<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 3, 2000.
REGISTRATION NO. 333-94777
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
EPRISE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7371 04-3179480
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
1671 WORCESTER ROAD
FRAMINGHAM, MA 01701
(508) 872-0200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOSEPH A. FORGIONE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
EPRISE CORPORATION
1671 WORCESTER ROAD
FRAMINGHAM, MA 01701
(508) 872-0200
(NAME, ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
AGENT FOR SERVICE)
------------------------
COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
DENNIS W. TOWNLEY, ESQ. EDWIN L. MILLER, JR., ESQ.
ANDREA M. TEICHMAN, ESQ. TESTA, HURWITZ & THIBEAULT, LLP
HILL & BARLOW, A PROFESSIONAL CORPORATION 125 HIGH STREET
ONE INTERNATIONAL PLACE BOSTON, MA 02110
BOSTON, MA 02110-2607 (617) 248-7000
(617) 428-3000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this registration statement
If any of the 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, 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
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<CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE FEE(3)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.001........................ 4,600,000 shares $10.00 $46,000,000 $12,144
- -----------------------------------------------------------------------------------------------------------------------------
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</TABLE>
(1) Includes 600,000 shares that the underwriters have the option to purchase to
cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(3) Previously Paid.
------------------------
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 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED MARCH 3, 2000
[EPRISE CORPORATION LOGO]
- --------------------------------------------------------------------------------
4,000,000 Shares
Common Stock
- --------------------------------------------------------------------------------
This is the initial public offering of Eprise Corporation, and we are offering
4,000,000 shares of our common stock. The initial public offering price is
expected to be between $8.00 and $10.00 per share.
We have applied to have our common stock approved for quotation on the Nasdaq
National Market under the symbol "EPRS."
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 5.
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.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND EPRISE
PUBLIC COMMISSIONS CORPORATION
<S> <C> <C> <C>
Per share $ $ $
Total $ $ $
</TABLE>
We have granted the underwriters the right to purchase up to 600,000 additional
shares to cover any over-allotments.
DEUTSCHE BANC ALEX. BROWN
DAIN RAUSCHER WESSELS
WIT SOUNDVIEW
THE DATE OF THIS PROSPECTUS IS , 2000.
<PAGE> 3
INSIDE FRONT COVER
The inside front cover of the prospectus depicts the following:
The upper left-hand corner displays the Eprise logo with the words "Eprise
Corporation" underneath.
The title bar at the top of the page states: "The Eprise Solution."
In the center of the page, there is a diagram with three sections. The
left-hand section contains four captions stating, in descending order,
"Corporate Info," "Product Info," "Sales Tools" and "Support Info." Each caption
is accompanied by a related illustration. The center section of the diagram
shows a transparent cylinder labeled "Web Server," which contains another
cylinder labeled "Eprise Participant Server(TM)" and displays a drawing of the
Eprise Participant Server product box. The internal cylinder also contains the
caption "Corporate Look and Feel." The right-hand section of the diagram
contains a drawing of two computer screens. The upper screen is labeled "Sales
Rep's View" and contains the illustrations from the left-hand section of the
diagram representing Corporate Info, Product Info and Sales Tools. The lower
screen is labeled "Customer's View" and contains the illustrations representing
Product Info, Corporate Info and Support Info.
Beneath the diagram, there is a caption that reads:
"EPRISE PARTICIPANT SERVER permits a business to manage its Web site content by:
- distributing responsibility for contribution and management of different
types of corporate content;
- maintaining a central repository where business managers can easily
organize, retrieve and re-use the business's Web site content; and
- delivering content to targeted Web site audiences."
<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. This summary does not contain all of the information that you should
consider before buying shares in this offering. You should read the entire
prospectus carefully.
EPRISE CORPORATION
Eprise provides software products and services that enable businesses to
manage the information contained on their Web sites. Eprise Participant Server,
our core product, provides a comprehensive, out-of-the-box Web content
management solution that enables an enterprise to distribute Web content
management and content approval rights broadly within the organization with
minimal involvement by technical personnel. Customers can quickly deploy Eprise
Participant Server and use it to keep their Web sites up to date without the
need for substantial technical assistance or customization. We believe that
these features make Eprise Participant Server the most cost-effective Web
content management solution currently available.
Creating dynamic, up-to-date Web site content has become an increasingly
complex and critically important business process. As businesses develop and
expand their use of the Internet for business communications and electronic
commerce, the number of Web sites and the amount of Web content continue to grow
worldwide at an unprecedented pace. This has created a strong demand for Web
content management software, resulting in increased capital expenditures on Web
content management solutions. IDC estimates that the market for Web development
life-cycle management software, which includes Web content management software,
will grow from $76.4 million in 1998 to $1.6 billion in 2003.
The Eprise Participant Server product line has been designed to meet all of
the important needs for Web content management software. It permits an
enterprise to delegate to appropriate individuals within the organization the
right to create and manage Web content. It also permits the enterprise to target
the content that is seen by each category of Web site user, such as employees,
customers and business partners. At the same time, business rules can be created
to ensure that the overall Web site content is carefully controlled and the Web
site design has a consistent look and feel.
Eprise Participant Server is based on widely accepted, non-proprietary
industry standards so that it can easily be integrated with other Internet
infrastructure software, such as databases, back office systems, and e-commerce
and application servers. It employs a technical architecture that is highly
scalable so that it can manage the Web site content of even the largest of
enterprises. Customers can also use readily available software development tools
to adapt and customize Eprise Participant Server to meet their specific business
needs.
Eprise also offers a variety of optional professional services to
complement Eprise Participant Server. Through our Eprise Advantage Program, an
Eprise professional evaluates and designs a Web content management plan for each
customer. During and after the implementation phase, our professional services
team and alliance partners are available to provide advice and technical
assistance, including building unique applications for the customer's business.
We also provide customer training, maintenance and support.
We principally market our products domestically through our direct sales
force, and we intend to increase our global presence. We target enterprise level
accounts and dot-com companies for which the use of the Internet is a
fundamental part of their strategy. To extend our market reach, we also have
business relationships with a number of systems integrators and Web developers.
In addition, we are making substantial investments in research and development
in order to continue to expand and enhance Eprise Participant Server and to
develop new products.
1
<PAGE> 5
To date, we have licensed Eprise Participant Server to more than 40
customers, including Bausch & Lomb, Eastman Chemical, EMC, Hartford Financial,
Hewlett-Packard, Lincoln Financial Group, Novell, Sharp Electronics and
SmartMoney.com.
We were incorporated in Delaware in September 1992. Our principal executive
offices are located at 1671 Worcester Road, Framingham, Massachusetts 01701, and
our telephone number is (508) 872-0200. Our World Wide Web address is
www.eprise.com. The information on our Web site is not part of this prospectus.
-------------------------
"Eprise" is a registered trademark of Eprise Corporation. "E-business
Experts," "Eprise Advantage Program," "Eprise Participant Server," "Eprise Web
Catalyst," "Eprise Integration Agent," and the Eprise logo are trademarks of
Eprise Corporation. All other trademarks, service marks or trade names referred
to in this prospectus are the property of their respective owners.
2
<PAGE> 6
THE OFFERING
Common stock offered by Eprise..... 4,000,000 shares
Common stock to be outstanding
after the offering................. 22,943,440 shares
Use of proceeds.................... Working capital and general corporate
purposes, including expansion of sales,
distribution and marketing activities;
development of technology; capital
expenditures; funding of future operating
losses; and repayment of debt
Proposed Nasdaq National Market
symbol........................... EPRS
Common stock to be outstanding after this offering is based on shares
outstanding as of December 31, 1999. It excludes:
- 2,225,264 shares of common stock issuable upon exercise of options
outstanding at a weighted average exercise price of $0.71 per share, all
of which options are exercisable, subject to repurchase restrictions on
the option shares, and
- 432,151 shares issuable upon exercise of warrants outstanding at a
weighted average exercise price of $2.78 per share, all of which warrants
are exercisable.
Except as presented in the financial statements or as otherwise specified
in this prospectus, all information in this prospectus:
- assumes no exercise of the underwriters' over-allotment option;
- reflects a 1-for-2.55 reverse split of our common stock occurring
immediately prior to the effectiveness of this offering; and
- reflects the automatic conversion of all outstanding shares of preferred
stock into a total of 16,105,845 shares of common stock upon the closing
of this offering.
3
<PAGE> 7
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The summary financial information below sets forth a summary of the results
of our operations and summary information about our assets, liabilities and
capital. In 1997, Eprise changed its fiscal year end from August 31 to December
31. The unaudited statement of operations for the twelve months ended December
31, 1997 has been computed by summing the results of operations for the four
fiscal quarters in the period ended December 31, 1997. The data for pro forma
net loss per share treats our outstanding preferred stock as though it were
common stock from the date of original issuance. You should read this
information along with our discussion in "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our financial statements
and notes to those statements included elsewhere in this prospectus.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
FOUR MONTHS OR YEAR ENDED
YEAR ENDED ENDED DECEMBER 31,
AUGUST 31, DECEMBER 31, ---------------------------
1997 1997 1997 1998 1999
---------- ------------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues................................. $1,420 $ 303 $ 1,222 $ 807 $ 3,659
Gross profit................................... 902 18 643 347 2,539
Total operating expenses....................... 1,481 1,082 2,048 5,744 9,235
Operating loss................................. (579) (1,064) (1,405) (5,397) (6,696)
Net loss....................................... $ (733) $(1,164) $(1,615) $(5,261) $(6,409)
====== ======= ======= ======= =======
Loss per share................................. $(0.35) $ (0.54) $ (0.76) $ (2.40) $ (2.62)
====== ======= ======= ======= =======
Weighted average common shares outstanding..... 2,073 2,156 2,118 2,200 2,473
====== ======= ======= ======= =======
Pro forma loss per share....................... $ (0.48)
=======
Pro forma weighted average common shares
outstanding.................................. 13,274
=======
</TABLE>
The following table presents a summary of our balance sheet at December 31,
1999:
- on an actual basis;
- on a pro forma basis to reflect the conversion of all outstanding shares
of our preferred stock into a total of 16,105,845 shares of common stock,
which will occur upon the closing of this offering; and
- on a pro forma as adjusted basis to reflect the sale of 4,000,000 shares
of common stock in this offering at an assumed initial public offering
price of $9.00 per share after deducting the estimated underwriting
discounts and commissions and offering expenses and the application of
the estimated net proceeds from this offering.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 22,455 $22,455 $54,920
Working capital............................................. 22,977 22,977 55,442
Total assets................................................ 25,534 25,534 57,999
Total liabilities........................................... 1,977 1,977 1,812
Redeemable preferred stock.................................. 36,849 -- --
Total stockholders' equity (deficiency)..................... (13,291) 23,558 56,188
</TABLE>
4
<PAGE> 8
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks described below together with the other information about Eprise in
this prospectus before deciding to invest in shares of our common stock. If one
or more of the following risks actually occurs, our business, results of
operations and financial condition could be materially adversely affected, the
trading price of our common stock could decline, and you might lose all or part
of your investment. See "Special Note Regarding Forward-Looking Statements."
RISKS RELATED TO OUR BUSINESS
WE HAVE A HISTORY OF LOSSES, AND MAY NOT BE ABLE TO ACHIEVE OR SUSTAIN
PROFITABILITY.
We incurred net losses of $5.3 million for the year ended December 31, 1998
and $6.4 million for the year ended December 31, 1999. As of December 31, 1999,
we had an accumulated deficit of $14.3 million. We have not yet achieved
profitability and we expect to incur net losses for the foreseeable future. To
date, we have funded our operations from the sale of equity securities and have
not generated cash from operations. We expect to continue to incur significant
research and development, selling and marketing, and general and administrative
expenses and, as a result, we will need to generate significant revenues to
achieve and maintain profitability. Although our revenues have grown
significantly in recent quarters, we cannot be certain that we can sustain these
growth rates or that we will achieve sufficient revenues for profitability. If
we do achieve profitability, we cannot be certain that we can sustain or
increase profitability on a quarterly or annual basis in the future. See
"Summary Financial Information," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the financial statements and
notes to those statements found elsewhere in this prospectus.
OUR LIMITED OPERATING HISTORY MAKES EVALUATING OUR BUSINESS DIFFICULT.
Eprise was founded in 1992 as a provider of online interactive games. We
made the transition to our current business in 1997 and, as a result, have a
limited operating history. We are still in the early stages of our development,
which makes the evaluation of our business operations and our prospects
difficult. We shipped our first commercial Web content management software
product in February 1998. Since that time, we have derived substantially all of
our revenues from licensing our Eprise Participant Server product and related
services. As a result of our limited operating history, we cannot forecast
operating expenses based on our historical results. Our ability to forecast
accurately our quarterly revenue is limited because our software products have a
long sales cycle, making it difficult to predict the quarter in which sales
revenue will be recognized. We would expect our business, operating results and
financial condition to be materially adversely affected if our revenues do not
meet our projections, and that net losses in a given quarter could be even
greater than expected.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY AND YOU SHOULD NOT
RELY ON THEM TO PREDICT OUR FUTURE PERFORMANCE.
Our revenues and operating results are likely to vary significantly from
quarter to quarter. A number of factors are likely to cause these variations,
including:
- demand for our products and services;
- the timing of sales of our products and services;
- the timing of customer orders and product implementation;
- unexpected delays in introducing new products and services;
5
<PAGE> 9
- increased expenses, whether related to selling and marketing, research
and development or general and administrative;
- changes in the rapidly evolving market for Web content management
solutions;
- the mix of product license and service revenue; and
- the timing and size of sales derived through our strategic partners.
Accordingly, we believe that quarter-to-quarter comparisons of our
operating results are not necessarily meaningful. Investors should not rely on
the results of one quarter as an indication of our future performance.
We plan to increase our operating expenditures to expand our sales and
marketing operations, develop new distribution channels, fund greater levels of
research and development, broaden professional services and support and improve
operational and financial systems. If our revenues do not increase along with
these expenses, our business, operating results or financial condition could be
materially adversely affected and net losses in a given quarter could be greater
than expected. Although we have limited historical financial data, we believe
that our quarterly operating results may experience seasonal fluctuations due to
clients' fiscal year budgeting cycles and purchasing patterns.
ONLY A LIMITED NUMBER OF CUSTOMERS HAVE LICENSED OUR PRODUCT, AND OUR WEB
CONTENT MANAGEMENT SOLUTION MAY NEVER ACHIEVE BROAD MARKET ACCEPTANCE.
We first introduced Eprise Participant Server in February 1998 and
delivered a second major release in April 1999. To date, only a limited number
of customers have licensed Eprise Participant Server, and an even smaller number
are operating Web sites using the most recent version. Therefore, we have not
demonstrated broad market acceptance of Eprise Participant Server. If our
product does not gain broad market acceptance, or if it fails to meet customer
expectations, our business would be harmed.
A LARGE PORTION OF OUR REVENUES ARE CURRENTLY DERIVED FROM A LIMITED NUMBER OF
CUSTOMERS.
Although we believe that our customer concentration will decrease as we
continue to build our client base, we expect that a small number of customers
will continue to account for a substantial portion of revenues in the near term.
As a result, our inability to secure major customers during a given period or
the loss of existing customers could have a material adverse effect on our
business, financial condition or results of operations. American Express
accounted for 58% of our revenues for the year ended December 31, 1998. Two of
our customers accounted for an aggregate of 23% of our revenues for the year
ended December 31, 1999.
IF WE DO NOT SUCCESSFULLY EXPAND OUR DIRECT SALES AND SERVICES ORGANIZATIONS, WE
MAY NOT BE ABLE TO INCREASE OUR SALES OR SUPPORT OUR CUSTOMERS.
In the fiscal year ended December 31, 1998, we licensed substantially all
of our products through our direct sales organization. As of February 25, 2000,
we had 20 direct sales representatives. Our future success depends on
substantially increasing the size and scope of our direct sales force, both
domestically and internationally. There is intense competition for personnel,
and we cannot guarantee that we will be able to attract, assimilate or retain
additional qualified sales personnel on a timely basis. Moreover, we believe
that as our sales increase, and given the large-scale deployment required by our
customers, we will need to hire and retain a number of highly trained customer
service and support personnel. As of February 25, 2000, our customer service and
support organization included 18 individuals. We cannot guarantee that we will
be able to increase the size of our customer service and support organization on
a timely basis to provide the high quality of support required by our customers.
6
<PAGE> 10
Failure to add additional sales and customer service representatives would have
a material adverse effect on our business, operating results and financial
condition.
IF WE DO NOT SUCCESSFULLY MAINTAIN AND EXPAND OUR RELATIONSHIPS WITH INDIRECT
SALES CHANNELS, OUR SALES COULD DECLINE OR GROW MORE SLOWLY THAN EXPECTED.
To offer products and services to a larger customer base, our direct sales
force must establish and expand relationships with alliance partners, including
systems integrators, consulting firms, Web developers and application service
providers who build customer solutions based on Eprise Participant Server. We
must also build relationships, which we refer to as original equipment
manufacturer or OEM relationships, with companies offering complementary
products that can package our software along with their products. We are
currently investing, and we intend to continue to invest, significant resources
to develop these relationships. If our efforts are unsuccessful, our sales
growth would be adversely affected. We cannot guarantee that we will be able to
market our products effectively through our established partners. Further, these
third parties are under no obligation to recommend or support our products.
These companies could recommend or give higher priority to the products of other
companies or to their own products. A significant shift by these companies
toward favoring competing products could negatively affect our license and
service revenues. We cannot guarantee that we will be able to attract additional
distribution partners for desired distribution arrangements. The loss of
distribution partners or failure to establish new relationships could materially
adversely affect our business, operating results and financial condition.
WE NEED TO MANAGE OUR GROWTH EFFECTIVELY TO REMAIN COMPETITIVE AND CONTINUE TO
EXPAND OUR OPERATIONS.
We have expanded our operations rapidly since inception. We intend to
expand in the foreseeable future to pursue existing and potential opportunities.
This rapid growth places a significant demand on management, administrative and
operations resources. Our ability to compete effectively and to manage our
anticipated future growth requires us to continue to improve our financial and
management controls, reporting systems and procedures on a timely basis. We
recently hired a significant number of employees, and must continue to add
personnel to maintain our ability to grow in the future. We cannot guarantee
that we will be able to do so successfully. Failure to manage our growth
effectively could have a material adverse effect upon our business, operating
results and financial condition.
WE MUST HIRE AND RETAIN SKILLED PERSONNEL IN A TIGHT LABOR MARKET.
Qualified personnel are in great demand throughout the computer software,
hardware and networking industries. The demand for qualified personnel is
particularly acute in the New England area because of the large number of
software and other high technology companies and the low unemployment rate in
the region. Our success depends in large part upon our ability to attract,
train, motivate and retain highly-skilled employees, particularly sales and
marketing personnel, software engineers, and technical support personnel. We
have had difficulty hiring these highly-skilled employees in the past. If we are
unable to attract and retain the highly-skilled technical personnel that are
integral to our sales, marketing, product development and customer support
teams, the rate at which we can generate sales and develop new products or
product enhancements may be limited. This inability could have a material
adverse effect on our business, operating results and financial condition.
COMPETITION COULD REDUCE OUR REVENUES AND MARKET SHARE, AND PREVENT US FROM
EXPANDING IN THE FUTURE.
The market for Web content management software and services is rapidly
evolving and highly competitive and there are a number of products that compete
directly with our software
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<PAGE> 11
solutions. Our clients' requirements and the technology available to satisfy
those requirements continually change. Some of our current and potential
competitors have significantly greater financial, marketing, technical and other
competitive resources than we do. This may enable them to adapt more quickly to
new or emerging technologies and changes in customer requirements, or to devote
greater resources to the development, promotion and sale of their products. In
addition, other companies could develop new products or incorporate additional
functionality into their existing products that could directly compete with our
products. Barriers to entering the software market are relatively low.
Furthermore, cooperative relationships among our competitors could increase
their ability to address the Web site content management needs of our
prospective customers, and they could rapidly acquire significant market share.
We cannot guarantee that we will compete successfully against existing or new
competitors. Further, competitive pressures may require us to lower the prices
of our software and services. Failure to compete successfully would have a
material adverse effect on our business, operating results and financial
condition.
IF WE ARE UNABLE TO ENHANCE AND EXPAND OUR PRODUCT LINE TO MEET THE RAPID
CHANGES IN THE MARKET FOR WEB CONTENT MANAGEMENT TECHNOLOGY, OUR BUSINESS WILL
BE UNABLE TO GROW.
To succeed, we will need to enhance our current Eprise Participant Server
product and develop new products on a timely basis to keep pace with
developments related to Internet technology and to satisfy the increasingly
sophisticated requirements of our customers. The market for our products is
marked by rapid technological change, frequent new product introductions and
Internet-related technology enhancements, uncertain product life cycles, changes
in client demands and evolving industry standards. We cannot be certain that we
will successfully develop and market new products or new product enhancements
compliant with present or emerging Internet technology standards. New products
based on new technologies or new industry standards can rapidly render existing
products obsolete and unmarketable. Internet commerce technology is complex and
new products and product enhancements can require long development and testing
periods. Any delays in developing, testing and releasing enhanced or new
products could harm our business. New products or upgrades may not be released
according to schedule or may contain defects when released. Either situation
could result in adverse publicity, loss of sales, delay in market acceptance of
our products or customer claims against us, any of which could harm our
business. If we do not develop, license or acquire new software products, or
deliver enhancements to existing products on a timely and cost-effective basis,
our business will be harmed.
WE HAVE RELIED ON AND EXPECT TO CONTINUE TO RELY ON SALES OF OUR EPRISE
PARTICIPANT SERVER LINE FOR OUR REVENUES.
Since 1998, we have derived substantially all of our revenues from licenses
of, and services related to, Eprise Participant Server. We expect that revenues
from this product will continue to account for a significant portion of our
revenues for the foreseeable future. A decline in the price of Eprise
Participant Server or our inability to increase license sales of Eprise
Participant Server would seriously harm our business and operating results. In
addition, our future financial performance will depend upon the successful
development, introduction and customer acceptance of enhanced versions of Eprise
Participant Server and future products. Failure to deliver the enhancements or
products that customers want could have a material adverse effect on our
business, operating results and financial condition.
OUR LENGTHY SALES CYCLES REQUIRE EXPENDITURE OF RESOURCES THAT WILL NOT
NECESSARILY RESULT IN A SALE.
We typically experience long sales cycles. These sales cycles generally
vary by customer from three to six months. Because the licensing of our products
generally involves a significant capital expenditure by the customer, our sales
process is subject to lengthy approval processes
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<PAGE> 12
and delays. We often devote significant time and resources to a prospective
customer, including costs associated with multiple site visits, product
demonstrations and feasibility studies, without any assurance that the
prospective customer will decide to license our products.
YEAR 2000 PROBLEMS MAY CAUSE PRODUCT ERRORS OR FAILURES THAT COULD DIVERT
PERSONNEL AND FINANCIAL RESOURCES.
We have designed Eprise Participant Server and its add-on modules to be
Year 2000 compliant and have not been advised of any Year 2000 issues related to
those products. One prototype product (a precursor of Eprise Participant
Server), which was licensed to one customer and may currently be in use, may not
be Year 2000 compliant and may need to be upgraded or its use discontinued. We
have not been advised of any Year 2000 problems by this customer to date.
Further, although we have not been made aware of any Year 2000 problem relating
to the hardware and software used by our customers in connection with our
products to date, these problems may exist. Should any of these problems
develop, they may have a material adverse effect on our business, operating
results and financial condition.
In addition, we utilize software, computer technology and other services
internally developed and provided by third party vendors that may have Year 2000
issues. Although we have not experienced any of these problems to date, the
failure of our internal computing systems or of systems provided by third party
vendors to be Year 2000 compliant could materially adversely affect our
business.
IF OUR PRODUCTS FAIL TO REMAIN COMPATIBLE WITH MAJOR COMMERCIAL OPERATING
PLATFORMS, OUR SALES WOULD DECREASE.
Our products currently operate on the Microsoft Windows NT and Sun Solaris
operating systems. In addition, our products are required to interoperate with
Web servers, browsers and database servers. We must, therefore, continually
modify and enhance our products to keep pace with changes in these operating
systems and servers. If our products are not compatible with new operating
systems, Web servers, browsers or database servers that achieve sufficient
market penetration, our business will be harmed. In addition, uncertainties
related to the timing and nature of new product announcements, or introductions
or modifications by vendors of operating systems or browsers, could also harm
our business.
POTENTIAL DEFECTS IN OUR PRODUCTS COULD CAUSE SALES TO DECREASE AND COULD
SUBJECT US TO FUTURE WARRANTY CLAIMS.
Our products are complex and might contain undetected software errors or
failures when new versions are released. We cannot guarantee that, despite
testing by us and by current and prospective customers, we will not find errors
in existing products, new products or product enhancements after commercial
release. These errors may result in loss or delay of market acceptance, which
could have a material adverse effect upon our business, operating results and
financial condition.
IF WE LOSE ANY KEY PERSONNEL, OR FAIL TO ATTRACT AND RETAIN ADDITIONAL
PERSONNEL, WE MAY BE UNABLE TO CONTINUE EXPANDING OUR BUSINESS AND PRODUCT LINE.
The loss of the services of one or more of our key personnel could have a
material adverse effect on our business, operating results and financial
condition. We do not maintain key person life insurance on any executive
officers other than our Chief Executive Officer and Chief Technology Officer. We
cannot guarantee that we will be able to retain our key personnel. Our future
success also depends on our continuing ability to attract, assimilate and retain
highly qualified sales, technical and managerial personnel. Competition for
these individuals is intense, and there can be no assurance that we can attract,
assimilate or retain them in the future.
9
<PAGE> 13
WE HAVE A LIMITED ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, AND
OTHERS COULD INFRINGE ON OR MISAPPROPRIATE OUR PROPRIETARY RIGHTS AND
INFORMATION.
Our software is proprietary and is protected by trade secret, copyright and
trademark laws, license agreements, confidentiality agreements with employees
and nondisclosure and other contractual requirements imposed on our customers,
consulting partners and others. We cannot guarantee that these protections will
adequately protect our proprietary rights or that our competitors will not
independently develop products that are substantially equivalent or superior to
our products. In addition, the laws of countries in which our products may be
licensed in the future may not protect our products and intellectual property
rights to the same extent as the laws of the United States. Although we believe
that our products, trademarks and other proprietary rights do not infringe upon
the proprietary rights of third parties, we cannot guarantee that third parties
will not assert infringement claims against us. The cost of pursuing, enforcing
or defending infringement claims can be substantial and can also require
significant management attention.
RISKS RELATED TO THE INTERNET INDUSTRY
IF THE USE OF THE INTERNET DOES NOT EXPAND, THE DEMAND FOR OUR PRODUCTS MAY
STAGNATE OR DECLINE.
Our future success depends heavily on the Internet being accepted and
widely used. If Internet use does not continue to grow or grows more slowly than
expected, our business, operating results and financial condition would be
materially adversely affected. Consumers and businesses may reject the Internet
as a viable communications medium for a number of reasons, including potentially
inadequate network infrastructure, security concerns, slow development of
enabling technologies or insufficient commercial support. The Internet
infrastructure may not be able to support the demands placed on it by increased
Internet usage and bandwidth requirements. In addition, delays in the
development or adoption of new standards and protocols required to handle an
increased level of Internet activity or increased government regulation could
cause the Internet to lose its viability as a commercial medium. Even if the
required infrastructure, standards, protocols or complementary products,
services or facilities are developed, we may incur substantial expenses adapting
our solutions to changing or emerging technologies.
WE CANNOT BE SURE THAT A SUSTAINABLE MARKET FOR OUR PRODUCTS WILL DEVELOP.
The market for Web content management software and services is new and
rapidly evolving, and the size and potential growth of this new market and the
direction of its development are uncertain. We have licensed our products to a
small number of customers. We expect that we will continue to need intensive
marketing and sales efforts to educate prospective clients about the uses and
benefits of our products and services. Enterprises that have invested
substantial resources in other methods of conducting business over the Internet
may be reluctant to adopt a new approach that may replace, limit or compete with
their existing systems. Any of these factors could inhibit the growth and market
acceptance of our products and services. Accordingly, we cannot be certain that
a viable market for our products will emerge, or if it does emerge, that it will
be sustainable.
IF THE INTERNET OR E-COMMERCE BECOMES SUBJECT TO GOVERNMENTAL REGULATION OR
OTHER FUTURE LAWS, USE OF AND DEMAND FOR OUR PRODUCTS COULD DECLINE.
We are not currently required to comply with direct regulation by any
domestic or foreign governmental agency, other than regulations applicable to
businesses generally and any laws or regulations directly applicable to the
Internet. However, due to the increasing popularity of the Internet, it is
possible that laws may be adopted regarding the Internet, any of which could
materially harm our business. For example, because our products can be used for
the
10
<PAGE> 14
solicitation of personal data from individual consumers, our business could be
limited by laws regulating the solicitation, collection or processing of this
data. The Telecommunications Act of 1996 prohibits the transmission of some
types of information and content over the Internet. Legislation imposing
potential liability for information collected or disseminated through our
products could adversely affect our business. In addition, the increased
attention focused upon liability issues as a result of the Telecommunications
Act could limit the growth of Internet commerce, which could decrease demand for
our products.
Export regulations, either in their current form or as may be subsequently
enacted, may limit our ability to distribute our software outside the United
States. The unlawful export of our software could also harm our business.
Although we take precautions against unlawful export of our software, the global
nature of the Internet makes if difficult to effectively control the
distribution of software.
Furthermore, the growth and development of the Internet may lead to more
stringent consumer protection laws that may impose additional burdens on
companies conducting business online. The adoption of any additional laws may
decrease Internet use or impede the growth of Internet use, which may lead to a
decrease in the demand for our products and services or an increase in the cost
of doing business. Further, the imposition of new sales or other taxes could
limit the growth of Internet commerce generally and, as a result, the demand for
our products. Although recent federal legislation limits the imposition of state
and local taxes on Internet-related sales, there is a possibility that Congress
may not renew this legislation, in which case state and local governments would
be free to impose taxes on goods and services purchased on the Internet.
RISKS RELATED TO THIS OFFERING
OUR COMMON STOCK PRICE IS LIKELY TO BE VOLATILE AND COULD DROP UNEXPECTEDLY.
The market for securities of most high technology companies has been highly
volatile. It is likely that the market price of our common stock will fluctuate
widely in the future. Factors affecting the trading price of our common stock
are likely to include:
- responses to quarter-to-quarter variations in our results of operations;
- the announcement of new products or product enhancements by us or our
competitors;
- technological innovation by us or our competitors;
- general market conditions or market conditions specific to particular
industries; and
- changes in earnings estimates by analysts.
WE HAVE ADOPTED ANTI-TAKEOVER PROVISIONS THAT COULD AFFECT THE MARKET PRICE OF
OUR COMMON STOCK OR OUR ABILITY TO SELL OUR BUSINESS.
Our amended and restated certificate of incorporation and by-laws contain
provisions that could make it more difficult for a third party to acquire us or
effect a change of control in our management, even if doing so would be
beneficial to our stockholders. In addition, the provisions of Delaware law and
our stock incentive plans relating to an acquisition or change in control of
Eprise may also have the effect of discouraging, delaying or preventing a sale.
See "Description of Capital Stock."
11
<PAGE> 15
WE HAVE BROAD DISCRETION TO USE THE OFFERING PROCEEDS AND HOW WE INVEST THESE
PROCEEDS MAY NOT YIELD A FAVORABLE, OR ANY, RETURN.
The net proceeds of this offering are allocated generally for working
capital and general corporate purposes. Thus, our management has broad
discretion over how these proceeds are used and could spend the proceeds in ways
with which you may not agree. We cannot assure you that the proceeds will be
invested in a way that yields a favorable, or any, return for us.
SHARES OF OUR COMMON STOCK ELIGIBLE FOR SALE AFTER THIS OFFERING MAY ADVERSELY
AFFECT OUR STOCK PRICE.
Once a trading market develops for our common stock, many of our
stockholders will have an opportunity to sell their stock for the first time.
More than 11,800,000 shares, or almost three times the number of shares sold in
this offering, assuming no exercise of the underwriters' over-allotment option,
will become eligible for sale in the public market at various dates beginning
180 days after the date of this prospectus. Sales of a substantial number of
shares of common stock in the public market, or the threat that substantial
sales might occur, could cause the market price of our stock to decrease
significantly. These factors could also make it difficult for us to raise
additional capital by selling stock. See "Shares Eligible for Future Sale."
YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION.
The expected offering price of our common stock is substantially higher
than the book value per share. As a result, investors purchasing our common
stock in the offering will incur immediate and substantial dilution. In
addition, we have issued options and warrants to acquire common stock at prices
significantly below the expected offering price. To the extent these outstanding
options and warrants are exercised, there will be further dilution. See
"Dilution."
12
<PAGE> 16
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operation," "Business" and elsewhere in this prospectus constitute
forward-looking statements. These statements relate to future events or our
future financial performance and are identified by terminology such as "may,"
"will," "could," "should," "expects," "plans," "intends," "seeks,"
"anticipates," "believes," "estimates," "potential," or "continue" or the
negative of such terms or other comparable terminology. These statements are
only predictions. You should not place undue reliance on these forward-looking
statements. Actual events or results may differ materially. In evaluating these
statements, you should specifically consider various important factors,
including the risks outlined under "Risk Factors." These factors may cause our
actual results to differ materially from any forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. We are under no duty to update any of the
forward-looking statements after the date of this prospectus to conform such
statement to actual results.
USE OF PROCEEDS
We anticipate that our net proceeds from the sale of 4,000,000 shares of
common stock in this offering will be approximately $32.6 million, at an assumed
initial public offering price of $9.00 per share and after deducting the
estimated underwriting discounts and commissions and offering expenses. If the
underwriters' over-allotment option is exercised in full, we estimate that the
net proceeds will be approximately $37.7 million.
The principal purposes of this offering are to obtain additional capital,
create a public market for our common stock and facilitate our future access to
the public capital markets.
We anticipate that we will use substantially all of the net proceeds for
working capital and other general corporate purposes, including:
- expansion of sales, distribution and marketing activities;
- development of technology;
- capital expenditures;
- funding of future operating losses; and
- repayment of a term note outstanding to Silicon Valley Bank in the amount
of approximately $165,000.
We have not allocated any specific portion of the net proceeds to any
particular purposes, and our management will have the ability to allocate the
proceeds at its discretion. A portion of the net proceeds may be used for the
acquisition of businesses, products and technologies that are complementary to
our own, although we have no current plans, agreements or commitments with
respect to any such transaction and are not in any negotiations with respect to
any such transaction. Pending these uses, the net proceeds will be invested in
government securities and other short-term, investment-grade, interest-bearing
instruments.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock and
do not anticipate paying any cash dividends on our capital stock in the
foreseeable future. Future dividends, if any, will be determined by the board of
directors. Our current loan agreement prohibits the payment of any dividends on
our capital stock.
13
<PAGE> 17
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999
on an actual, pro forma and pro forma as adjusted basis. The "actual" column
reflects our capitalization as of December 31, 1999 on a historical basis,
without any adjustments to reflect subsequent events or anticipated events. The
"pro forma" column reflects our capitalization as of December 31, 1999 with
adjustments for the following:
- the filing prior to the closing of this offering of a Certificate of
Amendment to our Fourth Amended and Restated Certificate of Incorporation
authorizing 90,000,000 shares of common stock and 10,000,000 shares of
undesignated preferred stock.
- the automatic conversion of all of the shares of Series A, Series B and
Series C preferred stock into an aggregate of 16,105,845 shares of common
stock upon the closing of this offering.
The "pro forma as adjusted" column reflects our capitalization as of
December 31, 1999 with the preceding "pro forma" adjustments plus:
- the receipt of the estimated net proceeds and the anticipated use of such
proceeds from our sale of 4,000,000 shares of common stock at an assumed
initial public offering price of $9.00 per share.
None of the columns set forth below reflects as of December 31, 1999:
- the potential issuance of 600,000 shares of common stock issuable under
the overallotment option granted to the underwriters of this offering.
- outstanding warrants to purchase 432,151 shares of common stock at a
weighted average exercise price of $2.78 per share (assuming conversion
of the Series A Preferred Stock warrants to common stock warrants).
- outstanding options to purchase 2,225,264 shares of common stock at a
weighted average exercise price of $0.71 per share.
The information shown in the table below is qualified by, and should be
read in conjunction with, our more detailed financial statements and the related
notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Current portion of equipment line of credit................. $ 86 $ 86 $ --
======== ======== ========
Long-term equipment line of credit, less current portion.... 79 79 --
======== ======== ========
Redeemable preferred stock:
Series A redeemable convertible preferred stock, $0.01 par
value, 10,842,920 shares authorized, 10,515,925 shares
issued and outstanding, actual; no shares authorized,
issued and outstanding, pro forma and pro forma as
adjusted............................................... 5,192 -- --
Series B redeemable convertible preferred stock, $0.01 par
value, 14,320,446 shares authorized, issued and
outstanding, actual; no shares authorized, issued and
outstanding, pro forma and pro forma as adjusted....... 8,569 -- --
Series C redeemable convertible preferred stock, $0.01 par
value, 16,500,000 shares authorized, 16,233,766 issued
and outstanding, actual; no shares authorized, issued
and outstanding, pro forma and pro forma as adjusted... 23,088 -- --
-------- -------- --------
Total redeemable preferred stock............................ 36,849 -- --
-------- -------- --------
</TABLE>
14
<PAGE> 18
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Stockholders equity (deficit):
Preferred stock, $0.01 par value; 41,663,366 shares
authorized, 41,070,137 shares issued and outstanding,
actual; 10,000,000 shares authorized, no shares issued
and outstanding, pro forma and pro forma as adjusted... -- -- --
Common Stock, $0.001 par value; 58,500,000 shares
authorized, 2,837,595 shares issued and outstanding,
actual; 58,500,000 shares authorized, 18,943,440 shares
issued and outstanding, pro forma; 90,000,000 shares
authorized, 22,943,440 shares issued and outstanding,
pro forma as adjusted.................................. 3 19 23
Additional paid-in capital................................ 1,053 37,886 70,512
Accumulated deficit....................................... (14,278) (14,278) (14,278)
Notes receivable from officers............................ (69) (69) (69)
-------- -------- --------
Total stockholders' equity (deficit)................... (13,291) 23,558 56,188
-------- -------- --------
Total capitalization.............................. $ 23,723 $ 23,723 $ 56,188
======== ======== ========
</TABLE>
15
<PAGE> 19
DILUTION
The pro forma net tangible book value of Eprise as of December 31, 1999 was
approximately $23.6 million, or $1.24 per share of common stock. Pro forma net
tangible book value per share represents the amount of total tangible assets
less total liabilities, divided by the pro forma shares of common stock
outstanding as of December 31, 1999. Pro forma net tangible book value gives
effect to the conversion to common, as of December 31, 1999, of all outstanding
shares of preferred stock. After giving effect to the issuance and sale of the
4,000,000 shares of common stock offered by this prospectus at an assumed
initial public offering price of $9.00 per share and after deducting estimated
underwriting discounts and commissions and offering expenses, the pro forma net
tangible book value of Eprise as of December 31, 1999 would have been $56.2
million, or $2.45 per share. This represents an immediate increase in pro forma
net tangible book value of $1.21 per share to existing stockholders and an
immediate dilution of $6.55 per share to new investors. The following table
illustrates this per share dilution.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $ 9.00
Pro forma net tangible book value per share at December
31, 1999............................................... $ 1.24
Increase in pro forma net tangible book value per share
attributable to new investors.......................... 1.21
-------
Pro forma net tangible book value per share after
offering.................................................. 2.45
------
Dilution per share to new investors......................... $ 6.55
======
</TABLE>
The following table summarizes, on a pro forma basis, as of December 31,
1999, the differences between the number of shares of common stock purchased
from Eprise, the aggregate cash consideration paid and the average price per
share paid by existing stockholders and new investors purchasing shares of
common stock in this offering before deducting estimated underwriting discounts
and commission and offering expenses payable by Eprise:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNTS PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 18,943,440 82.6% $38,998,840 52.0% $2.06
New investors................. 4,000,000 17.4 36,000,000 48.0 9.00
---------- ----- ----------- ----- -----
Total....................... 22,943,440 100.0% $74,998,840 100.0% $3.27
========== ===== =========== ===== =====
</TABLE>
The discussion and tables above assume no exercise of any stock options or
warrants outstanding as of December 31, 1999. As of December 31, 1999, there
were options outstanding to purchase a total of 2,225,264 shares of common stock
with a weighted average exercise price of $0.71 per share and warrants
outstanding to purchase 303,918 shares of common stock at a weighted average
exercise price of $3.42 per share and 326,995 shares of Series A preferred stock
(convertible into 128,233 shares of common stock) at an exercise price of
$0.49695 per share. To the extent that any of these options or warrants are
exercised, there will be further dilution to new investors.
16
<PAGE> 20
SELECTED FINANCIAL DATA
The selected financial data presented below as of December 31, 1997, 1998
and 1999 and for the year ended August 31, 1997, the four months ended December
31, 1997 and the years ended December 31, 1998 and 1999 have been derived from
our audited financial statements, included elsewhere in this prospectus.
Selected financial data as of August 31, 1997 have been derived from our audited
financial statements, which are not included in this prospectus. The selected
financial data as of August 31,1995 and 1996 and for the years ended August 31,
1995 and 1996 have been derived from our unaudited financial statements, which
in the opinion of management include all adjustments necessary for a fair
presentation of such information in accordance with generally accepted
accounting principles. In 1997, Eprise changed its fiscal year end from August
31 to December 31. The unaudited statement of operations for the 12 months ended
December 31, 1997 has been derived by summing the results of operations for the
four fiscal quarters in the period ended December 31, 1997. The information set
forth below should be read along with our "Management's Discussions and Analysis
of Financial Condition and Results of Operations" and our financial statements
and notes to those statements appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
FOUR TWELVE
MONTHS MONTHS YEARS ENDED
YEARS ENDED AUGUST 31, ENDED ENDED DECEMBER 31,
------------------------ DEC. 31, DEC. 31, ------------------
1995 1996 1997 1997 1997 1998 1999
------ ------ ------ -------- -------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software licenses....................................... $ -- $ -- $ 33 $ 65 $ 65 $ 345 $ 2,355
Services................................................ 1,104 1,192 1,387 238 1,157 462 1,304
------ ------ ------ ------- ------- ------- -------
Total revenues........................................ 1,104 1,192 1,420 303 1,222 807 3,659
Cost of revenues.......................................... 458 567 518 285 579 460 1,120
------ ------ ------ ------- ------- ------- -------
Gross profit.............................................. 646 625 902 18 643 347 2,539
Operating expenses:
Research and development................................ -- 131 180 327 459 2,149 2,334
Selling and marketing................................... -- 291 800 392 879 2,349 4,917
General and administrative.............................. 1,014 332 501 363 710 1,246 1,984
------ ------ ------ ------- ------- ------- -------
Total operating expenses.............................. 1,014 754 1,481 1,082 2,048 5,744 9,235
------ ------ ------ ------- ------- ------- -------
Operating loss............................................ (368) (129) (579) (1,064) (1,405) (5,397) (6,696)
Other income (expense), net............................... (18) (26) (154) (100) (210) 136 287
------ ------ ------ ------- ------- ------- -------
Net loss.................................................. $ (386) $ (155) $ (733) $(1,164) $(1,615) $(5,261) $(6,409)
====== ====== ====== ======= ======= ======= =======
Loss per share............................................ $(0.20) $(0.08) $(0.35) $ (0.54) $ (0.76) $ (2.40) $ (2.62)
====== ====== ====== ======= ======= ======= =======
Weighted average common shares outstanding................ 1,822 2,064 2,073 2,156 2,118 2,200 2,473
====== ====== ====== ======= ======= ======= =======
Pro forma loss per share.................................. $ (0.48)
=======
Pro forma weighted average common shares outstanding...... 13,274
=======
</TABLE>
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1996 1997 1997 1998 1999
---------- ---------- ---------- ------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................... $ 26 $ -- $ 105 $ 3,136 $ 6,357 $ 22,455
Working capital (deficit).................... (341) (508) (1,358) 2,389 5,829 22,977
Total assets................................. 320 408 335 3,647 7,075 25,534
Long-term debt............................... 202 144 -- -- 158 79
Redeemable preferred stock................... -- -- -- 5,004 13,740 36,849
Total stockholders' deficiency............... (370) (521) (1,220) (2,327) (7,583) (13,291)
</TABLE>
17
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our financial
statements and related notes which appear elsewhere in this prospectus.
GENERAL
Eprise, originally named Inner Circle Technologies and then NovaLink, was
founded in 1992 as a provider of online interactive games. Between 1994 and
1997, our principal business shifted to creating and hosting Web sites for
corporate clients. During this period, we encountered recurring problems arising
out of the inadequacy of software tools that were commercially available to
build and maintain Web sites. Realizing that there was an opportunity to
streamline and automate these processes, we began to develop a software product
called Eprise Participant Server to facilitate the construction and updating of
Web sites. We shipped our first commercial product in early 1998. Eprise now
markets and sells version 2.5 of Eprise Participant Server.
We have completed three rounds of venture capital financing since December
1997, for over $38.0 million in gross proceeds, from investors including Prism
Venture Partners, Alliance Technology Ventures and Brookside Capital Partners.
OVERVIEW
We changed our fiscal year end from August 31 to December 31 in 1997. Our
financial information for the last eight months of the fiscal year ended August
31, 1997 and the four months ended December 31, 1997 contained in this
prospectus has been combined in order to present a comparable accounting period
for 1997 to the audited year ended December 31, 1998. Future references to the
year 1997 or 1998 mean the twelve months ended December 31 unless otherwise
indicated.
We generate revenues from two principal sources: (1) license fees for our
software products and (2) professional services and technical support revenues
derived from consulting, implementation, training and maintenance services
related to our software products. In the year ended December 31, 1999, two
customers accounted for 23% of our total revenues. In the year ended December
31, 1998, one customer accounted for 58% of our total revenues.
As our revenue generated from license sales has increased, our gross profit
margins have improved. License revenue represented 73% of total revenue in the
fourth quarter of 1999. License sales produce significantly higher margins than
service sales due to nominal costs associated with licenses and their delivery.
Software licenses. Customers typically pay an up-front, one-time fee for a
perpetual non-exclusive license of our software. Generally, the amount of the
fee is based on the number of licensed servers. To date, software license
revenues have principally come from direct sales to customers. The sales cycle
for our products is typically three to six months. Although we have limited
historical financial data, we believe that our quarterly operating results may
experience seasonal fluctuations due to clients' fiscal year budgeting cycles
and purchasing patterns. Because of our server-based licensing, we experience
significant variation in the size of our licensing transactions.
We generally recognize license fee revenues upon delivery of the product.
If the product is subject to acceptance and/or return and refund, we defer
revenues until acceptance has occurred or the refund period has expired.
18
<PAGE> 22
Services. Services revenues consist principally of revenues derived from
professional services associated with the implementation and integration of our
software products, training of customers' employees and ongoing customer
support, which primarily includes customer technical support services and
product enhancements. We deliver professional services on either a fixed price
basis or a time and materials basis. We generally complete implementation and
training services within three to six months following license contract signing.
We recognize revenues from professional services as such services are
performed. We recognize maintenance revenues, which are invoiced annually in
advance, ratably over the term of the maintenance agreement, which is generally
12 months. Our maintenance revenues currently account for less than 10% of total
revenues. As part of these agreements, we provide product enhancements and
technical support services to customers for an annual fee, which typically
amounts to 20% of the license fee. While a 60-day warranty is included in the
software license, maintenance agreements typically are entered into as of the
date of the software license. Maintenance agreements are renewable at the
discretion of the customer. As of December 31, 1999, there have been 31
customers who have entered into maintenance agreements with Eprise. Of the 31
contracts, to date two have expired, and have not currently been renewed. The
remaining contracts have not yet come up for renewal.
Backlog. Delivery lead times for our products are very short and,
consequently, substantially all of our license fee revenues in each quarter
result from orders received in that quarter. Accordingly, we generally only
maintain a backlog for our professional services and maintenance activities, and
we believe that our backlog at any point in time is not a reliable indicator of
future revenues and earnings.
Cost of revenues. The costs associated with software licenses, including
CDs and packaging, arise primarily from the production of software products, and
have not been significant in any period presented, nor are they expected to be
significant in the foreseeable future. Cost of services revenues consists
primarily of salaries and related personnel costs and other allocated expenses
of our consulting, support and training organizations, as well as costs related
to servicing our legacy products.
Research and development. We maintain a product development staff to
enhance our existing products and to develop new products. Software costs are
expensed as incurred until technological feasibility of the software is
determined, after which any additional costs are capitalized. To date, we have
expensed all software development costs because development costs incurred
subsequent to the establishment of technological feasibility have been minimal.
Selling and marketing. We license our products primarily through our
direct sales force. Selling and marketing expenses consist primarily of costs
associated with personnel, sales commissions, office facilities, travel and
promotional events such as trade shows, seminars and technical conferences,
advertising and public relations programs.
General and administrative. General and administrative expenses include
salaries and related personnel expenses and other costs of the finance, human
resources, information technology and administrative functions at Eprise.
19
<PAGE> 23
RESULTS OF OPERATIONS
The following table sets forth our operating results for the periods
indicated as a percentage of revenues.
<TABLE>
<CAPTION>
FOUR TWELVE
YEARS ENDED MONTHS MONTHS YEARS ENDED
AUGUST 31, ENDED ENDED DEC. 31,
------------ DEC. 31, DEC. 31, ----------------
1996 1997 1997 1997 1998 1999
---- ---- -------- -------- -------- ----
(AS A PERCENTAGE OF TOTAL REVENUES)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Software licenses............................ --% 2% 21% 5% 43% 64%
Services..................................... 100 98 79 95 57 36
--- --- ---- ---- ---- ----
Total revenues........................ 100 100 100 100 100 100
--- --- ---- ---- ---- ----
Cost of revenues............................... 48 37 94 47 57 31
--- --- ---- ---- ---- ----
Gross profit................................... 52 63 68 53 43 69
Operating expenses:
Research and development..................... 11 13 108 38 266 64
Selling and marketing........................ 24 56 129 72 291 134
General and administrative................... 28 35 120 58 154 54
--- --- ---- ---- ---- ----
Total operating expenses.............. 63 104 357 168 711 252
--- --- ---- ---- ---- ----
Operating loss................................. (11) (41) (351) (115) (668) (183)
Other income (expense), net.................... (2) (11) (33) (17) 17 7
--- --- ---- ---- ---- ----
Net loss....................................... (13)% (52)% (384)% (132)% (651)% (176)%
=== === ==== ==== ==== ====
</TABLE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31, 1998
Software licenses. Revenues from software licenses increased by 582.6% to
approximately $2.4 million for the year ended December 31, 1999 compared to
$345,000 for the year ended December 31, 1998. The increase in revenues from
software licenses was primarily due to the release of version 2.0 of Eprise
Participant Server in April 1999 and the resulting increases in license
deliveries during 1999. All license revenues for the year ended December 31,
1999 were attributable to new customers compared to 30% attributable to new
customers for the year ended December 31, 1998.
Services. Revenues from services increased by 182.3% to approximately $1.3
million for the year ended December 31, 1999 compared to $462,000 for the year
ended December 31, 1998. Approximately 88% of the increase in revenues from
services is attributable to consulting, 9% to training, and 3% to implementation
revenue generated by new software license sales. Approximately 58% of services
revenues for the year ended December 31, 1999 were attributable to new customers
compared to 51% for the year ended December 31, 1998.
Cost of revenues. Cost of revenues, which primarily relate to services
because costs of licenses are insignificant, increased by 143.5% to
approximately $1.1 million for the year ended December 31, 1999 compared to
$460,000 for the year ended December 31, 1998. However, as a percentage of total
revenues, cost of revenues decreased to 31% for the year ended December 31, 1999
from 57% for the year December 31, 1998. This was primarily due to a larger
percentage of total revenues being derived from software license fees (which
have significantly higher gross profit margins) in the year ended December 31,
1999 compared to the year ended December 31, 1998, more efficient implementation
of our products and better utilization of service personnel.
Research and development. Research and development expenses increased by
8.6% to approximately $2.3 million for the year ended December 31, 1999 compared
to approximately $2.1 million for the year ended December 31, 1998. The increase
was primarily attributable to
20
<PAGE> 24
employee-related expenses incurred in the year ended December 31, 1999 for the
continued development of Version 2.0 of Eprise Participant Server and future
product releases.
Selling and marketing. Selling and marketing expenses increased by 109.3%
to approximately $4.9 million for the year ended December 31, 1999 compared to
approximately $2.3 million for the year ended December 31, 1998. Approximately
72% of the increase in selling and marketing expenses was attributable to an
increase in the number of sales and sales support personnel as we expanded our
direct sales force. In addition, approximately 19% of the increase was
attributable to significant cost increases in marketing programs and public
relations activities as we expanded our presence in the market and further
developed our brand.
General and administrative. General and administrative expenses increased
by 59.3% to approximately $2.0 million for the year ended December 31, 1999
compared to $1.2 million for the year ended December 31, 1998. The increase in
general and administrative expenses primarily reflects personnel increases and
the related costs associated with supporting our recent and anticipated revenue
growth.
Compensation cost for stock options. Options were granted during 1999 at
exercise prices which were the best estimate of our board of directors as to the
fair value of the underlying common stock on the date of grant. However,
subsequent to the grant date, management concluded that for grants after the
release of the new version of Eprise Participant Server, these estimates may not
have fully reflected the impact of this release. Management has determined that
for grants made in or after May 1999, the value of the Series C preferred stock
sold in November 1999 ($1.54 per share, before adjustment for the reverse stock
split), less a 10% discount reflecting the significant preferences enjoyed by
the preferred stock, is a more reliable estimate of the fair value of the common
stock during this period. For grants subsequent to November 1999, management has
determined that the mid-point of the price range for our anticipated public
offering represents the best estimate of the fair value of the common stock
during this period. For grants during 1999, compensation cost aggregated
approximately $4.0 million, which will be amortized to expense over the four
year vesting period of the option grants. For the year ended December 31, 1999,
compensation expense recorded related to these grants aggregated $332,000.
Other income (expense). Other income and expense consisted primarily of
interest income on invested cash balances and interest expense on borrowings.
The increase in other income between the two periods was the result of higher
cash balances generated from our second round of venture capital financing in
August 1998 and our private placement financing in November 1999.
Income taxes. During the years ended December 31, 1999 and 1998, we
reported losses for both financial and income tax purposes. No provision or
benefit for income taxes was recorded in either period. At December 31, 1999, we
had net operating loss carry forwards for federal and state income tax purposes
aggregating $13.5 million available to offset future taxable income. These loss
carry forwards expire in varying amounts through 2014. At December 31, 1999, we
had federal and state tax credits aggregating $319,000 available to reduce
future taxes payable, expiring through 2014. Because of changes in ownership
that have occurred, including the proposed offering, our ability to fully
utilize these carry forwards is likely to be limited.
SUPPLEMENTAL DISCUSSION OF YEAR ENDED DECEMBER 31, 1998 AND TWELVE MONTHS ENDED
DECEMBER 31, 1997
Software licenses. Revenues from software licenses increased by 430.8% to
$345,000 for the year ended December 31, 1998 compared to $65,000 for the twelve
months ended December 31, 1997. The increase in revenues from software licenses
was primarily due to the first commercial release of Eprise Participant Server
in February 1998 and an increase in the
21
<PAGE> 25
number of licenses delivered. Revenues from software license fees for the twelve
months ended December 31, 1997 resulted from a limited number of license sales
of a preliminary version of the product.
Approximately 30% of license revenues for the year ended December 31, 1998
were attributable to new customers compared to 100% for the year ended December
31, 1997.
Services. Revenues from services decreased by 60.1% to $462,000 for the
year ended December 31, 1998 compared to approximately $1.2 million for the
twelve months ended December 31, 1997. The decrease in revenues from services
was attributable to the fact that prior to the first commercial release of
Eprise Participant Server in February 1998, we derived the majority of our
revenues from Web site development; supporting and operating, or hosting,
customer Web sites; and online interactive games. During these periods, these
revenues decreased as we focused on development and marketing of Eprise
Participant Server.
Cost of revenues. Cost of revenues, which primarily relate to services
because costs of licenses are not significant, decreased by 20.6% to $460,000
for the year ended December 31, 1998 compared to $579,000 for the twelve months
ended December 31, 1997. Cost of services revenues for the twelve months ended
December 31, 1997 included data communication costs associated with our hosting
of customers' Web sites. The decrease in services revenues between the two
periods was due to a decrease in services revenues associated with Web site
hosting and development.
Research and development. Research and development expenses increased by
368.2% to approximately $2.1 million for the year ended December 31, 1998
compared to $459,000 for the twelve months ended December 31, 1997.
Approximately 80% of the increase was due to increased payroll and related
expenses associated with the expansion of our product development staff, which
was required for the continued development of Eprise Participant Server. In
addition, approximately 19% of the increase was due to consulting and contract
programmer expenses incurred in the year ended December 31, 1998 to supplement
our product development staff in the development of version 2.0 of Eprise
Participant Server.
Selling and marketing. Selling and marketing expenses increased by 167.2%
to approximately $2.3 million for the year ended December 31, 1998 compared to
$879,000 for the twelve months ended December 31, 1997. Approximately 75% of the
increase in selling and marketing expenses was due to an increase in the number
of sales and sales support personnel as we developed and expanded our direct
sales force in 1998. Additionally, with the first commercial release of Eprise
Participant Server in February 1998, approximately 25% of the increase was due
to marketing expenses incurred for market awareness programs associated with the
product launch.
General and administrative. General and administrative expenses increased
by 75.5% to approximately $1.2 million for the year ended December 31, 1998
compared to $710,000 for the twelve months ended December 31, 1997.
Approximately 60% of the increase in general and administrative expenses was due
to costs associated with the recruitment and hiring of our Chief Executive
Officer and other executive management staff in 1998 following the first round
of venture financing and approximately 40% of the increase was due to costs
associated with the move to our new facilities in October 1997.
Other income (expense). Other income, consisting of interest income,
increased to $164,000 for the year ended December 31, 1998 compared to $6,000
for the twelve months ended December 31, 1997. The increase in interest income
resulted from interest earned on invested cash balances generated from our first
round of venture capital financing in December 1997. Other expense, consisting
of interest expense, decreased to $28,000 for the year ended December 31, 1998
compared to $216,000 for the year ended December 31,
22
<PAGE> 26
1997. The majority of interest expense incurred in 1997 was associated with
borrowings from a financial institution under an accounts receivable factoring
arrangement.
Income taxes. During the year ended December 31, 1998 and the twelve
months ended 1997, we reported losses for both financial and income tax
purposes. No provision or benefit for income taxes was recorded in either year.
FOUR MONTHS ENDED DECEMBER 31, 1997
Software licenses. Revenues from software licenses for the four months
ended December 31, 1997 were $65,000. The increase in software license revenues
compared to the full year ended August 31, 1997, was primarily attributable to
the release of the preliminary version of Eprise Participant Server and the
initial deliveries of the product to customers.
Services. Revenues from services totaled $238,000 for the four months
ended December 31, 1997. These revenues primarily related to consulting services
provided for initial installations of Eprise Participant Server and, on a
monthly basis, were reduced from levels realized in the year ended August 31,
1997. This decrease in revenues was attributable to the fact that prior to the
release of Eprise Participant Server, we derived a majority of our revenues from
Web site development, Web site hosting and online interactive games.
Cost of revenues. Costs of revenues, which primarily relate to services
because costs of licenses are not significant, totaled $285,000 for the four
months ended December 31, 1997. As a percentage of revenues, cost of services
revenues was 94.1%, compared to 36.5% in the year ended August 31, 1997. The
increase in cost of services and other revenues as a percentage of revenues is
attributable to the decrease in revenues discussed above, as we began to exit
our original lines of business.
Research and development. Research and development expenses totaled
$327,000 for the four months ended December 31, 1997. As a percentage of
revenues, research and development expenses were 107.9%, compared to 12.7% for
the year ended August 31, 1997. This increase in research and development
expenses as a percentage of revenues is attributable primarily to increased
salaries, benefits, and recruiting expenses associated with an increase in
product development personnel during the four months ended December 31, 1997.
Selling and marketing. Selling and marketing expenses totaled $392,000 for
the four months ended December 31, 1997. Spending in this category, on a monthly
basis compared to monthly spending during the year ended August 31, 1997, rose
due to an increase in the number of sales and sales support personnel during the
period.
General and administrative. General and administrative expenses totaled
$363,000 for the four months ended December 31, 1997. Spending in this category,
on a monthly basis compared to monthly spending during the year ended August 31,
1997, rose due to an increase in the number of personnel during the period to
support our anticipated growth.
Other income (expense). Other expense for the four months ended December
31, 1997 totalled $99,000 and consisted principally of interest expense related
to outstanding borrowings during the period under an accounts receivable
factoring arrangement.
Income taxes. During the four months ended December 31, 1997, we reported
a loss for both financial and income tax purposes. No provision or benefit for
income taxes was recorded during the period.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED AUGUST 31, 1997
Software licenses. Revenues from software licenses were $345,000 for the
year ended December 31, 1998 compared to $33,000 for the year ended August 31,
1997. The increased revenues from software licenses were the result of the first
commercial release of Eprise
23
<PAGE> 27
Participant Server in February 1998. In the year ended August 31, 1997, revenues
from software licenses were derived from the sale of a preliminary version of
Eprise Participant Server. Eprise derived the majority of its revenues during
the year ended August 31, 1997 from Web site development, Web site hosting and
online interactive games.
Services. Revenues from services decreased by 66.7% to $462,000 for the
year ended December 31, 1998 compared to approximately $1.4 million for the year
ended August 31, 1997. The decrease in revenues from services was attributable
to the fact that for the year ended August 31, 1997, prior to the release of
Eprise Participant Server, Eprise derived the majority of its revenues from Web
site development, Web site hosting and online interactive games.
Cost of revenues. Cost of revenues, which primarily relate to services as
costs of licenses are not significant, decreased by 11.2% to $460,000 for the
year ended December 31, 1998 compared to $518,000 for the year ended August 31,
1997. The decrease in cost of revenues was primarily due to the significant
reduction of data communications expenses associated with the operation of
online interactive games and Web site hosting.
Research and development. Research and development expenses increased by
1,093.9% to approximately $2.1 million for the year ended December 31, 1998
compared to $180,000 for the year ended August 31, 1997. Approximately 73% of
the increase was due to increased salaries, benefits and recruiting expenses
associated with an increase in the number of research and development personnel.
In addition, approximately 16% of the increase was due to consulting and
contract programmer expenses incurred in the year ended December 31, 1998 to
supplement our research and development staff in the development of version 2.0
of Eprise Participant Server.
Selling and marketing. Selling and marketing expenses increased by 193.6%
to approximately $2.3 million for the year ended December 31, 1998 compared to
$800,000 for the year ended August 31, 1997. Approximately 40% of the increase
in selling and marketing expenses was due to the hiring of sales and sales
support personnel as Eprise developed and expanded its direct sales force in
1998. Additionally, with the first commercial release of Eprise Participant
Server in February 1998, approximately 60% of the increase was due to increased
marketing expenses for market awareness programs associated with the product
launch.
General and administrative. General and administrative expenses increased
by 148.7% to approximately $1.2 million for the year ended December 31, 1998
compared to $501,000 for the year ended August 31, 1997. Approximately 88% of
the increase in general and administrative expenses was due to costs associated
with the recruitment and hiring of our Chief Executive Officer and other
executive management staff in 1998 following the first round of venture
financing and approximately 12% of the increase was due to costs associated with
our move to new facilities in October 1997.
Other income (expense). Interest income increased to $164,000 for the year
ended December 31, 1998 compared to $3,000 for the year ended August 31, 1997.
The increase in interest income resulted from interest earned on invested cash
balances generated from our two rounds of venture capital financing in December
1997 and August 1998. Interest expense decreased to $28,000 for the year ended
December 31, 1998 compared to $157,000 for the year ended August 31, 1997. The
majority of interest expense incurred in 1997 was associated with borrowings
from a financial institution under an accounts receivable factoring arrangement.
Income taxes. During the years ended December 31, 1998 and August 31,
1997, we reported losses for both financial and income tax purposes. No
provision for or benefit from income taxes was recorded in either year.
24
<PAGE> 28
QUARTERLY RESULTS OF OPERATIONS
The following table presents our unaudited results of operations for each
of our last eight quarters up to and including the quarter ended December 31,
1999, and also presents such information as a percentage of our total revenue
for the periods indicated. The unaudited results of operations have been
prepared on substantially the same basis as the audited statements of operations
contained in this prospectus and include all adjustments, consisting of normal
recurring accruals, that we consider necessary to present this information
fairly when read in conjunction with our financial statements and accompanying
notes appearing elsewhere in this prospectus. The operating results in any
quarter are not necessarily indicative of the results that may be expected for
any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEP. 30, DEC. 31, MAR. 31, JUNE 30, SEP. 30, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenues:
Software licenses.. $ 76 $ 101 $ -- $ 168 $ 108 $ 223 $ 524 $ 1,500
Services........... 95 148 104 115 53 305 399 547
------- ------- ------- ------- ------- ------- ------- -------
Total
revenues..... 171 249 104 283 161 528 923 2,047
------- ------- ------- ------- ------- ------- ------- -------
Cost of revenues..... 149 94 101 116 126 161 415 418
------- ------- ------- ------- ------- ------- ------- -------
Gross profit......... 22 155 3 167 35 367 508 1,629
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development...... 421 473 624 631 568 545 556 665
Selling and
marketing........ 571 605 550 623 765 1,099 1,192 1,861
General and
administrative... 249 301 344 352 364 410 443 767
------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses..... 1,241 1,379 1,518 1,606 1,697 2,054 2,191 3,293
------- ------- ------- ------- ------- ------- ------- -------
Operating loss....... (1,219) (1,224) (1,515) (1,439) (1,662) (1,687) (1,684) (1,664)
Other income
(expense), net..... 19 7 28 82 55 33 18 181
------- ------- ------- ------- ------- ------- ------- -------
Net loss............. $(1,200) $(1,217) $(1,487) $(1,357) $(1,607) $(1,654) $(1,665) $(1,483)
======= ======= ======= ======= ======= ======= ======= =======
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEP. 30, DEC. 31, MAR. 31, JUNE 30, SEP. 30, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- -------- -------- -------- -------- -------- --------
(AS A PERCENTAGE OF TOTAL REVENUES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PERCENT OF TOTAL
REVENUES:
Revenues:
Software licenses.. 44% 41% --% 59% 67% 42% 57% 73%
Services........... 56 59 100 41 33 58 43 27
------- ------- ------- ------- ------- ------- ------- -------
Total
revenues..... 100 100 100 100 100 100 100 100
------- ------- ------- ------- ------- ------- ------- -------
Cost of revenues..... 87 38 97 41 78 30 45 20
------- ------- ------- ------- ------- ------- ------- -------
Gross profit......... 13 62 3 59 22 70 55 80
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development...... 247 190 600 223 353 103 60 32
Selling and
marketing........ 333 243 529 220 475 208 129 91
General and
administrative... 146 121 331 124 226 79 48 38
------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses..... 726 554 1,460 567 1,054 390 237 161
------- ------- ------- ------- ------- ------- ------- -------
Operating loss....... (713) (492) (1,457) (508) (1,032) (320) (182) (81)
Other income
(expense), net..... 11 3 27 29 34 6 2 8
------- ------- ------- ------- ------- ------- ------- -------
Net loss............. (702)% (489)% (1,430)% (479)% (998)% (314)% (180)% (73)%
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
25
<PAGE> 29
Our quarterly operating results have varied in the past and may vary
significantly in the future depending on many factors including, among others:
- demand for our products and services;
- the timing of sales of our products and services;
- the timing of customer orders and product implementation;
- unexpected delays in introducing new products and services;
- increased expenses, whether related to selling and marketing, product
development or general administration;
- changes in the rapidly evolving market for Web content management
solutions;
- the mix of product license and service revenue; and
- the timing and size of sales derived through our strategic partners.
Furthermore, we believe that the purchase of our products is relatively
discretionary and generally involves a significant commitment of capital. As a
result, purchases of our products may be deferred or canceled in the event of a
downturn in any potential customer's business or the economy in general.
LIQUIDITY AND CAPITAL RESOURCES
From our inception through 1997, we primarily financed our operations and
met our capital expenditure requirements through funds generated from
operations, funds borrowed from several stockholders and a director, and funds
borrowed from Silicon Valley Bank. Since December 1997, we have raised over
$38.0 million in venture capital and private placement funding in order to
expand the product development and sales and marketing efforts of the business.
At December 31, 1999, our primary source of liquidity consisted of cash
totaling approximately $22.5 million as well as accounts receivable of
approximately $2.0 million. Accounts receivable increased by approximately $1.9
million in 1999, primarily as a result of our increase in revenues during the
fourth quarter of 1999. We expect that as we continue to expand our revenue
base, our accounts receivable will increase proportionally. On November 8, 1999,
we raised cash proceeds of approximately $23.4 million, after expenses, from the
sale of an aggregate of 16,233,766 shares of Series C preferred stock. In
addition, we have a borrowing agreement with Silicon Valley Bank that provides
us with a working capital revolving line of credit and a capital equipment line
of credit. The working capital line of credit, which expires on March 26, 2000,
provides for borrowings up to a maximum amount equal to the lesser of $1.0
million or a percentage of eligible accounts receivable. Borrowings under the
line are subject to financial performance covenants, bear interest at a rate per
annum equal to the bank's prime rate plus 1%, and are collateralized by all of
our tangible assets. There have been no borrowings to date under the working
capital line of credit and as of December 31, 1999 there was $1.0 million
available under the line. As of December 31, 1999, the equipment line of credit
had expired and is subject to renewal, and there were no borrowings outstanding
under the equipment line of credit. At December 31, 1999, there was a term note
outstanding relating to a previous equipment line of credit with Silicon Valley
Bank totaling $164,675. At December 31, 1998, we were not in compliance with
maximum net loss covenants contained in the line of credit agreements. The bank
waived the events of noncompliance, and the covenants were amended. At December
31, 1999, we were in compliance with all of the terms of our line of credit
agreements.
Our operating activities have used cash in the current fiscal year and each
of the last two fiscal years. During the calendar years 1999, 1998 and 1997,
cash used in operating activities of approximately $6.9 million, $5.3 million
and $1.4 million, respectively, resulted from net losses of approximately $6.4
million, $5.3 million and $1.6 million, respectively. For the year
26
<PAGE> 30
ended December 31, 1999, the cash operating loss was primarily a result of
payroll and related expenditures, as well as marketing programs representing
approximately 15% of revenues, and research and development representing
approximately 10% of revenues (excluding payroll and related expenditures). For
the year ended December 31, 1998, the cash operating loss was primarily a result
of payroll and related expenditures, as well as marketing programs representing
approximately 8% of revenues, and research and development representing
approximately 10% of revenues (excluding payroll and related expenditures). We
expect the trend in cash operating losses to continue at a rate equal to or
greater than the current rate as we increase and expand our distribution
capability and continue our product development.
Cash used in investing activities was approximately $366,000, $350,000 and
$212,000 in the calendar years 1999, 1998 and 1997, respectively. The cash used
in investing activities was primarily used for purchases of computer systems and
software for internal development used to support our growth, as well as
furniture and equipment to accommodate the increased number of personnel.
Cash provided by financing activities amounted to approximately $23.4
million, $8.8 million and $4.7 million in the calendar years 1999, 1998 and
1997, respectively. In November 1999, approximately $23.4 million was provided
from the sale of Series C preferred stock to approximately 200 venture capital
investors and other qualified investors who were existing stockholders of Eprise
or clients of our private placement agent. In 1998, approximately $8.5 million
was provided from the sale of Series B Preferred Stock to seven institutional
venture capital investors and their affiliates and one accredited individual. In
calendar year 1997, approximately $4.9 million was provided from the sale of,
and conversion of a note payable into, Series A preferred stock issued to three
institutional venture capital investors and one accredited individual.
We currently anticipate that the net proceeds from the issuance of Series C
preferred stock on November 8, 1999, and the net proceeds from this offering,
together with our current cash and equivalents and line of credit, will be
sufficient to meet our anticipated cash needs for working capital and capital
expenditures for at least the next 12 months. However, we may need to raise
additional funds in future periods through public or private financings, or
other arrangements. Any additional financings, if needed, might not be available
on reasonable terms or at all. Failure to raise capital when needed could harm
our business, financial condition and results of operations. If additional funds
are raised through the issuance of equity securities, additional dilution could
result. In addition, any equity securities issued might have rights, preferences
or privileges senior to our common stock.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 1998, the American Institute of Certified Public Accountants
released Statement of Position No. 98-9 ("SOP 98-9"), "Modification of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions." SOP 98-9
amends SOP 97-2 to provide guidance related to determination of the allocation
of revenues in multiple element contracts under certain circumstances. SOP 98-9
will be effective for transactions entered into in our fiscal year beginning
January 1, 2000. Eprise does not expect that adoption of SOP 98-9 will have a
material impact on financial position or the results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," effective for
fiscal years beginning after June 15, 2000. The new standard requires that all
companies record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for based on the use of the derivative and
whether it qualifies for hedge accounting. Management is currently assessing the
27
<PAGE> 31
impact of SFAS No. 133 on our financial statements. Eprise will adopt this
accounting standard on January 1, 2001, as required.
YEAR 2000 ISSUES
We have designed Eprise Participant Server and its add-on modules to be
Year 2000 compliant, and, as a result, to date we have not experienced Year 2000
problems related to these products. We licensed a precursor of Eprise
Participant Server that may not be Year 2000 compliant to one customer, but have
not been advised of any Year 2000 problems by such customer to date.
The majority of the computer programs and hardware we currently use in our
own internal operations did not require replacement or modification as a result
of the Year 2000 issue.
We believe that our significant vendors and service providers are Year 2000
compliant and have not, to date, been made aware that any of our significant
vendors or service providers have suffered Year 2000 disruptions in their
systems.
Accordingly, we do not anticipate incurring material expenses or
experiencing any material operational disruptions as a result of any Year 2000
problems.
28
<PAGE> 32
BUSINESS
Eprise provides software products and services that enable businesses to
maintain, update, expand and otherwise manage the information contained on their
Web sites. Our core product, Eprise Participant Server, enables a business
organization to distribute this Web content management function among the
appropriate individuals within the enterprise who are charged with particular
aspects of the Web business. These individuals need no knowledge of programming
languages or other technical skills to use Eprise Participant Server, thereby
minimizing a customer's reliance on information technology professionals and
consultants. Eprise Participant Server ensures, however, that changes to Web
content are carefully managed through rules contained in the software which
govern Web content access and approval rights. Eprise Participant Server permits
an enterprise to have Web site content which is dynamic, up to the minute and
responsive to the needs of customers, business partners, employees and others
who visit the enterprise's Web site. Our product can be easily integrated with a
customer's existing Web site infrastructure and it can be extended to provide
enhanced, customized functionality. We believe that Eprise Participant Server's
comprehensive, out-of-the-box functionality makes it the most cost-effective Web
content management solution currently available.
INDUSTRY BACKGROUND
The Internet has evolved into a critical sales, service and communications
channel for businesses. This development has permanently altered the way
organizations manage relationships, not just with customers, but also with
suppliers, business partners, employees and others interested in the business
enterprise. Business organizations worldwide have realized that an effective Web
site can help the organization to achieve higher revenues as well as to build
and strengthen relationships with its many constituencies. IDC estimates that
the number of business Web pages will increase from 2.2 billion in 1999 to 16.5
billion in 2003.
Effective Web sites must communicate business information to one or more
target audiences. In order to do this, many enterprises maintain:
- an intranet site, which is used for internal communications with and
among employees and which may contain information about corporate
policies and employee benefits, other non-public announcements, and
internal product and sales support.
- an extranet site, which is used for restricted external communications
with business partners and which may contain information about products
and pricing, distribution channels, contract terms and conditions and
promotional material.
- an Internet site, which is used for communications with customers and the
general public and which often contains information about products,
customer service and support, company contacts, and investor and
financial information.
Because Web sites provide critical business information, they must be
carefully managed and kept up to date. Given the large amount of information
that can be made available on an organization's Web sites, and the number of
people who may be responsible for delivering and maintaining that information, a
business must determine who will contribute and manage what content, and how and
to whom that content will be presented. This means that software which manages
Web site content must:
- distribute Web site content contribution, editing and approval functions
to the most appropriate individuals in the organization to enable them to
modify content quickly and easily without the assistance of technical
personnel;
- organize and store content so that it is presented consistently
throughout the Web site, and so that it can be easily formatted,
retrieved, re-used and revised over time;
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- target content to the intended audience that is consistent with the
organization's business strategy and marketing messages; and
- permit integration with existing Web site content and software, without
the need for complex conversions or extensive programming.
Businesses have found it difficult and expensive to build in-house systems
or to customize commercially available software to manage their Web site
content. Businesses first attempted to manage the content of their Web sites
through in-house software development efforts. These efforts often failed
because the organization did not have sufficient resources and internal
technical personnel. These difficulties led to the development of commercially
available software that businesses could use to manage their Web site content
without substantial commitment of internal technical personnel. Many of these
solutions required a high degree of costly and time-consuming customization in
connection with both implementation and ongoing Web site management and
enhancement. Customized software solutions have also made businesses dependent
upon proprietary technology, which is difficult to integrate with other existing
and future business applications.
Because of these difficulties, business organizations require a new
approach to Web content management. This new approach requires software that is
as fully functional as possible upon installation, without requiring extensive
customization or consulting services. The software should be easy for
non-technical personnel to use, should be easy to integrate with the user's
existing databases, information systems and other technology and it should
permit a business to manage the content of its Web site on a decentralized basis
so that the appropriate individuals within the organization are responsible for
managing the content. Finally, the software should permit the business
organization to deliver timely, targeted information to its various audiences.
OUR SOLUTION
Eprise Participant Server provides a solution that addresses all of the
requirements for effective Web content management software.
Comprehensive, Out-of-the-Box Functionality. We believe that Eprise
Participant Server is the most complete out-of-the-box content management
software solution available today, with built-in functionality that results in
low implementation and customization costs.
Rapid Deployment. Typically, a customer can quickly install Eprise
Participant Server and begin using it commercially within a week. Because our
software is intuitive and easy to use, there is no need for technical scripting
or programming. This means that business people can begin contributing to and
modifying content on the Web site immediately after deployment, dramatically
reducing the time to market of the enterprise's Web initiatives.
Easy Integration with Existing Web Site Infrastructure and
Technology. Eprise Participant Server uses widely accepted, non-proprietary
industry standards to communicate with other Internet infrastructure software.
This permits a customer to easily integrate Eprise Participant Server with its
back-office systems, databases, e-commerce and application servers and existing
Web content. In addition, customers can use readily available software
development tools to adapt and customize Eprise Participant Server to address
their specific needs. Our architecture also permits a software developer to
enhance the functionality of our product to address a customer's specific
requirements.
Distribution of Content Management Responsibility. Eprise Participant
Server distributes Web site content creation, editing and approval
responsibilities throughout an organization, enabling the appropriate
individuals to implement and manage the Web site, in most cases without
assistance from a Webmaster or other technical personnel. At the same time,
Eprise Participant Server enables an organization to establish rules to control
those aspects of the Web site which
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are most appropriately managed by the Webmaster, such as rules to provide a
consistent look and feel. As a result of this distribution of responsibility, a
customer using our solution can successfully provide more timely and targeted
information that is consistent with the organization's business objectives.
Delivery of Information Targeted to Particular Audiences. Through the
creation of unique business rules and individually assigned roles, Eprise
Participant Server makes it easy for the appropriate people within an enterprise
to create targeted, up-to-date content for the specific audiences that the
enterprise is trying to reach. Similarly, by assigning roles to Web site users
within and outside the enterprise, such as "employee," "manager" or "business
partner," and allowing those persons to select user preferences relevant to
their role or the available content, an enterprise can ensure that each member
of its audience is receiving the most relevant content.
Because Eprise Participant Server has all of this functionality, we believe
that it is the most cost-effective Web content management solution currently
available. Using Eprise Participant Server, a customer can create and maintain a
dynamic Web site that can be seamlessly integrated with other aspects of its
business with minimal reliance on internal or external information technology
professionals.
OUR STRATEGY
Our objective is to become the leading provider of Web content management
solutions. To achieve this goal we are pursuing the following strategies:
Expand Product Offerings. Using customer feedback and market research, we
intend to expand our research and development in order to provide new releases
of Eprise Participant Server and to add new products that respond to our
customers' requirements. We intend through future releases of Eprise Participant
Server and new products to provide for further integration with our customers'
other software products, and to extend the content management capabilities of
our products.
Expand Direct Sales. Our direct sales force consists of teams of account
executives and systems engineers. Each of these teams is assigned to a territory
where it calls on enterprise accounts and dot-com companies that need content
management software to support their Internet infrastructure requirements. We
intend to substantially increase the number of our sales personnel in order to
achieve greater geographical coverage and increased market penetration.
Expand Alliances. We will continue to form and develop alliances with
large systems integrators, Web developers, interactive agencies, application
service providers and original equipment manufacturers. These alliances enable
us to expand our sales and marketing activities, giving us greater marketing
presence and sales coverage. In addition, we intend to continue forming
alliances with other Internet software companies with complementary products and
technologies so that together we may deliver to our respective customers more
comprehensive and better integrated solutions.
Expand Sales Rapidly in Global Markets. We intend to rapidly expand our
international sales presence to take advantage of the growing global demand for
Web content management solutions. We will support this effort with a combination
of direct sales and support personnel, indirect sales channels and alliance
partnerships. We have formed a key alliance with a Japanese integrator to
co-develop and distribute a Japanese language version of Eprise Participant
Server. Additionally, we are establishing a direct sales presence and forming
alliances in the European market.
Leverage Existing and New Customer Relationships. We are targeting
potential customers with multiple Web sites. We intend to develop and strengthen
our relationships with these customers with the expectation that we can generate
substantial additional revenues beyond
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the initial license and service fees, as well as shorten the sales cycle on
future licenses for the same account. In addition, we expect to build on our
relationships with existing and future "marquee" customers to expand the
market's awareness of our product.
PRODUCTS
The Eprise product line consists of Eprise Participant Server, which is our
Web content management software, and a series of add-on products for Eprise
Participant Server. The following table highlights the key functionality and
features of Eprise Participant Server.
Eprise Participant Server Functionality and Features
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
PRODUCT FUNCTIONALITY FEATURES
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Content Management - Enterprise-wide distributed content contribution and
editing
- Categorization and organization of content
- Ability to store and retrieve previous versions of
content
- Ability to track access and editing history
- Re-useable page components (i.e., headers, footnotes) and
templates
- ------------------------------------------------------------------------------------------------------
User Management - Ability to assign roles to view and manage content
- Authentication of user identity using a variety of
industry standards
- Ability of Web site visitors to select content
preferences
- ------------------------------------------------------------------------------------------------------
Business Rule Management - Ability to provide for multiple levels of content
approval
- Ability to create rules governing an individual's rights
to view, modify or manage content
- Ability to target content to appropriate audiences
- ------------------------------------------------------------------------------------------------------
</TABLE>
Eprise Participant Server provides all of the functionality shown in the
above chart directly to non-technical business people within an enterprise, in
most cases without intervention by information technology personnel.
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Eprise also offers a variety of add-on products to maximize the effective
use of Eprise Participant Server by the broadest range of users. The current
add-on products offered by Eprise are shown in the following table.
Eprise Add-On Products
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
PRODUCT FEATURES
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Integration Agents - Facilitates communication and exchange of information and
services between Eprise Participant Server and e-commerce
and applications servers
for ASP - Supports products based on Microsoft Active Server Pages
including Site Server Commerce
for Cold Fusion - Supports Allaire Cold Fusion Application Servers
for Java technologies - Supports Java Server Pages applications and other
applications servers that utilize Java technologies
- ------------------------------------------------------------------------------------------------------
Full Text Options - Allows a searchable full-text index to be created for
content managed in Eprise Participant Server
- Provides permission system for search requests and
displaying search results
for Windows NT - Uses Microsoft Index Server that ships with Windows NT
4.0
for Solaris - Uses technology from Verity, a leading full-text search
provider for the Unix platform
- ------------------------------------------------------------------------------------------------------
Web Catalyst - Automatically incorporates existing Web site content into
Eprise Participant Server
- ------------------------------------------------------------------------------------------------------
</TABLE>
We typically charge for Eprise Participant Server and add-on product
licenses based on the number of servers the customer will need to support its
Web sites, but occasionally we will provide our customers with the option to
license our products on an enterprise, divisional, or site license basis. As a
result, as the customer's Web sites prosper and site visits and transaction
volume grow, the client will need to purchase more licenses for the additional
servers deployed.
TECHNOLOGY
Eprise Participant Server incorporates a number of important technological
and design features. Its open architecture is based on the programming language
XML and supports other programming standards such as COM and Java through our
optional add-ons. The user interface for Eprise products is delivered through a
Web browser and is based upon standard Web programming languages such as HTML,
DHTML, Java and JavaScript. Eprise Participant Server is also portable, allowing
customers to use different database products for their information repository,
such as Microsoft SQL Server or Oracle, as well as different operating systems
and Web servers such as Windows NT and Solaris.
Eprise Participant Server's architecture is highly scalable because it uses
technology that allows dynamically rendered content to be stored in memory to
improve transactional performance and speed, as well as a two-tier architecture
that permits multiple Eprise servers to be "clustered" to share a database
server.
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Eprise Participant Server is also extensible, allowing a business to create
customized Web pages for specialized business process automation. Eprise
Participant Server's business rule management can incorporate information
provided by other corporate systems, such as directories. Using widely available
Web software development tools, a customer can easily integrate Eprise
Participant Server with other systems, such as application and e-commerce
servers, sales and service systems and back-office systems.
SERVICES
While the effective use of Eprise Participant Server requires little or no
customization, we do offer a variety of optional services to our customers.
Eprise Advantage Program. Through our Eprise Advantage Program, available
for a standard fee, an Eprise professional will evaluate a customer's Internet
initiatives in conjunction with its overall business strategy. Based on this
evaluation, we will deliver a discovery and design analysis providing
recommendations on how Eprise Participant Server can best be used to implement
the customer's business goals, either through the customer's own technology
department, Eprise professional services or third party service providers.
Professional Services. If a customer wishes to work with Eprise in the
implementation phase of a project, including projects arising out of Eprise
Advantage Program recommendations, our professional services team will provide
development services ranging from graphics design to building applications using
complex database and development tools, either on a fixed fee or a time and
materials basis.
Customer Training. Our professional services team provides customer
training, either as a component of our Eprise Advantage Program or as a
stand-alone service offering for a fixed fee.
Maintenance and Support. We provide technical support and maintenance
services through annual maintenance agreements with our customers. These
services include delivery of software product bug fixes, enhancements and new
versions of Eprise Participant Server. We deliver support and maintenance
services primarily through telephone and e-mail communications. We also address
customer questions involving product operation, installation and application
development.
CUSTOMERS
We target enterprise-level accounts and dot-com companies who
- understand the critical importance of communicating with their
distribution channels and customers through their Web sites,
- have a significant amount of information to impart which requires
frequent updating,
- must address the informational needs of a number of different audiences
from their sites, and
- require rapid design of, and updates to, their sites.
To date, we have licensed Eprise Participant Server to over 40 clients in a
broad spectrum of industries, including the financial services, technology and
manufacturing industries. For the year ended December 31, 1999, American Express
accounted for 13% of revenues and Teijin Systems Technology Ltd. accounted for
10% of revenues for such period.
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The following is a partial list of clients that have licensed our products
and that we believe are representative of our overall client base.
Allstate Insurance
American Express
Asset International
Bausch & Lomb
BP Amoco
Briggs & Stratton
CAP Ventures
ChemPoint.com
Eastman Chemical
EMC Corp.
Financial Executives Institute
The Hartford
Hewlett-Packard
Homeruns.com
Laidlaw
Lincoln Financial Group
Martin Professional A/S
(Denmark)
MicroTouch Systems Inc.
Novell
Racing Rhino.com
Republican National Committee
Sabre
Sharp Electronics
SmartMoney.com
SPX Corporation
Teijin Systems Technology
(Japan)
VIS Corporation
CASE STUDIES
Our customers have a wide variety of business objectives and Web site
strategies that we believe our product can address.
EMC CORPORATION, a supplier of intelligent enterprise storage and retrieval
technology, was seeking to reduce the time and cost associated with maintaining
its "build-it-yourself" Web site, while preserving its existing Web content.
EMC's Web site provides a critically important internal communications vehicle
for its geographically dispersed personnel. Using Eprise Participant Server, the
company has developed an intranet that provides employees with a wealth of
competitive data. The information is organized in three secure levels, and is
made available to employees depending upon their role in the organization. This
intranet is helping to maximize the productivity of marketing, corporate
executives, field operations, and other departments throughout EMC.
SHARP ELECTRONICS CORPORATION is the U.S. sales and marketing subsidiary of
Sharp Corporation, a Japanese manufacturer of consumer electronics, business
products and electronic components. Sharp has traditionally sold products to end
users through existing distribution networks. However, it recently established a
new division, the Document and Network Systems Group, that focuses on selling
Network Laser Systems to businesses through value-added resellers, or VARs, and
equipment dealers.
Because the Document and Network Systems Group required a more
sophisticated sales channel than that used by other Sharp product groups, Sharp
believed that new and more sophisticated communications tools would be
necessary. Sharp elected to develop a complete e-business system to support its
VAR and equipment dealer relationships, including a Web site that would be the
focal point for product marketing, sales and support and communication between
Sharp and its VARs and equipment dealers. In consultation with Andersen
Consulting, Sharp elected to deploy a Microsoft-centric environment that uses
Windows NT, SQL Server, IIS, and Site Server Commerce. To round out the
solution, Sharp and Andersen Consulting chose Eprise Participant Server to
provide dynamic Web content management.
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With Eprise Participant Server, the content on Sharp's new Web site is
targeted to various tiers of resellers and provides timely, up-to-date
information which is easily added to the site by Sharp's business professionals.
Sharp has realized the following competitive advantages by using our product to
develop its sales channels:
- real-time delivery of product information, such as price lists, technical
notes, bulletins, frequently asked questions, or FAQs, and service
documentation, to resellers and equipment dealers;
- effective, targeted communications with business partners and consumers;
- ability of non-technical business professionals to quickly add and update
content on the Web site to improve customer service and satisfaction; and
- enhanced ability to attract sales channel partners.
SALES, MARKETING AND BUSINESS DEVELOPMENT
We license our product through both our direct sales force and indirect
sales channels. As of February 25, 2000, our sales, marketing and business
development organization consisted of 54 individuals, 52 of whom were based in
North America, including 22 direct sales representatives, who are supported by
11 sales support personnel, and 10 marketing personnel.
Direct Sales. To date, we have sold our products primarily through our
direct sales force. We currently have nationwide sales coverage, organized
principally by geographic regions. We intend to increase our direct sales force
in the U.S. and overseas. We are focusing our sales efforts on well-defined
market segments where the need for our solution is greatest and where technology
innovation is the norm, such as the financial services, technology and
manufacturing industries. We target enterprise-level accounts and dot-com
companies for whom the Internet is a fundamental part of their corporate
strategy.
Marketing. We support our sales efforts through various marketing efforts
to generate brand awareness and to qualify leads for the sales organization. We
intend to significantly increase both expenditures and personnel to support our
marketing efforts.
Business Development. It is the goal of our business development staff to
extend our market reach and increase our sales opportunities through the
establishment of relationships with systems integrators, Web developers and
application service providers who build customer solutions based on Eprise
Participant Server. In many cases, these business partners will recommend a Web
content management solution to their customers as part of the e-business
application that they deliver. We anticipate that these business partners will
reduce our current three- to six-month sales cycle while adding value to the
planning and deployment phase of projects that require an Eprise solution. Our
current business partner arrangements include lead sharing, product training,
joint marketing and access to engineering resources. These relationships are
important to our strategy because of our business partners' technical knowledge
and extensive customer relationships across many industries. We intend to devote
significant resources to developing these relationships further.
We also have formal contractual relationships under our "E-business
Experts" program with a number of systems integrators and Web developers. Under
this program, we provide our E-business Experts with a license to use Eprise
Participant Server along with in-depth professional training in order to enable
the E-business Experts, in turn, to design and build for their customers content
management solutions based on the use of Eprise Participant Server.
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The following is a partial list of our current E-business Experts
alliances:
<TABLE>
<S> <C>
Agency.com PixelDance Communications
Lante Corporation Power 2000
Mitchell Systems Corporation Primix Solutions
MultiMedia Management AS Telesoft Corporation
(Sweden) The New Media Group
Northwoods Software TUSC Computer Systems
Development, Inc. Pty. Ltd. (Australia)
OPN Systems Wing.net
</TABLE>
Additionally, we are working with key large systems companies such as
Microsoft to coordinate product and marketing activities. We are a Microsoft
Certified Solutions Provider and a member of the Hewlett-Packard Covision
Program, the Sun Developer Connection Program and the Allaire Alliance Program.
These relationships afford us greater worldwide marketing and sales reach.
Global Expansion. We currently sell our products primarily in the United
States, but are taking steps to rapidly expand our global sales efforts to
domestically based global companies and companies based outside the United
States. We intend to do this with a combination of direct sales and support
personnel, indirect sales channels and partnerships. We have formed an alliance
with a Japanese integrator, Teijin Systems Technology Ltd., to co-develop and
distribute Japanese-language versions of our products. Additionally, we are in
the process of establishing a presence and forming partnerships in the European
market.
RESEARCH AND DEVELOPMENT
We have invested significantly in research and development to enhance our
current products and develop new products. Our research and development expenses
were $459,000 for the twelve months ended December 31, 1997, approximately $2.1
million for the year ended December 31, 1998 and approximately $2.3 million for
the year ended December 31, 1999. We expect that we will increase the dollar
amount of our research and development expenditures substantially in the future.
As of February 25, 2000, 26 employees were engaged in research and development
activities and we plan to continue to hire additional engineers to further our
research and development activities.
Our research team, led by the Chief Technology Officer, identifies market
opportunities and develops prototypes for new product features, product updates,
add-ons and new products. This team is responsible for defining and guiding our
product strategy and vision, and maintaining our reputation as an innovator in
content management solutions. Our development team, led by the Vice President of
Software Development, designs, develops and enhances new and existing products.
This team is responsible for product development, quality and assurance testing,
product documentation, product release and maintenance, and overall execution of
our product development strategy. We intend to continue to expand and enhance
the capabilities of Eprise Participant Server, as well as develop and extend our
content management product offerings, to provide our customers with complete
flexibility in choosing the most desirable environment for creating and managing
content.
COMPETITION
The market for Web content management solutions is intensely competitive,
subject to rapid technological changes and significantly affected by new product
introductions and other
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market activities of industry participants. Many of our competitors currently
have a greater market share than Eprise. We have four primary sources of
competition:
- in-house development efforts by potential clients and partners;
- specialized application servers such as Vignette;
- legacy document management systems such as Documentum; and
- file-based content management systems such as Interwoven.
In addition, we currently partner with a number of companies that provide
complementary products such as Web tools and application servers. Any of these
companies might introduce competitive product offerings in the future.
We believe that the primary factors upon which we compete favorably are the
out-of-the-box functionality and rapid deployment capability of Eprise
Participant Server and Eprise Participant Server's ease of integration with our
customers' existing and future application server products. Other areas in which
we compete favorably include the ability to distribute content management
responsibilities within an organization, the ability to deliver information
targeted to specific audiences, and the cost-effectiveness of our product.
Despite these competitive advantages, we also face competitive
disadvantages because many of our competitors have longer operating histories
and significantly greater financial, technical, marketing and other resources
than we. As a result, they may be able to undertake more extensive promotional
efforts, adopt more aggressive pricing strategies, and offer more attractive
terms to purchasers than we.
We expect competition to persist and intensify in the future. Competition
could materially and adversely affect our ability to obtain revenues from
license fees from new or existing customers and service fees from existing
customers. Further, competitive pressure may force us to reduce the price of our
products. In either case, our operating results and financial condition would be
materially and adversely affected.
PROPRIETARY RIGHTS AND LICENSING
Our success depends upon our ability to maintain the proprietary aspects of
our technology and operate without infringing the proprietary rights of others.
We rely on a combination of trademark, trade secret and copyright law, and
contractual restrictions, to protect the proprietary aspects of our technology.
We seek to protect the source code for our software, documentation and other
written materials under trade secret and copyright laws. These legal protections
provide limited protection for our technology. Our license agreements prohibit
our customers from using our software other than for internal business purposes.
We also seek to protect our intellectual property by requiring employees and
consultants with access to our proprietary information to execute
confidentiality agreements with us and by restricting access to our source code.
Due to rapid technological change, we believe that factors such as the
technological and creative skills of our personnel, new product developments and
enhancements to existing products are at least as important to establishing and
maintaining a technology leadership position. Eprise also licenses third party
software from RogueWave and Verity that is incorporated into Eprise Participant
Server and an add-on product, respectively. We believe these licenses are not
material to our business and the technology could be replaced, if necessary or
appropriate, by commercially available third party software or internally
developed technology without material disruption to our business or operations.
See "Risk Factors -- We have a limited ability to protect our intellectual
property rights, and others could infringe on or misappropriate our proprietary
rights and information."
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EMPLOYEES
As of February 25, 2000, we had a total of 118 employees, including 54 in
sales and marketing, 26 in research and development, 25 in professional services
and support and 13 in information technology, administration and finance. None
of our employees is represented by a collective bargaining agreement, nor have
we experienced any work stoppage. We consider our relations with our employees
to be good.
FACILITIES
Our principal office occupies approximately 12,400 square feet in
Framingham, Massachusetts, under a lease that expires in September 2000. Annual
lease payments on the Framingham facility are approximately $198,600. We have
entered into a lease agreement for approximately 78,000 square feet of new
office space in Framingham, Massachusetts commencing on October 1, 2000. Initial
annual lease payments on the new Framingham facility will be approximately $2.1
million, with periodic increases over the ten-year term of the lease. In
addition, we lease sales and service offices in Oakbrook, Illinois; Dallas,
Texas; San Jose, California; Denver, Colorado; and Reading, U.K., as well as
additional office space in Framingham, Massachusetts. Eprise does not own any
real property.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Joseph A. Forgione(1).................. 45 President, Chief Executive Officer and Director
Jonathan B. Radoff..................... 27 Founder, Chief Technology Officer and Director
Milton A. Alpern....................... 48 Vice President, Finance and Chief Financial Officer
Henry Barnes........................... 36 Vice President, Marketing
Thomas Feldman......................... 41 Vice President, Business Development
Joseph Fiorentino...................... 43 Vice President, Sales
Robert Strong.......................... 56 Vice President, Software Development
Edson D. de Castro(2).................. 61 Director and Chairman
Deborah M. Besemer(2).................. 45 Director
Robert C. Fleming(1)................... 43 Director
Alain J. Hanover(1)(2)................. 51 Director
Nicholas A. Papantonis................. 65 Director
Joseph J. Tischler..................... 51 Director
</TABLE>
- -------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Joseph A. Forgione has been President and Chief Executive Officer, and a
Director of Eprise since November 1997. Prior to joining Eprise, Mr. Forgione
held several senior positions at Lotus Corporation from 1993 to 1997, including
most recently Vice President of Business Development and Planning for the
Internet Applications Division. Mr. Forgione also co-founded and served as a
Senior Vice President of HyperDesk, an object-oriented development tools
company, from 1990 to 1993. Prior to founding HyperDesk, Mr. Forgione held
senior management positions at Data General Corporation. Mr. Forgione holds a
B.S.E.E. degree from the Massachusetts Institute of Technology (MIT) and a
Master of Science in Management from the Sloan School of Management at MIT.
Jonathan B. Radoff is the founder of Eprise, and served as its Chairman,
President and Chief Executive Officer from 1992 until 1997. In November 1997,
Mr. Radoff assumed the position of Chief Technology Officer. Prior to founding
Eprise, Mr. Radoff was the President of Inner Circle Software, a developer of
online interactive software products for Atari and Amiga computers. Mr. Radoff
is a member of the Association of Computer Machinery (ACM) and a trustee of the
Massachusetts Software Council.
Milton A. Alpern joined Eprise in April 1998 as Chief Financial Officer.
Prior to joining Eprise, Mr. Alpern served as Vice President of Finance at
National Transaction Network, Inc. from 1992 to 1998, where he helped establish
that company as a leading publicly-held provider of software solutions to the
electronic payments industry. He also has served as Vice President of Finance at
Henco Software, Inc., a venture-funded producer of information management
software products, from 1987 to 1992. He received his B.S. degree in Accounting
from Montclair State University.
Henry Barnes joined Eprise as Director of Marketing in 1997 and became Vice
President, Marketing in March 1998. Prior to joining Eprise, Mr. Barnes served
as director of product marketing from 1995 to 1997 at ESS Software. He also has
held managerial positions at Edify
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Corporation, a self-service tools and applications company. He holds a B.S.
degree in Computer Science from Tulane University and is a member of the
American Marketing Association.
Thomas Feldman joined Eprise in November 1999 as Vice President, Business
Development. Prior to joining Eprise, Mr. Feldman served from September 1998 to
October 1999 as Vice President, Marketing and Business Development for Prodigy
Communications Corporation, an Internet service provider. Prior to that, Mr.
Feldman worked at Simon & Schuster from 1994 to 1997 as Vice President and
General Manager of RedRocket.com, an online retailer of educational toys and
games. He has also held management positions with Staples and PepsiCo. Mr.
Feldman holds a B.A. degree from Ohio Wesleyan University and a Masters of
Management degree from the Kellogg School of Management at Northwestern
University.
Joseph Fiorentino joined Eprise in April 1999 as Vice President, Sales.
Prior to joining Eprise, Mr. Fiorentino served as Vice President of Sales for
American Internet Corporation, a developer of Internet Protocol address
management software, from December 1997 to December 1998. Mr. Fiorentino also
served as Vice President of Sales for OrderTrust, an e-commerce start-up
company, from March 1996 to November 1997 and as Director of North American
Sales at FTP Software Inc., from April 1994 to March 1996. Mr. Fiorentino holds
a B.A. degree from Merrimack College.
Robert Strong joined Eprise in December 1998 as Vice President, Software
Development. Prior to joining Eprise, Mr. Strong served as Director of Software
Development for FTP Software Inc. from 1996 to 1998. Before that, he served from
1993 to 1996 as Vice President of Research and Development for HyperDesk (which
was acquired by FTP Software in 1996). Mr. Strong also has held senior
management positions at the technology firms Ontologic, Inc., Softbridge
Microsystems and Xyvision. He holds a B.E.E. degree from Villanova University
and a Ph.D. in Communications from MIT, and is a member of the ACM, the IEEE,
the IEEE Computer Society and the Scientific Research Society of North America.
Edson D. de Castro joined our board of directors in May 1998 and was
elected as chairman in October 1999. He served as Chief Executive Officer of
Xenometrix Inc., a biotechnology company, from July 1995 until January 1997. Mr.
de Castro served as Chief Executive Officer of Data General Corporation from
September 1968 to December 1990, and has worked as a consultant in the
technology industry since January 1991. Mr. de Castro currently sits on the
boards of seven other companies, including Healthgate Data Corporation.
Deborah M. Besemer joined our board of directors in October 1999. Ms.
Besemer has been President and Chief Executive Officer of HireSystems, Inc., a
software and services company for hiring management personnel, since June 1999.
Prior to that, Ms. Besemer was President and Chief Operating Officer at
SystemSoft from November 1997 to August 1998. Ms. Besemer worked from 1986 to
1997 at Lotus Corporation, most recently as Executive Vice President of
Worldwide Field Operations. She is a trustee of the Massachusetts Software
Council.
Robert C. Fleming joined our board of directors in December 1997. Mr.
Fleming is general partner of Prism Venture Partners. Prior to co-founding Prism
in November 1995, Mr. Fleming was a general partner at Norwest Venture Capital
from July 1993 to May 1995. Mr. Fleming currently serves on the boards of
directors of a number of venture-backed companies.
Alain J. Hanover joined our board of directors in March 1998. Mr. Hanover
is a co-founder, and has been President and Chief Executive Officer, of InCert
Software Corp., a company that develops program failure detection and prevention
software, since October 1997. Mr. Hanover was co-founder, President, Chief
Executive Officer and Chairman of Viewlogic Systems, Inc. from 1984 to 1997. He
sits on the boards of directors of three other companies, including Applix, Inc.
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<PAGE> 45
Nicholas A. Papantonis joined our board of directors in August 1998. Mr.
Papantonis has been a venture partner with Alliance Technology Ventures of
Atlanta since 1995 and heads that firm's Boston office. He has been a general
partner of Aspen Venture Partners, a Boston-based venture capital partnership,
since 1989, where he has focused on telecommunications investments. In 1970, Mr.
Papantonis joined Infinet Inc., a venture-backed start-up telecommunications
company in Boston, and served as its Chief Executive Officer from 1984 until
1988.
Joseph J. Tischler joined our board of directors in December 1997. Since
January 1995, Mr. Tischler has been an investment manager of The Still River
Management Company and a general partner and founder of The Still River Fund, a
venture capital fund. Mr. Tischler has more than 20 years experience in
marketing and retail store management, including strategic planning and senior
operating positions with divisions of Federated Department Stores and the Batus
Retail Group. Mr. Tischler currently sits on the boards of three other
companies.
ELECTION OF OFFICERS AND DIRECTORS
Our executive officers are elected by the board of directors and serve
until their successors are duly elected and qualified. There are no family
relationships among any of our executive officers or directors.
Our board of directors consists of eight members. Currently, each director
is elected pursuant to our Second Amended and Restated Stockholders Agreement
among Eprise, our preferred stockholders, Messrs. Forgione and Radoff and Angela
Bull. This agreement will automatically terminate upon the closing of this
offering. Our Fourth Amended and Restated Certificate of Incorporation, to be
filed prior to the effectiveness of the registration statement of which this
prospectus forms a part, will provide for classification of our board into three
classes, with the members of the respective classes serving for staggered
three-year terms. The first class consists of Mr. Fleming, Mr. Papantonis and
Mr. Tischler, the second of Ms. Besemer, Mr. de Castro and Mr. Hanover and the
third of Mr. Forgione and Mr. Radoff, with the initial terms of the directors
comprising each class expiring upon the election and qualification of directors
at the annual meetings of stockholders held following the fiscal years ending
December 31, 2000, 2001 and 2002, respectively. At each annual meeting of
stockholders, the number of directors will be fixed and directors will be
re-elected or elected for full three-year terms.
BOARD COMMITTEES
Our audit committee reviews our external and internal auditing procedures,
reviews with our independent auditors the scope and results of their audit for
the year, and also reviews with our management the plan, scope and results of
Eprise's operations. After the closing of this offering, it will also review all
quarterly and year-end financial statements before such financial information is
included in our quarterly and annual filings with the Commission. The members of
our audit committee are Mr. de Castro, Ms. Besemer and Mr. Hanover.
Our compensation committee's functions are to determine the salaries and
other forms of compensation of officers of Eprise and to review general policy
matters relating to compensation and benefits of Eprise's employees. The
compensation committee is also charged with granting stock options and
restricted stock to officers, key employees and consultants, and addressing
stock option and restricted stock matters generally. The members of our
compensation committee are Mr. Forgione, Mr. Fleming and Mr. Hanover. Mr.
Forgione does not participate in any decisions with respect to his own
compensation or, to the extent mandated by applicable securities laws and
Internal Revenue Code regulations, in any compensation decisions relating to
other executive officers.
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<PAGE> 46
No member of the audit committee or the compensation committee is a past or
current officer or employee of Eprise, except as noted with respect to Mr.
Forgione's service on the compensation committee.
DIRECTOR COMPENSATION
The directors of Eprise are not compensated in cash for their service as
directors. Directors who are not employees of Eprise are eligible to participate
in our 2000 Non-Employee Director Stock Option Plan, described below under
"Stock Option Plans." To date, Messrs. de Castro and Hanover each have received
options to purchase 39,215 shares of common stock upon joining the board, and
Ms. Besemer has received options to purchase 15,686 shares of common stock upon
joining the board and 3,921 shares of common stock in January 2000. In addition,
Mr. de Castro received an option to purchase 19,607 shares of common stock in
connection with his election as chairman of the board. All of these grants were
made under the Company's 1997 Stock Option Plan. Directors who are employees of
Eprise are not paid any fees or additional compensation for service as members
of the board of directors or any committee of the board. We maintain directors'
and officers' liability insurance and our by-laws provide for mandatory
indemnification of directors and officers to the fullest extent permitted by
Delaware law. In addition, our charter limits the liability of directors to
Eprise or its stockholders for breaches of the directors' fiduciary duties to
the fullest extent permitted by Delaware law.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In December 1997, the board of directors established a compensation
committee with sole responsibility for determining the compensation of officers
of Eprise, the members of which were Messrs. Fleming, Forgione and Hanover.
Prior to that, all compensation decisions were made by the full board. Mr.
Forgione does not participate in board or compensation committee deliberations
with respect to his compensation. No interlocking relationship exists between
our board or compensation committee and the board of directors or compensation
committee of any other company, nor has any such interlocking relationship
existed in the past. Mr. Forgione and an affiliate of Mr. Fleming have engaged
in transactions with Eprise as described in "Certain Transactions -- Board
Member Participation in Financings" and "-- Officer Loans," respectively.
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<PAGE> 47
EXECUTIVE COMPENSATION
The following table provides information regarding all compensation
received by our Chief Executive Officer and the other four most highly
compensated executive officers of Eprise whose total salary and bonus for the
fiscal year ended December 31, 1999 exceeded $100,000 for services rendered in
all capacities during 1999. We will use the term "named executive officers" to
refer collectively to these individuals later in this prospectus.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
----------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS(#)
--------------------------- ---- --------- ----------- ------------
<S> <C> <C> <C> <C>
Joseph A. Forgione............................. 1999 $225,869 $48,021 90,584
President and Chief Executive Officer
Joseph Fiorentino.............................. 1999 86,539 80,833(3) 329,411
Vice President, Sales(2)
Jonathan B. Radoff............................. 1999 141,509 25,567 --
Chief Technology Officer
Robert Strong.................................. 1999 141,509 23,126 188,234
Vice President, Software Development
Milton A. Alpern............................... 1999 122,376 32,156 39,215
Vice President, Finance and Chief Financial
Officer
</TABLE>
- -------------------------
(1) The bonus figures listed above represent bonuses paid in July 1999 and
January 2000 for services performed in 1999.
(2) Mr. Fiorentino commenced employment with Eprise in April 1999.
(3) Represents amounts paid to Mr. Fiorentino as sales commissions.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
Mr. Forgione has entered into an employment agreement with Eprise dated
November 4, 1997, which provides, among other things, for salary and bonus
payments and stock option grants in specified amounts. The agreement also
provides that Mr. Forgione will receive up to 12 months' severance if his
employment is terminated without "cause" (defined as having engaged in gross
negligence relative to Eprise's affairs or having been convicted of a felony)
and that Mr. Forgione's stock options will become fully vested upon a change of
control of Eprise. In addition, Mr. Forgione has agreed not to solicit Eprise's
employees or customers, or to compete with its business, for a period of one
year following the termination of his employment. Either party can terminate the
agreement at any time, with or without cause. As a condition of his employment
agreement, Mr. Forgione also has signed Eprise's standard form of non-disclosure
and assignment of inventions agreement.
Mr. Radoff has entered into an employment agreement with Eprise dated
December 17, 1997, which provides, among other things, for salary payments of a
specified minimum amount and 12 months' severance if Mr. Radoff's employment is
terminated without "cause" (defined as having engaged in gross negligence
relative to Eprise's affairs or having been convicted of a felony). Mr. Radoff
has agreed not to solicit Eprise's employees or customers, or to compete with
its business, for a period of one year following the termination of his
employment, and has agreed that all works created by him during the term of his
employment shall be deemed works made for hire. The agreement provides that Mr.
Radoff can be terminated only upon the vote of at least five-sevenths of the
board of directors.
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<PAGE> 48
All employee stock option grants, including those granted to the named
executive officers, provide for partial acceleration of vesting (and partial
termination of Eprise's right to repurchase the underlying shares) upon a change
of control of Eprise. Grants to the named executive officers also provide for
additional vesting (and additional lapsing of Eprise's right to repurchase the
underlying shares) upon material, adverse changes in the employee's
responsibilities, compensation and/or job location occurring within one year of
the change of control.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to stock options
granted to each of the named executive officers in fiscal 1999.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERMS(3)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL 1999(1) PRICE($/SH)(2) DATE 5%($) 10%($)
---- ---------- -------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Joseph A. Forgione(4).. 90,584 6.7% $ 0.64 9/17/09 $1,234,739 $1,961,948
Jonathan B. Radoff..... -- -- -- -- -- --
Joseph Fiorentino...... 250,980 18.7 0.46 5/12/09 3,494,101 5,551,976
78,431 5.8 0.64 9/15/09 1,069,083 1,698,727
Robert Strong.......... 141,176 10.5 0.31 1/14/09 2,000,636 3,178,925
47,058 3.5 0.64 9/15/09 641,442 1,019,223
Milton A. Alpern....... 39,215 2.9 0.64 9/15/09 534,535 849,353
</TABLE>
- -------------------------
(1) Based on an aggregate of 1,345,682 options granted by us during the fiscal
year ended December 31, 1999 to our employees, including the named executive
officers.
(2) The options in this table were granted under our 1997 stock plan, have
10-year terms and are exercisable in full as of the date of this prospectus.
We have the right to repurchase the shares issued upon exercise of these
options at the original exercise price paid for such shares upon termination
of the optionee's employment. Except as indicated in footnote (4) below,
this right lapses over a four-year period in equal annual installments
beginning on the first anniversary of the date of grant, except that upon a
change of control this right will lapse as to the next regularly scheduled
installment, and will further lapse as to 50% (100% in the case of Mr.
Fiorentino) of any remaining unvested shares upon termination of the
optionee's employment or materially adverse changes in the optionee's
employment responsibilities, compensation and/or job location within one
year after the change of control. All options are incentive stock options,
except for 29,134 options held by Mr. Forgione, and all were granted at the
fair market value of our common stock on the date of grant.
(3) In accordance with SEC rules, we have based our calculation of the potential
realizable value on the term of the option at its time of grant, and we have
assumed that:
- The estimated fair market value on the date of grant, based on an assumed
initial public offering price of $9.00 per share, appreciates at the
indicated annual rate compounded annually for the entire term of the
option; and
- The option is exercised and sold on the last day of its term for the
appreciated stock price.
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<PAGE> 49
These amounts are based on 5% and 10% assumed rates of appreciation and do
not represent our estimate of future stock prices. Actual gains, if any, on
stock option exercises will be dependent on the future performance of the
common stock.
(4) Any shares purchased by Mr. Forgione pursuant to exercise of his option vest
ratably over a 48-month period from the date of grant, and vest in full upon
a change of control.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table provides information regarding the exercise of stock
options by the named executive officers during fiscal 1999 and the value of
unexercised options at 1999 fiscal year-end.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS HELD AT VALUE OF UNEXERCISED
DECEMBER 31, IN-THE-MONEY OPTIONS AT
SHARES 1999(#)(2) DECEMBER 31, 1999($)(3)
ACQUIRED VALUE ----------------------- -----------------------
NAME ON EXERCISE(#) REALIZED($)(1) VESTED UNVESTED VESTED UNVESTED
---- -------------- -------------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Joseph A. Forgione... 285,385 $135,940 18,220 498,746 $157,585 $4,323,546
Joseph Fiorentino.... -- -- -- 329,411 -- 2,799,499
Jonathan B. Radoff... -- -- 98,039 98,039 854,851 854,851
Robert Strong........ 35,294 127,800 -- 152,940 -- 1,314,061
Milton A. Alpern..... 12,254 4,688 12,253 112,744 106,528 969,072
</TABLE>
- -------------------------
(1) Equal to the fair market value of the purchased shares on the option
exercise date, less the exercise price paid for such shares.
(2) All such options are currently exercisable; however, a portion of the shares
underlying the exercisable options of each of the named executive officers
are subject to our repurchase as of December 31, 1999. The heading "Vested"
refers to shares no longer subject to repurchase and the heading "Unvested"
refers to shares subject to repurchase as of December 31, 1999, in each case
assuming exercise of the underlying option.
(3) Based on the assumed initial public offering price of $9.00 per share, minus
the per share exercise price, multiplied by the number of shares issuable
upon exercise of the option.
STOCK OPTION PLANS
Eprise's 1994 and 1997 stock plans provide for the granting of either
incentive stock options or non-qualified options to purchase shares of our
common stock in order to provide incentives to our employees, consultants and
directors. In addition, the 1994 plan provides for the issuance of purchase
authorizations and stock awards. The stock plans authorize the grant of up to
4,144,281 shares in the aggregate, which number will increase automatically on
each of January 1, 2001 and January 1, 2002 by a number of shares equal to the
lesser of (i) 5% of the number of shares of Eprise common stock issued and
outstanding, including treasury shares, as of the close of business on December
31 of the prior year or (ii) 1,372,549 shares. As of January 1, 2000, there were
697,053 shares outstanding pursuant to option exercises, 2,225,264 options
outstanding and 1,221,964 options available for grant under both plans.
The 1994 and 1997 stock plans are administered by our board of directors
and the compensation committee, each of which has the authority to select the
persons to whom options are granted and determine the terms of each option,
including the number of shares of common stock underlying each option. Our plans
allow participants to purchase common stock of Eprise at prices set by the board
of directors, but in the case of incentive stock options and
46
<PAGE> 50
options granted under the 2000 Non-Employee Director Stock Option Plan described
below, not less than fair market value on the date the option is granted.
The maximum term for options granted under the 1994 and 1997 stock plans is
ten years. Options generally expire three months after termination of the
optionee's service to Eprise. Unless otherwise specified, outstanding options
are exercisable immediately upon grant, but we have the right to repurchase the
shares issued upon exercise of the option at the option exercise price if the
employee's employment is terminated for any reason. Generally, the repurchase
right lapses over a four-year period in equal annual installments beginning on
the first anniversary of the date of grant. In the event of a "change in
control" transaction, our board of directors is authorized to take one or more
of the following actions:
- provide that outstanding options be assumed or substituted for by the
acquiror;
- provide that all unexercised options terminate immediately prior to the
event unless exercised within a time period specified in a written notice
to the option holder;
- in the event of a merger in which the holders of common stock would
receive a cash payment for each share surrendered, provide for a cash
payment to each option holder equal to the amount by which the amount
paid to common stockholders exceeds the option's exercise price,
multiplied by the total number of shares for which the option is then
exercisable; in exchange for this payment, the options would be
terminated; or
- provide that any or all outstanding options become fully exercisable and
Eprise's repurchase right with respect to the shares issuable upon
exercise of these options terminate.
In any event, the shares underlying outstanding options that would have become
vested on the next scheduled vesting date will become vested upon the change in
control.
Our board and stockholders have approved the 2000 Non-Employee Director
Stock Option Plan, to take effect upon the effectiveness of this offering. The
director plan provides for the grant of options to purchase a maximum of 274,510
shares of our common stock to non-employee directors of Eprise. The director
plan will be administered by a committee appointed by the board of directors. In
the event the board does not appoint such a committee, the board shall have all
power and authority to administer the director plan. Under the director plan,
each director who is not also an employee or officer of Eprise and who is not a
director at the time of this offering shall automatically be granted, on the
date such person is first elected to the board of directors, an option to
purchase 15,686 shares of common stock. In addition, each continuing
non-employee director will automatically receive an option to purchase 7,843
shares of common stock upon the effectiveness of the registration statement of
which this prospectus forms a part and thereafter immediately following each
annual meeting of our stockholders commencing in 2001. Each option is
immediately exercisable, subject to our right to repurchase the option shares if
the director ceases to be a member of the board (other than due to death or
disability). The repurchase right lapses over a three-year period in the case of
option grants to new directors and on the first anniversary of the date of grant
in the case of annual option grants. Upon a change in control, our repurchase
rights will lapse as to all shares subject to director options. All options
granted under the director plan will have an exercise price equal to the fair
market value of the common stock on the date of grant. The term of each option
will be ten years from the date of grant. No options have been granted to date
under the director plan.
Payment of the exercise price of an option granted under any of our stock
plans may be made in cash or by check or, if permitted by the applicable grant
(as determined by the compensation committee or board of directors), in shares
of common stock or by recourse promissory note, or by a combination of any of
the above methods, consistent with Section 422 of the Internal Revenue Code and
Rule 16b-3 under the Exchange Act. Unless otherwise specified in a nonqualified
stock option grant, options are not transferable (although,
47
<PAGE> 51
once the option is exercised, the underlying stock may be) except by will or the
laws of descent and distribution. Each of the board of directors and the
compensation committee may, in its sole discretion, amend, modify or terminate
our stock plans, so long as such amendment, modification or termination would
not materially and adversely affect any participant. Amendment, modification or
termination of individual grants requires the consent of the participant
affected. Each of the board of directors and the compensation committee may
also, in its sole discretion, accelerate the date or dates on which all or any
particular option or options granted under our stock plans may be exercised.
STOCK LOAN PROGRAM
On July 14, 1999, the board of directors approved a stock loan program, as
subsequently amended, whereby our executive officers may borrow from Eprise an
amount equal to the purchase price of common stock purchased pursuant to stock
options, solely for the purpose of acquiring such stock. All shares purchased
with such loans are pledged to Eprise as collateral for repayment of the loans.
The loans are recourse to the borrower, bear interest at a variable rate which
is one-half of one percent above Eprise's cost of funds, payable quarterly in
arrears, and are payable as to principal no later than five years after the date
of the loan. As of the date of this prospectus, Eprise has loans outstanding to
the named executive officers in the following aggregate principal amounts,
secured by the number of shares listed: Mr. Forgione, $151,301, secured by
564,900 shares; Mr. Alpern, $52,500, secured by 137,254 shares; Mr. Fiorentino,
$165,200, secured by 329,411 shares; and Mr. Strong, $10,800, secured by 35,294
shares.
2000 EMPLOYEE STOCK PURCHASE PLAN
The board and stockholders have approved the Eprise Corporation 2000
Employee Stock Purchase Plan, and have authorized the reservation of a total of
588,235 shares of common stock for issuance under this plan. On each January 1
commencing January 1, 2001, the aggregate number of shares reserved for issuance
under our 2000 Employee Stock Purchase Plan will be increased automatically by a
number of shares equal to the lesser of (i) 1% of our outstanding shares on the
preceding December 31 or (ii) 294,118 shares. Our compensation committee will
administer the plan, which will become effective on the first day on which price
quotations are available for our common stock on the Nasdaq National Market.
Employees generally will be eligible to participate in the plan if they are
employed at least three months before the beginning of the applicable offering
period and they are customarily employed by Eprise, or any of our subsidiaries
that we designate, for more than 20 hours per week and more than five months in
a calendar year. Employees are not eligible to participate in the plan if they
hold 5% or more of our outstanding stock, or would become 5% stockholders as a
result of their participation in this plan.
Under the plan, eligible employees will be able to acquire shares of our
common stock through payroll deductions. Eligible employees may select payroll
deductions between $150 and 10% of their cash compensation and are subject to
maximum purchase limitations under the Internal Revenue Code. Participation in
this plan will end automatically upon termination of employment for any reason.
Each offering period under the plan will be for six months. The first offering
period is expected to begin on the first business day on which price quotations
for our common stock are available on the Nasdaq National Market. The first
offering period may be more or less than six months long. Offering periods
thereafter will begin on September 1 and March 1. The purchase price for common
stock purchased under the plan will be 85% of the lesser of fair market value of
our common stock on the first day of the applicable offering period or the last
day of such offering period. In the case of the first offering period, the
purchase price for common stock purchased under the plan will be 85% of the
price offered to the public in the
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<PAGE> 52
offering. The compensation committee will have the power to change the duration
of offering periods.
The plan is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code. The plan will terminate in 2010,
unless it is terminated earlier pursuant to its terms.
401(k) PLAN
Eprise has established a 401(k) plan for the benefit of eligible employees
and their beneficiaries. Almost all employees are eligible to participate in the
plan and are fully vested as to their own contributions. Eprise matches 50% of
employee contributions, up to 5% of each employee's annual salary. Our
contributions are subject to a six-year vesting schedule.
LIMITATIONS ON LIABILITY OF DIRECTORS AND INDEMNIFICATION OF DIRECTORS AND
OFFICERS.
As permitted by the Delaware General Corporation Law, as amended, Eprise's
Amended and Restated Certificate of Incorporation provides that Eprise's
directors shall not be liable to Eprise or its stockholders for monetary damages
for breach of fiduciary duty as a director to the fullest extent permitted by
the Delaware corporation law as it now exists or as it may be amended. As of the
date of this prospectus, the Delaware corporation law permits limitations on
liability for a director's breach of fiduciary duty other than liability
- for any breach of the director's duty of loyalty to Eprise or its
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation law;
- under Section 174 of the Delaware corporation law; or
- for any transaction from which the director derived an improper personal
benefit.
In addition, Eprise's bylaws provide that Eprise shall indemnify all directors,
officers, employees and agents of Eprise for acts performed on behalf of Eprise
in such capacity to the fullest extent permitted by law.
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<PAGE> 53
CERTAIN TRANSACTIONS
OFFICER LOANS
On August 1, 1999, Eprise loaned Mr. Forgione an amount required to fund
his partial exercise of options granted under Eprise's 1997 Stock Option Plan.
The loan matures on July 31, 2004. On October 29, 1999, Mr. Forgione borrowed
$41,146 from Eprise to fund his partial exercise of options granted under
Eprise's 1997 Stock Option Plan. This loan matures on October 28, 2004. On
January 3, 2000, the following officers borrowed the following amounts from
Eprise to fund their exercise of options granted under our 1997 Stock Option
Plan: Mr. Forgione, $80,155; Mr. Fiorentino, $165,200; and Mr. Feldman,
$152,075. As collateral for the loans and pursuant to pledge agreements dated as
of the respective dates of the loans, each such officer has pledged the shares
of common stock purchased with the loans to Eprise. The loans bear interest at a
variable rate which is 0.5% above Eprise's cost of funds, payable monthly in
arrears. As of January 31, 2000, total loan amounts outstanding to Messrs.
Feldman, Fiorentino and Forgione were $153,183, $166,404 and $149,283,
respectively.
EMPLOYMENT OF FAMILY MEMBER
One member of Mr. Radoff's family is employed by Eprise in a managerial,
non-executive position. Eprise believes that the compensation paid by Eprise to
this family member is on terms no less favorable to Eprise than could be
obtained from unrelated third parties.
BOARD MEMBER PARTICIPATION IN FINANCINGS
On October 9, 1997, as part of a bridge financing, we issued a warrant to
purchase 326,995 shares of Series A preferred stock at an exercise price of
$0.49695 per share to Prism Venture Partners, of which Mr. Fleming is a general
partner. This warrant has a five-year term and will convert automatically to a
right to purchase 128,233 shares of common stock at an exercise price of $1.27
per share upon the closing of this offering. No part of the warrant has been
exercised to date.
On December 18, 1997, we sold a total of 10,515,925 shares of our Series A
preferred stock in a private financing at a price of $0.49695 per share. The
purchasers included Prism Venture Partners (6,036,825 shares), of which Mr.
Fleming is a general partner, The Still River Fund (1,006,138 shares), of which
Mr. Tischler is a general partner, and Alain Hanover (201,228 shares). As part
of the terms of the financing, the purchasers received registration rights with
respect to the purchased shares.
On August 18, 1998, we sold a total of 14,320,446 shares of our Series B
preferred stock in a private financing at a price of $0.60 per share. The
purchasers included Alliance Technology Ventures and an affiliate (5,100,000
shares), of which Mr. Papantonis is a venture partner, Prism Venture Partners
(1,666,667 shares), of which Mr. Fleming is a general partner, The Still River
Fund (833,333 shares), of which Mr. Tischler is a general partner, and Alain
Hanover (100,000 shares).
On November 8, 1999, we sold a total of 16,233,766 shares of our Series C
preferred stock in a private placement at a price of $1.54 per share. The
purchasers included Alliance Technology Ventures and an affiliate (662,338
shares), of which Mr. Papantonis is a venture partner, Prism Venture Partners
(324,675 shares), of which Mr. Fleming is a general partner, The Still River
Fund (649,351 shares), of which Mr. Tischler is a general partner, Edson de
Castro (64,935 shares) and Alain Hanover (65,000 shares).
50
<PAGE> 54
The following table provides information with respect to the Series A,
Series B and Series C preferred stock financings on an as-converted to common
stock basis, reflecting the 1-for-2.55 reverse stock split that will occur
immediately before the effectiveness of this offering:
<TABLE>
<CAPTION>
SHARES OF PREFERRED STOCK
----------------------------------
STOCKHOLDER SERIES A SERIES B SERIES C
----------- -------- -------- --------
<S> <C> <C> <C>
Prism Venture Partners............................ 2,367,382 653,594 127,323
The Still River Fund.............................. 394,563 326,797 254,647
Alain Hanover..................................... 78,912 39,215 25,490
Alliance Technology Ventures...................... -- 1,960,784 254,647
Edson de Castro................................... -- -- 25,464
</TABLE>
We believe that all transactions set forth above were made on terms no less
favorable to us than would have been or were obtained from unaffiliated third
parties. We have adopted a policy providing that all future transactions between
Eprise and any of our officers, directors and affiliates will be on terms no
less favorable to us than could be obtained from unaffiliated third parties and
will be approved by a majority of the disinterested members of our board of
directors.
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<PAGE> 55
PRINCIPAL STOCKHOLDERS
The following table provides information concerning the beneficial
ownership of Eprise's common stock as of December 31, 1999, and as adjusted to
reflect the sale of common stock offered by this prospectus. The information is
provided for
- each person known to Eprise to beneficially own at least five percent of
the common stock of Eprise (on an as-converted basis),
- each named executive officer of Eprise,
- each director of Eprise and
- all executive officers and directors as a group.
Unless otherwise noted, each person or group identified possesses sole voting
and investment power with respect to such shares, subject to community property
laws where applicable. Shares not outstanding but deemed beneficially owned
because a person or member of a group has a right to acquire them within 60 days
after the date of this prospectus are treated as outstanding only when
determining the amount and percent owned by such person or group.
<TABLE>
<CAPTION>
PERCENTAGE OF COMMON STOCK
BENEFICIALLY OWNED(1)
NUMBER OF SHARES -----------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER: BENEFICIALLY OWNED BEFORE OFFERING AFTER OFFERING(2)
- ------------------------------------- ------------------ --------------- -----------------
<S> <C> <C> <C>
Prism Venture Partners I, L.P.(3)......... 3,276,532 17.2% 14.2%
100 Lowder Brook Drive, Suite 2500
Westwood, MA 02090
Alliance Technology Ventures II,
L.P.(4)................................. 2,259,738 11.9 9.8
3343 Peachtree Road NE, Suite 1140
East Tower, Atlanta, GA 30326
Angela Bull(5)............................ 2,135,390 11.3 9.2
c/o Eprise Corporation
1671 Worcester Road,
Framingham, MA 01701
TGI Fund I, LC(6)......................... 1,899,249 10.0 8.3
c/o Tredegar Investments, Inc.
6501 Columbia Center, 701 Fifth Avenue
Seattle, WA 98104
Brookside Capital Partners Fund,
L.P.(7)................................. 1,273,236 6.7 5.5
Two Copley Place
Boston, MA 02116
Van Wagoner Funds(8)...................... 1,018,589 5.4 4.4
345 California Street, Suite 2450
San Francisco, CA 94104
Axiom Venture Partners II, L.P.(9)........ 995,245 5.3 4.3
City Place II, 17th Floor
185 Asylum Street
Hartford, CT 06103
The Still River Fund(10).................. 976,007 5.2 4.3
100 Federal Street, 29th Floor
Boston, MA 02109
</TABLE>
52
<PAGE> 56
<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS:
- ---------------------------------
<S> <C> <C> <C>
Joseph A. Forgione(11).................... 802,352 4.1% 3.4%
Jonathan B. Radoff(12).................... 2,135,390 11.3 9.2
Joseph Fiorentino(13)..................... 329,411 1.7 1.4
Robert Strong(14)......................... 188,235 1.0 *
Milton A. Alpern(15)...................... 137,254 * *
Deborah M. Besemer(16).................... 15,686 * *
Edson D. de Castro........................ 84,287 * *
Robert C. Fleming(17)..................... 3,276,532 17.2 14.2
Alain J. Hanover.......................... 182,832 1.0 *
Nicholas A. Papantonis(18)................ 2,259,738 11.9 9.8
Joseph J. Tischler(19).................... 976,007 5.2 4.3
---------- ---- ----
All executive officers and directors as a
group (13 persons)...................... 10,679,879 51.6% 43.2%
========== ==== ====
</TABLE>
- -------------------------
* Represents beneficial ownership of less than 1%.
(1) Percentages are based on a total of 18,943,440 shares of common stock
(including shares of preferred stock convertible into common stock)
outstanding as of December 31, 1999. For holders of options or warrants
exercisable within 60 days after the date of this prospectus, the number of
shares so exercisable by each such holder has been added to the denominator
for purposes of calculating such holder's percentage ownership.
(2) Assumes the underwriters' over-allotment option is not exercised.
(3) Includes 128,233 shares of common stock issuable within 60 days upon
exercise of a warrant. The general partner of Prism Venture Partners I,
L.P. is Prism Investment Partners, L.P. Prism Venture Partners, LLC is the
general partner of Prism Investment Partners, L.P. and exercises sole
voting and investment power with respect to all shares held of record by
Prism Venture Partners I, L.P. No member or manager of Prism Venture
Partners, LLC is deemed individually to have or to share such voting or
investment power.
(4) Includes 2,215,431 shares held by Alliance Technology Ventures II, L.P. and
44,307 shares held by ATV II Affiliates Fund, L.P. Alliance Associates II,
LLC is the sole general partner of both Alliance Technology Ventures II,
L.P. and ATV II Affiliates Fund, L.P., and exercises sole voting and
investment control with respect to all shares held of record by Alliance
Technology Ventures II, L.P. and ATV II Affiliates Fund, L.P. Michael A.
Henos, Stephen R. Fleming and Michael R. Slawson are the managing members
of Alliance Associates II, LLC. No member of Alliance Associates II, LLC is
deemed individually to have or to share voting or investment control with
respect to any shares held of record by Alliance Technology Ventures II,
L.P. and ATV II Affiliates Fund, L.P. Nicholas A. Papantonis, a member of
our board of directors, has an ownership interest in Alliance Associates
II, LLC; Mr. Papantonis disclaims beneficial ownership of the shares held
by Alliance Technology Ventures II, L.P. and ATV II Affiliates Fund, L.P.
(5) Includes 969,901 shares of common stock held by, and 196,078 shares
issuable within 60 days upon exercise of outstanding options to, Ms. Bull's
spouse, Jonathan Radoff. Ms. Bull disclaims beneficial ownership of such
shares.
(6) Tredegar Investments, Inc. is the sole manager of TGI Fund I, LC. Tredegar
Corporation owns 100% of Tredegar Investments, Inc. and exercises sole
voting and investment control with respect to all shares held of record by
TGI Fund I, LC. No stockholder,
53
<PAGE> 57
director or officer of Tredegar Corporation is deemed individually to have
or to share such voting or investment control.
(7) Brookside Capital Investors, L.P. is the sole general partner of Brookside
Capital Partners Fund, L.P. Brookside Capital Investors, Inc. is the sole
general partner of Brookside Capital Investors, L.P. W. Mitt Romney is the
sole stockholder of Brookside Capital Investors, Inc., and Mr. Romney is
thus the controlling person of Brookside Capital Partners Fund, L.P.
(8) Includes 483,207 shares held by Van Wagoner Funds and 26,087 shares held by
Van Wagoner Capital Partners. Van Wagoner Capital Management, Inc. is the
sole investment advisor to Van Wagoner Funds. Van Wagoner Capital
Management, Inc. is the general partner of Van Wagoner Capital Partners.
Garrett R. Van Wagoner is the sole shareholder of Van Wagoner Capital
Management, Inc., and he exercises sole voting and investment control with
respect to all shares held of record by Van Wagoner Funds and by Van
Wagoner Capital Partners.
(9) The general partner of Axiom Venture Partners II Limited Partnership is
Axiom Venture Associates II Limited Liability Company. The managers of
Axiom Venture Associates are Alan M. Mendelson, Samuel McKay, Linda Sonntag
and Barry R. Bronfin, all of whom make investment and voting decisions on a
unanimous basis. No manager is deemed individually to have or to share
voting or investment power.
(10) Still River Management Company, Inc. is the sole manager of The Still River
Fund. James A. Saalfield and Joseph J. Tischler are each 50% stockholders
of Still River Management Company, Inc., and each has 50% voting and
investment control with respect to all shares held of record by The Still
River Fund. In the event of a tie vote with respect to any voting or
investment matter, Mr. Saalfield has the authority to cast the decisive
vote.
(11) Includes 516,967 shares issuable within 60 days upon exercise of
outstanding stock options; 22,549 shares held by Maria-Elena Kadala, Mr.
Forgione's spouse, as trustee under three trusts, the beneficiaries of
which are Michael A. Forgione, Angela Forgione and Joseph A. Forgione; and
250,568 shares pledged to Eprise pursuant to stock pledge agreements dated
August 1, 1999 and October 29,1999 as collateral for promissory notes held
by Eprise of the same dates in the aggregate amount of $71,146.
(12) Includes 196,078 shares issuable within 60 days upon exercise of
outstanding options and 969,411 shares held by Mr. Radoff's spouse, Angela
Bull, as to which Mr. Radoff disclaims beneficial ownership.
(13) Represents shares issuable within 60 days upon exercise of outstanding
options.
(14) Includes 152,941 shares issuable within 60 days upon exercise of
outstanding options.
(15) Includes 125,000 shares issuable within 60 days upon exercise of
outstanding options and 12,254 shares pledged to Eprise under a pledge
agreement dated October 29, 1999.
(16) Represents shares issuable within 60 days upon exercise of outstanding
options.
(17) Represents shares beneficially owned by Prism Venture Partners I, L.P., of
which Mr. Fleming is a general partner.
(18) Represents shares beneficially owned by Alliance Technology Ventures and an
affiliate, of which Mr. Papantonis is a venture partner. Mr. Papantonis
disclaims beneficial ownership of all such shares.
(19) Represents shares beneficially owned by The Still River Fund, of which Mr.
Tischler is a general partner.
54
<PAGE> 58
DESCRIPTION OF CAPITAL STOCK
GENERAL
Effective upon the closing of this offering and the filing of a Certificate
of Amendment to our Fourth Amended and Restated Certificate of Incorporation,
our authorized capital stock will consist of 90,000,000 shares of common stock,
par value $0.001 per share, and 10,000,000 shares of preferred stock, par value
$0.01 per share. Prior to the effectiveness of the registration statement of
which this prospectus is a part, and in accordance with our Third Amended and
Restated Certificate of Incorporation, the authorized and outstanding capital
stock was as follows, without giving effect to the 1-for-2.55 reverse stock
split to take effect upon the effectiveness of this offering:
<TABLE>
<CAPTION>
OUTSTANDING AS OF
AUTHORIZED DECEMBER 31, 1999
----------- -----------------
<S> <C> <C>
Common Stock, par value $0.001 per share................. 58,500,000 7,235,927
Preferred Stock, par value $0.01 per share............... 41,663,366 41,070,137
Total Capital Stock...................................... 100,163,366 48,306,064
=========== ==========
</TABLE>
Upon the closing of this offering and giving effect to the 1-for-2.55
reverse stock split, there will be 22,943,440 shares of our common stock
outstanding, including all outstanding shares of preferred stock which will have
automatically converted into 16,105,845 shares of common stock.
The following summary of the terms and provisions of Eprise's capital stock
does not purport to be complete and is qualified by reference to the actual
terms and provisions of the capital stock contained in our amended and restated
certificate of incorporation, the various documents and agreements referred to
below, which are included as exhibits to the registration statement of which
this prospectus forms a part, and the provisions of applicable Delaware law.
COMMON STOCK
As of December 31, 1999, there were 2,837,595 shares of common stock
outstanding held by 62 stockholders of record. Based upon the number of shares
outstanding as of that date and giving effect to the issuance of the 4,000,000
shares of common stock offered by Eprise in this offering and the conversion of
the outstanding shares of preferred stock, there will be 22,943,440 shares of
common stock outstanding upon the closing of this offering. In addition, as of
December 31, 1999, there were outstanding stock options for the purchase of
2,225,264 shares of common stock and outstanding warrants for the purchase of
303,918 shares of common stock and 326,995 shares of Series A preferred stock.
The 326,955 shares of Series A preferred stock will be automatically convertible
into 128,233 shares of our common stock upon the closing of this offering.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders and do not have cumulative voting
rights. Directors are elected by a plurality of the votes of the shares present
in person or by proxy at the meeting and entitled to vote in this election. The
holders of common stock are entitled to receive, at the same rate, cash
dividends when and as declared by the board of directors out of legally
available funds, subject to the rights and preferences of the holders of
preferred stock. In the event of any liquidation, dissolution, or winding up of
Eprise, the holders of common stock are entitled to receive, at the same rate,
the net assets of Eprise available after the payment of all our debts and other
liabilities, and after the satisfaction of the rights of any outstanding
preferred stock.
55
<PAGE> 59
Holders of the common stock have no preemptive, subscription, redemption or
conversion rights, nor are they entitled to the benefit of any sinking fund. The
outstanding shares of common stock are, and the shares offered by Eprise in this
offering will be, when issued and paid for, validly issued, fully paid and
non-assessable. The rights, powers, preferences and privileges of holders of
common stock are subordinate to, and may be adversely affected by, the rights of
the holders of shares of any series of preferred stock which we may designate
and issue in the future.
PREFERRED STOCK
The board of directors will be authorized, subject to any limitations
prescribed by Delaware law, without further stockholder approval, to issue from
time to time up to an aggregate of 10,000,000 shares of preferred stock, in one
or more series. The board of directors is also authorized, subject to the
limitations prescribed by Delaware law, to establish the number of shares to be
included in each series and to fix the voting powers, preferences,
qualifications and special or relative rights or privileges of each series. The
board of directors is authorized to issue preferred stock with voting,
conversion and other rights and preferences that could adversely affect the
voting power or other rights of the holders of common stock.
Eprise has no current plans to issue any preferred stock. However, the
issuance of preferred stock or of rights to purchase preferred stock could have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, a majority of the
outstanding common stock of Eprise.
WARRANTS
Upon the closing of this offering, we will have outstanding warrants as
follows:
<TABLE>
<CAPTION>
HOLDERS GRANT DATE NUMBER OF SHARES EXERCISE PRICE EXPIRATION DATE
------- ---------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
Silicon Valley Bank July 18, 1997 19,728 $0.03 July 17, 2002
Prism Venture
Partners I, L.P. October 9, 1997 128,233 1.27 October 9, 2002
Silicon Valley Bank December 5, 1997 29,592 1.27 December 5, 2002
Deutsche Bank
Securities Inc. September 8, 1999 254,598 3.93 September 8, 2004
</TABLE>
The number of shares for which the December 5, 1997 Silicon Valley Bank
warrant is exercisable will be subject to adjustment for future issuances of
common stock at a price per share that is less than the warrant price, other
than issuances pursuant to outstanding options or options granted in the future
under plans approved by the board of directors.
REGISTRATION RIGHTS
We have granted registration rights to the holders of preferred stock under
a registration rights agreement dated November 8, 1999 with respect to any
common stock acquired by such holders, whether by conversion of preferred stock
or otherwise. Under that agreement, we have agreed to register the registrable
securities upon request of at least 40% in interest of the holders of the
registrable securities, at the earlier of (i) six months following our initial
public offering or (ii) December 18, 2000. The holders are entitled to two
demand registrations as described in the preceding sentence, as well as
unlimited registrations on Form S-3 (when and if we are eligible to register
shares on such form). The holders of at least 20% of the registrable securities
must request registrations on Form S-3 and the minimum aggregate price
56
<PAGE> 60
to the public must be expected to be at least $1.0 million. Further, if we elect
to register any of our shares of common stock for an offering to the public, our
holders are entitled to include their registrable securities in such offering,
subject to the terms of our underwriting agreement and underwriter cutbacks.
Registration expenses for demand registrations and the first two registrations
on Form S-3 shall be borne by us. The holders of at least 50% of the preferred
stock must approve any further registration rights granted by us to third
parties. In addition, we shall not engage in a merger or consolidation in which
Eprise is not the surviving company unless the surviving company agrees to
assume the registration rights described in this paragraph. Such registration
rights shall terminate on the fifth anniversary of our initial public offering.
We also have granted registration rights to the holders of warrants to
purchase our common stock. Under Registration Rights Agreements between the
Company and Silicon Valley Bank dated July 18, 1997 and December 5, 1997, if we
elect to register any of our shares of common stock under the Securities Act
(with exceptions related to underwritten offerings and registrations in
connection with acquisitions or employee stock plans), we have agreed to include
the warrant shares in such offering, subject to the terms of our underwriting
agreement and underwriter cutbacks, if any. The Company must pay all
registration expenses incurred in connection with any such registration.
Under the terms of the warrant issued to Deutsche Bank Securities Inc. as
of September 8, 1999, if we elect to register any of our shares of common stock
for an underwritten offering to the public on a form that would permit
registration of the warrant shares, we have agreed to include the warrant shares
in such offering, subject to the terms of our underwriting agreement and
underwriter cutbacks, if any. Eprise will pay all registration expenses incurred
in connection with such registration. These registration rights will terminate
on the fifth anniversary of our initial public offering.
We also have granted registration rights to one holder of shares of our
common stock. Under the terms of a debenture purchase agreement between Eprise
and Leigh Leeper dated April 1, 1993, if we elect to register any of our
securities under the Securities Act (other than registrations relating to
employee stock plans), we have agreed to use our best efforts to include in such
registration such number of Mr. Leeper's shares as he may request.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS AND ANTI-TAKEOVER EFFECTS
Upon completion of this offering, the provisions of Section 203 of the
General Corporation Law of Delaware will prohibit Eprise from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. An "interested
stockholder" is defined as a person who, at the time of determination whether a
person is an interested stockholder,
- beneficially owns 15% or more of Eprise's common stock; or
- is an affiliate or associate of Eprise and beneficially owned 15% or more
of Eprise's common stock at any time within three years of the date of
determination.
Eprise's Fourth Amended and Restated Certificate of Incorporation provides
for the division of the board of directors into three classes as nearly equal in
size as possible with staggered three-year terms. See "Management -- Election of
Officers and Directors". In addition, our Fourth Amended and Restated
Certificate of Incorporation provides that directors may be removed only for
cause by the affirmative vote of the holders of 75% of the shares of capital
57
<PAGE> 61
stock of Eprise entitled to vote. Under our Fourth Amended and Restated
Certificate of Incorporation, any vacancy on the board of directors, however
occurring, including a vacancy resulting from an enlargement of the board, may
only be filled by vote of a majority of the directors then in office. The likely
effect of the classification of the board of directors and the limitations on
the removal of directors and filling of vacancies is an increase in the time
required for the stockholders to change the composition of the board of
directors. For example, because only two to three directors may be replaced by
stockholder vote at each annual meeting of stockholders, stockholders seeking to
replace a majority of the members of the board of directors will need at least
two annual meetings of stockholders to effect this change.
Eprise's Fourth Amended and Restated Certificate of Incorporation also
provides that, after the effective date of the registration statement of which
this prospectus is a part, any action required or permitted to be taken by the
stockholders of Eprise at an annual meeting or special meeting of stockholders
may only be taken if it is properly brought before the meeting and may not be
taken by written action in lieu of a meeting. Eprise's Amended and Restated
By-laws provide that special meetings of the stockholders may only be called by
the board of directors, the chairman of the board of directors, the Chief
Executive Officer or the president of Eprise. Eprise's Amended and Restated
By-laws further provide that in order for any matter to be considered "properly
brought" before a meeting, a stockholder must comply with requirements regarding
advance notice to Eprise. The foregoing provisions could have the effect of
delaying until the next stockholders meeting stockholder actions which are
favored by the holders of a majority of the outstanding voting securities of
Eprise. These provisions may also discourage another person or entity from
making a tender offer for Eprise's common stock, because such person or entity,
even if it acquired a majority of the outstanding voting securities of Eprise,
would be able to take action as a stockholder, such as electing new directors or
approving a merger, only at a duly called stockholders meeting, and not by
written consent.
The General Corporation Law of Delaware provides that the affirmative vote
of a majority of the shares entitled to vote on any matter is required to amend
a corporation's certificate of incorporation or by-laws, unless a corporation's
certificate of incorporation or by-laws, as the case may be, requires a greater
percentage. Eprise's Fourth Amended and Restated Certificate of Incorporation
requires the affirmative vote of the holders of at least 75% of the shares of
capital stock of Eprise issued and outstanding and entitled to vote to amend or
repeal any of the foregoing provisions of the Fourth Amended and Restated
Certificate of Incorporation. Eprise's Amended and Restated By-laws may be
amended or repealed by a majority vote of the board of directors. The Amended
and Restated By-laws may also be amended or repealed by the affirmative vote of
the holders of at least 75% of the shares of capital stock of Eprise issued and
outstanding and entitled to vote. The 75% stockholder vote would be in addition
to any separate class vote that might in the future be required in accordance
with the terms of any series of preferred stock that might be outstanding at the
time any such amendments are submitted to stockholders.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is EquiServe Trust
Company.
LISTING
We have applied to list the common stock on the Nasdaq National Market
under the symbol "EPRS."
58
<PAGE> 62
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. Sales of substantial amounts of our common stock in the public market
could adversely affect prevailing market prices of our common stock. Since
substantially all of our shares currently outstanding will not be available for
sale immediately following this offering because of the contractual and legal
restrictions on resale described below, sales of substantial amounts of common
stock in the public market after these restrictions lapse could adversely affect
the prevailing market price and our ability to raise equity capital in the
future.
Upon completion of this offering and based on shares outstanding as of
December 31, 1999, we will have outstanding an aggregate of 22,943,440 shares of
common stock, assuming no exercise of the underwriters' over-allotment option
and no exercise of outstanding options or warrants. Of these shares, all of the
shares sold in this offering will be freely tradable without restriction or
further registration under the Securities Act, unless such shares are purchased
by "affiliates" as that term is defined in Rule 144 under the Securities Act. In
general, affiliates include officers, directors or 10% stockholders. The
remaining 18,943,440 shares outstanding are "restricted securities" within the
meaning of Rule 144. Restricted securities may be sold in the public market only
if registered or if they qualify for an exemption from registration under Rules
144, 144(k) or 701 promulgated under the Securities Act, which are summarized
below. Sales of the restricted securities in the public market, or the
availability of such shares for sale, could adversely affect the market price of
the common stock.
LOCK UP AGREEMENTS
All of our directors and officers and substantially all of our security
holders have entered into lock-up agreements in connection with this offering
generally providing that they will not offer, sell, contract to sell or grant
any option to purchase or otherwise dispose of our common stock or any
securities exercisable for or convertible into our common stock for a period of
180 days after the effectiveness of this offering without the prior written
consent of Deutsche Bank Securities Inc. Holders of an aggregate of 67,647
shares of our common stock that were issued upon exercise of stock options are
subject to a 120-day lock-up period, rather than a 180-day period, under the
terms of our stock option plans. The holder of warrants to purchase an aggregate
of 49,320 shares of our common stock is not subject to a lock-up agreement.
Taking into account the lock-up agreements, and assuming Deutsche Bank
Securities Inc. does not release security holders from these agreements, the
number of shares that will be available for sale in the public market under the
provisions of Rule 144, 144(k) and 701 will be as follows:
- Beginning on the effective date of this prospectus, only the shares sold
in this offering and 49,320 shares of common stock issuable upon exercise
of two warrants will be immediately available for sale in the public
market.
- Beginning 120 days after the effective date, 67,647 shares will be
eligible for sale.
- Beginning 180 days after the effective date, approximately 11,745,669
shares will be eligible for sale, including 908,175 shares subject to
outstanding warrants and vested options.
- At various times thereafter upon the expiration of applicable holding
periods, 9,806,018 shares will become eligible for sale, including
1,632,310 shares subject to outstanding unvested options.
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<PAGE> 63
STOCK OPTIONS
Approximately 180 days after this offering, we intend to file a
registration statement on Form S-8 under the Securities Act covering the shares
of common stock reserved for issuance under our stock incentive and employee
stock purchase plans as well as the resale of the shares issued upon the
exercise of options prior to filing the registration statement on Form S-8. As
of December 31, 1999, options to purchase 2,225,264 shares of common stock were
issued and outstanding. Shares registered under the registration statement on
Form S-8 will, subject to vesting provisions and Rule 144 volume limitations
applicable to shares held by our affiliates and to options exercised before the
registration statement is filed, be available for sale in the open market
immediately after the 180-day lock-up period expires or terminates pursuant to
the lock-up agreement.
RULE 144
In general, under Rule 144, after the expiration of the lock-up agreements,
a person who has beneficially owned restricted securities for at least one year
would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of:
- one percent of the number of shares of common stock then outstanding,
which will equal approximately 229,434 shares immediately after the
offering; or
- the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale.
Sales under Rule 144 are also subject to requirements with respect to
manner of sale, notice and the availability of current public information about
us.
RULE 144(k)
Under Rule 144(k), a person holding restricted securities who is not deemed
to have been our affiliate at any time during the three months preceding a sale,
and who has beneficially owned the shares proposed to be sold for at least two
years, is entitled to sell such shares without complying with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.
RULE 701
Rule 701 permits our employees, officers, directors or consultants who
purchased shares pursuant to a written compensatory plan or contract to resell
such shares in reliance upon Rule 144 but without compliance with specific
restrictions. Rule 701 provides that affiliates may sell their Rule 701 shares
under Rule 144 without complying with the holding period requirement and that
non-affiliates may sell such shares in reliance on Rule 144 without complying
with the holding period, public information, volume limitation or notice
provisions of Rule 144.
WARRANTS
Upon the closing of this offering, there will be warrants outstanding to
purchase 432,151 shares of common stock at a weighted average exercise price of
$2.78 per share.
60
<PAGE> 64
REGISTRATION RIGHTS
Upon completion of this offering, the holders of 16,105,845 shares of our
common stock, or their transferees, will be entitled to registration of such
shares under the Securities Act as described above in "Description of Capital
Stock -- Registration Rights." Upon the effectiveness of such a registration,
these shares would become freely tradable without restriction under the
Securities Act.
61
<PAGE> 65
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives Deutsche Bank Securities
Inc., Dain Rauscher Incorporated, and SoundView Technology Group, Inc., have
severally agreed to purchase from Eprise the following respective number of
shares of common stock at the public offering price less the underwriting
discounts and commissions set forth on the cover page of this prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------- ---------
<S> <C>
Deutsche Bank Securities Inc. ..............................
Dain Rauscher Incorporated..................................
SoundView Technology Group, Inc. ...........................
---------
Total............................................. 4,000,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters to purchase the shares of common stock offered by this prospectus
are subject to the prior satisfaction of various conditions, including the
absence of any material adverse change in our business and the receipt of
certificates, opinions and letters from us, and that the underwriters will be
obligated to purchase all shares of the common stock offered by this prospectus,
other than those covered by the over-allotment option described below, if any
are purchased. The underwriting agreement provides that, in the event of a
default by an underwriter who is obligated to purchase not more than 10% of the
common stock offered by this prospectus or not more than 10% of the shares
covered by the over-allotment option, as the case may be, the purchase
commitments of the non-defaulting underwriters may be increased.
The underwriters propose to offer the shares of common stock to the public
at the public offering price set forth on the cover of this prospectus and to
dealers at a price that represents a concession not in excess of $ per share
under the public offering price. The underwriters may allow, and these dealers
may re-allow, a concession of not more than $ per share to other dealers.
After the initial public offering, the representatives of the underwriters may
change the offering price and other selling terms.
At our request, the underwriters have reserved up to 280,000 shares of
common stock to be sold in the offering and offered for sale, at the public
offering price, to our directors, employees, business associates and persons
related to, or affiliated with, the foregoing persons. The number of shares of
common stock available for sale to the general public will be reduced to the
extent these individuals purchase the reserved shares. Any reserved shares which
are not so purchased will be offered by the underwriters to the general public
on the same basis as the other shares offered by this prospectus.
We have granted to the underwriters an option, exercisable not later than
30 days after the date of this prospectus, to purchase up to 600,000 additional
shares of common stock at the public offering price less the underwriting
discounts and commissions set forth on the cover page of this prospectus. The
underwriters may exercise this option only to cover over-allotments made in
connection with the sale of the common stock offered by this prospectus. To the
extent that the underwriters exercise this option, each of the underwriters will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of additional shares of common stock as the number of shares of
common stock to be purchased by it in the above table bears to the total number
of shares of common stock offered by this prospectus.
The underwriting fee is equal to the public offering price per share of
common stock less the amount paid by the underwriters to us per share of common
stock. The underwriting fee is
62
<PAGE> 66
% of the initial public offering price. We have agreed to pay the underwriters
the following fees, assuming either no exercise or full exercise by the
underwriters of the underwriters' over-allotment option:
<TABLE>
<CAPTION>
TOTAL FEES
--------------------------------------
WITHOUT EXERCISE WITH FULL EXERCISE
FEE PER OF OVER-ALLOTMENT OF OVER-ALLOTMENT
SHARE OPTION OPTION
------- ----------------- ------------------
<S> <C> <C> <C>
Fees paid by Eprise.............................. $ $ $
</TABLE>
In addition, we estimate that our share of the total expenses of this
offering, excluding underwriting discounts and commissions, will be
approximately $850,000.
We have agreed to indemnify the underwriters against specified types of
liabilities, including liabilities under the Securities Act and to contribute to
payments the underwriters may be required to make in respect of any of these
liabilities.
Each of our officers and directors and substantially all of our
stockholders and holders of options and warrants to purchase our common stock,
have agreed not to offer, sell, contract to sell or otherwise dispose of or
transfer, or enter into any transaction that is designed to, or could be
expected to, result in the disposition of any portion of our common stock or
common stock issuable upon exercise or conversion of options, warrants or
convertible securities held by these persons for a period of 180 days after the
date of this prospectus without the prior written consent of Deutsche Bank
Securities Inc. This consent may be given at any time without public notice. We
have entered into a similar agreement with the representatives of the
underwriters.
The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority in excess of 5% of the shares of common stock
being offered by this prospectus.
A prospectus in electronic format is being made available on an Internet
Web site maintained by Wit SoundView's affiliate, Wit Capital Corporation. In
addition, other dealers purchasing shares from Wit SoundView in this offering
have agreed to make a prospectus in electronic format available on Web sites
maintained by each of these dealers. Other than the prospectus in electronic
format, the information on Wit Capital's Web site and any information contained
on any other Web site maintained by Wit Capital is not part of the prospectus or
the registration statement of which this prospectus forms a part, has not been
approved or endorsed by Eprise or any underwriter in its capacity as underwriter
and should not be relied upon by investors.
In order to facilitate the offering of our common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of our common stock. Specifically, the underwriters may over-allot
shares of our common stock in connection with this offering, thus creating a
short position in our common stock for their own account. A short position
results when an underwriter sells more shares of common stock than that
underwriter is committed to purchase. Additionally, to cover these
over-allotments or to stabilize the market price of our common stock, the
underwriters may bid for, and purchase, shares of our common stock in the open
market. Finally, the representatives, on behalf of the underwriters, may also
reclaim selling concessions allowed to an underwriter or dealer if the
underwriting syndicate repurchases shares distributed by that underwriter or
dealer. Any of these activities may maintain the market price of our common
stock at a level above that which might otherwise prevail in the open market.
These transactions may be effected on the Nasdaq National Market or otherwise.
The underwriters are not required to engage in these activities and, if
commenced, may end any of these activities at any time.
63
<PAGE> 67
In June 1999, we sold shares of our Series C preferred stock in a private
placement at a price of $1.54 per share. Each of the shares of Series C
preferred stock is convertible at the option of the holder into one share of our
common stock. In this private placement, Deutsche Bank Securities Inc. received
a warrant to purchase 254,598 shares of common stock at an exercise price of
$3.93 per share, ABS Employees' Venture Fund LP, an affiliate of Deutsche Bank
Securities Inc., purchased 246,443 shares of Series C preferred stock at the
purchase price of $1.54 per share and Timothy Dolan, an employee of Deutsche
Bank Securities Inc., purchased 6,494 shares of Series C preferred stock at the
purchase price of $1.54 per share. Each of ABS Employees' Venture Fund LP and
Mr. Dolan purchased the Series C preferred stock on the same terms as the other
investors in the private placement, and the exercise price per share under the
warrant issued to Deutsche Bank Securities Inc. is the same price per share paid
by the investors in the private placement, assuming the reverse stock split
immediately prior to, and the automatic conversion of the Series C preferred
stock upon, the closing of this offering.
PRICING OF THIS OFFERING
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock has
been determined by negotiation among us and the representatives of the
underwriters. Among the primary factors considered in determining the public
offering price were:
- prevailing market conditions;
- our results of operations in recent periods;
- the present stage of our development;
- the market capitalizations and stages of development of other companies
that we and the representatives of the underwriters believe to be
comparable to our business; and
- estimates of our business potential.
There can be no assurance that an active trading market will develop for
our common stock or that the common stock will trade in the market subsequent to
the offering at or above the initial public offering price.
64
<PAGE> 68
LEGAL MATTERS
Hill & Barlow, a Professional Corporation, will pass upon the validity of
the shares of common stock offered by this prospectus for us. A purchase trust,
the beneficiaries of which are members of Hill & Barlow, purchased 16,233 shares
of our Series C preferred stock in the private placement that closed on November
8, 1999. Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts, will pass upon
legal matters in connection with this offering for the underwriters.
EXPERTS
The consolidated financial statements as of December 31, 1998 and 1999 and
for the four months ended December 31, 1997 and for the years ended December 31,
1998 and 1999 included in this prospectus have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report appearing herein, and have
been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The financial statements for the year ended August 31, 1997 included in
this prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are included
in reliance upon the authority of said firm as experts in giving said reports.
CHANGE IN ACCOUNTANTS
Effective in May 1998, Deloitte & Touche LLP was engaged as our independent
auditors and replaced Arthur Andersen LLP whose position as our independent
auditors was terminated. The decision to change independent auditors was
approved by our board of directors. In the period from October 1995 to May 1998,
Arthur Andersen LLP issued no audit report which was qualified or modified as to
uncertainty, audit scope or accounting principles. During the same period,
Arthur Andersen LLP issued no adverse opinions or disclaimers of opinion on any
of our financial statements, and there were no disagreements with Arthur
Andersen LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures. Arthur Andersen LLP has
reported on the financial statements for the year ended August 31, 1997 included
in this prospectus. Prior to May 1998 we had not consulted with Deloitte &
Touche LLP on items which involved our accounting principles or the form of
audit opinion to be issued on our financial statements.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Commission a registration statement on Form S-1
under the Securities Act with respect to the shares of common stock offered by
this prospectus. This prospectus does not contain all of the information set
forth in the registration statement and the exhibits and schedule filed
therewith. For further information with respect to Eprise Corporation and the
common stock offered by this prospectus, reference is made to the registration
statement and the exhibits and schedule filed therewith. Statements contained in
this prospectus regarding the contents of any contract or any other document to
which reference is made are not necessarily complete, and, in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the registration statement, each such statement being qualified in
all respects by such reference. A copy of the registration statement and the
exhibits and schedule filed therewith may be inspected without charge at the
public reference facilities maintained by the Commission in Room 1025, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
located in Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New
York 10048 and copies of all or any part of the
65
<PAGE> 69
registration statement may be obtained from such offices upon the payment of the
fees prescribed by the Commission. Copies of these materials may also be
obtained from the Public Reference Room of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. You may obtain information
regarding the operation of the Public Reference Room by calling the Commission
at 1-800-SEC-0330. The Commission maintains a World Wide Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of the
site is www.sec.gov.
66
<PAGE> 70
EPRISE CORPORATION
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Reports............................... F-2
Consolidated Balance Sheets at December 31, 1998 and 1999... F-4
Consolidated Statements of Operations for the Year Ended
August 31, 1997, the Four Months Ended December 31, 1997,
and the Years Ended December 31, 1998 and 1999............ F-5
Consolidated Statements of Changes in Stockholders'
Deficiency for the Year Ended August 31, 1997, the Four
Months Ended December 31, 1997, and the Years Ended
December 31, 1998 and 1999................................ F-6
Consolidated Statements of Cash Flows for the Year Ended
August 31, 1997, the Four Months Ended December 31, 1997,
and the Years Ended December 31, 1998 and 1999............ F-7
Notes to the Consolidated Financial Statements.............. F-8
</TABLE>
F-1
<PAGE> 71
INDEPENDENT AUDITORS' REPORT
The accompanying consolidated financial statements give effect to the
completion of a 1 for 2.55 reverse split of the Company's outstanding common
stock which will take place on the effective date of the offering. The following
report is in the form which will be furnished by Deloitte & Touche LLP upon the
completion of the 1 for 2.55 reverse split of the Company's outstanding common
stock described in Note 2 to the consolidated financial statements and assuming
that from January 21, 2000 to the date of such completion no other material
events have occurred that would affect the accompanying consolidated financial
statements or require disclosure therein.
"INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of Eprise Corporation:
We have audited the accompanying consolidated balance sheets of Eprise
Corporation (the "Company") as of December 31, 1998 and 1999, and the related
consolidated statements of operations, changes in stockholders' deficiency and
cash flows for the four months ended December 31, 1997, and for the years ended
December 31, 1998 and 1999. 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, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31,
1998 and 1999, and the results of its operations and its cash flows for the
four-month period ended December 31, 1997 and for the years ended December 31,
1998 and 1999, in conformity with generally accepted accounting principles.
Boston, Massachusetts
January 21, 2000 (March , 2000, as to the effects of the stock split described
in Note 2)"
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 2, 2000
F-2
<PAGE> 72
After the 1 for 2.55 reverse stock split discussed in Note 2, "Stock
Split," to Eprise Corporation's consolidated financial statements is effected,
we expect to be in a position to render the following audit report.
/s/ ARTHUR ANDERSEN LLP
- --------------------------------
Boston, Massachusetts
February 29, 2000
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Eprise Corporation:
We have audited the accompanying statements of operations, stockholders'
deficit and cash flows of Eprise Corporation (the "Company") for the year ended
August 31, 1997. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of the Company's operations and its cash
flows for the year ended August 31, 1997, in conformity with generally accepted
accounting principles.
Boston, Massachusetts
December 18, 1997
(except with respect to the disclosure of the issuance of
Series A Redeemable Preferred Stock (Note 5) as to which
the date is January 28, 1998)
F-3
<PAGE> 73
EPRISE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
--------------------------- DECEMBER 31,
1998 1999 1999
----------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 6,356,665 $ 22,455,448
Accounts receivable (less allowance for doubtful accounts
of approximately $48,000 and $189,000 at December 31,
1998 and 1999, respectively)............................ 103,060 2,045,076
Due from related parties.................................. -- 58,145
Prepaid expenses and other current assets................. 129,657 316,945
----------- ------------
Total current assets.................................... 6,589,382 24,875,614
----------- ------------
Property and equipment:
Computers and equipment................................... 672,296 987,443
Furniture and fixtures.................................... 92,758 134,933
Leasehold improvements.................................... 29,897 29,897
----------- ------------
Total................................................... 794,951 1,152,273
Less accumulated depreciation and amortization............ (345,103) (538,886)
----------- ------------
Property and equipment, net............................. 449,848 613,387
----------- ------------
Other assets, net........................................... 36,054 45,377
----------- ------------
Total assets................................................ $ 7,075,284 $ 25,534,378
=========== ============
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY
Current liabilities:
Current portion of equipment line of credit............... $ 85,920 $ 85,917
Accounts payable.......................................... 264,273 148,484
Accrued compensation and benefits......................... 220,492 597,380
Other accrued expenses.................................... 100,125 495,050
Deferred revenue.......................................... 89,873 571,724
----------- ------------
Total current liabilities............................... 760,683 1,898,555
----------- ------------
Long-term equipment line of credit, less current portion.... 157,510 78,756
----------- ------------
Commitments (Note 9)
Redeemable convertible preferred stock (Aggregate
liquidation preference of $13,818,157 and $38,818,157 in
1998 and 1999)............................................ 13,740,189 36,848,516
----------- ------------
Stockholders' (deficiency) equity:
Common stock, $.001 par value; 58,500,000 shares
authorized; 2,237,331 and 2,837,595 shares issued and
outstanding at December 31, 1998 and 1999, respectively
(18,943,440 shares pro forma)........................... 2,238 2,838 $ 18,944
Additional paid-in capital................................ 209,535 1,053,085 37,885,495
Accumulated deficit....................................... (7,794,871) (14,278,101) (14,278,101)
Notes receivable from officers............................ (69,271) (69,271)
----------- ------------ ------------
Total stockholders' (deficiency) equity................. (7,583,098) (13,291,449) $ 23,557,067
----------- ------------ ============
Total liabilities and stockholders' (deficiency) equity..... $ 7,075,284 $ 25,534,378
=========== ============
</TABLE>
See notes to the consolidated financial statements.
F-4
<PAGE> 74
EPRISE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOUR MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
AUGUST 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1997 1998 1999
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Software licenses.............................. 33,000 $ 65,000 $ 345,000 $ 2,354,908
Services....................................... 1,387,223 237,541 462,321 1,303,907
---------- ----------- ----------- -----------
Total revenues............................... 1,420,223 302,541 807,321 3,658,815
Cost of revenues (includes compensation cost of
$9,212 for stock options in 1999.)............. 518,456 285,037 459,730 1,119,741
---------- ----------- ----------- -----------
Gross profit..................................... 901,767 17,504 347,591 2,539,074
Operating expenses:
Research and development (includes compensation
cost of $46,275 for stock options in
1999.)....................................... 179,929 326,718 2,149,289 2,333,530
Selling and marketing (includes compensation
cost of $241,979 for stock options in
1999.)....................................... 800,399 392,537 2,348,835 4,916,787
General and administrative (includes
compensation cost of $34,772 for stock
options in 1999.)............................ 500,715 362,708 1,245,951 1,984,947
---------- ----------- ----------- -----------
Total operating expenses..................... 1,481,043 1,081,963 5,744,075 9,235,264
---------- ----------- ----------- -----------
Operating loss................................... (579,276) (1,064,459) (5,396,484) (6,696,190)
---------- ----------- ----------- -----------
Other income (expense):
Interest income................................ 2,232 4,146 164,105 314,441
Interest expense and other..................... (156,364) (103,392) (28,129) (26,759)
---------- ----------- ----------- -----------
Other income (expense), net.................. (154,132) (99,246) 135,976 287,682
---------- ----------- ----------- -----------
Net loss......................................... (733,408) (1,163,705) (5,260,508) (6,408,508)
Accretion of redeemable convertible preferred
stock........................................ -- (1,983) (14,920) (74,722)
---------- ----------- ----------- -----------
Loss to common shareholders...................... $ (733,408) $(1,165,688) $(5,275,428) $(6,483,230)
========== =========== =========== ===========
Loss per share................................... $ (0.35) $ (0.54) $ (2.40) $ (2.62)
========== =========== =========== ===========
Weighted-average common shares outstanding....... 2,072,575 2,156,252 2,199,732 2,472,745
========== =========== =========== ===========
Pro forma loss per share......................... $ (0.48)
===========
Pro forma weighted-average common shares
outstanding.................................... 13,273,529
===========
</TABLE>
See notes to the consolidated financial statements.
F-5
<PAGE> 75
EPRISE CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
YEAR ENDED AUGUST 31, 1997, THE FOUR MONTHS ENDED DECEMBER 31, 1997 AND THE
YEARS ENDED DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL NOTE
------------------ PAID-IN ACCUMULATED RECEIVABLE
SHARES AMOUNT CAPITAL DEFICIT FROM OFFICER TOTAL
--------- ------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 1, 1996............. 2,067,157 $2,067 $ 97,133 $ (620,347) $ -- $ (521,147)
Exercise of stock options............ 3,921 4 2,496 -- -- 2,500
Issuance of warrants................. -- -- 12,212 -- -- 12,212
Issuance of stock in exchange for
notes payable...................... 79,292 79 19,921 -- -- 20,000
Net loss............................. -- -- -- (733,408) -- (733,408)
--------- ------ ---------- ------------ -------- ------------
Balance, August 31, 1997............... 2,150,370 2,150 131,762 (1,353,755) -- (1,219,843)
Exercise of stock options............ 11,765 11 7,489 -- -- 7,500
Issuance of warrants................. -- -- 51,186 -- -- 51,186
Accretion of redeemable preferred
stock to redemption value.......... -- -- -- (1,983) -- (1,983)
Net loss............................. -- -- -- (1,163,705) -- (1,163,705)
--------- ------ ---------- ------------ -------- ------------
Balance, December 31, 1997............. 2,162,135 2,161 190,437 (2,519,443) -- (2,326,845)
Exercise of stock options............ 75,196 77 19,098 -- -- 19,175
Accretion of redeemable preferred
stock to redemption value.......... -- -- -- (14,920) -- (14,920)
Net loss............................. -- -- -- (5,260,508) -- (5,260,508)
--------- ------ ---------- ------------ -------- ------------
Balance, December 31, 1998............. 2,237,331 2,238 209,535 (7,794,871) -- (7,583,098)
Exercise of stock options.......... 600,264 600 180,085 -- -- 180,685
Accretion of redeemable preferred
stock to redemption value........ -- -- (74,722) -- (74,722)
Compensation cost for stock
options.......................... -- -- 332,238 -- -- 332,238
Issuance of warrant for services... -- -- 331,227 -- -- 331,227
Notes receivable from officers..... (69,271) (69,271)
Net loss........................... -- -- -- (6,408,508) -- (6,408,508)
--------- ------ ---------- ------------ -------- ------------
Balance, December 31, 1999............. 2,837,595 $2,838 $1,053,085 $(14,278,101) $(69,271) $(13,291,449)
========= ====== ========== ============ ======== ============
</TABLE>
See notes to the consolidated financial statements.
F-6
<PAGE> 76
EPRISE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOUR MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
AUGUST 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1997 1998 1999
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss................................................ $(733,408) $(1,163,705) $(5,260,508) $ (6,408,508)
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation and amortization......................... 51,312 27,680 146,225 198,034
Compensation cost for stock options................... -- -- -- 332,238
Loss on sale of property and
equipment........................................... -- 5,642 -- 4,108
Provision for doubtful accounts receivable............ -- 4,600 3,200 155,770
Interest accretion related to warrants................ 4,037 59,361 -- --
Conversion of interest to note payable................ -- 28,165 -- --
Exchange of preferred stock for
services............................................ -- 63,888 91,000 --
Increase (decrease) in cash from:
Accounts receivable................................... 203,110 (63,595) 26,575 (2,097,786)
Due from related parties.............................. -- -- -- (58,145)
Prepaid expenses and other current assets............. (18,407) (70,997) (40,253) (187,288)
Other assets.......................................... (10,399) (19,388) 5,965 (9,323)
Accounts payable...................................... (190) 3,622 44,867 (115,789)
Accrued expenses...................................... 116,317 (11,428) (19,821) 771,813
Deferred revenue...................................... 249,631 (81,985) (256,327) 481,851
--------- ----------- ----------- ------------
Net cash used for operating
activities........................................ (137,997) (1,218,140) (5,259,077) (6,933,025)
--------- ----------- ----------- ------------
Cash flows from investing activities:
Purchases of property and equipment..................... (47,941) (165,539) (349,534) (366,432)
Proceeds from sale of property and equipment............ -- 1,010 -- 750
--------- ----------- ----------- ------------
Net cash used for investing
activities........................................ (47,941) (164,529) (349,534) (365,682)
--------- ----------- ----------- ------------
Cash flows from financing activities:
Proceeds from issuance of preferred stock, net of
issuance costs........................................ -- 3,712,581 8,629,928 23,364,830
Payments on notes payable............................... (202,914) (1,056,167) (77,470) (78,754)
Proceeds from issuance of note payable.................. 491,000 1,750,000 257,750 --
Proceeds from exercise of stock options................. 2,500 7,500 19,175 111,414
--------- ----------- ----------- ------------
Net cash provided by (used for) financing
activities........................................ 290,586 4,413,914 8,829,383 23,397,490
--------- ----------- ----------- ------------
Net increase (decrease) in cash........................... 104,648 3,031,245 3,220,772 16,098,783
Cash and cash equivalents, beginning of period............ -- 104,648 3,135,893 6,356,665
--------- ----------- ----------- ------------
Cash and cash equivalents, end of period.................. $ 104,648 $ 3,135,893 $ 6,356,665 $ 22,455,448
========= =========== =========== ============
Supplemental disclosures of cash flow information -- cash
paid for interest....................................... $ 55,642 $ 16,617 $ 46,987 $ --
========= =========== =========== ============
Summary of noncash investing and financing activities
-- Issuance of stock for notes payable.................. $ 20,000 $ 1,225,889 $ -- $ --
========= =========== =========== ============
-- Issuance of stock for note receivable................ $ -- $ -- $ -- $ 69,271
========= =========== =========== ============
-- Issuance of preferred stock for services at fair
value................................................ $ -- $ 63,888 $ 91,000 $ --
========= =========== =========== ============
-- Issuance of warrant for common stock for services.... $ -- -- -- $ 331,227
========= =========== =========== ============
</TABLE>
See notes to the consolidated financial statements.
F-7
<PAGE> 77
EPRISE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
Eprise Corporation and its subsidiary, together referred to as the
"Company," develop, market and implement web content management solutions that
help businesses shape and direct e-business communications effectively and
efficiently. The Company also provides design and other consultative services
designed to help organizations maximize the value they derive from the Company's
web content management solutions. Business is conducted primarily in the United
States.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
UNAUDITED PRO FORMA PRESENTATION
The unaudited pro forma balance sheet as of December 31, 1999, reflects the
conversion of all outstanding shares of Series A, B and C preferred stock to
common stock, which will occur upon closing of an initial public offering.
STOCK SPLIT
The accompanying financial statements reflect a 1 for 2.55 reverse split of
the Company's common stock which is expected to occur immediately prior to the
effectiveness of the Company's proposed public offering. All share and per share
information herein has been retroactively restated to reflect this split.
SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates that affect the reported amounts of assets, liabilities and reported
results of operations. Actual results could differ from those estimates.
REVENUE RECOGNITION
Software license fees are generally recognized when a signed contract has
been received, the product has been shipped and collectibility is probable.
Revenue from maintenance agreements is deferred and recognized ratably over the
term of the agreement. Consulting revenue is recognized as services are
performed.
COSTS OF REVENUE
Costs of revenue consist primarily of personnel costs related to the
provision of services. Costs of licenses, which are comprised of media and
documentation costs, are not material in any period presented.
COMPREHENSIVE INCOME (LOSS)
The Company does not have any items of comprehensive income (loss) other
than net loss.
F-8
<PAGE> 78
EPRISE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist primarily of demand deposits and highly
liquid short-term instruments purchased with remaining maturities of three
months or less.
DEPRECIATION AND AMORTIZATION
Property and equipment are stated at cost. Repairs and maintenance are
expensed as incurred, while betterments are capitalized. Depreciation and
amortization are provided using the straight-line method over estimated useful
lives ranging from three years for computer equipment to seven years for
furniture and fixtures. Leasehold improvements are amortized over the life of
the asset or the lease, whichever is shorter.
LONG-LIVED ASSETS
Upon occurrence of certain events or changes in circumstances, the Company
reviews the carrying value of its long-lived assets to determine if impairment
has occurred and, if necessary, adjusts the carrying value accordingly. No
adjustments have been required to date.
STOCK-BASED COMPENSATION
Compensation expense associated with awards of stock or options to
employees is measured using the intrinsic-value method. Compensation expense
associated with awards to nonemployees is measured using the fair-value method.
(See Note 6)
INCOME TAXES
Deferred income taxes are provided for differences between the financial
statement carrying amounts and tax basis of the Company's assets and liabilities
and tax loss and credit carryforwards, using enacted tax rates in effect in the
years in which the differences are expected to reverse. Valuation allowances are
provided to the extent realization of deferred tax assets is not considered more
likely than not.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs, other than software development costs, are
expensed as incurred. Software development costs are capitalized upon
achievement of technological feasibility. To date, no costs have been incurred
which qualify for capitalization.
NET LOSS PER SHARE
PRO FORMA NET LOSS PER SHARE
Pro forma net loss per share has been computed using the weighted-average
number of shares of common stock outstanding during each period. In addition,
for purposes of pro forma net loss per share, all shares of Series A, B and C
preferred stock, which are convertible into common stock on a one-for-one basis
and are expected to be converted to common upon closing of this offering, have
been treated as though they were common stock in all periods in which such
shares were outstanding.
HISTORICAL NET LOSS PER SHARE
Historical net loss per share has been computed using the weighted-average
number of shares of common stock outstanding during each period. Diluted amounts
per share would
F-9
<PAGE> 79
EPRISE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
include the impact of the Company's outstanding potential common shares, such as
options and warrants (computed using the treasury stock method) and convertible
preferred stock. However, the effect of these items would be antidilutive in all
periods presented and they are excluded from the computation. Had such shares
been included in the computation, weighted average shares would have been
increased by 1,794,249 shares in 1999.
CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS
The Company's revenues are derived from various customers who generally are
not required to provide collateral for amounts owed to the Company. The Company
operates in one segment. The Company's customers are dispersed over a wide
geographic area.
Major customers accounted for the following percentages of the Company's
revenues:
<TABLE>
<CAPTION>
YEAR FOUR MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
AUGUST 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1997 1998 1999
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Customer A........... -- 21% 58% 13%
Customer B........... -- 16 -- --
Customer C........... -- 15 -- --
Customer D........... -- 13 -- --
Customer E........... 22% -- -- --
Customer F........... -- -- -- 10%
</TABLE>
No other customers accounted for more than 10% of revenue in any of the
periods presented.
DUE FROM RELATED PARTIES
Amounts shown as due from related parties represent cash due from employees
at December 31, 1999 for exercise of stock options. This cash was received in
January 2000.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
DERIVATIVE INSTRUMENTS
On June 1998, the Financial Accounting Standards Board released Statement
of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for fiscal years beginning after
June 15, 2000. The new standard requires that all companies record derivatives
on the balance sheet as assets or liabilities, measured at fair value. Gains or
losses resulting from changes in the values of those derivatives would be
accounted for based on the use of the derivative and whether it qualifies for
hedge accounting. Management is currently assessing the impact of SFAS No. 133
on the financial statements of the Company. The Company will adopt this
accounting standard on January 1, 2001.
SOFTWARE REVENUE RECOGNITION
In December 1998, the American Institute of Certified Public Accountants
released Statement of Position No. 98-9 ("SOP 98-9"), "Modification of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions." SOP 98-9
amends SOP 97-2 to provide
F-10
<PAGE> 80
EPRISE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
guidance related to determination of the allocation of revenues in multiple
element contracts under certain circumstances. SOP 98-9 will be effective for
transactions entered into in the Company's fiscal year beginning January 1,
2000. The Company does not expect that adoption of SOP 98-9 will have a material
impact on financial position or the results of operations.
3. LINES OF CREDIT
The Company has lines of credit with a bank providing for borrowings of up
to $1,000,000 for working capital ($800,000 prior to March 26, 1999) and
borrowings of up to $500,000 for equipment purchases ($400,000 prior to March
26, 1999).
Borrowings under the working capital commitment are limited to the lesser
of $1,000,000 or 80% of eligible accounts receivable. The revolving line of
credit expires on March 26, 2000. Any borrowings outstanding under the working
capital line of credit bear interest at the bank's prime rate plus 1%. As of
December 31, 1998 and 1999, there were no borrowings under the working capital
line of credit. The equipment line of credit was available to purchase equipment
acquisitions through December 26, 1999. Borrowings under the equipment line of
credit bear interest at the bank's prime rate plus 1.5%. At December 31, 1998
and 1999, $243,430 and $78,756 were outstanding under the initial tranche of the
equipment line of credit, respectively. As of December 31, 1999, there were no
borrowings under the second tranche of the lease line of credit. Minimum lease
payments at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
- ----------------------
<S> <C>
2000................................................ $ 97,701
2001................................................ 82,444
--------
Total payments...................................... 180,145
Less portion representing interest.................. 15,472
--------
Net amount due...................................... 164,673
Current portion of note payable..................... 85,917
--------
Long-term note payable.............................. $ 78,756
========
</TABLE>
Both the revolving line of credit and the equipment line of credit are
collateralized by substantially all of the Company's assets. The lines of credit
contain covenants requiring minimum levels of liquidity and tangible net worth,
and prohibit the payment of cash dividends. At December 31, 1998, the Company
was not in compliance with maximum net loss covenants contained in the
agreements related to the lines of credit; the bank has waived the events of
non-compliance for 1998, and the agreements have been amended. At December 31,
1999, the Company was in compliance with the terms and covenants contained in
the amended lines of credit.
4. NOTES PAYABLE AND OTHER OBLIGATIONS
CONVERTIBLE DEMAND NOTES PAYABLE
In August 1997, the Company entered into a convertible demand note payable
with an investor in the amount of $200,000, bearing interest at a rate of 10%
per annum. Effective with the issuance of the Series A redeemable convertible
preferred stock in December 1997 ("Series A"), the investor elected to convert
the note and accrued interest into 415,983 shares of Series A (see Note 5).
F-11
<PAGE> 81
EPRISE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On October 9, 1997, the Company issued a $1,000,000 convertible demand note
payable, bearing interest at 10% per annum. Effective with the issuance of
Series A, the investor elected to convert the note and accrued interest into
2,050,843 shares of Series A (see Note 5). In connection with the issuance of
this note, the Company issued the investor a warrant to purchase 326,995 shares
of Series A for $0.49695 per share (see Note 6).
ACCOUNTS RECEIVABLE FINANCING
The Company has an agreement with a bank to finance its accounts receivable
with recourse. There were no borrowings under the agreement during 1998 or 1999.
The outstanding balance due to the bank under this agreement at December 31,
1997 was $37,696, which was repaid in 1998. The agreement has no defined
termination date.
5. REDEEMABLE CONVERTIBLE PREFERRED STOCK
SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK
In December 1997, the Company issued 10,189,936 shares of Series A, $0.01
par value. The issuance involved the sale of 7,594,550 shares for approximately
$3,774,100 and the conversion of a note payable and payment in kind for services
rendered of a total of $1,225,889 into 2,466,826 shares. Issuance costs
approximated $61,500 and are being accreted to the carrying value of the Series
A stock over the period to the stock's scheduled redemption date.
SERIES B REDEEMABLE CONVERTIBLE PREFERRED STOCK
In August 1998, the Company sold 14,272,113 shares of Series B and received
proceeds of approximately $8,530,000. Issuance costs approximated $33,000 and
are being accreted to the carrying value of the Series B stock over the period
to the stock's scheduled redemption date.
SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK
In November 1999, the Company issued 16,233,766 shares of Series C, $0.01
par value, and received proceeds of $25,000,000. Issuance costs approximated
$1,939,000, which includes the value of a warrant granted to the placement agent
in connection therewith (Note 6), and will be accreted to the carrying value of
the Series C stock over the period to the stock's scheduled redemption date.
The rights and preferences of the different classes of preferred stock are
as follows:
Liquidation -- Upon liquidation, dissolution or winding up of the
Company, holders of the Series C will be entitled to receive, before any
distribution is made to any other class of currently outstanding capital
stock, an amount equal to $1.54 per share, plus all accrued and unpaid
dividends, if any. Following this distribution to the holders of the Series
C, the holders of Series A and B will be entitled to receive, on a pari
passu basis, before any distribution or payment is made on the common
stock, an amount equal to $0.49695 and $0.60 per share, respectively, plus
all accrued and unpaid dividends, if any. The remaining assets will be
distributed among the holders of Series A, B and C and the common stock on
an "as if" converted basis. If the assets of the Company are insufficient
to permit payment in full to the holders of Series A and B of all amounts
distributable to them, then the entire assets of the Company available for
distribution will be distributed ratably among the holders of Series A and
B in proportion to the full preferential amount each holder is otherwise
entitled to receive.
F-12
<PAGE> 82
EPRISE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Conversion -- Each share of Series A, B or C is convertible at the
option of the holder into shares of common stock on a 1 for 2.55 basis,
subject to adjustment in the event of subsequent issuances of securities at
a price per share that is lower than the price paid by the preferred
stockholders. Conversion of all classes of currently outstanding preferred
stock into common becomes automatic upon the closing of an initial public
offering with gross proceeds of at least $15,000,000 and a per share price
of at least $0.98, as to the Series A and B, and $1.21 as to the Series C.
Conversion also becomes automatic if at least two-thirds of the preferred
shareholders, voting as a single class, so elect or if at least 90% of the
outstanding preferred shares have been converted to common.
Dividends -- The holders of Series A, B and C are entitled to receive
dividends, if and when declared on the shares of common stock, on an "as
if" converted basis.
Voting -- The holders of Series A, B and C vote together with all
other classes and series of stock of the corporation as one class. Each
share of Series A, B and C entitles the holder to a number of votes equal
to the number of shares of common stock into which the preferred shares
could be converted on that date.
Redemption -- Upon the election of a majority of the Series C holders
at any time on or after December 18, 2002, the Company will be required to
redeem all of the then outstanding shares of Series C in three equal
installments. The redemption price per share is equal to the greater of
$1.54 per share plus all accrued but unpaid dividends, if any, or the fair
market value of the Series C shares. These redemption rights of the Series
C holders are senior to the redemption rights described below for the
Series A and B shares. Should sufficient funds exist if redemption of the
Series C has occurred and upon the election of the majority of the Series A
and B holders at any time on or after December 18, 2002, the Company will
be required to redeem all of the then outstanding shares of the Series A
and B in three equal annual installments. The redemption price per share is
equal to the greater of $0.49695 for Series A and $0.60 for Series B, plus
all declared but unpaid dividends, if any, or the fair market value of the
stock.
Covenants -- The Company's fourth amended and restated certificate of
incorporation provides for separate, identical covenants for all classes of
redeemable preferred stock as follows: except with the approval of a
majority of each class of redeemable preferred stock outstanding, the
Company may not amend its Certificate of Incorporation or By-laws; increase
the number of shares of redeemable preferred stock, or reclassify any
common stock into shares having any preference or priority superior to or
in parity with the redeemable preferred stock; create, authorize or issue
any class or classes of stock senior to or in parity with the redeemable
preferred stock; pay or declare any dividend or distribution on any shares
of common stock; or effect any sale, lease, assignment, transfer or other
conveyance (other than the grant of a mortgage or security interest in
connection with indebtedness for borrowed money) of all or substantially
all the assets of the Company, any liquidation, dissolution or winding up
of, or any consolidation or merger involving the Company, or
recapitalization of the Company.
In addition, except with the approval of 51% of the holders of Series C
preferred stock, the Company may not issue additional securities (other than
under an approved plan), adopt or amend its stock option plans, sell or lease
the assets of the Company or impair its ability to perform under the Series C
Purchase Agreement.
F-13
<PAGE> 83
EPRISE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1998 and 1999, the number of shares, and liquidation
value of each class of redeemable convertible preferred stock are as follows:
<TABLE>
<CAPTION>
1998 1999
----------- -----------
<S> <C> <C>
Number of shares:
Series A............................................ 10,515,925 10,515,925
Series B............................................ 14,320,446 14,320,446
Series C............................................ -- 16,233,766
Redemption and liquidation value:
Series A............................................ $ 5,225,889 $ 5,225,889
Series B............................................ 8,592,268 8,592,268
Series C............................................ -- 25,000,000
</TABLE>
6. STOCKHOLDERS' DEFICIENCY
In August 1998, the Company amended its Certificate of Incorporation to
increase the number of authorized shares of common stock from 25,000,000 to
40,000,000. In November 1999, the number of authorized shares of common stock
was further increased to 58,500,000.
WARRANTS
In connection with the issuance of a bridge note payable to a bank issued
and paid in 1997 (see Note 4), the Company issued a warrant to purchase 19,728
shares of the Company's common stock at an exercise price of $0.03 per share.
The warrant expires five years from the issuance date. The estimated fair value
of the warrant as of the grant date, $12,205, was recorded as a discount on the
bridge note. This discount was amortized to interest expense over the period the
bridge note payable was outstanding.
In connection with the issuance of a convertible demand note payable,
issued and paid in 1997 (see Note 4), the Company issued a warrant to purchase
326,995 shares of the Company's Series A preferred stock at an exercise price of
$0.49695 per share. The warrant expires five years from the issuance date. The
estimated fair value of the warrant as of the date of the grant, $41,589, was
recorded as a discount on the convertible demand note payable and charged to
interest expense during the four months ended December 31, 1997.
In connection with the issuance of a promissory note payable, issued and
paid in 1997 (see Note 4), the Company issued a warrant to purchase 29,592
shares of the Company's common stock at an initial exercise price of $1.27 per
share, which may be adjusted upon issuance of securities at a price less than
the initial exercise price of the warrant. The warrant expires five years from
the issuance date. The estimated fair value of the warrant as of the date of the
grant, $9,597, was recorded as a discount on the promissory note and charged to
interest expense during the four months ended December 31, 1997.
In connection with the private placement of 16,233,776 shares of Series C
preferred stock, the Company issued to the placement agent a warrant to purchase
254,598 shares of common stock at an exercise price of $3.93 per share. The
warrant expires five years from the issuance date (September 1999). The
estimated fair value of the warrant as of the date of grant was $331,227. The
warrant has been recorded as an issuance cost and has been offset against the
initial carrying value of the Series C Preferred Stock.
F-14
<PAGE> 84
EPRISE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
All warrants were valued on the date of grant using the Black-Scholes
option pricing model. Among the assumptions used to value these warrants were as
follows:
<TABLE>
<CAPTION>
FOUR MONTHS
YEAR ENDED ENDED YEAR ENDED
AUGUST 31, DECEMBER 31, DECEMBER 31,
1997 1997 1999
----------- ------------ ------------
<S> <C> <C> <C>
Risk-free interest rate................. 6.1% - 6.75% 6.0% 6.0%
Expected life of warrant................ 5 years 5 years 5 years
Expected dividend payment rate, as a
percentage of the stock price on the
date of grant......................... -- -- --
Assumed volatility...................... 45% 45% 51%
</TABLE>
STOCK OPTIONS
In August 1997, the Company adopted the 1997 Stock Option Plan (the "1997
Plan"), which provides for the issuance of common stock as either incentive
stock options ("ISOs") or nonqualified stock options ("NSOs"). Under the terms
of the 1997 Plan, ISOs are to be granted at the fair market value of the
Company's common stock on the date of grant and NSOs are to be granted at a
price determined by the Board of Directors. ISOs and NSOs generally vest over
four years and have contractual lives of up to ten years. In December 1999, the
Company amended the grants outstanding under its stock option plans to allow the
holder of the affected options to exercise their options immediately with a
resale restriction on the underlying stock which lapses over a four year period.
This amendment did not result in a new measurement date.
In December 1999, the 1997 Plan was amended to provide for automatic
increases in options available for grant on January 1 of each of 2000, 2001 and
2002. The increase in options available (and the related reserved shares of
common stock) in any given year is limited to the lesser of 5% of the total
outstanding shares of common stock as of December 31st of the previous year or
1,372,549 additional options.
F-15
<PAGE> 85
EPRISE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of the effective date of the 1997 Plan, any unvested or unexercised
options that were issued under the 1997 Plan's predecessor, the 1994 Plan, that
are forfeited will become available for issuance under the 1997 Plan thereby
increasing the options available for grant under the 1997 Plan to a maximum of
4,144,281 shares. Option activity under both the 1997 and 1994 plans is as
follows:
<TABLE>
<CAPTION>
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
NUMBER OF EXERCISE FAIR
SHARES PRICE VALUE
--------- --------- ---------
<S> <C> <C> <C>
Outstanding, September 1, 1996........... 227,452 $0.64
Granted................................ 423,529 0.64 $0.15
Exercised.............................. (3,922) 0.64
Canceled............................... (214,510) 0.64
---------
Outstanding, August 31, 1997............. 432,549 0.64
Granted................................ 844,082 0.64 0.15
Exercised.............................. (11,765) 0.64
Canceled............................... (111,373) 0.64
---------
Outstanding, December 31, 1997........... 1,153,493 0.64
Granted................................ 962,393 0.28 0.08
Exercised.............................. (75,196) 0.26
Canceled............................... (239,706) 0.26
---------
Outstanding, December 31, 1998........... 1,800,984 0.26
Granted................................ 1,380,940 0.99 2.52
Exercised.............................. (600,287) 0.30
Canceled............................... (356,373) 0.29
---------
Outstanding and exercisable, December 31,
1999................................... 2,225,264 0.71
=========
Vested, December 31, 1999................ 586,549 0.26
=========
Vested, December 31, 1998................ 337,902 0.26
=========
Vested, December 31, 1997................ 137,255 0.64
=========
Vested, August 31, 1997.................. 98,039 0.64
=========
</TABLE>
In October 1999, the Company granted options to acquire 133,725 shares of
common stock to employees at an exercise price of $0.64. In December 1999, the
Company granted options to acquire 200,196 shares of common stock to employees
at an exercise price of $3.53. In January 2000, the Company granted options to
acquire 259,118 shares of common stock to employees at an exercise price of
$6.89.
In July, 1999, the Board of Directors approved a stock loan program, which
allows specified employees to fund the purchase of common stock pursuant to the
exercise of stock options through loans from the Company. Borrowings are limited
to 50% of the employee's annual salary. Loans under this program bear interest
at a variable rate of 0.5% over the Company's cost of funds and are secured by
the underlying shares. All loans are due no later
F-16
<PAGE> 86
EPRISE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
than five years from the date of the loan. At December 31, 1999, $69,271 had
been advanced to employees under this program.
In January 2000, the Board of Directors of the Company approved the 2000
Employee Stock Purchase Plan, which allows employees of the Company to purchase
common stock of the Company through payroll deductions at 85% of the then fair
market value of the Company's stock. The Company reserved 588,235 shares for
issuance under the plan. The 2000 Employee Stock Purchase Plan provides for
automatic increases in shares available for purchase under the plan. In general,
the increase in shares available in any given year is limited to the lesser of
1% of the total outstanding shares of common stock as of December 31st of the
previous year or 294,118 additional shares.
The board of directors has approved the 2000 Non-Employee Director Stock
Plan, which will become effective upon the effectiveness of the Company's
proposed initial public offering. The 2000 Non-Employee Director Stock Plan
provides for the issuance of options covering up to 274,510 shares of common
stock to non-employee directors. Under the plan, non-employee directors will
receive a one-time grant of 15,686 options upon election to the Board of
Directors. In addition, each year all non-employee directors will automatically
receive an additional grant of 7,843 shares following the Company's annual
meeting. Options granted under the plan will be immediately exercisable, but
will be subject to repurchase restrictions which will lapse over a three year
period following the grant. Options granted under the plan will contain exercise
prices equal to the fair market value of the underlying common stock on the date
of grant.
At December 31, 1999, there were 1,221,964 options available for grant
under the 1997 Plan, including those shares forfeited under the 1994 Plan. In
February 1998, the Company's Board approved the repricing of all outstanding
options on that date, covering approximately 1,153,333 shares, to $0.26 per
share to reflect the Board's estimate of the fair value of the underlying common
stock on the date of the repricing.
Grants made during 1999 contained exercise prices which were the Company's
best estimate of fair value of the underlying common stock on the date of grant.
However, subsequent to the grant date, management concluded that for grants
after the release of the new version of the Company's principal product, these
estimates may not have fully reflected the impact of this event. Management has
concluded that for grants made between May and November 1999, the value of the
preferred stock sold in November 1999 (adjusted for the reverse common stock
split of 1 for 2.55) less a 10% discount reflecting the significant preferences
enjoyed by the preferred stock is a more reliable estimate of the fair value of
the common stock during this period. For grants made in December 1999,
management concluded that the mid-point value implied in the range of prices for
a proposed initial public offering ($9.00) is a more reliable estimate of the
fair value of the common stock during the period. For grants during this period,
compensation cost aggregated $3,960,234, which will be amortized to expense over
the four year vesting period of the option grants. For the year ended December
31, 1999, compensation expense recorded related to these grants aggregated
$332,238.
F-17
<PAGE> 87
EPRISE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The fair value of the options on their grant date was measured using the
Black-Scholes option pricing model. Key assumptions used to apply this option
pricing model are as follows:
<TABLE>
<CAPTION>
FOUR MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
AUGUST 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1997 1998 1999
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Risk-free interest
rate................... 6.1% - 6.75% 6.0% 6.0% 6.0%
Expected life of option
grants................. 5 years 5 years 5 years 5 years
Expected dividend payment
rate, as a percentage
of the stock price on
the date of grant...... -- -- -- --
Assumed volatility....... 45% 45% 45% 51%
</TABLE>
The option-pricing model used was designed to value readily tradable stock
options with relatively short lives. However, management believes that the
assumptions used to value the options and the model applied yield a reasonable
estimate of the fair value of the grants made under the circumstances.
The following table sets forth information regarding options outstanding
and vested at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS VESTED
- ------------------------------------------------------------ ---------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE REMAINING EXERCISE EXERCISE
SHARES PRICE LIFE PRICE SHARES PRICE
------ ------------ ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
2,225,264............ $0.26 - 3.53 9.00 years $0.71 586,549 $0.26
</TABLE>
As described in Note 2, the Company uses the intrinsic value method to
measure compensation expense associated with grants of stock options to
employees. If the Company had used the fair value method to measure
compensation, reported net loss would have been as follows:
<TABLE>
<CAPTION>
FOUR MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
AUGUST 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1997 1998 1999
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
As reported....................... $(733,408) $(1,163,705) $(5,260,508) $(6,408,508)
========= =========== =========== ===========
Pro forma......................... $(743,799) $(1,179,636) $(5,337,568) $(7,278,924)
========= =========== =========== ===========
Pro forma loss per share.......... $ (0.36) $ (0.54) $ (2.42) $ (3.31)
========= =========== =========== ===========
</TABLE>
RESERVED SHARES
At December 31, 1999, 19,985,224 shares of common stock were reserved for
issuance under the Company's stock option plans and outstanding warrants and for
potential conversion of preferred stock.
F-18
<PAGE> 88
EPRISE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
The components of the provision (benefit) for income taxes consisted of the
following:
<TABLE>
<CAPTION>
FOUR MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
AUGUST 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1997 1998 1999
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Federal -- deferred.................. $(226,000) $(358,000) $(1,619,000) $ (2,144,000)
State -- deferred.................... (70,000) (110,000) (500,000) (627,000)
Increase in valuation allowance...... 296,000 468,000 2,119,000 2,771,000
--------- --------- ----------- ------------
Provison (benefit) for income
taxes.............................. $ -- $ -- $ -- $ --
========= ========= =========== ============
</TABLE>
Taxes during interim periods are computed using the estimated rate
effective for the entire year. Changes to the estimated rate are reflected in
periods in which the change in estimate occurs.
A reconciliation of the statutory federal rate to the effective rate for
all periods is as follows:
<TABLE>
<S> <C>
Statutory Federal rate benefit............................ (34)%
State, net of Federal effect.............................. (6)
Valuation allowance provided.............................. 40
---
Effective rate............................................ --%
===
</TABLE>
Deferred tax assets and liabilities consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------ ------------
<S> <C> <C>
Deferred tax assets (liabilities):
Property and equipment........................ $ (13,400) $ (30,500)
Accounts receivable -- allowance for doubtful
accounts................................... 19,100 75,600
Accrued liabilities........................... -- 182,800
Net operating loss carryforwards.............. 3,115,600 5,471,500
Research and development credits.............. 125,800 318,900
Valuation allowance........................... (3,247,100) (6,018,300)
----------- -----------
$ -- $ --
=========== ===========
</TABLE>
At December 31, 1999, the Company had net operating loss carryforwards for
federal and state tax purposes aggregating approximately $13,500,000 available
to offset future taxable income. These net operating loss carryfowards expire in
varying amounts through 2013. At December 31, 1999, the Company had federal and
state tax credits aggregating $318,900 available to offset future taxable
income, expiring through 2013. Due to changes in ownership due to stock
issuances during 1997, 1998 and 1999, the Company's ability to utilize these
carryforwards and credits is likely to be limited.
The valuation allowance increased by $2,191,500 and $2,771,200 in 1998 and
1999, respectively, primarily due to the generation of net operating loss
carryforwards and credits for which realization is not reasonably assured.
F-19
<PAGE> 89
EPRISE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. EMPLOYEE BENEFIT PLAN
The Company has a qualified 401(k) retirement plan (the "Plan") under which
eligible employees may contribute up to 20% of their annual compensation,
subject to limitations imposed by the Internal Revenue Code. The Company
provides matching contributions of 50% of the employee salary deferral, up to 5%
of eligible earnings. Employees vest immediately in their contributions and
earnings thereon and ratably over six years in the Company's contributions.
During the year ended August 31, 1997, the four months ended December 31, 1997,
the year ended December 31, 1998 and 1999, the Company made matching
contributions of approximately $13,900, $7,200, $55,800, and $81,882
respectively.
9. COMMITMENTS
LEASE COMMITMENTS
The Company has operating lease agreements for facilities and equipment.
The Company entered into a three-year, noncancelable operating sublease for its
office facilities commencing October 15, 1997. The lease provides that the
Company pay a base monthly rental of approximately $16,500, plus its
proportionate annual share of the facility's common area expenses and real
estate taxes. On November 30, 1997, the Company terminated its previous lease
for office space and paid a $34,000 termination fee.
Subsequent to December 31, 1999, the Company entered into a short-term
lease for an operating facility. This lease calls for rental payments of
$171,126 and expires at the end of September 2000. The Company also entered into
a ten year lease, commencing in October 2000, for a 78,260 sq. ft. operating
facility which calls for base lease payments of $27 per square foot in the first
three years of the lease, $28.75 in years four through six, and $30.75
thereafter.
Future minimum lease commitments for all noncancelable operating leases at
December 31, 1999, including leases entered into subsequent to December 31,
1999, approximated the following:
<TABLE>
<S> <C>
Years Ending December 31:
2000........................................... $ 792,000
2001........................................... 2,115,000
2002........................................... 2,115,000
2003........................................... 2,150,000
2004........................................... 2,252,000
Thereafter..................................... 13,567,000
</TABLE>
Rent expense under operating lease agreements approximated $148,000,
$113,900, (including the termination fee) $198,400 and $255,835 for the year
ended August 31, 1997, the four months ended December 31, 1997, and the years
ended December 31, 1998 and 1999, respectively.
F-20
<PAGE> 90
[INTENTIONALLY LEFT BLANK]
<PAGE> 91
[INTENTIONALLY LEFT BLANK]
<PAGE> 92
[EPRISE CORPORATION LOGO]
<PAGE> 93
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE 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.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 5
Special Note Regarding Forward-
Looking Statements and Industry
Data................................ 13
Use of Proceeds....................... 13
Dividend Policy....................... 13
Capitalization........................ 14
Dilution.............................. 16
Selected Financial Data............... 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 18
Business.............................. 29
Management............................ 40
Certain Transactions.................. 50
Principal Stockholders................ 52
Description of Capital Stock.......... 55
Shares Eligible for Future Sale....... 59
Underwriting.......................... 62
Legal Matters......................... 65
Experts............................... 65
Change in Accountants................. 65
Where You Can Find Additional
Information......................... 65
Index to Financial Statements......... F-1
</TABLE>
DEALER PROSPECTUS DELIVERY OBLIGATION: UNTIL , 2000 (25 DAYS AFTER
THE DATE OF THIS PROSPECTUS), ALL DEALERS THAT BUY, SELL OR TRADE THE COMMON
STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
[EPRISE CORPORATION LOGO]
4,000,000 SHARES
COMMON STOCK
DEUTSCHE BANC ALEX. BROWN
DAIN RAUSCHER WESSELS
WIT SOUNDVIEW
PROSPECTUS
, 2000
<PAGE> 94
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Eprise in connection with the
sale of the common stock being registered under this registration statement. All
amounts shown are estimated, except the SEC registration fee and the NASD filing
fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 12,144
NASD filing fee............................................. 5,100
Nasdaq National Market listing fee.......................... 90,000
Blue Sky fee and expenses (including legal fees)............ 10,000
Printing and engraving expenses............................. 150,000
Legal fees and expenses..................................... 300,000
Accounting fees and expenses................................ 200,000
Transfer agent and registrar fees and expenses.............. 12,000
Miscellaneous expenses...................................... 70,756
--------
Total............................................. $850,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law and our by-laws, as amended, provide
for indemnification of our directors and officers for liabilities and expenses
that they may incur in such capacities. In general, directors and officers are
indemnified with respect to actions taken in good faith in a manner reasonably
believed to be in, or not opposed to, our best interests and, with respect to
any criminal action or proceeding, actions that the indemnitee had no reasonable
cause to believe were unlawful. For a more complete description, you should
refer to our by-laws, as amended, and our proposed amended and restated by-laws
filed as Exhibits 3.5 and 3.6 to this registration statement.
The Underwriting Agreement (filed as Exhibit 1.1 to this registration
statement) provides that the Underwriters are obligated, under certain
circumstances, to indemnify our directors, officers and controlling persons
against certain liabilities, including liabilities under the Securities Act. For
a more complete description, you should refer to Exhibit 1.1 to the registration
statement.
In addition, we have an existing directors and officers liability insurance
policy in effect.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the three years preceding the filing of this registration statement, we
have issued the following securities that were not registered under the
Securities Act. All share numbers and purchase prices reflect a 1-for-2.55
reverse split of the common stock occurring immediately prior to the
effectiveness of the offering that is the subject of this registration.
(a) Issuances of Capital Stock
In August 1997, we issued and sold 79,291 shares of common stock to one
purchaser at a purchase price of approximately $0.26 per share, which was paid
by conversion of a convertible promissory note.
In December 1997 and January 1998, we issued and sold an aggregate of
10,262,604 shares of Series A preferred stock to four investors at a purchase
price of $0.49695 per share,
II-1
<PAGE> 95
for an aggregate sales price of $5.1 million. In addition, we issued 253,321
shares of Series A preferred stock to a consultant as a placement fee in
connection with hiring two executives.
In August 1998, we issued and sold an aggregate of 14,320,446 shares of
Series B preferred stock to ten investors at a purchase price of $0.60 per
share, for an aggregate sales price of approximately $8.6 million.
In November 1999, we issued and sold an aggregate of 16,233,776 shares of
Series C preferred stock to approximately 190 investors at a purchase price of
$1.54 per share, for an aggregate sales price of approximately $25.0 million.
Deutsche Bank Securities Inc. served as placement agent for this offering. As
partial consideration for its services, we issued Deutsche Bank Securities Inc.
a warrant to purchase 254,598 shares of our common stock as described in
paragraph (b) below.
No underwriters were engaged in connection with the foregoing sales of
securities. All such sales were made solely to accredited investors, as defined
in Rule 501 under the Securities Act, and were made in reliance upon the
exemption from registration provided by Section 4(2) of the Securities Act and,
as to the private placement of our Series C preferred stock, Regulation D
promulgated under the Securities Act, for transactions by an issuer not
involving a public offering.
(b) Issuances of Warrants
In July and December 1997, we issued warrants to Silicon Valley Bank to
purchase 19,728 and 29,592 shares of our common stock, respectively, at an
exercise price of $0.0255 and $1.267 per share, respectively, in consideration
for extending two bridge loans to us. These warrants expire in July and December
2002, respectively.
In October 1997, we issued a warrant to an investor to purchase 326,995
shares of our Series A preferred stock at an exercise price of $0.49695 per
share, in consideration for extending a bridge loan to us. This warrant expires
in December 2002.
As of September 1999, we issued a warrant to Deutsche Bank Securities Inc.
to purchase 254,598 shares of our common stock at an exercise price of $3.93 per
share in partial consideration of its services as the placement agent for the
shares of Series C preferred stock offered in November 1999 as described in
paragraph (a) above. This warrant expires in September 2004.
No underwriters were engaged for purposes of the foregoing transactions.
All sales of securities described above were made in reliance upon the exemption
from registration provided by Section 4(2) under the Securities Act for
transactions by an issuer not involving a public offering.
(c) Grants and Exercises of Stock Options
Since January 1, 1997, we have granted stock options to purchase 3,444,313
shares of common stock with exercise prices ranging from $0.255 to $3.93 per
share, to employees and directors under our 1994 and 1997 stock plans. Of these
options, 597,052 have been exercised for an aggregate consideration of $207,359
as of December 31, 1999. The issuance of common stock upon exercise of such
options was exempt either pursuant to Rule 701 under the Securities Act, as a
transaction pursuant to a compensatory benefit plan, or pursuant to Section 4(2)
under the Securities Act, as a transaction by an issuer not involving a public
offering.
II-2
<PAGE> 96
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
a. Exhibits
<TABLE>
<CAPTION>
NO. DESCRIPTION OF DOCUMENT
- --- -----------------------
<C> <S>
1.1+ Form of Underwriting Agreement by and among Eprise and the
Underwriters
3.1+ Third Amended and Restated Certificate of Incorporation of
Eprise Corporation filed in the State of Delaware on
November 2, 1999
3.2 Form of Fourth Amended and Restated Certificate of
Incorporation of Eprise (to be filed with the Secretary of
State of Delaware and effective immediately prior to the
effectiveness of the registration statement)
3.3* Form of Certificate of Amendment to Fourth Amended and
Restated Certificate of Incorporation of Eprise (to be filed
with the Secretary of State of Delaware and effective upon
the effectiveness of the offering)
3.4* Form of Certificate of Amendment to Fourth Amended and
Restated Certificate of Incorporation of Eprise (to be filed
with the Secretary of State of Delaware and effective upon
the closing of the offering.)
3.5+ Corporate bylaws of Inner Circle Technologies, Inc., as
currently in effect
3.6 Form of Amended and Restated By-Laws (to take effect as of
the effective date of the registration statement)
4.1* Specimen certificate for shares of the common stock of
Eprise
4.2 Description of capital stock (contained in Exhibits 3.1 and
3.2)
4.3+ Warrant to purchase 50,307 shares of common stock, issued to
Silicon Valley Bank on July 18, 1997
4.4+ Warrant to purchase 326,995 shares of Series A Preferred
Stock, issued to Prism Venture Partners I, L.P. on October
9, 1997
4.5+ Warrant to purchase 75,460 shares of common stock, issued to
Silicon Valley Bank on December 5, 1997
4.6+ Antidilution Agreement with Silicon Valley Bank, dated
December 5, 1997
4.7+ Warrant to purchase 649,227 shares of common stock, issued
to Deutsche Bank Securities Inc. as of September 8, 1999
5.1* Opinion of Hill & Barlow regarding legality of common stock
to be offered hereunder
10.1* Lease dated as of February , 2000 between NDNE 9/90 200
Crossing Boulevard, LLC and Eprise Corporation, relating to
the future principal executive offices of Eprise at 200
Crossing Boulevard, Framingham, Massachusetts
10.2+ Sublease Agreement between NovaLink USA Corporation and
Merkert Enterprises, Inc., as amended
10.3+ Sublease Agreement dated June 9, 1999 between Aquila
Biopharmaceuticals, Inc. and Eprise Corporation
10.4 Eprise Corporation 1997 Stock Option Plan, as amended
through December 1, 1999
10.5 Eprise 1997 Amended and Restated Stock Option Plan
10.6+ Inner Circle Technologies, Inc. 1994 Stock Option Plan
10.7 Eprise 2000 Non-Employee Director Stock Option Plan
10.8+ Employment Agreement between Eprise Corporation and Joseph
A. Forgione dated as of November 4, 1997
10.9+ Employment Agreement between Eprise Corporation and Jonathan
B. Radoff dated as of December 17, 1997
</TABLE>
II-3
<PAGE> 97
<TABLE>
<CAPTION>
NO. DESCRIPTION OF DOCUMENT
- --- -----------------------
<C> <S>
10.10 Eprise 2000 Employee Stock Purchase Plan dated January 5,
2000
10.11+ Eprise Corporation Retirement Savings Plan dated October 14,
1998, as amended
10.12+ Second Amended and Restated Stockholders Agreement dated as
of November 8, 1999 among Eprise and the preferred
stockholders of Eprise......................................
10.13+ Second Amended and Restated Registration Rights Agreement
dated as of November 8, 1999 among Eprise and the preferred
stockholders of Eprise......................................
10.14+ Registration Rights Agreement dated July 18, 1997 among
Eprise and Silicon Valley Bank..............................
10.15+ Registration Rights Agreement dated December 5, 1997 among
Eprise and Silicon Valley Bank..............................
10.16+ Loan and Security Agreement among Eprise and Silicon Valley
Bank dated January 28, 1998.................................
10.17+ Negative Pledge Agreement among Eprise and Silicon Valley
Bank dated , 1997...............................
10.18+ First Loan Modification Agreement among Eprise and Silicon
Valley Bank dated March 1999................................
16+ Letter re Change in Certifying Accountant...................
21.1 List of Subsidiaries........................................
23.1* Independent Auditors' Consent -- Deloitte & Touche LLP......
23.2 Independent Accountants' Consent -- Arthur Andersen LLP.....
23.3* Consent of Hill & Barlow, a Professional Corporation
(contained in Exhibit 5.1)..................................
23.4 Consent of IDC..............................................
27.1 Eprise Financial Data Schedule of the period ending December
31, 1999
27.2+ Eprise Financial Data Schedule for the period ending
December 31, 1998...........................................
27.3+ Eprise Financial Data Schedule for the period ending
December 31, 1997...........................................
27.4+ Eprise Financial Data Schedule for the period ending August
31, 1997....................................................
</TABLE>
- ------------------------
+ Previously filed.
* To be filed by amendment.
b. Financial Statement Schedules.
None required.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of Eprise
pursuant to the provisions described in Item 14, or otherwise, Eprise has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Eprise of expenses incurred
or paid by a director, officer or controlling person of Eprise 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, Eprise
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 of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-4
<PAGE> 98
Eprise hereby undertakes that:
(1) For purposes of determining any liability under the Securities 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 Eprise pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration statement as of
the time it was declared effective.
(2) For the purpose of determining any liability under the Securities 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.
Eprise hereby undertakes to provide at the closing of this offering to the
underwriters specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
II-5
<PAGE> 99
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 1 to registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in Boston,
Massachusetts on March 3, 2000.
EPRISE CORPORATION
By: /s/ JOSEPH A. FORGIONE
-----------------------------------------------
Joseph A. Forgione
President and Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to registration statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ JOSEPH A. FORGIONE President, Chief Executive March 3, 2000
- ------------------------------------------------ Officer and Director
(Joseph A. Forgione) (Principal Executive
Officer)
/s/ MILTON A. ALPERN Vice President, Finance and March 3, 2000
- ------------------------------------------------ Chief Financial Officer,
(Milton A. Alpern) (Principal Financial and
Accounting Officer)
* Chairman of the Board March 3, 2000
- ------------------------------------------------
(Edson D. de Castro)
* Director March 3, 2000
- ------------------------------------------------
(Deborah M. Besemer)
* Director March 3, 2000
- ------------------------------------------------
(Robert C. Fleming)
* Director March 3, 2000
- ------------------------------------------------
(Alain J. Hanover)
* Director March 3, 2000
- ------------------------------------------------
(Nicholas A. Papantonis)
</TABLE>
II-6
<PAGE> 100
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
* Director March 3, 2000
- ------------------------------------------------
(Jonathan B. Radoff)
* Director March 3, 2000
- ------------------------------------------------
(Joseph Tischler)
*By: /s/ JOSEPH A. FORGIONE
-------------------------------------------
Joseph A. Forgione
Attorney-in-fact
</TABLE>
II-7
<PAGE> 101
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1+ Form of Underwriting Agreement by and among Eprise and the
Underwriters
3.1+ Third Amended and Restated Certificate of Incorporation of
Eprise Corporation filed in the State of Delaware on
November 2, 1999
3.2 Form of Fourth Amended and Restated Certificate of
Incorporation of Eprise (to be filed with the Secretary of
State of Delaware and effective immediately prior to the
effectiveness of the registration statement)
3.3* Form of Certificate of Amendment to Fourth Amended and
Restated Certificate of Incorporation of Eprise (to be filed
with the Secretary of State of Delaware and effective upon
the effectiveness of the offering)
3.4* Form of Certificate of Amendment to Fourth Amended and
Restated Certificate of Incorporation of Eprise (to be filed
with the Secretary of State of Delaware and effective upon
the closing of the offering.)
3.5+ Corporate bylaws of Inner Circle Technologies, Inc., as
currently in effect
3.6 Form of Amended and Restated By-Laws (to take effect as of
the effective date of the registration statement)
4.1* Specimen certificate for shares of the common stock of
Eprise
4.2 Description of capital stock (contained in Exhibits 3.1 and
3.2)
4.3+ Warrant to purchase 50,307 shares of common stock, issued to
Silicon Valley Bank on July 18, 1997
4.4+ Warrant to purchase 326,995 shares of Series A Preferred
Stock, issued to Prism Venture Partners I, L.P. on October
9, 1997
4.5+ Warrant to purchase 75,460 shares of common stock, issued to
Silicon Valley Bank on December 5, 1997
4.6+ Antidilution Agreement with Silicon Valley Bank, dated
December 5, 1997
4.7+ Warrant to purchase 649,227 shares of common stock, issued
to Deutsche Bank Securities Inc. as of September 8, 1999
5.1* Opinion of Hill & Barlow regarding legality of common stock
to be offered hereunder
10.1* Lease dated as of February , 2000 between NDNE 9/90 200
Crossing Boulevard, LLC and Eprise, relating to the future
principal executive offices of Eprise at 200 Crossing
Boulevard, Framingham, Massachusetts
10.2+ Sublease Agreement between NovaLink USA Corporation and
Merkert Enterprises, Inc., as amended
10.3+ Sublease Agreement dated June 9, 1999 between Aquila
Biopharmaceuticals Inc. and Eprise Corporation
10.4 Eprise Corporation 1997 Stock Option Plan, as amended
through December 1, 1999
10.5 Eprise 1997 Amended and Restated Stock Option Plan
10.6+ Inner Circle Technologies, Inc. 1994 Stock Option Plan
10.7 Eprise 2000 Non-Employee Director Stock Option Plan
10.8+ Employment Agreement between Eprise Corporation and Joseph
A. Forgione dated as of November 4, 1997
10.9+ Employment Agreement between Eprise Corporation and Jonathan
B. Radoff dated as of December 17, 1997
10.10 Eprise 2000 Employee Stock Purchase Plan dated January 5,
2000
</TABLE>
<PAGE> 102
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
10.11+ Eprise Corporation Retirement Saving Plan dated October 14,
1998, as amended
10.12+ Second Amended and Restated Stockholders Agreement dated as
of November 8, 1999 among Eprise and the preferred
stockholders of Eprise
10.13+ Second Amended and Restated Registration Rights Agreement
dated as of November 8, 1999 among Eprise and the preferred
stockholders of Eprise
10.14+ Registration Rights Agreement dated July 18, 1997 among
Eprise and Silicon Valley Bank
10.15+ Registration Rights Agreement dated December 5, 1997 among
Eprise and Silicon Valley Bank
10.16+ Loan and Security Agreement among Eprise and Silicon Valley
Bank dated January 28, 1998
10.17+ Negative Pledge Agreement among Eprise and Silicon Valley
Bank dated , 1997
10.18+ First Loan Modification Agreement among Eprise and Silicon
Valley Bank dated March 1999
16+ Letter re Change in Certifying Accountant
21.1 List of Subsidiaries
23.1* Independent Auditors' Consent -- Deloitte & Touche LLP
23.2 Independent Accountants' Consent -- Arthur Andersen LLP
23.3* Consent of Hill & Barlow, a Professional Corporation
(contained in Exhibit 5.1)
23.4 Consent of IDC
27.1 Eprise Financial Data Schedule for the period ending
December 31, 1999
27.2+ Eprise Financial Data Schedule for the period ending
December 31, 1998
27.3+ Eprise Financial Data Schedule for the period ending
December 31, 1997
27.4+ Eprise Financial Data Schedule for the period ending August
31, 1997
</TABLE>
- ------------------------
+ Previously filed.
* To be filed by amendment.
<PAGE> 1
Exhibit 3.2
FORM OF FOURTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF EPRISE CORPORATION
Pursuant to Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware
The undersigned, Joseph A. Forgione, certifies that he is President of
Eprise Corporation, a corporation organized and existing under the laws of the
State of Delaware, and does hereby further certify as follows:
1. The name of the corporation is Eprise Corporation (the
"Corporation"). The name of the Corporation at the time of its incorporation was
Inner Circle Technologies, Inc. The Certificate of Incorporation of the
Corporation, as subsequently amended, was filed in the office of the Secretary
of State of the State of Delaware on September 24, 1992.
2. At a meeting held on January 5, 2000, the Board of Directors
recommended this Fourth Amended and Restated Certificate of Incorporation to the
stockholders for approval as being advisable and in the best interests of the
Corporation.
3. In accordance with Section 228 of the General Corporation Law
of the State of Delaware, this Fourth Amended and Restated Certificate of
Incorporation has been duly approved by written consent of the holders of not
less than (i) a majority of the issued and outstanding shares of the capital
stock of the Corporation entitled to vote thereon and (ii) a majority of the
issued and outstanding shares of each series entitled to vote thereon as a
class.
4. This Fourth Amended and Restated Certificate of Incorporation
restates and integrates and further amends the certificate of incorporation of
the Corporation, as heretofore amended or supplemented.
The text of the Certificate of Incorporation of the Corporation, as
heretofore amended, is amended and restated in its entirety as follows:
FIRST: The name of the Corporation is Eprise Corporation.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of Delaware.
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FOURTH: The Corporation shall have authority to issue 100,163,366
shares of capital stock, consisting of (i) Fifty-Eight Million Five Hundred
Thousand (58,500,000) shares of Common Stock with a par value of $.001 per
share, (ii) Ten Million Eight Hundred Forty-Two Thousand Nine Hundred Twenty
(10,842,920) shares of Series A Convertible Preferred Stock with a par value of
$.01 per share (the "Series A Preferred Stock"), (iii) Fourteen Million Three
Hundred Twenty Thousand Four Hundred Forty-Six (14,320,446) shares of Series B
Convertible Preferred Stock with a par value of $.01 per share (the "Series B
Preferred Stock") and (iv) Sixteen Million Five Hundred Thousand (16,500,000)
shares of Series C Convertible Preferred Stock with a par value of $.01 per
share (the "Series C Preferred Stock," and, together with the Series A Preferred
Stock and the Series B Preferred Stock, the "Preferred Stock"), amounting to an
aggregate par value of $475,134.
The powers, preferences and rights, and qualifications, limitations and
restrictions thereof, in respect of each class or series of stock of the
Corporation shall be as follows:
SECTION 1. VOTING RIGHTS.
Except as otherwise required by law or hereinafter set forth, the
holders of Preferred Stock shall vote together with all other classes and series
of stock of the Corporation as one class upon any matter submitted to the
stockholders for a vote, including, but not limited to, actions amending the
Certificate of Incorporation to increase the number of authorized shares of
Common Stock.
Each share of Preferred Stock shall entitle the holder thereof to such
number of votes per share on each such action as shall equal the number of
shares of Common Stock into which each such share of Preferred Stock held by
such holder could be converted on the date for determination of stockholders
entitled to vote at the meeting or on the date of any written consent.
SECTION 2. DIVIDENDS.
When and as dividends are declared payable in cash, property or shares
of the Corporation's capital stock on shares of Common Stock, the Corporation
shall (except as otherwise provided in SUBSECTION 4.4) declare at the same time
and pay, pari passu to each holder of Preferred Stock, a dividend equal to the
dividend which would have been payable to such holder if the shares of Preferred
Stock held by such holder had been converted into Common Stock on the record
date for the determination of holders of Common Stock entitled to receive such
dividend.
SECTION 3. LIQUIDATION.
3.1 LIQUIDATION PAYMENTS.
3.1.1 In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the holders
of shares of Series C Preferred Stock
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shall be entitled to be paid first out of the assets of the Corporation
available for distribution to holders of the Corporation's capital stock of all
classes an amount equal to $1.54 per share of Series C Preferred Stock (which
amount shall be subject to equitable adjustment whenever there shall occur a
stock dividend, stock split, combination of shares, reclassification or other
similar event with respect to the Series C Preferred Stock), plus all dividends
accrued or declared but unpaid thereon, to and including the date on which full
payment shall be tendered to the holders of the Series C Preferred Stock with
respect to such liquidation, dissolution or winding up (such aggregate amount,
the "Series C Liquidation Payments").
If the assets of the Corporation shall be
insufficient to permit the payment in full of the Series C Liquidation Payments,
then the entire assets of the Corporation available for such distribution shall
be distributed ratably among the holders of the Series C Preferred Stock in
proportion to the full preferential amount each such holder is otherwise
entitled to receive under this SUBSECTION 3.1.1.
3.1.2 In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, after
payment in full of the Series C Liquidation Payments, the holders of shares of
Series A Preferred Stock and Series B Preferred Stock shall be entitled to be
paid out of the assets of the Corporation available for distribution to holders
of the Corporation's capital stock of all classes the following amounts:
(a) in the case of the Series A Preferred
Stock, an amount equal to $.49695 per share of Series A Preferred Stock (which
amount shall be subject to equitable adjustment whenever there shall occur a
stock dividend, stock split, combination of shares, reclassification or other
similar event with respect to the Series A Preferred Stock), plus all dividends
accrued or declared but unpaid thereon, to and including the date on which full
payment shall be tendered to the holders of the Series A Preferred Stock with
respect to such liquidation, dissolution or winding up;
(b) in the case of the Series B Preferred
Stock, an amount equal to $0.60 per share of Series B Preferred Stock (which
amount shall be subject to equitable adjustment whenever there shall occur a
stock dividend, stock split, combination of shares, reclassification or other
similar event with respect to the Series B Preferred Stock), plus all dividends
accrued or declared but unpaid thereon, to and including the date on which full
payment shall be tendered to the holders of the Series B Preferred Stock with
respect to such liquidation, dissolution or winding up.
If the assets of the Corporation remaining
after payment in full of the Series C Liquidation Payments shall be insufficient
to permit the payment in full to the holders of the Series A Preferred Stock and
Series B Preferred Stock of all amounts distributable to them under this
SUBSECTION 3.1.2, then the entire remaining assets of the Corporation available
for such distribution shall be distributed ratably among the holders of the
Series A Preferred Stock and Series B Preferred Stock in proportion to the full
preferential amount each such holder is otherwise entitled to receive under this
SUBSECTION 3.1.2.
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3.1.3 After the payments described in SUBSECTIONS
3.1.1 AND 3.1.2 shall have been made in full to the holders of the Preferred
Stock, or funds necessary for such payments shall have been set aside by the
Corporation in trust for the account of holders of Preferred Stock so as to be
available for such payments, the remaining assets available for distribution
shall be distributed among the holders of the Preferred Stock and the Common
Stock ratably in proportion to the number of shares of Common Stock then held by
them or issuable to them upon conversion of the Preferred Stock then held by
them.
3.1.4 Upon conversion of shares of Preferred Stock
into shares of Common Stock pursuant to SECTION 4 below, the holders of such
Common Stock shall not be entitled to any preferential payment or distribution
in case of any liquidation, dissolution or winding up of the Corporation, but
shall share ratably in any distribution of the assets of the Corporation to all
the holders of Common Stock.
3.1.5 The amounts payable with respect to shares
of Series A Preferred Stock and Series B Preferred Stock under this SUBSECTION
3.1 are sometimes hereinafter referred to as "Series A Liquidation Payments" and
"Series B Liquidation Payments," respectively, and together with the Series C
Liquidation Payments are sometimes hereinafter referred to as the "Liquidation
Payments."
3.2 DISTRIBUTIONS OTHER THAN CASH. Whenever the
distributions provided for in this SECTION 3 shall be payable in property other
than cash, the value of such distributions shall be the fair market value of
such property as determined in good faith by the Board of Directors of the
Corporation.
3.3 MERGER AS LIQUIDATION, ETC. The merger or
consolidation of the Corporation into or with another corporation (except one in
which the holders of capital stock of the Corporation immediately prior to such
merger or consolidation continue to hold at least fifty percent (50%) in voting
power (assuming conversion of all convertible securities and exercise of all
outstanding options and warrants) of the capital stock of the surviving
corporation, in which case the provisions of SUBSECTION 4.6 shall apply), or the
sale of all or substantially all of the assets of the Corporation (other than to
a corporation in which holders of the capital stock of the Corporation hold at
least fifty percent (50%) in voting power (assuming conversion of all
convertible securities and exercise of all outstanding options and warrants) of
the capital stock), shall be deemed to be a liquidation, dissolution or winding
up of the Corporation for purposes of this SECTION 3 with respect to (1) the
Series C Preferred Stock unless the holders of at least 51% of the then
outstanding shares of Series C Preferred Stock (voting as a separate class)
elect to the contrary and (2) the Series A Preferred Stock and Series B
Preferred Stock unless the holders of at least 51% of the then outstanding
shares of Series A Preferred Stock and Series B Preferred Stock (voting as a
single class) elect to the contrary, any such election to be made by giving
written notice thereof to the Corporation at least three days before the
effective date of such event. If such notice is given, the provisions of
SUBSECTION 4.6 shall apply to the series of Preferred Stock which have provided
such notice. Unless such election is made, any consideration received by the
holders of the Preferred Stock as a result of such merger or consolidation shall
be deemed to be applied toward, and all consideration received by the
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Corporation in such asset sale together with all other available assets of the
Corporation shall be distributed toward, the Liquidation Payments attributable
to each such series of Preferred Stock, respectively, as set forth in SUBSECTION
3.1. If such consideration is in the form of property, rights, or other
securities, the value of such property, rights, or other securities shall be
determined in good faith by the Board of Directors of the Corporation.
3.4 NOTICE. Written notice of any proposed liquidation,
dissolution or winding up of the Corporation (including any merger,
consolidation or sale of assets which may be deemed to be a liquidation,
dissolution or winding up of the Corporation under SUBSECTION 3.3), stating a
payment date, the amount of the Liquidation Payments and the place where said
Liquidation Payments shall be payable, shall be given to the holders of record
of the Preferred Stock by first class mail, postage prepaid, or by fax or DHL,
Federal Express or other recognized express international courier service in the
case of non-U.S. stockholders, not less than twenty (20) days prior to the
payment date stated therein, such notice to be addressed to each such holder at
its address as shown by the records of the Corporation. Any holder of
outstanding shares of Preferred Stock may waive any notice required by this
Subsection by a written document specifically indicating such waiver.
SECTION 4. CONVERSION. The holders of the Preferred Stock shall have
conversion rights as follows (the "CONVERSION Rights");
4.1 VOLUNTARY CONVERSION
4.1.1 RIGHT TO CONVERT; CONVERSION PRICE FOR
SERIES A PREFERRED STOCK. Each share of Series A Preferred Stock shall be
convertible, without the payment of any additional consideration by the holder
thereof and at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for the Series A Preferred Stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $.49695 by the
"Series A Conversion Price," determined as hereinafter provided, in effect at
the time of conversion. The Series A Conversion Price at which shares of Common
Stock shall be deliverable upon conversion without the payment of any additional
consideration by the holders of Series A Preferred Stock shall initially be
$.49695 per share (the "SERIES A CONVERSION PRICE"). The initial Series A
Conversion Price shall be subject to adjustment, in order to adjust the number
of shares of Common Stock into which the Series A Preferred Stock is
convertible, as provided in Subsection 4.3.
4.1.2 RIGHT TO CONVERT; CONVERSION PRICE FOR
SERIES B PREFERRED STOCK. Each share of Series B Preferred Stock shall be
convertible, without the payment of any additional consideration by the holder
thereof and at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for the Series B Preferred Stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $.60 by the
"Series B Conversion Price," determined as hereinafter provided, in effect at
the time of conversion. The Series B Conversion Price at which shares of Common
Stock shall be deliverable upon conversion without the payment of any additional
consideration by the holders of Series A Preferred Stock shall initially
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be $.60 per share (the "SERIES B CONVERSION PRICE"). The initial Series B
Conversion Price shall be subject to adjustment, in order to adjust the number
of shares of Common Stock into which the Series B Preferred Stock is
convertible, as provided in Subsection 4.3.
4.1.3 RIGHT TO CONVERT; CONVERSION PRICE FOR
SERIES C PREFERRED STOCK. Each share of Series C Preferred Stock shall be
convertible, without the payment of any additional consideration by the holder
thereof and at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for the Series C Preferred Stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $1.54 by the
"Series C Conversion Price," as defined below, in effect at the time of
conversion. The Series C Conversion Price at which shares of Common Stock shall
be deliverable upon conversion without the payment of any additional
consideration by the holders of Series C Preferred Stock shall initially be
$1.54 per share (the "SERIES C CONVERSION PRICE"). The initial Series C
Conversion Price shall be subject to adjustment, in order to adjust the number
of shares of Common Stock into which the Series C Preferred Stock is
convertible, as provided in Subsection 4.3.
4.1.4 MECHANICS OF VOLUNTARY CONVERSION. Before
any holder of Preferred Stock shall be entitled to convert the same into full
shares of Common Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed for transfer or with duly executed stock
transfer powers sufficient to permit transfer attached, at the office of the
Corporation or of any transfer agent for the Preferred Stock (or such holder
shall notify the Corporation or any transfer agent that such certificates have
been lost, stolen or destroyed and shall execute an agreement reasonably
satisfactory to the Corporation to indemnify the Corporation from any loss
incurred by it in connection therewith), and shall give written notice to the
Corporation at such office that such holder elects to convert the same and shall
state therein such holder's name or the name or names of such holder's nominees
in which such holder wishes the certificate or certificates for shares of Common
Stock to be issued. No fractional shares of Common Stock shall be issued upon
conversion of the Preferred Stock. In lieu of any fractional shares to which the
holder would otherwise be entitled, the Corporation shall pay cash equal to such
fraction multiplied by the then effective Conversion Price. The Corporation
shall, as soon as practicable thereafter, issue and deliver at such office to
such holder of Preferred Stock, or to such holder's nominee or nominees, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid, together with cash in lieu of any
fraction of a share. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
certificates for the shares of Preferred Stock to be converted, and the person
or persons entitled to receive the shares of Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.
4.2 AUTOMATIC CONVERSION
4.2.1 CONVERSION BY TWO-THIRDS VOTE. Each share of
Series A Preferred Stock and Series B Preferred Stock shall automatically be
converted into shares of Common Stock at the then effective Series A Conversion
Price or Series B Conversion Price, respectively,
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if the holders of at least two-thirds of the then outstanding Series A Preferred
Stock and Series B Preferred Stock, voting as a single class, shall so elect by
giving written notice of such election to the Corporation. Each share of Series
C Preferred Stock shall automatically be converted into shares of Common Stock
at the then effective Series C Conversion Price if the holders of at least
two-thirds of the then-outstanding Series C Preferred Stock, voting as a
separate class, shall so elect by giving written notice of such election to the
Corporation. Any such conversion shall be deemed to have occurred immediately
after the close of business on the later of the date specified in such notice or
the date such written notice is actually received by the Corporation.
4.2.2 CONVERSION UPON QUALIFYING PUBLIC OFFERING.
(a) Each share of Series A Preferred Stock
and Series B Preferred Stock shall automatically be converted into shares of
Common Stock at the then effective Series A Conversion Price or Series B
Conversion Price, respectively, upon the closing of an underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of Common Stock for the
account of the Corporation to the public at an initial public offering price per
share of not less than $2.50 (subject to equitable adjustment in the event of
any stock split, stock dividend, combination or reclassification of shares or
other similar event) and with net proceeds to the Corporation of not less than
$15,000,000 (a "SERIES A AND B QUALIFYING INITIAL PUBLIC OFFERING"). In the
event of a Series A and B Qualifying Initial Public Offering, the holders
entitled to receive the Common Stock issuable upon such conversion of the Series
A Preferred Stock and Series B Preferred Stock shall not be deemed to have
converted such Preferred Stock until the closing of the Series A and B
Qualifying Initial Public Offering.
(b) Each share of Series C Preferred Stock
shall automatically be converted into shares of Common Stock at the then
effective Series C Conversion Price upon the closing of an underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of Common Stock for the
account of the Corporation to the public at an initial public offering price per
share of not less than $3.08 (subject to equitable adjustment in the event of
any stock split, stock dividend, combination or reclassification of shares or
other similar event) and with net proceeds to the Corporation of not less than
$15,000,000 (a "SERIES C QUALIFYING INITIAL PUBLIC OFFERING"). In the event of a
Series C Qualifying Initial Public Offering, the holders entitled to receive the
Common Stock issuable upon such conversion of the Series C Preferred Stock shall
not be deemed to have converted their Series C Preferred Stock until the closing
of the Series C Qualifying Initial Public Offering.
4.2.3 CONVERSION UPON CONVERSION OF 90% OF
PREFERRED STOCK.
(a) Each share of Series A Preferred Stock
and Series B Preferred Stock then outstanding shall automatically be converted
into shares of Common Stock at the then-effective Series A Conversion Price or
Series B Conversion Price, respectively, upon the conversion of ninety percent
(90%) or more of the authorized Series A Preferred Stock and Series B Preferred
Stock (measured as a single class). Such conversion shall be deemed to have
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occurred on the date upon which the aggregate number of shares of Series A
Preferred Stock and Series B Preferred Stock which have been converted to Common
Stock equals or exceeds ninety percent (90%) of the aggregate authorized Series
A Preferred Stock and Series B Preferred Stock.
(b) Each share of Series C Preferred Stock
then outstanding shall automatically be converted into shares of Common Stock at
the then-effective Series C Conversion Price upon the conversion of ninety
percent (90%) or more of the authorized Series C Preferred Stock. Such
conversion shall be deemed to have occurred on the date upon which the number of
shares of Series C Preferred Stock which have been converted to Common Stock
equals or exceeds ninety percent (90%) of the aggregate authorized Series C
Preferred Stock.
4.2.4 MECHANICS OF AUTOMATIC CONVERSION. Upon an
automatic conversion pursuant to this SUBSECTION 4.2, all shares of the
applicable series of Preferred Stock shall be converted automatically without
any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or its
transfer agent; PROVIDED, HOWEVER, that the Corporation shall not be obligated
to issue certificates evidencing the shares of Common Stock issuable upon such
conversion unless certificates evidencing such shares of the Preferred Stock
being converted are either delivered to the Corporation or its transfer agent,
or the holder of such shares notifies the Corporation or any transfer agent that
such certificates have been lost, stolen, or destroyed and executes an agreement
reasonably satisfactory to the Corporation to indemnify the Corporation from any
loss incurred by it in connection therewith. Upon the delivery of such
certificates, at the office of the Corporation or of its transfer agent, or upon
the execution and delivery to the Corporation of such agreement, there shall be
issued and delivered to such holder, promptly at such office and in the name as
shown on such surrendered certificate or certificates or specified in such
agreement, a certificate or certificates for the number of shares of Common
Stock into which the shares of the Preferred Stock surrendered were convertible
on the date on which such automatic conversion occurred. No fractional shares of
Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of
any fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Conversion Price.
4.3 ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING
ISSUANCES
4.3.1 SPECIAL DEFINITIONS. For purposes of this
SUBSECTION 4.3, the following definitions shall apply:
(a) "OPTION" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(b) "ORIGINAL ISSUE DATE" shall mean the first date on which a
share of the applicable series of Preferred Stock was issued.
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(c) "CONVERTIBLE SECURITIES" shall mean any evidences of
indebtedness, shares (other than shares of Common Stock and Preferred
Stock) or other securities directly or indirectly convertible into or
exchangeable for Common Stock.
(d) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of
Common Stock issued (or, pursuant to SUBSECTION 4.3.3, deemed to be
issued) by the Corporation after the applicable Original Issue Date,
other than:
(i) up to 10,842,940 shares of Common Stock issued or
issuable upon conversion of shares of Series A Preferred
Stock, provided that the number of shares referred to in this
clause shall be appropriately adjusted to give effect to any
changes in the Series A Conversion Price pursuant to the
antidilution provisions of this SECTION 4;
(ii) up to 14,320,446 shares of Common Stock issued or
issuable upon conversion of shares of Series B Preferred
Stock, provided that the number of shares referred to in this
clause shall be appropriately adjusted to give effect to any
changes in the Series B Conversion Price pursuant to the
antidilution provisions of this SECTION 4;
(iii) up to 16,500,000 shares of Common Stock issued or
issuable upon conversion of shares of Series C Preferred
Stock, provided that the number of shares referred to in this
clause shall be appropriately adjusted to give effect to any
changes in the Series C Conversion Price pursuant to the
antidilution provisions of this SECTION 4; and
(iv) such number of shares of Common Stock as may be
issued or issuable to officers, employees or directors of the
Corporation pursuant to either a stock purchase or option plan
or other employee stock bonus arrangement approved by the
directors of the Corporation (appropriately adjusted to take
account of any stock split, stock dividend, combination of
shares or the like); PROVIDED, HOWEVER, that such options or
purchases must be granted or made at fair market value and
approved by the Board of Directors, and the maximum number of
shares issuable under any such arrangement must be approved by
the holders of a majority in interest of the Preferred Stock,
voting as a single class; and PROVIDED, further, that the
issuance of up to 8,152,614 shares of Common Stock under
option plans in effect as of November 3, 1999 (less any
issuances to date under such plans) is deemed approved by the
holders of Series C Preferred Stock.
4.3.2 NO ADJUSTMENT OF CONVERSION PRICE. No
adjustment in the number of shares of Common Stock into which the Preferred
Stock is convertible shall be made, by adjustment in the Conversion Price for
any series of Preferred Stock (referred to generally as a "Series Conversion
Price"), in respect of the issuance of Additional Shares of Common Stock or
otherwise, unless the consideration per share for an Additional Share of Common
Stock issued or deemed to be issued by the Corporation is less than the
applicable Series Conversion Price in
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effect on the date of, and immediately prior to, the issue of such Additional
Share of Common Stock.
4.3.3 ISSUE OR SALE OF SECURITIES DEEMED ISSUE OF
ADDITIONAL SHARES OF COMMON STOCK.
(a) OPTIONS AND CONVERTIBLE SECURITIES. In
the event the Corporation at any time or from time to time after the applicable
Original Issue Date shall issue or sell any Options or Convertible Securities
(other than those excluded from the definition of Additional Shares of Common
Stock in SUBSECTION 4.3.1(d) pursuant to clause (iv) thereof) or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares (as set forth in the instrument relating thereto without regard to any
provisions contained therein for a subsequent adjustment of such number) of
Common Stock issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or sale or, in case such a record date shall
have been fixed, as of the close of business on such record date, provided that
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to SUBSECTION 4.3.5 hereof)
received for such Additional Shares of Common Stock would be less than any
Series Conversion Price in effect on the date of and immediately prior to such
issue or sale or such record date, as the case may be, and shall be deemed to be
Additional Shares of Common Stock only with respect to the series of Preferred
Stock as to which the consideration received is less than the Conversion Price
therefor, and provided further that in any such case in which Additional Shares
of Common Stock are deemed to be issued:
(i) no further adjustment in the applicable Series Conversion
Price shall be made upon the subsequent issue of Convertible Securities
or shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
(ii) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any change in the
consideration payable to the Corporation, or change in the number of
shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the applicable Series Conversion Price computed upon
the original issue thereof (or upon the occurrence of a record date
with respect thereto), and any subsequent adjustments based thereon,
shall, upon any such change becoming effective, be recomputed to
reflect such change insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities;
(iii) upon the expiration of any such Options or any rights of
conversion or exchange under such Convertible Securities which shall
not have been exercised, the applicable Series Conversion Price
computed upon the original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent adjustments based
thereon, shall, upon such expiration, be recomputed as if:
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(A) in the case of Convertible Securities or Options for
Common Stock, the only Additional Shares of Common Stock
issued were the shares of Common Stock, if any, actually
issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, and the consideration
received therefor was the consideration actually received by
the Corporation for the issue of all such Options, whether or
not exercised, plus the consideration actually received by the
Corporation upon such exercise, or for the issue of all such
Convertible Securities which were actually converted or
exchanged, plus the additional consideration, if any, actually
received by the Corporation upon such conversion or exchange;
and
(B) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued upon
the exercise thereof were issued at the time of issue of such
Options, and the consideration received by the Corporation for
the Additional Shares of Common Stock deemed to have been then
issued was the consideration actually received by the
Corporation for the issue of all such Options, whether or not
exercised, plus the consideration deemed to have been received
by the Corporation (determined pursuant to SUBSECTION 4.3.5)
upon the issue of the Convertible Securities with respect to
which such Options were actually exercised;
(iv) in the case of any Options which expire by their terms not
more than 30 days after the date of issue thereof, no adjustment of the
applicable Conversion Price shall be made until the expiration or
exercise of all such Options, whereupon such adjustment shall be made
in the same manner provided in clause (iii) above; and
(v) if such record date shall have been fixed and such Options or
Convertible Securities are not issued on the date fixed therefor, the
adjustment previously made in the applicable Series Conversion Price
which became effective on such record date shall be canceled as of the
close of business on such record date, and thereafter the applicable
Series Conversion Price shall be adjusted pursuant to this SUBSECTION
4.3.3 as of the actual date of their issuance.
(b) STOCK DIVIDENDS, STOCK DISTRIBUTIONS AND
SUBDIVISIONS. In the event the Corporation at any time or from time to time
after the Original Issue Date shall declare or pay any dividend or make any
other distribution on the Common Stock payable in Common Stock or effect a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise) then and in any such event Additional Shares of Common Stock shall be
deemed to have been issued:
(i) in the case of any such dividend or distribution, immediately
after the close of business on the record date for the determination of
holders of any class of securities entitled to receive such dividend or
distribution, or
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(ii) in the case of any such subdivision, at the close of business
on the date immediately prior to the date upon which such corporate
action becomes effective.
If such record date shall have been fixed and no part of such dividend shall
have been paid on the date fixed therefor, the adjustment previously made in the
Conversion Price which became effective on such record date shall be canceled as
of the close of business on such record date, and thereafter the Conversion
Price shall be adjusted pursuant to this SUBSECTION 4.3.3 as of the time of
actual payment of such dividend. If such record date shall have been fixed and
part but not all of such dividend shall have been paid on the date fixed
therefor, the adjustment previously made in the Conversion Price which became
effective on such record date shall be revised as of the close of business on
such record date to reflect the amount of such dividend actually paid.
4.3.4 ADJUSTMENT OF SERIES CONVERSION PRICE UPON
ISSUANCE, SALE OR DEEMED ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In the
event that at any time or from time to time after the applicable Original Issue
Date, the Corporation shall issue or sell Additional Shares of Common Stock
(including, without limitation, Additional Shares of Common Stock deemed to be
issued pursuant to SUBSECTION 4.3.3(a) but not including Additional Shares of
Common Stock deemed to be issued pursuant to SUBSECTION 4.3.3(b) as a result of
a dividend or other distribution on the Common Stock payable in Common Stock or
a subdivision of outstanding shares of Common Stock), without consideration or
for a consideration per share less than the applicable Series Conversion Price
in effect on the date of and immediately prior to such issue or sale, then and
in such event, the applicable Series Conversion Price shall be reduced,
concurrently with such issue, to a price (calculated to the nearest cent)
determined in accordance with the following formula:
P1 Ql + P2 Q2
Conversion Price = ----------------
Ql + Q2
where:
Conversion Price = New Conversion Price.
P1 = Conversion Price of the applicable series of Preferred
Stock in effect immediately prior to such new issue or
sale.
Q1 = Number of shares of Common Stock deemed outstanding
immediately prior to such new issue or sale.
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P2 = Weighted average price per share received by the
Corporation upon such new issue or sale.
Q2 = Number of shares of Common Stock issued or sold or deemed
to have been issued in the subject transaction.
For the purpose of this SUBSECTION 4.3.4, (a) the number of shares of Common
Stock outstanding at any given time shall exclude shares in the treasury of the
Corporation or shares of Common Stock held for the account of the Corporation or
any of its subsidiaries and (b) all shares of Common Stock issuable upon
exercise or conversion of Options, Convertible Securities and shares of
Preferred Stock outstanding immediately prior to the issue or sale of Additional
Shares of Common Stock triggering the adjustment provided for by this SUBSECTION
4.3.4 shall be deemed to be outstanding. Anything contained in this SUBSECTION
4.3.4 to the contrary notwithstanding, the applicable Series Conversion Price
shall not be reduced at any time if the amount of such reduction would be an
amount less than $.01, but any such amount shall be carried forward and
reduction with respect thereto made at the time of and together with any
subsequent reduction which, together with such amount and any other amount or
amounts so carried forward, shall aggregate $.01 or more.
4.3.5 DETERMINATION OF CONSIDERATION. For purposes
of this SUBSECTION 4.3, the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as follows:
(a) CASH AND PROPERTY. Such consideration
shall:
(i) insofar as it consists of cash, be computed at the aggregate
amounts of cash received by the Corporation excluding amounts paid or
payable for accrued interest or accrued dividends;
(ii) insofar as it consists of property other than cash, be
computed at the fair market value thereof at the time of such issue or
sale, as determined in good faith by the Board of Directors; and
(iii) in the event Additional Shares of Common Stock are issued
together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of
such consideration so received, computed as provided in clauses (i) and
(ii) above, as determined in good faith by the Board of Directors.
(b) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to SUBSECTION 4.3.3(a) relating
to Options and Convertible Securities shall be determined by dividing (x) the
total amount, if any, received or receivable as consideration for the issue of
such Options or Convertible Securities plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any
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provision contained therein for a subsequent adjustment of such consideration)
payable to the Corporation upon the exercise of such Options or the conversion
or exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible Securities by (y) the maximum
number of shares of Common Stock (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
4.3.6 ADJUSTMENT FOR DIVIDENDS, DISTRIBUTIONS, OR
SUBDIVISIONS, COMBINATIONS OR
CONSOLIDATIONS OF COMMON STOCK.
(a) STOCK DIVIDENDS, DISTRIBUTIONS OR
SUBDIVISIONS. In the event Additional Shares of Common Stock shall be deemed to
have been issued in a dividend or other distribution on the Common Stock payable
in Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise) described in SUBSECTION 4.3.3(b), the applicable
Series Conversion Price in effect immediately prior to the record date or
effectiveness, as the case may be, of such dividend, distribution or subdivision
shall, concurrently with such record date or effectiveness, be proportionately
decreased.
(b) COMBINATIONS OR CONSOLIDATIONS. In the
event the outstanding shares of Common Stock shall be combined or consolidated
(by reclassification or otherwise) into a lesser number of shares of Common
Stock, the applicable Series Conversion Price in effect immediately prior to
such combination or consolidation shall, concurrently with the effectiveness of
such combination or consolidation, be proportionately increased.
4.4 ADJUSTMENTS FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS.
In the event that at any time or from time to time after the applicable Original
Issue Date the Corporation shall make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the Corporation other than shares of
Common Stock, then and in each such event provision shall be made so that the
holders of Preferred Stock shall receive upon conversion thereof in addition to
the number of shares of Common Stock receivable thereupon, the amount of
securities of the Corporation that they would have received had their Preferred
Stock been converted into Common Stock on the date of and immediately prior to
such event and had they thereafter, during the period from the date of such
event to and including the conversion date, retained such securities receivable
by them as aforesaid during such period, giving application during such period
to all adjustments called for herein.
4.5 ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE, OR
SUBSTITUTION. In the event that at any time or from time to time after the
applicable Original Issue Date, the Common Stock issuable upon the conversion of
the Preferred Stock shall be changed into the same or a different number of
shares of any class or classes of stock, whether by capital reorganization,
reclassification, or otherwise (other than a subdivision or combination of
shares or stock dividend provided for above, or a merger, consolidation, or sale
of assets provided for below), then and in
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each such event the holder of each such share of Preferred Stock shall have the
right thereafter to convert such share into the kind and amount of shares of
stock and other securities and property receivable upon such reorganization,
reclassification, or other change, by a holder of the number of shares of Common
Stock into which such share of Preferred Stock might have been converted
immediately prior to such reorganization, reclassification or change, all
subject to further adjustment as provided herein.
4.6 ADJUSTMENT FOR MERGER, CONSOLIDATION OR SALE OF
ASSETS. In the event that at any time or from time to time after the applicable
Original Issue Date, the Corporation shall merge or consolidate with or into
another entity or sell all or substantially all of its assets (other than a
consolidation, merger or sale which is treated as a liquidation pursuant to
SUBSECTION 3.3), each share of Preferred Stock shall thereafter be convertible
into the kind and amount of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock of the Corporation
deliverable upon conversion of such Preferred Stock would have been entitled
upon such consolidation, merger or sale; and, in such case, appropriate
adjustment (as determined in good faith by the Board of Directors) shall be made
in the application of the provisions in this SECTION 4 set forth with respect to
the rights and interest thereafter of the holders of Preferred Stock, to the end
that the provisions set forth in this SECTION 4 (including provisions with
respect to changes in and other adjustments of the Series Conversion Prices)
shall thereafter be applicable, as nearly as reasonably may be, in relation to
any shares of stock or other property thereafter deliverable upon the conversion
of the Preferred Stock.
4.7 NO IMPAIRMENT. The Corporation shall not, by
amendment of its Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation but shall at all times in good faith assist in the carrying out of
all the provisions of this SECTION 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Preferred Stock against impairment.
4.8 CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of
each adjustment or readjustment of any Series Conversion Price pursuant to this
SECTION 4, the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and furnish to each affected
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any affected holder of Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the applicable Conversion Price at the time in effect, and
(iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of each share
of Preferred Stock.
4.9 NOTICES OF RECORD DATE. In the event of any taking by
the Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof
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<PAGE> 16
who are entitled to receive any dividend (other than a cash dividend which is
the same as cash dividends paid in previous quarters) or other distribution, the
Corporation shall mail to each holder of Preferred Stock at least ten (10) days
prior to such record date a notice specifying the date on which any such record
is to be taken for the purpose of such dividend or distribution.
4.10 COMMON STOCK RESERVED. The Corporation shall reserve
and keep available out of its authorized but unissued Common Stock such number
of shares of Common Stock as shall from time to time be sufficient to effect
conversion of the Preferred Stock.
4.11 CERTAIN TAXES. The Corporation shall pay any stamp,
issue or transfer taxes payable in connection with the conversion of the
Preferred Stock; PROVIDED, HOWEVER, that the Corporation shall not be required
to pay any tax which may be payable in respect of any transfer to a name other
than that of the holder of the Preferred Stock.
4.12 CLOSING OF BOOKS. The Corporation shall at no time
close its transfer books against the transfer of any shares of Preferred Stock
or of any shares of Common Stock issued or issuable upon the conversion of any
shares of Preferred Stock in any manner which interferes with the timely
conversion or transfer of such Preferred Stock or Common Stock, unless otherwise
required by law.
SECTION 5. REDEMPTION.
5.1 At the written election of holders of a majority of
the outstanding shares of Series C Preferred Stock, made at any time on or after
December 18, 2002 (the "Series C Redemption Election"), the Corporation shall be
required to redeem all, but not less than all, of the outstanding shares of
Series C Preferred Stock in three equal annual installments, upon the terms set
forth in this SECTION 5. The first installment of such redemption (the "First
Series C Redemption Date") shall occur on a date specified by the electing
holders in such written election to redeem shares of Series C Preferred Stock,
which date shall not be earlier than 90 days following the date of the Series C
Redemption Election. The second and third installments of such redemption shall
occur on the first and second anniversaries of the First Series C Redemption
Date, respectively. The Corporation shall redeem one-third of the outstanding
shares of Series C Preferred Stock held by each holder on the First Series C
Redemption Date, one-third of the outstanding shares of Series C Preferred Stock
held by each holder immediately prior to the First Series C Redemption Date on
the first anniversary of the First Series C Redemption Date and the remaining
shares on the second anniversary of the First Series C Redemption Date. On each
such redemption date, the holders shall surrender the certificate or
certificates for the shares to be redeemed duly endorsed for transfer or with
duly executed stock transfer powers sufficient to permit transfer attached, at
the offices of the Corporation or of any transfer agent for the Series C
Preferred Stock. The Corporation shall, as soon as practicable thereafter, issue
and deliver to each holder a certificate or certificates for the balance of the
shares not being redeemed. The redemption price per share of the Series C
Preferred Stock shall be equal to the greater of (i) $1.54 (subject to equitable
adjustment in the event of any stock dividend, stock split, combination,
reclassification of shares or other similar event) plus all accrued but unpaid
dividends thereon, if any, at the time of such redemption and (ii) the Fair
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<PAGE> 17
Market Value (as defined in SUBSECTION 5.7) per share as of the date of the
Series C Redemption Election. The Series C redemption rights described in this
SUBSECTION 5.1 shall be senior to the Series A and Series B redemption rights
set forth below. The Corporation shall not redeem any Series A Preferred Stock
or Series B Preferred Stock unless it has set aside sufficient funds to redeem
the Series C Preferred Stock in full as provided in Section 5.4 hereof.
5.2 At the written election of holders of a majority of
the outstanding shares of Series A Preferred Stock and Series B Preferred Stock,
acting as a single class, made at any time on or after December 18, 2002 (the
"Series A and B Redemption Election"), the Corporation shall be required to
redeem all, but not less than all, of the outstanding shares of Series A
Preferred Stock and Series B Preferred Stock in three equal annual installments,
upon the terms set forth in this SECTION 5. The first installment of such
redemption (the "First Series A and B Redemption Date") shall occur on a date
specified by the electing holders in such written election to redeem shares of
Series A Preferred Stock and Series B Preferred Stock, which date shall not be
earlier than 90 days following the date of the Series A and B Redemption
Election. The second and third installments of such redemption shall occur on
the first and second anniversaries of the First Series A and B Redemption Date,
respectively. The Corporation shall redeem one-third of the outstanding shares
of Series A Preferred Stock and/or Series B Preferred Stock held by each holder
on the First Series A and B Redemption Date, one-third of the outstanding shares
of such Preferred Stock held by each holder immediately prior to the First
Series A and B Redemption Date on the first anniversary of the First Series A
and B Redemption Date and the remaining shares on the second anniversary of the
First Series A and B Redemption Date. On each such redemption date, the holders
shall surrender the certificate or certificates for the shares to be redeemed
duly endorsed for transfer or with duly executed stock transfer powers
sufficient to permit transfer attached, at the offices of the Corporation or of
any transfer agent for the Series A Preferred Stock and Series B Preferred
Stock. The Corporation shall, as soon as practicable thereafter, issue and
deliver to each holder a certificate or certificates for the balance of the
shares not being redeemed. The redemption price per share of the Series A
Preferred Stock shall be equal to the greater of (i) $.49695 (subject to
equitable adjustment in the event of any stock dividend, stock split,
combination, reclassification of shares or other similar event) plus all accrued
but unpaid dividends thereon, if any, at the time of such redemption and (ii)
the Fair Market Value (as defined in SUBSECTION 5.7) per share as of the date of
the Series A and B Redemption Election. The redemption price per share of the
Series B Preferred Stock shall be equal to the greater of (i) $.60 (subject to
equitable adjustment in the event of any stock dividend, stock split,
combination, reclassification of shares or other similar event) plus all accrued
but unpaid dividends thereon, if any, at the time of such redemption and (ii)
the Fair Market Value (as defined in SUBSECTION 5.7) per share as of the date of
the Series A and B Redemption Election.
5.3 Notice of redemption shall be sent by first class
mail, postage prepaid, to each holder of record of the applicable series of
Preferred Stock, not less than 30 days nor more than 60 days prior to the First
Redemption Date for such series, at the address of such holder as it appears on
the books of the Corporation. Such notice shall set forth (1) the First
Redemption Date for such series, the dates of the second and third installments
of such redemption, and the place of redemption; and (ii) the number of shares
to be redeemed on each date of redemption
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and the redemption price on each such date, including all accrued but unpaid
dividends thereon, if any, to each redemption date. The Corporation shall be
obligated to redeem the applicable series of Preferred Stock on the dates and in
the amounts set forth in the notice; provided, however, that any holder of
Preferred Stock who is not party to a Redemption Election may convert any or all
of the shares owned by such holder into Common Stock in accordance with SECTION
4 at any time prior to the date of redemption of such shares. The Corporation,
if advised before the close of business on the relevant redemption date by
written notice from any holder of record of Preferred Stock to be redeemed,
shall credit against the number of shares of Preferred Stock required to be
redeemed from such holder, and shall not redeem, the number of shares of
Preferred Stock which had been converted by such holder on or before such date
and which had not previously been credited against any redemption.
5.4 If, on or before a redemption date, the funds
necessary for such redemption shall have been set aside by the Corporation and
deposited with a bank or trust company, in trust for the pro rata benefit of the
holders of the Preferred Stock that has been called for redemption, then,
notwithstanding that any certificates for shares that have been called for
redemption shall not have been surrendered for cancellation, the shares
represented thereby shall no longer be deemed outstanding from and after such
redemption date, and all rights of holders of such shares so called for
redemption shall forthwith, after such redemption date, cease and terminate with
respect to such shares, excepting only the right to receive the redemption funds
therefor to which they are entitled. Any interest accrued on funds so deposited
and unclaimed by stockholders entitled thereto shall be paid to such holders at
the time their respective shares are redeemed or to the Corporation at the time
unclaimed amounts are paid to it. In case the holders of Preferred Stock which
shall have been called for redemption shall not, within six years after the
final redemption date, claim the amounts so deposited with respect to the
redemption thereof, any such bank or trust company shall, upon demand, pay over
to the Corporation such unclaimed amounts and thereupon such bank or trust
company shall be relieved of all responsibility in respect thereof to such
holder and such holder shall look only to the Corporation for the payment
thereof. Any funds so deposited with a bank or trust company which shall not be
required for such redemption by reason of the exercise subsequent to the date of
such deposit of the right of conversion of any shares or otherwise shall be
returned to the Corporation forthwith.
5.5 If the Corporation for any reason fails to redeem any
of the shares of Preferred Stock in accordance with SUBSECTIONS 5.1 AND 5.2 on
or prior to the redemption dates determined in accordance with this SECTION 5,
then, notwithstanding anything to the contrary contained in this Certificate of
Incorporation:
5.5.1 The Corporation may not incur any
indebtedness for money borrowed (unless the proceeds of such incurrence of
indebtedness are used to make all overdue redemptions) or borrow or reborrow any
amounts under any lines of credit which it may then have outstanding without the
prior written consent of the holders of not less than two-thirds of the then
outstanding shares of the Preferred Stock required to be redeemed; and
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5.5.2 Notwithstanding any provision to the
contrary contained herein or in any contract or agreement to which the
Corporation is a party, the number of directors constituting the Board of
Directors shall be fixed at eight and the holders of a majority of the
outstanding shares of Preferred Stock required to be redeemed shall have the
right, by written consent or at any special or annual meeting of the
stockholders of the Corporation, voting as a separate class to the exclusion of
the holders of Common Stock and any series of Preferred Stock not being
redeemed, or which is being redeemed in accordance with the schedule set forth
in Section 5.1, to elect five of the eight directors of the Corporation. Such
right shall continue until the Corporation is no longer in default of its
obligation to redeem shares of Preferred Stock pursuant to SUBSECTIONS 5.1 AND
5.2. Each director elected by the holders of shares of any Preferred Stock
pursuant to this SUBSECTION 5.5.2 (each, an "Additional Director") shall
continue to serve as such director until the date that all obligations of the
Corporation pursuant to this SECTION 5 have been satisfied in full,
notwithstanding that prior to such date a default under this SECTION 5 shall
cease to exist. Any Additional Director may be removed by, and shall not be
removed except by, the written consent or vote of the holders of record of a
majority of the outstanding shares of the Preferred Stock entitled to have
originally voted for such director's election, voting together as a separate
class to the exclusion of the holders of Common Stock and any series of
Preferred Stock not being redeemed or which is being redeemed in accordance with
the schedule set forth in Section 5.1. So long as a default under this SECTION 5
shall exist, any vacancy in the office of an Additional Director shall be filled
by the vote or written consent of the holders of a majority of the outstanding
shares of the Preferred Stock entitled to have originally voted for the removed
director's election, voting together as a separate class to the exclusion of the
holders of Common Stock and any series of Preferred Stock not being redeemed, or
which is being redeemed in accordance with the schedule set forth in Section
5.1.
5.6 If the funds of the Corporation legally available for
redemption of shares of Preferred Stock on a redemption date are insufficient to
redeem the total number of shares of Preferred Stock submitted for redemption,
those funds which are legally available will be used to redeem the maximum
possible number of whole shares ratably among the holders of such shares in
proportion to the redemption amounts otherwise payable to them, subject to the
priority of the Series C Preferred Stock specified in the last sentence of
Section 5.1. The shares of Preferred Stock not redeemed shall remain outstanding
and entitled to all rights and preferences provided herein. At any time
thereafter when additional funds of the Corporation are legally available for
the redemption of such shares of Preferred Stock, such funds will be used, at
the end of the next succeeding fiscal quarter, to redeem the balance of such
shares, or such portion thereof for which funds are then legally available.
5.7 For the purposes of SUBSECTIONS 5.1 AND 5.2, the
"Fair Market Value" of each share of Preferred Stock shall be determined as
follows: if, within 20 days after the date of the applicable Redemption
Election, the Corporation and the holders of a majority of the outstanding
Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock,
as the case may be, agree upon the fair market value of one share of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as the
case may be, then the Fair Market Value shall be as so agreed. If the
Corporation and such holders do not agree upon the Fair Marker Value within such
20 day period but agree upon an appraiser to determine the fair market
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value per share of the Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock, as the case may be, then such appraiser shall make
such determination and such determination shall govern. If the Corporation and
such holders do not, within such 20 day period, agree as to the Fair Market
Value or as to a single appraiser to determine the fair market value of each
share of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock, as the case may be, then the Corporation shall, by notice to
the holders of the applicable series of Preferred Stock, appoint one appraiser,
and the holders of a majority of the outstanding shares of all such series of
Preferred Stock electing redemption shall, by notice to the Corporation and
acting as a single class, appoint one appraiser, both experienced in the
appraisal of companies engaged in the business of the Corporation. If either the
Corporation or such holders shall fail to appoint such an appraiser within 15
days after the lapse of such 20-day period, then the appraiser appointed by the
party which does appoint an appraiser shall make the appraisal of the Fair
Market Value, and such appraisal shall govern. If two appraisers are appointed,
then the average of the appraisals rendered by such appraisers shall be
considered the Fair Market Value. All appraisal reports shall be rendered in
writing and shall be signed by the appraiser(s), and the Corporation and the
holders of the series of Preferred Stock who designated an appraiser shall use
reasonable efforts to cause each appraiser to render its appraisal report within
20 days after the date of its appointment. The costs of the appraisals shall be
borne by the Corporation. All notices delivered pursuant to this SUBSECTION 5.7
shall be sent by certified mail, postage prepaid, or by hand or
nationally-recognized overnight delivery service and shall, in the case of
notices to holders of Preferred Stock, be sent to the address of such holder as
it appears on the books of the Corporation.
SECTION 6. NEGATIVE COVENANTS
6.1 SERIES A. So long as at least one-fourth of the
number of shares of Series A Preferred Stock (subject to equitable adjustment in
the event of any stock split, stock dividend, combination or reclassification of
shares or other similar event) shall remain issued and outstanding, the
Corporation shall not, without first having provided the written notice of such
proposed action to each holder of outstanding shares of Series A Preferred Stock
and having obtained the affirmative vote or written consent of the holders of
51% of the shares of Series A Preferred Stock then outstanding:
6.1.1 amend, alter or repeal any provision of, or
add any provision to, the Corporation's Certificate of Incorporation or By-laws;
6.1.2 increase the number of shares of Series A
Preferred Stock designated as Series A Preferred Stock, or reclassify any Common
Stock or Preferred Stock into shares having any preference or priority as to
assets superior to or on a parity with any such preference or priority of the
Series A Preferred Stock;
6.1.3 create, authorize or issue any other class
or classes of stock or series of Common Stock or Preferred Stock or any security
convertible into or evidencing the right to purchase shares of any class or
series of Common Stock or Preferred Stock or any capital stock of the
Corporation senior to or in parity with the Series A Preferred Stock in any
respect;
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6.1.4 pay or declare any dividend or distribution
on any shares of Common Stock or apply any of its assets to the redemption,
retirement, purchase or other acquisition, directly or indirectly, through
subsidiaries or otherwise, of any shares of Common Stock except (1) pursuant to
that certain Second Amended and Restated Stockholders Agreement dated on or
about November 3, 1999 by and among the Corporation and certain stockholders, or
(2) pursuant to repurchase provisions contained in any Stock Restriction
Agreement dated as of December 18, 1997 by and between the Corporation and any
of its stockholders; or
6.1.5 effect any sale, lease, assignment, transfer
or other conveyance (other than the grant of a mortgage or security interest in
connection with indebtedness for borrowed money) of all or substantially all the
assets of the Corporation or any of its subsidiaries; any liquidation,
dissolution or winding up of, or any consolidation or merger involving, the
Corporation or any of its subsidiaries; or any recapitalization of the
Corporation.
6.2 SERIES B. So long as at least one-fourth of the
number of shares of Series B Preferred Stock (subject to equitable adjustment in
the event of any stock split, stock dividend, combination or reclassification of
shares or other similar event) shall remain issued and outstanding, the
Corporation shall not, without first having provided the written notice of such
proposed action to each holder of outstanding shares of Series B Preferred Stock
and having obtained the affirmative vote or written consent of the holders of
51% of the shares of Series B Preferred Stock then outstanding:
6.2.1 amend, alter or repeal any provision of, or
add any provision to, the Corporation's Certificate of Incorporation or By-laws;
6.2.2 increase the number of shares of Series B
Preferred Stock designated as Series B Preferred Stock, or reclassify any Common
Stock or Preferred Stock into shares having any preference or priority as to
assets superior to or on a parity with any such preference or priority of the
Series B Preferred Stock;
6.2.3 create, authorize or issue any other class
or classes of stock or series of Common Stock or Preferred Stock or any security
convertible into or evidencing the right to purchase shares of any class or
series of Common Stock or Preferred Stock or any capital stock of the
Corporation senior to or in parity with the Series B Preferred Stock in any
respect;
6.2.4 pay or declare any dividend or distribution
on any shares of Common Stock or apply any of its assets to the redemption,
retirement, purchase or other acquisition, directly or indirectly, through
subsidiaries or otherwise, of any shares of Common Stock except (1) pursuant to
that certain Second Amended and Restated Stockholders Agreement dated on or
about November 3, 1999 by and among the Corporation and certain stockholders, as
the same may be amended from time to time or (2) pursuant to repurchase
provisions contained in any Stock Restriction Agreement dated as of December 18,
1997 by and between the Corporation and any of its stockholders; or
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6.2.5 effect any sale, lease, assignment, transfer
or other conveyance (other than the grant of a mortgage or security interest in
connection with indebtedness for borrowed money) of all or substantially all the
assets of the Corporation or any of its subsidiaries; any liquidation,
dissolution or winding up of, or any consolidation or merger involving, the
Corporation or any of its subsidiaries; or any recapitalization of the
Corporation.
6.3 SERIES C. So long as at least one-fourth of the
number of shares of Series C Preferred Stock (subject to equitable adjustment in
the event of any stock split, stock dividend, combination or reclassification of
shares or other similar event) shall remain issued and outstanding, the
Corporation shall not, without first having provided the written notice of such
proposed action to each holder of outstanding shares of Series C Preferred Stock
and having obtained the affirmative vote or written consent of the holders of
51% of the shares of Series C Preferred Stock then outstanding:
6.3.1 amend, alter or repeal any provision of, or
add any provision to, the Corporation's Certificate of Incorporation or By-laws;
6.3.2 increase the number of shares of Series C
Preferred Stock designated as Series C Preferred Stock, or reclassify any Common
Stock or Preferred Stock into shares having any preference or priority as to
assets superior to or on a parity with any such preference or priority of the
Series C Preferred Stock;
6.3.3 create, authorize or issue any other class
or classes of stock or series of Common Stock or Preferred Stock or any security
convertible into or evidencing the right to purchase shares of any class or
series of Common Stock or Preferred Stock or any capital stock of the
Corporation senior to or in parity with the Series C Preferred Stock in any
respect;
6.3.4 pay or declare any dividend or distribution
on any shares of Common Stock or any other series of Preferred Stock or apply
any of its assets to the redemption, retirement, purchase or other acquisition,
directly or indirectly, through subsidiaries or otherwise, of any shares of
Common Stock or any other series of Preferred Stock except (1) pursuant to that
certain Second Amended and Restated Stockholders Agreement dated on or about
November 3, 1999 by and among the Corporation and certain stockholders, as the
same may be amended from time to time or (2) pursuant to repurchase provisions
contained in any Stock Restriction Agreement dated as of December 18, 1997 by
and between the Corporation and any of its stockholders;
6.3.5 effect any sale, lease, assignment, transfer
or other conveyance (other than the grant of a mortgage or security interest in
connection with indebtedness for borrowed money) of all or substantially all the
assets of the Corporation or any of its subsidiaries; any liquidation,
dissolution or winding up of, or any consolidation or merger involving, the
Corporation or any of its subsidiaries; or any recapitalization of the
Corporation;
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<PAGE> 23
6.3.6 enter into any agreement that would restrict
the Corporation's ability to perform under that certain Series C Stock Purchase
Agreement dated on or about November 3, 1999 by and among the Corporation and
the holders of Series C Preferred Stock;
6.3.7 sell or lease 25% or more of the assets of
the Corporation, except in the ordinary course of business;
6.3.8 issue additional securities to employees,
officer or directors of the Corporation, except securities (a) issued under
stock option plans in existence as of November 3, 1999 or stock option plans
approved by the holders of Series C Preferred Stock as provided herein, (b)
issuable upon the exercise of outstanding options or warrants or (c) issuable
upon the exercise of options granted in the future at fair market value;
6.3.9 adopt any additional stock option plans or
increase the number of shares available for issuance under plans in effect as of
November 3, 1999; or
6.3.10 issue any securities for a price less than
fair market value, other than as may be required by contractual commitments in
existence as of November 3, 1999.
6.4 NOTICE. Any other provision of the Corporation's
Certificate of Incorporation or By-laws to the contrary notwithstanding, notice
of any action specified in SUBSECTIONS 6.1, 6.2 OR 6.3 shall be given by the
Corporation to each holder of outstanding shares of the applicable series of
Preferred Stock by first class mail, postage prepaid, addressed to such holder
at the last address of such holder as shown by the records of the Corporation,
at least 20 days before the date on which the books of the Corporation shall
close or a record shall be taken with respect to such proposed action, or, if
there shall be no such date, at least 20 days before the date when such proposed
action is scheduled to occur. Any holder of outstanding shares of Preferred
Stock may waive any notice required by this SUBSECTION 6.4 by a written document
indicating such waiver.
SECTION 7. NO REISSUANCE OF PREFERRED STOCK. No share or shares of
Preferred Stock acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
canceled, retired and eliminated from the shares which the Corporation shall be
authorized to issue.
SECTION 8. RESIDUAL RIGHTS. All rights accruing to the outstanding
shares of the Corporation not expressly provided for to the contrary herein
shall be vested in the Common Stock.
Subject to Section 6 above, the Board of Directors of the Corporation
shall have full authority, to the extent permitted by law, to increase, decrease
or otherwise adjust the capital stock of the Corporation, to designate the
classes or series thereof and to determine whether all or any part of such stock
shall have voting powers, full or limited, or no voting powers, and to determine
such designations, and such powers, preferences, relative, participating or
optional, or
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other special rights and the qualifications, limitations or restrictions thereof
as the Board shall from time to time determine in duly adopted resolutions.
Subject to Section 6 above, at any time and from time to time when
authorized by resolution of the Board of Directors and without any action by its
stockholders, the Corporation may issue or sell any shares of its capital stock
of any class or series, whether out of the unissued shares thereof authorized by
the Certificate of Incorporation of the Corporation as originally filed or by an
amendment thereof or out of shares of its capital stock acquired by it after the
issue thereof, and whether or not the shares thereof so issued or sold shall
confer upon the holders thereof the right to exchange or convert such shares for
or into other shares of capital stock of the Corporation of any class or classes
or any series thereof. When similarly authorized, but without any action by its
stockholders, the Corporation may issue or grant rights, warrants or options, in
bearer or registered or such other form as the Board of Directors may determine,
for the purchase of shares of the capital stock of any class or series of the
Corporation within such period of time, or without limit as to time, to such
aggregate number of shares, and at such price per share, as the Board of
Directors may determine. Such rights, warrants or options may be issued or
granted separately or in connection with the issue of any bonds, debentures,
notes, obligations or other evidences of indebtedness or shares of the capital
stock of any class or series of the Corporation and for such consideration and
on such terms and conditions as the Board of Directors in its sole discretion
may determine. In each case, the consideration to be received by the Corporation
for any such shares so issued or sold shall be such as shall be fixed from time
to time by resolution of the Board of Directors.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The following provisions are included for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its Board of Directors and stockholders:
SECTION 1. BOARD OF DIRECTORS.
The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors of the Corporation.
SECTION 2. AMENDMENT OF BY-LAWS.
The Board of Directors of the Corporation is expressly
authorized to adopt, amend or repeal the by-laws of the Corporation, subject to
any limitation thereof contained in the by-laws. The stockholders shall also
have the power to adopt, amend or repeal the by-laws of the Corporation;
PROVIDED, however, that, in addition to any vote of the holders of any class or
series of stock of the Corporation required by law or by this Fourth Amended and
Restated Certificate of Incorporation, the affirmative vote of the holders of at
least seventy-five percent (75%) of the voting power of all of the then
outstanding shares of the capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single
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<PAGE> 25
class, shall be required to adopt, amend or repeal any provision of the by-laws
of the Corporation.
SECTION 3. STOCKHOLDER ACTION.
Stockholders of the Corporation may not take any action by written
consent in lieu of a meeting.
SECTION 4. SPECIAL STOCKHOLDER MEETINGS.
Special meetings of stockholders may be called at any time
only by the Chief Executive Officer, the President, the Chairman of the Board of
Directors (if any) or a majority of the Board of Directors. Business transacted
at any special meeting of stockholders shall be limited to matters relating to
the purpose or purposes stated in the notice of meeting.
SECTION 5. LOCATION OF BOOKS.
The books of the Corporation may be kept at such place within
or without the State of Delaware as the by-laws of the Corporation may provide
or as may be designated from time to time by the Board of Directors of the
Corporation.
SEVENTH:
SECTION 1. NUMBER OF DIRECTORS.
The number of directors which shall constitute the whole Board of
Directors shall be determined by resolution of a majority of the Board of
Directors, but in no event shall the number of directors be less than three. The
number of directors may be decreased at any time and from time to time by a
majority of the directors then in office, but only to eliminate vacancies
existing by reason of the death, resignation, removal or expiration of the term
of one or more directors. The directors shall be elected at the annual meeting
of stockholders by such stockholders as have the right to vote on such election.
Directors need not be stockholders of the Corporation.
SECTION 2. CLASSES OF DIRECTORS.
The Board of Directors shall be and is divided into three classes:
Class I, Class II and Class III. No one class shall have more than one director
more than any other class.
SECTION 3. ELECTION OF DIRECTORS.
Elections of directors need not be by written ballot except as and to
the extent provided in the by-laws of the Corporation.
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SECTION 4. TERMS OF OFFICE.
Each director shall serve for a term ending on the date of the third
annual meeting following the annual meeting at which such director was elected;
provided, however, that each initial director in Class I shall serve for a term
ending on the date of the annual meeting next following the end of the
Corporation's fiscal year ending December 31, 2000; each initial director in
Class II shall serve for a term ending on the date of the annual meeting next
following the end of the Corporation's fiscal year ending December 31, 2001; and
each initial director in Class III shall serve for a term ending on the date of
the annual meeting next following the end of the Corporation's fiscal year
ending December 31, 2002.
SECTION 5. ALLOCATION OF DIRECTORS AMONG CLASSES IN THE EVENT OF
INCREASES OR DECREASES IN THE NUMBER OF DIRECTORS.
In the event of any increase or decrease in the authorized number of
directors, (i) each director then serving as such shall nevertheless continue as
director of the class of which he or she is a member until the expiration of
such director's current term or his or her prior death, removal or resignation
and (ii) the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to ensure that no one class has more than one
director more than any other class. To the extent possible, consistent with the
foregoing rule, any newly created directorships shall be added to those classes
whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of office are to expire at the earliest dates
following such allocation, unless otherwise provided for from time to time by
resolution adopted by a majority of the directors then in office, though less
than a quorum. No decrease in the number of directors constituting the whole
Board of Directors shall shorten the term of an incumbent director.
SECTION 6. TENURE.
Notwithstanding any provisions to the contrary contained herein, each
director shall hold office until his or her successor is elected and qualified,
or until his or her earlier death, resignation or removal.
SECTION 7. VACANCIES.
Unless and until filled by the stockholders, any vacancy in the Board
of Directors, however occurring, including a vacancy resulting from an
enlargement of the Board of Directors, may be filled only by vote of a majority
of the directors then in office, even if less than a quorum, or by a sole
remaining director, and not by the stockholders. A director elected to fill a
vacancy shall be elected for the unexpired term of his or her predecessor in
office, if applicable, and a director chosen to fill a position resulting from
an increase in the number of directors shall hold office until the next election
of the class for which such director shall have been chosen and until his or her
successor is elected and qualified, or until his or her earlier death,
resignation or removal.
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SECTION 8. QUORUM.
A majority of the total number of the whole Board of Directors shall
constitute a quorum at all meetings of the Board of Directors. In the event one
or more of the directors shall be disqualified to vote at any meeting, then the
required quorum shall be reduced by one for each such director so disqualified;
provided, however, that in no case shall less than one-third (1/3) of the number
so fixed constitute a quorum. In the absence of a quorum at any such meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice other than announcement at the meeting, until a quorum
shall be present.
SECTION 9. ACTION AT MEETING.
At any meeting of the Board of Directors at which a quorum is present,
the vote of a majority of those present shall be sufficient to take any action,
unless a different vote is specified by law or the Corporation's by-laws.
SECTION 10. REMOVAL.
Any one or more or all of the directors may be removed with cause only
by the holders of at least seventy-five percent (75%) of the shares then
entitled to vote at an election of directors. Directors may not be removed
without cause.
SECTION 11. STOCKHOLDER NOMINATIONS AND INTRODUCTION OF BUSINESS, ETC.
Advance notice of stockholder nominations for election of directors and
other business to be brought by stockholders before a meeting of stockholders
shall be given in the manner provided in the by-laws of the Corporation.
SECTION 12. RIGHTS OF PREFERRED STOCK.
The provisions of this Article are subject to the rights of the holders
of any series of Preferred Stock from time to time outstanding.
EIGHTH: No director (including any advisory director) of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director notwithstanding
any provision of law imposing such liability; provided, however, that, to the
extent provided by applicable law, this provision shall not eliminate the
liability of a director (i) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of the State of Delaware,
or (iv) for any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this provision shall apply to or have any
effect on the liability or alleged liability of any director for or with respect
to any acts or omissions of such director occurring prior to such amendment or
repeal.
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NINTH: The Board of Directors of the Corporation, when evaluating any
offer of another party (a) to make a tender or exchange offer for any equity
security of the Corporation or (b) to effect a business combination, shall, in
connection with the exercise of its judgment in determining what is in the best
interests of the Corporation as whole, be authorized to give due consideration
to any such factors as the Board of Directors determines to be relevant,
including, without limitation:
(i) the interests of the Corporation's stockholders, including
the possibility that these interests might be best served by
the continued independence of the Corporation;
(ii) whether the proposed transaction might violate federal or
state laws;
(iii) not only the consideration being offered in the proposed
transaction, in relation to the then current market price for
the outstanding capital stock of the Corporation, but also to
the market price for the capital stock of the Corporation over
a period of years, the estimated price that might be achieved
in a negotiated sale of the Corporation as a whole or in part
or through orderly liquidation, the premiums over market price
for the securities of other corporations in similar
transactions, current political, economic and other factors
bearing on securities prices and the Corporation's financial
condition and future prospects; and
(iv) the social, legal and economic effects upon employees,
suppliers, customers, creditors and others having similar
relationships with the Corporation, upon the communities in
which the Corporation conducts its business and upon the
economy of the state, region and nation. In connection with
any such evaluation, the Board of Directors is authorized to
conduct such investigations and engage in such legal
proceedings as the Board of Directors may determine.
TENTH: The Corporation reserves the right to amend or repeal any
provision contained in this Fourth Amended and Restated Certificate of
Incorporation in the manner prescribed by the laws of the State of Delaware and
all rights conferred upon stockholders are granted subject to this reservation,
PROVIDED, HOWEVER, that in addition to any vote of the holders of any class or
series of stock of the Corporation required by law, this Fourth Amended and
Restated Certificate of Incorporation or a Certificate of Designation with
respect to a series of Preferred Stock, the affirmative vote of the holders of
shares of voting stock of the Corporation representing at least seventy-five
percent (75%) of the voting power of all of the then outstanding shares of the
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to amend or
repeal, or adopt any provision inconsistent with, Articles SIXTH, SEVENTH,
EIGHTH, NINTH and this Article TENTH of this Fourth Amended and Restated
Certificate of Incorporation.
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IN WITNESS WHEREOF, the undersigned has hereunto signed his name and
affirms that the statements made in this Fourth Amended and Restated Certificate
of Incorporation are true under the penalties of perjury this ____ day of
_________, 2000.
By:
--------------------------------------
Joseph A. Forgione
President and Chief Executive Officer
[SEAL]
29
<PAGE> 1
Exhibit 3.6
FORM OF AMENDED AND RESTATED BY-LAWS
OF
EPRISE CORPORATION
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE 1 - STOCKHOLDERS 1
1.1 Place Of Meetings 1
1.2 Annual Meeting 1
1.3 Special Meetings 1
1.4 Notice Of Meetings 1
1.5 Voting List 1
1.6 Quorum 2
1.7 Adjournments 2
1.8 Voting And Proxies 2
1.9 Action At Meeting 3
1.10 Introduction Of Business At Meetings 3
1.11 Action Without Meeting 6
ARTICLE 2 - DIRECTORS 6
2.1 General Powers 6
2.2 Number; Election And Qualification 7
2.3 Classes Of Directors 7
2.4 Terms In Office 7
2.5 Allocation Of Directors Among Classes 7
2.6 Tenure 7
2.7 Vacancies 7
2.8 Resignation 8
2.9 Regular Meetings 8
2.10 Special Meetings 8
2.11 Notice Of Special Meetings 8
2.12 Meetings By Telephone Conference Calls 8
2.13 Quorum 8
2.14 Action At Meeting 9
2.15 Action By Written Consent 9
2.16 Removal 9
2.17 Committees 9
2.18 Compensation Of Directors 9
2.19 Amendments To Article 10
ARTICLE 3 - OFFICERS 10
3.1 Enumeration 10
3.2 Election 10
3.3 Qualification 10
i
<PAGE> 3
3.4 Tenure 10
3.5 Resignation And Removal 10
3.6 Vacancies 11
3.7 Chairman And Vice-Chairman Of The Board 11
3.8 President 11
3.9 Vice Presidents 11
3.10 Secretary And Assistant Secretaries 11
3.11 Treasurer And Assistant Treasurers 12
3.12 Salaries 12
3.13 Action With Respect To Securities
Of Other Corporations 12
ARTICLE 4 - CAPITAL STOCK 12
4.1 Issuance Of Stock 12
4.2 Certificates Of Stock 13
4.3 Transfers 13
4.4 Lost, Stolen Or Destroyed Certificates 13
4.5 Record Date 13
ARTICLE 5 - GENERAL PROVISIONS 14
5.1 Fiscal Year 14
5.2 Corporate Seal 14
5.3 Notices 14
5.4 Waiver Of Notice 14
5.5 Evidence Of Authority 14
5.6 Facsimile Signatures 14
5.7 Reliance Upon Books, Reports And Records 15
5.8 Time Periods 15
5.9 Certificate Of Incorporation 15
5.10 Transactions With Interested Parties 15
5.11 Severability 16
5.12 Pronouns 16
ARTICLE 6 - AMENDMENTS 16
6.1 By The Board Of Directors 16
6.2 By The Stockholders 16
ARTICLE 7 - INDEMNIFICATION 16
7.1 Actions Other Than By Or In The Right of The Corporation 16
7.2 Actions By Or In The Right Of The Corporation 17
7.3 Success On The Merits 17
ii
<PAGE> 4
7.4. Authorization 17
7.5 Expense Advance 17
7.6 Nonexclusivity 18
7.7 Insurance 18
7.8 "The Corporation 18
7.9 Other Indemnification 18
7.10 Other Definitions 18
7.11 Continuation Of Indemnification 19
iii
<PAGE> 5
FORM OF AMENDED AND RESTATED BY-LAWS
OF
EPRISE CORPORATION
(the "Corporation")
Effective _____________, 2000
ARTICLE 1 - STOCKHOLDERS
1.1 PLACE OF MEETINGS. All meetings of stockholders shall be held at
such place within or without the State of Delaware as may be designated from
time to time by the Chairman of the Board (if any), the board of directors of
the Corporation (the "Board of Directors") or the President or, if not so
designated, at the registered office of the Corporation.
1.2 ANNUAL MEETING. The annual meeting of stockholders for the
election of directors and for the transaction of such other business as may
properly be brought before the meeting shall be held on a date (which date shall
not be a legal holiday in the place where the meeting is to be held) and at the
time and place to be fixed by the Chairman of the Board (if any), Board of
Directors, the Chief Executive Officer or the President, as stated in the notice
of the meeting.
1.3 SPECIAL MEETINGS. Special meetings of stockholders may be called
at any time by the Chairman of the Board (if any), a majority of the Board of
Directors, the Chief Executive Officer or the President and shall be held at
such place, on such date and at such time as shall be fixed by the Board of
Directors or the person calling the meeting. Business transacted at any special
meeting of stockholders shall be limited to matters relating to the purpose or
purposes stated in the notice of meeting.
1.4 NOTICE OF MEETINGS. Except as otherwise provided by law, written
notice of each meeting of stockholders, whether annual or special, shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notices of all meetings
shall state the place, date and hour of the meeting. The notice of a special
meeting shall state, in addition, the purpose or purposes for which the meeting
is called. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his or her address as it appears
on the records of the Corporation.
1.5 VOTING LIST. The officer who has charge of the stock ledger of
the Corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the
<PAGE> 6
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least 10 days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or if not so specified, at the place where the meeting is
to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time of the meeting, and may be inspected by any
stockholder who is present. This list shall presumptively determine the identity
of the stockholders entitled to vote at the meeting and the number of shares
held by each of them.
1.6 QUORUM. Except as otherwise provided by law, the Corporation's
Certificate of Incorporation, as such may be amended from time to time, or these
Amended and Restated By-Laws, as such may be amended from time to time (the
"Restated By-Laws"), the holders of a majority of the shares of the capital
stock of the Corporation issued and outstanding and entitled to vote at the
meeting, present in person or represented by proxy, shall constitute a quorum
for the transaction of business. Shares held by brokers who are prohibited from
voting (pursuant to their discretionary authority on behalf of beneficial owners
of such shares who have not submitted a proxy with respect to such shares) on
some or all of the matters before the stockholders, but which shares would
otherwise be entitled to vote at the meeting ("Broker Non-Votes") shall be
counted, for the purpose of determining the presence or absence of a quorum,
both (a) toward the total voting power of the shares of capital stock of the
Corporation and (b) as being represented by proxy. If a quorum has been
established for the purpose of conducting the meeting, a quorum shall be deemed
to be present for the purpose of all votes to be conducted at such meeting,
provided that where a separate vote by a class or classes, or series thereof, is
required, a majority of the voting power of the shares of such class or classes,
or series, present in person or represented by proxy shall constitute a quorum
entitled to take action with respect to that vote on that matter. If a quorum
shall fail to attend any meeting, the chairman of the meeting or the holders of
a majority of the voting power of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting to another place, date,
or time.
1.7 ADJOURNMENTS. Any meeting of stockholders may be adjourned to any
other time and to any other place at which a meeting of stockholders may be held
under these Restated By-Laws by the stockholders present or represented at the
meeting and entitled to vote, although less than a quorum, or, if no stockholder
is present, by any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than 30 days if the time and place of the adjourned meeting are
announced at the meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the Corporation may transact any business which might have
been transacted at the original meeting.
1.8 VOTING AND PROXIES. At any meeting of the stockholders, each
stockholder shall have one vote for each share of stock entitled to vote at such
meeting held of record by such stockholder and a proportionate vote for each
fractional share so held, unless otherwise provided in the Certificate of
Incorporation. Each stockholder of record entitled to vote at a meeting of
stockholders, or to express consent or dissent to corporate action in writing
without a meeting (to
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<PAGE> 7
the extent not otherwise prohibited by the Certificate of Incorporation or these
Restated By-laws), may vote or express such consent or dissent in person or may
authorize another person or persons to vote or act for such stockholder by
written proxy executed by such stockholder or his or her authorized agent or by
a transmission permitted by law and delivered to the Secretary of the
Corporation. No such proxy shall be voted or acted upon after three years from
the date of its execution, unless the proxy expressly provides for a longer
period. Any copy, facsimile telecommunication or other reliable reproduction of
the writing or transmission created pursuant to this Section 1.8 may be
substituted or used in lieu of the original writing or transmission for any and
all purposes for which the original writing or transmission could be used,
provided that such copy, facsimile telecommunication or reproduction shall be a
complete reproduction of the entire original writing or transmission.
In the election of directors, voting shall be by written ballot, and
for any other action, voting need not be by ballot.
The Corporation may, and to the extent required by law or the
Certificate of Incorporation, shall, in advance of any meeting of stockholders,
appoint one or more inspectors to act at such meeting and make a written report
thereof. The Corporation may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is able to act at a meeting of stockholders, the person presiding at
such meeting may, and to the extent required by law or the Certificate of
Incorporation, shall, appoint one or more inspectors to act at such meeting.
Each inspector, before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability.
1.9 ACTION AT MEETING. When a quorum is present at any meeting of
stockholders, the holders of a majority of the stock present or represented and
voting on a matter (or if there are two or more classes of stock entitled to
vote as separate classes, then in the case of each such class, the holders of a
majority of the stock of that class present or represented and voting on such
matter) shall decide any matter to be voted upon by the stockholders at such
meeting (other than the election of directors), except when a different vote is
required by express provision of law, the Certificate of Incorporation or these
Restated By-Laws. Any election of directors by the stockholders shall be
determined by a plurality of the votes cast by the stockholders entitled to vote
at such election, except as otherwise provided by the Certificate of
Incorporation. For the purposes of this paragraph, Broker Non-Votes represented
at the meeting but not permitted to vote on a particular matter shall not be
counted, with respect to the vote on such matter, in the number of (a) votes
cast, (b) votes cast affirmatively, or (c) votes cast negatively.
1.10 INTRODUCTION OF BUSINESS AT MEETINGS.
A. ANNUAL MEETINGS OF STOCKHOLDERS.
(1) Nominations of persons for election to the Board of Directors and
the proposal of business to be considered by the stockholders may be made at an
annual meeting of stockholders (a) pursuant to the Corporation's notice of
meeting, (b) by or at the direction of the Board of
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<PAGE> 8
Directors or (c) by any stockholder of the Corporation who was a stockholder of
record at the time of giving of notice provided for in this Section 1.10, who is
entitled to vote at the meeting and who complies with the notice procedures set
forth in this Section 1.10.
(2) For nominations or other business to be properly brought before
an annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of
this Section 1.10, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
one hundred twentieth (120th) day nor earlier than the close of business on the
one hundred fiftieth (150th) day prior to the first anniversary of the date of
the proxy statement delivered to stockholders in connection with the preceding
year's annual meeting; provided, however, that if either (i) the date of the
annual meeting is more than thirty (30) days before or more than sixty (60) days
after such an anniversary date or (ii) no proxy statement was delivered to
stockholders in connection with the preceding year's annual meeting, notice by
the stockholder to be timely must be so delivered not earlier than the close of
business on the ninetieth (90th) day prior to such annual meeting and not later
than the close of business on the later of the sixtieth (60th) day prior to such
annual meeting or the close of business on the tenth (10th) day following the
day on which public announcement of the date of such meeting is first made by
the Corporation. Such stockholder's notice shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director, all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (b) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (c) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Corporation's books, and of such beneficial
owner and (ii) the class and number of shares of capital stock of the
Corporation that are owned beneficially and held of record by such stockholder
and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph
(A)(2) of this Section 1.10 to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement by the Corporation naming all of
the nominees for director or specifying the size of the increased Board of
Directors at least seventy (70) days prior to the first anniversary of the
preceding year's annual meeting (or, if the annual meeting is held more than
thirty (30) days before or sixty (60) days after such anniversary date, at least
seventy (70) days prior to such annual meeting), a stockholder's notice required
by this Section 1.10 shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered to the Secretary at the principal executive office of the Corporation
not later than the close of business on the tenth
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(10th) day following the day on which such public announcement is first made by
the Corporation.
B. SPECIAL MEETINGS OF STOCKHOLDERS. Only such business
shall be conducted at a special meeting of stockholders as shall have been
brought before the meeting pursuant to the Corporation's notice of meeting.
Nominations of persons for election to the Board of Directors may be made at a
special meeting of stockholders at which directors are to be elected pursuant to
the Corporation's notice of meeting (a) by or at the direction of the Board of
Directors or (b) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any stockholder of the
Corporation who is a stockholder of record at the time of giving of notice of
the special meeting, who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 1.10. If the
Corporation calls a special meeting of stockholders for the purpose of electing
one or more directors to the Board of Directors, any such stockholder may
nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder's notice required by paragraph (A)(2) of this Section 1.10 shall be
delivered to the Secretary at the principal executive offices of the Corporation
not earlier than the ninetieth (90th) day prior to such special meeting nor
later than the later of (x) the close of business on the sixtieth (60th) day
prior to such special meeting or (y) the close of business on the tenth (10th)
day following the day on which public announcement is first made of the date of
such special meeting and of the nominees proposed by the Board of Directors to
be elected at such meeting.
C. GENERAL.
(1) Only such persons who are nominated in accordance with the
procedures set forth in this Section 1.10 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 1.10. Except as otherwise provided by law, the
Certificate of Incorporation or these Restated By-Laws, the chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made or proposed, as the
case may be, in accordance with the procedures set forth in this Section 1.10
and, if any proposed nomination or business is not in compliance herewith, to
declare that such defective proposal or nomination shall be disregarded.
(2) For purposes of this Section 1.10, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 1.10, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth herein. Nothing in this Section 1.10 shall be deemed to affect any rights
(i) of stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders
of any series of Preferred Stock to elect directors under specified
circumstances.
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1.11 ACTION WITHOUT MEETING. Stockholders of the Corporation may not
take any action by written consent in lieu of a meeting.
ARTICLE 2 - DIRECTORS
2.1 GENERAL POWERS. The business and affairs of the Corporation shall
be managed by or under the direction of a Board of Directors, who may exercise
all of the powers of the Corporation except as otherwise provided by law or the
Certificate of Incorporation. In the event of a vacancy in the Board of
Directors, the remaining directors, except as otherwise provided by law or the
Certificate of Incorporation, may exercise the powers of the full Board of
Directors until the vacancy is filled. Without limiting the foregoing, the Board
of Directors may:
(a) declare dividends from time to time in accordance with law;
(b) purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(c) authorize the creation, making and issuance, in such form
as it may determine, of written obligations of every kind,
negotiable or non-negotiable, secured or unsecured, to
borrow funds and guarantee obligations, and to do all
things necessary in connection therewith;
(d) remove any officer of the Corporation with or without
cause, and from time to time to devolve the powers and
duties of any officer upon any other person for the time
being;
(e) confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees
and agents;
(f) adopt from time to time such stock option, stock purchase,
bonus or other compensation plans for directors, officers,
employees, consultants and agents of the Corporation and
its subsidiaries as it may determine;
(g) adopt from time to time such insurance, retirement, and
other benefit plans for directors, officers, employees,
consultants and agents of the Corporation and its
subsidiaries as it may determine; and
(h) adopt from time to time regulations, not inconsistent
herewith, for the management of the Corporation's business
and affairs.
2.2 NUMBER; ELECTION AND QUALIFICATION. The number of directors which
shall constitute the whole Board of Directors shall be determined by resolution
of the Board of Directors, but in no event shall be less than three. The number
of directors may be decreased at any time and from time to time by a majority of
the directors then in office, but only to eliminate
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vacancies existing by reason of the death, resignation, removal or expiration of
the term of one or more directors. The directors shall be elected at the annual
meeting of stockholders (or, if so determined by the Board of Directors pursuant
to Section 10 hereof, at a special meeting of stockholders), by such
stockholders as have the right to vote on such election. Directors need not be
stockholders of the Corporation.
2.3 CLASSES OF DIRECTORS. The Board of Directors shall be and is
divided into three classes: Class I, Class II and Class III. No one class shall
have more than one director more than any other class.
2.4 TERMS IN OFFICE. Each director shall serve for a term ending on
the date of the third annual meeting following the annual meeting at which such
director was elected; PROVIDED, however, that each initial director in Class I
shall serve for a term ending on the date of the annual meeting next following
the end of the Corporation's fiscal year ending December 31, 2000; each initial
director in Class II shall serve for a term ending on the date of the annual
meeting next following the end of the Corporation's fiscal year ending December
31, 2001; and each initial director in Class III shall serve for a term ending
on the date of the annual meeting next following the end of the Corporation's
fiscal year ending December 31, 2002.
2.5 ALLOCATION OF DIRECTORS AMONG CLASSES. In the event of any
increase or decrease in the authorized number of directors, (i) each director
then serving as such shall nevertheless continue as a director of the class of
which he or she is a member until the expiration of such director's current term
or his or her prior death, removal or resignation and (ii) the newly created or
eliminated directorships resulting from such increase or decrease shall be
apportioned by the Board of Directors among the three classes of directors,
subject to the second sentence of Section 2.3. To the extent possible,
consistent with the foregoing rule, any newly created directorships shall be
added to those classes whose terms of office are to expire at the latest dates
following such allocation, and any newly eliminated directorships shall be taken
from those classes whose terms of office are to expire at the earliest date
following such allocation, unless otherwise provided for from time to time by
resolution adopted by a majority of the directors then in office, although less
than a quorum. No decrease in the number of directors constituting the whole
Board of Directors shall shorten the term of an incumbent Director.
2.6 TENURE. Notwithstanding any provisions to the contrary contained
herein, each director shall hold office until his or her successor is elected
and qualified, or until his or her earlier death, resignation or removal.
2.7 VACANCIES. Unless and until filled by the stockholders, any
vacancy in the Board of Directors, however occurring, including a vacancy
resulting from an enlargement thereof, may be filled only by vote of a majority
of the directors then in office, although less than a quorum, or by a sole
remaining director, and not by the stockholders. A director elected to fill a
vacancy shall be elected for the unexpired term of his or her predecessor in
office, if any, and a director chosen to fill a position resulting from an
increase in the number of directors shall hold office
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until the next election of directors of the class for which such director was
chosen and until his or her successor is elected and qualified, or until his or
her earlier death, resignation or removal.
2.8 RESIGNATION. Any director may resign by delivering his or her
written resignation to the Corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
2.9 REGULAR MEETINGS. Regular meetings of the Board of Directors may
be held without notice at such time and place, either within or without the
State of Delaware, as shall be determined from time to time by the Board of
Directors; provided that any director who is absent when such a determination is
made shall be given notice of the determination.
2.10 SPECIAL MEETINGS. Special meetings of the Board of Directors may
be held at any time and place, within or without the State of Delaware,
designated in a call by the Chairman of the Board (if any), the Chief Executive
Officer, the President, two or more directors, or by one director in the event
that there is only a single director in office.
2.11 NOTICE OF SPECIAL MEETINGS. Notice of any special meeting of
directors shall be given to each director by the Secretary or by the officer or
one of the directors calling the meeting. Notice shall be duly given to each
director (i) by giving notice to such director in person or by telephone at
least 48 hours in advance of the meeting, (ii) by sending a telegram or
delivering written notice by facsimile transmission or by hand, to his or her
last known business or home address at least 48 hours in advance of the meeting,
or (iii) by mailing written notice to his or her last known business or home
address at least 72 hours in advance of the meeting. A notice or waiver of
notice of a meeting of the Board of Directors need not specify the purposes of
the meeting.
2.12 MEETINGS BY TELEPHONE CONFERENCE CALLS. Directors or any members
of any committee designated by the Board of Directors may participate in a
meeting of the Board of Directors or such committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation by such
means shall be deemed to constitute presence in person at such meeting.
2.13 QUORUM. A majority of the total number of the whole Board of
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; PROVIDED, however, that in no case shall less than one-third
(1/3) of the total number of the whole Board of Directors constitute a quorum.
In the absence of a quorum at any such meeting, a majority of the directors
present may adjourn the meeting from time to time without further notice other
than announcement at the meeting, until a quorum shall be present.
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2.14 ACTION AT MEETING. At any meeting of the Board of Directors at
which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action, unless a different vote is specified by law, the
Certificate of Incorporation or these Restated By-Laws.
2.15 ACTION BY WRITTEN CONSENT. Any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee of the
Board of Directors may be taken without a meeting, if all members of the Board
of Directors or committee, as the case may be, consent to such action in
writing, and the written consents are filed with the minutes of proceedings of
the Board of Directors or committee.
2.16 REMOVAL. Unless otherwise provided in the Certificate of
Incorporation, any one or more or all of the directors may be removed with cause
only by the holders of at least seventy-five percent (75%) of the shares then
entitled to vote at an election of directors. Directors may not be removed
without cause.
2.17 COMMITTEES. The Board of Directors may, by resolution passed by
a majority of the whole Board, designate one or more committees, each committee
to consist of one or more of the directors of the Corporation. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
such committee. In the absence or disqualification of a member of a committee,
the member or members of such committee present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at such meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors
and subject to the provisions of the General Corporation Law of the State of
Delaware, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation
and may authorize the seal of the Corporation to be affixed to all papers which
may require it. Each such committee shall keep minutes and make such reports as
the Board of Directors may from time to time request. Except as the Board of
Directors may otherwise determine or as provided herein, any committee may make
rules for the conduct of its business, but unless otherwise provided by the
directors or in such rules, its business shall be conducted as nearly as
possible in the same manner as is provided in these Restated By-Laws for the
Board of Directors. Adequate provisions shall be made for notice to members of
all meeting of committees. One-third (1/3) of the members of any committee shall
constitute a quorum unless the committee shall consist of one (1) or two (2)
members, in which event one (1) member shall constitute a quorum; and all
matters shall be determined by a majority vote of the members present. Action
may be taken by any committee without a meeting if all members thereof consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of such committee.
2.18 COMPENSATION OF DIRECTORS. Directors may be paid such
compensation for their services and such reimbursement for expenses of
attendance at meetings as the Board of Directors may from time to time
determine. No such payment shall preclude any director from
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serving the Corporation or any of its parent or subsidiary corporations in any
other capacity and receiving compensation for such service.
2.19 AMENDMENTS TO ARTICLE. Notwithstanding any other provisions of
law, the Certificate of Incorporation or these Restated By-Laws, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of a least seventy-five percent (75%) of the
votes which all the stockholders would be entitled to cast at any annual
election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Article 2.
ARTICLE 3 - OFFICERS
3.1 ENUMERATION. The officers of the Corporation shall consist of a
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including, but not limited to,
a Chairman of the Board, a Vice-Chairman of the Board, and one or more Vice
Presidents, Assistant Treasurers and Assistant Secretaries. The Board of
Directors may appoint such other officers as it may deem appropriate.
3.2 ELECTION. The President, Treasurer and Secretary shall be elected
annually by the Board of Directors at its first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
3.3 QUALIFICATION. No officer need be a stockholder. Any two or more
offices may be held by the same person.
3.4 TENURE. Except as otherwise provided by law, by the Certificate
of Incorporation or by these Restated By-Laws, each officer shall hold office
until his or her successor is elected and qualified, unless a different term is
specified in the vote choosing or appointing such officer, or until his or her
earlier death, resignation or removal.
3.5 RESIGNATION AND REMOVAL. Any officer may resign by delivering his
or her written resignation to the Chairman of the Board (if any), to the Board
of Directors at a meeting thereof, to the Corporation at its principal office or
to the President or Secretary. Such resignation shall be effective upon receipt
unless it is specified to be effective at some other time or upon the happening
of some other event.
Any officer may be removed at any time, with or without cause, by
vote of a majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer
who resigns or is removed shall have any right to any compensation as an officer
for any period following his or her resignation or removal, or any right to
damages on account of such removal, whether his or her compensation be by the
month or by the year or otherwise, unless such compensation is expressly
provided in a duly authorized written agreement with the Corporation.
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3.6 VACANCIES. The Board of Directors may fill any vacancy occurring
in any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Secretary. Each such successor shall hold office for the unexpired term of
his predecessor and until his or her successor is elected and qualified, or
until his or her earlier death, resignation or removal.
3.7 CHAIRMAN AND VICE-CHAIRMAN OF THE BOARD. The Chairman of the
Board, if any, shall preside at all meetings of the Board of Directors and
stockholders at which he or she is present and shall perform such duties and
possess such powers as are designated by the Board of Directors. If the Board of
Directors appoints a Vice-Chairman of the Board, he or she shall, in the absence
or disability of the Chairman of the Board, perform the duties and exercise the
powers of the Chairman of the Board and shall perform such other duties and
possess such other powers as may from time to time be designated by the Board of
Directors.
3.8 PRESIDENT. The President shall, subject to the direction of the
Board of Directors, have general charge and supervision of the business of the
Corporation. Unless otherwise provided by the Board of Directors, and provided
that there is no Chairman of the Board or that the Chairman and Vice-Chairman,
if any, are not available, the President shall preside at all meetings of the
stockholders, and, if a director, at all meetings of the Board of Directors.
Unless the Board of Directors has designated another officer as the Chief
Executive Officer, the President shall be the Chief Executive Officer of the
Corporation. The President shall perform such other duties and shall have such
other powers as the Board of Directors may from time to time prescribe. The
President shall have the power to enter into contracts and otherwise bind the
Corporation in matters arising in the ordinary course of the Corporation's
business.
3.9 VICE PRESIDENTS. Any Vice President shall perform such duties and
possess such powers as the Board of Directors or the President may from time to
time prescribe. In the event of the absence, inability or refusal to act of the
President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and, when so performing, shall have all the powers of
and be subject to all the restrictions upon the President. The Board of
Directors may assign to any Vice President the title of Executive Vice
President, Senior Vice President or any other title selected by the Board of
Directors. Unless otherwise determined by the Board of Directors, any Vice
President shall have the power to enter into contracts and otherwise bind the
Corporation in matters arising in the ordinary course of the Corporation's
business.
3.10 SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall perform
such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Secretary shall
perform such duties and have such powers as are incident to the office of
secretary, including without limitation the duty and power to give notices of
all meetings of stockholders and special meetings of the Board of Directors, to
attend all meetings of stockholders and the Board of Directors and keep a record
of the proceedings, to maintain a stock ledger and prepare lists of stockholders
and their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.
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Any Assistant Secretary shall perform such duties and possess such
powers as the Board of Directors, the President or the Secretary may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Secretary, the Assistant Secretary (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any
meeting of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.11 TREASURER AND ASSISTANT TREASURERS. The Treasurer shall perform
such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the Corporation, to deposit funds of
the Corporation in depositories selected in accordance with these Restated
By-Laws, to disburse such funds as ordered by the Board of Directors, to make
proper accounts for such funds, and to render as required by the Board of
Directors statements of all such transactions and of the financial condition of
the Corporation.
The Assistant Treasurers shall perform such duties and possess such
powers as the Board of Directors, the President or the Treasurer may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Treasurer, the Assistant Treasurer (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.
3.12 SALARIES. Officers of the Corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
3.13 ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS. Unless
otherwise directed by the Board of Directors, the President or any officer of
the Corporation authorized by the President shall have power to vote and
otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which the Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE 4 - CAPITAL STOCK
4.1 ISSUANCE OF STOCK. Unless otherwise voted by the stockholders and
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the Corporation
or the whole or any part of any issued, authorized capital stock of the
Corporation held in its treasury may be issued, sold, transferred or
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otherwise disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.
4.2 CERTIFICATES OF STOCK. Every holder of stock of the Corporation
shall be entitled to have a certificate, in such form as may be prescribed by
law and by the Board of Directors, certifying the number and class of shares
owned by such stockholder in the Corporation. Each such certificate shall be
signed by, or in the name of the Corporation by, the Chairman or Vice-Chairman,
if any, of the Board of Directors, or the President or a Vice President, and the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the Corporation. Any or all of the signatures on such certificate may be a
facsimile.
Each certificate for shares of stock which are subject to any
restriction on transfer pursuant to the Certificate of Incorporation, the
Restated By-Laws, applicable securities laws or any agreement among any number
of shareholders or among such holders and the Corporation shall have
conspicuously noted on the face or back of such certificate either the full text
of such restriction or a statement of the existence of such restriction.
4.3 TRANSFERS. Except as otherwise established by rules and
regulations adopted by the Board of Directors, and subject to applicable law,
shares of stock may be transferred on the books of the Corporation by the
surrender to the Corporation or its transfer agent of the certificate
representing such shares, properly endorsed or accompanied by a written
assignment or power of attorney properly executed, and with such proof of
authority or the authenticity of signature as the Corporation or its transfer
agent may reasonably require. Except as may be otherwise required by law, by the
Certificate of Incorporation or by these Restated By-Laws, the Corporation shall
be entitled to treat the record holder of stock as shown on its books as the
owner of such stock for all purposes, including the payment of dividends and the
right to vote with respect to such stock, regardless of any transfer, pledge or
other disposition of such stock, until the shares have been transferred on the
books of the Corporation in accordance with the requirements of these Restated
By-Laws.
4.4 LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation may issue
a new certificate of stock in place of any previously issued certificate alleged
to have been lost, stolen, or destroyed, upon such terms and conditions as the
President may prescribe, including the presentation of reasonable evidence of
such loss, theft or destruction and the giving of such indemnity as the
President may require for the protection of the Corporation or any transfer
agent or registrar.
4.5 RECORD DATE. The Board of Directors may fix in advance a date as
a record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders or, to the extent permitted by the
Certificate of Incorporation and these By-laws, to express consent (or dissent)
to corporate action in writing without a meeting, or entitled to receive payment
of any dividend or other distribution or allotment of any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action. Such record date shall not be more than 60 nor less than 10 days
before the date of such meeting, nor more than 60 days prior to any other action
to which such record date relates.
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If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day before the day on which notice is given,
or, if notice is waived, at the close of business on the day before the day on
which the meeting is held. The record date for determining stockholders entitled
to express consent to corporate action in writing without a meeting (to the
extent permitted by the Certificate of Incorporation and these By-laws) when no
prior action by the Board of Directors is necessary, shall be the day on which
the first written consent is expressed. The record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE 5 - GENERAL PROVISIONS
5.1 FISCAL YEAR. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
5.2 CORPORATE SEAL. The corporate seal shall be in such form as shall
be approved by the Board of Directors.
5.3 NOTICES. Except as otherwise specifically provided herein or
required by law or the Certificate of Incorporation, all notices required to be
given to any stockholder, director, officer, employee or agent of the
Corporation shall be in writing and may in every instance be effectively given
by hand delivery to the recipient thereof, by depositing such notice in the
mails, postage paid, or by sending such notice by prepaid telegram or facsimile
transmission. Any such notice shall be addressed to such stockholder, director,
officer, employee or agent at his or her last known address as the same appears
on the books of the Corporation. The time when such notice is received shall be
deemed to be the time of the giving of the notice.
5.4 WAIVER OF NOTICE. Whenever any notice whatsoever is required to
be given by law, by the Certificate of Incorporation or by these Restated
By-Laws, a waiver of such notice either in writing signed by the person entitled
to such notice or such person's duly authorized attorney, or by telegraph,
facsimile transmission or any other available method, whether before, at or
after the time stated in such waiver, or the appearance of such person or
persons at such meeting in person or by proxy, shall be deemed equivalent to
such notice.
5.5 EVIDENCE OF AUTHORITY. A certificate by the Secretary, or an
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
Corporation shall, as to all persons who rely on the certificate in good faith,
be conclusive evidence of such action.
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5.6 FACSIMILE SIGNATURES. In addition to the provisions for use of
facsimile signatures elsewhere specifically authorized in these Restated
By-Laws, facsimile signatures of any officer or officers of the Corporation may
be used whenever and as authorized by the Board of Directors or a committee
thereof.
5.7 RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each director, each
member of any committee designated by the Board of Directors, and each officer
of the Corporation shall, in the performance of his or her duties, be fully
protected in relying in good faith upon the books of account or other records of
the Corporation and upon such information, opinions, reports or statements
presented to the Corporation by any of its officers or employees or committees
of the Board of Directors so designated, or by any other person as to matters
which such director or committee member reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
5.8 TIME PERIODS. In applying any provision of these Restated By-Laws
that requires that an act be done or not be done a specified number of days
prior to an event or that an act be done during a period of a specified number
of days prior to an event, calendar days shall be used, the day of the doing of
the act shall be excluded, and the day of the event shall be included.
5.9 CERTIFICATE OF INCORPORATION. All references in these Restated
By-Laws to the Certificate of Incorporation shall be deemed to refer to the
Fourth Amended and Restated Certificate of Incorporation of the Corporation, as
amended and in effect from time to time.
5.10 TRANSACTIONS WITH INTERESTED PARTIES. No contract or transaction
between the Corporation and one or more of the directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of the directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because such director or officer is present at or
participates in the meeting of the Board of Directors or a committee of the
Board of Directors which authorizes the contract or transaction or solely
because his, her or their votes are counted for such purpose, if:
(1) The material facts as to his or her relationship or interest and
as to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee in good faith authorizes
the contract or transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum;
(2) The material facts as to his or her relationship or interest and
as to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
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(3) The contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified, by the Board of Directors, a
committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
5.11 SEVERABILITY. Any determination that any provision of these
Restated By-Laws is for any reason inapplicable, illegal or ineffective shall
not affect or invalidate any other provision of these Restated By-Laws.
5.12 PRONOUNS. All pronouns used in these Restated By-Laws shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the persons or persons so designated may require.
ARTICLE 6 - AMENDMENTS
6.1 BY THE BOARD OF DIRECTORS. Except as is otherwise set forth in
these Restated By-Laws, these Restated By-Laws may be altered, amended or
repealed, or new by-laws may be adopted, by the affirmative vote of a majority
of the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
6.2 BY THE STOCKHOLDERS. Except as otherwise set forth in these
Restated By-Laws, these Restated By-Laws may be altered, amended or repealed or
new by-laws may be adopted by the affirmative vote of the holders of
seventy-five percent (75%)of the shares of the capital stock of the Corporation
issued and outstanding and entitled to vote at any regular meeting of
stockholders, or at any special meeting of stockholders, provided notice of such
alteration, amendment, repeal or adoption of new by-laws shall have been stated
in the notice of such special meeting.
ARTICLE 7 - INDEMNIFICATION
7.1 ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify and hold harmless, to the fullest extent permitted
by applicable law as it presently exists or may hereafter be amended, any person
who was or is a party or is threatened to be made a party or is otherwise
involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation) by reason of the fact that such person,
or a person for whom such person is the legal representative, is or was a
director, trustee, partner, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise or non-profit entity (all such persons, an "Indemnitee"),
against all liability, losses, expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement
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actually and reasonably incurred by such person in connection with such action,
suit or proceeding if such person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interest of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
7.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The Corporation
shall indemnify any Indemnitee who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of the
fact that he or she is or was a director, trustee, partner, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise or non-profit entity against expenses
(including attorneys' fees) and, to the extent permitted by law, amounts paid in
settlement actually and reasonably incurred by him or her in connection with the
defense or settlement of such action or suit 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 Corporation; 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 Corporation unless and only to the extent that the
Court of Chancery of the State of Delaware or the court in which such action or
suit was brought shall determine upon application that despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery of the State of Delaware or such other court shall deem proper.
7.3 SUCCESS ON THE MERITS. To the extent that any person referred to
in Sections 7.1 or 7.2 has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to therein, or in defense of any
claim, issue or matter therein, he or she shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection therewith. Without limiting the foregoing, if any action, suit or
proceeding is disposed of, on the merits or otherwise (including a disposition
without prejudice), without (i) the disposition being adverse to the Indemnitee,
(ii) an adjudication that the Indemnitee was liable to the Corporation, (iii) a
plea of guilty or nolo contendere by the Indemnitee, (iv) an adjudication that
the Indemnitee did not act in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the Corporation, and
(v) with respect to any criminal proceeding, an adjudication that the Indemnitee
had reasonable cause to believe his or her conduct was unlawful, the Indemnitee
shall be considered for the purposes hereof to have been wholly successful with
respect thereto.
7.4 NOTIFICATION AND DEFENSE OF CLAIM. As a condition precedent to
his or her right to be indemnified, the Indemnitee must notify the Corporation
in writing as soon as practicable of any action, suit, proceeding or
investigation involving him or her for which indemnity will or could be sought.
With respect to any action, suit, proceeding or investigation of which the
Corporation is so notified, the Corporation will be entitled to participate
therein at its own expense and/or to assume the defense thereof at its own
expense, with legal counsel reasonably acceptable to the Indemnitee. After
notice from the Corporation to the Indemnitee of its election so to assume such
defense, the Corporation shall not be liable to the Indemnitee for
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<PAGE> 22
any legal or other expenses subsequently incurred by the Indemnitee in
connection with such claim, other than as provided below in this Section 7.4.
The Indemnitee shall have the right to employ his own counsel in connection with
such claim, but the fees and expenses of such counsel incurred after notice from
the Corporation of its assumption of the defense thereof shall be at the expense
of the Indemnitee unless (i) the employment of counsel by the Indemnitee has
been authorized by the Corporation, (ii) counsel by the Indemnitees shall have
reasonably concluded that there may be a conflict of interest or position on any
significant issue between the Corporation and the Indemnitee in the conduct of
the defense of such action or (iii) the Corporation shall not in fact have
employed counsel to assume the defense of such action, in each of which cases
the fees and expenses of the counsel for the Indemnitee shall be at the expense
of the Corporation, except as otherwise expressly provided by this Article. The
Corporation shall not be entitled, without the consent of the Indemnitee, to
assume the defense of any claim brought by or in the right of the Corporation or
as to which counsel for the Indemnitee shall have reasonably made the conclusion
provided for in clause (ii) above.
7.5 ADVANCE OF EXPENSES. Subject to the provisions of Section 7.6
below, in the event that the Corporation does not assume the defense pursuant to
Section 7.4 of this Article of any action, suit, proceeding or investigation of
which the Corporation receives notice under this Article, any expenses
(including attorneys' fees) incurred by an Indemnitee in defending a civil or
criminal action, suit, proceeding or investigation or any appeal therefrom shall
be paid by the Corporation in advance of the final disposition of such matter;
provided, however, that the payment of such expenses incurred by an Indemnitee
in advance of the final disposition of such matter; provided, however, that the
payment of such expenses incurred by an Indemnitee in advance of the final
disposition of such matter shall be made only upon receipt of an undertaking by
or on behalf of the Indemnitee to repay all amounts so advanced in the event
that it shall ultimately be determined that the Indemnitee is not entitled to be
indemnified by the Corporation as authorized in this Article. Such undertaking
shall be accepted without reference to the financial ability of the Indemnitee
to make such repayment.
7.6. PROCEDURE FOR INDEMNIFICATION. In order to obtain
indemnification or advancement of expenses pursuant to Section 7.1, 7.2, 7.3 or
7.5 of this Article, the Indemnitee shall submit to the Corporation a written
request, including in such request such documentation and information as is
reasonably available to the Indemnitee and is reasonably necessary to determine
whether and to what extent the Indemnitee is entitled to indemnification or
advancement of expenses. Any such indemnification or advancement of expenses
shall be made promptly, and in any event within 60 days after receipt by the
Corporation of the written request of the Indemnitee, unless with respect to
requests under Section 7.1, 7.2 or 7.5 the Corporation determines within such
60-day period that the Indemnitee did not meet the applicable standard of
conduct set forth in Section 7.1 or 7.2, as the case may be. Such determination
shall be made in each instance by (a) a majority vote of the directors of the
Corporation consisting of persons who are not at that time parties to the
action, suit or proceeding in question ("disinterested directors"), whether or
not a quorum, (b) a majority vote of a committee of disinterested directors
designated by majority vote of disinterested directors, whether or not a quorum,
(c) a majority vote of a quorum of the outstanding shares of stock of all
classes entitled to vote for directors, voting as a single class, which quorum
shall consist of stockholders who are not at that time parties to the
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action, suit or proceeding in question, (d) independent legal counsel (who may,
to the extent permitted by law, be regular legal counsel to the Corporation), or
(e) a court of competent jurisdiction.
7.7 REMEDIES. The right to indemnification or advances as granted by
this Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 7.6. Unless otherwise required by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the Corporation. Neither the failure of the Corporation
to have made a determination prior to the commencement of such action that
indemnification is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct, nor an actual determination by the
Corporation pursuant to Section 7.6 that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
The Indemnitee's expenses (including attorneys' fees) incurred in connection
with successfully establishing his or her right to indemnification, in whole or
in part, in any such proceeding shall also be indemnified by the Corporation.
7.8. AUTHORIZATION. Any indemnification under Sections 7.1, 7.2 or
7.3 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, trustee, partner, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Sections 7.1 and 7.2. Such determination shall be made by (a) a majority vote of
the directors of the Corporation consisting of persons who are not at that time
parties to the action, suit or proceeding in question ("disinterested
directors"), whether or not a quorum, (b) a majority vote of a committee of
disinterested directors designated by majority vote of disinterested directors,
whether or not a quorum, (c) a majority vote of a quorum of the outstanding
shares of stock of all classes entitled to vote for directors, voting as a
single class, which quorum shall consist of stockholders who are not at that
time parties to the action, suit or proceeding in question, or (d) independent
legal counsel (who may, to the extent permitted by law, be regular legal counsel
to the Corporation).
7.9 NONEXCLUSIVITY. The indemnification and advancement of expenses
provided by, or granted pursuant to, the other Sections of this Article shall
not be deemed exclusive of any other rights to which any person seeking
indemnification or advancement of expenses may be entitled under any statute,
by-law, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his or her official capacity and as to action in another
capacity while holding such office.
7.10 INSURANCE. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, trustee, partner, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise or
non-profit entity against any liability asserted against and incurred by such
person
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in any such capacity, or arising out of his or her status as such, whether or
not the Corporation would have the power to indemnify such person against such
liability under the provisions of this Article or Section 145 of the Delaware
General Corporation Law.
7.11 "THE CORPORATION." For the purposes of this Article, in the
event of a consolidation or merger to which the Corporation is a party,
references to "the Corporation" shall include the resulting corporation and, to
the extent that the Board of Directors of the resulting corporation so decides,
all constituent corporations (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its directors,
officers and employees or agents so that any person who is or was a director,
officer, employee or agent of such a constituent corporation or is or was
serving at the request of such constituent corporation as director, trustee,
partner, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise or non-profit entity shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as he or she would have with respect to such constituent
corporation if its separate existence had continued.
7.12 OTHER INDEMNIFICATION. The Corporation's obligation, if any, to
indemnify any person who was or is serving at its request as a director,
trustee, partner, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise or non-profit entity shall
be reduced by any amount such person may collect as indemnification from such
other corporation, partnership, joint venture, trust or other enterprise or
non-profit entity or from any insurance.
7.13 OTHER DEFINITIONS. For purposes of this Article, references to
"other enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, trustee, officer, employee or agent of
the Corporation which imposes duties on, or involves services by, such director,
trustee, officer, employee, or agent with respect to an employee benefit plan,
its participants, or beneficiaries; and a person who acted in good faith and in
a manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article.
7.14 CONTINUATION OF INDEMNIFICATION. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article shall,
unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a director, trustee, partner, officer, employee or agent
and shall inure to the benefit of the heirs, executors and administrators of
such a person.
7.15 SUBSEQUENT AMENDMENT. No amendment, termination or repeal of
this Article or of the relevant provisions of the General Corporation Law of
Delaware or any other applicable laws shall affect or diminish in any way the
rights of any Indemnitee to indemnification under the provisions hereof with
respect to any action, suit, proceeding or
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investigation arising out of or relating to any actions, transactions or facts
occurring prior to the final adoption of such amendment, termination or repeal.
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EXHIBIT 10.4
EPRISE CORPORATION
1997 STOCK OPTION PLAN
AS ADOPTED AUGUST 20, 1997, AND AMENDED
NOVEMBER 1, 1997, AUGUST 13, 1998, MAY 12, 1999,
SEPTEMBER 15, 1999 AND DECEMBER 1, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Purpose; Restrictions.................................................. 1
2. Effective Date......................................................... 1
3. Stock Covered by the Plan.............................................. 1
4. Administration......................................................... 2
5. Eligible Recipients.................................................... 2
6. Duration of the Plan................................................... 3
7. Terms and Conditions of Options........................................ 3
8. Restrictions on Incentive Options...................................... 6
9. Suspension of Rights Prior to a Dissolution, Reorganization, Etc....... 6
10. Adjustment in Shares.................................................. 6
11. Investment Representations; Transfer Restrictions..................... 6
12. Change in Control..................................................... 7
13. Company's Right of First Refusal...................................... 9
14. No Exercise of Option if Employment Terminated for Misconduct......... 10
15. Company's Right of Repurchase......................................... 11
16. Lock-up Agreement..................................................... 12
17. Definitions........................................................... 13
18. Termination or Amendment of Plan...................................... 13
</TABLE>
<PAGE> 3
As adopted 8/20/97 and amended 11/1/97,
08/13/98, 05/12/99, 9/15/99 and 12/1/99
EPRISE CORPORATION
1997 STOCK OPTION PLAN
1. PURPOSE; RESTRICTIONS. The purpose of this Eprise Corporation 1997
Stock Option Plan (the "Plan") is to advance the interests of Eprise
Corporation, a Delaware corporation (the "Company"), by strengthening the
ability of the Company to attract, retain and motivate key employees,
consultants and other individual contributors of or to the Company or any
present or future parent or subsidiary of the Company (the "Company Group") by
providing them with an opportunity to purchase stock of the Company and thereby
permitting them to share in the Company's success. It is intended that this
purpose will be effected by granting (i) incentive stock options ("Incentive
Options"), which are intended to qualify under the provisions of Section 422 of
the Code (as hereinafter defined), and (ii) non-statutory stock options
("Nonqualified Options"), which are not intended to meet the requirements of
Section 422 of the Code and which are intended to be taxed upon exercise under
Section 83 of the Code. (Both Incentive Options and Nonqualified Options shall
be collectively referred to as "Options".)
Notwithstanding the foregoing, no Incentive Options shall be granted
under this Plan unless this Plan shall have been approved by the stockholders of
the Company within twelve (12) months before or after the Effective Date (as
hereinafter defined).
2. EFFECTIVE DATE. This Plan was adopted on August 20, 1997, which is
also the Effective Date of the Plan.
3. STOCK COVERED BY THE PLAN. Subject to adjustment as provided in
Sections 9 and 10 below, the initial maximum number of shares that may be made
subject to Options under this Plan through the end of the Company's fiscal year
ending December 31, 1999 ("Shares") shall not exceed in the aggregate Seven
Million One Hundred Thirty-Four Thousand Six Hundred Fourteen (7,134,614) shares
of the common stock, $.001 par value, of the Company ("Common Stock"), subject
to the proviso in the following sentence. Any Shares subject to an Option which
for any reason expires or is terminated unexercised as to such Shares and any
Shares reacquired by the Company pursuant to forfeiture or a repurchase right
hereunder may again be the subject of an Option under the Plan; provided, that
Shares subject to an option under the Company's 1994 Stock Option Plan (the
"1994 Plan") which would have become available for subsequent option grants
under the 1994 Plan upon expiration, termination, forfeiture or repurchase in
the manner described in the first part of this sentence, shall instead become
available for grants under this Plan (thereby increasing the initial maximum
number of Shares that may be made subject to Options hereunder through the end
of the Company's fiscal year ending December 31, 1999 to a number greater than
7,134,614). In addition, on January 1 of each of 2000, 2001 and 2002, the
<PAGE> 4
number of Shares that may be made subject to Options under this Plan shall be
increased automatically by an amount equal to the lesser of (i) 5% of the total
number of shares of Common Stock that are issued and outstanding (including
shares convertible into Common Stock, on an as-converted basis) or held in
treasury as of the close of business on December 31 of the preceding year or
(ii) 3,500,000 shares (subjected to adjustment as provided in Sections 9 and 10
below). The Shares purchased pursuant to the exercise of Options under this Plan
may, in whole or in part, be either authorized but unissued Shares or issued
Shares reacquired by the Company.
4. ADMINISTRATION. This Plan shall be administered by the Compensation
Committee of the Board of Directors (the "Committee") as follows:
(a) So long as the Company is not subject to the Exchange Act (as
hereinafter defined), the Committee shall consist of one or more persons
appointed by, and serving at the pleasure of, the Board of Directors.
(b) If the Company becomes subject to the Exchange Act, the Committee
thereafter shall consist of not less than three (3) members of the Board, who
shall be appointed by and shall serve at the pleasure of the Board; provided
that each of such members of the Committee shall be a person who in the opinion
of counsel to the Company is (i) a "non-employee director" as such term is used
in Rule 16b-3 promulgated under the Exchange Act and (ii) an "outside director"
as such term is used in regulation Section 1.162.27(e)(3) under Section 162(m)
of the Code.
(c) The Committee shall have the authority, subject to the express
provisions of the Plan, to construe the Plan and the respective Options and
related agreements, to prescribe, amend and rescind rules and regulations
relating to the Plan, to determine the terms and provisions of the respective
Options and related agreements, and to make all other determinations in the
judgment of the Committee necessary or desirable for the administration of the
Plan. The Committee may correct any defect or supply any omission or reconcile
any inconsistency in the Plan or in any Option or related agreement in the
manner and to the extent it shall deem expedient to carry the Plan into effect,
and it shall be the sole and final judge of such expediency. No member of the
Committee shall be liable for any action or determination made in good faith.
5. ELIGIBLE RECIPIENTS. Subject to the restrictions of Section 1 above,
Options may be granted to such key employees, consultants or other individual
contributors of or to the Company Group, including without limitation members of
the Board, as are selected by the Committee (a "Participant"); provided, that
only Employees (as defined below) of the Company Group shall be eligible for
grants of Incentive Options.
6. DURATION OF THE PLAN. This Plan shall terminate ten (10) years from
the Effective Date hereof, unless terminated earlier pursuant to Section 13
below, and no Options may be granted thereafter.
7. TERMS AND CONDITIONS OF OPTIONS. Options granted under this Plan
shall be evidenced by grant forms in such form and containing such terms and
conditions as the
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<PAGE> 5
Committee shall determine; provided, however, that such grant forms shall
evidence among their terms and conditions the following:
(a) PRICE. The purchase price per Share payable upon the exercise of
each Option granted hereunder shall be determined by the Committee at the time
the Option is granted. Subject to Section 7(j)(i), if applicable, the purchase
price per Share payable upon the exercise of each Incentive Option granted
hereunder shall not be less than one hundred percent (100%) of the fair market
value per Share of the Common Stock on the day the Incentive Option is granted.
Fair market value shall be determined in accordance with procedures to be
established in good faith by the Committee. The purchase price per Share payable
upon the exercise of each Nonqualified Option granted hereunder shall be
determined by the Board at the time of the grant. No Share shall be issued for
less than its par value, if any.
(b) NUMBER OF SHARES. Each grant form shall specify the number of
Shares to which it pertains.
(c) EXERCISE OF OPTIONS. Each Option shall be exercisable for the
full amount or for any part thereof and at such intervals or in such
installments as the Committee may determine at the time it grants such Option;
provided, however, that no Option shall be exercisable with respect to any
Shares later than ten (10) years after the date of the grant of such Option (or
five (5) years in the case of Incentive Options to which Section 7(j)(ii)
applies). An Option shall be exercisable only by delivery of a written notice to
the Company's President, or any other officer of the Company designated by the
Committee to accept such notices on its behalf, specifying the number of Shares
for which the Option is exercised and accompanied by either (i) payment or (ii)
if permitted by the Committee, irrevocable instructions to a broker to promptly
deliver to the Company full payment in accordance with Section 7(d)(ii) below of
the amount necessary to pay the aggregate exercise price. With respect to an
Incentive Option, the permission of the Committee referred to in clause (ii) of
the preceding sentence must be granted at the time the Incentive Option is
granted.
(d) PAYMENT. Payment shall be made in full (i) at the time the Option
is exercised or (ii) promptly after the Participant forwards the irrevocable
instructions referred to in Section 7(c)(ii) above to the appropriate broker, if
exercise of an Option is made pursuant to Section 7(c)(ii) above. Payment shall
be made either (I) in cash, (II) by check, (III) if permitted by the Committee
(with respect to an Incentive Option, such permission to have been granted at
the time the Incentive Option is granted), by delivery and assignment to the
Company of shares of Company stock having a fair market value (as determined by
the Committee) equal to the exercise price, (IV) if permitted by the Committee,
as stated in the grant form evidencing the Option, and to the extent permitted
by any applicable law, by the Participant's recourse promissory note, which note
must be due and payable not more than five (5) years after the date the Option
is exercised, or (V) by a combination of one or more of the foregoing methods.
If shares of Company stock are to be used to pay the exercise price of an
Incentive Option, the Company prior to such payment must be furnished with
evidence satisfactory to it that the acquisition of such shares and their
transfer in payment of the exercise price satisfy the requirements of Section
422 of the Code and other applicable laws.
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(e) WITHHOLDING TAXES; DELIVERY OF SHARES. The Company's obligation
to deliver Shares upon exercise of an Option shall be subject to the
Participant's satisfaction of all applicable federal, state and local income and
employment tax withholding obligations. Without limiting the generality of the
foregoing, the Company shall have the right to deduct from payments of any kind
otherwise due to the Participant any federal, state or local taxes of any kind
required by law to be withheld with respect to any Shares issued upon exercise
of Options. The Participant may elect to satisfy such obligation(s), in whole or
in part, by (i) delivering to the Company a check for the amount required to be
withheld or (ii) if the Committee in its sole discretion approves in any
specific or general case, having the Company withhold Shares or delivering to
the Company already owned shares of Common Stock having a value equal to the
amount required to be withheld, as determined by the Committee.
(f) NON-TRANSFERABILITY. No Option shall be transferable by the
Participant otherwise than by will or the laws of descent or distribution, and
each Option shall be exercisable during the Participant's lifetime only by the
Participant.
(g) TERMINATION OF OPTIONS. Except to the extent the Committee
provides specifically in a grant form or Option agreement for a lesser period
(or a greater period, in the case of Nonqualified Options only), each Option
shall terminate and may no longer be exercised if the Participant ceases for any
reason to render continuous Service (as hereinafter defined), in accordance with
the following provisions:
(i) if the Participant ceases to render Service for any reason
other than death or Disability (as hereinafter defined), the
Participant may, at any time within a period of three (3) months
after the date of such cessation of Service, exercise the Option to
the extent that the Option was exercisable on the date of such
cessation;
(ii) if the Participant ceases to render Service because of
Disability, the Participant may, at any time within a period of one
(1) year after the date of such cessation of Service, exercise the
Option to the extent that the Option was exercisable on the date of
such cessation; and
(iii) if the Participant ceases to render Service because of
death, the Option, to the extent that the Participant was entitled to
exercise it on the date of death, may be exercised within a period of
one (1) year after the Participant's death by the person or persons
to whom the Participant's rights under the Option pass by will or by
the laws of descent or distribution;
provided, however, that no Option may be exercised to any extent by anyone after
the date of its expiration; and provided, further, that Options may be exercised
at any time only as to Shares which at such time are available for acquisition
pursuant to the terms of the applicable grant form or agreement.
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<PAGE> 7
(h) RIGHTS AS STOCKHOLDER. A Participant shall have no rights as a
stockholder with respect to any Shares covered by an Option until the date of
issuance of a stock certificate in the Participant's name for such Shares.
(i) REPURCHASE OF SHARES BY THE COMPANY. Any Shares acquired upon
exercise of an Option may in the discretion of the Committee be subject to
repurchase by or forfeiture to the Company if and to the extent and at the
repurchase price, if any, specifically set forth in the option grant form or
agreement pursuant to which the Shares were acquired. Certificates representing
Shares subject to such repurchase or forfeiture may be subject to such escrow
and stock legending provisions as may be set forth in the option grant form or
agreement pursuant to which the Shares were acquired.
(j) 10% STOCKHOLDER. If any Participant to whom an Incentive Option
is granted pursuant to the provisions of the Plan is on the date of grant the
owner of stock (as determined under Section 424(d) of the Code) possessing more
than 10% of the total combined voting power or value of all classes of stock of
the Company, its parent, if any, or subsidiaries, then the following special
provisions shall be applicable:
(i) The exercise price per Share subject to such Option shall not
be less than 110% of the fair market value of each Share on the date
of grant; and
(ii) The Option shall not have a term in excess of five (5) years
from the date of grant.
(k) CONFIDENTIALITY AGREEMENTS. Each Participant shall execute, prior
to or contemporaneously with the grant of any Option hereunder, the Company's
then standard form of agreement, if any, relating to nondisclosure of
confidential information, assignment of inventions and related matters.
(l) AGGREGATE LIMITATION. The maximum number of Shares with respect
to which any Options may be granted under the Plan to any individual during each
successive twelve-month period commencing on the Effective Date of the Plan
shall not exceed the total number of Shares reserved for the Plan pursuant to
Section 3 above.
(m) RIGHT TO TERMINATE. Nothing contained in the Plan or in any
Option granted hereunder shall restrict the right of any member of the Company
Group to terminate the employment of any Participant or other Service by the
Participant at any time and for any reason, with or without notice.
8. RESTRICTIONS ON INCENTIVE OPTIONS. Incentive Options granted under
this Plan shall be specifically designated as such and shall be subject to the
additional restriction that the aggregate fair market value, determined as of
the date the Incentive Option is granted, of the Shares with respect to which
Incentive Options are exercisable for the first time by a Participant during any
calendar year shall not exceed $100,000. If an Incentive Option which exceeds
the $100,000 limitation of this Section 8 is granted, the portion of such Option
which is exercisable
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<PAGE> 8
for Shares in excess of the $100,000 limitation shall be treated as a
Nonqualified Option pursuant to Section 422(d) of the Code. In the event that
such Participant is eligible to participate in any other stock incentive plans
of the Company, its parent, if any, or a subsidiary which are also intended to
comply with the provisions of Section 422 of the Code, such annual limitation
shall apply to the aggregate number of shares for which options may be granted
under all such plans.
9. SUSPENSION OF RIGHTS PRIOR TO A DISSOLUTION, REORGANIZATION, ETC.
Prior to any dissolution, liquidation, merger, consolidation or reorganization
of the Company as to which the Company will not be the surviving corporation, or
the sale or exchange of substantially all of the Common Stock or the sale of
substantially all of the assets of the Company (the "Event"), the Board or the
Committee may decide to terminate each outstanding Option. If the Board or the
Committee so decides, each Option shall terminate as of the effective date of
the Event, but the Board or the Committee shall suspend the exercise of all
outstanding Options a reasonable time prior to the Event, giving each person
affected thereby not less than fourteen days written notice of the date of
suspension, prior to which date such person may purchase in whole or in part the
Shares otherwise available to him as of the date of purchase. For purposes of
this section, the Shares available to any person as of the date of purchase
shall include all Shares issuable under any Accelerated Options of such person,
as defined in Section 12 hereof. If the Event is not consummated, the suspension
shall be removed and all Options shall continue in full force and effect,
subject to their terms.
10. ADJUSTMENT IN SHARES. Appropriate adjustment shall be made by the
Committee in the maximum number of Shares subject to the Plan and in the number,
kind, and exercise price of Shares covered by outstanding Options granted
hereunder to give effect to any stock dividends, stock splits, stock
combinations, recapitalizations and other similar changes in the capital
structure of the Company after the Effective Date of the Plan. In the event of a
change of the Common Stock resulting from a merger or similar reorganization as
to which the Company is the surviving corporation, the number and kind of Shares
which thereafter may be purchased pursuant to an Option under the Plan and the
number and kind of Shares then subject to Options granted hereunder and the
price per Share thereof shall be appropriately adjusted in such manner as the
Committee may deem equitable to prevent dilution or enlargement of the rights
available or granted hereunder.
11. INVESTMENT REPRESENTATIONS; TRANSFER RESTRICTIONS. The Company may
require Participants, as a condition of purchasing Shares pursuant to the
exercise of an Option, to give written assurances in substance and form
satisfactory to the Company to the effect that such person is acquiring the
Shares for the Participant's own account for investment and not with any present
intention of selling or otherwise distributing the same, and to such other
effects as the Company deems necessary or appropriate (including without
limitation confirmation that the Participant is aware of any applicable
restrictions on transfer of the Shares, as specified in the by-laws of the
Company or otherwise) in order to comply with federal and applicable state
securities laws.
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<PAGE> 9
12. CHANGE IN CONTROL
Notwithstanding anything to the contrary in the Plan or in any Option
grant (but subject to the provisions of this Section 12), upon the occurrence of
a Change in Control (as defined below) of the Company, the right to purchase
shares under each option granted under the Plan that is then vested or that will
become vested on the next scheduled vesting date, as set forth in the applicable
Option grant, shall vest and become exercisable immediately on the date of
occurrence of a Change in Control (any such options, the "Accelerated Options").
Notwithstanding the foregoing, the Board of Directors may, by vote of a majority
of the entire Board (such majority to include the two directors appointed by the
Investors, as such term is defined in the Stock Purchase Agreement dated
December 18, 1997 by and among the Company, Prism Venture Partners I, L.P.,
Tredegar Investments, Inc., The Still River Fund and Gustin Partners, L.P., for
so long as such agreement remains in effect), provide for acceleration rights
upon a Change in Control in addition to those provided in this Section 12. For
the purpose of this Plan a "Change in Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Sections 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 35 percent or more of either (i) the then outstanding shares of
Common Stock or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of the
directors (the "Outstanding Company Voting Securities"); provided, however, that
the following acquisitions shall not constitute a Change in Control: (A) any
acquisition directly from the Company; (B) any acquisition by the Company or by
any corporation controlled by the Company; (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or (D) any acquisition by any corporation
pursuant to a consolidation or merger, if, following such consolidation or
merger, the conditions described in clauses (i), (ii) and (iii) of paragraph (c)
of this Section 12 are satisfied; or
(b) Individuals who, as of the Effective Date, constitute the Board
(the "Incumbent Board") ceasing for any reason to constitute at least two-thirds
of the Board over any period of 24 consecutive months or less; provided,
however, that any individual becoming a director subsequent to the Effective
Date whose election, or nomination for election by the Company's stockholders,
was approved by a vote or resolution of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board; or
(c) Adoption by the Board of a resolution approving an agreement of
consolidation of the Company with or merger of the Company into another
corporation or business entity in each case unless, following such consolidation
or merger, (i) more than 60 percent of, respectively, the
7
<PAGE> 10
then outstanding shares of common stock of the corporation resulting from such
consolidation or merger and/or the combined voting power of the then outstanding
voting securities of such corporation or business entity entitled to vote
generally in the election of directors (or other persons having the general
power to direct the affairs of such entity) is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Common Stock and Outstanding
Company Voting Securities immediately prior to such consolidation or merger in
substantially the same proportions as their ownership, immediately prior to such
consolidation or merger, of the Common Stock and/or Outstanding Company Voting
Securities, as the case may be, (ii) no Person (excluding the Company; any
employee benefit plan (or related trust) of the Company or such corporation or
other business entity resulting from such consolidation or merger; and any
Person beneficially owning, immediately prior to such consolidation or merger,
directly or indirectly, 35 percent or more of the Common Stock and/or
Outstanding Company Voting Securities, as the case may be) beneficially owns,
directly or indirectly, 35 percent or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
consolidation or merger or the combined voting power of the then outstanding
voting securities of such corporation or business entity entitled to vote
generally in the election of its directors (or other persons having the general
power to direct the affairs of such entity) and (iii) at least two-thirds of the
members of the board of directors (or other group of persons having the general
power to direct the affairs of the corporation or other business entity)
resulting from such consolidation or merger were members of the Incumbent Board
at the time of the execution of the initial agreement providing for such
consolidation or merger; provided that any right which shall vest by reason of
the action of the Board pursuant to this paragraph (c) shall be divested, with
respect to any such right not already exercised, upon (A) the rejection of such
agreement of consolidation or merger by the stockholders of the Company or (B)
its abandonment by either party thereto in accordance with its terms; or
(d) Adoption by the requisite majority of the whole Board, or by the
holders of such majority of stock of the Company as is required by law or by the
Certificate of Incorporation or By-Laws of the Company as then in effect, of a
resolution or consent authorizing (i) the dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the assets of the
Company, other than to a corporation or other business entity with respect to
which, following such sale or other disposition, (A) more than 60 percent of,
respectively, the then outstanding shares of common stock of such corporation
and/or the combined voting power of the outstanding voting securities of such
corporation or other business entity entitled to vote generally in the election
of directors (or other persons having the general power to direct the affairs of
such entity) is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Common Stock and Outstanding Company Voting
Securities immediately prior to such sale or other disposition in substantially
the same proportions as their ownership, immediately prior to such sale or other
disposition, of the Common Stock and/or Outstanding Company Voting securities,
as the case may be, (B) no Person (excluding the Company; any employee benefit
plan (or related trust) of the Company or such corporation or other business
entity; and any Person beneficially owning, immediately prior to such sale or
other disposition, directly or indirectly, 35 percent or more of the Common
Stock and/or Outstanding Company Voting Securities, as the
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<PAGE> 11
case may be) beneficially owns, directly or indirectly, 35 percent or more of,
respectively, the then outstanding shares of common stock of such corporation
and/or the combined voting power of the then outstanding voting securities of
such corporation or other business entity entitled to vote generally in the
election of directors (or other persons having the general power to direct the
affairs of such entity) and (C) at least two-thirds of the members of the board
of directors (or other group of persons having the general power to direct the
affairs of such corporation or other entity) were members of the Incumbent Board
at the time of the execution of the initial agreement or action of the Board
providing for such sale or other disposition of assets of the Company; provided
that any right which shall vest by reason of the action of the Board or the
stockholders pursuant to this paragraph (d) shall be divested, with respect to
any such right not already exercised, upon the abandonment by the Company of
such dissolution, or such sale or other disposition of assets, as the case may
be.
A Change in Control shall not occur upon the mere reincorporation of
the Company in another state.
13. COMPANY'S RIGHT OF FIRST REFUSAL.
(a) EXERCISE OF RIGHT. If the Employee desires to sell all or any
part of the shares acquired under an Option (including any securities received
in respect thereof pursuant to any stock dividend, stock split,
reclassification, reorganization, recapitalization and the like), and an offeror
(the "Offeror") has made an offer therefor, which offer the Employee desires to
accept, the Employee shall: (i) obtain in writing an irrevocable and
unconditional bona fide offer (the "Bona Fide Offer") for the purchase thereof
from the Offeror; and (ii) give written notice (the "Option Notice") to the
Company setting forth his or her desire to sell such shares, which Option Notice
shall be accompanied by a photocopy of the original executed Bona Fide Offer and
shall set forth at least the name and address of the Offeror and the price and
terms of the Bona Fide Offer. Upon receipt of the Option Notice, the Company
shall have an assignable option to purchase any or all of such shares (the
"Option Shares") specified in the Option Notice, such option to be exercisable
by giving, within 30 days after receipt of the Option Notice, a written
counter-notice to the Employee. If the Company elects to purchase any or all of
such Option Shares, it shall be obligated to purchase, and the Employee shall be
obligated to sell to the Company, such Option Shares at the price and terms
indicated in the Bona Fide Offer within 60 days from the date of receipt by the
Company of the Option Notice.
(b) SALE OF OPTION SHARES TO OFFEROR. The Employee may sell,
pursuant to the terms of the Bona Fide Offer, any or all of such Option Shares
not purchased or agreed to be purchased by the Company for 60 days after the
expiration of the 30-day period during which the Company may give the aforesaid
counter-notice; provided, however, that the Employee shall not sell such Option
Shares to the Offeror if the Offeror is a competitor of the Company and the
Company gives written notice to the Employee, within 30 days of its receipt of
the Option Notice, stating that the Employee shall not sell his Option Shares to
the Offeror; and provided, further, that prior to the sale of such Option Shares
to the Offeror, the Offeror shall execute an agreement with the Company pursuant
to which the Offeror agrees to be subject to the restrictions set forth in this
Section 13. If any or all of such Option Shares are not sold pursuant
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<PAGE> 12
to a Bona Fide Offer within the time permitted above, the unsold Option Shares
shall remain subject to the terms of this Section 13.
(c) ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. If there shall be
any change in the Common Stock of the Company through merger, consolidation,
reorganization, recapitalization, stock dividend, split-up, combination or
exchange of shares, or the like, the restrictions contained in this Section 13
shall apply with equal force to additional and/or substitute securities, if any,
received by the Employee in exchange for, or by virtue of his or her ownership
of, Option Shares.
(d) FAILURE TO DELIVER OPTION SHARES. In the event the Employee
fails or refuses to deliver on a timely basis duly endorsed certificates
representing Option Shares to be sold to the Company pursuant to this Section 13
the Company shall have the right to deposit the purchase price for the Option
Shares in a special account with any bank or trust company in the Commonwealth
of Massachusetts, giving notice of such deposit to the Employee, whereupon such
Option Shares shall be deemed to have been purchased by the Company. All such
monies shall be held by the bank or trust company for the benefit of the
Employee. All monies deposited with the bank or trust company but remaining
unclaimed for two (2) years after the date of deposit shall be repaid by the
bank or trust company to the Company on demand, and the Employee shall
thereafter look only to the Company for payment. The Company may place a legend
on any stock certificate delivered to the Employee reflecting the restrictions
on transfer provided in this Section 13.
(e) EXPIRATION OF COMPANY'S RIGHT OF FIRST REFUSAL. The refusal
rights of the Company forth above shall remain in effect until the earlier of
(i) the date which is ten years from the date of grant of this option or (ii)
such time, if ever, as a distribution to the public is made of shares of the
Company's Common Stock for an aggregate public offering price of at least
$5,000,000 or more pursuant to a registration statement filed under the
Securities Act of 1933, as amended, or a successor statute, at which time the
refusal rights of the Company set forth herein will automatically expire.
14. NO EXERCISE OF OPTION IF EMPLOYMENT TERMINATED FOR MISCONDUCT. If
the employment of the Employee is terminated for "Misconduct", an Option shall
terminate on the date of such termination of employment with respect to any
shares which have become exercisable during the period commencing on the date
which is six months prior to the date upon which such Misconduct is determined
by the Board of Directors to have commenced or occurred and shall thereupon not
be exercisable to the extent of such termination. "Misconduct" is conduct, as
determined by the Board of Directors, involving one or more of the following:
(i) the substantial and continuing failure of the Employee to render services to
the Company in accordance with his assigned duties; (ii) a determination by
two-thirds of the members of the Board of Directors that the Employee has
inadequately performed the duties of his employment; (iii) disloyalty, gross
negligence, dishonesty or breach of fiduciary duty to the Company; (iv) the
commission of an act of embezzlement, fraud, disloyalty, dishonesty or
deliberate disregard of the rules or policies of the Company which results in
loss, damage or injury to the Company, whether directly or indirectly; (v) the
unauthorized disclosure of any trade secret or confidential
10
<PAGE> 13
information of the Company; or (vi) the commission of an act which constitutes
unfair competition with the Company or which induces any customer of the Company
to withdraw from or not enter into a contract with the Company. In making such
determination, the Board of Directors shall act fairly and in utmost good faith
and shall give the Employee an opportunity to appear and to be heard at a
hearing before the Board of Directors or any Committee and present evidence on
his or her behalf. For the purposes of this Section 14, termination of
employment shall be deemed to occur when the Employee receives notice that his
or her employment is terminated.
15. COMPANY'S RIGHT OF REPURCHASE.
(a) RIGHTS OF REPURCHASE. If any of the events specified in Section
15(b) below occur, then:
(i) with respect to shares acquired upon exercise of an Option
prior to the occurrence of such event, within 60 days after the
Company receives actual knowledge of the event, and
(ii) with respect to shares acquired upon exercise of an Option
after the occurrence of such event, within 60 days following the
later of the date of such exercise or the date the Company receives
actual knowledge of such event,
(in either case, the "Repurchase Period"), the Company shall have the right, but
not the obligation, to repurchase all, but not a portion of, the shares from the
Employee, or his or her legal representatives, as the case may be (the
"Repurchase Right"). The Repurchase Right shall be exercised by the Company by
giving the Employee, or his or her legal representative, written notice of its
intention to exercise the Repurchase Right on or before the last day of the
Repurchase Period, and, together with such notice, tendering to the Employee, or
his or her legal representative, an amount equal to the higher of the Option
price or the fair market value of the shares. The Company may, in exercising the
Repurchase Right, designate one or more nominees to purchase the shares either
within or without the Company. Upon timely exercise of the Repurchase Right in
the manner provided in this Section 15(a), Employee, or his or her legal
representative, shall deliver to the Company the stock certificate or
certificates representing the shares being repurchased, duly endorsed and free
and clear of any and all liens, charges and encumbrances.
If shares are not purchased under the Repurchase Right, the Employee
and his or her successor in interest, if any, will hold any such shares in his
or her possession subject to all of the provisions of this Plan.
(b) COMPANY'S RIGHT TO EXERCISE REPURCHASE RIGHT. The Company shall
have the Repurchase Right in the event that any of the following events shall
occur:
(i) The termination of the Employee's employment with the
Company or any other member of the Company Group, voluntarily or involuntarily,
for any
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<PAGE> 14
reason whatsoever, including death or permanent disability, prior to the time
the Option shall be fully vested as provided in the applicable Option grant;
(ii) The receivership or bankruptcy of the Employee, any other
creditor's proceeding affecting the Employee's ownership of any shares acquired
upon exercise of this option or the taking of any of Employee's shares acquired
upon exercise of this option by legal process, such as a levy of execution;
(iii) Distribution of shares held by the Employee to his or her
spouse as such spouse's joint or community interest pursuant to a decree of
dissolution, operation of law, divorce, property settlement agreement or for any
other reason, except as may be otherwise permitted by the Company; or
(iv) The termination of the Employee's employment by the
Company for Misconduct (as defined in Section 14 hereof).
(c) DETERMINATION OF FAIR MARKET VALUE. The fair market value of
the shares subject to the Repurchase Right shall be, for purposes of this
Section 15, an amount per share determined on the basis of the price at which
shares of the Common Stock could reasonably be expected to be sold in an
arms-length transaction, for cash, other than on an installment basis, to a
person not employed by, controlled by, in control of or under common control
with the Company. Fair market value shall be determined by the Board of
Directors, giving due consideration to recent grants of incentive stock options
for shares of Common Stock, recent transactions involving shares of the Common
Stock, if any, earnings of the Company to the date of such determination,
projected earnings of the Company, the effect of the transfer restrictions to
which the shares are subject under law and this Agreement, the absence of a
public market for the Common Stock and such other matters as the Board of
Directors deems pertinent. The determination by the Board of Directors of the
fair market value shall be conclusive and binding. The fair market value of the
shares shall be determined as of the day on which the event occurs.
16. LOCK-UP AGREEMENT. The Employee agrees that the Employee will not,
for such period following the effective date of the Company's initial
distribution of securities in an underwritten public offering to the general
public pursuant to a registration statement filed with the Securities and
Exchange Commission as the managing underwriter of such offering shall
reasonably request, but in any event not to exceed 120 days, directly or
indirectly, sell, offer to sell or otherwise dispose of the Company's securities
other than any securities which are included in such initial public offering.
17. DEFINITIONS.
(a) "BOARD" means the Board of Directors of the Company.
(b) "CODE" means the Internal Revenue Code of 1986, as heretofore
and hereafter amended, and the regulations promulgated
thereunder.
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(c) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
heretofore and hereafter amended.
(d) "SERVICE" means the performance of work for one or more members
of the Company Group as an employee, director, consultant or
other individual contributor.
(e) "SUBSIDIARY" has the meaning set forth in Section 424(f) of the
Code.
18. TERMINATION OR AMENDMENT OF PLAN. The Board may by written action
at any time terminate the Plan or make such changes in or additions to the Plan
as it deems advisable without further action on the part of the stockholders of
the Company, provided:
(a) that no such termination or amendment shall adversely affect or
impair any then outstanding Option or related agreement without the consent of
the Participant holding such Option or related agreement; and
(b) that if the Plan itself shall have been approved by the
stockholders of the Company, no such amendment which (i) increases the maximum
number of Shares subject to this Plan (except to the extent provided in Section
3), (ii) materially increases the benefits accruing to Participants, or (iii)
materially modifies the requirements as to eligibility for participation in the
Plan may be made without obtaining, or being conditioned upon, stockholder
approval.
With the consent of the Participant affected, the Committee may amend
outstanding Options or related agreements in a manner not inconsistent with the
Plan. The Committee shall have the right to amend or modify the terms and
provisions of the Plan and of any outstanding Incentive Options granted under
the Plan to the extent necessary to qualify any or all such Options for such
favorable federal income tax treatment (including deferral of taxation upon
exercise) as may be afforded incentive stock options under Section 422 of the
Code.
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<PAGE> 1
Exhibit 10.5
EPRISE CORPORATION
AMENDED AND RESTATED
1997 STOCK OPTION PLAN
AS ADOPTED AUGUST 20, 1997, AND AMENDED
NOVEMBER 1, 1997, AUGUST 13, 1998,
MAY 12, 1999, SEPTEMBER 15, 1999, DECEMBER 1, 1999
AND AMENDED AND RESTATED JANUARY 5, 2000
<PAGE> 2
TABLE OF CONTENTS
-----------------
1. Purpose; Restrictions......................................................1
2. Effective Date..............................................................1
3. Stock Covered by the Plan...................................................1
4. Administration..............................................................2
5. Eligible Recipients.........................................................3
6. Duration of the Plan........................................................3
7. Terms and Conditions of Options.............................................3
8. Restrictions on Incentive Options...........................................7
9. Suspension of Rights Prior to a Dissolution, Reorganization, Etc............7
10. Adjustment in Shares.......................................................7
11. Investment Representations; Transfer Restrictions..........................7
12. Change in Control..........................................................8
13. No Exercise of Option if Employment Terminated for Misconduct.............12
14. Lock-up Agreement.........................................................15
15. Definitions...............................................................15
16. Termination or Amendment of Plan..........................................15
<PAGE> 3
EPRISE CORPORATION
AMENDED AND RESTATED
1997 STOCK OPTION PLAN
1. PURPOSE; RESTRICTIONS. The purpose of this Eprise Corporation
Amended and Restated 1997 Stock Option Plan (the "Plan") is to advance the
interests of Eprise Corporation, a Delaware corporation (the "Company"), by
strengthening the ability of the Company to attract, retain and motivate key
employees, consultants and other individual contributors of or to the Company or
any present or future parent or subsidiary of the Company (the "Company Group")
by providing them with an opportunity to purchase stock of the Company and
thereby permitting them to share in the Company's success. It is intended that
this purpose will be effected by granting (i) incentive stock options
("Incentive Options"), which are intended to qualify under the provisions of
Section 422 of the Code (as hereinafter defined), and (ii) non-statutory stock
options ("Nonqualified Options"), which are not intended to meet the
requirements of Section 422 of the Code and which are intended to be taxed upon
exercise under Section 83 of the Code. (Both Incentive Options and Nonqualified
Options shall be collectively referred to as "Options".)
Notwithstanding the foregoing, no Incentive Options shall be
granted under this Plan unless this Plan shall have been approved by the
stockholders of the Company within twelve (12) months before or after the
Effective Date (as hereinafter defined).
2. EFFECTIVE DATE. This Plan was originally adopted on August 20,
1997. As amended and restated herein, this Plan was adopted on January 5, 2000
which is also the new Effective Date of the Plan.
3. STOCK COVERED BY THE PLAN. Subject to adjustment as provided
in Sections 9 and 10 below, the initial maximum number of shares that may be
made subject to Options under this Plan through the end of the Company's fiscal
year ending December 31, 1999 ("Shares") shall not exceed in the aggregate Seven
Million One Hundred Thirty-Four Thousand Six Hundred Fourteen (7,134,614) shares
of the common stock, $.001 par value, of the Company ("Common Stock"), subject
to the proviso in the following sentence. Any Shares subject to an Option which
for any reason expires or is terminated unexercised as to such Shares and any
Shares reacquired by the Company pursuant to forfeiture or a repurchase right
hereunder may again be the subject of an Option under the Plan; PROVIDED, that
Shares subject to an option under the Company's 1994 Stock Option Plan (the
"1994 Plan") which would have become available for subsequent option grants
under the 1994 Plan upon expiration, termination, forfeiture or repurchase in
the manner described in the first part of this sentence, shall instead become
available for grants under this Plan (thereby increasing the initial maximum
number of Shares that may be made subject to Options hereunder through the end
of the Company's fiscal year ending December 31, 1999 to a
<PAGE> 4
number greater than 7,134,614). In addition, on January 1 of each of 2000, 2001
and 2002, the number of Shares that may be made subject to Options under this
Plan shall be increased automatically by an amount equal to the lesser of (i) 5%
of the total number of shares of Common Stock that are issued and outstanding
(including shares convertible into Common Stock, on an as-converted basis) or
held in treasury as of the close of business on December 31 of the preceding
year or (ii) 3,500,000 shares (subjected to adjustment as provided in Sections 9
and 10 below). The Shares purchased pursuant to the exercise of Options under
this Plan may, in whole or in part, be either authorized but unissued Shares or
issued Shares reacquired by the Company.
4. ADMINISTRATION. This Plan shall be administered by the
Compensation Committee of the Board of Directors (the "Committee") as follows:
(a) So long as the Company is not subject to the Exchange Act (as
hereinafter defined), the Committee shall consist of one or more persons
appointed by, and serving at the pleasure of, the Board of Directors.
(b) The Plan may be administered by different Committees with
respect to different groups of Participants. If and when the Common Stock is
registered under the Exchange Act, then (x) to the extent that the Board
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code or otherwise meeting
the requirements of Section 162(m) at such time and (y) to the extent desirable
to qualify transactions hereunder as exempt under Rule 16b-3 of the Exchange
Act, the transactions contemplated hereunder shall be structured to satisfy the
requirements for exemption under Rule 16b-3.
(c) The Committee shall have the authority, subject to the express
provisions of the Plan, to construe the Plan and the respective Options and
related agreements, to prescribe, amend and rescind rules and regulations
relating to the Plan, to grant Options pursuant to Section 5 and to determine
the terms and provisions of the respective Options and related agreements, and
to make all other determinations in the judgment of the Committee necessary or
desirable for the administration of the Plan. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any Option or related agreement in the manner and to the extent it shall deem
expedient to carry the Plan into effect, and it shall be the sole and final
judge of such expediency. No member of the Committee shall be liable for any
action or determination made in good faith.
5. ELIGIBLE RECIPIENTS. Subject to the restrictions of Section 1
above, Options may be granted to such key employees, consultants or other
individual contributors of or to the Company Group, including without limitation
members of the Board, as are selected by the Committee (a "Participant");
provided, that only Employees (as defined below) of the Company Group shall be
eligible for grants of Incentive Options.
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<PAGE> 5
6. DURATION OF THE PLAN. This Plan shall terminate ten (10) years
from the Effective Date hereof, unless terminated earlier pursuant to Section 13
below, and no Options may be granted thereafter.
7. TERMS AND CONDITIONS OF OPTIONS. Options granted under this
Plan shall be evidenced by grant forms in such form and containing such terms
and conditions as the Committee shall determine; provided, however, that such
grant forms shall evidence among their terms and conditions the following:
(a) PRICE. The purchase price per Share payable upon the
exercise of each Option granted hereunder shall be determined by the Committee
at the time the Option is granted. Subject to Section 7(j)(i), if applicable,
the purchase price per Share payable upon the exercise of each Incentive Option
granted hereunder shall not be less than one hundred percent (100%) of the fair
market value per Share of the Common Stock on the day the Incentive Option is
granted. Fair market value shall be determined in accordance with procedures to
be established in good faith by the Committee. The purchase price per Share
payable upon the exercise of each Nonqualified Option granted hereunder shall be
determined by the Board at the time of the grant. No Share shall be issued for
less than its par value, if any.
(b) NUMBER OF SHARES. Each grant form shall specify the
number of Shares to which it pertains.
(c) EXERCISE OF OPTIONS. Each Option shall be exercisable for
the full amount or for any part thereof and at such intervals or in such
installments as the Committee may determine at the time it grants such Option;
provided, however, that no Option shall be exercisable with respect to any
Shares later than ten (10) years after the date of the grant of such Option (or
five (5) years in the case of Incentive Options to which Section 7(j)(ii)
applies). An Option shall be exercisable only by delivery of a written notice to
the Company's President, or any other officer of the Company designated by the
Committee to accept such notices on its behalf, specifying the number of Shares
for which the Option is exercised and accompanied by either (i) payment or (ii)
if permitted by the Committee, irrevocable instructions to a broker to promptly
deliver to the Company full payment in accordance with Section 7(d)(ii) below of
the amount necessary to pay the aggregate exercise price. With respect to an
Incentive Option, the permission of the Committee referred to in clause (ii) of
the preceding sentence must be granted at the time the Incentive Option is
granted.
(d) PAYMENT. Payment shall be made in full (i) at the time
the Option is exercised or (ii) promptly after the Participant forwards the
irrevocable instructions referred to in Section 7(c)(ii) above to the
appropriate broker, if exercise of an Option is made pursuant to Section
7(c)(ii) above. Payment shall be made either (I) in cash, (II) by check, (III)
if permitted by the Committee (with respect to an Incentive Option, such
permission to have been granted at the time the Incentive Option is granted), by
delivery and assignment to the Company of shares of Company stock (A) which have
a fair market value (as determined by the Committee) equal to the exercise
price, and (B) except to the extent otherwise permitted by the Committee in any
instance, have been owned by the Participant (or other person(s) exercising the
Participant's
3
<PAGE> 6
rights under this Plan) for at least six months prior to the date of delivery or
deemed delivery of such shares (or such other period as may be required to avoid
a charge to the Company's earnings) or were not acquired, directly or
indirectly, from the Company and are acceptable to the Committee, (IV) if
permitted by the Committee, as stated in the grant form evidencing the Option,
and to the extent permitted by any applicable law, by the Participant's recourse
promissory note, which note must be due and payable not more than five (5) years
after the date the Option is exercised, or (V) by a combination of one or more
of the foregoing methods. If shares of Company stock are to be used to pay the
exercise price of an Incentive Option, the Company prior to such payment must be
furnished with evidence satisfactory to it that the acquisition of such shares
and their transfer in payment of the exercise price satisfy the requirements of
Section 422 of the Code and other applicable laws.
For purposes of this Section and Section 7(e) below, a deemed
delivery of shares shall mean the offset by the Company of a number of shares
subject to the Option against an equal number of shares of the Company's stock
owned by the Participant, which may be accomplished by attestation by the
Participant as to such shares owned. If shares of Common Stock are to be used to
pay the exercise price of an Incentive Option, the Company must be furnished
with evidence satisfactory to it prior to such payment that the acquisition of
such shares and their transfer in payment of the exercise price satisfy the
requirements of Section 422 of the Code and other applicable laws.
(e) WITHHOLDING TAXES; DELIVERY OF SHARES. The Company's
obligation to deliver Shares upon exercise of an Option shall be subject to the
Participant's satisfaction of all applicable federal, state and local income and
employment tax withholding obligations. Without limiting the generality of the
foregoing, the Company shall have the right to deduct from payments of any kind
otherwise due to the Participant any federal, state or local taxes of any kind
required by law to be withheld with respect to any Shares issued upon exercise
of Options. The Participant may elect to satisfy such obligation(s), in whole or
in part, by (i) delivering to the Company a check for the amount required to be
withheld or (ii) if the Committee in its sole discretion approves in any
specific or general case, through the surrender (by actual or deemed delivery)
of shares of Common Stock which the Participant already owns with a fair market
value equal to the amount required to be withheld and which, except to the
extent otherwise permitted by the Committee in any instance, have been owned by
the Participant for at least six months prior to the date of delivery or deemed
delivery of such Shares (or such other period as may be required to avoid a
charge to the Company's earnings) or were not acquired, directly or indirectly,
from the Company, or (iii) to the extent of the minimum applicable federal and
state withholding rate only, through the surrender of shares of Common Stock to
which the Participant is otherwise entitled under the Plan, subject to the
discretion of the Committee to require payment in cash if it determines that
payment by other methods is not in the best interests of the Company.
(f) NON-TRANSFERABILITY. Except as the Board may otherwise
specify in an Option Grant (which it shall not do in any Incentive Stock
Option), no Option shall be transferable by the Participant otherwise than by
will or the laws of descent or distribution, and each Option shall be
exercisable during the Participant's lifetime only by the Participant.
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<PAGE> 7
(g) TERMINATION OF OPTIONS. Except to the extent the
Committee provides specifically in a grant form or Option agreement for a lesser
period (or a greater period, in the case of Nonqualified Options only), each
Option shall terminate and may no longer be exercised if the Participant ceases
for any reason to render continuous Service (as hereinafter defined), in
accordance with the following provisions:
(i) if the Participant ceases to render Service for
any reason other than death or Disability (as hereinafter
defined), the Participant may, at any time within a period of
three (3) months after the date of such cessation of Service,
exercise the Option to the extent that the Option was
exercisable on the date of such cessation;
(ii) if the Participant ceases to render Service
because of Disability, the Participant may, at any time within
a period of one (1) year after the date of such cessation of
Service, exercise the Option to the extent that the Option was
exercisable on the date of such cessation; and
(iii) if the Participant ceases to render Service
because of death, the Option, to the extent that the
Participant was entitled to exercise it on the date of death,
may be exercised within a period of one (1) year after the
Participant's death by the person or persons to whom the
Participant's rights under the Option pass by will or by the
laws of descent or distribution;
provided, however, that no Option may be exercised to any extent by anyone after
the date of its expiration; and provided, further, that Options may be exercised
at any time only as to Shares which at such time are available for acquisition
pursuant to the terms of the applicable grant form or agreement.
The Committee shall have full power and authority to extend the period
of time for which a Nonqualified Option is to remain exercisable following
termination of Participant's Service from the periods set forth in subsection
7(g)(i), (ii) or (iii) above or in the Option Agreement to such greater time as
the Board shall deem appropriate, provided that in no event shall such Option be
exercisable later than the date of expiration of the term of such Option as set
forth in the Option Agreement.
(h) RIGHTS AS STOCKHOLDER. A Participant shall have no
rights as a stockholder with respect to any Shares covered by an Option until
the date of issuance of a stock certificate in the Participant's name for such
Shares.
(i) REPURCHASE OF SHARES BY THE COMPANY. Any Shares
acquired upon exercise of an Option may in the discretion of the Committee be
subject to repurchase by or forfeiture to the Company if and to the extent and
at the repurchase price, if any, specifically set forth in the option grant form
or agreement pursuant to which the Shares were acquired. Certificates
representing Shares subject to such
5
<PAGE> 8
repurchase or forfeiture may be subject to such escrow and stock legending
provisions as may be set forth in the option grant form or agreement pursuant to
which the Shares were acquired.
(j) 10% STOCKHOLDER. If any Participant to whom an
Incentive Option is granted pursuant to the provisions of the Plan is on the
date of grant the owner of stock (as determined under Section 424(d) of the
Code) possessing more than 10% of the total combined voting power or value of
all classes of stock of the Company, its parent, if any, or subsidiaries, then
the following special provisions shall be applicable:
(i) The exercise price per Share subject to such
Option shall not be less than 110% of the fair market value of
each Share on the date of grant; and
(ii) The Option shall not have a term in excess of
five (5) years from the date of grant.
(k) CONFIDENTIALITY AGREEMENTS. Each Participant shall
execute, prior to or contemporaneously with the grant of any Option hereunder,
the Company's then standard form of agreement, if any, relating to nondisclosure
of confidential information, assignment of inventions and related matters.
(l) AGGREGATE LIMITATION. The maximum number of Shares
with respect to which any Options may be granted under the Plan to any
individual during each successive twelve-month period commencing on the
Effective Date of the Plan shall not exceed 1,500,000 Shares.
(m) RIGHT TO TERMINATE. Nothing contained in the Plan or
in any Option granted hereunder shall restrict the right of any member of the
Company Group to terminate the employment of any Participant or other Service by
the Participant at any time and for any reason, with or without notice.
(n) AUTOMATIC EXERCISE. Unless provided otherwise in the
Option grant form, each Option granted on or after the Effective Date of this
restated Plan shall be deemed to have been exercised in full (to the extent not
previously exercised) on the last day the Option is exercisable if such Option
would have a before-tax net value of at least $200,000 to the holder upon
exercise on such date. Such deemed exercise shall be subject to payment in full
of the exercise price (and all applicable withholding taxes) by any of the
methods permitted pursuant to the Option grant form, but subject to the
discretion of the Committee to require payment in cash if it determines that
payment by other methods is not in the best interests of the Company.
8. RESTRICTIONS ON INCENTIVE OPTIONS. Incentive Options granted
under this Plan shall be specifically designated as such and shall be subject to
the additional restriction that the aggregate fair market value, determined as
of the date the Incentive Option is granted, of the Shares with respect to which
Incentive Options are exercisable for the first time by a Participant during any
calendar year shall not exceed $100,000. If an Incentive Option which exceeds
the $100,000 limitation of this Section 8 is granted, the portion of such Option
which is exercisable
6
<PAGE> 9
for Shares in excess of the $100,000 limitation shall be treated as a
Nonqualified Option pursuant to Section 422(d) of the Code. In the event that
such Participant is eligible to participate in any other stock incentive plans
of the Company, its parent, if any, or a subsidiary which are also intended to
comply with the provisions of Section 422 of the Code, such annual limitation
shall apply to the aggregate number of shares for which options may be granted
under all such plans.
9. SUSPENSION OF RIGHTS PRIOR TO A DISSOLUTION, REORGANIZATION,
ETC. Prior to any dissolution, liquidation, merger, consolidation or
reorganization of the Company as to which the Company will not be the surviving
corporation, or the sale or exchange of substantially all of the Common Stock or
the sale of substantially all of the assets of the Company (the "Event"), the
Board or the Committee may decide to terminate each outstanding Option. If the
Board or the Committee so decides, each Option shall terminate as of the
effective date of the Event, but the Board or the Committee shall suspend the
exercise of all outstanding Options a reasonable time prior to the Event, giving
each person affected thereby not less than fourteen days written notice of the
date of suspension, prior to which date such person may purchase in whole or in
part the Shares otherwise available to him as of the date of purchase. For
purposes of this section, the Shares available to any person as of the date of
purchase shall include all Shares issuable under any Accelerated Options of such
person, as defined in Section 12 hereof. If the Event is not consummated, the
suspension shall be removed and all Options shall continue in full force and
effect, subject to their terms.
10. ADJUSTMENT IN SHARES. Appropriate adjustment shall be made by
the Committee in the maximum number of Shares subject to the Plan (including the
annual increase set forth in Section 3 hereof), in the aggregate Share limit set
forth in Section 7(l) hereof, and in the number, kind, and exercise price of
Shares covered by outstanding Options granted hereunder to give effect to any
stock dividends, stock splits, stock combinations, recapitalizations and other
similar changes in the capital structure of the Company after the Effective Date
of the Plan. In the event of a change of the Common Stock resulting from a
merger or similar reorganization as to which the Company is the surviving
corporation, the number and kind of Shares which thereafter may be purchased
pursuant to an Option under the Plan and the number and kind of Shares then
subject to Options granted hereunder and the price per Share thereof shall be
appropriately adjusted in such manner as the Committee may deem equitable to
prevent dilution or enlargement of the rights available or granted hereunder.
11. INVESTMENT REPRESENTATIONS; TRANSFER RESTRICTIONS. The Company
may require Participants, as a condition of purchasing Shares pursuant to the
exercise of an Option, to give written assurances in substance and form
satisfactory to the Company to the effect that such person is acquiring the
Shares for the Participant's own account for investment and not with any present
intention of selling or otherwise distributing the same, and to such other
effects as the Company deems necessary or appropriate (including without
limitation confirmation that the Participant is aware of any applicable
restrictions on transfer of the Shares, as specified in the by-laws of the
Company or otherwise) in order to comply with federal and applicable state
securities laws.
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<PAGE> 10
12. CHANGE IN CONTROL.
(a) For the purpose of this Plan, a "Change in Control" shall
mean:
(w) The acquisition by any individual, entity or
group (within the meaning of Sections 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person") of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 35 percent or more
of either (i) the then outstanding shares of Common Stock or (ii) the
combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of the directors
(the "Outstanding Company Voting Securities"); provided, however, that
the following acquisitions shall not constitute a Change in Control:
(A) any acquisition directly from the Company; (B) any acquisition by
the Company or by any corporation controlled by the Company; (C) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled by the
Company; or (D) any acquisition by any corporation pursuant to a
consolidation or merger, if, following such consolidation or merger,
the conditions described in clauses (i), (ii) and (iii) of paragraph
(a)(y) of this Section 12 are satisfied; or
(x) Individuals who, as of the Effective Date,
constitute the Board (the "Incumbent Board") ceasing for any reason to
constitute at least two-thirds of the Board over any period of 24
consecutive months or less; provided, however, that any individual
becoming a director subsequent to the Effective Date whose election, or
nomination for election by the Company's stockholders, was approved by
a vote or resolution of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board;
or
(y) Adoption by the Board of a resolution approving
an agreement of consolidation of the Company with or merger of the
Company into another corporation or business entity in each case
unless, following such consolidation or merger, (i) more than 60
percent of, respectively, the then outstanding shares of common stock
of the corporation resulting from such consolidation or merger and/or
the combined voting power of the then outstanding voting securities of
such corporation or business entity entitled to vote generally in the
election of directors (or other persons having the general power to
direct the affairs of such entity) is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Common
Stock and Outstanding Company Voting Securities immediately prior to
such consolidation or merger in substantially the same proportions as
their ownership, immediately prior to such consolidation or merger, of
the
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<PAGE> 11
Common Stock and/or Outstanding Company Voting Securities, as the case
may be, (ii) no Person (excluding the Company; any employee benefit
plan (or related trust) of the Company or such corporation or other
business entity resulting from such consolidation or merger; and any
Person beneficially owning, immediately prior to such consolidation or
merger, directly or indirectly, 35 percent or more of the Common Stock
and/or Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 35 percent or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such consolidation or merger or the combined
voting power of the then outstanding voting securities of such
corporation or business entity entitled to vote generally in the
election of its directors (or other persons having the general power to
direct the affairs of such entity) and (iii) at least two-thirds of the
members of the board of directors (or other group of persons having the
general power to direct the affairs of the corporation or other
business entity) resulting from such consolidation or merger were
members of the Incumbent Board at the time of the execution of the
initial agreement providing for such consolidation or merger; provided
that any right which shall vest by reason of the action of the Board
pursuant to this paragraph (a)(y) shall be divested, with respect to
any such right not already exercised, upon (A) the rejection of such
agreement of consolidation or merger by the stockholders of the Company
or (B) its abandonment by either party thereto in accordance with its
terms; or
(z) Adoption by the requisite majority of the whole
Board, or by the holders of such majority of stock of the Company as is
required by law or by the Certificate of Incorporation or By-Laws of
the Company as then in effect, of a resolution or consent authorizing
(i) the dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company,
other than to a corporation or other business entity with respect to
which, following such sale or other disposition, (A) more than 60
percent of, respectively, the then outstanding shares of common stock
of such corporation and/or the combined voting power of the outstanding
voting securities of such corporation or other business entity entitled
to vote generally in the election of directors (or other persons having
the general power to direct the affairs of such entity) is then
beneficially owned, directly or indirectly, by all or substantially all
of the individuals and entities who were the beneficial owners,
respectively, of the Common Stock and Outstanding Company Voting
Securities immediately prior to such sale or other disposition in
substantially the same proportions as their ownership, immediately
prior to such sale or other disposition, of the Common Stock and/or
Outstanding Company Voting securities, as the case may be, (B) no
Person (excluding the Company; any employee benefit plan (or related
trust) of the Company or such corporation or other business entity; and
any Person beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 35 percent or more of the Common
Stock and/or Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 35 percent or more of,
respectively, the then outstanding shares of common stock of such
corporation and/or the combined voting power of the then outstanding
voting securities of such corporation or other business entity entitled
to vote generally in the election of directors (or other persons having
the general power to direct the affairs of
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<PAGE> 12
such entity) and (C) at least two-thirds of the members of the board of
directors (or other group of persons having the general power to direct
the affairs of such corporation or other entity) were members of the
Incumbent Board at the time of the execution of the initial agreement
or action of the Board providing for such sale or other disposition of
assets of the Company; provided that any right which shall vest by
reason of the action of the Board or the stockholders pursuant to this
paragraph (a)(z) shall be divested, with respect to any such right not
already exercised, upon the abandonment by the Company of such
dissolution, or such sale or other disposition of assets, as the case
may be.
A Change in Control shall not occur upon the mere reincorporation of
the Company in another state.
(b) Unless otherwise expressly provided in the applicable
Option Grant, upon the occurrence of a Change in Control (as defined
above), the Board or the board of directors of any entity assuming the
obligations of the Company hereunder (as used in this Section 12, also
the "Board") shall, as to outstanding Options, either (i) make
appropriate provision for the continuation of such Options by
substituting on an equitable basis for the shares then subject to such
Options either (A) the consideration payable with respect to the
outstanding shares of Common Stock in connection with the Change in
Control, (B) shares of stock of the surviving or successor corporation
or (C) such other securities as the Board deems appropriate, the fair
market value of which shall not materially differ from the fair market
value of the shares of Common Stock subject to such Options immediately
preceding the Change in Control; or (ii) upon written notice to the
Participants, provide that all Options must be exercised, to the extent
then exercisable or to be exercisable as a result of the Change in
Control, within a specified number of days of the date of such notice,
at the end of which period the Options shall terminate; or (iii)
terminate all Options in exchange for a cash payment equal to the
excess of the fair market value of the Shares subject to such Options
(to the extent then exercisable or to be exercisable as a result of the
Change in Control) over the exercise price thereof. Upon a Change in
Control, any Options granted pursuant to the Plan that are exercisable
in installments shall accelerate so that the Option installment that
would otherwise become exercisable on the next regularly scheduled
vesting date shall become immediately exercisable upon the Change in
Control, and any election by the Board or any assumption of Options
under clauses (i), (ii) and (iii) above shall reflect such accelerated
vesting. Notwithstanding the previous sentence, the Board may, in its
discretion, provide acceleration or other rights in addition to those
provided above.
(c) Upon the occurrence of any Change in Control, the
repurchase and other rights of the Company under each outstanding
Option shall inure to the benefit of the Company's successor and shall
apply to the cash, securities or other property which the Common Stock
was converted into or exchanged for pursuant to such Change in Control
in the same manner and to the same extent as they applied to the Common
Stock subject to such Option; PROVIDED, HOWEVER, that upon a Change in
Control, any Options granted under the Plan that are exercisable in
full, with the underlying Option shares subject to repurchase by the
Company according to a vesting schedule, shall be immediately and
automatically amended so that the installment of the underlying Option
shares that
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<PAGE> 13
would otherwise become a vested installment (and no longer subject to
repurchase by the Company) on the next regularly scheduled vesting date
shall become immediately vested upon such Change in Control, and any
election by the Board or assumption of Options under clauses (i), (ii)
or (iii) of Section 12(b) above shall reflect such accelerated vesting;
provided further that the Board may, in its discretion, provide for
acceleration or other rights in addition to those provided above.
13. NO EXERCISE OF OPTION IF EMPLOYMENT TERMINATED FOR MISCONDUCT.
(a) If the employment of the Employee is terminated for
"Misconduct" (as defined below):
(x) an Option which is exercisable in installments shall
terminate on the date of such termination of employment with respect to
any shares which have become exercisable during the period commencing
on the date which is six months prior to the date upon which such
Misconduct is determined by the Board of Directors to have commenced or
occurred and shall thereupon not be exercisable to the extent of such
termination; and
(y) an Option which is fully exercisable upon grant, subject
to a right of the Company to repurchase unvested Option shares, shall
terminate on the date of such termination of employment and, in
addition, the Company shall have the right, but not the obligation, to
repurchase the Option shares which the Employee purchased within six
months prior to the date on which such Misconduct occurred from the
Employee, or his or her legal representatives, as the case may be (the
"Repurchase Right"). The Repurchase Right shall be exercised by the
Company by giving the Employee, or his or her legal representatives,
written notice of its intention to exercise the Repurchase Right within
three months of the Employee's termination of employment, and, together
with such notice, tendering to the Employee, or his or her legal
representative, an amount equal to the Option price of the shares. The
Company may, in exercising the Repurchase Right, designate one or more
nominees to purchase the shares either within or without the Company.
Upon timely exercise of the Repurchase Right in the manner provided in
this Section 13(a)(y), Employee, or his or her legal representative,
shall deliver to the Company the stock certificate or certificates
representing the shares being repurchased, duly endorsed and free and
clear of any and all liens, charges and encumbrances.
(b) "Misconduct" is conduct, as determined by the Board of
Directors, involving one or more of the following: (i) disloyalty, dishonesty or
breach of fiduciary duty to the Company; (ii) the commission of an act of
embezzlement, fraud, disloyalty, dishonesty or deliberate disregard of the rules
or policies of the Company which results in loss, damage or injury to the
Company, whether directly or indirectly; (iii) the unauthorized disclosure of
any trade secret or confidential information of the Company; or (iv) the
commission of an act which constitutes unfair competition with the Company or
which induces any customer of the Company to withdraw from or not enter into a
contract with the Company. In making such determination, the Board of Directors
shall act fairly and in utmost good faith and shall give the Employee an
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opportunity to appear and to be heard at a hearing before the Board of Directors
or any Committee and present evidence on his or her behalf. For the purposes of
this Section 13, termination of employment shall be deemed to occur when the
Employee receives notice that his or her employment is terminated.
14. LOCK-UP AGREEMENT. The Employee agrees that the Employee will
not, for such period following the effective date of the Company's initial
distribution of securities in an underwritten public offering to the general
public pursuant to a registration statement filed with the Securities and
Exchange Commission as the managing underwriter of such offering shall
reasonably request, but in any event not to exceed 180 days, directly or
indirectly, sell, offer to sell or otherwise dispose of the Company's securities
other than any securities which are included in such initial public offering.
15. DEFINITIONS.
(a) "BOARD" means the Board of Directors of the Company.
(b) "CODE" means the Internal Revenue Code of 1986, as
heretofore and hereafter amended, and the regulations
promulgated thereunder.
(c) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as heretofore and hereafter amended.
(d) "SERVICE" means the performance of work for one or
more members of the Company Group as an employee,
director, consultant or other individual contributor.
(e) "SUBSIDIARY" has the meaning set forth in Section
424(f) of the Code.
16 TERMINATION OR AMENDMENT OF PLAN. The Board may by written
action at any time terminate the Plan or make such changes in or additions to
the Plan as it deems advisable without further action on the part of the
stockholders of the Company, provided:
(a) that no such termination or amendment shall adversely
affect or impair any then outstanding Option or related agreement without the
consent of the Participant holding such Option or related agreement; and
(b) that if the Plan itself shall have been approved by the
stockholders of the Company, no such amendment which, pursuant to (i) the Code,
(ii) the Exchange Act or the regulations thereunder, (iii) any rules and
regulations of any stock exchange or consolidated stock price reporting system
on which prices for the Common Stock are quoted at any time or (iv) any
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other applicable federal, state or foreign laws, rules and regulations requires
action by the stockholders, may be made without obtaining, or being conditioned
upon, stockholder approval.
With the consent of the Participant affected, the Committee may amend
outstanding Options or related agreements in a manner not inconsistent with the
Plan. The Committee shall have the right to amend or modify the terms and
provisions of the Plan and of any outstanding Incentive Options granted under
the Plan to the extent necessary to qualify any or all such Options for such
favorable federal income tax treatment (including deferral of taxation upon
exercise) as may be afforded incentive stock options under Section 422 of the
Code.
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Exhibit 10.7
EPRISE CORPORATION
2000 NON-EMPLOYEE ("ELIGIBLE") DIRECTOR STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The purpose of this Plan is to grant options ("Options") to purchase
shares of the common stock, $.001 par value (the "Common Stock"), of Eprise
Corporation (the "Company") to Eligible Directors (as defined in Section 5 of
this Plan) of the Company at fair market value on the date of grant. The Company
believes that the granting of such options will serve to enhance the Company's
ability to attract and retain the services of such directors, to provide
additional incentives to them and to encourage the highest level of performance
by them by offering them a proprietary interest in the Company's success. The
Company also believes that the Plan will encourage directors to make greater
equity investment in the Company, more closely aligning the interests of the
directors and the stockholders.
2. EFFECTIVE DATE
This Plan was adopted on January 5, 2000, which is also its Effective
Date.
3. SHARES RESERVED UNDER THE PLAN
Subject to adjustment as provided in Section 11, the aggregate number
of shares of Common Stock which may be issued and sold pursuant to options
granted under this Plan shall not exceed 700,000 shares, which may be either
authorized but unissued shares or treasury shares. If any option granted under
the Plan shall terminate or expire without being fully exercised, the shares
which have not been purchased will again become available for purposes of the
Plan.
4. ADMINISTRATION
This Plan shall be administered by the Compensation Committee (the
"Committee") of the Company's Board of Directors (the "Board").
The Committee shall have the authority, subject to the express
provisions of the Plan, to construe the Plan and the respective Options and
related agreements, to prescribe, amend and rescind rules and regulations
relating to the Plan, to determine the terms and provisions of the respective
Options and related agreements, and to make all other determinations in the
judgment of the Committee necessary or desirable for the administration of the
Plan. The Committee may correct any defect or supply any omission or reconcile
any inconsistency in the Plan or in any Option or related agreement in the
manner and to the extent it shall deem expedient to carry the Plan into effect,
and it shall be the sole and final judge of such expediency. No member of the
Committee shall be liable for any action or determination made in good faith.
<PAGE> 2
5. OPTION GRANTS
"Eligible Directors" shall mean directors of the Company who are
directors on the date of grant and who are not officers or employees of the
Company. All options granted under this Plan shall be non-incentive stock
options within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"). "Optioned Shares" shall mean shares of Common Stock
issued and sold pursuant to Options granted under this Plan.
(a) INITIAL GRANT. Each new Eligible Director who becomes such during
the term of this Plan and on or after its Effective Date shall be granted an
Option to purchase 40,000 shares of Common Stock on the date that he or she
becomes such an Eligible Director (an "Initial Grant").
(b) ANNUAL GRANTS. Each Eligible Director who is such following the
annual meeting of stockholders in any year during the term of the Plan shall,
immediately following such meeting, be granted an Option to purchase 20,000
shares of Common Stock (an "Annual Grant") PROVIDED, however, that all Annual
Grants made in 2000 shall be made immediately following the effectiveness of the
Company's registration statement filed with the Securities and Exchange
Commission in connection with the Company's initial public offering of common
stock.
The date of grant of an Option to an Eligible Director under this
Plan shall be the applicable date referred to immediately above.
6. OPTION PRICE
The price per share at which each Option granted under this Plan to an
Eligible Director may be exercised (the "Option Price") shall be the fair market
value of the Common Stock on the date of grant of the Option as determined in
accordance with procedures to be established in good faith by the Committee (the
"Fair Market Value").
In no event shall the Option Price per share for any option under this
Plan be less than the par value per share.
7. TERMS OF GRANT
Each option granted under this Plan shall be evidenced by and subject
to the terms and conditions of an Option Grant attached hereto as EXHIBIT A.
Each Option Grant executed and delivered to an Eligible Director shall contain
the following terms and conditions. Each Option shall expire ten years from the
date of grant of such Option, and shall be exercisable in full on the date of
grant, subject to the provisions of Section 8 below. Each Eligible Director to
whom an Option is granted may exercise such Option from time to time, in whole
or in part, during the period that it is exercisable, by payment of the Option
Price of each share purchased. The Option Price of each share purchased shall be
paid in cash, or by delivery or deemed delivery of other shares of the Company's
Common Stock owned by the Eligible Director with an aggregate Fair
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Market Value equal to the product of the Option Price multiplied by the number
of the shares to be purchased, or by withholding by the Company of the number of
shares of its Common Stock otherwise issuable upon exercise of the installment
with an aggregate Fair Market Value equal to the product of the Option Price
multiplied by the number of the shares (including such withheld shares) to be
purchased, or by delivery of irrevocable instructions to a broker promptly to
pay to the Company the exercise price of the shares to be purchased, or in any
combination of the forms of payment. A deemed delivery of shares shall mean the
offset by the Company of a number of shares to be purchased against an equal
number of shares of the Company's Common Stock owned by the Eligible Director
which may be accomplished by attestation by the Eligible Director as to such
shares owned. If, however, the Committee determines in good faith that an
exercise of an option through the delivery or deemed delivery or withholding of
shares of the Company's Common Stock or through delivery of irrevocable
instructions to a broker is not in the best interest of the Company, the
Committee may withhold the right to so exercise the option and require payment
of the purchase price in cash.
Unless provided otherwise in the Option Grant, each Option shall be
deemed to have been exercised in full (to the extent not previously exercised)
on the last day the option is exercisable if such Option would have a before-tax
net value of at least $200,000 to the holder upon exercise on such date. Such
deemed exercise shall be subject to payment in full of the exercise price (and
all applicable withholding taxes) by any of the methods permitted pursuant to
the Option Grant, but subject to the discretion of the Committee to require
payment in cash if it determines that payment by other methods is not in the
best interests of the Company.
The shares of Common Stock issued upon exercise of an Option granted
under this Plan will be acquired for investment and not with a view to
distribution thereof unless there shall be an effective registration statement
under the Securities Act of 1933, as amended (the "1933 Act"), with respect
thereto. In the event that the Company, upon the advice of counsel, deems it
necessary to list upon official notice of issuance shares to be issued pursuant
to the Plan on a national securities exchange or to register under the 1933 Act
or other applicable federal or state statute any shares to be issued pursuant to
the Plan, or to qualify any such shares for exemption from the registration
requirements of the 1933 Act under the Rules and Regulations of the Securities
and Exchange Commission or for similar exemption under state law, then the
Company shall notify each Eligible Director to that effect and no shares of
Common Stock subject to an Option shall be issued until such registration,
listing or exemption has been obtained. The Company shall make prompt
application for any such registration, listing or exemption pursuant to federal
or state law or rules of such securities exchange which it deems necessary and
shall make reasonable efforts to cause such registration, listing or exemption
to become and remain effective. Nothing in this Plan or in the Option Grant will
confer upon any Eligible Director the right to continue as a director of the
Company.
8. COMPANY'S RIGHT TO REPURCHASE UNVESTED SHARES; RESTRICTIONS ON TRANSFER
OF UNVESTED SHARES
(a) If an Eligible Director ceases to be a member of the Company's
Board, the Company shall have the right to repurchase unvested Optioned Shares,
to the extent such shares
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have been purchased by the Eligible Director on the date such Eligible Director
ceases to serve on the Board or are purchased during the period permitted under
Section 10 hereof, subject to the terms of this Section 8. The Company shall
have no right to repurchase Vested Installments (as defined below) of Optioned
Shares at any time.
(i) While the Eligible Director continues to serve on
the Company's Board, the Optioned Shares shall vest in installments ("Vested
Installments") as follows. Each Initial Grant shall vest in three equal annual
installments beginning on the first anniversary of the date of grant. Each
Annual Grant shall vest in full on the first anniversary of the date of grant.
Vesting shall occur whether or not the Eligible Director has actually exercised
the Option with respect to a Vested Installment, and unexercised Optioned Shares
which are part of a Vested Installment as set forth above shall be deemed fully
vested upon exercise, if any.
(ii) The Optioned Shares shall be subject to a right
(but not an obligation) of repurchase by the Company (the "Right of
Repurchase"). The Right of Repurchase shall be exercisable only with respect to
unvested Optioned Shares ("Unvested Shares"), and only during the 90-day period
following the date the Eligible Director ceases to serve on the Company's Board
for any reason, with or without cause, including (without limitation) death or
Disability (as defined in Section 10 below).
(iii) If the Company exercises its Right of Repurchase,
it shall pay the Eligible Director an amount per share equal to the Option Price
of the Unvested Shares being repurchased.
(iv) The Right of Repurchase shall be exercisable only
by written notice delivered to the Eligible Director prior to the expiration of
the 90-day period specified in clause (a)(ii) above. The notice shall set forth
the date on which the repurchase is to be effected. Such date shall not be more
than 30 days after the date of the notice. The certificate(s) representing the
Unvested Shares to be repurchased shall, prior to the close of business on the
date specified for the repurchase, be delivered to the Company properly endorsed
for transfer. The Company shall, concurrently with the receipt of such
certificate(s), pay to the Eligible Director the purchase price determined
according to clause (a)(iii) above and deliver a balancing certificate for any
unpurchased Optioned Shares. Payment shall be made in cash or by check. The
Right of Repurchase shall terminate with respect to any Unvested Shares for
which it has not been timely exercised pursuant to this clause (a)(iv).
(v) In the event of the declaration of a stock
dividend, a spin-off, a stock split, a recapitalization or a similar transaction
affecting the Company's outstanding securities without receipt of consideration,
any new, substituted or additional securities or other property (including money
paid other than as an ordinary cash dividend) which are by reason of such
transaction distributed with respect to any Unvested Shares or into which such
Unvested Shares thereby become convertible shall immediately be subject to the
Right of Repurchase. Appropriate adjustments to reflect the distribution of such
securities or property shall be made to the number and/or class of the Unvested
Shares. Appropriate adjustments shall also, after each such transaction, be made
to the Option Price per share in order to reflect any change in the
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Company's outstanding securities effected without receipt of consideration
therefor; PROVIDED, however, that the aggregate purchase price payable for the
Unvested Shares shall remain the same.
(vi) If the Company makes available, at the time and
place and in the amount and form provided in this Agreement, the consideration
for the Unvested Shares to be repurchased in accordance with this Section 8,
then after such time the person from whom such Unvested Shares are to be
repurchased shall no longer have any rights as a holder of such Unvested Shares
(other than the right to receive payment of such consideration in accordance
with this Agreement). Such Unvested Shares shall be deemed to have been
repurchased in accordance with the applicable provisions hereof, whether or not
the certificate(s) therefor have been delivered as required by this Agreement.
(b) Except as permitted below, no Eligible Director may sell,
assign, pledge, or in any manner transfer any Unvested Shares or any right or
interest therein, whether voluntarily or by operation of law, or by gift or
otherwise. If the owner of any Unvested Shares fails to comply with the
provisions of the Plan in respect of any Unvested Shares in any regard, the
Company at its option and in addition to its other remedies, may suspend the
rights to vote or to receive dividends on the Unvested Shares, and may refuse to
register on its books any transfer of the Unvested Shares or otherwise to
recognize any transfer or change in the ownership thereof or in the right to
vote thereon, until these provisions are complied with to the satisfaction of
the Company.
The restrictions on transfer in this Section 8(b) shall not be
applicable to (i) a gratuitous transfer of the Unvested Shares made to a
Permitted Transferee (as defined below), or (ii) a transfer of title to the
Unvested Shares effected pursuant to the Eligible Director's will or the laws of
intestate succession; provided that each person (other than the Company) to whom
the Unvested Shares are transferred by means of one of the permitted transfers
specified in this Section must, as a condition precedent to the validity of such
transfer, acknowledge in writing to the Company that such person is bound by the
provisions of the Plan and the related Option Grant and that the transferred
Unvested Shares are subject to (x) the Company's Right of Repurchase and (y) the
lock-up provisions contained in the applicable Option Grant to the same extent
such Unvested Shares would be so subject if retained by the Eligible Director.
The term "Eligible Director," as used in this Section 8, shall include the
Eligible Director and all subsequent holders of the Unvested Shares who derive
their chain of ownership through a permitted transfer from the Eligible Director
in accordance with this Section 8(b).
Any restrictions on transfer of shares of the capital stock of the
Company contained in the certificate of incorporation or bylaws shall also apply
to the Optioned Shares, but in the event that any provision of the certificate
of incorporation or bylaws conflicts with those of this Section 8(b), those of
this Section 8(b) shall govern.
As used herein, a "Permitted Transferee" of an Eligible Director
shall mean (i) any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, daughter-in-law, son-in-law, sister-in-law or brother-in-
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law (including adoptive relationships), any person sharing the Eligible
Director's household (other than a tenant or employee), a trust in which these
persons have more than fifty percent of the beneficial interest, a foundation in
which these persons (or the Eligible Director) control the management of assets,
and any other entity in which these persons (or the Eligible Director) own more
than fifty percent of the voting interests or (ii) the beneficial owner of the
shares for which the Eligible Director acts as trustee. In the event of any
transfer to a Permitted Transferee, prompt written notice of the transfer shall
be delivered by the Eligible Director to the Company.
9. TRANSFERABILITY OF OPTION
Each Option shall be transferable (subject to any terms and
conditions imposed by the Committee) by the Eligible Director to one or more
Permitted Transferees. Following any transfer permitted pursuant to this
paragraph, of which the Eligible Director has notified the Committee in writing,
such Option may be exercised by the transferee(s), subject to all terms and
conditions of the Option. Except as otherwise provided above in this section, no
Option shall be transferable otherwise than by will or the laws of descent and
distribution.
10. EXPIRATION
Each Option shall terminate and may no longer be exercised upon the
earliest of (1) ten years after the date of grant, (2) one year after
termination of the Eligible Director's service due to death or disability as
defined in Section 22(e)(3) of the Code (a "Disability"), (3) three months after
termination of the Eligible Director's service for any other reason.
Notwithstanding the foregoing, if the service of the Eligible
Director is terminated for "Misconduct", an Option shall terminate on the date
of such termination of service and, in addition, the Company may exercise its
Right of Repurchase with respect to any Optioned Shares held by the Eligible
Director or his or her legal representatives which were purchased within six
months prior to the date on which such Misconduct occurred. "Misconduct" is
conduct, as determined by the Board, involving one or more of the following: (i)
disloyalty, dishonesty or breach of fiduciary duty to the Company; (ii) the
commission of an act of embezzlement, fraud, disloyalty, dishonesty or
deliberate disregard of the rules or policies of the Company which results in
loss, damage or injury to the Company, whether directly or indirectly; (iii) the
unauthorized disclosure of any trade secret or confidential information of the
Company; or (iv) the commission of an act which constitutes unfair competition
with the Company or which induces any customer of the Company to withdraw from
or not enter into a contract with the Company. In making such determination, the
Board shall act fairly and in utmost good faith and shall give the Eligible
Director an opportunity to appear and to be heard at a hearing before the Board
or any Committee and present evidence on his or her behalf.
For the purposes of this Section 10, termination of service for a
reason other than death or Disability shall be deemed to occur when the Eligible
Director receives notice that his or her service is terminated.
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11. ADJUSTMENT OF SHARES RESERVED UNDER THE PLAN
The aggregate number and kind of shares that may be issued under this
Plan, the number of shares as to which Options may be granted to any Eligible
Director under Initial Grants and Annual Grants, the number of shares covered by
outstanding Options granted hereunder and the Option Price per share shall be
appropriately adjusted by the Board in the event of any recapitalization, stock
split, stock dividend, combination of shares, or other similar change in the
capitalization of the Company, but no adjustment in the Option Price shall be
made which would reduce the Option Price per share to less than the par value
per share.
12. DISSOLUTION OR REORGANIZATION
Subject to the provisions of Section 13, prior to a dissolution,
liquidation, merger, consolidation, or reorganization of the Company (the
"Event"), the Board may decide to terminate each outstanding Option. If the
Board so decides, such Option shall terminate as of the effective date of the
Event, but the Board shall suspend the exercise of all outstanding Options a
reasonable time prior to the Event, giving each Eligible Director not less than
fourteen days written notice of the date of suspension, prior to which an
Eligible Director may purchase in whole or in part the shares available to him
or her as of the date of receipt of the notice. If the Event is not consummated,
the suspension shall be removed and all options shall continue in full force and
effect subject to the terms of their respective Option Grants.
13. CHANGE IN CONTROL
Notwithstanding anything to the contrary in the Plan or in any Option
Grant (but subject to the provisions of this Section 13), upon the occurrence of
a Change in Control (as defined below) of the Company, all unvested Optioned
Shares shall be accelerated and vest immediately on the date of occurrence of a
Change in Control, and the Company's right of repurchase set forth in Section
8(a) hereof and the restrictions on transfer set forth in Section 8(b) hereof
shall expire as to all Optioned Shares. Notwithstanding the foregoing, the Board
may, by vote of a majority of the entire Board, provide for acceleration rights
upon a Change in Control in addition to those provided in this Section 13. For
the purpose of this Plan a "Change in Control" shall mean:
(a) The acquisition by any individual, entity or group (within
the meaning of Sections 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 35 percent or more of either (i) the then outstanding shares of
Common Stock or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of the
directors (the "Outstanding Company Voting Securities"); provided, however, that
the following acquisitions shall not constitute a Change in Control: (A) any
acquisition directly from the Company; (B) any acquisition by the Company or by
any corporation controlled by the Company; (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or (D) any acquisition by any corporation
pursuant to a consolidation or merger, if, following such
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consolidation or merger, the conditions described in clauses (i), (ii) and (iii)
of paragraph (c) of this Section 12 are satisfied; or
(b) Individuals who, as of the Effective Date, constitute the
Board (the "Incumbent Board") ceasing for any reason to constitute at least
two-thirds of the Board over any period of 24 consecutive months or less;
provided, however, that any individual becoming a director subsequent to the
Effective Date whose election, or nomination for election by the Company's
stockholders, was approved by a vote or resolution of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board; or
(c) Adoption by the Board of a resolution approving an
agreement of consolidation of the Company with or merger of the Company into
another corporation or business entity in each case unless, following such
consolidation or merger, (i) more than 60 percent of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
consolidation or merger and/or the combined voting power of the then outstanding
voting securities of such corporation or business entity entitled to vote
generally in the election of directors (or other persons having the general
power to direct the affairs of such entity) is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Common Stock and Outstanding
Company Voting Securities immediately prior to such consolidation or merger in
substantially the same proportions as their ownership, immediately prior to such
consolidation or merger, of the Common Stock and/or Outstanding Company Voting
Securities, as the case may be, (ii) no Person (excluding the Company; any
employee benefit plan (or related trust) of the Company or such corporation or
other business entity resulting from such consolidation or merger; and any
Person beneficially owning, immediately prior to such consolidation or merger,
directly or indirectly, 35 percent or more of the Common Stock and/or
Outstanding Company Voting Securities, as the case may be) beneficially owns,
directly or indirectly, 35 percent or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
consolidation or merger or the combined voting power of the then outstanding
voting securities of such corporation or business entity entitled to vote
generally in the election of its directors (or other persons having the general
power to direct the affairs of such entity) and (iii) at least two-thirds of the
members of the Board (or other group of persons having the general power to
direct the affairs of the corporation or other business entity) resulting from
such consolidation or merger were members of the Incumbent Board at the time of
the execution of the initial agreement providing for such consolidation or
merger; provided that any right which shall vest by reason of the action of the
Board pursuant to this paragraph (c) shall be divested, with respect to any such
right not already exercised, upon (A) the rejection of such agreement of
consolidation or merger by the stockholders of the Company or (B) its
abandonment by either party thereto in accordance with its terms; or
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(d) Adoption by the requisite majority of the whole Board, or
by the holders of such majority of stock of the Company as is required by law or
by the Certificate of Incorporation or By-Laws of the Company as then in effect,
of a resolution or consent authorizing (i) the dissolution of the Company or
(ii) the sale or other disposition of all or substantially all of the assets of
the Company, other than to a corporation or other business entity with respect
to which, following such sale or other disposition, (A) more than 60 percent of,
respectively, the then outstanding shares of common stock of such corporation
and/or the combined voting power of the outstanding voting securities of such
corporation or other business entity entitled to vote generally in the election
of directors (or other persons having the general power to direct the affairs of
such entity) is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Common Stock and Outstanding Company Voting
Securities immediately prior to such sale or other disposition in substantially
the same proportions as their ownership, immediately prior to such sale or other
disposition, of the Common Stock and/or Outstanding Company Voting securities,
as the case may be, (B) no Person (excluding the Company; any employee benefit
plan (or related trust) of the Company or such corporation or other business
entity; and any Person beneficially owning, immediately prior to such sale or
other disposition, directly or indirectly, 35 percent or more of the Common
Stock and/or Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 35 percent or more of, respectively,
the then outstanding shares of common stock of such corporation and/or the
combined voting power of the then outstanding voting securities of such
corporation or other business entity entitled to vote generally in the election
of directors (or other persons having the general power to direct the affairs of
such entity) and (C) at least two-thirds of the members of the Board (or other
group of persons having the general power to direct the affairs of such
corporation or other entity) were members of the Incumbent Board at the time of
the execution of the initial agreement or action of the Board providing for such
sale or other disposition of assets of the Company; provided that any right
which shall vest by reason of the action of the Board or the stockholders
pursuant to this paragraph (d) shall be divested, with respect to any such right
not already exercised, upon the abandonment by the Company of such dissolution,
or such sale or other disposition of assets, as the case may be.
A Change in Control shall not occur upon the mere reincorporation of
the Company in another state.
14. AMENDMENT AND TERMINATION OF THE PLAN
The Board may amend, suspend, or terminate this Plan,
including the form of Option Grant. No such action, however, may, without
approval or ratification by the shareholders, increase the maximum number of
shares reserved under this Plan except as provided in Section 11, alter the
class or classes of individuals eligible for options, or make any other change
which, pursuant Section 16(b) of the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder, requires action by the
shareholders. No such action may, without the consent of the holder of the
option, alter or impair any option previously granted.
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Exhibit 10.10
EPRISE CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------
The following constitute the provisions of the 2000 Employee Stock
Purchase Plan of Eprise Corporation.
1. PURPOSE. The purpose of the Plan is to provide employees of the Company
and its Subsidiaries with an opportunity to purchase Common Stock of the
Company. It is the intention of the Company to have the Plan qualify as an
"Employee Stock Purchase Plan" under Section 423 of the Code. The provisions of
the Plan shall, accordingly, be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. DEFINITIONS.
(a) "ADMINISTRATOR" shall mean the person, committee or entity
appointed by the Board to administer the Plan as provided herein. If no
Administrator is in office from time to time, the Board shall serve as
Administrator until the effective date of any successor's appointment.
(b) "BOARD" shall mean the Board of Directors of the Company.
(c) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(d) "COMMON STOCK" shall mean the Common Stock, $0.001 par value, of
the Company.
(e) "COMPANY" shall mean Eprise Corporation, a Delaware corporation.
(f) "COMPENSATION" shall mean all base pay, salary, bonuses and
commissions, including payments for overtime and sales commissions and elective
contributions to 401(k) plans, health and dependent care benefits plans and
non-qualified pay deferral plans.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of (i) a leave of
absence either (A) agreed to in writing by the Company, provided that such leave
is for a period of not more than 90 days, or (B) if reemployment upon the
expiration of such leave is guaranteed by contract or statute and provided
further that the Employee returns to service upon the expiration of such leave;
or (ii) a single interruption in service for any other reason of up to 30 days.
(h) "CONTRIBUTIONS" shall mean all amounts credited to the account of a
participant pursuant to the Plan.
<PAGE> 2
(i) "EMPLOYEE" shall mean any person, including an officer, who is an
employee of the Company or one of its Subsidiaries, as determined pursuant to
Treasury Regulation Section 1.421-7(h) or any successor thereto.
(j) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "EXERCISE DATE" shall mean the last business day of each Offering
Period of the Plan.
(l) "OFFERING DATE" shall mean the first business day of each Offering
Period of the Plan.
(m) "OFFERING PERIOD" shall mean a period of six (6) months, unless
otherwise determined by the Board with respect to any one or more Offering
Periods.
(n) "PLAN" shall mean this Employee Stock Purchase Plan.
(o) "SUBSIDIARY" shall mean a corporation, domestic or foreign, defined
as such in Section 424(f) of the Code, whether or not such corporation now
exists or is hereafter organized or acquired by the Company or a Subsidiary.
3. ELIGIBILITY.
(a) SERVICE REQUIREMENT. Any Employee who (i) customarily works more
than twenty (20) hours per week for the Company and (ii) has had Continuous
Status as an Employee for at least three (3) months as of the Offering Date of a
given Offering Period shall be eligible to participate in such Offering Period
under the Plan, subject to the requirements of Section 5(a) and the limitations
imposed by Section 423(b) of the Code.
(b) RESTRICTIONS ON ELIGIBILITY. Any provisions of the Plan to the
contrary notwithstanding, no Employee shall be granted an option under the Plan
(i) if, immediately after the grant, such Employee (either individually or
together with any other person whose stock would be attributed to such Employee
pursuant to Section 424(d) of the Code) would own stock and/or hold outstanding
options to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or of any
subsidiary of the Company, or (ii) to the extent that such option would permit
his or her rights to purchase stock under all employee stock purchase plans
(described in Section 423 of the Code) of the Company and its Subsidiaries to
accrue at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) of fair
market value of such stock (determined at the time such option is granted) for
each calendar year in which such option is outstanding at any time (as further
described in Section 6(c)).
4. OFFERING PERIODS. The Plan shall be implemented by a series of Offering
Periods, with new Offering Periods commencing on or about March 1 and September
1 of each year (or at such other time or times as may be determined by the
Board). The first Offering Period shall commence on the first business day on
which price quotations for the Company's Common Stock are available on the
Nasdaq National Market or on such other date the Board shall
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<PAGE> 3
determine. The Plan shall continue until terminated in accordance with Section
19 hereof. The Board shall have the power to change the duration and/or the
frequency of Offering Periods with respect to future offerings without
stockholder approval if such change is announced at least fifteen (15) days
prior to the scheduled beginning of the first Offering Period to be affected.
5. PARTICIPATION.
(a) SUBSCRIPTION AGREEMENTS; RANGE OF CONTRIBUTIONS. An eligible
Employee may become a participant in the Plan by completing a subscription
agreement on the form provided by the Company and filing it with the
Administrator (or its designee) prior to the applicable Offering Date, unless an
earlier or a later time for filing the subscription agreement is set by the
Board for all eligible Employees with respect to a given offering. The
subscription agreement shall set forth the percentage of the participant's
Compensation (which shall be not less than the percentage that will result in a
minimum Contribution of $150 per Offering Period and not more than 10% of the
Employee's Compensation) to be paid as Contributions pursuant to the Plan.
(b) ENTRY DATE; TERMINATION. Payroll deductions shall commence on the
first payroll on or following the Offering Date and shall end on the last
payroll paid on or prior to the Exercise Date of the offering to which the
subscription agreement is applicable, unless sooner terminated by the
participant as provided in Section 10.
6. METHOD OF PAYMENT OF CONTRIBUTIONS.
(a) PAYROLL DEDUCTIONS. Subject to the limitations of Section 423(b) of
the Code and Section 3(b) herein and subject to the terms and conditions of the
subscription agreement referred to in Section 5(a) above, the participant shall
elect to have payroll deductions made on each payday during the Offering Period
in any amount permitted pursuant to the subscription agreement. All payroll
deductions made by a participant shall be credited to his or her account under
the Plan. A participant may not make any additional payments into such account.
(b) CHANGES IN CONTRIBUTION RATE. A participant may discontinue his or
her participation in the Plan as provided in Section 10, or, on one occasion
only during the Offering Period, may increase or decrease the rate of his or her
Contributions during the Offering Period by completing and filing with the
Administrator (or its designee) a new subscription agreement. The change in rate
shall be effective as of the beginning of the calendar quarter following the
date of filing of the new subscription agreement or as soon thereafter as is
administratively practicable.
(c) APPLICATION OF $25,000 ANNUAL LIMIT. Notwithstanding the foregoing,
to the extent necessary to comply with Section 423(b)(8) of the Code and Section
3(b) herein, a participant's payroll deductions shall be decreased to 0%.
Payroll deductions shall re-commence at the rate provided in such participant's
subscription agreement at the beginning of the first Offering Period which is
scheduled to end in the following calendar year, unless terminated by the
participant as provided in Section 10.
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<PAGE> 4
7. GRANT OF OPTION; OPTION PRICE.
(a) GRANT OF OPTION; NUMBER OF OPTION SHARES. On the Offering Date of
each Offering Period, each eligible Employee participating in such Offering
Period shall be granted an option to purchase on the Exercise Date a number of
shares which shall be determined by dividing such Employee's Contributions
accumulated prior to such Exercise Date and retained in the participant's
account as of the Exercise Date by the option price per share of the shares of
Common Stock offered in the Offering Period, determined as provided in Section
7(b); PROVIDED however, that such purchase shall be subject to the limitations
set forth in Sections 3(b) and 12. The fair market value of a share of the
Company's Common Stock shall be determined as provided in Section 7(b).
(b) DETERMINATION OF OPTION PRICE; FAIR MARKET VALUE. The option price
per share of the shares offered in a given Offering Period shall be the lower
of: (i) 85% of the fair market value of a share of the Common Stock of the
Company on the Offering Date; or (ii) 85% of the fair market value of a share of
the Common Stock of the Company on the Exercise Date. The fair market value of
the Company's Common Stock on a given date shall be determined by the Board
based on (i) the average of the high and low prices of the Common Stock on such
date on the principal national securities exchange on which the Common Stock is
traded, if the Common Stock is then traded on a national securities exchange; or
(ii) the last reported sale price of the Common Stock on the Nasdaq National
Market System on such date, if the Common Stock is not then traded on a national
securities exchange; or (iii) the closing bid price or the average of bid prices
last quoted on such date by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the Nasdaq
National Market System or on a national securities exchange. Notwithstanding the
foregoing, in the case of the first Offering Period, the fair market value of
the Common Stock will be the price per share at which shares of the Company's
Common Stock are initially offered for sale to the public by the Company's
underwriters in the initial public offering of the Company's Common Stock
pursuant to a registration statement filed with the SEC under the Securities
Act. If the Common Stock is not publicly traded at the time a right is granted
under this Plan, "fair market value" shall mean the fair market value of the
Common Stock as determined by the Board in its discretion after taking into
consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan as
provided in Section 10, his or her option for the purchase of shares will be
exercised automatically on the Exercise Date of the Offering Period, and the
number of full shares subject to option (but in no event more than the maximum
amount permitted pursuant to Section 7(a) and the other provisions of the Plan,
subject to adjustment as provided in Section 18(a) hereof) will be purchased at
the applicable option price with the accumulated Contributions in the
participant's account. The shares purchased upon exercise of an option hereunder
shall be deemed to be transferred to the participant on the Exercise Date.
During his or her lifetime, a participant's option to purchase shares hereunder
is exercisable only by him or her.
9. DELIVERY. As promptly as practicable after the Exercise Date of each
Offering Period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the shares purchased upon exercise of
his or her option. Any cash remaining to the
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<PAGE> 5
credit of a participant's account under the Plan after a purchase by him or her
of shares at the termination of each Offering Period, or which is insufficient
to purchase a full share of Common Stock of the Company, shall be returned to
said participant, without interest.
10. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) VOLUNTARY WITHDRAWAL. A participant may withdraw all but not less
than all the Contributions credited to his or her account under the Plan at any
time prior to the Exercise Date of the Offering Period by giving written notice
to the Administrator (or its designee), provided that such notice must be
received prior to the Exercise Date to be effective. All of the participant's
Contributions credited to his or her account will be paid without interest to
him or her promptly after timely receipt of his or her notice of withdrawal and
his or her option for the current period will be automatically terminated, and
no further Contributions for the purchase of shares will be made during the
Offering Period.
(b) TERMINATION OF EMPLOYMENT. Upon termination of the participant's
Continuous Status as an Employee prior to the Exercise Date of the Offering
Period for any reason, including retirement, disability or death, the
participant's option shall terminate and the Contributions credited to his or
her account will be returned without interest to him or her or, in the case of
his or her death, to his or her designated beneficiary hereunder (or as
otherwise provided in Section 14(b) herein).
(c) RESUMPTION OF PARTICIPATION IN SUBSEQUENT OFFERING PERIODS. A
participant's withdrawal from an offering will not have any effect upon his or
her eligibility to participate in a succeeding offering or in any similar plan
which may hereafter be adopted by the Company except to the extent set forth in
Rule 16b-3 under the Exchange Act.
11. INTEREST. No interest shall accrue on the Contributions of a
participant in the Plan.
12. STOCK.
(a) AGGREGATE LIMITATION ON OPTIONS: PRO-RATA ALLOCATIONS. The maximum
number of shares of the Company's Common Stock which shall be made available for
sale under the Plan shall be 1,500,000 shares, subject to adjustment upon
changes in capitalization of the Company as provided in subsection 18(a) hereof.
Such number shall increase automatically on January 1 of each year beginning in
2001 by a number of shares equal to the lesser of (i) 1% of the Common Stock
issued and outstanding (including shares convertible into Common Stock, counted
on an as-converted basis) and shares held in treasury as of December 31 of the
preceding year and (ii) 750,000 shares, subject to adjustment as provided in
subsection 18(a). If the total number of shares which would otherwise be subject
to options granted pursuant to Section 7(a) on the Offering Date of an Offering
Period exceeds the number of shares then available under the Plan (after
deduction of all shares for which options have been exercised or are then
outstanding), the Company shall make a pro rata allocation of the shares
remaining available for option grant in as uniform a manner as shall be
practicable and as it shall determine to be equitable and consistent with the
requirements of Section 423(b)(5) of the Code. In such event, the Company shall
give written notice of such reduction of the number of shares subject to the
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<PAGE> 6
option to each Employee affected thereby and shall similarly reduce the rate of
Contributions, if necessary.
(b) STATUS OF OPTIONED SHARES. The participant will have no interest or
voting right in shares covered by his or her option until such option has been
exercised.
(c) REGISTRATION OF PURCHASED SHARES. Shares to be delivered to a
participant under the Plan will be registered in the name of the participant or
in the name of the participant and his or her spouse, at the participant's
election.
13. ADMINISTRATION. The Administrator shall supervise and administer the
Plan and shall have full power to adopt, amend and rescind any rules deemed
desirable and appropriate for the administration of the Plan and not
inconsistent with the Plan, to construe and interpret the Plan, and to make all
other determinations necessary or advisable for the administration of the Plan.
The composition of any committee appointed to administer the Plan shall be in
accordance with the requirements to obtain or retain any available exemption
from the operation of Section 16(b) of the Exchange Act pursuant to Rule 16b-3
promulgated thereunder.
14. DESIGNATION OF BENEFICIARY.
(a) MANNER AND EFFECT OF DESIGNATION. A participant may file a written
designation of a beneficiary who is to receive any shares and cash, if any, from
the participant's account under the Plan in the event of such participant's
death subsequent to the end of the Offering Period but prior to delivery to him
or her of such shares and cash.
(b) CHANGES IN BENEFICIARIES; EFFECT OF NO BENEFICIARY. Such
designation of beneficiary may be changed by the participant at any time by
written notice, provided that such notice shall not be effective until actually
received by the Administrator (or its designee). In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate. To the
extent of any such delivery of shares and/or cash hereunder, the Company's
obligation under the Plan with respect to the participant shall be discharged.
15. TRANSFERABILITY. Neither Contributions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 14) by the participant. Any such attempt
at assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with Section 10.
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<PAGE> 7
16. USE OF FUNDS. All Contributions received or held by the Company under
the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.
17. REPORTS. Individual accounts will be maintained for each participant in
the Plan. Statements of account will be given by January 31 of each year to each
participating Employee who transferred during the prior year any shares of
Common Stock acquired at a price less than fair market value pursuant to the
exercise of an option under this Plan. Each such statement of account shall
contain the information required by Section 6039(a)(2) of the Code, including
but not limited to the date that the shares were originally acquired by the
participating Employee and the number of shares the participating Employee has
transferred.
18. ADJUSTMENTS.
(a) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The number of shares of
Common Stock covered by each option under the Plan which has not yet been
exercised and the number of shares of Common Stock which have been authorized
for issuance under the Plan but have not yet been placed under option
(collectively, the "Reserves"), as well as the price per share of Common Stock
covered by each option under the Plan which has not yet been exercised, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of shares of Common Stock effected without
receipt of consideration by the Company. Such adjustment shall be made by the
Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an option.
(b) EFFECT OF DISSOLUTION, LIQUIDATION, SALE OF ASSETS OR MERGER OF THE
COMPANY. In the event of the proposed dissolution or liquidation of the Company,
the Offering Period will terminate immediately prior to the consummation of such
proposed action, the options granted during such Offering Period shall terminate
and each participant's Contributions shall be returned without interest, unless
otherwise provided by the Board. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each option under the Plan shall be assumed or
an equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Board determines,
in the exercise of its sole discretion and in lieu of such assumption or
substitution, to shorten the Offering Period then in progress by setting a new
Exercise Date (the "New Exercise Date"). If the Board shortens the Offering
Period then in progress in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify each participant in writing, at
least ten (10) days prior to the New Exercise Date, that the Exercise Date for
his or her option has been changed to the New Exercise Date and that his or her
option will be exercised automatically on the New Exercise Date, unless prior to
such date he or she has withdrawn from the Offering Period as provided in
Section 10. For purposes of this paragraph, an option granted under the Plan
shall be deemed to be assumed if, following the sale of assets or merger, the
option confers the right to purchase, for each share of option stock
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<PAGE> 8
subject to the option immediately prior to the sale of assets or merger, the
consideration (whether stock, cash or other securities or property) received in
the sale of assets or merger by holders of Common Stock for each share of Common
Stock held on the effective date of the transaction (and if such holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares of Common Stock); provided,
however, that if such consideration received in the sale of assets or merger was
not solely common stock of the successor corporation or its parent (as defined
in Section 424(e) of the Code), the Board may, with the consent of the successor
corporation, provide for the consideration to be received upon exercise of the
option to be solely common stock of the successor corporation or its parent
equal in fair market value to the per share consideration received by holders of
Common Stock in the sale of assets or merger.
(c) OTHER ADJUSTMENTS. The Board may, if it so determines in the
exercise of its sole discretion but subject to the requirements of Section 423
of the Code, also make provision for adjusting the Reserves, as well as the
price per share of Common Stock covered by each outstanding option, in the event
that the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock not covered by subsection (a) hereof, and in the event of the Company
being consolidated with or merged into any other corporation.
19. AMENDMENT OR TERMINATION.
(a) RIGHT OF COMPANY TO AMEND OR TERMINATE PLAN; LIMITATIONS. The Board
may at any time terminate or amend the Plan. Except as provided in Section 18,
no such termination may affect options previously granted, nor may an amendment
make any change in any option theretofore granted which adversely affects the
rights of any participant without the written consent of such participant. In
addition, to the extent necessary to comply with Rule 16b-3 under the Exchange
Act or Section 423 of the Code (or any successor rules or provisions or any
other applicable laws or regulations), the Company shall obtain stockholder
approval in such a manner and to such a degree as so required.
(b) ADDITIONAL RIGHTS OF THE COMPANY. Without stockholder consent and
without regard to whether any participant rights may be considered to have been
adversely affected, the Board (or its committee) shall be entitled to change the
duration of future Offering Periods (subject to Section 4 hereof), limit the
frequency and/or number of changes in the amount withheld during an Offering
Period, permit payroll withholding in excess of the amount designated by a
participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish reasonable
waiting and adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of Common Stock for each
participant properly correspond with amounts withheld from the participant's
Compensation, and establish such other limitations or procedures as the Board
(or its committee) determines in its sole discretion advisable which are
consistent with the Plan.
20. NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form
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<PAGE> 9
specified by the Company at the location, or by the person, designated by the
Company for the receipt thereof.
21. CONDITIONS UPON ISSUANCE OF SHARES.
(a) COMPLIANCE WITH LAW. Shares shall not be issued with respect to an
option unless the exercise of such option and the issuance and delivery of such
shares pursuant thereto shall comply with all applicable provisions of law,
domestic or foreign, including, without limitation, the Securities Act of 1933,
as amended, the Exchange Act, the rules and regulations promulgated thereunder,
and the requirements of any stock exchange upon which the shares may then be
listed, and shall be further subject to the approval of counsel for the Company
with respect to such compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the exercise of an
option, the Company may require the person exercising such option to represent
and warrant at the time of any such exercise that the shares are being purchased
only for investment and without any present intention to sell or distribute such
shares if, in the opinion of counsel for the Company, such a representation is
required by any of the aforementioned applicable provisions of law.
22. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective upon the
earlier to occur of its adoption by the Board or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 19.
23. ADDITIONAL RESTRICTIONS OF RULE 16B-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
24. WITHHOLDING OF ADDITIONAL INCOME TAXES. By electing to participate in
the Plan, each participant acknowledges that the Company and its Subsidiaries
are required to withhold taxes with respect to the amounts deducted from the
participant's Compensation and accumulated for the benefit of the participant
under the Plan, and each participant agrees that the Company and its
Subsidiaries may deduct additional amounts from the participant's Compensation,
when amounts are added to the participant's account, used to purchase Common
Stock or refunded, in order to satisfy such withholding obligations. Each
participant further acknowledges that when Common Stock is purchased under the
Plan, the Company and its Subsidiaries may be required to withhold taxes with
respect to all or a portion of the difference between the fair market value of
the Common Stock purchased and its purchase price, and each participant agrees
that such taxes may be withheld from compensation otherwise payable to such
participant. It is intended that tax withholding will be accomplished in such a
manner that the full amount of payroll deduction elected by the participant
under Section 6 will be used to purchase Common Stock. However, if amounts
sufficient to satisfy applicable tax withholding obligations have not been
withheld from Compensation otherwise payable to any participant, then,
notwithstanding any other provision of the Plan, the Company may withhold such
taxes from the participant's accumulated payroll deductions and apply the net
amount to the purchase of Common Stock, unless the participant pays
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<PAGE> 10
to the Company, prior to the exercise date, an amount sufficient to satisfy such
withholding obligations. Each participant further acknowledges that the Company
and its Subsidiaries may be required to withhold taxes in connection with the
disposition of stock acquired under the Plan and agrees that the Company or any
Subsidiary may take whatever action it considers appropriate to satisfy such
withholding requirements, including deducting from any amount otherwise payable
to such participant an amount sufficient to satisfy such withholding
requirements or conditioning any disposition of Common Stock by the participant
upon the payment to the Company or such Subsidiary of an amount sufficient to
satisfy such withholding requirements.
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New Election _____
Change of Election _____
EPRISE CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
1. I, ________________________, hereby elect to participate in the Eprise
Corporation 2000 Employee Stock Purchase Plan (the "Plan") for the Offering
Period ________________, 20____ to ______________, 20___ and for all subsequent
Offering Periods under the Plan, and subscribe to purchase shares of the
Company's Common Stock in accordance with this Subscription Agreement and the
Plan.
2. I elect to have Contributions in the amount of ___% of my Compensation,
as those terms are defined in the Plan, applied to this purchase. I understand
that this amount must be not less than the percentage that will result in
Contributions of at least $150 per Offering Period and not more than 10% of my
Compensation during the Offering Period.
3. I hereby authorize payroll deductions from each paycheck during the
Offering Period at the rate stated in Section 2 of this Subscription Agreement.
I understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I understand that, except as otherwise set forth in
the Plan, shares will be purchased for me automatically on the Exercise Date of
the Offering Period unless I withdraw from the Plan by giving timely written
notice for such purpose to the Administrator appointed pursuant to the Plan.
4. I understand that I may discontinue at any time prior to the Exercise
Date my participation in the Plan as provided in Section 10 of the Plan. I also
understand that on one occasion only during the Offering Period I may increase
or decrease the rate of my Contributions during the Offering Period by
completing and filing with the Administrator a new Subscription Agreement. The
change in rate shall be effective as of the beginning of the calendar quarter
following the date of filing of the new Subscription Agreement or as soon
thereafter as is administratively practicable.
5. I have received a copy of the Company's most recent description of the
Plan and a copy of the complete Plan document. I understand that my
participation in the Plan is in all respects subject to the terms of the Plan.
<PAGE> 12
6. Shares purchased for me under the Plan should be issued in the name(s)
of (name of employee or employee and spouse only):
- ----------------------------------
- ----------------------------------
7. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:
NAME: (Please print)
------------------------------------------
(First) (Middle) (Last)
- ----------------------------- ----------------------------------------
(Relationship) (Address)
----------------------------------------
8. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Offering Date (the first day of the Offering
Period during which I purchased such shares) or within 1 year after the last day
of the Offering Period, I will be treated for federal income tax purposes as
having received ordinary compensation income at the time of such disposition in
an amount equal to the excess of the fair market value of the shares at the time
such shares were transferred to me over the price which I paid for the shares,
regardless of whether I disposed of the shares at a price less than their fair
market value at such transfer to me. The remainder of the gain or loss, if any,
recognized on such disposition will be treated as capital gain or loss.
I HEREBY AGREE TO NOTIFY THE COMPANY IN WRITING WITHIN 30 DAYS AFTER
THE DATE OF ANY SUCH DISPOSITION, AND I WILL MAKE ADEQUATE PROVISION FOR
FEDERAL, STATE OR OTHER TAX WITHHOLDING OBLIGATIONS, IF ANY, WHICH ARISE UPON
THE DISPOSITION OF THE COMMON STOCK. The Company may, but will not be obligated
to, withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to the sale or early
disposition of Common Stock by me.
9. If I dispose of such shares at any time after expiration of the 2-year
and 1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received compensation income only to the extent of
an amount equal to the lesser of (a) the excess, if any, of the fair market
value of the shares at the time of such disposition over the purchase price
which I paid for the shares under the option, or (b) the difference between the
fair market value of the shares on the Offering Date and the Option Price on the
Offering Date. The remainder of the gain or loss, if any, recognized on such
disposition will be treated as capital gain or loss.
I UNDERSTAND THAT THIS TAX SUMMARY IS ONLY A SUMMARY AND IS SUBJECT TO
CHANGE.
2
<PAGE> 13
10. I hereby agree to be bound by the terms of the Plan. The effectiveness
of this Subscription Agreement is dependent upon my eligibility to participate
in the Plan.
SIGNATURE:_______________________
SOCIAL SECURITY #:_______________
DATE:____________________________
3
<PAGE> 14
EPRISE CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
I, __________________, hereby elect to withdraw my participation in the
Eprise Corporation 2000 Employee Stock Purchase Plan (the "Plan") for the
Offering Period ending _________________. The withdrawal covers all
Contributions credited to my account and is effective when actually received by
the Administrator appointed pursuant to the Plan.
I understand that all Contributions credited to my account will be paid
to me without interest within ten (10) business days of timely receipt by the
Administrator of this Notice of Withdrawal and that my option for the current
period will automatically terminate, and that no further Contributions for the
purchase of shares can be made by me during the Offering Period.
I understand that my withdrawal from this Offering will not affect my
eligibility to participate in a succeeding Offering Period or in any similar
plan that may hereafter be adopted by the Company. I understand and agree,
however, that I will be eligible to participate in succeeding Offering Periods
only by delivering to the Company a new Subscription Agreement.
Dated:___________________ __________________________________
Signature of Employee
__________________________________
Social Security Number
<PAGE> 1
Exhibit 21.1
List of Subsidiaries
Eprise Securities Corporation
Eprise UK Limited
<PAGE> 1
Exhibit 23.2
After the 1 for 2.55 reverse stock split discussed in Note 2, "Stock Split", to
Eprise, Corporation's consolidated financial statements is effected, we expect
to be in a position to render the following report.
/s/ Arthur Andersen LLP
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 29, 2000
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated December 18, 1997 (except with respect to the disclosure of the issuance
of Series A Redeemable Preferred Stock (Note 5) as to which the date is January
28, 1998) on the Company's financial statements as of and for the year ended
August 31, 1997 (and to all references to our Firm) included in or made a part
of this registration statement.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 14, 2000
<PAGE> 1
Exhibit 23.4
CONSENT OF IDC
We consent to the quotation in the Registration Statement on Form S-1 of Eprise
Corporation of the following:
a) our estimates of the growth of the market for Web development
life-cycle management software between 1998 and 2003 as indicated in
the prospectus summary; and
b) our estimates of the expected growth in the number of business Web
sites between 1999 and 2003, as presented in the section entitled
"Industry Background."
IDC
By: /s/ Noreen Murphy
-------------------------
Title: PR Specialist
----------------------
February 29, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF DECEMBER 31, 1999 AND THE RELATED STATEMENT OF OPERATION FOR THE
YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 22,455,448
<SECURITIES> 0
<RECEIVABLES> 2,103,221
<ALLOWANCES> 189,000
<INVENTORY> 0
<CURRENT-ASSETS> 24,875,614
<PP&E> 1,152,273
<DEPRECIATION> 538,886
<TOTAL-ASSETS> 25,534,378
<CURRENT-LIABILITIES> 1,898,555
<BONDS> 0
36,848,516
0
<COMMON> 2,838
<OTHER-SE> 13,288,611
<TOTAL-LIABILITY-AND-EQUITY> 25,534,378
<SALES> 0
<TOTAL-REVENUES> 3,658,815
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<TOTAL-COSTS> 1,119,741
<OTHER-EXPENSES> 9,235,264
<LOSS-PROVISION> 149,960
<INTEREST-EXPENSE> 101,481
<INCOME-PRETAX> (6,408,508)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,696,190)
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<NET-INCOME> (6,483,230)
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