall be repaired by and at the expense of Landlord to at least as good
a condition as that which existed immediately prior to such damage and the rent
until such repairs shall be made shall be apportioned from the date of such fire
or other casualty according to the part of the Premises which is usable by
Tenant. Landlord agrees to repair such damage within a reasonable period of time
after receipt from Tenant of written notice of such damage, subject to any
delays caused by Acts of God, labor strikes or other events beyond Landlord's
reasonable control. Landlord shall not be liable for any inconvenience or
annoyance to Tenant or injury to the business of Tenant resulting in any way
from such damage or the repair thereof. Tenant acknowledges notice (i) that
Landlord shall not obtain insurance of any kind on Tenant's furniture or
furnishings,

15
<PAGE>

equipment, fixtures, alterations, improvements and additions, (ii) that it is
Tenant's obligation to obtain such insurance at Tenant's sole cost and expense,
and (iii) that Landlord shall not be obligated to repair any damage thereto or
replace the same.

(b) If the Premises, in the sole opinion of Landlord, are (i)
rendered substantially untenantable by reason of such fire or other casualty, or
(ii) twenty (20%) percent or more of the Premises is damaged by said fire or
other casualty and less than six (6) months would remain of the Lease term or
any renewal thereof upon completion of the repairs or reconstruction, Landlord
shall have the right, to be exercised by notice in writing delivered to Tenant
within thirty (30) days from and after said occurrence, to elect not to
reconstruct the Premises, and, in such event, this Lease and the tenancy hereby
created shall cease as of the date of said occurrence, the rent to be adjusted
as of, and be payable only up to, said date.

(c) If the Building, in the sole opinion of Landlord, shall be
substantially damaged by fire or other casualty, regardless of whether or not
the Premises were damaged by such occurrence, Landlord shall have the right, to
be exercised by notice in writing delivered to Tenant within thirty (30) days
from and after said occurrence, to terminate this Lease, and, in such event,
this Lease and the tenancy hereby created shall cease as of the date of said
termination unless terminated as of the date of said occurrence in accordance
with paragraph 21 (b), the rent to be adjusted as of, and be payable only up to,
----------------
the date of such termination.

(d) If the Premises are damaged by fire or other casualty so as to
render the same substantially untenantable by Tenant, and such damage is not
restored within one hundred and twenty (120) days after Landlord adjusts the
loss with its insurance company and receives the applicable insurance proceeds,
or within one hundred eighty (180) days after the date of the fire or casualty,
not including (in either case) delays caused by Tenant's acts or omissions, then
Tenant may, by notice to Landlord, terminate this Lease, the rent to be adjusted
as of, and be payable only up to, the date the damage was incurred.

22. SUBORDINATION.
-------------

This Lease is subject and subordinate to any mortgage hereafter placed
on the Premises or the Building. In the event of the foreclosure of any such
mortgage at the option of the mortgagee or the purchaser at foreclosure sale,
Tenant agrees to attorn to and to recognize the mortgagee or the purchaser at
foreclosure sale as Tenant's Landlord for the balance of the term of this Lease
subject to all of the terms and provisions hereof. Tenant hereby agrees,
however, that such mortgagee or the purchaser at foreclosure sale shall not be:

(a) liable for any act or omission of Landlord;

(b) subject to any offsets or defenses which Tenant might have
against Landlord;

16
<PAGE>

(d) bound by any amendment or modification of this Lease made without
its consent. The aforesaid subordination and attornment provision shall be self-
operative, however, Tenant agrees to promptly execute any other agreement
submitted by Landlord in confirmation or acknowledgement of the same. Landlord
agrees to seek an acknowledgement from the holder of any such mortgage to the
effect that, so long as Tenant performs its obligations hereunder, Tenant's
possession and enjoyment of the Premises shall not be disturbed as a result of
such holder's exercise of any right it may have (including foreclosure) under
such mortgage.

23. CONDEMNATION.
------------

(a) If the whole of the Premises shall be condemned or taken either
permanently or temporarily for any public or quasi-public use or purpose, under
any statute or by right of eminent domain, or by private purchase in lieu
thereof, then in that event the term of this Lease shall cease and terminate
from the date when possession is taken thereunder pursuant to such proceeding or
purchase. The rent shall be adjusted as of the time of such termination and any
rent paid for a period thereafter shall be refunded. In the event a portion only
of the Premises or a portion of the Building shall be so taken (even though the
Premises may not have been affected by the taking of some other portion of the
Building) Landlord may elect to terminate this Lease from the date when
possession is taken thereunder pursuant to such proceeding or purchase or
Landlord may elect to repair and restore, at its own expense, the portion not
taken and thereafter the rent shall be reduced proportionately to the portion of
the Premises taken.

(b) In the event of any total or partial taking of the Premises or
the Building, Landlord shall be entitled to receive the entire award in any such
proceeding and Tenant hereby assigns any and all right, title and interest of
Tenant now or hereafter arising in or to any such award or any part thereof and
hereby waives all right against Landlord and the condemning authority, except
that Tenant shall have the right to claim and prove in any such proceeding and
to receive any award which may be made to Tenant, if any, specifically for
damages for loss of good will, movable trade fixtures, equipment and moving
expenses.

(c) If, due to causes beyond Landlord's reasonable control, the
Premises or the Building is declared unsafe by any duly constituted authority
having the power to make such determination, or are the subject of a violation
notice or notices requiring repair or reconstruction which are not the result of
Landlord's gross negligence or willful misconduct, Landlord, at its option, may
make the required repairs or may terminate this Lease, and in the latter event,
Tenant shall immediately surrender said Premises to Landlord and thereupon this
Lease shall terminate and the rent shall be apportioned as of the date of such
termination.

24. ESTOPPEL CERTIFICATE. Tenant shall, at any time and from time to time
--------------------
and within ten (10) business days after request by Landlord, execute,
acknowledge and deliver to Landlord a statement in writing (i) certifying that
this Lease is in full force and effect without modification or amendment (or, if
there have been any modifications or amendments, that this Lease is in full
force and effect as modified and amended and setting forth the modifications and
amendments); (ii) certifying the dates to which Base Rent and Additional Rent
have been paid,

17
<PAGE>

as well as Tenant's Percentage; (iii) either certifying that to the knowledge of
the Tenant no default exists under this Lease or specifying each such default;
(iv) certifying the term of the Lease, any renewal term, and whether any renewal
rights have been exercised; (v) certifying whether any hazardous substances have
been used or stored by Tenant at the Premises, other than in a manner incidental
to Tenant's permitted use and in compliance with all applicable laws and
regulations; (vi) certifying any expansion or termination rights of Tenant as to
the Premises and (vii) certifying such other matters as to the Premises, the
Building, or Tenant as the party requesting such certification may reasonably
require. It is the intention and agreement of Landlord and Tenant that any such
statement by Tenant may be relied upon by a prospective purchaser, title company
or a prospective or current mortgagee of the Building, or by others, in any
matter affecting the Premises.

25. DEFAULT. The occurrence of any of the following shall constitute a
-------
material default and breach of this Lease by Tenant:

(a) If Tenant fails to pay, when due, any installment of rent
hereunder or any such other sum herein required to be paid by Tenant and such
failure continues for five (5) days after written notice from Landlord;

(b) A failure by Tenant to observe and perform any other provision or
covenant of this Lease to be observed or performed by Tenant, where such failure
continues for thirty (30) days after written notice thereof from Landlord to
Tenant; provided, however, that if the nature of the default is such that the
same cannot reasonably be cured within such thirty-day period, Tenant shall not
be deemed to be in default if Tenant shall within such period commence such cure
and thereafter diligently prosecute the same to completion;

(c) Failure by Tenant to comply with all of the obligations of Tenant
under any preexisting lease for the Premises, or any part thereof, or other
premises in the Building; or

(d) The filing of a petition by or against Tenant for adjudication as
a bankrupt or insolvent or for its reorganization or for the appointment
pursuant to any local, state or federal bankruptcy or insolvency law of a
receiver or trustee of Tenant's property; or an assignment by Tenant for the
benefit of creditors; or the taking possession of the property of Tenant by any
local, state or federal governmental officer or agency or court-appointed
official for the dissolution or liquidation of Tenant or for the operating,
either temporary or permanent, of Tenant's business, provided, however, that if
any such action is commenced against Tenant the same shall not constitute a
default if Tenant causes the same to be dismissed within sixty (60) days after
the filing of same.

26. REMEDIES. Upon the occurrence of any such event of default specified
--------
in Article 25:
----------

(a) Landlord may cure for the account of Tenant any such default of
Tenant and immediately recover as Additional Rent any expenditures made and the
amount of

18
<PAGE>

any obligations incurred in connection therewith, plus fifteen (15%) percent per
annum interest from the date of any such expenditure;

(b) Landlord may accelerate all Base Rent and Additional Rent due for
the balance of the term of this Lease and declare the same, discounted to
present value using a 7% discount rate, along with all sums past due, to be
immediately due and payable. In determining the amount of any future payments
due Landlord as a result of increases in Operation and Maintenance Costs and/or
Real Estate Taxes, Landlord may make such determination based upon the amount of
Operation and Maintenance Costs and/or Real Estate Taxes paid by Tenant for the
full year immediately prior to such default;

(c) Landlord may immediately proceed to collect or bring action for
the whole rent or such part thereof as aforesaid, as being rent in arrears, or
may file a Proof of Claim in any bankruptcy or insolvency proceeding for such
rent, or Landlord may institute any other proceedings, whether similar to the
foregoing or not, to enforce payment thereof;

(d) Landlord may re-enter and repossess the Premises breaking open
locked doors, if necessary, and may use as much force as necessary to effect
such entrance without being liable to any action or prosecution for such entry
or the manner thereof, nor shall Landlord be liable for the loss of any property
upon the Premises. Landlord may remove all of Tenant's goods and property from
the Premises. Landlord shall have no liability for any damage to such goods and
property, nor shall Landlord be responsible for the storage or protection of the
same upon removal;

(e) Landlord may, at any time after the occurrence of any event of
default re-enter and repossess the Premises and any part thereof and attempt to
relet all or any part of such Premises for and upon such terms and to such
persons, firms or corporations and for such period or periods as Landlord, in
its sole discretion, shall determine, including a term beyond the termination of
this Lease; and Landlord shall not be required to accept any tenant offered by
Tenant or observe any instruction given by Tenant about such reletting or do any
act or exercise any care or diligence with respect to such reletting or to the
mitigation of damages. For the purpose of such reletting, Landlord may decorate
or make repairs, changes, alterations or additions in or to the Premises to the
extent deemed by Landlord desirable or convenient, and the cost of such
decoration, repairs, changes, alterations or additions shall be charged to and
be payable by Tenant as Additional Rent hereunder, as well as any reasonable
brokerage and legal fees expended by Landlord; and any sums collected by
Landlord from any new tenant obtained on account of the Tenant shall be credited
against the balance of the rent due hereunder as aforesaid. Tenant shall pay to
Landlord monthly, on the days when the rent would have been payable under this
Lease, the amount due hereunder less the amount obtained by Landlord from such
new tenant;

(f) Landlord, at its option, may serve notice upon Tenant that this
Lease and the then unexpired term hereof shall cease and expire and become
absolutely void on the date specified in such notice, to be not less than five
(5) days after the date of such notice without any right on the part of the
Tenant to save the forfeiture by payment of any sum due or by the performance of
any term, provision, covenant, agreement or condition broken; and, thereupon

19
<PAGE>

and at the expiration of the time limit in such notice, this Lease and the term
hereof granted, as well as the right, title and interest of the Tenant
hereunder, shall wholly cease and expire and become void in the same manner and
with the same force and effect (except as to Tenant's liability) as if the date
fixed in such notice were the date herein granted for expiration of the term of
this Lease. Thereupon, Tenant shall immediately quit and surrender to Landlord
the Premises, and Landlord may enter into and repossess the Premises by summary
Proceedings, detainer, ejectment or otherwise and remove all occupants thereof
and, at Landlord's option, any property thereon without being liable to
indictment, prosecution or damages therefor;

(g) In the event of termination of this Lease pursuant to provisions
of paragraph 26(f), Tenant shall pay to Landlord all rental and other charges
---------------
payable hereunder due and unpaid to the date of termination;

(h) Landlord shall have the right of injunction, in the event of a
breach or threatened breach by Tenant of any of the agreements, conditions,
covenants or terms hereof, to restrain the same and the right to invoke any
remedy allowed by law or in equity, whether or not other remedies, indemnity or
reimbursements are herein provided. The rights and remedies given to Landlord in
this Lease are distinct, separate and cumulative remedies, and no one of them,
whether or not exercised by Landlord, shall be deemed to be in exclusion of any
of the others;

(i) When this Lease shall be determined by condition broken, either
during the original term of this Lease, including any renewal thereof, and also
when and as soon as the term hereby created, including any renewal thereof,
shall have expired, it shall be lawful for any attorney as attorney for the
Tenant to file an agreement for entering in any competent court an amicable
action and judgment in ejection against Tenant and all persons or entities
claiming under Tenant for the recovery by Landlord of possession of the
Premises, for which this Lease shall be sufficient warrant; whereupon, if
Landlord so desires, a writ of habere facias possessionem, may issue forthwith,
------ ------ ------------
without any prior writ or proceeding whatsoever, and provided that, if for any
reason after such action shall have been commenced the same shall be determined
and the possession of the Premises shall remain in or be restored to Tenant,
Landlord shall have the right, upon any subsequent default or defaults or upon
the termination or expiration of this Lease, to bring one or more amicable
action or actions to recover possession of the Premises. In any amicable action
of ejectment, Landlord shall first cause to be filed in such action an affidavit
made by it or someone acting for it setting forth the facts necessary to
authorize the entry of judgment, and, if a true copy of this Lease (and of the
truth a copy of such affidavit shall be sufficient evidence) be filed in such
action, it shall not be necessary to file the original as a warrant of attorney,
any rule of court, custom or practice to the contrary notwithstanding.

(j) If as a result of any breach or default in the performance of any
of the provisions of this Lease, Landlord uses the services of an attorney in
order to secure compliance with such provisions or recover damages therefor, or
to terminate this Lease or evict Tenant, Tenant shall reimburse Landlord upon
demand for any and all reasonable attorney's fees and expenses so incurred by
Landlord.

20
<PAGE>

27. REQUIREMENT OF STRICT PERFORMANCE. The failure or delay on the part
---------------------------------
of either party to enforce or exercise at any time any of the provisions, rights
or remedies in this Lease shall in no way be construed to be a waiver thereof,
nor in any way to affect the validity of this Lease or any part hereof, or the
right of the party to thereafter enforce each and every such provision, right or
remedy. No waiver of any breach of this Lease shall be held to be a waiver of
any other or subsequent breach. The receipt by Landlord of rent at a time when
the rent is in default under this Lease shall not be construed as a waiver of
such default. The receipt by Landlord of a lesser amount than the rent due shall
not be construed, to be other than a payment on account of the rent then due,
nor shall any statement on Tenant's check or any letter accompanying Tenant's
check be deemed an accord and satisfaction, and Landlord may accept such payment
without prejudice to Landlord's right to recover the balance of the rent due or
to pursue any other remedies provided in this Lease. No act or thing done by
Landlord or Landlord's agents or employees during the term of this Lease shall
be deemed an acceptance of a surrender of the Premises, and no agreement to
accept such a surrender shall be valid unless in writing and signed by Landlord.

28. RELOCATION OF TENANT. Except during such periods as Tenant is
--------------------
leasing not less than 8,000 aggregate rentable square feet of space in the
Building (pursuant to this Lease and other leases), Landlord, at its sole
expense, on at least 60 days prior notice, may require Tenant to move from the
Premises to another suite of comparable size and equal or better decor in order
to permit Landlord to consolidate the Premises with other adjoining space leased
or to be leased to another tenant in or coming into the Building; provided,
however, that in the event of receipt of any such notice, Tenant by notice to
Landlord may elect not to move to the other space and in lieu thereof to
terminate this Lease. In the event of any such relocation, Landlord will pay all
the expenses of preparing and decorating the new premises so that they will be
of equal or better decor as compared to the Premises and the expense of moving
Tenant's furniture and equipment, telephone service and signs to the relocated
premises and costs of changing letterheads. Occupancy of the new premises shall
be under and pursuant to the terms of this Lease.

29. SURRENDER OF PREMISES; HOLDING OVER.
-----------------------------------

(a) This Lease shall terminate and Tenant shall deliver up and
surrender possession of the Premises on the last day of the term hereof, and
Tenant waives the right to any notice of termination or notice to quit. Tenant
covenants that upon the expiration or sooner termination of this Lease it shall
without notice deliver up and surrender possession of the Premises in the same
condition in which Tenant has agreed to keep the same during the continuance of
this Lease and in accordance with the terms hereof, normal wear and tear
excepted.

(b) Upon the failure of the Tenant to surrender possession of the
Premises upon the expiration or sooner termination of this Lease, Tenant shall
pay to Landlord, as liquidated damages, an amount equal to one hundred fifty
(150%) percent of the rent and additional rent required to be paid under this
Lease as applied to any period in which Tenant shall remain in possession after
expiration or sooner termination of this Lease. Acceptance by Landlord of rent
after such expiration or earlier termination shall not constitute a consent to a

21
<PAGE>

holdover hereunder or result in a renewal. The foregoing provisions of this
Article 29 are an addition to and do not affect Landlord's right of reentry or
any other rights of Landlord hereunder or as otherwise provided by law.

30. DELAY IN POSSESSION. In the event that the Premises are not ready
-------------------
for Tenant's occupancy at the time herein fixed for the beginning of the term of
this Lease, because of any alterations or construction now or hereafter being
carried on either to the Premises or to the Building of which the said Premises
form a part (unless such alterations are being done by Tenant or Tenant's
contractor, in which case there shall be no suspension or proration of rental or
other sums), or because of the non-completion of the Building, or because
Landlord being itself a Tenant of the same Premises has not received possession
thereof from its Landlord for any reason whatsoever, or because of the failure
or refusal of the occupant of the said Premises who is or may be in possession
immediately before the beginning of the term hereof to vacate and surrender up
the same, or because of any restrictions, limitations or delays caused by
Government regulations or Governmental agencies, this Lease and the term hereof
shall not be affected thereby, nor shall Tenant be entitled to make any claim
for or receive any damages whatsoever from Landlord, but no rent or other sums
herein provided to be paid by Tenant shall become due until the Premises are
delivered by Landlord for Tenant's occupancy, and until that time the rental and
other sums shall be suspended and pro rated. However, if the Premises have not
been delivered to Tenant on or before January 15, 1998, subject to delays caused
by Tenant's acts or omissions, Tenant may, by notice to Landlord at any time
prior to such delivery, terminate this Lease.

31. COMPLIANCE WITH LAWS AND ORDINANCES. The Tenant agrees that it will,
-----------------------------------
at its sole cost and expense, promptly fulfill and comply with all laws,
ordinances, regulations and requirements of the City, County, State and Federal
Governments and any and all departments thereof having jurisdiction over the
Building, and of the National Board of Fire Underwriters or any other similar
body now or hereafter constituted, affecting the Tenant's occupancy of the
Premises or the business conducted therein.

32. NOTICES. Wherever in this Lease it shall be required or permitted
-------
that notice or demand be given or served by either party to this Lease to or on
the other party, such notice or demand shall be deemed to have been duly given
or served only if in writing and either personally served or forwarded by
Registered or Certified mail, postage prepaid, and addressed as follows:

To Landlord: Maplewood Office Center Limited Partnership
c/o BR Management, Inc.
1500 Market Street, Suite 3000
Philadelphia, PA 19103

To Tenant: ESPS
1300 Virginia Drive
Fort Washington, PA 19034

22
<PAGE>

Each such mailed notice shall be deemed to have been given to or
served upon the party to which addressed on the date the same is deposited in
the United States Registered or Certified Mail, postage prepaid, and properly
addressed in the manner above provided. Either party hereto may change its
address to which said notice shall be delivered or mailed by giving notice of
such change to the other party hereto, as herein provided.

33. PARKING. Tenant shall be entitled to a proportionate share of
-------
unreserved vehicle parking spaces, provided, that at such times as Tenant is
conducting training sessions in Suite 120, it shall be entitled to utilize up to
20 additional unreserved vehicle parking spaces, and further provided that a
portion of the vehicle parking spaces may be designated by Landlord as visitor
parking for the tenants of the Building. Except as otherwise designated by
Landlord, parking spaces shall be available for the common use of the tenants,
subtenants and invitees of the Building on a non-exclusive basis, subject to any
reasonable restrictions from time to time imposed by Landlord. Tenant shall not
use or permit its officers, employees or invitees to use any spaces which have
been specifically reserved by Landlord to other tenants or for such other uses
as have been designated by appropriate governmental entities as being restricted
to certain uses. Tenant shall at all times comply and cause its officers,
employees and invitees to comply with any parking Rules and Regulations as
Landlord may from time to time reasonably adopt.

34. WARRANTIES OF TENANT AND AGENT. Each of Landlord and Tenant warrants
------------------------------
to the other that it dealt and negotiated solely and only through Aegis Property
Group, Agent respecting this Lease and with no other broker, firm, company or
person, except (if none, state none"): None

Each of Landlord and Tenant shall indemnify and hold the other
harmless from and against any and all claims, suits, proceedings, damages,
obligations, liabilities, counsel fees, costs, losses, expenses, orders and
judgments imposed upon, incurred by or asserted against the other by reason of
the falsity or error of the former's aforesaid warranty.

35. FORCE MAJEURE. Landlord or Tenant shall be excused for the period of
-------------
any delay, in the performance of any obligations hereunder, when prevented from
so doing by cause or causes beyond its reasonable control which shall include,
without limitation, all labor disputes, inability to obtain any material or
services, civil commotion, or acts of God; provided, that in no event shall any
such cause excuse Tenant's prompt payment of all amounts required of it
hereunder.

36. LANDLORD'S OBLIGATIONS. Landlord's obligations hereunder shall be
----------------------
binding upon Landlord only for the period of time that Landlord is in ownership
of the building; and, upon termination of that ownership, Tenant, except as to
any obligations which have then matured, shall look solely to Landlord's
successor in interest in the Building for the satisfaction of each and every
obligation of Landlord hereunder. If any security deposit has been made by
Tenant, Landlord may transfer such security to such successor and thereupon
Landlord shall be discharged from any further liability in reference thereto.

37. LANDLORD'S LIABILITY. Landlord shall have no personal liability under
--------------------
any of the terms, conditions or covenants of this Lease and Tenant shall look
solely to the equity

23
<PAGE>

of the Landlord in the Building for the satisfaction of any claim, remedy or
cause of action accruing to Tenant as a result of the breach of any action of
this Lease by Landlord.

38. SUCCESSORS. The respective rights and obligations provided in this
----------
Lease shall bind and shall inure to the benefit of the parties hereto, their
legal representatives, heirs, successors and assigns, provided, however, that no
rights shall inure to the benefit of any successors of Tenant unless Landlord's
written consent for the transfer to such successor has first been obtained as
provided in Article 14.
----------

39. GOVERNING LAW. This Lease shall be construed, governed and enforced in
-------------
accordance with the laws of the Commonwealth of Pennsylvania.

40. SEVERABILITY. If any provisions of this Lease shall be held to be
------------
invalid, void or unenforceable, the remaining provisions hereof shall in no way
be affected or impaired and such remaining provisions shall remain in full force
and effect.

41. CAPTIONS. Any headings preceding the text of the several Articles and
--------
paragraphs hereof are inserted solely for convenience of reference and shall not
constitute a part of this Lease, nor shall they affect its meaning, construction
or effect.

42. GENDER. As used in this Lease, the word "person" shall mean and
------
include, where appropriate, an individual, corporation, partnership or other
entity; the plural shall be substituted for the singular, and the singular for
the plural, where appropriate; and words of any gender shall mean to include any
other gender.

43. EXECUTION. This Lease shall become effective when it has been signed
---------
by a duly authorized officer or representative of each of the parties and
delivered to the other party.

44. EXHIBITS AND RIDERS. Attached to this Lease and made part hereof, and
-------------------
initialed on behalf of both parties simultaneously with the execution of this
Lease, are Exhibits A to D inclusive.

45. ENTIRE AGREEMENT. This Lease, including the Exhibits and any Riders
----------------
hereto, contains all the agreements, conditions, understandings, representations
and warranties made between the parties hereto with respect to the subject
matter hereof, and may not be modified orally or in any manner other than by an
agreement in writing signed by both parties hereto.

46. LIMITATION OF USE. Tenant shall not use the Premises or any portion
-----------------
thereof for any business which involves the operation of printing presses, dance
studios, discotheques or exercise studios, nor shall Tenant engage in any other
business in the Premises which may cause vibrations of a similar character and
frequency to those caused by printing presses, dance studios, discotheques or
exercise studios. Tenant shall not use in the Premises any x-ray equipment,
electrical arc-welding devices, electrical equipment for the repair of radio
transmitters, radar, pulse generators, displays utilizing neon or strobe
lighting, and citizens band and other amateur radios (provided that this
provision shall not prohibit Tenant from using any radio frequencies authorized
for business use by the Federal Communications Commission).

24
<PAGE>

Tenant agrees that Landlord, or its nominee, shall have the right at any time,
and from time to time, to inspect the Premises for the purpose of detecting
spurious radio emissions. In addition to the foregoing, Tenant may not conduct
any business that is in the nature of a commercial bank, savings and loan
association, loan company or safe deposit company, or conduct a foreign exchange
or sale of travelers checks.

47. CORPORATE AUTHORITY. If Tenant is a corporation, each individual
-------------------
executing this Lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation in accordance with the duly adopted resolution of the Board of
Directors of said corporation or in accordance with the by-laws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms.

48. EXPANSION RIGHTS. During such period as Tenant is leasing not less
----------------
than 8,000 aggregate rentable square feet of space in the Building (pursuant to
this Lease and other leases), to the extent that any space adjacent to, or
directly across the hall from, the Premises becomes available for Lease on the
first or second floor of the Building (the "Available Space"), before offering
---------------
the Available Space to any other prospective tenant, Landlord shall first offer
the same to Tenant pursuant to terms and conditions which Landlord is willing to
accept. If Tenant is interested in leasing the Available Space, Tenant must
notify Landlord within ten (10) days after receipt of Landlord's notice that
Tenant accepts Landlord's offer, whereupon Landlord and Tenant shall enter into
a new Lease respecting Landlord's offer on substantially the same terms and
conditions as are contained herein, modified to incorporate the terms of
Landlord's offer. If Tenant does not timely accept Landlord's offer, or if
Landlord and Tenant are unable to agree upon a form of Lease regarding the
Available Space within thirty (30) days after Tenant's timely acceptance of
Landlord's offer, then Landlord shall thereafter be free to Lease the Available
Space to any other party, free and clear of any rights of Tenant hereunder.
Tenant's rights under this paragraph 48 are subject to any rights in the
Available Space of any other tenant of the Building existing prior to the date
of execution of this Lease.

IN WITNESS WHEREOF, the parties hereto have duly executed this Lease
and have initialed the Exhibits and any Riders hereto, in counterparts the day
and year first above written.

ATTEST: "LANDLORD"

MAPLEWOOD OFFICE CENTER LIMITED
PARTNERSHIP, by its sole general partner,
BERGEN OF FT. WASHINGTON, INC.

By: /s/ Arthur Lazuna By: /s/ Samuel Jones
------------------ --------------------------------------
Secretary Samuel Jones, Vice President

25
<PAGE>

ATTESTS: "TENANT"

ELECTRONIC SUBMISSION PUBLISHING
SYSTEMS, INC.

By: /s/ Sonya Berry By: /s/ Terrence A. Brennen
------------------ ----------------------------------
Secretary Its: President and C.E.O
---------------------------------

[If Tenant is a corporation, Lease must be executed by the President or the Vice
President as well as the Secretary and properly sealed. If Tenant is a
partnership, all partners must execute the Lease and if Tenant is an individual
or a partnership, all signatures must be witnessed.]

AEGIS PROPERTY GROUP hereby executes this Lease to confirm its
agreement with Article 34.
----------

AEGIS PROPERTY GROUP

By: /s/ [SIGNATURE ILLEGIBLE]
----------------------------

Its: Executive Vice President
---------------------------

26
<PAGE>

EXHIBIT "B"
LANDLORD'S WORK
---------------

(a) Landlord agrees, at its own cost and expense, to do the following
work in the Premises:

Preparation of all plans, specifications, architectural and mechanical drawings
and bid documents (the "Plans"), and construction of all interior improvements
to the Premises in accordance with space plans to be agreed to by Landlord and
Tenant (collectively, "Landlord's Work"); provided, that Landlord's cost of
completing Landlord's Work shall in no event exceed the amounts set forth in
paragraph (f) of this Exhibit ("Landlord's Fit-Out Cap"). To the extent the
----------------------
actual total cost of completing Landlord's Work (the "Actual Fit-Out Cost")
-------------------
exceeds Landlord's Fit-Out Cap, Landlord shall so notify Tenant ("Landlord's
----------
Fit-Out Notice"). If the Actual Fit-Out Cost of Landlord's Work is $350,000.00
- --------------
or less, Tenant shall be obligated, within five (5) days thereafter, to deposit
with Landlord the difference between the Actual Fit-Out Cost and Landlord's Fit-
Out Cap, which difference shall be collectible as Additional Rent pursuant to
this Lease. If the Actual Fit-Out Cost of Landlord's Work is greater than
$350,000.00, Tenant may elect to terminate this Lease by written notice to
Landlord within 2 days after receipt of Landlord's Fit-Out Notice, accompanied
by payment to Landlord of the sum of $3,500.00 toward the reimbursement of
Landlord's out-of-pocket costs incurred in connection with the preparation of
the Plans, in which event the parties shall have no further rights and
obligations under this Lease, provided, however, that the 215 Lease and the 240
Lease shall remaining in effect or be automatically reinstated if superseded by
this Lease.

(b) Within ten (10) days after the execution of this Lease, Tenant
shall furnish to the architect designated by Landlord complete information
concerning any work to be performed by Landlord on Tenant's behalf. Such
information must, in the opinion of Landlord, be reasonably consistent with the
architectural and mechanical requirements of the Building. Upon receipt of such
information from Tenant, and upon approval thereof by Landlord, the architect
designated by Landlord shall prepare or cause to be prepared on Tenant's behalf
and at Tenant's cost and expense architectural and mechanical drawings and
specifications for said work. All such plans and specifications shall be
expressly subject to Landlord's written approval, which approval shall not be
unreasonably withheld.

(c) Landlord may, but shall not be obligated, to perform, at Tenant's
request, and upon submission of plans and specifications prepared by Tenant to
the architect designated by Landlord, any additional work over and above that
specified in (a) hereof, at Tenant's sole cost and expense as a tenant extra.
Prior to commencing any such work requested by Tenant, Landlord shall submit to
Tenant one or more written estimates of the cost of such work, including
Landlord's fees for supervision, coordination and final inspection. If Tenant
shall fail to approve an estimate for such work and pay the amount thereof
within five (5) days of Landlord's submission thereof, such estimate shall be
deemed disapproved by Tenant and Landlord shall not be authorized to proceed
thereon. If Tenant shall approve an estimate, Landlord shall be authorized to
proceed thereon and payment for such work so authorized
<PAGE>

(including Landlord's fees aforesaid) shall be paid within five (5) days of such
approval and shall be collectible as Additional Rent pursuant to this Lease.

(d) Anything in Article 3 of this Lease to the contrary
---------
notwithstanding, Tenant's obligation to pay rent hereunder shall not commence
until Landlord shall have substantially completed all work to be performed by
Landlord as herein above set forth in (a) hereof; provided, however, that if
Landlord shall be delayed in substantially completing the work to be done by
Landlord as a result of (i) Tenant's failure to furnish complete information
consistent, in Landlord's opinion, with the architectural and mechanical
requirements of the Building in accordance with (b) hereof; or (ii) Tenant's
request for materials, finishes or installations being inconsistent, in
Landlord's opinion with, the architectural and mechanical requirements of the
Building; or (iii) Tenant's changes in the plans and specifications or in the
information supplied to the architect; or (iv) the performance of any act or
omission by Tenant or any act or omission by any agent, servant, employee,
contractor, subcontractor or materialmen of Tenant (each a "Tenant Delay"), then
Tenant's obligation to pay rent hereunder shall be accelerated and advanced by
the number of days of such delay.

(e) Landlord shall substantially complete Landlord's Work in accordance
with the construction schedule attached hereto as Schedule I (the "Construction
Schedule"). The parties acknowledge that the Construction Schedule is tentative
only and will more likely than not require adjustment. Landlord and Tenant
shall, in good faith, as soon as reasonably possible following Landlord's
determination of the Actual Fit-Out Cost, agree upon a final Construction
Schedule. In the event that Landlord and Tenant are unable to so agree on a
final Construction Schedule on or before that date which is 5 business days
following the date of Landlord's determination of the Actual Fit-Out Cost,
Tenant may elect to terminate this Lease by written notice to Landlord within 2
days following the expiration of such 5 business day period, accompanied by
payment to Landlord of the sum of $3,500.00 toward the reimbursement of
Landlord's out-of-pocket costs incurred in connection with the preparation of
the Plans, in which event the parties shall have no further rights and
obligations under this Lease, provided, however, that the 215 Lease and the 240
Lease shall remain in effect or be automatically reinstated if superseded by
this Lease. In the event Landlord shall fail to deliver any portion of the
Premises on or before the scheduled delivery date therefor, as set forth in the
final Construction Schedule, other than by reason of force majeure or a Tenant
Delay, Tenant shall be entitled to free rent equal to 2 the per diem Base Rent
rate applicable to such Suite for each day delivery is so delayed, beginning on
the Commencement Date applicable to such Fit-Out Suite.

(f) The amount of the Landlord=s Fit-Out Cap is $279,345.00
<PAGE>

EXHIBIT "C"
RULES AND REGULATIONS
---------------------

DEFINITIONS
-----------

1. Wherever in these Rules and Regulations the word "Tenant" is used, it
shall be taken to apply to and include the Tenant and his agents, employees,
invitees, licensees, subtenants and contractors, and is to be deemed of such
number and sender as the circumstances require. The word room" is to be taken
to include the space covered by Lease. The word "Landlord" shall be taken to
include the employees and agents of Landlord.

CONSTRUCTION
------------

2. The streets, parking areas, sidewalks, entrances, lobbies, halls,
passages, elevators, stairways and other common area provided by Landlord shall
not be obstructed by Tenant, or used by him for any other purpose than for
ingress and egress.

WASHROOMS
---------

3. Toilet rooms, water-closets and other water apparatus shall not be
used for any purposes other than those for which they were constructed.

INSURANCE REGULATIONS
---------------------

4. Tenant shall not do anything in the rooms, or bring or keep anything
therein, which will in any way increase or tend to increase the risk of fire or
the rate of fire insurance, or which will conflict with the regulations of the
Fire Department or the fire laws, or with any insurance policy on the Building
or any part thereof, or with any law, ordinance, rule or regulation affecting
the occupancy and use of the rooms, now existing or hereafter enacted or
promulgated by any public authority or by the Board of Fire Underwriters.

GENERAL PROHIBITIONS
--------------------

5. In order to insure proper use and care of the Premises Tenant shall
not:

(a) Keep animals or birds in the rooms.

(b) Use rooms as sleeping apartments.

(c) Allow any sign, advertisement or notice to be fixed to the
Building, inside or outside, without Landlord's consent. Signs on interior class
doors will be painted only by the person designated by Landlord, the cost of the
painting to be paid by Tenant.

(d) Make improper noises or disturbances of any kind; sing, play or
operate any musical instrument, radio or television without consent of Landlord,
or otherwise do anything to disturb other tenants or tend to injure the
reputation of the Building.
<PAGE>

(e) Mark or defile elevators, water-closets, toilet-rooms, walls,
windows, doors or any other part of the Building.

(f) Place anything on the outside of the Building, including roof
setbacks, window ledges and other projections; or drop anything other
projections; or drop anything from the windows, stairways, or parapets; or place
trash or other matter in the halls, stairways, elevators or light wells of the
Building.

(g) Cover or obstruct any window, skylight, door or transom that
admits light.

(h) Paint or paper the walls, floors, woodwork, or partitions without
consent of Landlord.

(i) Operate any machinery other than small office equipment.

(j) Interfere with the heating or cooling apparatus.

(k) Allow anyone but Landlord's employees or contractors to clean
rooms.

(l) Leave rooms without locking doors, stopping all office machines,
and extinguishing all lights.

(m) Install any shades, blinds, or awnings without consent of
Landlord.

(n) Use any electric heating device without permission of Landlord.

(o) Install call boxes, or any kind of wire in or on the Building
without Landlord's permission and direction.

(p) Manufacture any commodity, or prepare or dispense any foods or
beverages, tobacco, drugs, flowers, or other commodities or articles without the
written consent of Landlord.

(q) Secure duplicate keys for rooms or toilets, except from Landlord.

(r) [Intentionally Deleted]

(s) Place any weights in any portion of the Building beyond the safe
carrying capacity of the structure.

(t) Enter any mechanical or electrical areas, telephone closets,
loading areas, roof or building storage areas without the written consent of
Landlord.

(u) Place door mats in public corridors without consent of Landlord.
<PAGE>

PUBLICITY
---------

6. Tenant shall not use the name of the building in any way in connection
with his business except as the address thereof. Landlord shall also have the
right to prohibit any advertising by Tenant, which, in its opinion, tends to
impair the reputation of the Building or its desirability as a building for
offices; and upon written notice from Landlord, Tenant shall refrain from or
discontinue such advertising.

MOVEMENT OF EQUIPMENT
---------------------

7. Landlord reserves the right to designate the time when and the method
whereby freight, small office equipment, furniture, safes and other like
articles may be brought into, moved or removed from the Building or rooms, and
to designate the location for temporary disposition of such items.

REGULATION CHANGES
------------------

8. Landlord shall have the right to make such other and further
reasonable rules and regulations as in the judgment of Landlord, may from time
to time be needful for the safety, appearance, care, and cleanliness of the
Building and for the preservation of good order therein. Landlord shall not be
responsible to Tenant for any violation of rules and regulations by other
tenants, but Landlord shall enforce all rules and regulations on a uniform
basis.

PUBLIC ENTRANCE
---------------

9. Landlord reserves the right to exclude the general public (but not
Tenant's employees) from the Building upon such days and at such hours as in
Landlord's judgment will be for the best interest of the Building and its
tenants.
<PAGE>

EXHIBIT "D"

CONFIRMATION OF LEASE TERM
--------------------------

(Sample Only)
-------------

THIS AGREEMENT, made the _____________ day of ___________, 199__ by
and between ______________________ hereinafter referred to as "Landlord", Party
of the First Part, and ______________ (hereinafter referred to as "Tenant"),
Party of the Second Part

WITNESSETH:

WHEREAS, by Agreement of Lease dated the ___ day of ___ 199___,
between the parties hereto, the Landlord leased to Tenant and Tenant leased and
took from Landlord, for the term and upon the terms and conditions therein set
forth, certain parts of a building known as

WHEREAS, said Agreement of Lease provides that the parties shall
execute a confirmation of the actual Commencement and Expiration Dates of the
lease, when such dates have been determined.

NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree that the term of said Lease shall commence with respect to Suite
__ on the ___ day of _____, 199__ and shall terminate at Midnight on the ___ day
of ___ 199__ unless sooner terminated or extended as therein provided.

The undersigned Tenant is in possession and occupation of the premises
demised to it in the above mentioned building and further states that it
commenced paying rent on the "Commencement Date" as set forth in said lease.
The lease is in full force and effect; the Landlord is not in default thereof;
the premises as erected, as completed, are accepted by Tenant as being in
accordance with the terms of the lease and there is no offset of rent.

IN WITNESS WHEREOF, the parties hereto have set their hands and seals
or caused these presents to be signed by their corporate officers and have
caused their proper corporate seals to be hereunto affixed, the day and year
first above written.

ATTEST: "LANDLORD"

By: MAPLEWOOD OFFICE CENTER LIMITED PARTNERSHIP,
------------------- by its sole general partner, BERGEN OF FT.
Secretary WASHINGTON, INC.

By:
--------------------------------
Its:
-------------------------------

(Signatures continued on next page)
<PAGE>

ATTEST: "TENANT"

By: By:
------------------- --------------------------------
Secretary Its:
-------------------------------

<PAGE>

Exhibit 10.4

LICENSE AND MARKETING AGREEMENT

This Agreement ("Agreement") is entered into effective as of November 6,
1997 ("Effective Date") between Electronic Submission Publishing Systems, Inc.,
a Delaware corporation, 1300 Virginia Drive, Fort Washington, Pennsylvania 19034
("ESPS") and Adobe Systems Incorporated, a Delaware corporation, 345 Park
Avenue, San Jose, California 95110 ("Adobe").

RECITAL

ESPS develops, markets and supports software products designed to manage,
generate, publish, and distribute high quality regulatory submissions. Adobe
develops, markets and supports software products that enable users to express
and use information across print and electronic media. ESPS and Adobe desire
that Adobe market and distribute retail and OEM products containing certain PDF
transformation and publishing software developed by ESPS. Therefore, subject to
the terms and conditions of this Agreement, ESPS has agreed to grant Adobe a
license to market and distribute the object code of such products in the retail
and OEM markets.

NOW, THEREFORE, intending to be legally bound hereby, ESPS and Adobe agree
as follows:

1. DEFINITIONS

Defined terms used in this Agreement shall have the meanings set forth
below:

1.1. "Acrobat" shall mean Adobe's Acrobat software products, including
current and future versions of the Acrobat products.

1.2. "Adobe Quarter" shall mean the three (3) month periods following
Adobe's fiscal year beginning December 1.

1.3. "Affiliate" shall mean, with respect to any Party, any other party
which directly or indirectly controls, is controlled by, or is under common
control with, such Party. A party shall be regarded as in control of another
party if it owns, or directly or indirectly controls, at least fifty percent
(50%) of the voting stock or other ownership interest of the other party, or if
it directly or indirectly possesses the power to direct or cause the direction
of the management and policies of the other party by any means whatsoever.

1
<PAGE>

1.4. "Alpha Release" shall mean, a functionally complete version of the
ESPS software (including installer) and the frozen APIs. The version may contain
bugs but testing has begun with test plans and test documentation written during
the development phase and further planned development requires only correction
of outstanding bugs unless Adobe and ESPS mutually agree on the additional
features and any necessary changes to the Specifications and Delivery Schedule.

1.5. "Beta Release" shall mean, a release which contains all features and
no severity 4 bugs (highest level) unless agreed upon by ESPS and Adobe and
draft documentation shall be completed. For the purpose of this provision, a
"Severity 4 Bug" means any bug that crashes the system, hangs the application,
or causes a loss of data.

1.6. "Change in Control" shall mean the sale of a majority of the
outstanding voting shares of ESPS to a direct competitor of Adobe or the merger
or consolidation of ESPS into, or the sale of all or substantially all of the
assets of ESPS to, a direct competitor. For purposes of this Section 1.3, a
direct competitor of Adobe shall mean a company that develops, manufactures
and/or distributes software that directly competes with Acrobat.

1.7. "Client/Server Licenses" shall mean licenses by Adobe in Adobe's
customary distribution markets for networked client/server systems of the
combination of (i) the PDFPress Server Software, and (ii) copies of Acrobat that
contain the PDFPress Client Software.

1.8. "Confidential Information" shall mean confidential or other
proprietary information that is disclosed by ESPS or Adobe to the other Party
under the terms of this Agreement, including without limitation, software code
and designs, product specifications, and documentation, business and product
plans, and other confidential business information. Confidential Information
shall not include information which: (i) is or becomes public knowledge without
any action by, or involvement of the receiving Party; (ii) is disclosed by the
receiving Party with the prior written approval of the disclosing Party; (iii)
is independently developed by the receiving Party without the use of any
Confidential Information received from the other Party under this Agreement; and
(iv) is disclosed pursuant to any judicial or governmental order, provided that
the receiving Party gives the disclosing Party sufficient prior notice to
contest such order.

1.9. "Effective Date" shall mean November 6, 1997.

1.10. "Enterprise Licenses" shall mean multiple-copy or multiple-seat
licenses by Adobe of the non-networked version of Acrobat that contains the
PDFPress Client Software, including without limitation any multiple-copy or
multiple-seat licenses sold as bundled products or sold through Adobe's
customary distribution channels.

2
<PAGE>

1.11. "ESPS Documentation" shall mean the initial version of the
explanatory and informational materials concerning the ESPS Software delivered
by ESPS under Section 5.1.

1.12. "ESPS Software" shall mean the PDFPress Client Software, PDFPress
Standalone Client Software and PDFPress Server Software and any subsequent
modifications, updates and or upgrades by ESPS as provided in Section 5.3.

1.13. "Intellectual Property Rights" shall mean all forms of intellectual
property rights and protections that may be obtained for, or may pertain to,
Acrobat, ESPS Software and Confidential Information, including, without
limitation, all right, title and interest arising under the common law, state
law, Federal law, and laws of foreign countries to all: (i) letters patent, and
filed, pending or potential applications for letters patent, including any
reissue, reexamination, division, continuation or continuation-in-part
applications; (ii) trade secrets, and all trade secret rights and equivalent
rights; (iii) mask works, copyrights and other literary property or authors
rights, whether or not protected by copyright or as a mask work; and (iv)
trademarks, trade names, symbols, logos, and/or brand names.

1.14. "Level I Support" shall mean the following Support Services:
acceptance of and response to customer inquiries, in writing, by telephone, or
by electronic mail, concerning the use and operation of the ESPS Software and
any possible errors or defects in the ESPS Software.

1.15. "Level II Support" shall mean the following Support Services:
replication and testing of Material Defects in the ESPS Software and correction
of Material Defects that do not require access to Source Code.

1.16. "Level III Support" shall mean the following Support Services:
correction of Material Defects in the ESPS software that require access to
Source Code.

1.17. "License Fee" shall mean an up-front payments by Adobe to ESPS under
Section 6.1. The total License Fee shall be one million three-hundred thousand
dollars ($1,300,000) and shall be paid in four installments as set forth in
Section 6.1.

1.18. Marks shall mean all trademarks, trade names, symbols, logos and/or
brand names adopted from time to time to identify a Party, product or service.

1.19. Material Defect shall mean any reported malfunction, error or other
defect in the ESPS Software that: (i) can be reproduced by ESPS and Adobe; and
(ii) constitutes a substantial nonconformity with the Specifications for such
ESPS Software.

3
<PAGE>

1.20. "Named Accounts" shall mean those OEM customers with which ESPS has
an established an ongoing business relationship and which are set forth in
Exhibit C. Additional ESPS OEM customers may be added as Named Accounts under
this Agreement by the mutual agreement of Adobe and ESPS.

1.21. "Net Revenues" shall have the meaning set forth in Section 6.3.

1.22. "Object Code" shall mean machine readable program code containing
actual computer instructions.

1.23. "OEM Customer" shall mean a distributor that incorporates the ESPS
Software in its products and distributes the ESPS Software as a component of
such products.

1.24. "OEM Licenses" shall mean licenses of the ESPS Software by Adobe or
ESPS to OEM Customers.

1.25. "Parties" shall mean ESPS and Adobe collectively and "Party" shall
mean either ESPS or Adobe.

1.26. "PDFPress Client Software" shall mean the ESPS Software set forth in
Exhibit A that is licensed to Adobe for distribution as a component of Acrobat
for client machines in Adobe's customary distribution channels.

1.27. "PDFPress Server Software" shall mean the ESPS software set forth in
Exhibit A that is licensed to Adobe for use on file server machines.

1.28. "PDFPress Standalone Client Software" shall mean the PDFPress Client
Software set forth in Exhibit A that is licensed to Adobe to be sold on a
standalone basis rather than as a component of Acrobat.

1.29. "Release Candidate version" shall mean, a release of the ESPS
software with no severity 4 bugs (highest level) and a minimum number of other
Material Defects and shall perform at a quality level consistent with recently
published products from Adobe. For the purpose of this provision, a "Severity 4
Bug" means any bug that crashes the system, hangs the application, or causes a
loss of data.

1.30. "Royalty Advance" shall mean the advance royalty payment by Adobe to
ESPS under Section 6.4. The Royalty Advance shall be a non-refundable payment of
five hundred thousand dollars ($500,000).

4
<PAGE>

1.31. "Source Code" shall mean program code expressed in a form suitable
for modification by humans.

1.32. "Source Code License Fee" shall mean the fee paid by Adobe to ESPS
under Section 2.7 for a license of the Source Code for the ESPS Software. The
Source Code Fee shall equal three times (3x) Adobe's Net Revenues for OEM
Licenses for the twelve (12) month period prior to the initial date of the
Source Code license, plus three times (3x) the royalties paid by Adobe to ESPS
for all other licenses of the ESPS Software during such twelve (12) month
period.

1.33. "Specifications" shall mean the specifications applicable to the ESPS
Software set forth in Exhibit A.

1.34. "Support Failure" shall mean, subject to the provisions for cure
under Section 12.2, the failure of ESPS to provide Adobe with Level III Support
in accordance with the terms of Section 5.5.

1.35. "Support Services" shall mean (i) providing qualified personnel to
furnish technical support for the ESPS Software; (ii) diagnosis and correction
of Material Defects of the ESPS Software via telephone, remote system access,
magnetic media, repair or replacement; and (iii) delivery of all updates to the
ESPS Software.

1.36. "Term" shall mean the period beginning on the Effective Date and
terminating on the date this Agreement is terminated under Article 12.

2. LICENSE RIGHTS

2.1. Grant of License. Subject to the provisions of this Agreement, during
the license terms set forth in Section 2.2, ESPS shall grant to Adobe an
exclusive, non-transferable, world-wide license to

(i) use and reproduce the ESPS Software in Object Code form on an
internal basis in connection with the manufacture by Adobe of copies of
PDFPress Server, PDFPress Standalone and copies of Acrobat that contain the
PDFPress Client Software and, subject to the terms of Section 5.1, the
PDFPress Standalone Client Software;

(ii) market, distribute and sublicense the PDFPress Client Software
in Object Code form (either directly or through its customary distribution
channels) solely as part of licenses of Acrobat;

5
<PAGE>

(iii) market, distribute and sublicense, in Object Code form (either
directly or through its customary distribution channels), the PDFPress
Server Software and, subject to the terms of Section 5.1, the PDFPress
Standalone Client Software;

(iv) use, reproduce, make derivative works of, and distribute the
ESPS Documentation to support the marketing and distribution of the ESPS
Software; and in connection with the localization efforts by Adobe under
Section 4.6 of this Agreement, the ESPS Software in Object Code form.

2.2. License Term. The term of the licenses for the PDFPress Client
Software and the PDFPress Server Software shall commence upon delivery and
acceptance of the Release Candidate of the PDFPress Client Software and the
PDFPress Server Software and the full payment of Adobe of the License Fee. The
term of the license for the PDFPress Standalone Client Software shall commence
upon delivery and acceptance of the PDFPress Standalone Client Software to Adobe
under the terms of Section 5.1. The term of the license for all of the ESPS
Software shall terminate upon the terms set forth in Article 12.

2.3. Exclusivity. In consideration of Adobe's marketing efforts and the
licensing and royalty fees paid under this Agreement, during the term of this
Agreement, ESPS will not enter into any marketing or licensing agreement with
any other party for distribution of the ESPS Software on a stand-alone basis;
provided that nothing in this Agreement shall prevent ESPS from (i)
distributing, marketing, and sublicensing the ESPS Software to Named Accounts,
or (ii) using or distributing the functionality contained in the ESPS Software
as part of any other ESPS product, including without limitation ESPS's
CoreDossier Products provided, however, in no event during the term of the
agreement shall ESPS sublicense the ESPS Software.

2.4. Restrictions. Adobe shall not use, copy, modify, sell, assign,
sublicense, or otherwise transfer or disclose the ESPS Software, in whole or in
part, except as permitted under this Agreement. All copies of the ESPS Software
must contain the copyright and other proprietary notices contained in the ESPS
Software delivered to Adobe under Section 5.1 and shall contain ESPS' Marks in
conformance with the requirements in Section 4.4 regarding use of ESPS's name on
Adobe products.

2.5. Sublicense Agreements. Adobe is authorized to sublicense the ESPS
Software only under the terms of this Agreement. Each such sublicense shall be
subject to Adobe's standard written license agreement which shall contain terms
substantially similar to the terms no less protective than those contained in
the Adobe license agreement attached hereto as Exhibit D.

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2.6. Marketing Limitations. In consideration of the exclusive license from
ESPS under this Agreement, during the term of this Agreement, neither Adobe, nor
any Affiliate of Adobe, shall (i) market, promote or sublicense the PDFPress
Client Software on a stand alone basis separate from Acrobat (the PDFPress
Standalone Client Software may be marketed on a stand-alone basis); or (ii)
market, promote or sublicense any product to the Named Accounts that is directly
competitive with the PDFPress Server Software that is sold to OEM Customers
during the twelve (12) month period of exclusivity set forth in Section 5.7,
provided nothing in this provision shall prevent Adobe or its Affiliates from
marketing, promoting or sublicensing any product to an end user where the
software from a Named Account is installed.

2.7. Source Code License. In the event that there is a Support Failure or a
Change in Control, within seven (7) days of payment of the Source Code License
Fee by Adobe to ESPS, ESPS shall: (i) deliver to Adobe a complete set of the
Source Code to the ESPS Software and all documents, programming tools,
utilities, file layouts, and other materials that are necessary for a computer
programmer to use or modify the ESPS Software on behalf of Adobe, and (ii) grant
to Adobe a license to use, reproduce and modify the ESPS Software in Source Code
form on an internal basis in connection with the manufacture, distribution and
maintenance by Adobe of copies of PDFPress Server, PDFPress Standalone Client
Software and copies of Acrobat that contain PDFPress Client Software.

3. INTELLECTUAL PROPERTY RIGHTS

3.1. ESPS Intellectual Property Rights. Adobe hereby recognizes that ESPS
retains all Intellectual Property Rights in the ESPS Software, ESPS
Documentation and the Confidential Information received by Adobe from ESPS,
including without limitation, all corrections and modifications to the ESPS
Software and ESPS Documentation, if any, developed by ESPS or Adobe; provided,
that ESPS grants to Adobe a perpetual, royalty free, unrestricted license to
corrections or modifications made by Adobe. Adobe hereby assigns to ESPS all
Intellectual Property Rights it may possess in the ESPS Software, ESPS
Documentation and ESPS' Confidential Information, and all corrections and
modifications thereof and agrees (i) to execute all documents, and take all
actions, that may be necessary to confirm such rights, and (ii) to retain all
proprietary marks, legends and patent and copyright notices that appear on the
ESPS Software, ESPS Documentation and Confidential Information delivered to
Adobe by ESPS and all whole or partial copies made by Adobe thereof.

3.2. Adobe's Intellectual Property Rights. ESPS hereby recognizes that
Adobe retains all Intellectual Property Rights in Acrobat and the Confidential
Information received by ESPS from Adobe, including without limitation, all
corrections and modifications to Acrobat, if any, developed by Adobe or ESPS.
ESPS hereby assigns to Adobe all Intellectual Property Rights it may posses in
Acrobat and Adobe's Confidential Information, and all corrections and
modifications thereof and agrees (i) to

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execute all documents, and take all actions, that may be necessary to confirm
such rights, and (ii) to retain all proprietary marks, legends and patent and
copyright notices that appear on Acrobat and Confidential Information delivered
to ESPS by Adobe and all whole or partial copies made by ESPS thereof.

3.3. Source Code. Except as provided in Section 2.7, Adobe shall not
attempt to decompile, disassemble, reverse engineer or use any other process to
gain access to the Source Code of the ESPS Software.

3.4. Confidentiality. The Parties agree not to disclose, or permit any
third party or entity access to, the Confidential Information (or any portion
thereof) without prior written permission of the disclosing Party (except such
disclosure or access which is required to perform any obligations under this
Agreement); and to insure that any employees, or any third parties who receive
access to the Confidential Information, are advised of the confidential and
proprietary nature thereof and are prohibited from copying, utilizing or
otherwise revealing the Confidential Information. Without limiting the
foregoing, the Parties agrees to employ with regard to the Confidential
Information procedures no less restrictive than the procedures used by it to
protect its own confidential and proprietary information of a similar nature and
that in no event will the Parties employ less than commercially reasonable
procedures to protect such Confidential Information.

3.5. Trademarks. During the Term, subject to the terms of Sections 3.5 and
4.4, the Parties may use the other Party's Marks for only the purposes of
marketing and distributing the ESPS Software (for the purposes of ESPS this is
only to the Named Accounts). Except as set forth in this Section 3.5, nothing
contained in this Agreement shall grant to either Party any right, title or
interest in the Marks of the other Party. At no time during or after the Term
shall either Party challenge or assist others to challenge the other Party's
Intellectual Property Rights in such other Party's Marks or the registration
thereof or attempt to register any Marks confusingly similar to the Marks of the
other Party.

4. ADOBE RESPONSIBILITIES

4.1. Marketing of ESPS Software. Adobe shall, at its own expense, promote
the distribution of the ESPS Software on a world-wide basis. At all times during
the Term, Adobe shall maintain in its own name, at its own cost, adequate
resources to effectively market the ESPS Software, inventory to fulfill market
demand for the ESPS Software and trained personnel to enable Adobe to provide
competent technical advise and service to its customers.

4.2. Marketing Events. Adobe shall regularly engage in market making events
to showcase the PDFPress Server Software. ESPS shall have the option to

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participate, without cost to ESPS (except for travel and entertainment), in all
OEM market making events for the PDFPress Server Software. Nothing in this
Agreement will prohibit ESPS from also marketing the PDFPress Server Software to
the Named Accounts.

4.3. Quality Control. Subject to the obligations of ESPS under Article 8,
Adobe shall be fully responsible for quality control assurance for the ESPS
Software distributed hereunder, including without limitation, acquisition of all
components and supplies for manufacturing copies of the ESPS Software and its
documentation and packaging, providing quality control processes for such
manufacturing and establishing the testing procedures necessary to assure that
the ESPS Software delivered to Adobe's customers will meet or exceed customary
industry standards and conform to the Specifications for the ESPS Software.

4.4. Packaging. Adobe shall be fully responsible for the packaging of the
ESPS Software distributed by Adobe hereunder, including without limitation, the
design and manufacturing of such packaging, provided that, in addition to
retaining all copyright notices and other proprietary rights notices on the ESPS
Software delivered under Section 5.1, wherever possible, Adobe shall include at
its discretion in the ESPS Software distributed by Adobe under this Agreement,
ESPS' Marks on all documentation, and initial splash screens including a
specific notation that ESPS is a critical or integral technology provider of
Adobe.

4.5. Manuals. Subject to the license for the ESPS Documentation under
Section 2.1 and the limitations set forth in Section 4.8, Adobe shall be fully
responsible for all manual and other documentation provided to Adobe's customers
with the ESPS Software distributed by Adobe hereunder.

4.6. Localization. Except as set forth in Section 5.4, Adobe shall be fully
responsible for any localization of the ESPS Software, and its documentation and
packaging necessary for marketing the ESPS Software outside of the United
States. Adobe shall complete localization of the ESPS Software for French,
German and Japanese within twelve (12) months of the acceptance of the Release
Candidate under Section 5.2. Upon completion of any localization effort, Adobe
will deliver to ESPS a copy of all localized ESPS Software, ESPS Documentation
and packaging, and, subject to Adobe's rights in its Marks, ESPS shall have the
right to use such localized materials on an internal basis and as a component of
software packages distributed by ESPS.

4.7. Support Services. During the term of this Agreement, subject to the
terms of Section 5.5, Adobe shall provide Adobe's customers with Support
Services for the ESPS Software distributed by Adobe hereunder, including without
limitation, (i) all Level I Support and Level II Support for the ESPS Software
at first and second level assistance for such customers; and (ii) any updates to
the ESPS Software to be provided

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by ESPS as part of Support Services to its customers. Adobe will not provide
support for any other ESPS product containing the functionality of the ESPS
Software. Nothing in this Agreement shall require that Adobe modify the ESPS
Software.

4.8. Performance Obligations. Adobe shall represent the ESPS Software
accurately and fairly and shall avoid any misleading or unethical business
practices. Without the prior written approval of ESPS, Adobe shall not (i) make
warranties of functionality or performance on the ESPS Software except as
specifically set forth in the ESPS Documentation, or (ii) alter, re-label or
change the ESPS Software or Documentation except as provided in Section 4.6 or
otherwise in this Agreement. Adobe shall take all necessary steps to ensure
compliance by its employees or its other representatives with Adobe's
obligations under this Agreement.

5. ESPS OBLIGATIONS

5.1. Delivery. In accordance with the specifications and timetables
identified and mutually agreed upon in Exhibit B, ESPS shall deliver to Adobe:
(i) one master copy each version (Alpha, Beta and Release Candidate versions) of
the Object Code of the PDFPress Client Software and PDFPress Server Software,
and (ii) one copy of the ESPS Documentation. Upon the mutual agreement of ESPS
and Adobe regarding the royalty under Section 6.2(ii), the specifications under
Exhibit A and the timetable under Exhibit B, ESPS shall deliver to Adobe: (i)
one master copy of the Object Code of the PDFPress Standalone Client Software,
and (ii) one copy of the ESPS Documentation related to the PDFPress Standalone
Client Software.

5.2. Acceptance. Upon any delivery of the ESPS Software under Section 5.1,
Adobe shall review, test and evaluate the ESPS Software. Within fourteen (14)
days after delivery, Adobe shall notify ESPS in writing of (i) acceptance of the
delivered version of the ESPS Software, or (ii) any Material Defects. If Adobe
notifies ESPS in writing of Material Defects within fourteen (14) days after
delivery, ESPS shall promptly correct such defects and return the corrected
deliverable for retesting and reevaluation to Adobe. If ESPS fails to correct
such Material Defects in the corrected deliverable or fails to provide a
corrected deliverable within thirty (30) days of Adobe's original notice, then,
subject to the terms of Section 12.2, Adobe may terminate this Agreement. In the
event that Adobe fails to notify ESPS of any Material Defect within fourteen
(14) days of the delivery of any deliverable or corrected deliverable, ESPS
shall be deemed to have accepted such deliverable.

5.3. Development. Except for the Level III Services provided under Section
5.5, ESPS shall have no obligation to develop any other modifications, updates
or upgrades to the ESPS Software, provided that (i) during the term of this
Agreement, in the event that ESPS develops modifications, updates or upgrades to
the ESPS Software, such modifications, updates and upgrades shall be delivered
to Adobe and included under

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the licenses granted under this Agreement; and (ii) in the event that Adobe
desires that the ESPS Software be modified or upgraded in any manner, it shall
notify ESPS of such request, including a proposed description of such
modifications. Within ninety (90) days of the receipt of such development
request, ESPS will provide the specifications for such development, including
any terms and conditions for such development. Upon acceptance of such
development plan by Adobe, ESPS will complete the development and Adobe will pay
ESPS at ESPS' customary rates for the time necessary to complete the
development.

5.4. Localization. Upon Adobe's request, ESPS, at its own expense, shall
provide Adobe with a reasonable amount of technical assistance to support
Adobe's localization efforts under Section 4.6 including without limitation any
modifications to the Source Code for the ESPS Software necessary to complete the
localization and to make the ESPS Software compatible with localized versions of
the application software programs set forth in Schedule A. ESPS will provide
localizable versions of the PDFPress Client software for French and German as
part of the Alpha, Beta, and Release Candidate releases. By November 14, 1997,
ESPS will provide the date for the localizable version of the PDFPress Software
for the Japanese release and will subsequently deliver the localizable software
for that release by that date as the parties may agree. In the event that Adobe
requires assistance from ESPS for localization other than French, German and
Japanese, or compatibility with other application software programs, the parties
will mutually agree on the compensation and other terms for such assistance.
Other than this reasonably requested content support, Adobe will have sole
responsibility for localization of the ESPS Software.

5.5. Level III Support. During the term of this Agreement and for a period
of three (3) years after the termination of this Agreement, at Adobe's request,
ESPS shall provide to Adobe: (i) Level III Support for the ESPS Software as
third level assistance for the maintenance that Adobe provides directly to its
customers; and (ii) any updates to the ESPS Software necessary for Adobe to
provide Support Services to its customers. ESPS shall have no obligation to
provide such services directly to Adobe's customers or to provide such services
if the Material Defect in the ESPS Software is caused by malfunction of non-ESPS
hardware or software, by modification of the ESPS Software not made by ESPS, by
operator error, or by use of the ESPS Software that is not in accordance with
the operating instructions for the ESPS Software.

5.6. Support Response. If requested by Adobe under Section 5.5, ESPS shall
provide telephone consultation within the next business day of ESPS' receipt of
a telephone request for Level III Support by Adobe during ESPS standard business
hours. ESPS shall provide a means whereby requests for consultation can be
recorded outside of standard hours. Subject to the provisions of Section 5.5,
ESPS shall use reasonable efforts to provide a workaround within fifteen (15)
days of ESPS' receipt of a notice of any Material Defect and to correct such
Material Defect within sixty (60) days of ESPS' receipt of such notice.

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5.7. Named Accounts. ESPS will have the exclusive right to market and
license the PDFPress Server Software to the Named Accounts for a period of
twelve (12) months after the date of acceptance by Adobe of the Release
Candidate version of the ESPS Software under Section 5.2. In the event that ESPS
has not licensed the PDF Server Software to the Named Account within such twelve
(12) month period, Adobe may thereafter market and sublicense the PDFPress
Server Software to such Named Account. In the event that ESPS has not licensed
the accounts in the allotted time but it can demonstrate that it reasonably
expects to close a licensing transaction with one or more of the Named Accounts.
Adobe agrees to accept a written letter of request for extension, for a period
of up to six months, such that ESPS may continue its pursuit of said specified
Named Accounts. In the event that ESPS licenses the PDFPress Server Software to
a Named Account, ESPS shall execute a written license agreement directly with
such Named Account. Support Services for the Named Account will be provided by
Adobe and ESPS in the same manner as Support Services are provided for Adobe's
customers under Articles 4 and 5.

6. CONSIDERATION

6.1. Initial Payments.

(i) Agreement Execution. Upon execution of the Agreement, Adobe
shall pay to ESPS eight hundred thousand dollars ($900,000), consisting of
(a) four hundred thousand dollars ($400,000) as a refundable pre-payment of
the License Fee, and (b) the non-refundable Royalty Advance of five hundred
thousand dollars ($500,000).

(ii) Alpha. Upon acceptance of the Alpha version of the PDFPress
Client Software and PDFPress Server Software under Section 5.2, Adobe shall
pay to ESPS three hundred thousand dollars ($300,000) as a refundable
pre-payment of the License Fee.

(iii) Beta. Upon acceptance of the Beta version of the PDFPress
Client Software and PDFPress Server Software under Section 5.2, Adobe shall
pay to ESPS three hundred thousand dollars ($300,000) as a refundable pre-
payment of the License Fee.

(iv) Release Candidate. Upon acceptance of the Release Candidate
version of the PDFPress Client Software and PDFPress Server Software under
Section 5.2, Adobe shall pay to ESPS the remaining three hundred thousand
dollars ($300,000) of the License Fee.

(v) Delivery Delay. In the event that ESPS fails to deliver the
Release Candidate version of the PDFPress Client Software and PDFPress

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Server Software within thirty (30) days of the delivery date set forth in
the schedule attached hereto as Exhibit B, Adobe may retain as a penalty
ten percent (10%) of the scheduled payment for such version. Such penalty
shall not be imposed in the event (i) Adobe has materially changed the
specifications or other requirements for the ESPS Software in any manner
after the Effective Date; or (ii) the delay is caused by any other action
or inaction of Adobe.

6.2. Royalties.

(i) PDFPress Client Software.

(a) Individual Licenses. Except for Enterprise Licenses
(6.2(i)(b)), the Client/Server Licenses (6.2(iii)(a)), Bundled Sales
(6.2(i)(b)), and OEM Licenses (6.2(iii)(b)), Adobe shall pay a royalty
to ESPS equal to one dollar and fifty cents ($1.50) for every copy of
Acrobat sold that contains the PDFPress Client Software. For purposes
of this Agreement, the sale of a copy of Acrobat shall occur on the
date of shipment of the copy of Acrobat by Adobe.

(b) Enterprise Licenses and Bundled Sales. Adobe shall pay a
royalty to ESPS equal to one percent (1%) of the Net Revenues received
by Adobe from (a) all Enterprise Licenses for copies of Acrobat that
contain the PDFPress Client Software and (b) all licenses of PDFPress
Client Software that are distributed in conjunction with other
products ("Bundled Sales").

(ii) PDFPress Standalone Client Software. The royalty for distribution
by Adobe of the PDFPress Standalone Client Software shall be determined by
mutual agreement of ESPS and Adobe upon the completion of the
specifications and timetable for delivery of the Standalone PDFPress Client
Software.

(iii) PDFPress Server Software.

(a) Client/Server Licenses. Except as provided in Section
6.2(iii)(b), Adobe shall pay a royalty to ESPS equal to ten percent
(10%) of the Net Revenues received by Adobe for Client/Server
Licenses.

(b) OEM Licenses. Except for OEM Licenses by Adobe of the
PDFPress Server Software to Named Accounts, Adobe shall pay a royalty
to ESPS equal to ten percent (10%) of the Net Revenues Adobe receives
from all OEM Licenses for the PDFPress

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Server Software. For OEM Licenses by Adobe of the PDFPress Server
Software to Named Accounts, Adobe shall pay a royalty to ESPS equal to
twenty percent (20%) of the Net Revenues from the OEM License at any
time within the first two years after the commencement of the OEM
License; the royalty for each such OEM License after the two year
period shall be 10%.

6.3. Revenues.

(i) Definition. "Net Revenues" mean all revenues received with
respect to the distribution of ESPS Software, less the sum of the
following: (i) customary discounts; (ii) sales, tariff duties or use taxes;
and (iii) credits or refunds provided for returns of the ESPS Software. No
deductions shall be made for the cost of distribution, collections or for
commissions paid to corporations or individuals. Net Revenues shall also
include all license fees and royalties received by Adobe or ESPS, as the
case may be, from third parties for products developed which incorporate
the ESPS Software.

(ii) Client/Server Revenues. For purposes of determining Net
Revenues for Client/Server Licenses and OEM Licenses, Net Revenues shall
include revenues received for all copies of Acrobat that contain the
PDFPress Client Software that are distributed in conjunction with, or
distributed for use with, the PDFPress Server Software, provided that such
copies of PDFPress Client Software are distributed within six (6) months
before or after the initial license term for the initial sale of the
PDFPress Server Software. In no event shall Adobe pay more than one royalty
to ESPS for each copy of Acrobat that contains the PDFPress Client Software
that is distributed hereunder.

6.4. Royalty Advance. On the Effective Date, Adobe shall pay ESPS the
Royalty Advance. This advance shall be credited against all royalty payments
owed by Adobe under Section 6.2 and will be considered the minimum amount of
royalties due under this Agreement.

6.5. Royalty Payment by ESPS. For Named Accounts where ESPS licenses the
PDFPress Server Software to the OEM customer and collects the revenue from such
license, ESPS shall pay a royalty to Adobe equal to forty percent (40%) of the
Net Revenues to ESPS from the OEM Licenses.

7. PAYMENT

7.1. Payment of Royalties. Within thirty (30) days after the end of each
Adobe Quarter during this Agreement, each Party shall submit to the other Party
the report described in Section 7.2 and pay the other Party all royalties due
under Article 6

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for such Adobe Quarter, including the number of copies of the ESPS Software
distributed (including the number of copies of Acrobat containing the ESPS
Software), and all Net Revenue received, during such Adobe Quarter. Payment for
all fees under this Agreement shall be in U.S. dollars and submitted to the
other Party at its principle place of business or other location that the other
Party shall indicate. The other party may impose a service charge of one and
one-half percent (1.5%) per month for all amounts not paid when due.

7.2. Reports. Within thirty (30) days after the end of each Adobe Quarter
under this Agreement, each Party shall deliver to the other Party a true and
accurate report giving the particulars of the business conducted under this
Agreement for the preceeding quarter as shall be pertinent to a royalty
accounting under this Agreement. The reports shall include the number of copies
of the ESPS Software that have been licensed, the amount of the Net Revenues for
Enterprise Licenses, Client/Server Licenses and OEM Licenses, the royalties due
for such Net Revenues, and all other records and documentation that may
reasonably be requested by the other Party. Information in such reports,
including without limitation, Net Revenue and volume data, shall be deemed
Confidential Information of the disclosing Party.

7.3. Records. Each Party shall keep full, true, and accurate books of
account containing all particulars that may be necessary for the purpose of
showing amounts payable hereunder. The books of account shall be kept at the
Party's principle place of business and shall be open upon reasonable notice and
during normal business hours for five (5) years following the end of the
calendar year to which they pertain, for inspection by other Party or its agents
for the purpose of verifying royalty statements or compliance with other
respects of this Agreement. The cost of such audit shall be borne by the Party
requesting the audit, except as set forth below. Any fees found by such audit to
be overdue shall promptly be paid. In addition, if the audit reveals that
underpayment exceeds five percent (5%) of the amounts due hereunder for the
period being audited, the Party that has made the underpayment shall pay the
cost of the audit.

8. WARRANTY

8.1. Limited Warranty. ESPS warrants that (i) ESPS has all Intellectual
Property Rights necessary to license the ESPS Software to Adobe in accordance
with the terms of this Agreement; and (ii) the ESPS Software will be free from
Material Defects for a period of ninety (90) days from the date of delivery to
Adobe. ESPS' sole responsibility under this Section 8(ii) warranty shall be, at
ESPS' option, to either repair or replace the ESPS Software.

8.2. Limitations. The foregoing warranties apply only to Adobe. ESPS shall
provide warranty service only for the most current version of the ESPS Software.
ESPS shall have no obligation to provide warranty services to the extent that
the Material

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Defect in the ESPS Software is caused by malfunction of non-ESPS hardware or
software, by modification of the ESPS Software not made by ESPS, by operator
error, or by use of the ESPS Software that is not in accordance with the
operating instructions for the ESPS Software.

8.3. Disclaimer. EXCEPT FOR THE EXPRESS WARRANTIES STATED HEREIN, THE ESPS
SOFTWARE IS PROVIDED TO ADOBE AS IS, AND ESPS MAKES NO WARRANTIES WHATSOEVER
WITH RESPECT TO FUNCTIONALITY, OPERABILITY OR USE OF THE ESPS SOFTWARE. ESPS
HEREBY DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE ESPS
SOFTWARE OR OTHERWISE HEREUNDER, INCLUDING ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

9. INDEMNIFICATION

Except as provided in Articles 8 and 10, Adobe will defend, at its expense,
any action brought against ESPS to the extent that it is based on a claim by a
third party based on the actions or omissions of Adobe regarding the
distribution of the ESPS Software by Adobe hereunder and Adobe will indemnify
ESPS from any costs, damages and fees incurred by ESPS from such claim. ESPS
agrees to notify Adobe promptly in writing of any claim, to permit Adobe to
defend, compromise or settle the claim and to provide all available information
and assistance regarding such claim.

10. INTELLECTUAL PROPERTY INDEMNIFICATION

10.1. Indemnification. ESPS will defend, at its expense, any action brought
against Adobe to the extent that it is based on a claim that the use of the ESPS
Software, ESPS Documentation or ESPS' Marks by Adobe in accordance with this
Agreement infringes any copyright, trademark, or United States patent, and ESPS
will indemnify Adobe from any costs, damages and fees incurred by Adobe from
such action. Adobe agrees to notify ESPS promptly in writing of any claim, to
permit ESPS to defend, compromise or settle the claim and to provide all
available information and assistance regarding such claim.

10.2. Remedies. Should the ESPS Software become, or in ESPS' opinion be
likely to become, the subject of a claim for infringement of a copyright,
trademark, or United States patent, ESPS may (i) procure for Adobe, at no cost
to Adobe, the right to continue to use the ESPS Software, (ii) replace or modify
the ESPS Software at no cost to Adobe, to make such software non-infringing,
provided that the replacement or modified ESPS Software provides substantially
similar function and performance; or (iii) if neither (i) or (ii) are practical,
terminate the right to use such ESPS Software, and ESPS shall reimburse Adobe
for all license fees and royalties paid by Adobe to ESPS, as depreciated

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on a straight-line five (5) year basis. None of these remedies shall relieve
ESPS of its obligations under 10.1.

10.3. Limitation of Liability. ESPS shall have no liability for any claim
to the extent that such claim is based upon: (i) the combination, operation or
use of any ESPS Software with equipment, devices or software not supplied or
specified by ESPS; (ii) the alteration or modification of any ESPS Software that
was not made by ESPS; or (iii) the failure by Adobe or its customers to use the
most current version of the ESPS Software.

10.4. Entire Liability. This Article 10 states the entire liability of ESPS
with respect to infringement of any intellectual property rights by the ESPS
Software and ESPS shall have no additional liability with respect to any alleged
or proven infringement.

10.5. Notification of Unauthorized Use. Adobe shall promptly notify ESPS in
writing upon its discovery for any unauthorized use or infringement of the ESPS
Software, or ESPS's Intellectual Property Rights with respect thereto. ESPS
shall have the sole and exclusive right to bring an infringement action or
proceeding against any infringing third party, and, in the event that ESPS
brings such an action or proceeding, Adobe shall, at ESPS' expense, cooperate
and provide full information and assistance to ESPS and its counsel in
connection with any such action or proceeding.

11. LIMITATION OF LIABILITY

11.1. Consequential Damages. EXCEPT FOR SECTION 10, UNDER NO CIRCUMSTANCES
WHATSOEVER SHALL ESPS OR ADOBE BE LIABLE FOR SPECIAL, INCIDENTIAL, OR
CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION, LOST PROFITS OR LOSSES
RESULTING FROM BUSINESS INTERRUPTION, EVEN IF IT HAS BEEN ADVISED OF THE
POSSIBILITY OR LIKELIHOOD OF SUCH DAMAGES. THESE LIMITATIONS SHALL APPLY
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.

11.2. Liability Limitation. In no event shall ESPS's liability for any and
all claims, losses or damages arising out of or relating to, in whole or in
part, this Agreement or any services provided hereunder exceed (i) all amounts
paid by Adobe to ESPS hereunder or (ii) two million, seven hundred thousand
dollars ($2,700,000) regardless of the form of action or legal theory under
which liability may be asserted.

12. TERM AND TERMINATION

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12.1. Term. This Agreement shall continue in force for an initial term of
five (5) years from the Effective Date unless terminated earlier under the
provisions of this Article 11. Upon the expiration of the initial term, this
Agreement shall be automatically renewed for consecutive additional one year
terms ("Renewal Terms") unless the Agreement has previously been terminated
under this Article 2. Either party may terminate this Agreement at the end of
the initial term or any Renewal Term by providing the other Party with notice of
termination at least ninety (90) days prior to end of such initial term or
Renewal Term.

12.2. Termination for Cause. In the event of any material breach of this
Agreement, the non-breaching Party may terminate this Agreement by giving sixty
(60) days' prior written notice to the other Party; provided, however, that this
Agreement shall not terminate if the other Party has cured the breach prior to
the expiration of such sixty (60) day period, or if such breach cannot be cured
within such sixty (60) day period, the other Party has taken steps within such
sixty (60) day period to cure the breach and thereafter cured such breach as
soon as practicable.

12.3. Termination for Insolvency. This Agreement may be terminated by
either party (i) upon the institution by or against the other Party of
insolvency, receivership or bankruptcy proceedings, (ii) upon the other Party's
making an assignment for the benefit of creditors, or (iii) upon the other
Party's dissolution or ceasing to do business.

12.4. Effect of Termination. Upon termination of this Agreement for any
reason:

(i) The license granted under this Agreement shall immediately
terminate, provided that Adobe shall retain the right to use the ESPS
Software to provide Level I and Level II Support to existing customers and
ESPS will continue to provide Level III support to Adobe under Section 5.5
and for a period of three (3) months following termination; however, Adobe
is under no obligation to provide support to existing customers upon
termination of agreement.

(ii) Customers properly sublicensed prior to the termination shall
have the right to continue to use the ESPS Software pursuant to the terms
and conditions of their respective sublicense agreements;

(iii) Except as necessary to provide Support Services under Section
4.7, Adobe shall return to ESPS the Confidential Information, Documentation
and all other tangible materials related to the ESPS Software, all
translations thereof; and

18
<PAGE>

(iv) Termination of this Agreement by either Party shall be without
prejudice to that Party's other rights and remedies hereunder, subject to
any limitations on remedies provided herein.

12.5. Survival. The provisions of Sections 4.7, 5.5, 6.2, 6.5, 8.3, 12.4
and 12.5 and Articles 3, 7, 9, 10 and 11 shall survive the termination of this
Agreement for any reason.

13. EXPORT COMPLIANCE

The rights and obligations of ESPS and Adobe hereunder shall be subject to
such United States laws and regulations as shall from time to time govern the
license and delivery of technology abroad by persons subject to the jurisdiction
of the United States, including the Export Administration Act of 1979, as
amended, any successor legislation to the Export Administration Act of 1979, and
the Export Administration regulations issued by the Department of Commerce,
International Trade Administration, Office of Export Administration. ESPS and
Adobe each shall certify that they shall not directly or indirectly, export,
reexport or transship the ESPS Software or any parts or copies thereof in such a
manner as to violate such laws and regulations in effect from time to time. ESPS
represents that the ESPS Software delivered to Adobe shall qualify for a general
export license under the Export Administration Act and that the ESPS Software
shall not include encryption technology that precludes qualification for such
general license.

14. DISPUTE RESOLUTION

In the event that a controversy or claim arises relating to this Agreement,
or the breach thereof, the Parties shall use good faith efforts to resolve such
controversy or claim without resort to litigation. Upon written notice of any
such dispute ("Dispute Notice"), the managers for distribution of the ESPS
Software for each Party must consult with each other to attempt to resolve the
matter amicably for a period of at least thirty (30) days. In the event that the
Parties are unable to reach an accommodation within such thirty (30) day period,
senior management from both ESPS and Adobe with authority to settle the
controversy or claim shall hold a meeting and use good faith efforts to resolve
the dispute within the following thirty (30) days. An attempt to arrive at a
settlement shall be deemed to have failed only if after such sixty (60) day
resolution period one of the Parties notifies the other Party in writing of such
failure.

15. GENERAL PROVISIONS

15.1. Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York, U.S.A., without reference to conflicts
of law principles.

19
<PAGE>

15.2. Entire Agreement. This Agreement sets forth the entire agreement and
understanding of the Parties relating to the subject matter herein and merges
all prior discussions between the Parties. No modification or amendment of this
Agreement, nor any waiver of any rights under this Agreement, shall be effective
unless in writing signed by the Party to be charged.

15.3. Notice. All notices and other communications hereunder shall be in
writing and shall be deemed effective when delivered by hand or by facsimile
transmission, when telexed or upon receipt when mailed by registered or
certified mail (return receipt requested) postage prepaid, to the Parties at the
address first listed above (or at such other address for a Party as shall be
specified by like notice). No change of address shall be binding upon the other
Party hereto until written notice thereof is received by such Party at the
address shown herein.

15.4. Force Majeure. Except for the obligation to make payment,
nonperformance of either Party shall be excused to the extent the performance is
rendered impossible by strike, fire, flood, governmental acts or orders or
restrictions, failure of suppliers, or any other reason where failure to perform
is beyond the reasonable control of and not caused by the negligence of the
non-performing Party. Each Party agrees to promptly notify the other of any such
circumstance delaying its performance and to resume performance as so as
reasonably practicable, but in no case greater than one hundred twenty (120)
days.

15.5. Non-assignability and Binding Effect. Neither Party shall assign this
Agreement to any third party without the prior written consent of the other
Party provided that, subject to the provisions of Section 2.7, the merger or
consolidation of one Party into, or the sale of all or substantially all of the
assets of such Party to, a third party shall not be deemed to be an assignment.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their permitted successors and assigns.

15.6. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

15.7. Severability. The provisions of this Agreement are severable, and in
the event that any provision of this Agreement shall be determined to be invalid
or unenforceable under any controlling body of law, such invalidity or
unenforceability shall not in any way affect the validity or enforceability of
the remaining provisions hereof.

IN WITNESS WHEREOF, the Parties have entered into this Agreement as of the
date first set forth above.

20
<PAGE>

ELECTRONIC SUBMISSION ADOBE SYSTEMS, INC.
PUBLISHING SYSTEMS, INC.

/s/ Terrence A. Brennan /s/ [SIGNATURE ILLEGIBLE]
- ------------------------------ ------------------------------
Authorized Signature Authorized Signature
/s/ Terrence A. Brennan /s/ [SIGNATURE ILLEGIBLE]
- ------------------------------ ------------------------------
Printed Name Printed Name
President CEO Vice President
- ------------------------------ ------------------------------
Title Title
Nov 18 1997 Nov 6 1992
- ------------------------------ ------------------------------
Date Date

<PAGE>

Exhibit 10.6

THIS CONVERTIBLE PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH
RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO
OR AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT.

Convertible Promissory Note

$500,000 July 29, 1996

For value received, ELECTRONIC SUBMISSION PUBLISHING SYSTEM, INC., a
Delaware corporation ("Payor"), promises to pay Adobe Ventures L.P. or its
assigns ("Holder") the principal sum of Five Hundred Thousand Dollars
($500,000.00) with interest on the outstanding principal amount at the rate of
6.04% per annum. Interest shall accrue commencing with the date hereof and shall
continue to accrue on the outstanding principal until paid in full.

The entire unpaid balance of principal and all unpaid accrued interest
shall become fully due and payable upon the earlier of (i) demand for payment or
(ii) the closing of a financing pursuant to which the net aggregate proceeds to
the Payor are at least one million dollars ($1,000,000).

All payments of interest and principal shall be in lawful money of the
United States of America, and shall be applied first to accrued interest, and
thereafter to principal. Payor reserves the right to prepay this note in whole
or in part at any time or from time to time upon five (5) days' prior written
notice to Holder, without penalty or additional fees.

The outstanding principal balance and unpaid accrued interest of this Note
shall be convertible in whole at any time at the option of Holder into shares of
Payor's Series A Preferred Stock. The number of shares issuable to Holder upon
conversion shall be equal to the principal balance and accrued interest that is
being converted divided by $1.00 (as adjusted for stock splits, combinations,
dividends or the like).

As collateral security for prompt and complete payment and performance of
all obligations of Payor under this Note and to induce Holder to extend credit,
Payor hereby assigns, conveys, grants, pledges and transfers to, and creates in
favor of, Holder a security interest in all goods and personal property of Payor
whether tangible or intangible and whether nor or hereafter owned by Payor,
including, without limitation, all accounts, chattel paper, contracts,
documents, equipment, fixtures, general intangibles, copyrights, trade secrets,
trademarks, licenses and inventory, including all proceeds of the foregoing and
all accessions to, substitutions and replacements for, and rents, profits and
products of the foregoing (collectively, the "Collateral"). Payor shall, upon
demand, do all such acts as Holder may reasonably request to establish and
maintain a perfected

1
<PAGE>

security interest in the Collateral, including, but not limited to executing
financing statements.

Payor represents and warrants to the Holder that Payor is or, to the extent
that the Collateral will be acquired after the date hereof, will be the true and
lawful owner of the Collateral, having good and marketable title thereto, free
and clear of any and all liens, mortgages, pledges, hypothecations, assignments,
deposit arrangements, security interests, charges, claims or other encumbrances
of any kind. Payor will keep the Collateral free at all times from all claims,
liens, security interests and encumbrances other than those in favor of Holder.
Payor will not, without the prior written consent of Holder, sell, transfer or
lease, or permit to be sold, transferred or leased, any or all of the
Collateral, except for inventory in the ordinary course of business. Payor will
keep the Collateral in good condition and will protect it from loss, damage or
deterioration.

This Note shall become due and payable, without notice or demand, upon
Payor's breach of any obligation, covenant, representation or warranty under
this Note. Upon such breach, Holder shall have the right to exercise any and all
rights afforded to a secured party under the Uniform Commercial Code in effect
from time to time in the relevant jurisdiction or other applicable law.

Payor hereby waives demand, diligence, notice, presentment, protest and
notice of dishonor. In the event of any default hereunder, Payor shall pay
costs, including but not limited to all reasonable attorneys' fees and court
costs, incurred by Holder in enforcing and collecting this Note, the collection
of any sums due hereunder, any actions for declaratory relief in any way related
to this Note or the protection or preservation of any rights of the Holder
hereunder.

This Note shall be binding upon, and shall inure to the benefit of, the
Payor and the Holder and their respective successors and assigns; provided,
however, that the Payor's rights and obligations shall not be assigned or
delegated without the Holder's prior written consent, given in its sole
discretion. This Note shall be deemed to have been made in the State of
California and the validity and terms of this Note shall be construed in
accordance with the internal laws of the State of California, without regard to
the choice of law principles of such State.

ELECTRONIC SUBMISSION
PUBLISHING SYSTEM, INC.

/s/ George B. Pearcy
-----------------------------

Title: Chief Executive Officer

<PAGE>

Exhibit 10.7

Convertible Promissory Note

$500,000 September 18, 1996

For value received, ELECTRONIC SUBMISSION PUBLISHING SYSTEM, INC., a
Delaware corporation ("Payor"), promises to pay Adobe Ventures L.P. or its
assigns ("Holder") the principal sum of Five Hundred Thousand Dollars
($500,000.00) with interest on the outstanding principal amount at the rate of
6.02% per annum. Interest shall accrue commencing with the date hereof and shall
continue to accrue on the outstanding principal until paid in full.

1
<PAGE>

security interest in the Collateral, including, but not limited to executing
financing statements.

ELECTRONIC SUBMISSION
PUBLISHING SYSTEM, INC.

/s/ George B. Pearcy
-----------------------------

Title: Chief Financial Officer

<PAGE>

Exhibit 10.8

Convertible Promissory Note

$500,000 November 6, 1996

For value received, ELECTRONIC SUBMISSION PUBLISHING SYSTEM, INC., a
Delaware corporation ("Payor"), promises to pay Adobe Ventures L.P. or its
assigns ("Holder") the principal sum of Five Hundred Thousand Dollars
($500,000.00) with interest on the outstanding principal amount at the rate of
5.96% per annum. Interest shall accrue commencing with the date hereof and shall
continue to accrue on the outstanding principal until paid in full.

1
<PAGE>

security interest in the Collateral, including, but not limited to executing
financing statements.

ELECTRONIC SUBMISSION
PUBLISHING SYSTEM, INC.

/s/ Terrence A. Brennan
-----------------------------

Title: Chief Executive Officer

<PAGE>

Exhibit 10.9

ELECTRONIC SUBMISSION PUBLISHING SYSTEM, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT

THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is made
as of March 5, 1997, between ELECTRONIC SUBMISSION PUBLISHING SYSTEMS, INC., a
Delaware corporation (the "Company"), ADOBE VENTURES L.P., a California limited
partnership and H&Q ESPS INVESTORS L.P., a California limited partnership. Adobe
Ventures L.P. and H&Q ESPS Investors L.P. are sometimes referred to herein
individually as a "Purchaser" and collectively as the "Purchasers." The parties
hereby agree as follows:

1. Authorization and Sale of the Preferred Shares.
----------------------------------------------

1.1. Authorization; Amendment of the Certificate of Incorporation. The
------------------------------------------------------------
Company has authorized the issuance and sale pursuant to the terms and
conditions hereof of up to 4,000,000 shares of its Series A Preferred Stock, par
value $0.001 per share (the "Series A Shares"), having the rights, restrictions,
privileges and preferences as set forth in the Company's Certificate of
Incorporation. The Company shall adopt and file with the Secretary of State of
the State of Delaware on or before the Closing (as defined below) the
Certificate of Amendment of the Certificate of Incorporation attached hereto as
Exhibit A ("Certificate of Amendment").
- ---------

1.2. Sale and Issuance of the Series A Shares. Subject to the terms and
----------------------------------------
conditions hereof, at the Closing (as defined below) the Company will issue and
sell to each Purchaser and each Purchaser will purchase from the Company the
number of Series A Shares, at a purchase price of $1.00 per share, as specified
opposite such Purchaser's name on Schedule A to this Agreement.
----------

2. Closing Date; Delivery.
----------------------

2.1. Closing Date.
------------

(a) Purchase and Sale at the Closing. The closing comprising the
--------------------------------
purchase by the Purchasers and sale by the Company of Series A Shares shall be
held at the offices of Fox, Rothschild, O'Brien & Frankel, Eagleview Corporate
Center, 760 Constitution Drive, Exton, Pennsylvania on March 5, 1997, or at such
other time and place as the Company and the Purchaser may agree in writing. The
closing referred to in this Section 2.1(a) shall be hereinafter referred to as
the "Closing" and the date of the Closing is hereinafter referred to as the
"Closing Date".

2.2. Delivery. Subject to the terms of this Agreement, at the Closing the
--------
Company will deliver to the Purchaser the certificates representing the Series A
Shares to be purchased by the Purchaser from the Company, against payment of the
purchase price therefor by delivery of a check, payable to the order of the
Company, by wire transfer or by cancellation of indebtedness owed by the Company
to Purchaser, which indebtedness is set forth on Exhibit A.
---------

1
<PAGE>

3. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to each Purchaser that except as set forth on a Schedule
of Exceptions attached hereto as Exhibit B, which exceptions shall be deemed to
---------
be representations and warranties as if made hereunder:

3.1. Organization and Standing. The Company is a corporation duly
-------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to carry on its
businesses as now conducted and as proposed to be conducted. The Company is
qualified or licensed to do business as a foreign corporation in all
jurisdictions where such qualification or licensing is required, except where
the failure to so qualify would not have a material adverse effect upon the
Company.

3.2. Corporate Power. The Company has now, or will have at the Closing
---------------
Date, all requisite corporate power necessary for the authorization, execution
and delivery of this Agreement and the Amendment to Rights Agreement in the form
attached hereto as Exhibit C (the "Rights Amendment"). This Agreement and the
---------
Rights Amendment are valid and binding obligations of the Company enforceable in
accordance with their terms, except as the same may be limited by bankruptcy,
insolvency, moratorium, and other laws of general application affecting the
enforcement of creditors' rights.

3.3. Subsidiaries. The Company does not control, directly or indirectly,
------------
any other corporation, association or business entity.

3.4. Capitalization. The authorized capital stock of the Company is
--------------
10,000,000 shares of Common Stock and 6,000,000 shares of Preferred Stock, of
which 6,000,000 shares have been designated Series A Preferred Stock. There are
issued and outstanding 365,400 shares of the Company's Common Stock and
2,000,000 shares of Preferred Stock. All such issued and outstanding shares have
been duly authorized and validly issued, are fully paid and nonassessable, and
were issued in compliance with all applicable state and federal laws concerning
the issuance of securities. Except for (a) the conversion privileges of the
Preferred Stock, (b) options to purchase 1,538,000 shares of Common Stock and
(c) the right of first refusal granted to certain stockholders of the Company
pursuant to that certain Registration Rights Agreement between the Company and
those stockholders dated July 5, 1994, as amended by the Rights Amendment (such
Registration Rights Agreement as amended by the Rights Agreement is herein
referred to as the "Rights Agreement"), there are no outstanding rights
(including conversion or preemptive rights), options, warrants, conversion
rights or agreements for the purchase or acquisition from the Company of any
shares of its capital stock. The Company is not a party or subject to any
agreement or understanding between any persons or entities, which affects or
relates to the voting or giving of written consents with respect to any
securities or by any director of the Company.

3.5. Authorization.
-------------

(a) Corporate Action. All corporate action on the part of the Company,
----------------
directors and stockholders necessary for the execution and delivery of this and
the Rights Amendment, the sale and issuance of the Series A Shares, the of the
Common Stock issuable upon conversion of the Series A Preferred Stock
performance of

2
<PAGE>

the Company's obligations hereunder and under the Rights Agreement has been
taken or will be taken prior to the Closing. The Company has duly served an
aggregate of 6,000,000 shares of Common Stock for issuance upon conversion of
the Series A Preferred Stock.

(b) Valid Issuance. The Series A Shares when issued in compliance with the
--------------
provisions of this Agreement, and the shares of Common Stock issued upon
conversion of the Series A Preferred Stock when issued in accordance with the
provisions of the Certificate of Incorporation, will be validly issued, fully
paid and nonassessable and will be free of any liens or encumbrances; provided,
however, that all such shares may be subject to restrictions on transfer under
state and/or federal securities laws as set forth herein, and as may be required
by future changes in such laws. The rights, preferences, privileges and
restrictions of the Series A Preferred Stock are as set forth in the Certificate
of Incorporation.

(c) No Preemptive Rights. Except as set forth in the Rights Agreement, no
--------------------
person has any right of first refusal or any preemptive rights in connection
with the issuance of the Series A Shares, the issuance of the Common Stock upon
conversion of the Series A Preferred Stock or any future issuances of securities
by the Company.

3.6. Patents, Trademarks, etc. The Company owns and possesses or is
------------------------
licensed under all patents, patent applications, licenses, trademarks, trade
names, brand names, trade secrets, inventions and copyrights employed in the
operation of its business as now conducted and as proposed to be conducted, with
no infringement of or conflict with the rights of others respecting any of the
same. The operation of the Company's business as now conducted or as proposed to
be conducted does not infringe any patent, copyright, trade secret or other
proprietary rights of any third parties. There are no outstanding options,
licenses, or agreements of any kind relating to the foregoing, nor is the
Company bound by or a party to any options, licenses or agreements of any kind
with respect to patents, patent applications, licenses, trademarks, trade names,
brand names, inventions, proprietary rights and copyrights of any other person
or entity. The Company is not obligated to make any payments by way of
royalties, fees or otherwise to any owner, licensor of, or other claimant to any
patent, trademark, trade name, copyright or other intangible asset, with respect
to the use thereof or in connection with the conduct of its business, or
otherwise. The Company has not received any communications alleging that it has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights or trade secrets or
other proprietary rights of any other person or entity, nor is the Company aware
of any basis for the foregoing. There are no agreements, understandings,
instruments, contracts, judgments, orders, writs of decrees to which the Company
is a party or by which it is bound which involve indemnification by the Company
with respect to infringements of proprietary rights.

3.7. Compliance with Other Instruments, None Burdensome, etc. The Company
-------------------------------------------------------
is not in violation of any term of its Certificate of Incorporation or Bylaws,
nor is the Company in violation of or in default in any material respect under
the terms of any mortgage, indenture, contract, agreement, instrument, judgment
or decree, the violation of which would have a material adverse effect on the
Company as a whole, and to the best knowledge of the Company, is not in
violation of any order, statute, rule or regulation applicable to the Company,
the violation of which would have a material adverse effect on the Company. The
execution, delivery and performance of and compliance with this Agreement and
the Rights Amendment

3
<PAGE>

and the issuance and sale of the Series A Shares will not (a) result in any such
violation, or (b) be in conflict with or constitute a default under any such
term, or (c) result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Company pursuant to any
such term. To the best knowledge of the Company, there is no such term or any
such order, statute, rule or regulation which adversely affects, or in the
future may materially adversely affect, the business, prospects, condition,
affairs or operations of the Company or any of its properties or assets.

3.8. Proprietary Agreements; Employees. Each employee and consultant of the
---------------------------------
Company has executed an agreement regarding confidentiality and proprietary
information, the form of which has been provided to special counsel to the
Purchaser. None of its employees or consultants is in violation thereof and the
Company will use best efforts to prevent such violations. The employees and
consultants of the Company are not obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with the use of his or her best efforts to promote the interests
of the Company or that would conflict with the Company's business as conducted
or as proposed to be conducted or that would prevent any such employee or
consultant from assigning inventions to the Company. Neither the execution nor
delivery of this Agreement or the Rights Amendment, nor the carrying on of the
Company's business as proposed, will conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees or consultants is now
obligated. The Company does not believe that it is or will be necessary for the
Company to utilize any inventions of any of its employees made prior to their
employment by the Company.

3.9. Litigation, etc. There is no action, proceeding or investigation
---------------
pending against the Company or its officers, directors or stockholders, or to
the best of the Company's knowledge, against employees or consultants of the
Company (or, to the best of the Company's knowledge, any basis therefor or
threat thereof): (1) which might result, either individually or in the
aggregate, in (a) any material adverse change in the business, prospects,
conditions, affairs or operations of the Company or in any of its properties or
assets, or (b) any material impairment of the right or ability of the Company to
carry on its business as now conducted or as proposed to be conducted, or (c)
any material liability on the part of the Company; or (2) which questions the
validity of this Agreement, the Rights Amendment or the Rights Agreement or any
action taken or to be taken in connection herewith, including in each case,
without limitation, actions pending or threatened involving the prior employment
of any of the Company's employees or consultants, the use in connection with the
Company's business of any information or techniques allegedly proprietary to any
of the former employers of such employees or consultants or their obligations
under any agreements with prior employers. The Company is not a party to or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company currently intends to initiate.

3.10. Governmental Consent, etc. No consent, approval or authorization of
-------------------------
or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with: (a) the valid execution and
delivery of this Agreement or the Rights Amendment; or (b) the offer, sale or
issuance of the Series A Shares, or the issuance of the

4
<PAGE>

shares of Common Stock issuable upon conversion of the Series A Preferred Stock
or (c) the obtaining of the consents, permits and waivers specified in
subsection 5.1(b) hereof.

3.11. Offering. In reliance on the representations and warranties of the
--------
Purchaser in Section 4 hereof, the offer, sale and issuance of the Series A
Shares in conformity with the terms of this Agreement will not result in a
violation of the requirements of Section 5 of the Securities Act of 1933, as
amended (the "Securities Act") or the qualification or registration requirements
of applicable blue sky laws.

3.12. Taxes. The Company has filed all tax returns that are required to
-----
have been filed with appropriate federal, state, county and local governmental
agencies or instrumentalities, except where the failure to do so would not have
a material adverse effect upon the Company, taken as a whole. The Company has
not elected pursuant to the Internal Revenue Code of 1986, as amended ("Code"),
to be treated as a Subchapter S corporation or a collapsible corporation
pursuant to Section 341(f) or Section 1362(a) of the Code, nor has it made any
other elections pursuant to the Code (other than elections which relate solely
to methods of accounting, depreciation or amortization) which would have a
material effect on the Company, its financial condition, its business as
presently conducted or proposed to be conducted or any of its properties or
material assets. The Company has paid or established reserves for all income,
franchise and other taxes, assessments, governmental charges, penalties,
interest and fines due and payable by them on or before the Closing.

3.13. Title. The Company owns its property and assets free and clear of all
-----
liens, mortgages, loans or encumbrances except liens for current taxes, and such
encumbrances and liens which arise in the ordinary course of business and do not
materially impair the Company's ownership or use of such property or assets.
With respect to the property and assets leased by the Company, the Company is in
compliance with such leases and, to the best of the Company's knowledge, holds
valid leasehold interests free and clear of any liens, claims or encumbrances.

3.14. Material Contracts and Commitments. All of the contracts, mortgages,
----------------------------------
indentures, agreements, instruments and transactions to which the Company is a
party or by which it is bound (including purchase orders to the Company or
placed by the Company) which involve obligations of, or payments to, the Company
in excess of Ten Thousand Dollars ($10,000) and all agreements between the
Company and its officers, directors, consultants and employees are either (i)
attached as exhibits to this Agreement, or (ii) set forth on Exhibit B (the
---------
"Contracts"), copies of which have been delivered to special counsel to the
Purchaser. All of the Contracts are valid, binding and in full force and effect
in all material respects and enforceable by the Company in accordance with their
respective terms in all material respects, subject to the effect of applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights and rules
or laws concerning equitable remedies. The Company is not in material default
under any of such Contracts.

3.15. Financial Statements. The Company maintains and will continue to
--------------------
maintain a standard system of accounting established and administered in
accordance with generally accepted accounting principles. The Company has
delivered to Purchaser its unaudited balance sheet as of March 31, 1996 and its
statement of operations and statement of cash flows for the year ended March 31,
1996 and its unaudited balance sheet as of January 31, 1997 and its

5
<PAGE>

statement of operations and statement of cash flows for the ten month period
ended January 31, 1997 (the above financial statements are hereinafter
collectively referred to as the "Financial Statements"). The Financial
Statements fairly set out and describe the financial condition and operating
results of the Company as of the dates, and during the periods, indicated
therein. Except as disclosed in the Financial Statements, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business, and (ii) obligations under contracts and
commitments incurred in the ordinary course of business, which, in both cases,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company.

3.16. Absence of Changes. Since January 31, 1997 (a) the Company has not
------------------
entered into any transaction which was not in the ordinary course of business,
(b) there has been no material adverse change in the condition (financial or
otherwise) of the business, property, assets or liabilities of the Company other
than changes in the ordinary course of its business, none of which, individually
or in the aggregate, has been materially adverse, (c) there has been no damage
to, destruction of or loss of physical property (whether or not covered by
insurance) materially adversely affecting the assets, prospects, financial
condition, operating results, business or operations of the Company, (d) the
Company has not declared or paid any dividend or made any distribution on its
stock, or redeemed, purchased or otherwise acquired any of its stock, (e) the
Company has not materially changed any compensation arrangement or agreement
with any of its key employees or executive officers, or materially changed the
rate of pay of its employees as a group, (f) the Company has not changed or
amended any material contract by which the Company or any of its assets are
bound or subject, except as contemplated by this Agreement, (g) there has been
no resignation or termination of employment of any key officer or employee of
the Company and the Company does not know of any impending resignation or
termination of employment of any such officer or employee that if consummated
would have a material adverse effect on the business of the Company, (h) there
has been no change, except in the ordinary course of business, in the material
contingent obligations of the Company (nor in any contingent obligation of the
Company regarding any director, stockholder or key employee or officer of the
Company) by way of guaranty, endorsement, indemnity, warranty or otherwise, (i)
there have been no loans made by the Company to any of its employees, officers
or directors other than travel advances and other advances made in the ordinary
course of business, (j) there has been no waiver by the Company of a valuable
right or of a material debt owing to it, and (k) there has not been any
satisfaction or discharge of any lien, claims or encumbrance or any payment of
any obligation by the Company, except in the ordinary course of business and
which is not material to the assets, properties, financial condition, operating
results or business of the Company.

3.17. Outstanding Indebtedness. The Company has no indebtedness for
------------------------
borrowed money which it has directly or indirectly created, incurred, assumed or
guaranteed, or with respect to which it has otherwise become liable, directly or
indirectly, except as reflected on the Financial Statements.

3.18. Registration Rights. Other than as granted pursuant to the Rights
-------------------
Agreement, the Company has not granted or agreed to grant any rights to register
(as that term is defined in the Rights Agreement), including piggyback
registration rights, to any person or entity.

6
<PAGE>

3.19. Certain Transactions. The Company is not indebted, directly or
--------------------
indirectly, to any of its employees, officers, directors or stockholders or to
their spouses or children, in any amount whatsoever; and none of said employees,
officers, directors or, to the best of the Company's knowledge, stockholders, or
any member of their immediate families, are indebted to the Company or have any
direct or indirect ownership interest in any firm or corporation with which the
Company is affiliated or with which the Company has a business relationship. To
the best of the Company's knowledge, no such employee, officer, director or
stockholder, or any member of their immediate families, is, directly or
indirectly, interested in any material contract with the Company. The Company is
not guarantor or indemnitor of any indebtedness of any other person, firm or
corporation.

3.20. Corporate Documents; Minute Books. Except for amendments necessary to
---------------------------------
satisfy representations and warranties or conditions contained herein (the form
of which amendments has been approved by the Purchaser), the Certificate of
Incorporation and Bylaws of the Company are in the form previously provided to
special counsel to the Purchaser. The minute books of the Company previously
provided to special counsel to the Purchaser contain a complete summary of all
meetings of directors and stockholders since the time of incorporation of the
Company.

3.21. Employee Benefit Plans. The Company does not have any "employee
----------------------
benefit plan" as defined in the Employee Retirement Income Security Act of 1974,
as amended.

3.22. Environmental and Safety Laws. To the best of its knowledge, the
-----------------------------
Company is not in violation of any applicable statute, law, or regulation
relating to the environment or occupational health and safety, and to the best
of its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law, or regulation.

3.23. Insurance. The Company has in full force and effect fire and casualty
---------
insurance policies, with extended coverage, and insurance against other hazards,
risks and liabilities to persons and property to the extent and in the manner
customary for companies in similar businesses similarly situated.

3.24. Labor Agreements and Actions. The Company is not aware that any
----------------------------
officer or key employee or consultant intends to terminate his or her employment
with the Company, nor does the Company have a present intention to terminate the
employment of any of the foregoing. Subject to general principles related to
wrongful termination of employees, the employment of each officer and employee
of the Company is terminable at the will of the Company.

3.25. Section 83(b) Elections. To the best of the Company's knowledge, all
-----------------------
elections and notices required by Section 83(b) of the Internal Revenue Code and
any analogous provisions of applicable state tax laws have been timely filed by
all individuals who have purchased shares of the Company's Common Stock.

3.26. Disclosure. No representation or warranty by the Company in this
----------
Agreement, or in any document or certificate furnished or to be furnished to the
Purchaser pursuant hereto or in connection with the transactions contemplated
hereby, when taken together, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact

7
<PAGE>

necessary to make the statements made herein and therein, in the light of the
circumstances under which they were made, not misleading. The Company has fully
provided the Purchaser with all the information which such Purchaser has
requested for deciding whether to purchase the Series A Preferred Stock.

4. Representations and Warranties of Purchasers and Restrictions on Transfer
-------------------------------------------------------------------------
Imposed by the Securities Act.
- -----------------------------

4.1. Representations and Warranties by the Purchasers. Each Purchaser
------------------------------------------------
represents and warrants to the Company as follows:

(a) Investment Intent. This Agreement is made with the Purchaser in
-----------------
reliance upon such Purchaser's representation to the Company, evidenced by
Purchaser's execution of this Agreement, that Purchaser is acquiring the Series
A Shares and the Common Stock issuable upon conversion of Series A Preferred
Stock (collectively the "Securities") for investment for such Purchaser's own
account, for investment and not with a view to, or for resale in connection
with, any distribution or public offering thereof within the meaning of the
Securities Act. Purchaser has the full right, power and authority to enter into
and perform this Agreement and the Rights Amendment, and this Agreement, the
Rights Amendment and the Rights Agreement constitute valid and binding
obligations upon it.

(b) Series A Shares Not Registered. Purchaser understands and
------------------------------
acknowledges that the offering of the Series A Shares pursuant to this Agreement
will not be registered under the Securities Act or qualified under applicable
blue sky laws on the grounds that the offering and sale of securities
contemplated by this Agreement are exempt from registration under the Securities
Act and exempt from qualifications available under applicable blue sky laws, and
that the Company's reliance upon such exemptions is predicated upon such
Purchaser's representations set forth in this Agreement. The Purchaser
acknowledges and understands that the Securities must be held indefinitely
unless the Securities are subsequently registered under the Securities Act and
qualified under applicable blue sky laws or an exemption from such registration
and such qualification is available.

(c) No Transfer. Purchaser covenants that in no event will such
-----------
Purchaser dispose of any of the Securities (other than in conjunction with an
effective registration statement for the Securities under the Securities Act or
in compliance with Rule 144 promulgated under the Securities Act) unless and
until (i) such Purchaser shall have notified the Company of the proposed
disposition and shall have furnished the Company with a statement of the
circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by the Company, such Purchaser shall have furnished the Company with
an opinion of counsel to the effect that (x) such disposition will not require
registration under the Securities Act and (y) appropriate action necessary for
compliance with the Securities Act and other applicable state, local or foreign
law has been taken. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144.

(d) Permitted Transfers. Notwithstanding the provisions of subsection
-------------------
(c) above, no registration statement or opinion of counsel shall be necessary
for a transfer by a Purchaser which is a partnership to a partner of such
partnership or a former partner of such

8
<PAGE>

partnership who leaves such partnership after the date hereof, or to the estate
of any such partner or former partner or the transfer by gift, will or intestate
succession of any partner to his spouse or lineal descendants or ancestors, if
the transferee agrees in writing to be bound by the terms of this Agreement to
the same extent as if he were an original Purchaser hereunder.

(e) Knowledge and Experience. Purchaser (i) has such knowledge and
------------------------
experience in financial and business matters as to be capable of evaluating the
merits and risks of such Purchaser's prospective investment in the Securities;
(ii) has the ability to bear the economic risks of such Purchaser's prospective
investment; (iii) has been furnished with and has had access to such information
as such Purchaser has considered necessary to make a determination as to the
purchase of the Securities together with such additional information as is
necessary to verify the accuracy of the information supplied; (iv) has had all
questions which have been asked by such Purchaser satisfactorily answered by the
Company; and (v) has not been offered the Securities by any form of
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any such media.

(f) Not Organized to Purchase. Purchaser has not been organized for
-------------------------
the purpose of purchasing the Securities.

4.2. Legends. Each certificate representing the Securities may be endorsed
-------
with the following legends:

(a) Federal Legend. THE SECURITIES REPRESENTED BY THIS CERTIFICATE
--------------
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") AND ARE "RESTRICTED SECURITIES" AS DEFINED IN RULE 144 PROMULGATED UNDER
THE ACT. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE
DISTRIBUTED EXCEPT (i) IN CONJUNCTION WITH AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SHARES UNDER THE ACT OR (ii) IN COMPLIANCE WITH RULE 144, OR (iii)
PURSUANT TO AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION OR COMPLIANCE IS NOT REQUIRED AS TO SAID SALE, OFFER OR
DISTRIBUTION.

(b) Other Legends. Any other legends required by applicable state blue
-------------
sky laws.

The Company need not register a transfer of legended Securities, and may also
instruct its transfer agent not to register the transfer of the Securities,
unless the conditions specified in each of the foregoing legends are satisfied.

4.3. Removal of Legend and Transfer Restrictions. Any legend endorsed on a
-------------------------------------------
certificate pursuant to subsection 4.2(a) and the stop transfer instructions
with respect to such legended Securities shall be removed, and the Company shall
issue a certificate without such legend to the holder of such Securities if such
Securities are registered under the Securities Act and a prospectus meeting the
requirements of Section 10 of the Securities Act is available or if such holder
satisfies the requirements of Rule 144(k) and, where reasonably deemed necessary

9
<PAGE>

by the Company, provides the Company with an opinion of counsel for such holder
of the Securities to the effect that (i) such holder, meets the requirements of
Rule 144(k) or (ii) a public sale, transfer or assignment of such Securities may
be made without registration.

5. Conditions to Closing.
---------------------

5.1. Conditions to Purchasers' Obligations. The obligation of the Purchaser
-------------------------------------
to purchase the Series A Shares at the Closing is subject to the fulfillment to
its satisfaction, on or prior to the Closing Date, of the following conditions,
any of which may be waived by Purchaser:

(a) Representations and Warranties Correct; Performance of
------------------------------------------------------
Obligations. The representations and warranties made by the Company in Section 3
- -----------
hereof shall be true and correct when made, and shall be true and correct in all
material respects on the Closing Date with the same force and effect as if they
had been made on and as of said date. The Company's business and assets shall
not have been adversely affected in any material way prior to the Closing Date.
The Company shall have performed in all material respects all obligations and
conditions herein required to be performed or observed by it on or prior to the
Closing Date.

(b) Consents and Waivers. The Company shall have obtained in a timely
--------------------
fashion any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by this Agreement and the Rights
Agreement, as amended by the Rights Amendment.

(c) Filing of the Certificate of Amendment of the Certificate of
------------------------------------------------------------
Incorporation. The Certificate of Amendment shall have been filed with the
- -------------
Division of Corporations for the State of Delaware.

(d) Compliance Certificate. The Company shall have delivered a
----------------------
Certificate, executed by the President of the Company, dated the Closing Date,
certifying to the fulfillment of the conditions specified in subsections (a),
(b) and (c) of this section 5.1.

(e) Secretary Certificate. The Company shall have delivered a
---------------------
Certificate, executed by the Secretary of the Company, dated the Closing Date,
certifying the Board of Directors and stockholders resolutions approving this
Agreement and the issuance of the Series A Shares and certifying the current
versions of the Certificate of Incorporation and Bylaws of the Company.

(f) Opinion of Counsel. The Purchaser shall have received an opinion
------------------
from Fox, Rothschild, O'Brien & Frankel, the Company's counsel, satisfactory in
form to special counsel for the Purchaser.

5.2. Conditions to Obligations of the Company. The Company's obligation to
----------------------------------------
sell and issue the Series A Shares at the Closing is subject to the fulfillment
to the satisfaction of the Company on or prior to the respective Closing Date of
the following conditions, any of which may be waived by the Company:

10
<PAGE>

(a) Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by the Purchaser in Section 4 hereof shall be true and correct
when made, and shall be true and correct on the Closing Date with the same force
and effect as if they had been made on and as of said date.

(b) Conditions Fulfilled. The conditions set forth in subsections (b)
--------------------
and (c) of Section 5.1 shall have been fulfilled.

6. Affirmative Covenants of the Company. The Company hereby covenants and
------------------------------------
agrees as follows:

6.1. Financial Information. Until the first to occur of (i) the date on
---------------------
which the Company is required to file a report pursuant to Section 13(a) of the
Securities Exchange Act of 1934 (the "Exchange Act"), by reason of the Company
having registered any of its securities pursuant to Section 12(g) of the
Exchange Act or (ii) quotations for the Common Stock of the Company are reported
by the automated quotations system operated by the National Association of
Securities Dealers, Inc. or by an equivalent quotations system or (iii) shares
of the Common Stock of the Company are listed on a national securities exchange
registered under Section 6 of the Exchange Act, the Company will furnish to the
Purchaser:

(a) so long as such Purchaser or its affiliates own any of the Series
A Shares or Common Stock issued upon conversion of the Series A Shares, as soon
as practicable after the end of each fiscal year, and in any event within 90
days thereafter, consolidated balance sheets of the Company and its
subsidiaries, if any, as at the end of such fiscal year, and consolidated
statements of operations and consolidated statements of cash flow of the Company
and its subsidiaries, if any, for such year, prepared in accordance with
generally accepted accounting principles, all in reasonable detail and certified
by independent public accountants of recognized national standing selected by
the Company; and

(b) so long as the Purchaser continues to hold at least 100,000 shares
of the Company's Series A Preferred Stock (as adjusted for stock splits,
combinations, dividends, distributions or recapitalizations), as soon as
practicable after the end of each month and in any event within 15 days
thereafter, consolidated balance sheets of the Company and its subsidiaries, if
any, as of the end of such month and consolidated statements of income and cash
flow statements, for such month and for the current fiscal year to date,
prepared in accordance with generally accepted accounting principles (except for
required footnotes), all in reasonable detail and signed, subject to changes
resulting from year-end audit adjustments, by the principal financial officer or
chief executive officer of the Company; and

(c) at such time as the Purchaser or its affiliates are no longer
entitled to receive information under Section 6.1(b) above and so long as such
Purchaser or its affiliates own any of the Series A Shares or Common Stock
issued upon conversion of the Series A Shares, as soon as practicable after the
end of each fiscal quarter, and in any event within 45 days thereafter,
consolidated balance sheets of the Company and its subsidiaries, if any, as at
the end of such fiscal quarter, and consolidated statements of operations and
consolidated statements of cash flow of the Company and its subsidiaries, if
any, for such quarter, prepared in accordance with generally accepted accounting
principles (except for required footnotes), all in reasonable

11
<PAGE>

detail and signed, subject to changes resulting from year-end audit adjustments,
by the principal financial officer or chief executive officer of the Company;
and

(d) so long as the Purchaser continues to hold at least 100,000 shares
of the Company's Series A Preferred Stock (as adjusted for stock splits,
combinations, dividends, distributions or recapitalizations), as soon as
practicable and in any event no later than sixty (60) days before the end of the
fiscal year, an annual budget (consisting of projected income statements and
projected cash flow statements reported on a monthly basis) for the subsequent
fiscal year.

6.2. Conflicts of Interests. The Company shall use its best efforts to
----------------------
ensure that the Company's employees and consultants, during the term of their
employment with the Company, do not engage in activities which would result in a
conflict of interest with the Company. The Company's obligations hereunder
include, but are not limited to, requiring that the Company's employees devote
their primary productive time, ability and attention to the business of the
Company (provided, however, the Company's employees may engage in other
professional activity if such activity does not materially interfere with their
obligations to the Company), requiring that the Company's employees and
consultants enter into agreements regarding proprietary information and
confidentiality.

6.3. Proprietary Agreements. The Company will use its best efforts to
----------------------
prevent any employee or consultant from violating the confidentiality and
proprietary information agreement entered into between the Company and each of
its employees.

6.4. Future Stock Issuances. After July 5, 1994, the Company has not and in
----------------------
the future will not issue more than 3,634,600 shares of Common Stock (or grant
any options, warrants or other rights to purchase the same) to employees,
officers, directors and consultants without unanimous vote of the Company's
Board of Directors. The Company will not issue any shares of Common Stock (or
grant any options, warrants or other rights to purchase the same) to any
employee, officer, director or consultant except pursuant to agreements which
provide for vesting over a period of at least forty-eighty (48) months (with the
initial vesting date to occur after twelve (12) months) and a right of first
refusal in favor of the Company in the event of any proposed transfer unless
such issuance or grant is approved by unanimous vote of the Company's Board of
Directors. The Company, Adobe Ventures L.P. and H&Q ESPS Investors L.P. agree to
terminate Section 6.4 of that certain Series A Preferred Stock Purchase
Agreement dated July 5, 1994.

6.5. Inspection. The Company shall permit the Purchaser, at the Purchaser's
----------
expense, to visit and inspect the Company's properties, to examine its books of
account and records and to discuss the Company's affairs, finances and accounts
with its officers, all at such reasonable times as may be requested by the
Purchaser; provided, however, that the Company shall not be obligated pursuant
to this Section 6.5 to provide access to any information which it reasonably
considers to be a trade secret or similar confidential information.

12
<PAGE>

7. Miscellaneous.
-------------

7.1. Governing Law. This Agreement shall be governed in all respects by the
-------------
laws of the State of Delaware as such laws are applied to agreements between
Delaware residents entered into and to be performed entirely within Delaware.

7.2. Survival. The representations, warranties, covenants and agreements
--------
made herein shall survive the Closing of the transactions contemplated hereby,
notwithstanding any investigation made by the Purchaser. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder as of the date of such certificate or instrument.

7.3. Successors and Assigns. Except as otherwise expressly provided herein,
----------------------
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.

7.4. Entire Agreement. This Agreement and the other documents delivered
----------------
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof and they
supersede, merge and render void every other prior written and/or oral
understanding or agreement among or between the parties hereto.

7.5. Notices, etc. All notices and other communications required or
------------
permitted hereunder shall be in writing and shall be delivered personally,
mailed by first class mail, postage prepaid, or delivered by courier or
overnight delivery, addressed (a) if to a Purchaser, at such Purchaser's address
set forth in the Schedule of Purchasers, or at such other address as such
Purchaser shall have furnished to the Company in writing or (b) if to the
Company, at 1300 Virginia Drive, Suite 215, Fort Washington, PA 19034, or at
such other address as the Company shall have furnished to the Purchaser in
writing. Notices that are mailed shall be deemed received five (5) days after
deposit in the United States mail.

7.6. Severability. In case any provision of this Agreement shall be found
------------
by a court of law to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.

7.7. Finder's Fees and Other Fees.
----------------------------
(a) The Company (i) represents and warrants that it has retained no
finder or broker in connection with the transactions contemplated by this
Agreement and, (ii) hereby agrees to indemnify and to hold Purchasers harmless
from and against any liability for commission or compensation in the nature of a
finder's fee to any broker or other person or firm (and the costs and expenses
of defending against such liability or asserted liability) for which the
Company, or any of its employees or representatives, is responsible.

(b) Each Purchaser (i) represents and warrants that it has retained no
finder or broker in connection with the transactions contemplated by this
Agreement and (ii) hereby agrees to indemnify and to hold the Company harmless
from and against any liability for any

13
<PAGE>

commission or compensation in the nature of a finder's fee to any broker or
other person or firm (and the costs and expenses of defending against such
liability or asserted liability) for which Purchaser, or any of its employees or
representatives, are responsible.

7.8. Expenses. The Company and the Purchasers shall each bear their own
--------
expenses and legal fees in connection with the consummation of this transaction;
provided, however, that the Company will pay the reasonable fees, up to $10,000,
of special counsel for the Purchasers, together with disbursements and expenses
incurred by special counsel.

7.9. Titles and Subtitles. The titles of the sections and subsections of
--------------------
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

7.10. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

7.11. Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to the Company or to any holder of any securities
issued or to be issued hereunder shall impair any such right, power or remedy of
the Company or such holder, nor shall it be construed to be a waiver of any
breach or default under this Agreement, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring; nor shall any delay or
omission to exercise any right, power or remedy or any waiver of any single
breach or default be deemed a waiver of any other right, power or remedy or
breach or default theretofore or thereafter occurring. All remedies, either
under this Agreement, or by law otherwise afforded to the Company or any holder,
shall be cumulative and not alternative.

14
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.

ELECTRONIC SUBMISSION
PUBLISHING SYSTEMS, INC.

By: /s/ Terrence Brennan
----------------------------
Terrence Brennan,
President

PURCHASERS:

ADOBE VENTURES L.P.

By: it general partner,
H&Q Adobe Ventures Management L.P.,

By: its general partner,
H&Q Adobe Ventures Management Corp.,

By: /s/ Jackie Berterretche
---------------------------------

Title: Attorney-in-Fact
------------------------------

H&Q ESPS INVESTORS L.P.

By: /s/ Jackie Berterretche
---------------------------------

Title: Attorney-in-Fact
------------------------------

<PAGE>

Exhibit 23.1

Consent of Independent Auditors

We consent to the reference to our firm under the captions "Selected Financial
Data" and "Experts" and to the use of our report dated April 23, 1998, except
Note 12, as to which the date is March 30, 1999, in the Registration Statement
on (Form S-1) and related Prospectus of ESPS, Inc. dated March 31, 1999.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
March 31, 1999

<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET, STATEMENT OF OPERATIONS AND STATEMENT OF CASH FLOWS INCLUDED IN THE
COMPANY'S FORM S-1 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>

<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> MAR-31-1998 MAR-31-1998
<PERIOD-START> APR-01-1998 APR-01-1997
<PERIOD-END> DEC-31-1998 MAR-31-1998
<CASH> 3,142 4,558
<SECURITIES> 0 0
<RECEIVABLES> 5,054 3,666
<ALLOWANCES> 150 50
<INVENTORY> 0 0
<CURRENT-ASSETS> 8,666 9,196
<PP&E> 2,339 1,224
<DEPRECIATION> 736 481
<TOTAL-ASSETS> 10,297 10,017
<CURRENT-LIABILITIES> 3,801 5,077
<BONDS> 0 0
0 0
6 6
<COMMON> 2 1
<OTHER-SE> 254 107
<TOTAL-LIABILITY-AND-EQUITY> 10,297 10,017
<SALES> 12,339 8,646
<TOTAL-REVENUES> 12,339 8,646
<CGS> 2,293 1,847
<TOTAL-COSTS> 2,293 1,847
<OTHER-EXPENSES> 127 52
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 2,155 2,361
<INCOME-TAX> 836 (514)
<INCOME-CONTINUING> 1,319 2,875
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,319 2,875
<EPS-PRIMARY> .80 5.53
<EPS-DILUTED> .13 .37

</TABLE>