<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 22, 2000
REGISTRATION NO. 333-95923
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
IMPRESSE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 7389 94-3288153
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification Number)
Incorporation or Organization)
</TABLE>
1309 SOUTH MARY AVENUE
SUNNYVALE, CA 94087
(408) 530-2000
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
NIMISH MEHTA
CHIEF EXECUTIVE OFFICER
1309 SOUTH MARY AVENUE
SUNNYVALE, CA 94087
(408) 530-2000
(Name, Address Including Zip Code, and Telephone Number Including Area Code, of
Agent for Service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
JOSHUA L. GREEN BRUCE DALLAS
JON E. GAVENMAN DAVIS POLK & WARDWELL
VENTURE LAW GROUP 1600 El Camino Real
A Professional Corporation Menlo Park, CA 94025
2800 Sand Hill Road (650) 752-2000
Menlo Park, CA 94025
(650) 854-4488
</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 (the "Securities Act"), check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ______
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ______
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE(3)
<S> <C> <C> <C> <C>
Common Stock, par value
$0.001.................... 4,025,000 $13.00 $52,325,000 $13,814
</TABLE>
(1) Includes 525,000 shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a) under the Securities Act.
(3) $17,160 previously paid with Registrant's initial filing on February 1,
2000.
--------------------------
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>
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED MARCH 22, 2000
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 WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
3,500,000 SHARES
[LOGO]
COMMON STOCK
-----------------
IMPRESSE CORPORATION IS OFFERING SHARES OF ITS COMMON STOCK. THIS IS OUR INITIAL
PUBLIC OFFERING AND NO PUBLIC MARKET CURRENTLY EXISTS FOR OUR SHARES. WE
ANTICIPATE THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN $11 AND $13
PER SHARE.
-------------------
WE HAVE APPLIED FOR OUR COMMON STOCK TO BE QUOTED ON THE NASDAQ NATIONAL MARKET
UNDER THE SYMBOL "IMPC."
-------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 6.
-------------------
PRICE $ A SHARE
-------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS IMPRESSE
-------- ------------- -----------
<S> <C> <C> <C>
PER SHARE.......................................... $ $ $
TOTAL.............................................. $ $ $
</TABLE>
IMPRESSE HAS GRANTED THE UNDERWRITERS THE RIGHT TO PURCHASE UP TO AN ADDITIONAL
525,000 SHARES TO COVER OVER-ALLOTMENTS.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
MORGAN STANLEY & CO. INCORPORATED EXPECTS TO DELIVER THE SHARES TO PURCHASERS ON
, 2000.
-------------------
MORGAN STANLEY DEAN WITTER
MERRILL LYNCH & CO.
DEUTSCHE BANC ALEX. BROWN
, 2000
<PAGE>
[Inside Front Cover--a foldout of graphics and text]
[Left Page] Impresse: Delivering Value Across the Print Supply Chain
Our impresse.com eHub enables print buyers to collaborate with marketing and
procurement professionals within their corporations and with outside
advertising, design and marketing agencies and commercial printers to design,
specify, price, order, track, fulfill and pay for print jobs.
[Artwork illustrating the benefits that the impresse.com electronic hub provides
to print buyers, including their collaboration and procurement partners, and
print suppliers]
[Right Page]
[A diagram illustrating that the impresse.com eHub provides Complementary
Services, Business Intelligence, Price Discovery and Collaboration features in
addition to the Transaction Automation and Demand Aggregation functions of an
electronic marketplace]
The impresse.com eHub can be customized and integrated with corporate systems
and provides additional e-commerce services, thereby extending the basic
eMarketplace.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Special Note Regarding Forward-Looking
Statements.......................... 14
Use of Proceeds....................... 15
Dividend Policy....................... 15
Capitalization........................ 16
Dilution.............................. 17
Selected Financial Data............... 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 19
</TABLE>
<TABLE>
Business.............................. 25
<CAPTION>
PAGE
----
<S> <C>
Management............................ 38
Related Party Transactions............ 47
Principal Stockholders................ 49
Description of Capital Stock.......... 52
Shares Eligible for Future Sale....... 55
Underwriters.......................... 57
Legal Matters......................... 59
Experts............................... 59
Additional Information................ 59
Index to Financial Statements......... F-1
</TABLE>
------------------------
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of our 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 any sale of our common stock.
UNTIL , 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
2
<PAGE>
PROSPECTUS SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION REGARDING IMPRESSE AND OUR COMMON STOCK BEING SOLD IN THIS OFFERING
AND OUR FINANCIAL STATEMENTS AND NOTES APPEARING ELSEWHERE IN THIS PROSPECTUS.
Impresse is a leading provider in the emerging market for
business-to-business e-commerce solutions for the creation and procurement of
commercially printed materials. Our hosted impresse.com service provides a
platform for corporations, their commercial print suppliers, their design,
advertising and marketing agencies and other participants in the print supply
chain to design, specify, price, order, track, fulfill and pay for print jobs.
Both corporate print buyers and their printers save time and increase their
productivity by replacing inefficient manual processes with the real-time
collaboration capabilities of our impresse.com service. For example, by
automating the process of requesting quotes for print jobs, our impresse.com
service allows corporations to access a broader range of printers and compare
more bids, more efficiently, thereby creating the opportunity to reduce print
product costs. Corporations further benefit from enterprise-wide consolidation
of transaction information, which can be utilized to make better print
procurement decisions and achieve economies of scale. Printers benefit from our
service because more potential customers can reach them through our network. In
addition, because our service streamlines the print procurement process,
printers can better allocate their time and resources to cultivate new, and
improve existing, customer relationships.
Virtually all businesses rely on commercially printed materials as the
primary medium for important business communications, such as marketing
brochures, promotional materials, direct mail, annual reports, product and user
manuals and other informational items. According to Raine Consulting, Inc., a
graphic arts industry consulting firm, large corporations typically spend
approximately 2% to 3% of their revenue on commercially printed materials. Based
on estimates by CAP Ventures, a print industry research firm, sales in the U.S.
printing and publishing industry totaled approximately $292 billion in 1998, of
which over $150 billion was derived from the commercial printing segments we
target.
The commercial print industry is a particularly attractive market for a
business-to-business e-commerce solution because:
- it is highly fragmented, with over 51,000 commercial printers in the U.S.,
according to the Printing Industries of America, an industry trade
association;
- 78% of commercial printers have access to and use the Internet, according
to Harris Interactive, a market research firm;
- most commercial printing content is digitally stored and can be readily
transferred through the Internet; and
- traditional methods of print procurement can be logistically complex,
time-consuming, inefficient and prone to errors.
Since print buyers and the corporations they represent have significant
market leverage relative to their commercial print suppliers, our strategy is to
target large multinational corporations that represent the greatest aggregate
demand for commercial print. We believe that their significant buying power will
enable us to attract a critical mass of printers to our network. To further
accelerate the growth of our network, we intend to leverage our existing
strategic relationships with key industry leaders such as Adobe Systems, Ariba,
Cisco Systems, Commerce One, eLance, ELetter, Hewlett-Packard, iPrint.com, Logic
Associates, Oracle, PaperExchange.com, VerticalNet and WAM!NET to gain access to
their corporate customers, and to establish additional strategic relationships.
As of February 29, 2000 we had signed agreements to use our impresse.com
service with 97 corporations and agencies and 172 of their commercial print
suppliers. Some of our large corporate customers include 3Com, AutoNation,
Target, Enron, McKesson HBOC, MetLife and Whirlpool.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered.................................... 3,500,000 shares
Common stock to be outstanding after this offering...... 28,650,121 shares
Use of proceeds......................................... For working capital. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol.................. IMPC
</TABLE>
The number of shares of our common stock to be outstanding immediately after
this offering is based on the number of shares outstanding as of December 31,
1999. This number does not take into account the following:
- 1,768,525 shares of common stock issuable on exercise of options
outstanding as of December 31, 1999, with a weighted average exercise
price of $1.11 per share;
- 483,428 shares of common stock issuable upon the exercise of warrants
outstanding as of December 31, 1999, with a weighted average exercise
price of $1.98 per share;
- 1,118,100 shares of common stock issuable upon exercise of options granted
after December 31, 1999 through March 10, 2000 with a weighted average
exercise price of $6 per share;
- 149,274 shares of common stock issuable upon the exercise of warrants
issued after December 31, 1999 through March 10, 2000 with an average
exercise price of $13.36 per share;
- 4,052,225 shares of common stock reserved for issuance under the 1997
Stock Option Plan, the 2000 Directors' Stock Plan and the 2000 Employee
Stock Purchase Plan; and
- the issuance of 189,668 shares of Series C convertible preferred stock in
January 2000 for approximately $2.4 million.
Unless otherwise specifically stated, the information in this prospectus
reflects the conversion of all outstanding shares of our preferred stock into
shares of common stock upon completion of this offering, reflects the Company's
reincorporation into the state of Delaware prior to completion of the offering,
and assumes no exercise of the underwriters' over-allotment option.
4
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 7, 1997 YEAR ENDED
(INCEPTION) THROUGH DECEMBER 31,
DECEMBER 31, -------------------
1997 1998 1999
------------------- -------- --------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue
Services.............................................. $ -- $ -- $ 4
License............................................... -- -- 160
Total revenue....................................... -- -- 164
Gross loss.............................................. -- -- (357)
Loss from operations.................................... (63) (4,416) (19,855)
Net loss................................................ (56) (4,313) (19,800)
Basic and diluted net loss per share.................... $ (.45) $ (3.45) $ (7.36)
Shares used to compute basic and diluted net loss per
share................................................. 124 1,252 2,691
Pro forma basic and diluted net loss per share
(unaudited)........................................... $ (1.30)
Shares used to compute pro forma basic and diluted net
loss per share (unaudited)............................ 15,227
</TABLE>
The As Adjusted column below reflects our sale of 3,500,000 shares of common
stock in this offering at an assumed initial public offering price of $12.00 per
share and the application of our estimated net proceeds, after deducting
estimated underwriting discounts and commissions and estimated offering expenses
payable by us.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
------------------------
ACTUAL AS ADJUSTED
---------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $48,077 $ 86,127
Working capital............................................. 44,834 82,884
Total assets................................................ 60,008 98,058
Long-term debt and capital lease obligation, less current
portion................................................... 3,939 3,939
Total liabilities........................................... 10,922 10,922
Total stockholders' equity.................................. 49,085 87,135
</TABLE>
We were incorporated in California in October 1997, and will be
reincorporated in Delaware prior to the closing of this offering. Our principal
executive offices are located at 1309 South Mary Avenue, Sunnyvale, California
94087, and our telephone number is (408) 530-2000. We maintain a worldwide web
site at www.impresse.com. The information in our web site is not incorporated by
reference into this prospectus. Impresse, Impresse's logo, and impresse.com are
some of our trademarks. Each other trademark, trade name or service mark of any
other company appearing in this prospectus is the property of its holder.
5
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING AN
INVESTMENT DECISION. ALTHOUGH THE RISKS IDENTIFIED BELOW REPRESENT THOSE WE
BELIEVE TO BE THE MOST SIGNIFICANT AT THIS TIME, ADDITIONAL RISKS NOT PRESENTLY
KNOWN TO US OR THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS
OPERATIONS.
THIS PROSPECTUS ALSO CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS, INCLUDING THE RISKS FACED BY US
DESCRIBED BELOW AND ELSEWHERE IN THIS PROSPECTUS.
RISKS RELATED TO OUR BUSINESS
OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT FOR YOU TO EVALUATE OUR
BUSINESS AND OUR PROSPECTS.
We were founded in October 1997 and have a limited operating history. From
inception through the three months ended September 1999, we were a development
stage company and did not have significant sales. In August 1999, we launched
our impresse.com service. For the year ended December 31, 1999, we generated
total revenue of approximately $164,000, of which approximately $4,000 was
derived from our impresse.com service. Currently, we intend to focus our
resources on further developing our impresse.com service. As a result, you
should not rely on our revenue or results of operations for any prior period as
an indication of future performance or prospects. We expect to encounter risks
and difficulties frequently encountered by early-stage companies in new and
rapidly evolving markets. If we do not successfully address these risks, our
business could be seriously harmed.
THE MARKET FOR OUR IMPRESSE.COM SERVICE IS AT AN EARLY STAGE AND WE MAY NOT
ACHIEVE THE CRITICAL MASS OF BUYERS AND SUPPLIERS OF COMMERCIAL PRINT THAT
OUR BUSINESS PLAN REQUIRES TO SUCCEED.
Our success depends on our ability to attract a critical mass of buyers and
suppliers of commercial print to use our impresse.com service for their
commercial print procurement and collaboration requirements. However, the market
for business-to-business e-commerce generally, and Internet-based print
procurement and collaboration solutions specifically, is at an early stage of
development, and our impresse.com service may fail to achieve market acceptance.
We may not be able to encourage buyers or suppliers of commercial print to
abandon familiar, traditional print procurement processes because of comfort
with existing purchasing habits and direct supplier relationships, the costs and
resources required to switch purchasing methods, security and confidentiality
concerns, supplier resistance to increased pricing transparency or general
reticence about technology or the Internet. If we fail to attract and maintain a
critical mass of buyers and suppliers of commercial print, we may be unable to
provide all of the benefits associated with a network of interdependent buyers
and sellers, including a wider breadth of product offerings, the ability to
manage project bids and access to the diverse industries that comprise the
demand for commercial print. As a result, our impresse.com service may not
achieve widespread market acceptance and we may not be able to develop our
business as we intend.
WE HAVE A HISTORY OF LOSSES AND ANTICIPATE CONTINUED LOSSES AND OUR ABILITY
TO GENERATE FUTURE REVENUE IS UNCERTAIN.
We have had substantial losses since our inception and we anticipate that we
will continue to incur net losses until we can derive sufficient revenue from
our impresse.com service, which we have not done to date. As of December 31,
1999, we had an accumulated deficit of $24.2 million. We cannot be certain that
we will ever achieve or sustain profitability. The extent of future losses is
contingent, in part, on the amount of growth in our revenue relative to our
operating expenses, which we anticipate will increase as we incur expenses
related to the development, operation and marketing of our impresse.com service.
Our ability to generate future revenue is uncertain. We may not have any revenue
growth, and our revenue could decline. We expect to derive revenue from our
impresse.com service, which is based on an unproven business plan. Moreover, we
expect to incur significant sales and marketing, research and development and
6
<PAGE>
general and administrative expenses. If we fail to generate revenue at
anticipated rates, or if our operating expenses increase without an adjustment
or a commensurate increase in revenue, our business, results of operations and
financial condition will be harmed. The future period in which we expect to
generate operating profits could be delayed and we may not be able to generate
operating profits.
WE EXPECT TO DEPEND ON OUR IMPRESSE.COM SERVICE FOR SUBSTANTIALLY ALL OF OUR
REVENUE AND WE MAY BE HARMED IF THE MARKET REJECTS OUR IMPRESSE.COM SERVICE.
Because we no longer intend to sell our intranet software solution, we
anticipate that revenue from our impresse.com service will constitute
substantially all of our revenue. However, we cannot be sure that buyers and
suppliers of commercial print will accept our business model of charging a fixed
percentage fee based on the gross dollar volume of print processed through our
impresse.com service. Consequently, a decline in the demand for and usage of our
impresse.com service, or its failure to achieve broad market acceptance, would
seriously harm our business.
We may not be able to supplement or replace our current sources of revenue
by offering additional products or services, and, even if we enhance the
features and functionality of our impresse.com service, we face additional risks
associated with the development and management of these enhancements. If we fail
to increase the commercial print volume transacted through our impresse.com
service, or if we are unable to offer alternative or supplemental
revenue-generating products or services, our revenue may not grow as we
anticipate or at all, which will harm our business, financial condition and
results of operations. The future period in which we expect to generate
operating profits could be delayed and we may not be able to generate operating
profits.
WE FACE INTENSE COMPETITION THAT COULD HARM OUR BUSINESS.
The market for business-to-business e-commerce and online print procurement
is new and rapidly evolving. Competition in this market is intense and is
expected to increase significantly in the future.
We may face competition from:
- other companies with commercial print-focused e-commerce offerings as well
as existing business-to-business e-commerce companies which may decide to
offer competing Internet-based print procurement and collaboration
solutions;
- large commercial printers which have developed or may acquire or develop
proprietary Internet-based e-commerce solutions;
- large multinational corporations with internally developed print
procurement and collaboration solutions; and
- traditional enterprise software companies which may develop alternative
print procurement and collaboration solutions.
We may not be able to compete successfully against our current or future
competitors and competition could significantly harm our business, results of
operations and financial condition. Our competitors and potential competitors
may develop superior e-commerce solutions for print procurement that achieve
greater market acceptance than our solution. Further, the market for commercial
printing includes traditional print providers and other providers of online
commercial print-related services which may seek to expand their on-line
presence to offer services similar to those offered by our impresse.com service.
Many of our current and potential competitors have longer operating histories,
significantly greater financial, technical and marketing resources,
significantly greater name recognition and a larger installed base of customers
than us. If we are unable to provide competitive services, our business will be
harmed. We may not be able to generate revenue to cover our operating expenses,
which could in turn delay the
7
<PAGE>
period in which we expect to generate operating profits and we may not be able
to generate operating profits.
IF WE ARE UNABLE TO DESIGN THE CORRECT FEATURES AND FUNCTIONALITY FOR OUR
IMPRESSE.COM SERVICE, WE MAY FAIL TO ATTRACT NEW CUSTOMERS OR WE MAY LOSE
EXISTING CUSTOMERS.
Our revenue is derived from the use of our impresse.com service, and, more
specifically, through the execution of commercial print transactions by buyers
and suppliers. If buyers or suppliers of commercial print choose not to use our
impresse.com service, we will not generate revenue. Our success depends upon our
ability to accurately determine and implement the features and functionality
that encourage and facilitate the execution of transactions through our
impresse.com service. We cannot be certain that the features and functionality
that we currently offer, or the features and functionality that we may offer in
the future, will be sufficient to encourage the use of our impresse.com service.
If we are unable to determine or design in the appropriate features and
functionality for our impresse.com service, our business will be harmed. We
could have diminished ability to generate revenue to cover our operating
expenses, which could in turn delay the period in which we expect to generate
operating profits and we may not be able to generate operating profits.
TECHNOLOGY DEVELOPMENTS COULD REDUCE THE DEMAND FOR OUR IMPRESSE.COM SERVICE
OR OTHERWISE ADVERSELY AFFECT OUR REVENUE.
In recent years, the market for printed business materials has experienced
significant changes due to advances in computer and communication technologies.
Certain products that were once commercially printed are now generated on
computers through word processing or desktop publishing software. In addition,
some information is now disseminated in a digital or electronic format rather
than in a paper format. These trends could continue in the future, resulting in
decreased demand for our impresse.com service and a corresponding decrease in
our revenue.
WE DEPEND ON OUR KEY PERSONNEL TO MANAGE OUR BUSINESS EFFECTIVELY IN A
RAPIDLY CHANGING MARKET AND WE COULD BE HARMED IF WE FAIL TO ATTRACT OR
RETAIN THESE PERSONNEL.
Our performance is substantially dependent on our executive officers and
other key employees. Our failure to successfully manage our personnel
requirements would have a negative effect on our business because we might not
be able to create or execute necessary elements of, or changes to, our business
plan. We may experience difficulty from time to time in hiring and retaining the
personnel necessary to support the growth of our business. The loss of the
services of any of our executive officers or other key employees could have a
negative effect on our business, results of operations and financial condition.
Our ability to attract new employees as well as our ability to execute on our
operating strategy could be diminished. As a result, we may experience
difficulty retaining our existing customers, attracting new customers, or
developing new features and functionality for our impresse.com service. Our
ability to generate revenue to cover our operating expenses could be diminished,
which could in turn delay the period in which we expect to generate operating
profits and we may not be able to generate operating profits.
IF WE FAIL TO MANAGE OUR EXPANDING BUSINESS EFFECTIVELY, WE COULD FAIL TO
MEET CUSTOMER EXPECTATIONS ABOUT THE NATURE AND SCOPE OF OUR SERVICES OR
INVESTOR EXPECTATIONS ABOUT OUR ABILITY TO MEET COMMERCIAL OR FINANCIAL
GOALS.
We have rapidly and significantly expanded our operations and expect to
continue to do so. This growth has placed, and is expected to continue to place,
a significant strain on our sales, marketing, managerial, operational, financial
and other resources. If we cannot manage our growth effectively, it is likely
that our revenue and results of operations will not meet customer and investor
expectations. Since our inception in October 1997, we have grown to 146
employees as of December 31, 1999. We expect to hire a significant number of new
employees to support our business.
8
<PAGE>
OUR CURRENT INFORMATION SYSTEMS, PROCEDURES AND CONTROLS MAY NOT CONTINUE TO
SUPPORT OUR OPERATIONS AND MAY HINDER OUR ABILITY TO EXPLOIT THE MARKET FOR
INTERNET-BASED PRINT PROCUREMENT AND COLLABORATION SOLUTIONS.
We are in the process of evaluating our accounting and management
information systems and anticipate that we may expand existing systems and
implement new systems within the next twelve months. We anticipate requiring
additional space to accommodate our growth in the next twelve months. We could
experience interruptions to our business when we add or transition to new
accounting or management information systems, or when we relocate to new
facilities.
OUR IMPRESSE.COM SERVICE IS NEW AND FACES RAPID TECHNOLOGICAL CHANGES AND IF
WE DO NOT RESPOND APPROPRIATELY, WE COULD BE HARMED.
The market for our impresse.com service is characterized by rapid
technological advances, evolving standards in the Internet and software markets,
changes in customer requirements, and frequent new product and service
introductions and enhancements. As a result, our future success depends upon our
ability to enhance our current impresse.com service, to develop and introduce
new solutions and services that will achieve market acceptance, and where
necessary to integrate our Internet-based print procurement and collaboration
solution with our customers' printing needs. If we do not adequately respond to
the need to develop and introduce new solutions or services, or to integrate
with our customers' printing needs, then our business, revenue, operating
results and financial condition will be negatively affected. For example, if we
incur substantial costs and expend significant resources developing new
technology that fails in the marketplace, we are unable to develop technology
that is a success in the marketplace, our technology does not integrate with our
customers, or our technology is surpassed by the technology of a competitor, we
may lose market share and revenue as our customers switch to our competitors'
offerings. Failure to provide this integration may delay or altogether dissuade
the market or a particular customer from adopting our impresse.com service,
which could have a material adverse effect on our business, financial condition
and results of operations.
Major enhancements and new solutions and services often require long
development and testing periods. In addition, our impresse.com service is
complex and, despite vigorous testing and quality control procedures, may
contain undetected errors or "bugs" when first implemented or updated. Any
inability to deliver a quality solution and services in a timely fashion could
harm our business, results of operations and financial condition by diminishing
our ability to retain our existing customers or attract new customers to our
impresse.com service, or by increasing our operating expenses.
WE MAY NOT SUCCESSFULLY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS.
Our intellectual property is important to our business, and we seek to
protect our intellectual property through copyrights, trademarks, trade secrets
and confidentiality provisions in our customer, supplier and strategic
relationship agreements, nondisclosure agreements with third parties, and
invention assignment agreements with our employees and contractors. We cannot
assure you that measures we take to protect our intellectual property will be
successful or that third-parties will develop an alternative procurement
solution that does not infringe our intellectual property. Claims that we
infringe others' intellectual property rights could inhibit the use or
development of our impresse.com service. Others may claim that we infringe their
intellectual property rights. Claims that we are infringing the intellectual
property of third parties could be costly to defend, divert attention from our
business and, if we have this type of claim, could limit our ability to run our
business.
9
<PAGE>
WE MAY NOT BE ABLE TO ESTABLISH AND DEVELOP SUFFICIENT BRAND RECOGNITION IN
ORDER TO ATTRACT THE NECESSARY CRITICAL MASS OF BUYERS AND SUPPLIERS OF
COMMERCIAL PRINT TO OUR IMPRESSE.COM SERVICE.
We believe that establishing and maintaining the identity of our brand is
crucial to attract a critical mass of commercial print buyers and suppliers to
our impresse.com service. The promotion and enhancement of our brand will depend
largely on our ability to provide value-added services, which cannot be assured.
If users do not perceive our impresse.com brand to be of high quality, or if we
introduce new services or enter into new business ventures that are not
favorably received by users, we will risk diluting our brand and decreasing the
likelihood that commercial print buyers and suppliers will transact their print
jobs through our impresse.com service. Furthermore, in order to attract and
retain buyers and suppliers of commercial print services and to promote and
maintain our brand in response to competitive pressures, we may find it
necessary to increase substantially our financial commitment to creating and
maintaining a distinct brand loyalty among our customers. If we are unable to
provide high quality service, or otherwise fail to promote and maintain our
brand, or if we incur excessive expenses in an attempt to improve our
impresse.com service, or promote and maintain our brand, our business, results
of operation and financial condition could be materially and adversely affected
by diminishing our ability to retain our existing customers or attract new
customers to our impresse.com service, or by increasing our operating expenses.
RISKS RELATED TO BUSINESS-TO-BUSINESS E-COMMERCE
OUR BUSINESS WILL SUFFER IF BUYERS AND SUPPLIERS OF COMMERCIAL PRINT DO NOT
ACCEPT INTERNET-BASED SOLUTIONS.
Business-to-business e-commerce is a new and emerging business practice that
remains largely untested in the marketplace. Growth in the demand for our
impresse.com service depends on the adoption of e-commerce and Internet
solutions by buyers and suppliers of commercial print, which requires their
acceptance of a new way of purchasing and selling commercial print. Our business
could suffer if Internet-based print procurement and collaboration solutions are
not accepted or perceived to be effective by buyers and suppliers of commercial
print.
SECURITY PROBLEMS WITH THE INTERNET OR TRANSACTING BUSINESS OVER THE
INTERNET MAY INHIBIT THE GROWTH OF OUR INTERNET-BASED PRINT PROCUREMENT AND
COLLABORATION SOLUTION.
The secure transmission of confidential information over the Internet is
essential to maintaining buyer and supplier confidence in our solution. Although
we have experienced no security breaches to date, substantial security breaches
on our system or other Internet-based systems could significantly harm our
business. We have incurred substantial expense to protect against security
breaches and their consequences and we may incur additional expense to remedy
any security breaches. A party that is able to circumvent our security systems
could steal proprietary information or cause interruptions in our operations.
Security breaches also could damage our reputation and expose us to a risk of
loss or litigation and possible liability. Our insurance policies may not be
adequate to reimburse us for losses caused by security breaches. We cannot
guarantee that our security measures will prevent security breaches. Customers
generally are concerned with security and privacy on the Internet and any
publicized security problems could inhibit the growth of the Internet and,
therefore, our impresse.com service as a means of conducting transactions.
BECAUSE OUR INFRASTRUCTURE AND SYSTEMS ARE LOCATED IN ONE SITE, A SINGLE
SYSTEM FAILURE MAY CAUSE INTERRUPTION OF OUR SERVICES.
The performance of our server and networking hardware and software
infrastructure is critical to our business and reputation and our ability to
process transactions, provide high quality customer service, and attract and
retain customers, suppliers, users and strategic partners. Currently our
infrastructure and systems are located in one site at Exodus Communications. We
anticipate adding a mirror site at a different, distant location. Until then, we
depend on our single-site infrastructure and any disruption to
10
<PAGE>
this infrastructure resulting from a natural disaster or other event could
result in an interruption in our service, fewer transactions and, if sustained
or repeated, could impair our reputation and the attractiveness of our services,
which would harm our ability to attract customers and run our business.
OUR SYSTEMS AND OPERATIONS ARE VULNERABLE TO FAILURE OR INTERRUPTION OF
SERVICE, WHICH COULD IMPEDE TRANSACTION FLOW OR HARM OUR REPUTATION.
Although we have not experienced significant system problems to date, our
systems and operations are vulnerable to damage or interruption from human
error, natural disasters, power loss, telecommunications failures, break-ins,
sabotage, computer viruses, intentional acts of vandalism and similar events. We
do not have a formal disaster recovery plan or alternative provider of hosting
services. In addition, we do not necessarily carry sufficient business
interruption insurance to compensate for losses that could occur. Any failure on
our part to expand our system or Internet infrastructure to keep up with the
demands of our customers and users, or any system failure that causes an
interruption in service or a decrease in responsiveness of our Internet-based
procurement solution or web site, could result in fewer transactions and, if
sustained or repeated, could harm our reputation and the attractiveness of our
brand name, which would harm our business.
THE ACCELERATED GROWTH AND INCREASING VOLUME OF INTERNET TRAFFIC MAY CAUSE
PERFORMANCE PROBLEMS WHICH MAY SLOW ADOPTION OF OUR INTERNET-BASED PRINT
PROCUREMENT AND COLLABORATION SOLUTION.
The growth of Internet traffic volume over a relatively short period of time
has caused frequent periods of decreased Internet performance, delays, and
system outages. This decreased performance is caused by limitations inherent in
the technology infrastructure supporting the Internet, and the technology
infrastructure supporting the internal networks of Internet users. If Internet
usage continues to grow rapidly, the infrastructure of the Internet and its
users may be unable to support the demands of growing e-commerce usage, and the
Internet's performance and reliability may decline. If our existing or potential
customers experience frequent outages or delays on the Internet, the adoption or
use of our impresse.com service by these existing or potential customers may
grow more slowly than we expect or even decline. Our ability to increase the
speed and reliability of our impresse.com service, however, is limited by and
depends upon the reliability of both the Internet and the internal networks of
our existing and potential customers. As a result, the sustained growth and
success of our impresse.com service is dependent upon improvements in the
infrastructure supporting both the Internet and the internal networks of the
buyers and suppliers of commercial print using our impresse.com service. If
these improvements are not made in a timely fashion, we may have difficulty
attracting new buyers and suppliers of commercial print, or maintaining our
existing buyers and suppliers of commercial print, either of which could harm
our business and financial condition.
REGULATION OR TAXATION OF THE INTERNET OR TRANSACTING BUSINESS OVER THE
INTERNET MAY INHIBIT THE GROWTH OF OUR INTERNET-BASED PRINT PROCUREMENT AND
COLLABORATION SOLUTION.
Due to the increasing popularity and use of the Internet and of e-commerce,
it is possible that a number of taxes, laws and regulations may be adopted in
the U.S. and abroad with particular applicability to the Internet and e-commerce
transactions. It is possible that governments will adopt taxes and enact
legislation that may be applicable to us in areas such as content, product
distribution, network security, encryption and the use of key escrow, data and
privacy protection, electronic authentication or "digital" signatures, illegal
and harmful content, access charges and re-transmission activities. Moreover,
the applicability to the Internet of existing laws governing issues such as
property ownership, content, taxation, defamation and personal privacy is
uncertain. Any taxes, laws or regulations may limit the growth of the Internet,
dampen e-commerce and reduce the number of transactions, increase our cost of
doing business or increase our legal exposure. Any of these factors could harm
our business or financial condition, or limit our ability to generate revenue.
11
<PAGE>
RISKS RELATED TO THIS OFFERING
THERE HAS BEEN NO PRIOR MARKET FOR OUR COMMON STOCK AND WE EXPECT THE PRICE
OF OUR COMMON STOCK TO BE VOLATILE.
Prior to this offering, you could not buy or sell our common stock publicly.
An active public market for our common stock may not develop or be sustained
after the offering. Although the initial public offering price will be
determined based on several factors, the initial offering price may vary from
the market price after the offering. The market price of the common stock may
fluctuate significantly in response to a number of factors, some which are
beyond our control, including:
- quarterly variations in our operating results;
- changes in financial estimates of our performance by securities analysts;
- changes in market valuation of Internet commerce companies generally;
- announcements by us of significant contracts, acquisitions, strategic
partnerships, joint ventures or capital commitments;
- stock market price and volume fluctuations, which are particularly common
among the highly volatile securities of Internet companies; and
- factors described elsewhere in this prospectus.
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs and divert management's attention
and resources, which could impede our ability to run our business or achieve a
positive financial condition.
WE MAY REQUIRE ADDITIONAL CAPITAL THAT COULD REDUCE, DILUTE OR SUBORDINATE
YOUR OWNERSHIP IN IMPRESSE.
We currently anticipate that the net proceeds of the offering, together with
our existing credit facilities and available funds, will be sufficient to meet
our anticipated working capital and capital expenditure needs for the next 18
months. We may need to raise additional funds in the future in order to fund
rapid expansion, to pursue customer sales and implementation, to develop new or
enhanced solutions and services, to respond to competitive pressures or to
acquire complementary businesses, technologies or services.
If we raise additional funds through the issuance of equity or convertible
debt securities, the percentage ownership of our stockholders will be reduced,
stockholders may experience additional dilution and these additional securities
may have powers, preferences and rights that are senior to those of the rights
of our common stock. We cannot be certain that additional financing will be
available on terms favorable to us, if at all. If adequate funds are not
available or not available on acceptable terms, we may be unable to fund our
expansion, promote our brand identity, take advantage of unanticipated
acquisition opportunities, develop or enhance services or respond to competitive
pressures.
FUTURE SALES OF SHARES BY EXISTING SHAREHOLDERS COULD AFFECT OUR STOCK
PRICE.
If our stockholders sell substantial amounts of our common stock in the
public market following this offering, the market price of our common stock
could fall, potentially resulting in substantial losses to investors. These
sales also might make it more difficult for us to sell equity or equity-related
securities in the future at a time and price that we deem appropriate. Based on
shares outstanding as of December 31, 1999, upon completion of this offering, we
will have outstanding 28,650,121 shares of common stock, assuming no exercise of
options after December 31, 1999, and the conversion of all shares of outstanding
preferred stock into common stock. Holders of 25,150,121 shares are subject to
agreements with the underwriters that restrict their ability to transfer their
stock for 180 days from the date of this prospectus.
12
<PAGE>
After these agreements expire, approximately 12,469,676 shares will be eligible
for sale in the public market, assuming no exercise of stock options after
December 31, 1999.
OFFICERS AND DIRECTORS AND THEIR AFFILIATES WILL CONTINUE TO HAVE
SUBSTANTIAL CONTROL OVER IMPRESSE AFTER THE OFFERING AND THEY MIGHT EXERCISE
THIS CONTROL IN WAYS THAT COULD DELAY OR DETER A CHANGE OF CONTROL.
After completion of this offering, our executive officers and directors and
their affiliates will beneficially own approximately 65.79% of the shares of
common stock (64.61% if the underwriters exercise the over-allotment option in
full). As a result, our officers, directors and their affiliates will have the
ability to influence the election of our Board of Directors and the outcome of
corporate actions requiring stockholder approval. This concentration of
ownership may have the effect of delaying or preventing a change in control of
Impresse.
WE HAVE ADOPTED ANTI-TAKEOVER PROVISIONS THAT COULD DELAY OR DETER THE SALE
OF IMPRESSE.
Some of the provisions of our Amended and Restated Certificate of
Incorporation and bylaws could make it more difficult for a third party to
acquire us, even if a change of control would be beneficial to our stockholders.
These provisions could depress the price of our common stock and deprive our
stockholders of the opportunity to realize a premium on their shares of common
stock in connection with a sale of Impresse.
13
<PAGE>
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
Operations," "Business," and elsewhere in this prospectus are forward-looking
statements. Some of these forward-looking statements are attributed to third
parties and relate to their statements relating to the growth of Internet users,
e-commerce, and the market for web-based network printing services. These
statements involve known and unknown risks and uncertainties that may cause our
or our industry's actual results, levels of activity, performance, or
achievements to be materially different from any future results, levels of
activity, performance, or achievements expressed or implied by forward-looking
statements. Such factors include, among other things, those listed under "Risk
Factors" and elsewhere in this prospectus.
You can identify forward-looking statements by terminology such as "may,"
"will," "should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," or "continue" or the negative of these terms or other
comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, growth rates,
levels of activity, performance, or achievements. Moreover, neither we nor any
other person assumes responsibility for the accuracy and completeness of these
statements. We are under no duty to update any of the forward-looking statements
after the date of this prospectus to conform these statements to actual results.
14
<PAGE>
USE OF PROCEEDS
Our net proceeds from the sale of the 3,500,000 shares of common stock in
this offering are estimated to be approximately $38.1 million, at an assumed
initial public offering price of $12.00 per share, after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by us. The primary purposes of this offering are to obtain additional capital,
create a public market for our common stock and facilitate future access to
public equity markets. We intend to use the net proceeds of this offering for
working capital, expenses associated with advertising campaigns, brand
promotions and other marketing efforts and capital expenditures. We also may use
a portion of the net proceeds to acquire or invest in complementary businesses,
technologies, products or services, although no specific acquisitions are
currently planned. Our management will have broad discretion in the application
of the net proceeds. Pending these uses, we intend to invest the net proceeds
from this offering in short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
We have not declared or paid any cash dividends on our capital stock since
inception and we do not, as of the date of this prospectus, expect to pay any
cash dividends. We currently intend to retain future earnings, if any, to
finance the expansion of our business. The terms of certain of our current
credit facilities prohibit the payment of cash dividends on our capital stock
without the prior written consent of the applicable creditors.
15
<PAGE>
CAPITALIZATION
The Actual column in the following table sets forth our actual
capitalization as of December 31, 1999. The Pro Forma column in the following
table gives effect to:
- the filing of our Certificate of Incorporation to provide for authorized
capital stock of 150,000,000 shares of common stock and 5,000,000 shares
of undesignated preferred stock; and
- the conversion of all outstanding shares of preferred stock into
16,247,360 shares of common stock upon the closing of this offering.
The As Adjusted column in the following table gives effect to this offering
and our receipt of the net proceeds at an assumed initial public offering price
of $12.00 per share, after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us.
The following table does not include:
- 1,768,525 shares of common stock issuable on exercise of options
outstanding as of December 31, 1999, with a weighted average exercise
price of $1.11 per share;
- 483,428 shares of common stock issuable upon the exercise of warrants
outstanding as of December 31, 1999, with a weighted average exercise
price of $1.98 per share;
- 1,118,100 shares of common stock issuable upon exercise of options granted
after December 31, 1999 through March 10, 2000 with a weighted average
exercise price of $6 per share;
- 149,274 shares of common stock issuable upon the exercise of warrants
issued after December 31, 1999 through March 10, 2000 with a weighted
average exercise price of $13.36 per share;
- 4,052,225 shares of common stock reserved for issuance under the 1997
Stock Option Plan, the 2000 Directors' Stock Plan and the 2000 Employee
Stock Purchase Plan; and
- the issuance of 189,668 shares of Series C convertible preferred stock in
January 2000 for approximately $2.4 million.
See "Management--Stock Plans" and Note 5, 7, 8 and 11 of Notes to Financial
Statements.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
----------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Capital lease obligation less current portion............... $ 118 $ 118 $ 118
Long-term debt, less current portion........................ 3,939 3,939 3,939
Stockholders' equity:
Convertible preferred stock, $.001 par value;
17,180,485 shares in 1999, and 5,000,000 shares pro
forma and as adjusted authorized; 16,247,360 shares in
1999, no shares pro forma, and no shares as adjusted
issued and outstanding................................ 16 -- --
Common stock, $.001 par value;
27,420,000 shares in 1999, and 150,000,000 shares pro
forma and as adjusted authorized; 8,902,761 shares in
1999 and 25,150,121 shares pro forma, 28,650,121
shares as adjusted issued and outstanding............. 9 25 29
Additional paid-in capital.................................. 87,235 87,235 125,281
Deferred stock compensation................................. (13,470) (13,470) (13,470)
Notes receivable from stockholders.......................... (535) (535) (535)
Accumulated deficit......................................... (24,170) (24,170) (24,170)
-------- ------- --------
Total stockholders' equity................................ 49,085 49,085 87,135
-------- ------- --------
Total capitalization.................................... $ 53,142 $53,142 $ 91,192
======== ======= ========
</TABLE>
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<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was $45.7
million, or $1.82 per share. Pro forma net tangible book value per share is
determined by dividing the pro forma number of shares of common stock, after
giving effect to the conversion of all outstanding shares of our convertible
preferred stock into 16,247,360 shares of common stock, into our net tangible
book value, which is equal to total tangible assets less total liabilities.
Dilution per share represents the difference between the amount per share paid
by purchasers of shares of common stock in this offering and the net tangible
book value per share of common stock immediately after completion of this
offering. After giving effect to the sale of 3,500,000 shares of our common
stock offered in this offering at an assumed initial public offering price of
$12.00 per share and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us, our pro forma net
tangible book value as of December 31, 1999 would have been approximately
$83.8 million, or $2.92 per share. This represents an immediate increase in pro
forma net tangible book value of $1.10 per share to existing stockholders and an
immediate dilution of $9.08 per share to new investors purchasing shares at the
assumed initial public offering price. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $12.00
Pro forma net tangible book value per share as of
December 31, 1999......................................... $ 1.82
Increase in pro forma net tangible book value per share
attributable to new investors............................. 1.10
------
Pro forma net tangible book value per share after this
offering.................................................. 2.92
------
Dilution per share to new investors......................... $ 9.08
======
</TABLE>
If the underwriters exercise their over-allotment option in full, the
dilution to new investors will be $8.93 per share. If all outstanding options
with exercise prices below an assumed initial public offering price of $12.00
per share were exercised, the dilution to new investors would be $9.04 per
share.
The following table summarizes as of December 31, 1999 on the pro forma
basis described above, after giving effect to the conversion of convertible
preferred stock into common stock, the number of shares of common stock
purchased from us, the total consideration paid to us and the average price per
share paid by existing stockholders and by investors purchasing shares of common
stock in this offering, before deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ----------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- -------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders...................... 25,150,121 87.8% $ 68,017,583 61.8% $ 2.70
New investors.............................. 3,500,000 12.2 42,000,000 38.2 12.00
---------- ----- ------------ -----
Totals................................. 28,650,121 100.0% $110,017,583 100.0%
========== ===== ============ =====
</TABLE>
The foregoing discussion and tables exclude:
- 1,768,525 shares of common stock issuable on exercise of options
outstanding as of December 31, 1999, with a weighted average exercise
price of $1.11 per share;
- 483,428 shares of common stock issuable upon the exercise of warrants
outstanding as of December 31, 1999 with a weighted average exercise price
of $1.98 per share;
- 1,118,100 shares of common stock issuable upon exercise of options granted
after December 31, 1999 through March 10, 2000 with a weighted average
exercise price of $6.00 per share;
- 149,274 shares of common stock issuable upon the exercise of warrants
issued after December 31, 1999 through March 10, 2000 with a weighted
average exercise price of $13.36 per share;
- 4,052,225 shares of common stock reserved for future issuance at March 10,
2000 under the 1997 Stock Option Plan, the 2000 Directors' Stock Plan and
the 2000 Employee Stock Purchase Plan; and
- the issuance of 189,668 shares of Series C convertible preferred stock in
January 2000.
See "Management--Stock Plans" and Notes 7, 8 and 11 of Notes to Financial
Statements.
17
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with our
financial statements and related notes and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
prospectus. The statement of operations data for the period from October 7, 1997
(inception) through December 31, 1997 and for the years ended December 31, 1998
and 1999 and the balance sheet data at December 31, 1998 and 1999, have been
derived from financial statements that have been audited by Ernst and Young LLP,
independent auditors, included elsewhere in this prospectus. Balance sheet data
at December 31, 1997, has been also derived from financial statements that have
been audited by Ernst and Young LLP, independent auditors, not included in this
prospectus. See Note 1 of notes to financial statements for an explanation of
the determination of the shares used in computing basic and diluted net loss per
share.
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 7, 1997
(INCEPTION)
THROUGH YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1999
--------------- ------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Services...................................... $ -- $ -- $ 4
License....................................... -- -- 160
------- ------- --------
Total revenue............................. -- -- 164
Cost of revenue................................. -- -- 520
------- ------- --------
Gross loss................................ -- -- (356)
------- ------- --------
Operating expenses:
Sales and marketing........................... -- 1,086 7,861
Research and development...................... 6 2,571 6,396
General and administrative.................... 19 756 2,051
Stock compensation and warrant expense........ 38 3 3,189
------- ------- --------
Total operating expenses.................. 63 4,416 19,497
------- ------- --------
Loss from operations............................ (63) (4,416) (19,854)
Interest income, net............................ 7 102 54
------- ------- --------
Net loss........................................ $ (56) $(4,314) $(19,800)
======= ======= ========
Basic and diluted net loss per share............ $ (.45) $ (3.45) $ (7.36)
======= ======= ========
Shares used to compute basic and diluted net
loss per share................................ 124 1,252 2,691
======= ======= ========
Pro forma basic and diluted net loss per share
(unaudited)................................... $ (1.30)
========
Shares used to compute pro forma basic and
diluted net loss per share (unaudited)........ 15,227
========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------
1997 1998 1999
------------- ------------- ----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................... $ 3,990 $11,425 $ 48,077
Working capital..................................... 3,973 9,524 44,834
Total assets........................................ 3,999 12,925 60,008
Long-term debt and capital lease obligation, less
current portion................................... -- 285 4,057
Total liabilities................................... 26 2,422 10,922
Total stockholders' equity.......................... 3,973 10,503 49,085
</TABLE>
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND RESULTS
OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH "SELECTED FINANCIAL DATA" AND
OUR FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN THIS
PROSPECTUS. THIS DISCUSSION AND ANALYSIS CONTAINS FORWARD-LOOKING STATEMENTS
THAT INVOLVE RISKS, UNCERTAINTIES AND ASSUMPTIONS. THE ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS, INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH UNDER
"RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
Impresse is a leading provider of business-to-business e-commerce solutions
for the procurement of commercially printed materials. Our impresse.com service
provides corporations and their commercial print suppliers with integrated
procurement and collaboration capabilities, industry-specific business
intelligence, improved price discovery, corporate systems integration and other
complementary services. Our impresse.com service also provides the transaction
automation and volume aggregation of an e-commerce marketplace.
We were founded in October 1997 and were a development stage company from
inception through the three months ended September 30, 1999. During this period
we did not have significant sales and our operating activities were related
primarily to the design and development of our e-commerce solutions, building
our corporate infrastructure, establishing relationships with suppliers and
customers and raising capital. We focused our initial development efforts on an
intranet software solution designed to automate the commercial print procurement
processes within large corporations. In mid-1999, however, we recognized the
opportunity to build upon our initial software development efforts to create a
broader, Internet-based business-to-business e-commerce solution. Accordingly,
we shifted our efforts to the development of our impresse.com service which we
launched in August 1999.
The first sale of our impresse.com service occurred during the three months
ended December 31, 1999. Through December 31, 1999 we processed a total of 3,207
transactions of which 3,146 were processed through our intranet software
solution, 37 on our impresse.com service and 24 using our private label hosted
impresse.com service. Through February 29, 2000 we processed an additional 72
transactions on our impresse.com service and 81 using our private label hosted
impresse.com service. The print jobs transacted through our impresse.com service
through February 29, 2000 represented an average per transaction gross dollar
value of $6,000.
Our ability to generate significant future revenue is uncertain. We have
incurred significant losses since inception and, as of December 31, 1999, we had
an accumulated deficit of approximately $24.2 million, including a net loss in
the year ended December 31, 1999 of $19.8 million. We currently expect our
losses to increase in the future and we cannot assure you that we will ever
achieve or sustain profitability. We believe our success depends on
- establishing additional customer relationships with large corporations and
their printers,
- increasing the commercial print volume transacted through our impresse.com
service,
- enhancing the features and functionality of our service, and
- accelerating market awareness of our impresse.com service.
Accordingly, we intend to continue to invest heavily in sales, marketing, and
research and development activities.
We have a limited operating history upon which to base an evaluation of our
business and we cannot assure you that our revenue will increase in future
periods. Our business and prospects must be considered
19
<PAGE>
in light of the risks, expenses and difficulties frequently encountered by
companies in our stage of development, particularly companies in new and rapidly
evolving markets such as business-to-business e-commerce.
QUARTERLY RESULTS OF OPERATIONS
Because we were a development stage company from inception through the three
months ended September 30, 1999 and have a limited operating history, we believe
that period-to-period comparisons prior to 1999 are less meaningful than an
analysis of recent quarterly operating results. Accordingly, we are providing a
discussion and analysis of our results of operations that is focused on the
eight quarters in the period ended December 31, 1999.
The following table presents our unaudited quarterly operating results for
each of the eight quarters in the period ended December 31, 1999. You should
read the following table together with our financial statements and related
notes included elsewhere in this prospectus. We have prepared this unaudited
information on the same basis as our audited financial statements. This table
includes all adjustments, consisting only of normal recurring adjustments, that
we consider necessary for a fair presentation of our financial position and
operating results for the quarters presented. You should not draw any
conclusions about our future results from the operating results of any quarter.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Services...................... $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ 4
License....................... -- -- -- -- -- -- -- 160
------- ------- ------- ------- ------- ------- ------- -------
Total revenue............... -- -- -- -- -- -- -- 164
Cost of revenue................. -- -- -- -- -- -- -- 520
------- ------- ------- ------- ------- ------- ------- -------
Gross loss.................... -- -- -- -- -- -- -- (357)
Operating expenses:
Sales and marketing........... 74 174 475 363 745 1,244 2,161 3,711
Research and development...... 165 601 742 1,063 1,265 1,411 1,633 2,087
General and administrative.... 86 160 196 314 250 405 444 952
Stock compensation and warrant
expense..................... 3 -- -- -- 32 162 657 2,339
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses.... 328 935 1,413 1,740 2,292 3,222 4,895 9,089
------- ------- ------- ------- ------- ------- ------- -------
Loss from operations............ (328) (935) (1,413) (1,740) (2,292) (3,222) (4,895) (9,445)
Interest income, net............ 44 35 22 2 76 47 (100) 31
------- ------- ------- ------- ------- ------- ------- -------
Net loss........................ $ (285) $ (900) $(1,391) $(1,738) $(2,216) $(3,175) $(4,995) $(9,414)
======= ======= ======= ======= ======= ======= ======= =======
Basic and diluted net loss per
share......................... $ (.44) $ (.89) $ (.99) $ (.89) $ (1.07) $ (1.42) $ (1.76) $ (2.00)
======= ======= ======= ======= ======= ======= ======= =======
Shares used to compute basic and
diluted net loss per share.... 647 1,016 1,399 1,945 2,066 2,243 2,838 3,617
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
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RESULTS OF OPERATIONS
REVENUE
From inception through the three months ended September 30, 1999, we were a
development stage company and had no revenue. For the three months ended
December 31, 1999, our total revenue was approximately $164,000.
Services revenue includes revenue from the use of our impresse.com service.
Services revenue through December 31, 1999 was approximately $4,000. The
impresse.com service enables corporations and their commercial printers to
automate commercial print procurement and collaboration over the Internet. We
charge a fixed percentage fee to printers on a per transaction basis based on
the gross dollar volume of print procured through our impresse.com service. Our
fee is for the use of our service from print project initiation through project
acceptance and delivery of printed materials. We bill printers and recognize
revenue from the use of our service upon completion of the print project, which
has taken from five to fifteen days from project acceptance. We currently do not
charge a fee for the use of our impresse.com service to the print buyer. We
believe our success depends primarily on repeat customer use as well as
increasing our customer base. We also expect to derive revenue from our private
label hosted impresse.com service. Revenue will be recognized in connection with
these transactions over the term of the hosting agreements.
License revenue consists of revenue from the license of our intranet
software solution. For the three months ended December 31, 1999, we recorded
license revenue totaling $160,000 from the licensing of our intranet software
solution. We recognized revenue in accordance with Statement of Position (SOP)
97-2, SOFTWARE REVENUE RECOGNITION, as modified by SOP 98-9, MODIFICATION OF SOP
97-2, SOFTWARE REVENUE RECOGNITION, WITH RESPECT TO CERTAIN TRANSACTIONS.
Revenue from the license of software is recognized upon shipment of the product,
provided that persuasive evidence of an arrangement exists, the fee is fixed and
determinable and collection of the resulting receivable is considered probable.
When we provide software license and hosting services and evidence of fair
value of each element is not available, the license fee is deferred and
recognized ratably along with hosting fees over the term of the hosting
agreement.
In 1999, two customers accounted for 76% and 22% of total revenue. Each of
these customers licensed our intranet software solution. We no longer intend to
market or license our intranet software solution as a stand-alone product.
COST OF REVENUE
Cost of revenue consists primarily of expenses associated with the
maintenance and support of our impresse.com service, including personnel,
facilities overhead, equipment depreciation costs and web hosting fees. During
the three months ended December 31, 1999, cost of revenue increased primarily
due to development of the infrastructure supporting the impresse.com service,
costs associated with the licensing of our intranet software solution and the
increase in revenue. Our gross margin for the three months ended December 31,
1999 was negative. We expect our gross margins to remain negative or relatively
low until our revenue sufficiently scales to cover our cost of revenue. Cost of
revenue also included, in connection with the licensing of our intranet software
solution, personnel and related overhead expenses associated with
implementation, training services and customer support.
OPERATING EXPENSES
Operating expenses for the period from October 7, 1997 (Inception) through
December 31, 1997 were nominal.
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SALES AND MARKETING. Sales and marketing expenses increased from
$1.1 million in the year ended December 31, 1998 to $7.9 million in the year
ended December 31, 1999. In both periods, sales and marketing expenses consisted
primarily of advertising and promotion costs in support of the development of
our marketing strategy and payroll, commissions and related expenses for
personnel engaged in sales and marketing activities. Except for the three months
ended December 31, 1998, in which sales and marketing expenses decreased
slightly, sales and marketing expenses have increased each quarter as we have
expanded our sales and marketing efforts. We intend to aggressively expand our
customer relationships in order to increase revenue and expand our brand
awareness. Consequently, we expect to increase our sales and marketing expenses
in absolute dollars in future periods.
As part of our growth strategy, we are actively seeking to co-market our
impresse.com service through industry leaders with strong relationships with
potential customers. These co-marketing relationships provide us with sales and
marketing leverage in signing-up customers and their printers. Payments made in
connection with these agreements will be charged to sales and marketing as
incurred. As of December 31, 1999, we had concluded sales and marketing alliance
agreements with several companies in the operating resources procurement and the
print and graphic arts markets including the following:
In November 1999, we concluded an agreement with Adobe Systems for our
impresse.com service to serve as the exclusive print procurement solution for
Adobe's adobe.com graphic arts portal. The agreement includes the marketing of
impresse.com to Adobe's graphic arts application users and technology
cooperation to integrate certain technologies, such as PDF workflows, with our
impresse.com service. As part of this agreement, we are required to pay Adobe
referral fees based on a percentage of the services revenue from Adobe-sourced
customers, subject to guaranteed minimums. The agreement has an initial term of
one year and may be renewed upon mutual consent.
In August 1999, we signed a co-selling and co-marketing agreement with
Hewlett-Packard to enable our impresse.com service to be marketed with
Hewlett-Packard's eServices. Our impresse.com service is synergistic with other
Hewlett-Packard's eProcurement initiatives and we plan to undertake joint
marketing and selling activities with Hewlett-Packard to access its customers
and partners. As part of this agreement, we are required to pay Hewlett-Packard,
a percentage of the services revenue derived from Hewlett-Packard-sourced
customers. The agreement has a term of five years and may be renewed upon mutual
consent. We or Hewlett-Packard can terminate the agreement if total fees earned
during each calendar year by Hewlett-Packard are less than specified minimum
amounts.
RESEARCH AND DEVELOPMENT. Research and development expenses increased from
$2.6 million in the year ended December 31, 1998 to $6.4 million in the year
ended December 31, 1999. In both periods, research and development expenses
consisted of personnel and other expenses associated with developing and
enhancing software in support of our impresse.com service. Our research and
development expenses have increased each quarter primarily due to increased
staffing and associated costs related to the design and development of our
impresse.com service. We believe that our success is dependent in large part on
continued enhancement of our impresse.com service. Accordingly, we expect
research and development expenses to increase in absolute dollars in future
periods.
In late 1999 we agreed to license intellectual property from a third party
until the patent expires in 2006. We will amortize the corresponding intangible
asset on a straight line basis over 18 months.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
from $800,000 in the year ended December 31, 1998 to $2.1 million in the year
ended December 31, 1999. In both periods, general and administrative expenses
consisted primarily of salaries for administrative and executive personnel,
occupancy costs and fees for professional services. General and administrative
expenses have increased each year primarily as a result of the addition of key
executives and finance and administrative personnel as well as increased
professional service fees. We expect general and administrative expenses to
increase in absolute dollars in future periods to support our expanded
operations and the expenses associated with being a public company.
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STOCK COMPENSATION AND WARRANT EXPENSE. We recorded aggregate deferred
compensation of $16.4 million in connection with certain stock options granted
through December 31, 1999. For the year ended December 31, 1999, we amortized
$2.9 million related to stock options. We estimate that we will record
additional deferred compensation of $1.1 million related to stock option grants
made subsequent to December 31, 1999. These deferred compensation amounts are
being amortized using an accelerated method over the vesting period of the stock
options, which is typically four years.
In connection with our agreement with Adobe and our facility operating lease
agreements, we issued fully vested and non-forfeitable warrants to purchase
convertible preferred and common stock. The value of these warrants, determined
using the Black-Scholes model, was approximately $2.0 million. These warrants,
starting in the quarter ended December 31, 1999, are being amortized over their
respective estimated periods of benefit. We amortized approximately $292,000
related to these warrants in the quarter ended December 31, 1999.
INTEREST INCOME, NET
Interest income, net, has been derived primarily from earnings on cash
investments, offset by interest expense associated with capital lease financing
and equipment and term loans.
In connection with term and equipment loan agreements, we issued fully
vested, non-forfeitable and immediately exercisable warrants to purchase
convertible preferred stock. The value of the warrants, determined using the
Black-Scholes model, was approximately $446,000. These warrants are being
amortized over the term of the loans. We amortized, in the aggregate,
approximately $87,000 related to these warrants in the quarters ended
September 30 and December 31, 1999.
INCOME TAXES
We incurred operating losses and accordingly did not record a provision for
income taxes for any of the periods presented. At December 31, 1999, we had net
operating loss carryforwards and tax credits for federal income tax purposes of
approximately $20.0 million and $300,000, respectively. In addition, we had
state net operating loss and research and development credit carryforwards of
approximately $20.0 million and $300,000, respectively. These net operating loss
carryforwards and credits will expire at various dates beginning in 2005 through
2019 if not utilized. Significant future changes in our share ownership, as
defined in the Tax Reform Act of 1986 and similar state provisions, may restrict
the utilization of these carryforwards. A valuation allowance has been recorded
for the entire deferred tax asset as a result of uncertainties regarding the
realization of the assets due to our lack of earnings history.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations primarily through the private sale of our
equity securities, through which we have raised net proceeds of approximately
$67.3 million from inception through December 31, 1999. We have also financed
our operations through capital lease financings and equipment and term loans.
These financing facilities totaled approximately $7.5 million, are payable in
monthly installments through September 2002, and were fully utilized at
December 31, 1999. As of December 31, 1999, our principal sources of liquidity
included approximately $49.1 million of cash and cash equivalents and short term
investments. Further, in January 2000, we obtained additional credit facilities
consisting of a $7 million subordinated loan and a $3 million equipment lease
for which there are no borrowings under either facility as of the date of this
prospectus.
Cash used in operating activities totaled $14.9 million in the year ended
December 31, 1999, primarily due to our net losses, which were partially offset
by non-cash charges of depreciation and amortization of deferred stock
compensation and deferred expenses related to warrants and increases in accounts
payable and accrued expenses.
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Cash used in investing activities totaled $8.8 million in the year ended
December 31, 1999. We have made substantial investments in computer equipment
and software as well as office furniture and leasehold improvements.
Net cash provided by financing activities was $60.4 million in 1999,
primarily from the sale of preferred stock and proceeds from equipment and term
loans.
We expect to fund future operating expenses from revenue generated through
our impresse.com service, public or private financings and the proceeds of this
offering. We currently anticipate that the net proceeds from this offering,
together with our current cash, cash equivalents, capital lease financing, and
additional credit facilities obtained in January 2000 will be sufficient to meet
our anticipated cash needs for working capital and capital expenditures for at
least the next 18 months. However, we may need to raise additional funds in
future periods through public or private financings, or other arrangements to
fund our operations and potential acquisitions, if any, over a long-term basis
until we achieve profitability, if ever. Any such additional financings, if
needed, might not be available on reasonable terms or at all. Failure to raise
capital when needed could seriously harm our business and results of operations.
If additional funds were raised through the issuance of equity securities, the
percentage of ownership of our stockholders would be reduced. Furthermore, such
equity securities might have rights, preferences or privileges senior to our
common stock.
RECENT ACCOUNTING PRONOUNCEMENT
In June 1998, the FASB issued FAS 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES, which we will be required to adopt for the year ending
December 31, 2001. FAS 133 establishes new methods of accounting for derivative
financial instruments and hedging activities related to those instruments as
well as other hedging activities. Because we do not currently hold any
derivative financial instruments and are not currently engaged in hedging
activities, the adoption of FAS 133 is not expected to have a material impact on
our financial condition or results of operations.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Our sales to date have been made to U.S. customers and, as a result, we have
not had any exposure to factors such as changes in foreign currency exchange
rates or weak economic conditions in foreign markets. However, in future
periods, we expect to sell in foreign markets, including Europe and Asia. As our
sales are made in U.S. dollars, a strengthening of the U.S. dollar could cause
our impresse.com service to be less attractive in foreign markets. Most of our
cash equivalents, short-term investments and capital lease obligations are at
fixed interest rates, therefore the fair value of these investments is affected
by changes in the market interest rates. However, because our investment
portfolio is primarily comprised of investments in money market funds and
high-grade commercial paper with short maturities, an immediate 10% change in
market interest rates would not have a material effect on the fair market value
of our portfolio. Therefore, we would not expect our operating results or cash
flows to be affected to any significant degree by the effect of a sudden change
in market interest rates on our investment portfolio.
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BUSINESS
OVERVIEW
Impresse is a leading provider in the emerging market for
business-to-business e-commerce solutions for the creation and procurement of
commercially printed materials. Our hosted impresse.com service, provides a
platform for corporations, their commercial print suppliers, their design,
advertising and marketing agencies and other participants in the print supply
chain to design, specify, price, order, track, fulfill and pay for print jobs.
We believe our service provides significant benefits for print buyers, the
corporations they represent and their commercial printers. As of February 29,
2000, 97 corporations and agencies and 172 of their commercial print suppliers
had signed agreements that enable them to use our impresse.com service to
transact their print jobs.
INDUSTRY BACKGROUND
GROWTH OF BUSINESS-TO-BUSINESS ELECTRONIC COMMERCE
The Internet and its increasingly rapid adoption by companies as a business
communication and collaboration platform have created new opportunities for
companies to streamline complex business processes and achieve efficiencies.
Forrester Research estimates that business-to-business e-commerce in the United
States will grow from $109 billion in 1999 to $1.3 trillion in 2003. Forrester
Research also estimates that 92% of U.S. companies with 5,000 or more employees
will be using the Internet as a channel for commerce by 2002. According to a
study by W. Caslon Company, Inc. commissioned by Print On Demand Initiative, a
digital printing industry analyst organization, print e-commerce volume is
expected to grow from $145 million in 2000 to $1.6 billion by 2003.
In response to this growing demand, a number of business-to-business
e-commerce solutions targeted at a variety of industries and business processes
have been developed and introduced in recent years. Many of these solutions have
been Internet-based marketplaces which connect large numbers of disparate buyers
and suppliers and enable automated transaction execution. This capability allows
companies to reach a broader base of customers and suppliers, access a greater
selection of products and services, and achieve economies of scale associated
with the aggregation of transaction volume. However, basic Internet-based
marketplaces do not provide the additional value-added processes and features
which many industries require, especially those industries that are
characterized by a high level of transaction and process complexity.
EVOLUTION OF THE INTERNET-BASED BUSINESS-TO-BUSINESS MARKETPLACE: THE EHUB
An electronic hub, or eHub, significantly extends the benefits of a basic
Internet-based marketplace by fully integrating essential yet decentralized
processes such as collaboration, procurement, tracking, reporting, logistics and
payment, both within companies and across the entire supply chain. Industries
characterized by a high degree of product customization, complex business
processes, highly iterative design, production and fulfillment workflows, and
significant dependence on information exchange are particularly suited to
benefit from an eHub. An eHub is easily distinguished from a basic
Internet-based marketplace because it incorporates the following additional
features and services:
- COLLABORATION CAPABILITY. The capability for all participants, including
designers, marketers, buyers, manufacturers, logistics providers, and
financial services providers, to communicate and collaborate efficiently
through the Internet.
- BUSINESS INTELLIGENCE. Access to business intelligence obtained through
the consolidation of company-specific transaction information and
industry-wide performance and quality data enables
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buyers and suppliers to make better procurement and fulfillment decisions
and to more efficiently identify, qualify and select their business
partners.
- IMPROVED PRICE DISCOVERY. The ability to standardize the request for
quotation process, and utilize bid preparation and job estimation
technologies facilitates improved price discovery and bid analysis.
- CORPORATE SYSTEMS INTEGRATION. The ability to integrate with corporate
procurement and enterprise resource planning systems and to be customized
for each supply chain participant enables process efficiencies and cost
reductions.
- COMPLEMENTARY SERVICES. The ability to offer complementary third-party
financial, logistical and materials management services extends the value
of the eHub.
THE COMMERCIAL PRINT MARKET
Virtually all businesses rely on commercially printed materials as the
primary medium for important business communications, such as marketing
brochures, promotional materials, direct mail, annual reports, product and user
manuals, and other informational items. According to Raine Consulting Inc., a
graphic arts industry consulting firm, large corporations spend approximately
2.0% to 3.0% of their revenue on commercially printed materials. Based on
estimates by CAP Ventures, a print industry research firm, sales in the U.S.
printing and publishing industry totaled approximately $292 billion in 1998, of
which over $150 billion was derived from the commercial printing segments we
target.
Despite its large size, the commercial print industry has experienced little
consolidation and continues to be highly fragmented and geographically
dispersed. According to the Printing Industries of America, an industry trade
group, there are more than 51,000 commercial printers in the United States, of
which more than 40,000 are small and medium sized businesses with fewer than 20
employees servicing local or regional markets. Statistics compiled by the U.S.
Department of Commerce indicate that less than 1% of commercial printers have
annual revenue in excess of $35 million, while 78% of commercial printers have
annual revenue of less than $2 million.
Commercial print businesses are generally characterized by high fixed costs,
low margins and excess capacity. Moreover, print buyers incur low costs in
switching from one printer to another to obtain better terms or a higher level
of quality and timeliness. As a result of these market dynamics, print buyers
and the corporations they represent have significant market leverage relative to
their suppliers in determining the terms of print transactions.
TRADITIONAL COMMERCIAL PRINT PROCUREMENT PROCESSES
In most large corporations there are numerous individual print buyers
responsible for procuring commercially printed materials. A print job typically
begins with the print buyer requesting quotes from a number of printers. Due to
the time-consuming process of issuing requests for quotes and receiving and
comparing non-standardized bids from competing printers, print buyers are
limited in the number of bids they are able to review. Once a printer is
selected, the print buyer and the printer's customer service personnel
communicate frequently to coordinate project design, modifications, rework,
proofing, timing, scheduling and delivery. These communications today are still
typically conducted through a combination of face-to-face meetings and
telephone, paper, fax and e-mail correspondence. Moreover, print buyers in large
corporations often manage several print jobs simultaneously, each of which must
satisfy precise design and quality specifications and be completed within
budgetary constraints and delivery timetables. Print buyers also face problems
related to the management, storage and delivery of the large content data files
required for each print job. As a result of these factors, commercial print
procurement can be logistically complex, time-consuming, inefficient, and prone
to errors.
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Because of the decentralized manner in which commercial print buying is
conducted, large corporations typically fail to exploit their inherent buying
power or to achieve economies of scale in print procurement. Many large
corporations lack the systems necessary to compile enterprise-wide or even
divisional print purchasing information that could be utilized to negotiate
better volume discounts, eliminate redundancies, streamline the vendor selection
and qualification process, and automate internal approvals. In addition, many
large corporations suffer from a problem known as "maverick buying," which
occurs when individual print buyers do not utilize approved printers or
otherwise fail to follow internal procurement guidelines. Without sufficient
procurement protocols or mechanisms for oversight, large corporations are often
unable to effectively control and manage print buying.
Printers also experience significant inefficiencies in the traditional
commercial print procurement process. Many printers do not have access to
sophisticated software to assist them in preparing competitive bids based on
accurate cost estimates and managing capacity utilization, scheduling and
fulfillment logistics. As a result, the profitability of an individual print job
is often unknown until it is completed. Printers also suffer from the
inefficiencies, miscommunications, errors and delays that result from the manual
nature of the print workflow. Consequently, printers spend significant time
investigating and responding to status requests and problems and often
experience frequent rework and related cost overruns.
Without fully automated and integrated e-commerce technologies specifically
designed for the commercial print industry, both buyers and suppliers of
commercial print incur substantial extraneous costs. CAP Ventures estimates that
for every $1 of printing costs there are approximately $10 of associated
processing costs, including the costs of creating, designing and revising the
printed material as well as ordering, warehousing, distribution and inventory
obsolescence costs.
OPPORTUNITY FOR A BUSINESS-TO-BUSINESS EHUB IN COMMERCIAL PRINTING
Because the commercial print market is large and highly fragmented, we
believe that an Internet-based marketplace for the print industry would result
in immediate efficiencies by enabling the aggregation of print demand and the
matching of numerous buyers and suppliers of commercial print. However, we also
believe that a basic Internet-based marketplace, in contrast with an eHub, is
incapable of addressing many of the needs of corporations and their printers
because of the complexities and inefficiencies of commercial print procurement
workflows and the custom nature of each print job that requires collaboration
among multiple parties. An effective eHub for the commercial print procurement
process will address these needs by providing:
- sufficient industry-specific functionality;
- flexibility to incorporate the unique procurement workflow processes of
the diverse companies that use commercial print;
- sufficient technological flexibility to integrate with existing
information technologies, such as operating resources procurement systems
and enterprise resource planning systems, thereby enabling corporations
and their printers to leverage their prior investments in these
technologies; and
- data collection, reporting and analytical tools that enable analysis of
end-user spending patterns and other print buying trends so that savings
opportunities can be identified by corporations and their printers.
In addition, we believe a successful business-to-business eHub is
particularly useful for the commercial print industry because most pre-printed
content is already digitally stored and can be transferred electronically.
Collaboration throughout the commercial print procurement process can therefore
be conducted over the Internet, potentially eliminating shipping, mailing and
other distribution costs since the content can be broadly distributed
electronically for printing and distribution in many locations. Moreover,
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Harris Interactive, a market research firm, estimates that in 1998, 78% of
commercial printers had access to the Internet, which should accelerate the
adoption of Internet-based services and features.
THE IMPRESSE SOLUTION
We have created an eHub for the commercial print industry that can provide
corporations and their commercial print suppliers with integrated procurement
and collaboration capabilities, industry-specific business intelligence,
improved price discovery, corporate systems integration. Our impresse.com eHub
also provides the transaction automation and volume aggregation of an e-commerce
marketplace. Our strategy of charging a fixed percentage fee based on the gross
dollar value of print volume procured through our impresse.com service provides
price transparency to corporations and their commercial print suppliers. Our
impresse.com service can be accessed through standard web-browsers without the
need to install additional software, and requires minimal training.
We believe our impresse.com service provides the following benefits:
BENEFITS TO CORPORATIONS AND THEIR PRINT BUYERS
REDUCED PROCESSING COSTS AND INCREASED PRODUCTIVITY. By automating the
print procurement process, our impresse.com service allows print buyers to
replace inefficient manual processes with real-time collaboration capabilities.
This simplifies the daily work routines of print buyers and enables them to
manage multiple print jobs with multiple printers simultaneously, increasing
their productivity. These real-time collaboration capabilities also enable print
buyers to reduce print job processing costs and turnaround times by reducing
miscommunications with the printer that lead to errors, cost overruns, waste and
delays. Moreover, the collaboration capabilities of our impresse.com service can
be extended to all members of the project team to streamline the complex and
iterative interactions among the print buyer, the printer's customer service
representatives and, in many cases, multiple project managers, marketing
communications professionals, graphic designers and advertising agencies. Our
impresse.com service also incorporates bid analysis capabilities that enable
more efficient comparison of quotes from multiple printers.
ENHANCED CORPORATE PRINT PROCUREMENT. Our impresse.com service enables
procurement managers to consolidate and analyze company-wide purchasing
information. This information can be used to monitor and control aggregate
commercial print expenditures and eliminate maverick buying practices. Our
impresse.com service automates the request for quotes process, which enables
corporations to conduct broader and more efficient bidding potentially leading
to better prices for their print jobs. The customization features of our
impresse.com service enable managers to create pre-programmed business rules
specific to their company that standardize procurement workflows and facilitate
the coordination of commercial print purchasing by multiple buyers. Our
impresse.com service can also be integrated with our customers' existing
internal information systems, enabling them to process financial and operating
information relevant to their use of our impresse.com service. In addition, our
impresse.com service can be used to find new printers and develop approved
printer lists based on location, project specifications, printer specialization,
cost and performance histories and other relevant selection criteria.
BENEFITS TO PRINTERS
Printers can expand their client base beyond local and regional markets by
being able to respond to requests for quotes transmitted broadly using our
impresse.com service. Printers therefore can develop more approved supplier
relationships without a commensurate direct selling effort. We believe that as
corporations utilize our impresse.com service to curb maverick buying practices,
their print buyers will direct more business to the printers on their approved
supplier lists, allowing the approved printers to generate greater print volumes
from these relationships. As a result, printers can allocate sales and other
resources to developing new, and improving existing, client relationships and
achieving production
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efficiencies. In addition, our impresse.com service allows for easier tracking
and on-line response to customer inquiries regarding project status leading to
better customer service. This capability reduces printers' administrative costs
by reducing the time spent by customer service personnel on these tasks.
THE IMPRESSE GROWTH STRATEGY
Our objective is to be the leading eHub in the emerging market for
business-to-business e-commerce for corporate commercial print procurement and
collaboration. Key elements of our strategy to achieve this objective include:
TARGET LARGE MULTINATIONAL CORPORATIONS ACROSS MULTIPLE INDUSTRIES. We
primarily target large multinational corporations that represent the greatest
aggregate demand for commercial print. We believe that as these corporations
realize the benefits of our impresse.com service and begin to channel their
commercial print spending through our eHub, their significant buying power will
attract an increasing number of printers to our service. In addition, we believe
that large corporations will enable us to expand our selling efforts to their
business partners by providing strong customer references.
LEVERAGE STRATEGIC RELATIONSHIPS TO EXPAND CUSTOMER BASE. We will continue
to leverage our strategic relationships with industry leaders in information
technology and e-commerce to accelerate the adoption of our impresse.com
service. We believe that the endorsement of our eHub by our strategic partners
gives us the credibility to access their customers. In addition, the
complementary nature of our services and those of our partners will facilitate
our co-selling and joint marketing initiatives. We believe that our current
strategic relationships, as well as others we intend to pursue, will enable us
to rapidly and widely deploy our impresse.com service.
FACILITATE AND PROMOTE INCREASED USAGE OF OUR EHUB. We will continue to
expand the customization and integration capabilities of our eHub in order to
minimize the time and capital required for our customers to deploy our service
on an enterprise-wide basis. We also intend to continue to provide training,
technical and customization support. Moreover, we do not currently charge
transaction fees to our print buying customers for their use of our eHub.
Instead, we charge a transaction fee to printers which is computed as a fixed
percentage of the gross dollar value of commercial print material procured
through our impresse.com service. We believe our print buyer-oriented strategy
will assist us in promoting initial usage of our eHub by the large corporations
we target and will cause them to encourage printers to join our network.
IMPROVE AND EXPAND OUR SERVICE. We will continue to improve our technology
and expand our impresse.com service, in part by leveraging our strategic
relationships, to meet the evolving needs of our customers, promote broad market
adoption and increased usage of our service, and create additional sources of
revenue. We will continue to expend substantial efforts to develop, purchase or
license technological and other value-added enhancements to our eHub to increase
its reliability, functionality and ease of integration with existing information
systems installed by our customers. We will continue to devote considerable
attention to improve our user interface to ensure that our impresse.com service
is easy to use.
PROVIDE SUPERIOR CUSTOMER SERVICE. We believe that a loyal customer base
will facilitate increased procurement activity, the development of a strong
brand, and valuable customer referrals. We intend to continue to employ rigorous
recruiting, training, evaluation and compensation practices to help us attract
and retain qualified employees who are dedicated to delivering outstanding
results to our customers.
OUR IMPRESSE.COM SERVICE
Our impresse.com service is designed to be a comprehensive
business-to-business e-commerce solution for corporate commercial print
collaboration and procurement. It is a hosted service designed to create a
worldwide print supply network that can be accessed through standard web
browsers by corporations, their commercial print suppliers and other
participants in the print supply chain, including
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graphic design, advertising and marketing agencies, logistics and payments
providers and equipment and material suppliers. Our impresse.com service
utilizes advanced privacy and encryption technology, which controls access and
provides security of confidential corporate information.
Key features and services of our impresse.com service include:
COLLABORATION
PROJECTTRACKER. This feature manages data stored on the impresse.com
service so that project team members can log onto the service at any time and
examine and track the overall status of the project and the most recent actions
taken, including change order tracking. Team members can also access historical
records and audit standard and customizable milestones, requests, transactions,
changes and approvals for projects processed through the service.
TEAMTRACKER. This feature gives project managers, usually a corporate print
buyer or printer, a way to create "teams" for projects and assign customizable
profiles and permissions to each individual team member. The project team
members within a company, at the company's advertising and design agencies and
at the commercial print providers can be notified as needed about the status of
a project and specific milestones and are able to review and update project
information depending upon their authorizations.
CONTENTTRACKER. This feature permits browser-based uploads of digital
content files to the impresse.com servers and tracks and manages all content
information associated with a specific project. Content items such as digital
files and proofs can be intelligently monitored through our impresse.com service
because of the association with individual projects, whether they are
transferred electronically through our impresse.com service, through other
networks, or sent physically by courier or overnight delivery.
ARCHIVAL. This feature provides current and historical records of status
and audit of all requests, orders, changes and approvals for projects processed
through our impresse.com service, by way of a comprehensive on-line transaction
archive.
DIGITAL ASSET MANAGEMENT. This feature allows print buyers in corporations
to store and retrieve their print-ready content files on our servers for future
reordering.
PROCUREMENT
NEW PROJECT SPECIFICATION. Our impresse.com service provides an interactive
browser-based interface for selecting, updating and changing project
specifications.
REQUEST FOR QUOTES PROCESSING. Our impresse.com service allows a print
buyer to quickly and accurately submit requests for quotes to multiple printers
for formal quotes, and to subsequently track bids and finalize orders.
QUOTE COMPARISON AND NEGOTIATION. Our impresse.com service streamlines the
comparison of quotes from multiple commercial printers and facilitates the
on-going negotiation of specifications and quote parameters, enabling more
efficient and accurate parameter and price recommendation and selection.
PRINT BUYER AND PRINTER ADMINISTRATION. Our impresse.com service simplifies
administration at the corporate level of multiple authorized print buyers and
lists of approved printers, based on project types and business rules.
PRINTER PERFORMANCE MONITORING. Our impresse.com service enables the
ongoing performance measurement of printers on our network along key metrics to
maintain a real-time performance profile for printers, which print buyers can
use to evaluate and select approved printers.
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MANAGEMENT REPORTING. Our impresse.com service generates management reports
for companies and printers about projects, orders and print buying trends.
CUSTOMIZATION AND INTEGRATION
CUSTOMIZED TEMPLATES. Using our SmartForms(SM) technology, we can customize
the user interface and print project templates of our impresse.com service to
meet the unique needs of each print buying customer.
CUSTOMIZED WORKFLOWS. Using our SmartFlows(SM) technology, we can customize
print procurement and collaboration processes from printer selection to pricing
and approval, to suit company-specific needs on a project-by-project basis.
INTEGRATION CAPABILITY. Our SmartLinks(SM) technology allows us to
integrate our impresse.com service with our customers' information systems, such
as operating resources procurement, enterprise resource planning or print
management systems. In addition, our impresse.com service can be integrated with
the e-commerce solutions of our strategic partners, enabling our customers to
conveniently use both impresse.com and our partners' services to conduct
e-commerce.
OUR CUSTOMERS
We market our impresse.com service to corporations, their advertising,
design and marketing agencies, and their commercial printers.
As of February 29, 2000, 97 corporations and agencies had signed agreements
to use our impresse.com service to transact their print jobs, of which 37
agreements were signed through December 31, 1999. Among these corporations and
agencies are:
<TABLE>
<S> <C>
3Com ICN Pharmaceuticals
Adobe Systems LMN Design
Advanstar Communications Loudoun County
Alan Davenport Design McKesson HBOC
Ambassador Programs MetLife
Ariba Moore Corporation
Aspect Development Nikken
AutoNation nVidia
Benchmarking Partners O'Neal McClure
Bindco P.S. Print Smart
Canon Communications Pearson Communications
Chicago Color Graphics Penrose Press
Cicero Graphic Resources Pepsi-Cola General Bottlers
Clarify Reliastar Life Insurance
ACCPAC, a division of Computer Associates Resort Maps North
CPS Communications Sage Software
Curb-Crowser Design Southern California Edison
DirecTV Target
Enron The Creative Network
Federal Home Loan Mortagage The Flesh Company
Ferrell Companies The Graphics Resource
Fleming Companies The Integer Group
Graphic Finishers of America The Prodigal Media Company
Grey Entertainment Think New Ideas
Harding Marketing Communications TPG Sports
Hello Direct Visual Printing
Hewlett-Packard (Enterprise Storage Unit) WAM!NET
Hormel Foods Whirlpool
</TABLE>
After we sign an agreement with a corporation, our dedicated printer sales
force works with its print buyers to sign up its commercial printers to use our
impresse.com service. As of February 29, 2000, 172 commercial printers had
entered into agreements to pay our fixed percentage fee to use our impresse.com
service, of which 66 agreements had been signed through December 31, 1999.
Our buyer and printer sales forces also register users on our impresse.com
service and train them in the use of the service. As of February 29, 2000, 965
users had been registered and were being trained, of which 288 had been
registered as of December 31, 1999.
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STRATEGIC RELATIONSHIPS
We actively seek to enter into strategic relationships with co-marketing and
co-selling partners whom we believe can provide us with sales and marketing
leverage in introducing the impresse.com service to their customers, technology
partners who can assist us in further developing our technology infrastructure,
and product partners who can assist us in increasing the breadth and
functionality of our impresse.com service offering. Potential candidates for
strategic relationships include leading operating resources procurement solution
providers, major distributors and resuppliers of operating resources procurement
solutions and leading technology and solutions providers in the commercial print
and graphic arts market. As of February 29, 2000, we were actively engaged in
programs and had concluded sales and marketing alliance agreements with the
companies detailed below:
ADOBE SYSTEMS INC.
In November 1999, we entered into a one year agreement with Adobe Systems
which provides for the creation of a co-branded website and for the impresse.com
service to serve as the exclusive print procurement solution for Adobe's
adobe.com graphic arts portal. Graphics arts professionals who visit the
adobe.com graphics arts portal will be able to easily click through to
impresse.com to procure printing services, thus bringing new customers and
potential revenue to our impresse.com service. The agreement requires Adobe to
market the impresse.com service to its graphic arts application users in
exchange for referral fees. The agreement also provides for technology
cooperation to enable us to integrate certain technologies, such as PDF
workflows, with our impresse.com service.
ARIBA, INC.
We are engaged in sales and marketing programs with Ariba and have a sales
promotion activity underway with Ariba's North American sales program. In
September 1999, we entered into a one-year agreement with Ariba to be an ASL, or
Ariba Supplier Link, partner. We plan to undertake further co-marketing and
joint selling activities with Ariba in 2000 to promote the integrated
impresse.com service and Ariba ORMS solution to large multinational
corporations. At the Fall 1999 Ariba users' group meeting, our development team
demonstrated the SmartLink that enables cXML integration of our impresse.com
service with the Ariba ORMS solution. This integration makes it simple for an
Ariba enterprise customer to use the impresse.com service for the procurement of
printed materials, with a link from the Ariba ORMS directly to our impresse.com
service. In this configuration, the Ariba ORMS solution integrates to the
corporation's financial systems and provides the purchase order requisition and
approval processes, while the impresse.com service works as part of the purchase
process and automates the procurement and collaboration workflow between the
corporation and its commercial print providers.
CISCO SYSTEMS
In March 2000, we entered into a one-year non-exclusive co-marketing and
co-selling agreement with Cisco Systems to jointly market and sell products and
services to small to medium commercial printers. The joint activities we plan to
undertake with Cisco include sales and promotional efforts targeted at
encouraging use of the impresse.com service and Cisco networking products and
services. These activities may involve Cisco resellers and Internet service
providers that participate in the Cisco Resource Network.
COMMERCE ONE
In March 2000, we entered into a one-year non-exclusive agreement with
Commerce One, a leading provider of e-commerce solutions for business. We will
participate in the Commerce One MarketSite electronic catalog as a provider of
commercial printing services. The relationship will enable customers using the
Commerce One suite of e-commerce products and portals to select Impresse as
their resource to specify, procure, and manage print-related projects.
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ELANCE INC.
In February 2000, we signed a one-year non-exclusive partner agreement with
eLance to enable a co-branded website. eLance allows individuals and businesses
to buy and sell services that can be performed and exchanged electronically. We
plan to enable our customers to access a co-branded website that contains
specified sections of the eLance services marketplace which are relevant to the
print creation and procurement process.
ELETTER, INC.
In February 2000, we signed a one-year non-exclusive co-marketing agreement
with ELetter, an online direct mail service. ELetter will produce content for
impresse.com and educational materials for our sales force. We also plan to
provide our customers with access to ELetter's services through a co-branded
website.
HEWLETT-PACKARD
In August 1999, we signed a five-year non-exclusive co-selling and
co-marketing agreement with Hewlett-Packard to enable our impresse.com service
to be marketed with Hewlett-Packard's eServices. Our impresse.com service is
synergistic with other Hewlett-Packard eProcurement initiatives and we plan to
undertake joint marketing and selling activities with Hewlett-Packard to access
its customers and partners. Hewlett-Packard's sales and marketing professionals
have strong customer relationships with procurement professionals at most of our
target large multi-national customers. Introductions to these professionals
could give our sales people the opportunity to present the impresse.com service
to these customers and win their business. In 1999, we conducted a direct mail
promotion and a web seminar, and in 2000 we began co-selling activities with
Hewlett-Packard's field sales teams to target Hewlett-Packard's corporate
customers and partners.
IPRINT.COM
In February 2000, we entered into a one-year non-exclusive marketing
alliance with iPrint, a leading on-line source for personalized items and
promotional materials. This relationship includes offering a co-branded version
of the iPrint.com service accessible from impresse.com. iPrint will also be
listed as a specialty printer on the impresse.com service.
LOGIC ASSOCIATES
In January 2000, we entered into a two-year non-exclusive alliance agreement
with Logic Associates, a leading developer and marketer of print management
solutions. Logic's solution is used by commercial printers for business
management tasks such as print job estimating, scheduling, and accounting. We
plan to develop a SmartLink to connect our impresse.com service with Logic's
print management solutions and to engage in joint marketing activities to reach
Logic's commercial printer customers.
ORACLE CORPORATION
In October 1999, we signed a two-year non-exclusive agreement to be an
Oracle Supplier Network partner. In the near term, we plan to complete the
SmartLink XML technology integration which will connect our impresse.com service
with Oracle's Internet procurement solution. We also plan to undertake
co-marketing and joint selling activities with Oracle to promote our
impresse.com service to Oracle's Internet procurement customers.
PAPEREXCHANGE.COM
In February 2000, we entered into an eighteen-month non-exclusive marketing
and product integration alliance with PaperExchange.com, a leading on-line
market place for the pulp and paper industry. This relationship will be used to
expand our services to include detailed paper specification based on industry
standard and manufacturer-specific nomenclature, as well as the ability to
procure paper directly from the impresse.com service via PaperExchange.com. We
will use its SmartGateway-TM- technology
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to link directly with the PaperExchange.com service so that impresse.com users
can automatically query and procure paper on the PaperExchange.com market place.
VERTICALNET
In March, 2000 we entered into a 15-month exclusive co-branding agreement
with VerticalNet, a leading Internet creator and operator of vertical trade
communities. Under this agreement, we will provide a co-branded version of the
impresse.com service to be offered as a solution and resource for the
VerticalNet communities. This agreement also includes co-marketing through
VerticalNet marketing and advertisement vehicles.
WAM!NET
In November 1999, we concluded a two-year co-marketing agreement, including
a provision for six months exclusivity, with WAM!NET, one of the largest
providers of managed private network services to the graphic arts industry.
WAM!NET is used by corporations, service bureaus and commercial printers as a
reliable private communications service for the transmission of the large
content files needed for print production. Our sales and marketing activities
with WAM!NET include special customer incentives and sales force promotions. In
2000, through this agreement, we expect additional joint promotions of the
impresse.com service to WAM!NET customers.
TECHNOLOGY AGREEMENTS
To enable our impresse.com service to leverage the latest technology
standards, we have technology relationships in place with the industry's leading
solution providers such as Adobe Systems, Apple Computer, BEA Systems, Microsoft
and Seagate.
TECHNOLOGY
Our impresse.com service is a comprehensive business-to-business e-commerce
solution that resides entirely on our servers and is accessible by standard web
browsers. This design requires minimal software installation by the customer and
enables rapid deployment of applications, enhancements and updates. Our
impresse.com service is built using open object-oriented architecture, and is
designed to be scaleable, secure, robust, and highly available. Our technology
enables our impresse.com service to be integrated with the internal business and
information systems of our customers and to be customized to meet their
business-specific requirements. Although our data center has, to date, provided
us with reliable and redundant high bandwidth Internet connectivity, electrical
power, and climate control within a physically secure, access-controlled
facility, our systems are potentially vulnerable to disruptions from natural
disasters and other events that could result in an interruption in our service.
To minimize this risk, we intend to add back-up infrastructure and systems at a
mirror site in a different, distant location.
SYSTEM ARCHITECTURE
Our impresse.com service includes four layers of technology:
- COMMUNICATION AND MESSAGING. This technology layer allows our
impresse.com service to connect with our customers' enterprise
applications using standard Internet protocols that work across a
corporation's network. This layer is implemented using standard network
and security equipment and standard web servers, and supports standard
Internet protocols such as HTTP (HyperText Transport Protocol, a protocol
for exchanging information on the Internet), SSL (Secure Sockets Layer, a
client-server protocol for encrypting data transmissions), FTP (File
Transfer Protocol, a client-server protocol which allows a user on one
computer to transfer files to and from another computer over a network),
SMTP (Simple Mail Transfer Protocol, a protocol used in sending and
receiving e-mail), and XML (eXtensible Markup Language, a language to
define document structures and elements, useful when exchanging data
between different computing systems).
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- APPLICATION SERVICES. This layer delivers the collaboration and
procurement functionality of our impresse.com service. Our impresse.com
service uses third-party and proprietary software to deliver its
commercial print procurement services.
- DATA AND CONTENT MANAGEMENT. This layer manages the transaction and
database information and the bills-of-materials, job specifications and
content of our customers' printed items. It is implemented using standard
servers, relational database management software, and advanced storage and
backup systems configured to meet the requirements of our impresse.com
service.
- ENTERPRISE SERVICES. This layer enables the administrative services
which allow us to operate our impresse.com service, including financial
services, customer service and support, data mining and reporting, and
sales force automation.
CUSTOMER INTEGRATION
The impresse.com service can be configured and integrated to meet a
customer's specific needs, including:
- LOG IN AND AUTHENTICATION. Our impresse.com service permits companies to
manage their own user population by controlling the authentication and
authorization process. Companies can control access to projects, job
specifications, quotes, document content and lists of commercial printers.
Industry-standard protocols and best practices are used to secure access
to this data, both physically and electronically.
- CUSTOMIZED TEMPLATES AND WORKFLOWS. The graphical user interface,
project templates and application behavior of our impresse.com service can
be uniquely tailored for each customer using SmartForms(SM) and
SmartFlows(SM) technology. For instance, corporations can customize our
service to create job specification templates, select a specific set of
commercial printers from a vendor list, pre-configure reports, and
customize and conform procurement and collaboration workflows with their
internal business rules and policies.
- ENTERPRISE APPLICATION INTEGRATION. Using SmartLinks(SM) technology, the
impresse.com service can be integrated across network firewalls with
internal enterprise resource planning applications and proprietary
internal systems used by corporations and their printers. Our SmartLink
integrations generally utilize standard XML-based messaging, which enables
faster implementations.
- OPERATIONAL SUPPORT. We offer technical support as part of our customer
service efforts to respond to any service disruption experienced by our
customers. In addition to standard site instrumentation and monitoring
software, we have developed custom monitoring agents that measure key
impresse.com application parameters. This proprietary software enables us
to provide high quality operational support and availability.
SALES, MARKETING AND CUSTOMER SERVICE AND SUPPORT
We market and sell our impresse.com service through a combination of our
direct sales force, internal telemarketing sales and strategic relationships
with partners such as Adobe Systems, Ariba, Hewlett-Packard, Logic Associates,
Oracle and WAM!NET. Our primary sales efforts target the purchasing
decision-makers and potential users in large multinational corporations who will
influence the decision to adopt an Internet-based commercial print procurement
and collaboration solution. These typically include print procurement, marketing
communications and print production executives. After we sign a print buying
agreement with a corporation, we obtain a list of the preferred or approved
printers with whom its print buyers do the most commercial printing. Our
dedicated printer sales force then calls on these printers to sign them up to
use our impresse.com service.
Our sales and marketing strategy is designed to inform corporations and
commercial printers about both the technical and business benefits, including
cost savings and return on investment, of our impresse.com service, and to
promote the adoption by large corporations and their commercial print suppliers
through education and training. Our field sales force focuses on large
multinational corporations,
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their graphic arts, design and marketing agencies, and their commercial
printers. Our telephone sales group primarily focuses on generating leads for
our field sales force.
We conduct a variety of marketing programs to educate our target market,
create awareness and attract large multinational corporations and their
commercial printers to use our impresse.com service. To achieve these goals, we
engage in marketing activities such as seminars, direct mailings, advertising,
trade shows, speaking engagements and web site marketing. We also conduct
comprehensive public relations programs to establish and maintain relationships
with key trade press, industry associations, business press and industry
analysts. In addition, we engage in customer-specific marketing programs to
educate print buyers to use our impresse.com service for their commercial print
orders.
We believe that good account management, customer service and support will
enable us to establish and maintain long-term relationships with the large
multinational corporations and printers on our eHub and encourage their
continued use of our impresse.com service. Our customer service and support
personnel respond to customer inquiries and technical questions and investigate
the status of orders, shipments and payments. At any time during the print
procurement process, a customer can contact our service and support staff by
telephone or e-mail by following prompts located throughout our web site. We
intend to expand our direct sales force and customer services organization and
to establish additional sales offices.
Our sales, marketing and customer service and support groups consisted of 84
individuals as of December 31, 1999, 43 of whom were located at our Sunnyvale,
California headquarters and 41 of whom were located in regional offices.
DEVELOPMENT AND NETWORK OPERATIONS
Our development organization is focused on developing and enhancing our
service and maintaining and improving our technology platform and
infrastructure. As of December 31, 1999, our development group was comprised of
38 employees responsible for development and quality assurance, and our network
operations staff was comprised of eight employees, all located in Sunnyvale,
California.
COMPETITION
The market for Internet-based business-to-business e-commerce solutions for
commercial printing is new and rapidly evolving. Competition in this market is
intense and is expected to increase significantly in the future. Barriers to
entry are relatively insubstantial. We believe that the critical success factors
for companies seeking to create comprehensive business-to-business e-commerce
solutions include the following:
- industry-specific expertise,
- quality and reliability of the solution,
- breadth, depth and customizability of solution offerings,
- ease of use and integration with corporate information systems,
- focus on corporations and their internal users,
- brand recognition,
- installed base of customers, and
- customer service and support.
We face competition from four main areas:
- companies with commercial print-focused e-commerce offerings including
Collabria, Noosh.com and printCafe and existing business-to-business
e-commerce companies which may decide to introduce competing offerings,
- large commercial printers which have developed or may acquire or develop
proprietary e-commerce solutions,
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- large multinational corporations with internally developed print
procurement and collaboration solutions, and
- traditional enterprise software companies, such as SAP, Baan and
PeopleSoft, that may develop alternative print procurement and
collaboration solutions.
Our current and potential competitors may develop Internet-based procurement
solutions that achieve greater market acceptance than our solution. Many of our
existing and potential competitors have greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than we do. These competitors can undertake more extensive marketing
campaigns for their brands, products and services, adopt more aggressive pricing
policies and make more attractive offers to customers, potential employees,
distribution partners, and commercial print suppliers.
In addition, many of our prospective customers have established
relationships with some of our potential competitors. Accordingly, we cannot be
certain that we will be able to expand and retain our base of print buyers and
commercial print suppliers. We may not be able to compete successfully against
our current or future competitors and competition could have a material adverse
effect on our business, results of operations and financial condition.
Our ongoing ability to compete effectively also depends on our ability to
respond to technological change by providing feature enhancements and expanded
service offerings, the quality and reliability of our operations, customer
service and support, and the effectiveness of our sales and marketing programs.
INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS AND LICENSING
We have taken steps to protect our discoveries, research and development and
intellectual property by implementing a patent disclosure and filing program
with the assistance of experienced patent counsel. Currently, we have several
pending U.S. and international patent applications relating to various aspects
of our eHub.
We have entered into a non-exclusive license agreement under which we
obtained rights to use the technology covered by a United States patent. This
patent covers automated printing control systems that allow for interaction
between print purchasers and printers across computer networks such as the
Internet. The license agreement requires us to make annual payments for a
specified period of time. To the extent a similar license of this patent is
granted to another party on more favorable terms, we are entitled to a discount
with respect to our annual payments. The license agreement covers the remaining
term of the patent, unless terminated earlier by the licensor in the event we
default on our payment obligations or there is a continuing uncured breach of
any material term of the agreement. The termination of this license agreement
could seriously harm our business.
LEGAL PROCEEDINGS
We are not currently involved in any material legal proceedings.
EMPLOYEES
As of December 31, 1999, we had 146 full-time employees, including 46 in
research and development and network operations, 84 in sales, marketing and
customer service and support and 16 in general and administrative functions. We
also employ independent contractors to support our engineering, sales,
marketing, customer services and support and administrative organizations.
FACILITIES
Our executive administrative and operating offices are located in
approximately 20,000 square feet of leased office space in Sunnyvale, California
under a lease expiring in 2007. We have entered into a lease for an additional
35,000 square feet of office space at the same location commencing in June 2000
and expiring in 2007. We also have sales offices in the metropolitan areas of
Atlanta, Boston, Chicago, Cincinnati, Dallas, Denver, Detroit, Los Angeles,
Minneapolis, New York, Philadelphia, Seattle, St. Louis, and Washington D.C.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is information regarding our directors and executive
officers as of December 31, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------
<S> <C> <C>
Nimish Mehta................ 41 President, Chief Executive Officer and Director
Sanjai K. Bijawat........... 41 Vice President and Chief Financial Officer
Robert W. Jones............. 52 Vice President, Customer Services
Siva V. Kumar............... 41 Vice President, Marketing and Chairman of the Board
Philip C. Nelson............ 36 Chief Technology Officer
Scott J. Yetter............. 38 Vice President, North American Sales and Field Marketing
Eric Archambeau (1)......... 41 Director
Bruce Dunlevie (1).......... 43 Director
Steven J. Gilbert (2)....... 52 Director
Paul Levy (2)............... 44 Director
Russell Siegelman (2)....... 38 Director
Hatim A. Tyabji (1)......... 54 Director
</TABLE>
- ------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
NIMISH MEHTA has served as President and Chief Executive Officer of Impresse
since August 1998. From October 1995 to July 1998, Mr. Mehta served as Senior
Vice President of the Industry & Front Office Applications Division of Oracle
Corporation, an enterprise software company. From August 1993 to October 1995,
Mr. Mehta served as Vice President of Oracle's Workgroup Solutions Division.
Prior to joining Oracle, Mr. Mehta held various product management and
development positions with AT&T Bell Laboratories and Octek Inc. Mr. Mehta holds
a Bachelor of Technology degree in Electrical Engineering from the Indian
Institute of Technology, New Delhi, a Master of Science degree in Electrical
Engineering from the University of Toronto and a Master of Business
Administration degree from the Sloan School of Management at the Massachusetts
Institute of Technology.
SANJAI K. BIJAWAT has served as Vice President and Chief Financial Officer
of Impresse since July 1999. From December 1997 to July 1999, Mr. Bijawat served
as Managing Director in the Media & Telecommunications and Corporate Investment
Banking Groups at BT Alex. Brown, a New York based investment banking company.
From June 1992 to December 1997, Mr. Bijawat served as Vice President of BT
Securities Corporation and Bankers Trust Company. Prior to joining Bankers Trust
Company, Mr. Bijawat held various systems engineering and management positions
with Micronix Corporation and Raychem Corporation. Mr. Bijawat holds a Bachelor
of Technology degree in Mechanical Enginering from the Indian Institute of
Technology, Bombay, a Master of Science degree in Mechanical Engineering from
Stanford University and a Master of Business Administration degree from the
Harvard Graduate School of Business Administration.
ROBERT W. JONES has served as Vice President, Customer Services of Impresse
since March 1999. Prior to joining Impresse, Mr. Jones was Director of
Professional Services at Genesys Telecommunication Laboratory, an enterprise
software company, from May 1997 to March 1999. From May 1989 through May 1997,
Mr. Jones was with Oracle Corporation where he served in various management
positions in Oracle's Professional Services organization. Mr. Jones began his
professional career with Arthur Andersen & Co. in its Management Information
Consulting Division. Mr. Jones holds a Bachelor of Arts degree from the
University of Notre Dame and a Master of Business Administration degree from the
University of Oklahoma.
SIVA V. KUMAR, a co-founder of Impresse, has served as its Vice President,
Marketing and Chairman of the Board of Directors since inception in
October 1997. From October 1997 to August 1998, Mr. Kumar
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also served as the Chief Executive Officer of Impresse. From January 1995 to
June 1997, Mr. Kumar served as the Vice President of Marketing of Chromatic
Research, a multimedia company. Prior to joining Chromatic Research, Mr. Kumar
was a Vice President at New Media Ventures, a venture capital firm. Before this,
Mr. Kumar was the Vice President of Marketing and General Manager of the PC and
Macintosh Division at Frame Technology, a desktop publishing software company.
Mr. Kumar has previously held senior marketing positions at Apple Computer,
Oracle Corporation and Intel Corporation. Mr. Kumar holds a Bachelor of
Technology degree from the Indian Institute of Technology, Madras, a Master of
Science degree from Pennsylvania State University and a Master of Business
Administration degree from the University of Chicago.
PHILIP C. NELSON, a co-founder of Impresse, has served as Chief Technical
Officer since inception in October 1997, Vice President, Engineering from
inception through November 1999, and as a director of Impresse from inception
until August 1998. In April 1988, Mr Nelson co-founded Verity, Inc. and from
April 1988 until July 1997 served in various engineering capacities at Verity,
including Vice President of Engineering and Chief Technology Officer. Prior to
co-founding Verity, Mr Nelson held various technical positions at Advanced
Decision Systems and Brigham & Women's Hospital. Mr. Nelson holds Bachelor of
Science degree in Electrical Engineering and Computer Science from the
Massachusetts Institute of Technology.
SCOTT J. YETTER has served as Vice President, North American Sales and Field
Marketing of Impresse since February 1999. Prior to joining Impresse,
Mr. Yetter was Vice President, Sales & Marketing, North America at American
Software USA, Inc. from June 1998 to February 1999. From October 1996 to May
1998, Mr. Yetter served as the Vice President & General Manager, Northeast Area
for American Software. Prior to that Mr. Yetter held various management and
sales executive positions with i2 Technologies, JBA International, American
Software, NCR Corporation and Otis Elevator Company. Mr. Yetter holds a Bachelor
of Science degree in Industrial Engineering from the Georgia Institute of
Technology.
ERIC ARCHAMBEAU has served as a director of Impresse since December 1998.
Since March 2000, Mr. Archambeau has been a general partner of Benchmark Capital
LLC, a venture capital firm. From September 1998 to February 2000, he was a
partner of Atlas Venture, a venture capital firm. Prior to joining Atlas
Venture, Mr. Archambeau was a co-founder and initial CEO of Trading Dynamics, a
leading business to business dynamic trading engine software company, now a
wholly-owned subsidiary of Ariba, Inc. From 1995 to 1997, he was a co-founder,
President and CEO of RightPoint, a leading Enterprise Marketing Software
company, now a wholly-owned subsidiary of E.piphany, Inc. Prior to 1995 he held
a variety of managerial positions in the high technology industry, from
engineering to corporate development, at firms such as VLSI Technology in San
Jose and Lagardere Group in Paris. Mr. Archambeau is a graduate of Ecole
Centrale in Lyon, France. He holds a Master of Science in electrical engineering
from the University of California, Berkeley, a degree in electrical engineering
from Stanford University, a PhD in Computer Science from Grenoble University and
a Master of Business Administration degree from Santa Clara University.
BRUCE DUNLEVIE has served as a director of Impresse since December 1997.
Mr. Dunlevie is a general partner of Benchmark Capital LLC, a venture capital
firm founded by Mr. Dunlevie in May 1995. From 1989 to 1995 Mr. Dunlevie served
as a general partner of Merrill, Pickard, Anderson & Eyre. Mr. Dunlevie has also
served as Vice President and General Manager of the Personal Computer Division
of Everex Systems, Inc., a personal computer manufacturer, and as an investment
banker with Goldman, Sachs & Co. He is also a director of Wink Communications
and Rambus, Inc. Mr. Dunlevie holds a Bachelor of Arts degree from Rice
University and a Master of Business Administration degree from the Stanford
Graduate School of Business.
STEVEN J. GILBERT has served as a director of Impresse since November 1999.
Mr. Gilbert is also Chairman of the Board of Gilbert Global Equity Partners,
L.P., a private equity fund. Mr. Gilbert is the former Managing Partner of Soros
Capital and founder and former Managing Partner of Chemical Venture Partners
(now Chase Capital Partners). Prior to founding Chemical Venture Partners,
Mr. Gilbert
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was an investment banker with Morgan Stanley & Co. Incorporated and an attorney
at Goodwin Procter & Hoar. Mr. Gilbert also serves as a director of several
private companies. Mr. Gilbert holds a Bachelor of Science degree from the
Wharton School of Finance at the University of Pennsylvania, a Juris Doctorate
from Harvard Law School and a Master of Business Administration degree from the
Harvard Graduate School of Business Administration.
PAUL LEVY has served as a director of Impresse since July 1999. In 1981,
Mr. Levy co-founded Rational Software Corporation, an Internet software
infrastructure company, and currently serves as its Chairman of the Board of
Directors. From 1981 to April 1999, Mr. Levy served as Chairman of the Board of
Directors and Chief Executive Officer of Rational Software Corporation.
Mr. Levy also serves as a director of Broadbase Software. Mr. Levy holds a
Bachelor of Science degree from the United States Air Force Academy and a Master
of Science degree in engineering from Stanford University.
RUSSELL SIEGELMAN has served as a director of Impresse since December 1997.
Since 1996, Mr. Siegelman has been a partner of Kleiner Perkins Caufield &
Byers, a venture capital firm. Prior to joining Kleiner Perkins, Mr. Siegelman
served in a variety of positions at Microsoft, most recently as Vice President
of the Microsoft Network, Microsoft's on-line service. Mr. Siegelman also serves
as a director of several private companies. Mr. Siegelman holds a Bachelor of
Science degree in Physics from the Massachusetts Institute of Technology and a
Master of Business Administration degree from the Harvard Graduate School of
Business Administration.
HATIM A. TYABJI has served as a director of Impresse since November 1999.
Mr. Tyabji served as President and Chief Executive Officer of Verifone, Inc.,
now a wholly-owned subsidiary of Hewlett-Packard, from 1986 to 1998 and as its
Chairman of the Board of directors from 1992 to 1998. Prior to joining VeriFone,
Mr. Tyabji served as President of the Information Systems Products and
Technologies Group of Unisys Corporation, formerly known as Sperry Corporation.
Mr. Tyabji also serves as a director of Ariba, Inc. and Deluxe Corporation.
Mr. Tyabji holds a Bachelor of Science degree in electrical engineering from the
College of Engineering in Poona, India and a Master of Science degree in
electrical engineering from the State University of New York, Buffalo. He also
holds a Master of Business Administration degree in International Business from
Syracuse University and is a graduate of the Stanford University Executive
Program.
BOARD OF DIRECTORS
Directors are elected annually at the annual meeting of Impresse
stockholders, and serve for the term for which they are elected and until their
successors are duly elected and qualified. Impresse's Bylaws currently provide
for a Board of Directors comprised of eight directors.
BOARD COMMITTEES
Impresse's Board of Directors has an Audit Committee and a Compensation
Committee. The Audit Committee of the Board of Directors consists of
Messrs. Archambeau, Dunlevie and Tyabji. The Audit Committee reviews Impresse's
financial statements and accounting practices and makes recommendations to the
Board of Directors regarding the selection of independent auditors. The
Compensation Committee of the Board of Directors consists of Messrs. Gilbert,
Levy and Siegelman. The Compensation Committee makes recommendations to the
Board of Directors concerning salaries and incentive compensation for Impresse's
officers and employees and administers Impresse's employee benefit plans.
DIRECTOR COMPENSATION
None of the directors is paid any fee or other compensation for acting as a
director, although directors are reimbursed for reasonable expenses incurred in
attending Board or committee meetings. As of the offering, directors of Impresse
are eligible to participate both in Impresse's 1997 Stock Option Plan and, for
non-employee directors, in Impresse's 2000 Directors' Stock Plan. See "Stock
Plans." In August 1999
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and November 1999, respectively, directors Paul Levy and Hatim Tyabji were each
granted 110,000 shares of the company's common stock at a price of $.50 per
share under a vesting schedule of four years.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee of the Board of Directors
is an officer or employee of Impresse. No executive officer of Impresse serves
as a member of the Board of Directors or compensation committee of any entity
that has one or more executive officers serving on Impresse's Compensation
Committee.
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation earned in
the fiscal year ended December 31, 1999 paid to Impresse's Chief Executive
Officer and Impresse's next four most highly compensated executive officers who
earned more than $100,000 during the fiscal year ended December 31, 1999 ("Named
Officers"). All options granted by the Board of Directors prior to the offering
allowed for early exercise. The number of securities underlying options in the
"Long-Term Compensation" column includes securities issued upon the exercise of
options subject to repurchase at cost by Impresse.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------------- ------------
NUMBER OF
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS
- ----------------------------------------------------- -------- -------- ------------------------- ------------
<S> <C> <C> <C> <C>
Nimish Mehta......................................... 1999 $200,000 $ -- 1,496,907
President, Chief Executive Officer and Director
Scott J. Yetter (1).................................. 1999 128,472 131,250 300,000
Vice President, North American Sales and Field
Marketing
Robert W. Jones...................................... 1999 120,000 50,000 150,000
Vice President, Customer Services
Siva V. Kumar (2).................................... 1999 155,000 -- 11,882
Vice President, Marketing and Chairman of the Board
Philip C. Nelson (3)................................. 1999 155,000 -- 8,911
Chief Technology Officer
</TABLE>
- ------------------------
(1) In an offer letter dated January 29, 1999, we agreed to grant a one-time
option to purchase up to an additional 50,000 shares of our common stock to
Mr. Yetter at the fair market value at the time of grant for the
accomplishment of sales goals during the fiscal year ended December 31,
1999. We also agreed to reimburse Mr. Yetter up to $100,000 for relocation
expenses that will be incurred by him during his move to California from
Pennsylvania.
(2) We also sold 1,920,000 shares of common stock to Mr. Kumar in October 1997
and December 1997 in connection with the sale of our common stock to
founders of Impresse. We may repurchase a portion of these shares of common
stock upon the cessation of Mr. Kumar's employment with Impresse. Mr. Kumar
holds rights to a total of 1,931,882 shares of our common stock.
(3) We sold 1,440,000 shares of common stock to Mr. Nelson in December 1997 in
connection with the sale of our common stock to founders of Impresse. We may
repurchase a portion of these shares of common stock upon the cessation of
Mr. Nelson's employment with Impresse. Mr. Nelson and his transferees hold
rights to a total of 1,448,911 shares of our common stock.
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<PAGE>
STOCK OPTIONS
The following table sets forth information concerning the grant of stock
options to the Named Officers during the fiscal year ended December 31, 1999.
The individual grants consist of options granted under Impresse's 1997 Stock
Option Plan. For the purposes of calculating the percent of total options
granted to employees during the last fiscal year, Impresse granted options to
purchase 3,517,500 shares of common stock to employees and consultants. The
exercise price per share of each option was equal to the fair market value of
common stock on the date of grant as determined by the Board of Directors. In
determining the fair market value of the common stock on each grant date, the
Board of Directors considered several factors, including Impresse's absolute and
relative levels of revenues and operating results, the state of Impresse's
technology development, increases in operating expenses, the absence of a public
trading market for Impresse's securities, the competitive nature of Impresse's
market and the appreciation of stock values of generally comparable companies.
The potential realizable value is based on the assumption that the common stock
of Impresse appreciates at the annual rate shown, compounded annually, from the
date of grant until the expiration of the ten-year term. These numbers are
calculated based on Securities and Exchange Commission requirements and do not
reflect Impresse's projections or estimates of future stock price growth.
Potential realizable values are computed by:
- multiplying the number of shares of common stock underlying a given option
by the exercise price;
- assuming that the total stock value derived from that calculation
compounds at the annual 5% or 10% rate shown in the table for the entire
ten-year term of the option; and
- subtracting from that result the total option exercise price.
OPTION GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
- ---- ---------- ------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Nimish Mehta .................... 9,207 .26 % $.50 7/01/09 $2,900 $ 7,320
President, Chief Executive
Officer and Director
Scott J. Yetter ................. 300,000 8.50 .45 3/12/09 85,050 214,650
Vice President, North American
Sales and Field Marketing
Robert W. Jones ................. 150,000 4.25 .45 3/12/09 42,525 107,325
Vice President, Customer
Services
Siva V. Kumar ................... 11,882 .34 .50 7/01/09 3,743 9,446
Vice President, Marketing and
Chairman of the Board
Philip C. Nelson ................ 8,911 .25 .50 7/01/09 2,807 7,084
Chief Technology Officer
</TABLE>
EXERCISE OF OPTIONS
The following table sets forth information concerning the exercise of stock
options during the fiscal year ended December 31, 1999 by the Named Officers and
the fiscal year-end value of unexercised options. Since there was no public
trading market for Impresse's common stock as of December 31, 1999, the values
of unexercised options at December 31, 1999 are based on a fair market value of
common stock of $2.00 per share as determined by the Board of Directors on
December 31, 1999. Therefore, these values are calculated based on the $2.00 per
share value for value at fiscal year-end or the fair market value as
42
<PAGE>
determined by the Board of Directors on the date of exercise for value realized,
less the applicable exercise price per share, multiplied by the number of shares
underlying these options. All options granted by the Board of Directors allowed
for early exercise and no named officer held any unexercisable option at
December 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT DECEMBER 31, 1999 AT DECEMBER 31, 1999
ACQUIRED ---------------------------- --------------------
NAME ON EXERCISE EXERCISABLE EXERCISABLE
- ---- ----------- ---------------------------- --------------------
<S> <C> <C> <C>
Nimish Mehta............................. -- 9,207 $13,811
President, Chief Executive Officer and
Director
Scott J. Yetter.......................... 300,000 -- --
Vice President, North American Sales
and Field Marketing
Robert W. Jones.......................... 150,000 -- --
Vice President, Customer Services
Siva V. Kumar............................ -- 11,882 17,823
Vice President, Marketing and
Chairman of the Board
Philip C. Nelson......................... -- 8,911 13,367
Chief Technology Officer
</TABLE>
- --------------------------
STOCK PLANS
1997 STOCK OPTION PLAN
GENERAL. Our 1997 Stock Option Plan provides for the granting of stock
options to eligible employees, officers, directors, including non-employee
directors, and consultants of Impresse. Stock options granted under the 1997
Stock Option Plan may be either "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, or nonstatutory stock options,
which are options not intended to qualify as incentive stock options. Incentive
stock options may be granted to employees, officers and employee directors of
Impresse and nonstatutory stock options may be granted to employees, officers,
employee and non-employee directors and consultants.
OPTIONS OUTSTANDING AND AVAILABLE. As of December 31, 1999, a total of
6,867,537 shares of common stock had been reserved for issuance under the 1997
Stock Option Plan. As of December 31, 1999, 1,768,525 shares of common stock
were issuable upon the exercise of outstanding options granted under the 1997
Stock Option Plan at a weighted average exercise price of $1.11. As of
December 31, 1999, the Company has issued 1,683,475 shares of common stock upon
exercise of options, and 31,837 shares of common stock remained available for
future issuance under the 1997 Stock Option Plan.
BOARD AND STOCKHOLDER APPROVAL. The Board of Directors adopted the 1997
Stock Option Plan in December 1997 and the stockholders approved the plan in
December 1997. The Board of Directors amended the 1997 Stock Option Plan in
January 2000 to increase the total number of shares reserved for issuance by
4,132,463 shares, and added a provision for an automatic annual increase on the
first day of each of our fiscal years beginning in 2001 and ending in 2007 equal
to the lesser of 2,500,000 shares or 6% of our outstanding common stock on the
last day of the prior fiscal year, or a lesser number determined by our Board of
Directors. We will submit the amendments to the 1997 Stock Option Plan to our
stockholders for their approval prior to the completion of this offering. The
1997 Stock Option Plan will terminate in 2007 unless terminated earlier by our
Board or the Compensation Committee.
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<PAGE>
TYPICAL TERMS. Stock options granted under the 1997 Stock Option Plan may
not have a term of more than ten years. These stock options generally remain
exercisable for three months following termination of the optionee's employment
or consulting relationship with Impresse, with longer periods applying if the
employee is terminated because of death or disability. The exercise price of all
incentive stock options must equal at least to the fair market value of the
common stock at the time of grant. However, for incentive stock options granted
to persons owning stock that represents more than 10% of the total combined
voting power of all classes of the outstanding capital stock of Impresse, the
exercise price must equal at least 110% of the fair market value of the common
stock at the time of grant. The exercise price of nonstatutory stock options
will be determined by the Administrator, except that for grants to certain
executive officers of Impresse, the exercise price must be at least 100% of the
fair market value if the option is intended to qualify as performance-based
compensation under applicable tax rules. Options granted under the 1997 Stock
Option Plan are generally subject to vesting at a rate of twenty-five percent at
the end of the first year and 1/48th of the original number of shares subject to
the option per month thereafter. The Administrator has the authority to grant
options which are exercisable prior to vesting, in which case the Company
maintains a right of repurchase of the unvested portion of the exercised shares
at the optionee's original cost. Options granted under the 1997 Stock Option
Plan are generally not transferable, although the Administrator has the
discretion to allow limited transferability of nonstatutory stock options.
CHANGE OF CONTROL. If Impresse is acquired or enters into a sale of all or
substantially all of Impresse's assets, each option outstanding under the 1997
Stock Option Plan shall vest as to an additional number of shares equal to the
lesser of (a) 25% of the number of shares originally granted pursuant to such
option and (b) the remaining number of shares not yet vested under the terms of
such option. Thereafter, each outstanding option shall be assumed or an
equivalent option shall be substituted by the successor corporation. If the
successor corporation refuses to do an assumption or substitution, each
outstanding option shall terminate 10 days following the closing of the
transaction. If the option is not terminated following the closing of the
transaction, and if an optionee is terminated by Impresse without good cause and
other than due to death or disability, or if an optionee resigns as a result of
a constructive termination by Impresse or by any successor entity, in either
case within one year following the closing of the transaction, then such
optionee's option shall vest as to an additional number of shares equal to the
lesser of (a) 25% of the number of shares originally granted, and (b) the
remaining number of shares not yet vested under the terms of such option.
OTHER CHANGES. In the event of a proposed dissolution or liquidation of
Impresse, each outstanding option granted under the 1997 Stock Option Plan shall
terminate. Outstanding options will adjust in the event of a stock split, stock
dividend or other similar change in our capital structure.
ADMINISTRATION. The 1997 Stock Option Plan may be administered by the Board
of Directors or a committee appointed by the Board of Directors. Currently, the
1997 Stock Option Plan is administered by the Compensation Committee. The
Administrator has the authority to grant options and to determine the terms of
these awards consistent with the terms of the 1997 Stock Option Plan. In no
event, however, may an individual receive option grants for more than 2,000,000
shares under the 1997 Stock Option Plan in any fiscal year. Decisions of the
Administrator are final and binding on all 1997 Stock Option Plan participants.
The Administrator has the authority to amend or terminate the 1997 Stock Option
Plan provided that the Company must obtain the consent of any option holder
whose rights are impaired by the action. In addition, stockholder approval will
be obtained for any amendment if required by applicable law.
2000 DIRECTORS' STOCK PLAN
BOARD AND STOCKHOLDER APPROVAL. The Board of Directors adopted the 2000
Directors' Stock Plan in January 2000 and expects the stockholders to approve
the Directors' Plan prior to the closing of this offering. A total of 300,000
shares of common stock has been reserved for issuance under the Directors' Plan.
The Directors' Plan provides for the grant of nonstatutory stock options to
nonemployee directors of Impresse. The Directors' Plan is designed to work
automatically without administration; however, to the
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<PAGE>
extent administration is necessary, it will be performed by the Board of
Directors. To the extent conflicts of interest arise, it is expected that they
will be addressed by abstention of any interested director from both
deliberations and voting regarding matters in which this director has a personal
interest. The Directors' Plan becomes effective on the date of this offering.
OPTION GRANTS. The Directors' Plan provides that each person who becomes a
nonemployee director of Impresse after the effective date of the registration
statement will be granted a nonstatutory stock option to purchase 20,000 shares
of common stock on the date on which the optionee first becomes a nonemployee
director of Impresse (a "First Option"). Thereafter, all non-employee directors
will receive an option to purchase 5,000 shares of common stock on the date of
the Impresse annual stockholders meeting provided on that date, he or she has
served on Impresse's Board of Directors for at least six months (the "Annual
Option").
TYPICAL TERMS. The Directors' Plan does not limit the number of shares for
which options may be granted to any one nonemployee director, but does specify
the number of shares that may be included in any grant and the method of making
a grant. Options granted under the Directors' Plan are not transferable by the
optionee other than by will or the laws of descent or distribution or pursuant
to a qualified domestic relations order. Each option is exercisable, during the
lifetime of the optionee, only by the optionee or a permitted transferee. The
Directors' Plan provides that each First Option shall vest and become
exercisable as to 1/48 of the total number of shares subject to the option on
the first day of each month after the date of grant. The Directors' Plan
provides that each Annual Option shall vest and become exercisable as to 1/12 of
the total number of shares subject to the option as of the first day of each
month after the date of grant. If a nonemployee director ceases to serve as a
director for any reason other than death or disability, the director may, but
only within 90 days after the date the director ceases to be a director,
exercise options granted under the Directors' Plan to the extent that the
director was entitled to exercise those options as of the date of termination.
This option shall terminate if the director does not exercise the option within
this 90 day period. The exercise price of all stock options granted under the
Directors' Plan shall be the fair market value of a share of Impresse's common
stock on the date of grant. Options granted under the Directors' Plan have a
term of ten years.
CHANGE OF CONTROL. In the event of an acquisition of Impresse or the sale
of all or substantially all of Impresse's assets, each option outstanding shall
become immediately exercisable as to all of the shares prior to the closing of
the transaction. The Board of Directors may amend or terminate the Directors'
Plan; provided, however, that these actions may not adversely affect any
outstanding option. Outstanding options will be adjusted in the event of a stock
split, stock dividend or other similar change in our capital structure. We will
obtain stockholder approval for any amendment to the extent required by
applicable law. The Directors' Plan will have a term of ten years if not
terminated earlier.
2000 EMPLOYEE STOCK PURCHASE PLAN
RESERVED SHARES. Impresse's 2000 Employee Stock Purchase Plan was adopted
by the Board of Directors in January 2000 and is expected to be approved by the
stockholders prior to the closing of this offering. A total of 500,000 shares of
common stock has been reserved for issuance under the Purchase Plan, In
addition, the reserved pool will be increased automatically on the first day of
each of Impresse's fiscal years beginning in 2001 and ending in 2010 equal to
the lesser of 500,000 shares, 2% of Impresse's outstanding common stock on the
last day of the immediately preceding fiscal year, or a lesser number of shares
determined by the Board of Directors. The Purchase Plan becomes effective on the
date of this offering.
OFFERING PERIOD. The Purchase Plan is intended to qualify under
Section 423 of the Code. The Purchase Plan will be implemented by a series of
overlapping offering periods of approximately 24 months duration, with new
offering periods (other than the first offering period) commencing on May 1st
and November 1st of each year. Each offering period will generally consist of
four consecutive purchase periods of approximately six months duration. At the
end of each purchase period, an automatic purchase
45
<PAGE>
will be made for the participant. The initial offering period is expected to
begin on the date of this offering and end on April 30, 2002. The initial
purchase period is expected to end on October 31, 2000.
ADMINISTRATION; ELIGIBILITY. The Purchase Plan will be administered by the
Board of Directors or by a committee appointed by the Board of Directors.
Employees (including officers and employee directors) of Impresse, or of any
majority-owned subsidiary designated by the Board of Directors, are eligible to
participate in the Purchase Plan if they are employed by Impresse or any
majority-owned subsidiary for at least 20 hours per week and more than five
months per year. The Purchase Plan permits eligible employees to purchase common
stock through payroll deductions, which may not exceed 20% of an employee's
compensation. The purchases are made at a price equal to the lower of 85% of the
fair market value of Impresse's common stock at the beginning of each offering
period or at the end of each purchase period. Employees may end their
participation in the offering period at any time. Participation ends
automatically on termination of employment. The Purchase Plan will have a term
of 10 years if not terminated earlier.
CHANGE OF CONTROL. In the event of a merger of Impresse with or into
another corporation or a sale of all or substantially all of Impresse's assets,
each right to purchase stock under the Purchase Plan will be assumed or an
equivalent right substituted by the successor corporation. However, in the event
the successor corporation refuses to assume each purchase right or to substitute
an equivalent right of the successor corporation the Board of Directors will
shorten any ongoing offering period so that participants' rights to purchase
stock under the Purchase Plan are exercised prior to the transaction.
Outstanding options will be adjusted in the event of a stock split, stock
dividend or other similar change in our capital structure. The Board of
Directors has the power to amend or terminate the Purchase Plan as long as the
action does not adversely affect any outstanding rights to purchase stock
thereunder. However, our Board of Directors may amend or terminate the Purchase
Plan or an offering period even if it would adversely affect outstanding options
in order to avoid our incurring adverse accounting charges.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by the Delaware General Corporation Law, Impresse has included
in its Amended and Restated Certificate of Incorporation a provision to
eliminate the personal liability of its officers and directors for monetary
damages for breach or alleged breach of their fiduciary duties as officers or
directors, respectively, subject to exceptions. In addition, Impresse's Bylaws
provide that Impresse is required to indemnify its officers and directors,
including under circumstances in which indemnification would otherwise be
discretionary, and Impresse is required to advance expenses to its officers and
directors as incurred in connection with proceedings against them for which they
may be indemnified. Impresse has also obtained directors' and officers'
liability insurance. We have entered into indemnity agreements with each of our
directors and executive officers. Such indemnity agreements contain provisions
that are in some respects broader than the specific indemnification provisions
contained in Delaware law.
At present, Impresse is not aware of any pending or threatened litigation or
proceeding involving a director, officer, employee or agent of Impresse in which
indemnification would be required or permitted. Impresse is not aware of any
threatened litigation or proceeding that might result in a claim for
indemnification. Impresse believes that its charter provisions and
indemnification agreements are necessary to attract and retain qualified persons
as directors and officers.
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<PAGE>
RELATED PARTY TRANSACTIONS
EQUITY TRANSACTIONS
Some stock option grants to directors and executive officers of Impresse are
described under the caption "Management--Executive Compensation."
In October 1997, Impresse issued and sold 1,000,000 shares of common stock
at $.01 per share to Rajeev Sehgal and 888,888 shares of common stock at $.01
per share to Siva Kumar, chairman of the board and a vice president of Impresse.
In December 1997, Impresse repurchased 600,000 shares of common stock at $.01
per share from Mr. Sehgal in connection with Mr. Sehgal's disassociation from
Impresse. Mr. Sehgal retains a total of 400,000 shares of common stock of
Impresse.
In December 1997, Impresse issued and sold 1,031,112 shares of common stock
at $.01 per share to Siva Kumar, chairman of the board and a vice president of
Impresse.
In December 1997, Impresse issued and sold 1,440,000 shares of common stock
at $.01 per share to Phil Nelson, a founder and the Chief Technology Officer of
Impresse.
In December 1997, April 1998 and August 1998, Impresse issued and sold
8,530,000 shares of Series A preferred stock at a price of $.50 per share,
including:
- 4,000,000 shares to entities affiliated with Kleiner Perkins Caufield &
Byers, an entity with which Mr. Siegelman, a director of Impresse, is
affiliated; and
- 4,000,000 shares to entities affiliated with Benchmark Capital, an entity
with which Mr. Dunlevie, a director of Impresse, is affiliated.
In December 1998, February 1999 and May 1999, Impresse issued and sold
3,507,928 shares of Series B preferred stock at price per share of $3.15,
including:
- 793,651 shares to entities affiliated with Kleiner Perkins Caufield &
Byers, an entity with which Mr. Siegelman, a director of Impresse, is
affiliated;
- 793,651 shares to entities affiliated with Benchmark Capital, an entity
with which Mr. Dunlevie, a director of Impresse, is affiliated; and
- 1,746,032 shares to entities affiliated with Atlas Venture, an entity with
which Mr. Archambeau, a director of Impresse, is affiliated.
In November 1999 and January 2000, Impresse issued and sold 4,399,100 shares
of its Series C Preferred Stock at a price of $12.39 per share, including:
- 80,709 shares to entities affiliated with Kleiner Perkins Caufield &
Byers, an entity with which Mr. Siegelman, a director of Impresse, is
affiliated;
- 80,710 shares to entities affiliated with Benchmark Capital, an entity
with which Mr. Dunlevie, a director of Impresse, is affiliated;
- 1,614,205 shares to entities affiliated with Gilbert Global Equity
Partners, an entity with which Mr. Gilbert, a director of Impresse, is
affiliated;
- 40,354 shares to entities affiliated with Atlas Venture, an entity with
which Mr. Archambeau, a director of Impresse, is affiliated; and
- 32,284 shares to Hatim Tyabji, a director of Impresse.
47
<PAGE>
OTHER TRANSACTIONS
In December 1997, Rajeev Sehgal and Impresse entered into a Separation and
Mutual General Release dated December 6, 1997 whereby Impresse repurchased
600,000 shares of common stock from Mr. Sehgal.
Since inception, Impresse from time to time has issued and sold shares of
its common stock and granted options to purchase common stock to its employees,
directors and consultants.
The following executive officers have executed full-recourse promissory
notes in the amounts set forth after their names in connection with their
purchases of shares of Impresse's common stock:
<TABLE>
<CAPTION>
OUTSTANDING
BALANCE AS OF
PRINCIPAL INTEREST DECEMBER 31,
NAME(1) DATE OF LOAN AMOUNT RATE 1999
- ------- ------------ --------- -------- -------------
<S> <C> <C> <C> <C>
Sanjai K. Bijawat................................. 8/24/99 $ 75,000 8% $ 77,129
Robert W. Jones................................... 4/20/99 67,500 8 71,205
Nimish Mehta...................................... 11/6/98 74,385 8 81,363
Scott J. Yetter................................... 4/22/99 135,000 8 142,440
</TABLE>
- ------------------------
(1) Jaime Murow, our former Chief Information Officer, early-exercised an option
to purchase 150,000 shares of our common stock on September 7, 1999 through
a promissory note with a principal of $75,000. On January 7, 2000, we
exercised our repurchase right as to 128,125 shares of common stock and
Mr. Murow tendered the outstanding balance at this time.
These notes become due the earlier of five years after the date of issuance,
ninety days after termination or cessation of the officer's employment, one year
after a merger or acquisition of Impresse, or one year after the date of this
offering. They bear interest at the lowest rate allowed under federal tax law to
avoid the imputation of interest, compounded annually.
Impresse has entered into compensation arrangements with some of its
directors and officers. See "Management--Executive Compensation" and "--Stock
Plans."
Impresse believes that the related transactions were on terms that are no
more favorable than those that would have been agreed upon by third parties on
an arm's length basis.
48
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to Impresse with respect to
the beneficial ownership of Impresse's common stock as of December 31, 1999 by
the following individuals or groups:
- each stockholder known by Impresse to be the beneficial owner of more than
5% of Impresse's common stock;
- the "Named Officers";
- each director of Impresse; and
- all executive officers and directors as a group.
Except as otherwise noted, the address of each person listed in the table is
c/o Impresse Corporation, 1309 South Mary Avenue, Sunnyvale, CA 94087. The table
includes all shares of common stock issuable within 60 days of December 31, 1999
upon the exercise of options and other rights beneficially owned by the
indicated stockholders on that date. These shares, however, are not deemed
outstanding for the purposes of computing the percentage of ownership of each
other person. To the knowledge of Impresse, except under applicable community
property laws or as otherwise indicated, the persons named in this table have
sole voting and investment power with respect to all shares of common stock
shown as beneficially owned by them. The applicable percentage of ownership for
each stockholder is based on 25,150,121 shares of common stock outstanding as of
December 31, 1999, together with applicable options for that stockholder. The
table assumes that the underwriters' over-allotment option is not exercised. In
addition, the table assumes that the outstanding shares of preferred stock were
converted into shares of common stock. Percentage ownership figures after the
offering do not include shares that may be purchased by each person in the
offering.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES
BENEFICIALLY OWNED
NUMBER OF SHARES -------------------
BENEFICIALLY BEFORE AFTER
NAME OF BENEFICIAL OWNER OWNED OFFERING OFFERING
- ------------------------ ---------------- -------- --------
<S> <C> <C> <C>
Entities affiliated with Kleiner Perkins Caufield & 4,874,360 19.38% 17.10%
Byers(1) .................................................
2750 Sand Hill Road
Menlo Park, CA 94025
Entities affiliated with Benchmark Capital(2) .............. 4,874,361 19.38 17.10
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Entities affiliated with Atlas Venture(3) .................. 1,786,386 7.10 6.24
2420 Sand Hill Road, Suite 102
Menlo Park, CA 94025
Entities affiliated with Gilbert Global Equity 1,614,205 6.42 5.63
Partners(4) ..............................................
785 Smith Ridge Road
New Canaan, CT 06840
Nimish Mehta................................................ 1,496,907 5.95 5.22
Sanjai K. Bijawat........................................... 150,000 * *
Robert W. Jones............................................. 150,000 * *
Philip C. Nelson............................................ 1,448,911 5.76 5.06
Scott J. Yetter............................................. 300,000 1.19 1.05
Eric Archambeau(5).......................................... 1,786,386 7.10 6.24
Bruce Dunlevie(6)........................................... 4,874,361 19.38 17.10
Steven J. Gilbert(7)........................................ 1,614,205 6.42 5.63
Siva V. Kumar............................................... 1,931,882 7.68 6.74
Paul Levy................................................... 110,000 * *
Russell Siegelman(8)........................................ 4,874,360 19.38 17.10
Hatim A. Tyabji............................................. 132,284 * *
All executive officers and directors as a group 18,869,296 74.94 65.79
(12 persons)..............................................
</TABLE>
- ------------------------
* Less than 1%
49
<PAGE>
(1) Includes:
- 2,190,552 shares held by Kleiner Perkins Caufield & Byers VIII, L.P.
- 126,786 shares held by KPCB VIII Founders Fund, L.P.
- 119,841 shares held by KPCB Information Sciences Zaibatsu Fund II, L.P.
- 2,437,181 shares held by KPCB Java Fund L.P.
The general partner of Kleiner Perkins Caufield & Byers VIII, L.P. and
KPCB VIII Founders Fund, L.P. is KPCB VIII Associates. The general partner
of KPCB Java Fund L.P. is KPCB Java Associates, L.P. The general partner of
KPCB Information Sciences Zaibatsu Fund II is KPCB VII Associates, L.P.
Russell Siegelman, a director of Impresse, is a general partner of Kleiner
Perkins Caufield & Byers. Mr. Siegelman disclaims beneficial ownership of
the shares held by Kleiner Perkins Caufield & Byers VIII, L.P., KPCB VIII
Founders Fund, L.P., KPCB Information Sciences Zaibatsu Fund II, L.P., KPCB
Java Fund L.P., except to the extent of his pecuniary interest therein
arising from his general partnership interest in these funds.
(2) Represents 4,874,361 shares of common stock held by Benchmark Capital
Partners II, L.P. as nominee for Benchmark Capital Partners II, L.P.,
Benchmark Founders Fund II, L.P., Benchmark Founders Fund II-A, L.P. and
Benchmark Members' Fund II, L.P.
Mr. Dunlevie is a managing member of Benchmark Capital Management Co. II,
LLC, the general partner of Benchmark Capital Partners II, L.P., Benchmark
Founders Fund II, L.P., Benchmark Founders Fund II-A, L.P. and Benchmark
Members' Fund II, L.P. Mr. Dunlevie disclaims beneficial ownership of these
shares, except to the extent of his pecuniary interest in the Benchmark
funds.
(3) Includes:
- 1,748,371 shares held by Atlas Venture Fund III, L.P.; and
- 38,015 shares held by Atlas Venture Entrepreneurs Fund, L.P.
The general partner of Atlas Venture Fund III, L.P. and Atlas Venture
Entrepreneurs Fund, L.P. is Atlas Venture. Eric Archambeau, a director of
Impresse, is a general partner of Atlas Venture. Mr. Archambeau disclaims
beneficial ownership of shares held by Atlas Venture Fund III, L.P. and
Atlas Venture Entrepreneurs Fund, L.P., except to the extent of his
pecuniary interest therein arising from his general partnership interest in
these funds.
(4) Includes:
- 1,236,292 shares held by Gilbert Global Equity Partners, L.P.; and
- 377,913 shares held by Gilbert Global Equity Partners (Bermuda), L.P.
The general partner of Gilbert Global Equity Partners, L.P. and Gilbert
Global Equity Partners (Bermuda) L.P. is Steven J. Gilbert, a director of
Impresse. Mr. Gilbert disclaims beneficial ownership of shares held by
Gilbert Global Equity Partners, L.P. and Gilbert Global Equity Partners
(Bermuda) L.P., except to the extent of his pecuniary interest in these
funds. Principal address c/o Conyers Dill & Pearman, Clarendon House, Church
Street, P.O. Box HM666, Hamilton HM CX, Bermuda.
(5) Includes:
- 1,748,371 shares held by Atlas Venture Fund III, L.P.; and
- 38,015 shares held by Atlas Venture Entrepreneurs Fund, L.P.
Eric Archambeau, a director of Impresse, is a general partner of Atlas
Venture. Mr. Archambeau disclaims beneficial ownership of shares held by
Atlas Venture Fund III, L.P. and Atlas Venture
50
<PAGE>
Entrepreneurs Fund, L.P., except to the extent of his pecuniary interest
therein arising from his general partnership interest in these funds.
(6) Represents 4,874,361 shares of common stock held by Benchmark Capital
Partners II, L.P. as nominee for Benchmark Capital Partners II, L.P.,
Benchmark Founders Fund II, L.P., Benchmark Founders Fund II-A, L.P. and
Benchmark Members' Fund II, L.P.
Bruce Dunlevie is a managing member of Benchmark Capital Management Co. II,
LLC, the general partner of Benchmark Capital Partners II, L.P., Benchmark
Founders Fund II, L.P., Benchmark Founders Fund II-A, L.P. and Benchmark
Members' Fund II, L.P. Mr. Dunlevie disclaims beneficial ownership of these
shares, except to the extent of his pecuniary interest in the Benchmark
funds.
(7) Includes:
- 1,236,292 shares held by Gilbert Global Equity Partners, L.P.; and
- 377,913 shares held by Gilbert Global Equity Partners (Bermuda), L.P.
Steven J. Gilbert, a director of Impresse, is the general partner of Gilbert
Global Equity Partners, L.P. and Gilbert Global Equity Partners (Bermuda)
L.P. Mr. Gilbert disclaims beneficial ownership of shares held by Gilbert
Global Equity Partners, L.P. and Gilbert Global Equity Partners (Bermuda)
L.P., except to the extent of his pecuniary interest therein arising from
his general partnership interest in these funds. Principal address c/o
Conyers Dill & Pearman, Clarendon House, Church Street, P.O. Box HM666,
Hamilton HM CX, Bermuda.
(8) Includes:
- 2,190,552 shares held by Kleiner Perkins Caufield & Byers VIII, L.P.
- 126,786 shares held by KPCB VIII Founders Fund, L.P.
- 119,841 shares held by KPCB Information Sciences Zaibatsu Fund II, L.P.;
and
- 2,437,181 shares held by KPCB Java Fund L.P.
Russell Siegelman, a director of Impresse, is a general partner of Kleiner
Perkins Caufield & Byers. Mr. Siegelman disclaims beneficial ownership of
the shares held by Kleiner Perkins Caufield & Byers VIII, L.P., KPCB VIII
Founders Fund, L.P., KPCB Information Sciences Zaibatsu Fund II, L.P., KPCB
Java Fund L.P., except to the extent of his pecuniary interest therein
arising from his general partnership interest in these funds.
51
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Immediately following the consummation of this offering, the authorized
capital stock of Impresse will consist of 150,000,000 shares of common stock,
$.001 par value, and 5,000,000 shares of undesignated preferred stock, $.001 par
value. Upon completion of this offering, 28,650,121 shares of common stock, no
shares of preferred stock, options to purchase 2,886,625 shares of common stock
and warrants to purchase 632,702 shares of common stock will be outstanding.
COMMON STOCK
As of December 31, 1999, approximately 120 stockholders of record held
8,902,761 shares of outstanding common stock. There will be 28,650,121 shares of
common stock outstanding, assuming no exercise of the underwriters'
over-allotment option and assuming no exercise after December 31, 1999 of
outstanding options or warrants, after giving effect to the sale of the shares
of common stock to the public in this offering and the conversion of our
preferred stock into common stock at a one-to-one ratio.
Depending on preferences that may apply to shares of preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available at times and in
amounts as the Board of Directors may determine. See "Dividend Policy." Each
stockholder may exercise one vote for each share of common stock held on all
matters submitted to a vote of the stockholders. Impresse's Amended and Restated
Certificate of Incorporation does not provide for cumulative voting, which means
that the majority of the shares voted can elect all of the directors then
standing for election. The holders of common stock have no preemptive rights and
may not convert or redeem their shares. Upon the occurrence of a liquidation,
dissolution or winding-up, the holders of shares of common stock may share
ratably in all assets remaining after payment of liabilities and satisfaction of
preferential rights of any outstanding preferred stock. There are no sinking
fund provisions applicable to the common stock. The outstanding shares of common
stock are, and the shares of common stock to be issued upon completion of this
offering will be, fully paid and non-assessable.
PREFERRED STOCK
Upon filing our Amended and Restated Certificate of Incorporation to be
effective upon the closing of this offering, we will authorize 5,000,000 shares
of preferred stock. The Board of Directors has the authority, within the
limitations and restrictions in the Amended and Restated Certificate of
Incorporation, to provide by resolution for the issuance of shares of preferred
stock in one or more series and to fix the rights, preferences, privileges and
restrictions of any or all series, including dividend rights, dividend rates,
conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting any series or the
designation of any series, without further vote or action by the stockholders.
The issuance of preferred stock may have the effect of delaying, deferring or
preventing a change in control of Impresse without further action by the
stockholders. The issuance of preferred stock with voting and conversion rights
may weaken the voting power of the holders of common stock, including voting
rights, of the holders of common stock. This issuance could have the effect of
decreasing the market price of the common stock. As of the closing of the
offering, no shares of preferred stock will be outstanding and Impresse
currently has no plans to issue any shares of preferred stock.
OPTIONS
As of December 31, 1999, options to purchase a total of 1,768,525 shares of
common stock were outstanding, and up to 31,837 shares were available for future
grant under the 1997 Stock Option Plan. See "Management--Stock Plans--1997 Stock
Option Plan."
52
<PAGE>
WARRANTS
As of December 31, 1999, Impresse had the following outstanding warrants:
- warrant to purchase 50,000 shares of its Series A preferred stock with an
exercise price of $.50 per share issued to Lighthouse Capital Partners in
connection with an equipment lease line obtained from them in June 1998.
- warrants to purchase 171,428 shares of its Series B preferred stock with
an exercise price of $3.15 per share issued to entities affiliated with
Meier Mitchell in connection with a credit facility obtained from them in
June 1999.
- warrant to purchase a total of 240,000 shares of common stock at an
exercise price of $.50 per share issued to Adobe Ventures III in
connection with an agreement with Adobe Systems Incorporated in
November 1999.
- warrant to purchase 22,000 shares of Series C preferred stock at an
exercise price of $12.39 per share issued to DeAnza Properties in
connection with execution of an office space lease in December 1999.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS
AND DELAWARE LAW
CERTIFICATE OF INCORPORATION AND BYLAWS
Our Amended and Restated Certificate of Incorporation provides that,
effective on the closing of this offering, all stockholder actions must be
effected at a duly called meeting and not by a consent in writing. Further,
provisions of the Bylaws and the Amended and Restated Certificate of
Incorporation provide that the stockholders may amend the Bylaws or provisions
of the Amended and Restated Certificate of Incorporation only with the
affirmative vote of more than 50% of our capital stock. These provisions of the
Amended and Restated Certificate of Incorporation and Bylaws could discourage
potential acquisition proposals and could delay or prevent a change in control
of Impresse. These provisions are intended to enhance the likelihood of
continuity and stability in the composition of the Board of Directors and in the
policies formulated by the Board of Directors and to discourage types of
transactions that may involve an actual or threatened change of control of
Impresse. These provisions are designed to reduce our vulnerability to an
unsolicited acquisition proposal. The provisions also are intended to discourage
tactics that may be used in proxy fights. However, these provisions could
discourage others from making tender offers for our shares and, as a
consequence, they also may inhibit fluctuations in the market price of our
shares that could result from actual or rumored takeover attempts. These
provisions also may have the effect of preventing changes in our management.
Our Amended and Restated Certificate of Incorporation to be effective upon
the closing of this offering also provides that our directors will be elected
without the application of cumulative voting. This Amended and Restated
Certificate of Incorporation also provides that after the closing of the
offering, any action required or permitted to be taken by our stockholders may
be taken only at a duly called annual or special meeting of the stockholders.
Our Bylaws to be effective upon the closing of this offering also establish
procedures, including advance notice procedures with regard to the nomination,
other than by or at the direction of the Board of Directors, of candidates for
election as directors. See "Description of Capital Stock--Common Stock."
The foregoing provisions could make it more difficult for a third party to
effect a change in the control of the Board of Directors. In addition, these
provisions could make it more difficult for a third party to acquire, or could
discourage a third party from attempting to acquire, a majority of the
outstanding voting stock of Impresse.
53
<PAGE>
DELAWARE TAKEOVER STATUTE
We must comply with Section 203 of the Delaware General Corporation Law, or
DGCL Section 203, which regulates corporate acquisitions. DGCL Section 203
prevents Delaware corporations, including those whose securities are listed for
trading on the Nasdaq National Market, from engaging, in some cases, in a
"business combination" with any "interested stockholder" for three years
following the date that the stockholder became an interested stockholder. For
purposes of DGCL Section 203, a "business combination" includes a merger or
consolidation involving Impresse and the interested stockholder and the sale of
more than ten percent (10%) of Impresse's assets. In general, DGCL Section 203
defines an "interested stockholder" as any entity or person beneficially owning
15% or more the outstanding voting stock of Impresse and any entity or person
affiliated with or controlling or controlled by this entity or person. A
Delaware corporation may "opt out" of DGCL Section 203 with an express provision
in its original certificate of incorporation or an express provision in its
certificate of incorporation or bylaws resulting from amendments approved by the
holders of at least a majority of the corporation's outstanding voting shares.
We have not "opted out" of the provisions of DGCL Section 203.
REGISTRATION RIGHTS
As of the completion of this offering, the holders of approximately
16,297,360 shares of common stock and common stock issuable upon exercise of a
warrant are entitled to rights to register these shares under the Securities
Act. The holders of registration rights are those investors that purchased
shares of our Series A, Series B and Series C preferred stock, the holder of a
warrant for shares of our Series A preferred stock, as well as some of our
present and former officers. These rights are provided under the terms of an
agreement between Impresse and the holders of the registrable securities. Under
this agreement, on the written demand of holders of more than 50% of the then
outstanding registrable securities, Impresse shall use its best efforts to
register these shares and those of any other stockholders who, by prompt notice,
request registration, which may be cut back in participation by the managing
underwriter of our initial public offering. Impresse is not required to effect
more than one demand registration on Form S-1 at any time and more than two
demand registrations on Form S-3 in any twelve-month period. These holders are
also entitled to unlimited piggyback registration rights, which may be cutback
in participation by the managing underwriter. All offering expenses in
connection with this registration will be borne by Impresse, excluding
underwriting discounts and commissions.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the common stock is U.S. Stock Transfer
Corporation.
54
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the common stock of
Impresse. Future sales of substantial amounts of common stock in the public
market could lower the prevailing market price. Furthermore, since only a
limited number of shares will be available for sale shortly after this offering
because of contractual and legal restrictions on resale (as described below),
sales of substantial amounts of common stock of Impresse in the public market
after the restrictions lapse could lower the prevailing market price and the
ability of Impresse to raise equity capital in the future.
Upon completion of the offering, Impresse will have outstanding 28,650,121
shares of common stock. Of these shares, the 3,500,000 shares sold in the
offering (plus any shares issued upon exercise of the underwriters'
over-allotment option) will be freely tradeable without restriction under the
Securities Act, unless purchased by "affiliates" of Impresse as that term is
defined in Rule 144 under the Securities Act.
The remaining 25,339,789 shares of common stock outstanding are "restricted
securities" as described in Rule 144 under the Securities Act. 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 these shares
for sale, could adversely affect the market price of the common stock.
The stockholders of Impresse have entered into lock-up agreements generally
providing that they will not offer, sell, contract to sell or grant any option
to purchase or otherwise dispose of the shares of common stock of Impresse or
any securities exercisable for or convertible into Impresse's common stock owned
by them for a period of 180 days after the effective date of the registration
statement filed in this offering without the prior written consent of Morgan
Stanley & Co. Incorporated. As a result of these contractual restrictions,
notwithstanding possible earlier eligibility for sale under the provisions of
Rules 144, 144(k) and 701, shares that are locked-up will not be saleable until
these agreements expire or are waived by Morgan Stanley & Co. Incorporated.
Taking into account the lock-up agreements, and assuming Morgan Stanley & Co.
Incorporated does not release stockholders from these agreements, the following
shares will be eligible for sale in the public market at the following times:
beginning on the effective date, only the shares sold in the offering will be
immediately available for sale in the public market; beginning 180 days after
the effective date, approximately 5,196,761 shares will be eligible for sale
under Rule 701 and approximately 11,523,801 additional shares will be eligible
for sale under Rule 144, of which all but 194,067 shares are held by affiliates
of Impresse. Shares eligible to be sold by affiliates under Rule 144 are
restricted as described below.
In general, under Rule 144, and beginning after the expiration of the
lock-up agreements (180 days after the effective date of the offering), a person
(or persons whose shares are aggregated) 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 286,500 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 restricted by manner of sale provisions and
notice requirements and by the availability of current public information about
Impresse. Under Rule 144(k), a person who is not deemed to have been an
affiliate of Impresse 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 these shares without complying with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.
55
<PAGE>
Under the lock-up agreements, all Impresse employees holding common stock or
stock options may not sell shares acquired upon exercise until after 180 days
following the effective date. Beginning after 180 days following the effective
date of the registration statement for this offering, any employee, officer or
director of or consultant to Impresse who purchased his or her shares pursuant
to a written compensatory plan or contract may be entitled to rely on the resale
provisions of Rule 701. Rule 701 permits affiliates to sell their Rule 701
shares under Rule 144 without complying with the holding period requirements of
Rule 144. Rule 701 further provides that non-affiliates may sell their shares in
reliance on Rule 144 without having to comply with the holding period, public
information, volume limitation or notice provisions of Rule 144. In addition,
Impresse intends to file registration statements under the Securities Act as
promptly as possible after the effective date to register shares to be issued
under Impresse's employee benefit plans. As a result, any options exercised
under the Stock Plan or any other benefit plan after the effectiveness of this
registration statement will also be freely tradeable in the public market,
except that shares held by affiliates will still be restricted by the volume
limitation, manner of sale, notice and public information requirements of
Rule 144 unless otherwise resaleable under Rule 701. As of December 31, 1999,
there were outstanding options for the purchase of 1,768,525 shares, of which
all shares were exercisable. No shares have been issued to date under Impresse's
Purchase Plan or Directors' Plan. See "Management--Stock Plans" and "Description
of Capital Stock--Registration Rights."
Morgan Stanley & Co. Incorporated may choose to release some or all of the
locked-up shares described above prior to the expiration of the 180-day period
with or without prior public notice, although it has no current intention to do
so.
56
<PAGE>
UNDERWRITERS
Under the terms and conditions contained in an underwriting agreement dated
, 2000, the underwriters named below, for whom Morgan
Stanley & Co. Incorporated; Merrill Lynch, Pierce, Fenner & Smith Incorporated
and Deutsche Bank Securities Inc. are acting as representatives, have severally
agreed to purchase, and Impresse has agreed to sell to them, the respective
number of shares of common stock listed opposite the names of the underwriters
below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---- -----------
<S> <C>
Morgan Stanley & Co. Incorporated...........................
Merrill Lynch, Pierce, Fenner & Smith Incorporated..........
Deutsche Bank Securities Inc................................
-----------
Total...................................................
===========
</TABLE>
The underwriters are offering the shares of common stock subject to their
acceptance of the shares from Impresse and subject to prior sale. The
underwriting agreement provides that the obligations of the several underwriters
to pay for and accept delivery of the shares of common stock offered hereby are
subject to the approval of legal matters by their counsel and to other
conditions. The underwriters are obligated to take and pay for all of the shares
of common stock offered, other than those covered by the overallotment option
described below, if any shares are taken. Morgan Stanley Dean Witter Online, an
affiliate of Morgan Stanley & Co. Incorporated, is acting as a selected dealer
in connection with the offering and will be the sole distributor of shares of
common stock over the Internet to its eligible account holders.
The underwriters initially propose to offer part of the shares of the common
stock directly to the public at the public offering price set forth on the cover
page hereof and part to dealers at a price that represents a concession not in
excess of $ a share under the public offering price. No underwriter will
allow, and no dealer will reallow, any concession to other underwriters or to
other dealers. After the initial offering of the shares of common stock, the
offering price and other selling terms may from time to time be varied by the
representatives.
The underwriters have informed Impresse that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.
At the request of Impresse, the underwriters have reserved up to
shares of common stock offered for sale at the initial public offering price to
employees of Impresse, friends and families of employees of Impresse, service
providers, employees of customers and others. The number of shares available for
sale to the general public will be reduced to the extent that these persons
purchase reserved shares. Any reserved shares not so purchased will be offered
by the underwriters to the general public on the same basis as other shares of
common stock in this offering.
Impresse has submitted an application to have its common stock approved for
quotation on the Nasdaq National Market under the symbol "IMPC."
Each of Impresse and the directors, officers and substantially all other
stockholders of Impresse has agreed that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the
57
<PAGE>
underwriters, it will not, during the period ending 180 days after the effective
date of the registration statement filed for this offering:
- offer, pledge, sell, contract to sell, engage in any short sale, sell any
option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of common stock or any
securities convertible into or exercisable or exchangeable for common
stock; or
- enter into any swap or similar agreement that transfers, in whole or in
part, the economic consequences of ownership of the common stock;
whether any transaction described above is to be settled by delivery of common
stock or other securities, in cash or otherwise.
The restrictions described in the previous paragraph do not apply to some
circumstances, including:
- the sale of the shares to the underwriters;
- the issuance by Impresse of shares of restricted stock awards under
Impresse's existing employee benefit plans or of common stock upon the
exercise of an option or a warrant or the conversion of a security
outstanding on the date of this prospectus restricted by a lock up period
at least 180 days after the effective date of the registration statement
for this offering;
- the grant of options by Impresse to officers, directors, employees or
consultants provided the options are restricted by a lock up period at
least 180 days after the effective date of the registration statement for
this offering; or
- transactions by any person other than Impresse relating to shares of
common stock or other securities acquired in open market transactions
after the completion of the offering of the shares.
In addition, the stockholders of Impresse have agreed that, without the
prior written consent of Morgan Stanley & Co. Incorporated on behalf of the
underwriters, neither it nor any of its affiliates will, during the period
ending 180 days after the date of this prospectus, make any demand for, or
exercise any right for, the registration of any shares of common stock or any
security convertible into or exercisable or exchangeable for common stock.
Morgan Stanley & Co. Incorporated may choose to release some or all of the
shares subject to the lock up restrictions described above prior to the
expiration of the 180 day period with or without prior public notice, although
it has no current intention to do so.
Impresse has granted to the underwriters an option, exercisable for 30 days
from the date of this prospectus, to purchase up to 525,000 additional shares of
common stock at the public offering price listed on the cover page hereof, less
underwriting discounts and commissions. The underwriters may exercise this
option solely to cover over-allotments, if any, made in connection with the
offering of the shares of common stock. To the extent this option is exercised,
each underwriter will become conditionally obligated to purchase approximately
the same percentage of these additional shares of common stock as the number
listed next to the underwriter's name in the preceding table bears to the total
number of shares of common stock listed next to the names of all underwriters in
the preceding table.
In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the common stock, the underwriters may bid for, and purchase, shares of
common stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
common stock in the offering if the syndicate repurchases previously distributed
common stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of
58
<PAGE>
these activities may stabilize or maintain the market price of the common stock
above independent market levels. The underwriters are not required to engage in
these activities, and may end any of these activities at any time.
Impresse and the underwriters have agreed to indemnify each other against
liabilities, including liabilities under the Securities Act.
Some of the underwriters from time to time perform various investment
banking services for Impresse, for which these underwriters receive customary
compensation.
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for the common
stock. The initial public offering price will be determined by negotiations
between Impresse and the underwriters. The principal factors that will be
considered in determining the initial public offering price include the future
prospects of Impresse and its industry in general, the ability of Impresse's
management, sales, earnings and other financial and operating information of
Impresse in recent periods, the prospects for Impresse's future earnings, and
the price-earnings ratios, price-sales ratios, market prices of securities and
financial and operating information of companies engaged in activities similar
to those of Impresse. The estimated initial public offering price range listed
on the cover page of this preliminary prospectus may change as a result of
market conditions and changes in the other principal factors.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Impresse by Venture Law Group, a Professional Corporation, Menlo Park,
California. Jon E. Gavenman, a director of Venture Law Group, is the Secretary
of Impresse. Davis Polk & Wardwell, Menlo Park, California is representing the
underwriters in connection with this offering. Employees of Venture Law Group
and an investment partnership affiliated with Venture Law Group own a total of
31,746 shares of Impresse's common stock, including 4,286 shares of common stock
held by Mr. Gavenman and 4,286 shares of common stock held by a trust associated
with Mr. Green. The value of each of Mr. Gavenman's and Mr. Green's shares based
upon an assumed initial public offering price is $12.00 per share.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements at December 31, 1998 and 1999, and for the period from October 7,
1997 (inception) through December 31, 1997 and for the years ended December 31,
1998 and 1999, as detailed in their report. We have included our financial
statements in the prospectus and elsewhere in the registration statement in
reliance on Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.
ADDITIONAL INFORMATION
Impresse has filed with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act for the common stock
offered under this prospectus. This prospectus does not contain all of the
information set forth in the registration statement and the exhibits. For
further information on Impresse and the common stock offered under this
prospectus, reference is made to the registration statement and the exhibits.
Statements contained in this prospectus regarding the contents of any contract
or any other document to which reference is made are not necessarily complete.
In each instance where a copy of a contract or other document has been filed as
an exhibit to the registration statement, reference is made to the exhibit for a
more complete description of the matter involved. A copy of the registration
statement and the exhibits may be inspected without charge at the Public
Reference Room of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies of all or any part of the registration
statement may be obtained from the Public Reference Section of the
59
<PAGE>
Commission upon the payment of the fees prescribed by the Commission. The public
may obtain information on the operation of the Public Reference Room by calling
the Commission at 1-800-SEC-0330. The Commission also maintains a Web site
(HTTP://WWW.SEC.GOV) that contains reports, proxy and information statements and
other information regarding registrants, such as Impresse, that file
electronically with the Commission.
Impresse intends to provide its stockholders with annual reports containing
combined financial statements audited by an independent accounting firm and
quarterly reports containing unaudited combined financial data for the first
three quarters of each fiscal year.
60
<PAGE>
IMPRESSE CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Balance Sheet............................................... F-3
Statement of Operations..................................... F-4
Statement of Stockholders' Equity........................... F-5
Statement of Cash Flows..................................... F-7
Notes to Financial Statements............................... F-8
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Impresse Corporation
We have audited the accompanying balance sheet of Impresse Corporation as of
December 31, 1998 and 1999, and the related statements of operations,
stockholders' equity, and cash flows for the period from October 7, 1997
(inception) through December 31, 1997 and 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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Impresse Corporation at
December 31, 1998 and 1999, and the results of its operations and its cash flows
for the period from October 7, 1997 (inception) through December 31, 1997 and
the years ended December 31, 1998 and 1999, in conformity with accounting
principles generally accepted in the United States.
<TABLE>
<S> <C>
San Jose, California
January 19, 2000,
except for Note 11, as to which the date is
March , 2000
</TABLE>
- --------------------------------------------------------------------------------
The foregoing report is in the form that will be signed upon the completion of
the reincorporation and other matters described in Note 11 to the financial
statements.
<TABLE>
<S> <C>
/s/ ERNST & YOUNG LLP
San Jose, California
March 21, 2000
</TABLE>
F-2
<PAGE>
IMPRESSE CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, STOCKHOLDERS' EQUITY AT
------------------------- DECEMBER 31,
1998 1999 1999
----------- ----------- -----------------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $11,425,193 $48,077,472
Short-term investment............................. -- 997,020
Accounts receivable, net of allowance for doubtful
accounts of $20,000 in 1999..................... 17,500 222,296
Other current assets.............................. 218,581 790,264
----------- -----------
Total current assets............................ 11,661,274 50,087,052
Property and equipment, net......................... 963,567 3,549,689
Restricted cash..................................... -- 3,000,000
Other assets........................................ 300,000 3,370,918
----------- -----------
$12,924,841 $60,007,659
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 503,562 $ 985,235
Accrued compensation.............................. 45,449 572,690
Accrued liabilities............................... 407,613 674,551
Deferred revenue.................................. 17,500 289,885
Current portion of capital lease obligation....... 162,680 167,858
Current portion of long-term debt................. 1,000,000 2,563,015
----------- -----------
Total current liabilities....................... 2,136,804 5,253,234
Capital lease obligation, less current portion...... 285,447 117,589
Long-term debt, less current portion................ -- 3,938,943
Other long-term liabilities......................... -- 1,612,500
Commitments
Stockholders' equity:
Convertible preferred stock, $.001 par value;
17,180,485 shares in 1999 and 5,000,000 shares
pro forma authorized; 11,863,334 shares in 1998,
16,247,360 shares in 1999 and no shares pro
forma issued and outstanding.................... 11,863 16,247 $ --
Common stock, $.001 par value; 27,420,000 shares
in 1999 and 150,000,000 shares pro forma
authorized; 7,378,663 shares in 1998, 8,902,761
shares in 1999 and 25,150,121 shares pro forma
issued and outstanding.......................... 7,379 8,903 25,150
Additional paid-in capital........................ 14,944,263 87,235,234 87,235,234
Deferred stock compensation....................... -- (13,469,802) (13,469,802)
Notes receivable from stockholders................ (91,385) (535,385) (535,385)
Accumulated deficit............................... (4,369,530) (24,169,804) (24,169,804)
----------- ----------- -----------
Total stockholders' equity...................... 10,502,590 49,085,393 $49,085,393
----------- ----------- ===========
$12,924,841 $60,007,659
=========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE>
IMPRESSE CORPORATION
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 7,
1997
(INCEPTION)
THROUGH
DECEMBER 31, YEAR ENDED DECEMBER 31,
1997 1998 1999
------------- ----------- ------------
<S> <C> <C> <C>
Revenue:
Services............................................ $ -- $ -- $ 3,581
License............................................. -- -- 160,000
----------- ----------- ------------
Total revenue..................................... -- -- 163,581
Cost of revenue....................................... -- -- 520,352
----------- ----------- ------------
Gross loss........................................ -- -- (356,771)
----------- ----------- ------------
Operating expenses:
Sales and marketing................................. -- 1,085,735 7,861,151
Research and development............................ 6,471 2,571,394 6,396,431
General and administrative.......................... 18,849 755,774 2,051,078
Stock compensation and warrant expense.............. 37,600 2,623 3,189,150
----------- ----------- ------------
Total operating expenses.......................... 62,920 4,415,526 19,497,810
----------- ----------- ------------
Loss from operations.................................. (62,920) (4,415,526) (19,854,581)
Interest income, net.................................. 6,522 102,394 54,307
----------- ----------- ------------
Net loss.............................................. $ (56,398) $(4,313,132) $(19,800,274)
=========== =========== ============
Basic and diluted net loss per share.................. $ (.45) $ (3.45) $ (7.36)
=========== =========== ============
Shares used to compute basic and diluted net loss per
share............................................... 124,357 1,251,701 2,690,947
=========== =========== ============
Pro forma basic and diluted net loss per share
(unaudited)......................................... $ (1.30)
============
Shares used to compute pro forma basic and diluted net
loss per share (unaudited).......................... 15,226,871
============
</TABLE>
- ------------------------
Cost of revenue excludes $120,311 in 1999 of stock compensation and warrant
expense.
Sales and marketing excludes $2,623 in 1998 and $1,871,228 in 1999 of stock
compensation and warrant expense.
Research and development excludes $14,400 in 1997 and $746,597 in 1999 of
stock compensation and warrant expense.
General and administrative excludes $23,200 in 1997 and $451,014 in 1999 of
stock compensation and warrant expense.
See accompanying notes.
F-4
<PAGE>
IMPRESSE CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED NOTES
STOCK COMMON STOCK ADDITIONAL RECEIVABLE
--------------------- -------------------- PAID-IN DEFERRED STOCK FROM
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION STOCKHOLDERS
---------- -------- --------- -------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock to
founders for services
rendered................... -- $ -- 4,360,000 $4,360 $ 39,240 $ -- $ --
Repurchase of common stock
from a founder............. -- (600,000) (600) (5,400) -- --
Issuance of Series A
convertible preferred stock
for cash................... 8,000,000 8,000 -- -- 3,983,380 -- --
Net loss..................... -- -- -- -- -- -- --
---------- ------- --------- ------ ----------- ------- --------
Balance at December 31,
1997....................... 8,000,000 8,000 3,760,000 3,760 4,017,220 -- --
Issuance of common stock to
consultants for services
rendered................... -- -- 52,463 52 2,571 -- --
Issuance of Series A
convertible preferred
stock...................... 530,000 530 -- -- 264,570 -- --
Issuance of Series B
convertible preferred
stock...................... 3,333,334 3,333 -- -- 10,485,159 -- --
Issuance of common stock to
employees upon exercise of
options for cash and notes
receivable................. -- -- 3,786,700 3,787 185,548 -- (91,385)
Repurchase of common stock... -- -- (220,500) (220) (10,805) -- --
Net loss..................... -- -- -- -- -- -- --
---------- ------- --------- ------ ----------- ------- --------
Balance at December 31,
1998....................... 11,863,334 $11,863 7,378,663 $7,379 $14,944,263 $ -- $(91,385)
<CAPTION>
TOTAL
ACCUMULATED STOCKHOLDERS'
DEFICIT EQUITY
----------- -------------
<S> <C> <C>
Issuance of common stock to
founders for services
rendered................... $ -- $ 43,600
Repurchase of common stock
from a founder............. -- (6,000)
Issuance of Series A
convertible preferred stock
for cash................... -- 3,991,380
Net loss..................... (56,398) (56,398)
----------- -----------
Balance at December 31,
1997....................... (56,398) 3,972,582
Issuance of common stock to
consultants for services
rendered................... -- 2,623
Issuance of Series A
convertible preferred
stock...................... -- 265,100
Issuance of Series B
convertible preferred
stock...................... -- 10,488,492
Issuance of common stock to
employees upon exercise of
options for cash and notes
receivable................. -- 97,950
Repurchase of common stock... -- (11,025)
Net loss..................... (4,313,132) (4,313,132)
----------- -----------
Balance at December 31,
1998....................... $(4,369,530) $10,502,590
</TABLE>
See accompanying notes.
F-5
<PAGE>
IMPRESSE CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED NOTES
STOCK COMMON STOCK ADDITIONAL RECEIVABLE
--------------------- -------------------- PAID-IN DEFERRED STOCK FROM
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION STOCKHOLDERS
---------- -------- --------- -------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998..... 11,863,334 $11,863 7,378,663 $7,379 $14,944,263 $ -- $ (91,385)
Issuance of common stock to
employees upon exercise of
options for cash and notes
receivable..................... -- -- 1,683,475 1,683 865,148 -- (444,000)
Issuance of common stock to
consultants for services
rendered....................... -- -- 23,123 23 11,870 -- --
Issuance of Series B convertible
preferred stock................ 174,594 175 -- -- 537,325 -- --
Issuance of Series C convertible
preferred stock................ 4,209,432 4,209 -- -- 52,100,406 -- --
Issuance of warrant to purchase
common stock in connection with
Adobe agreement................ -- -- -- -- 1,752,000 -- --
Issuance of warrant to purchase
convertible preferred stock in
connection with term and
equipment loans................ -- -- -- -- 445,713 -- --
Issuance of warrant to purchase
convertible preferred stock in
connection with facility
operating lease................ -- -- -- -- 225,500 -- --
Repurchase of common stock....... -- -- (182,500) (182) (13,943) -- --
Deferred stock compensation
related to stock option
grants......................... -- -- -- -- 16,366,952 (16,366,952) --
Amortization of deferred stock
compensation................... -- -- -- -- -- 2,897,150 --
Net loss......................... -- -- -- -- -- -- --
---------- ------- --------- ------ ----------- ------------ ---------
Balance at December 31, 1999..... 16,247,360 $16,247 8,902,761 $8,903 $87,235,234 $(13,469,802) $(535,385)
========== ======= ========= ====== =========== ============ =========
<CAPTION>
TOTAL
ACCUMULATED STOCKHOLDERS'
DEFICIT EQUITY
------------ -------------
<S> <C> <C>
Balance at December 31, 1998..... $ (4,369,530) $ 10,502,590
Issuance of common stock to
employees upon exercise of
options for cash and notes
receivable..................... -- 422,831
Issuance of common stock to
consultants for services
rendered....................... -- 11,893
Issuance of Series B convertible
preferred stock................ -- 537,500
Issuance of Series C convertible
preferred stock................ -- 52,104,615
Issuance of warrant to purchase
common stock in connection with
Adobe agreement................ -- 1,752,000
Issuance of warrant to purchase
convertible preferred stock in
connection with term and
equipment loans................ -- 445,713
Issuance of warrant to purchase
convertible preferred stock in
connection with facility
operating lease................ -- 225,000
Repurchase of common stock....... -- (14,125)
Deferred stock compensation
related to stock option
grants......................... -- --
Amortization of deferred stock
compensation................... -- 2,897,150
Net loss......................... (19,800,274) (19,800,274)
------------ ------------
Balance at December 31, 1999..... $(24,169,804) $ 49,085,393
============ ============
</TABLE>
See accompanying notes.
F-6
<PAGE>
IMPRESSE CORPORATION
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 7,
1997
(INCEPTION)
THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, ---------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................... $ (56,398) $ (4,313,132) $(19,800,274)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. -- 101,719 920,138
Stock compensation and warrant expense.................... 37,600 2,623 3,189,150
Allowance for doubtful accounts........................... -- -- 20,000
Changes in operating assets and liabilities:
Accounts receivable..................................... -- (17,500) (224,796)
Other current assets.................................... (8,683) (209,898) (571,683)
Accounts payable........................................ 13,270 490,292 481,673
Accrued compensation.................................... 12,941 32,508 527,241
Accrued liabilities..................................... -- 407,613 (266,938)
Deferred revenue........................................ -- 17,500 272,385
------------ ------------ ------------
Net cash used in operating activities....................... (1,270) (3,488,275) (14,919,228)
------------ ------------ ------------
INVESTING ACTIVITIES
Purchase of short term investment........................... -- -- (997,020)
Purchases of property and equipment......................... -- (566,734) (3,130,617)
Increase in restricted cash................................. -- -- (3,000,000)
Increase in other assets.................................... -- (300,000) (1,662,500)
------------ ------------ ------------
Net cash used in investing activities....................... -- (866,734) (8,790,137)
------------ ------------ ------------
FINANCING ACTIVITIES
Principal payments under capital lease obligation........... -- (50,425) (162,680)
Proceeds from issuance of long-term debt.................... -- 1,000,000 6,000,000
Repayment of long-term debt................................. -- -- (138,997)
Increase in other long-term liabilities..................... -- -- 1,612,500
Proceeds from sale of convertible preferred stock........... 3,991,380 10,753,592 52,642,115
Proceeds from sale of common stock.......................... -- 97,950 422,831
Repurchases of common stock................................. -- (11,025) (14,125)
------------ ------------ ------------
Net cash provided by financing activities................... 3,991,380 11,790,092 60,361,644
------------ ------------ ------------
Net increase in cash and cash equivalents................... 3,990,110 7,435,083 36,652,279
Cash and cash equivalents at beginning of period............ -- 3,990,110 11,425,193
------------ ------------ ------------
Cash and cash equivalents at end of period.................. $ 3,990,110 $ 11,425,193 $ 48,077,472
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest...................................... $ -- $ 12,203 $ 489,167
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Property and equipment acquired under capital lease......... $ -- $ 498,552 $ --
============ ============ ============
Common stock issued in exchange for notes receivable from
stockholders.............................................. $ -- $ 91,385 $ 444,000
============ ============ ============
Common stock issued to consultants for services rendered.... $ -- $ 2,623 $ 11,893
============ ============ ============
Common stock issued to founders and employees for services
rendered, net of repurchases.............................. $ 37,600 $ -- $ --
============ ============ ============
Deferred compensation related to stock option grants........ $ -- $ -- $ 16,366,952
============ ============ ============
Warrant issued in connection with Adobe agreement........... $ -- $ -- $ 1,752,000
============ ============ ============
Warrants issued in connection with term and equipment
loans..................................................... -- -- $ 445,713
============ ============ ============
Warrant issued in connection with facility operating
lease..................................................... -- -- $ 225,500
============ ============ ============
</TABLE>
See accompanying notes.
F-7
<PAGE>
IMPRESSE CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Impresse has created an eHub for the commercial print industry that can
provide corporations and their commercial print suppliers with integrated
procurement and collaboration capabilities, industry-specific business
intelligence, improved price discovery, corporate systems integration and other
complementary services. Its impresse.com eHub also provides the transaction
automation and volume aggregation of an e-commerce marketplace.
Impresse was founded in October 1997 and was a development stage company
from inception through the three months ended September 30, 1999. During this
period Impresse did not have significant sales and its operating activities were
related primarily to the design and development of its e-commerce solutions,
building its corporate infrastructure, establishing relationships with suppliers
and customers and raising capital. Impresse focused its initial development
efforts on an intranet software solution designed to automate the commercial
print procurement processes within large corporations. In mid-1999, however,
Impresse recognized the opportunity to build upon its initial software
development efforts to create a broader, Internet-based business-to-business
e-commerce solution. Accordingly, Impresse shifted its efforts to the
development of its impresse.com service which was launched in August 1999.
The first sale of its impresse.com service occurred during the three months
ended December 31, 1999 and we have recognized services revenue of approximately
$4,000 during that period. In addition, Impresse derived $160,000 of other
license revenue during the three months ended December 31, 1999 from the
licensing of its intranet software solution.
Impresse has incurred significant losses since inception and, as of
December 31, 1999, had an accumulated deficit of approximately $24.2 million,
including a loss in the year ended December 31, 1999 of $19.8 million.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements. Actual
results could differ from these estimates.
CASH AND CASH EQUIVALENTS, SHORT-TERM INVESTMENT AND RESTRICTED CASH
Impresse generally invests its excess cash in money market accounts,
certificates of deposits and short-term commercial paper. Impresse considers all
highly liquid investments with a maturity from date of purchase of three months
or less to be cash equivalents. The carrying amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.
Impresse classifies its short-term investment as "available-for-sale." This
investment is recorded at fair value based on quoted market prices with
unrealized gains and losses, which are considered to be temporary, recorded as
other comprehensive income (loss) until realized.
In September 1999, Impresse entered into a term loan with a bank (see
Note 6). Under the terms of this agreement, Impresse is required to maintain at
least $3,000,000 with the bank as a form of security. As of December 31, 1999,
this amount was classified as restricted cash.
F-8
<PAGE>
IMPRESSE CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, net of accumulated depreciation
and amortization. Computer equipment and furniture and fixtures are depreciated
on a straight-line basis over their estimated useful lives of three to five
years. Leasehold improvements and equipment acquired under capital lease are
amortized over the shorter of the lease term or the estimated useful lives of
the related assets.
IMPAIRMENT OF LONG-LIVED ASSETS
Impresse continually monitors events and changes in circumstances that could
indicate carrying amounts of long-lived assets, including intangible assets, may
not be recoverable. When such events or changes in circumstances are present,
Impresse assesses the recoverability of long-lived assets by determining whether
the carrying value of such assets will be realized through undiscounted expected
future cash flows. Impresse incurred no impairment losses in 1998 or 1999.
REVENUE RECOGNITION
Services revenue consists of revenue from the use of the impresse.com
service. The impresse.com service enables corporations and their commercial
print suppliers to automate commercial print procurement and collaboration over
the Internet. Impresse charges a fixed percentage fee to commercial print
suppliers based on the gross dollar value of print volume procured through its
service. Our fee is for the use of our service from print project initiation
through project acceptance and delivery of printed materials. Impresse bills its
customers and recognizes revenue from the use of its service upon completion of
the print project which has taken between five and fifteen days from project
acceptance. Impresse currently does not charge a fee for the use of our
impresse.com service to the print buyer.
License revenue consists of revenue from the license of Impresse's intranet
software solution. Impresse recognized revenue in connection with the license of
its intranet software solution under Statement of Position (SOP) 97-2, SOFTWARE
REVENUE RECOGNITION, and SOP 98-9, MODIFICATION OF SOP 97-2, SOFTWARE REVENUE
RECOGNITION, WITH RESPECT TO CERTAIN TRANSITIONS. Revenue from the license of
software is recognized upon shipment of the product, provided that persuasive
evidence of an arrangement exists, the fee is fixed and determinable and
collection of the resulting receivable is considered probable.
When Impresse provides software license and hosting services and evidence of
fair value of each element is not available, the license fee is deferred and
recognized ratably along with hosting fees over the term of the hosting
agreement.
In 1999, two customers accounted for 76% and 22% of total revenue. Both of
these customers licensed our intranet software solution. Impresse no longer
intends to market or license its intranet software solution as a stand-alone
product and expects to derive substantially all of its revenue for the
foreseeable future from impresse.com service.
COST OF REVENUE
Cost of revenue consists primarily of expenses associated with the
maintenance and support of the impresse.com service, including personnel,
facilities overhead, equipment depreciation costs and web
F-9
<PAGE>
IMPRESSE CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
hosting fees. Cost of revenue also included, in connection with the license of
Impresse's intranet software solution, personnel and related overhead expenses
associated with implementation, training services and customer support
organizations.
RESEARCH AND DEVELOPMENT
Research and development expenditures are generally charged to operations as
incurred. Statement of Financial Accounting Standards (SFAS) No. 86, "Accounting
for the Costs of Computer Software to Be Sold, Leased or Otherwise Marketed,"
requires the capitalization of certain software development costs subsequent to
the establishment of technological feasibility. Based on Impresse's product
development process, technological feasibility is established upon the
completion of a working model. Through December 31, 1999, capitalizable costs
incurred after achieving technological feasibility have not been significant for
any development project. Accordingly, Impresse has charged all costs to research
and development expense in the periods they were incurred.
Impresse adopted SOP 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" during 1999, which requires
capitalization of certain costs incurred during the development of internal use
software. Through December 31, 1999 capitalizable costs incurred have not been
significant for any development project. Accordingly, Impresse has charged all
costs to research and development expense in the periods they were incurred.
ADVERTISING EXPENSES
Advertising expenses are charged to operations as incurred and were
insignificant for all periods presented.
STOCK-BASED COMPENSATION
Impresse accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees," and complies with the disclosure
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." Under APB
Opinion No. 25, compensation expense is based on the difference between the fair
value of Impresse's stock on the date of grant and the exercise price.
Impresse accounts for stock awards issued to non-employees in accordance
with the provisions of SFAS No. 123 and Emerging Issues Task Force Consensus No.
96-18, (EITF 96-18). Under SFAS No. 123 and EITF 96-18, stock awards issued to
non-employees are accounted for at their fair value using the Black-Scholes
method.
INTEREST INCOME, NET
Interest income, net includes interest income of $6,522 and no interest
expense for the period from October 7, 1997 (inception) through December 31,
1997. Interest income, net includes interest income of $117,160 and interest
expense of $14,766 for the year ended December 31, 1998. For the year ended
December 31, 1999 interest income, net includes interest income of $548,007 and
interest expense of $493,700.
F-10
<PAGE>
IMPRESSE CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INCOME TAXES
Impresse accounts for income taxes under the liability method whereby
deferred tax asset or liability account balances are calculated at the balance
sheet date using current tax laws and rates in effect for the year in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts expected
to be realized.
OTHER COMPREHENSIVE INCOME (LOSS)
Other comprehensive income (loss) includes revenues and expenses and gains
and losses that are not included in net loss, but, rather are recorded directly
in stockholders' equity. To date, Impresse has not had any significant
transactions that are required to be reported in other comprehensive income
(loss).
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of Impresse's cash and cash equivalents, short-term
investments, accounts receivable, accounts payable and accrued liabilities
approximate their fair values due to their short maturities. The fair values of
the equipment capital lease obligation and equipment and term loans are
estimated based on current interest rates available to Impresse for debt
instruments with similar terms, degrees of risk and remaining maturities. The
carrying values of these obligations approximate their respective fair values.
The carrying value of notes receivable from stockholders approximate their fair
value. The estimated fair values may not be representative of actual values of
the financial instruments that could have been realized as of the period end or
that will be realized in the future.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject Impresse to significant
concentrations of credit risk consist principally of cash and cash equivalents,
short-term investment and accounts receivable.
Cash and cash equivalents and short-term investment are deposited with
financial institutions that management believes are credit worthy.
Accounts receivable consists of balances due from a limited number of
customers. Impresse believes its concentration of credit risk with respect to
its customer balances is mitigated by the performance of ongoing evaluations of
its customers' financial condition. Impresse generally requires no collateral
from its customers. Impresse maintains an allowance for doubtful accounts based
on the expected collectability of its accounts receivable. To date, Impresse has
not experienced any significant losses with respect to its accounts receivable.
NET LOSS PER SHARE
Basic net loss per share is computed using the weighted-average number of
vested outstanding shares of common stock. Diluted net loss per share is
computed using the weighted-average number of shares of vested common stock
outstanding and, when dilutive, unvested common stock outstanding, potential
common shares from options and warrants to purchase common stock using the
treasury stock method and from convertible securities using the as-if-converted
basis. All potential common shares have been
F-11
<PAGE>
IMPRESSE CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
excluded from the computation of diluted net loss per share for all periods
presented because the effect would be antidilutive.
Pursuant to the Securities and Exchange Commission Staff Accounting Bulletin
No. 98, common stock and convertible preferred stock issued for nominal
consideration, prior to the anticipated effective date of Impresse's proposed
initial public offering (IPO), are included in the calculation of basic and
diluted net loss per share as if they were outstanding for all periods
presented. To date, Impresse has not had any issuances or grants for nominal
consideration.
Basic and diluted pro forma net loss per share have been computed as
described above and also give effect, under Securities and Exchange Commission
guidance, to the automatic conversion of the preferred stock into shares of
common stock effective upon the closing of Impresse's IPO as if their conversion
occurred at the original date of issuance.
The following table presents the calculation of basic and diluted and pro
forma basic and diluted net loss per share.
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 7, 1997
(INCEPTION) YEAR ENDED DECEMBER 31,
THROUGH --------------------------
DECEMBER 31, 1997 1998 1999
------------------ ----------- ------------
<S> <C> <C> <C>
Net loss........................... $ (56,398) $(4,313,132) $(19,800,274)
=========== =========== ============
Basic and diluted:
Weighted average common shares
outstanding.................... 1,644,862 4,884,281 7,901,564
Less weighted-average common
shares subject to repurchase... (1,520,505) (3,632,579) (5,210,617)
----------- ----------- ------------
Shares used to compute basic
and diluted net loss per
share........................ 124,357 1,251,702 2,690,947
=========== =========== ============
Basic and diluted net loss per
share............................ $ (.45) $ (3.45) $ (7.36)
=========== =========== ============
Pro forma basic and diluted
(unaudited):
Shares used above................ 2,690,947
Weighted average convertible
preferred stock outstanding, as
if converted................... 12,535,924
------------
Shares used to compute pro
forma basic and diluted net
loss per share............... 15,226,871
============
Pro forma basic and diluted net
loss per share................... $ (1.30)
============
</TABLE>
F-12
<PAGE>
IMPRESSE CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
The total number of unvested and potential common shares excluded from the
calculation of diluted net loss per share is as follows:
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 7, 1997
(INCEPTION) YEAR ENDED DECEMBER 31,
THROUGH -------------------------
DECEMBER 31, 1997 1998 1999
------------------ ----------- -----------
<S> <C> <C> <C>
Shares subject to repurchase....... 3,322,963 6,023,163 5,352,780
Potential dilutive securities:
Options.......................... -- 1,000 1,768,525
Warrants......................... -- 50,000 483,428
Preferred stock.................. 8,530,000 11,863,334 16,247,360
----------- ----------- -----------
11,852,963 17,937,497 23,852,093
=========== =========== ===========
</TABLE>
These instruments have been excluded because their effect would be
antidilutive.
RECENT ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes methods for derivative financial instruments and hedging activities
related to those instruments, as well as other hedging activities. Because
Impresse does not currently hold any derivative instruments and does not engage
in hedging activities, the adoption of SFAS No. 133 is not expected to have a
significant impact on its financial position, results of operations or cash
flows. Impresse will be required to implement SFAS No. 133, as amended, for the
year ending December 31, 2001.
2. SHORT-TERM INVESTMENT
Short-term investment as of December 31, 1999 is comprised of the following:
<TABLE>
<CAPTION>
AMORTIZED
COST
------------
<S> <C>
Money market funds.......................................... $ 50,983,430
Commercial paper............................................ 997,020
------------
51,980,450
Less amounts classified as:
Restricted cash........................................... (3,000,000)
Cash and cash equivalents................................. (47,983,430)
------------
Short-term investment....................................... $ 997,020
============
</TABLE>
As of December 31, 1999 the contractual maturity of Impresse's investment
portfolio was less than 6 months and its fair value approximated the amortized
cost. Realized and unrealized gains or losses for all periods presented were
insignificant. Impresse had no short term investments as of December 31, 1998.
F-13
<PAGE>
IMPRESSE CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1998 1999
---------- ----------
<S> <C> <C>
Computer equipment................................... $ 477,817 $3,280,204
Furniture and fixtures............................... 449,458 761,341
Leasehold improvements............................... 138,011 125,358
---------- ----------
1,065,286 4,166,903
Less accumulated depreciation and amortization....... (101,719) (617,214)
---------- ----------
$ 963,567 $3,549,689
========== ==========
</TABLE>
Property and equipment includes assets acquired under a capital lease
financing of $498,552 at December 31, 1998 and 1999. Accumulated amortization
related to leased assets was $86,073 at December 31, 1998 and $238,691 at
December 31, 1999.
4. OTHER ASSETS
Other assets consist of deferred expenses of $1,752,000 and $225,500 related
to fully vested, non-forfeitable and immediately exercisable warrants issued
during 1999 in connection with the Adobe agreement and a facility operating
lease, respectively. The value of these warrants was determined using the
Black-Scholes model and the following assumptions: volatility of 75%, interest
rate of 6%, dividend yield of 0% and a life equal to the term of these warrants
(10 years). In 1999, amortization of the value of these warrants of $292,000 was
recorded as stock compensation and warrant expense. See Notes 5 and 7 for
further information on these securities.
The balance of other assets includes the cost of intellectual property
acquired in 1999 and long term deposits. In 1999, amortization of the cost of
acquiring intellectual property of $277,083 was recorded as research and
development expense.
The remaining amounts are being amortized over their respective estimated
periods of benefit, ranging from one to seven years.
5. LEASES AND COMMITMENTS
In 1998, the Company entered into a $500,000 equipment lease line of credit
which was fully utilized at March 31, 1999. The lease line of credit bears
interest at the annual prevailing rate. In connection with this financing, the
Company issued the lessor a fully vested, non-forfeitable and immediately
exercisable warrant to purchase 50,000 shares of Series A convertible preferred
stock at $.50 per share. The warrant expires on June 30, 2004. The fair value of
the warrant at the date of issuance was insignificant and accordingly, no value
was recorded. Impresse also leased office space under operating leases that
expire at various dates through May 2007. Rental expense under these operating
leases was approximately $135,000 in 1998 and $658,000 in 1999. There was no
rent expense in 1997.
F-14
<PAGE>
IMPRESSE CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. LEASES AND COMMITMENTS (CONTINUED)
As of December 31, 1999, future minimum lease payments under a noncancelable
equipment capital lease obligation and noncancelable facility operating leases
were as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- -----------
<S> <C> <C>
Years ending December 31:
2000............................................... $ 174,343 $ 1,228,105
2001............................................... 119,045 1,762,890
2002............................................... -- 1,865,414
2003............................................... -- 1,961,311
2004............................................... -- 2,077,165
Thereafter........................................... -- 5,508,919
--------- -----------
Total minimum lease and principal payments........... 293,388 $14,403,804
===========
Less amount representing interest.................... (7,941)
---------
Present value of future payments..................... 285,447
Less current portion of capital lease obligation..... (167,858)
---------
Noncurrent portion................................... $ 117,589
=========
</TABLE>
In November 1999, Impresse concluded an agreement with Adobe Systems for its
impresse.com service to serve as the exclusive print procurement solution for
adobe.com. The agreement includes technology cooperation to integrate certain
technologies, such as PDF workflows, with its impresse.com service. As part of
this agreement, Impresse is required to pay Adobe referral fees based on a
percentage of the services revenue from Adobe-sourced customers, subject to
guaranteed minimums. The agreement has an initial term of one year and may be
renewed upon mutual consent. These payments will be recorded as sales and
marketing expense as incurred. In connection with this agreement, Adobe
purchased 242,130 shares of Series C convertible preferred stock at $12.39 per
share during the preferred stock financing in November 1999. Also, in connection
with this agreement, Impresse issued a fully vested, non-forfeitable and
immediately exercisable warrant to Adobe to purchase 240,000 shares of its
common stock at $.50 per share. This warrant expires on November 15, 2009. See
Notes 4 and 7 for further information on this security.
In December 1999, Impresse entered into a lease agreement for additional
office space commencing in June 2000. Future payments under this noncancelable
operating lease are included in the above table. In connection with this
agreement Impresse issued a fully vested and non-forfeitable warrant to purchase
22,000 shares of Series C convertible preferred stock at $12.39 per share. This
warrant expires on December 2009. See Notes 4 and 7 for further information on
this security.
6. LONG-TERM DEBT
At December 31, 1998, Impresse had borrowed $1,000,000 under a working
capital line of credit with a bank. In September 1999, this facility was
converted to a term loan that bears interest at the lender's prime rate plus
.25% per annum (8% at December 31, 1999). Under this agreement, Impresse is
obligated to make 36 equal monthly interest and principal payments through
September 2002. The term loan agreement contains restrictive covenants,
including a limitation on incurring additional indebtedness,
F-15
<PAGE>
IMPRESSE CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT (CONTINUED)
paying dividends and requires Impresse to maintain certain minimum balance
requirements. Impresse has pledged substantially all of its tangible assets as
collateral for this term loan.
In June 1999, Impresse obtained a subordinated term loan totaling $5,000,000
from two financial institutions. The term loan is subordinated to all other
outstanding debt and bears interest at the U.S. treasury note rate plus 7.5% per
annum (13.2% at December 31, 1999). Impresse is obligated to make monthly
payments of interest only through January 2000. Beginning in February 2000,
Impresse will make 30 equal monthly principal and interest payments through
July 2002. The term loan agreement contains restrictive covenants, including a
limitation on incurring additional indebtedness and paying dividends. Impresse
has pledged substantially all of its tangible assets as collateral for this
subordinated term loan.
Also, in June 1999, Impresse obtained an equipment loan totaling $1,000,000
from the same two financial institutions. This equipment loan bears interest at
the U.S. treasury note rate plus 2.5% per annum (8.4% at December 31, 1999) and
is due and payable in 36 equal monthly principal and interest payments through
July 2002.
In connection with the subordinated term loan and the equipment loan,
Impresse issued fully vested, non-forfeitable and immediately exercisable
warrants to purchase 171,428 shares of Series B preferred stock at $3.15 per
share. These warrants expire on June 2009. Impresse has valued these warrants
using the Black Scholes model and the following assumptions: volatility of 75%,
interest rate of 6%, dividend yield of 0% and a life equal to the term of the
warrants (10 years) at approximately $445,712, which has been recorded as a debt
discount and is being accreted to interest expense over the 36 month term of the
loans. In 1999, amortization of the value of these warrants of $86,667 was
recorded as interest expense. See Note 7 for further information on these
securities.
Amounts available under all the above financing arrangements are fully
utilized at December 31, 1999.
7. STOCKHOLDERS' EQUITY
PREFERRED STOCK
A summary of convertible preferred stock is as follows:
<TABLE>
<CAPTION>
AUTHORIZED AND ISSUED AND LIQUIDATION
DESIGNATED OUTSTANDING PREFERENCE
-------------- ----------- -----------
<S> <C> <C> <C>
Series A............................... 8,580,000 8,530,000 $ 4,265,000
Series B............................... 4,000,000 3,507,928 11,049,973
Series C............................... 4,600,485 4,209,432 52,154,862
---------- ---------- -----------
Total.................................. 17,180,485 16,247,360 $67,469,835
========== ========== ===========
</TABLE>
Each share of Series A, B and C preferred stock is convertible into common stock
on a one-for-one basis, subject to appropriate adjustment for common stock
splits, stock dividends and similar transactions. Conversion is automatic upon
the closing of an initial public offering of common stock in which the aggregate
gross proceeds to Impresse are at least $25,000,000 with a minimum offering
price of at least 1.3 times the Series C price per share.
F-16
<PAGE>
IMPRESSE CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
Each holder of Series A, B and C preferred stock is entitled to the number
of votes equal to the number of shares of common stock into which the preferred
stock is convertible.
Each holder of preferred stock is entitled to receive, when and as declared
by the board of directors, noncumulative dividends at the annual rate of $.05
per share for Series A, $.315 per share for Series B and $1.239 per share for
Series C preferred stock payable in preference and priority to any payment of
any dividend on common stock.
In the event of liquidation, in addition to the amounts set forth in the
table above, the holders of preferred stock are entitled to all declared but
unpaid dividends for each outstanding share of Series A, B and C preferred
stock. Any remaining assets will be distributed with equal priority on a pro
rata basis among the holders of Impresse's Series B preferred and common stock
provided that once each holder of Series B preferred stock has received an
aggregate of $6.30 per share, the holder will not be entitled to any further
distribution. Any remaining assets will be distributed on a pro rata basis among
the holders of the common stock.
As described in Notes 4, 5 and 6, Impresse has issued warrants to purchase
convertible preferred stock in connection with obtaining equipment capital lease
financing equipment and term loans and a facility operating lease. At
December 31, 1999, warrants to purchase 50,000 shares of Series A convertible
preferred stock at $.50 per share, 171,428 shares of Series B convertible
preferred stock at $3.15 per share and 22,000 shares of Series C convertible
preferred stock at $12.39 per share were outstanding and exercisable.
COMMON STOCK
In 1997, 3,760,000 shares of common stock, net of repurchases, were issued
to Impresse's founders and employees at $.01 per share in exchange for services
rendered. The outstanding shares are subject to certain transfer restrictions.
These shares are also subject to repurchase at the issuance price upon the
occurrence of certain events, including termination of employment. Impresse's
right of repurchase expires ratably over four years. At December 31, 1999,
1,642,963 shares were subject to repurchase.
As described in Notes 4 and 5, Impresse issued a warrant to purchase common
stock in connection with the Adobe agreement. At December 31, 1999 the warrant
to purchase 240,000 shares of common stock at $.50 per share was outstanding and
exercisable.
At December 31, 1999, an aggregate of 18,531,150 shares of common stock were
reserved for issuance upon the exercise of the warrants, conversion of preferred
stock, exercise of outstanding stock options and future issuance of stock
options.
F-17
<PAGE>
IMPRESSE CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. EMPLOYEE STOCK PLANS
1997 STOCK OPTION PLAN
During 1997, Impresse adopted the 1997 Stock Option Plan (the Plan). Under
the Plan, up to 6,867,537 shares of Impresse's common stock may be granted as
options or sold to eligible participants. Under the Plan, options to purchase
common stock may be granted at no less than 85% of the fair value on the date of
the grant (110% of fair value in certain instances), as determined by the board
of directors. Options generally vest over a four-year period and have a maximum
term of ten years. Options under the Plan are exercisable immediately, subject
to repurchase rights held by Impresse, which lapse over the vesting period. No
stock options were granted during the period from inception to December 31,
1997. As of December 31, 1999, 31,837 shares were available for future grant
under the Plan.
The following table summarizes information with respect to stock option
activity.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1998 1999
--------------------- ---------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Balance, beginning of year.......................... -- $ -- 1,000 $ .05
Options granted..................................... 3,894,700 .05 3,517,500 .81
Options exercised................................... (3,786,700) .05 (1,683,475) .51
Options canceled.................................... (107,000) .05 (66,500) .49
---------- ----------
Balance, end of year................................ 1,000 $ .05 1,768,525 $1.11
========== ==========
</TABLE>
As of December 31, 1999, 3,709,817 exercised shares were not vested and are
therefore subject to repurchase.
The following table summarizes information regarding options outstanding and
exercisable at December 31, 1999.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AND EXERCISABLE
-----------------------------------------------
WEIGHTED AVERAGE
NUMBER OF WEIGHTED AVERAGE REMAINING
EXERCISE PRICE SHARES EXERCISE PRICE CONTRACTUAL LIFE
- -------------- --------- ---------------- ----------------
<C> <C> <C> <S>
.05.$..... 1,000 $ .05 8.47 years
.35...... 13,750 .35 9.07
.45...... 20,125 .45 9.19
.50...... 1,014,650 .50 9.65
2.00..... 719,000 2.00 9.99
---------
1,768,525 $1.11 9.78 years
=========
</TABLE>
F-18
<PAGE>
IMPRESSE CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. EMPLOYEE STOCK PLANS (CONTINUED)
The fair value of each option was estimated at the date of grant using the
Black-Scholes option pricing model and the following weighted average
assumptions:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1999
---------- ----------
<S> <C> <C>
Weighted average risk-free interest rate.................... 5.33% 5.71%
Expected life............................................... 3.5 years 3.5 years
Expected dividend yield..................................... --% --%
Volatility.................................................. 75% 75%
</TABLE>
Weighted-average fair value of options granted during 1998 and 1999 was $.01
and $.15, respectively.
Had compensation cost been determined in accordance with SFAS No. 123, net
loss and net loss per share would have been changed to the amounts indicated
below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1998 1999
----------- ------------
<S> <C> <C>
Net loss:
As reported............................................... $(4,313,132) $(19,800,274)
Pro forma................................................. $(4,326,498) $(19,906,878)
Basic and diluted net loss per share:
As reported............................................... $ (3.45) $ (7.36)
Pro forma................................................. $ (3.46) $ (7.40)
</TABLE>
DEFERRED STOCK COMPENSATION
In connection with certain stock option grants in the year ended
December 31, 1999 Impresse recorded deferred stock compensation of $16,366,952.
This amount represents the difference between the exercise price and the deemed
fair value of Impresse's common stock on the date the stock options were
granted. Deferred stock compensation is being amortized using the graded vesting
method, in accordance with FASB Interpretation No. 28, over the vesting period
of each respective option, generally four years.
NOTES RECEIVABLE FROM STOCKHOLDERS
As of December 31, 1999, Impresse held full recourse notes receivable from
stockholders for the purchase of common stock upon exercise of stock options.
Interest accrues on the notes at the rate of 8% per annum. The entire principal
balances, together with all accrued interest, become due and payable at various
dates between April 2003 and December 2004.
401(k) PLAN
Impresse has a 401(k) Plan that allows all full-time employees to elect to
contribute up to 15% of their salary, subject to some limitations, on a pretax
basis. Under the terms of the 401(k) Plan, Impresse may make matching
contributions at its discretion. No matching contributions were made in 1998 or
1999.
F-19
<PAGE>
IMPRESSE CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES
As of December 31, 1999, Impresse had net operating loss carryforwards for
both federal and state purposes of approximately $20,000,000. Impresse also had
research and development tax credit carryforwards of approximately $300,000
each, for both federal and state purposes. The net operating loss carryforwards
and tax credit carryforwards will expire at various dates beginning in 2005
through 2019, if not utilized. The net operating loss carryforwards differ from
the accumulated deficit primarily as a result of certain reserves and accruals
not currently deductible for tax purposes.
Utilization of the net operating losses may be subject to a substantial
annual limitation due to the ownership change limitations provided by the
Internal Revenue Code of 1986, as amended, and similar state provisions. The
annual limitation may result in the expiration of net operating losses before
utilization.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
Impresse's deferred tax assets were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1999
----------- ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 1,700,000 $ 9,100,000
Research credit carryforwards............................. 150,000 500,000
Non-deductible amortization............................... -- 1,100,000
----------- ------------
Total deferred tax assets............................... 1,850,000 10,700,000
Valuation allowance......................................... (1,850,000) (10,700,000)
----------- ------------
Net deferred tax assets..................................... $ -- $ --
=========== ============
</TABLE>
Under SFAS No. 109, "Accounting for Income Taxes," deferred tax assets and
liabilities are determined based on differences between financial reporting and
tax bases of assets and liabilities and are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to reverse.
Based upon the weight of available evidence, which includes Impresse's
historical operating performance, the reported net losses for the period from
October 7, 1997 (inception) through December 31, 1997 and for the years ended
December 31, 1998 and 1999, and the uncertainties regarding Impresse's future
results of operations, a full valuation allowance has been provided against its
net deferred tax assets. It is more likely than not that the deferred tax assets
will not be realized. The valuation allowance increased by $1,850,000 during the
year ended December 31, 1998.
10. SEGMENT INFORMATION
Impresse has organized its business in a single operating segment, the sale
of business-to-business e-commerce solutions to the commercial printing market.
Impresse operates solely within the United States and to date has derived
all of its revenue from within the United States. All of its assets are also
located within the United States.
In 1999, two customers accounted for 76% and 22% of total revenue.
F-20
<PAGE>
IMPRESSE CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. SUBSEQUENT EVENTS (UNAUDITED)
UNAUDITED PRO FORMA STOCKHOLDERS' EQUITY
In January 2000, Impresse's board of directors authorized the filing of a
registration statement with the Securities and Exchange Commission to register
shares of its common stock in connection with the proposed initial public
offering (IPO). If the IPO is consummated under the terms presently anticipated,
all of the currently outstanding shares of convertible preferred stock will be
converted into shares of common stock upon the closing of the IPO. The effect of
this conversion has been reflected in unaudited pro forma stockholders' equity
in the accompanying balance sheet as of December 31, 1999.
REINCORPORATION IN DELAWARE
Prior to the completion of this offering, the Board of Directors will
approve the reincorporation of Impresse in the State of Delaware. The
reincorporation is expected to be approved by the stockholders prior to the
closing date of Impresse's initial public offering.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Prior to the completion of this offering, Impresse will amend and restate
its Certificate of Incorporation to provide for authorized capital stock of
150,000,000 shares of common stock and 5,000,000 shares of undesignated
preferred stock.
STOCK PLANS
In January 2000, the Board of Directors approved an increase in the number
of shares reserved for issuance under the 1997 Stock Plan by 4,132,463 shares.
In addition the Board approved an automatic increase in the number of shares
reserved under the Plan on the first day of each fiscal year beginning in 2001
and ending in 2007 equal to the lesser of 2,500,000 shares or 6% of Impress's
outstanding common stock on the last day of the preceding fiscal year or a
lesser number of shares determined by the Board of Directors.
In January 2000, the Board of Directors approved the 2000 Directors' Stock
Plan (the Directors' Plan). A total of 300,000 shares of common stock have been
reserved for issuance under the Directors' Plan. The Directors' Plan provides
for the grant of nonstatutory options to Impresse's non-employee directors. The
Directors' Plan provides that each person who becomes a nonemployee director of
Impresse after the effective date of the registration statement will be granted
a nonstatutory stock option to purchase 20,000 shares of common stock on the
date on which the optionee first became a nonemployee director of Impresse.
Thereafter, on the date of Impresse's Annual Stockholders Meeting each year,
each non-employee director will be granted an additional option to purchases
15,000 shares of common stock if, on that date, he or she had served on
Impresse's Board of Directors for at least six months.
In January 2000, the Board of Directors approved the 2000 Employee Stock
Purchase Plan (the Purchase Plan). A total of 500,000 shares of common stock has
been reserved for issuance under the Purchase Plan, as well as an automatic
annual increase on the first day of each of Impresse's fiscal years beginning in
2001 and ending in 2010 equal to the lesser of 500,000 shares or 2% of
Impresse's outstanding common stock on the last day of the immediately preceding
fiscal year or a lesser number of shares determined by the Board. The Purchase
Plan, which is intended to qualify under Section 423 of the Internal Revenue
Code, will be implemented in a series of overlapping offering periods of
approximately
F-21
<PAGE>
IMPRESSE CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
24 months duration, with new offering periods, other than the first offering
period, commencing on May 1 and November 1 of each year. Each offering period
will generally consist of four consecutive purchase periods of six months
duration, at the end of which an automatic purchase will be made by the
participant. The initial offering and purchase periods are expected to begin on
the effective date of Impresse's initial public offering. Eligible employees
will be able to purchase common stock through payroll deductions, which may not
exceed 20% of an employee's compensation, at a price equal to the lower of 85%
of the fair market value of Impresse's common stock at the beginning of each
offering period or the end of each purchase period. Under the plan employees are
not allowed to purchase more than $25,000 of stock in each calendar year and no
employee may purchase more than 2,000 shares in any one purchase period.
All of the above Board actions are expected to be approved by the
stockholders prior to the completion of Impresse's initial public offering.
STOCK OPTION GRANTS
Subsequent to December 31, 1999, Impresse approved grants to employees for
options to purchase 1,118,100 shares of common stock at $6.00 per share.
Impresse estimates that it will record additional deferred stock compensation of
approximately $5.6 million with regard to these grants.
SERIES C CONVERTIBLE PREFERRED STOCK
In January 2000, Impresse executed a second closing of its Series C
convertible preferred stock financing. Impresse raised approximately $2,400,000
by issuing 189,668 shares in connection with this closing. The rights,
preferences and privileges of the holders of this stock are similar to those of
the holders of Series C convertible preferred stock issued in 1999.
EQUIPMENT LEASE FINANCING
In January 2000, Impresse obtained a subordinated loan totaling $7,000,000
from a financial institution. This loan is subordinated to all other outstanding
debt and bears interest at 13.5%. Impresse is obligated to make monthly payments
of principal and interest through January 2003. This loan agreement contains
restrictive covenants including a limitation on incurring additional
indebtedness and paying dividends.
Also in January 2000, Impresse obtained an equipment lease line of credit
totaling $3,000,000 from the same financial institution with a lease term of
36 months.
All amounts are available under the subordinated loan and equipment lease
line.
This financial institution purchased 242,131 shares of Series C convertible
preferred stock at $12.39 per share during the previous round of Series C
convertible preferred stock financing in November 1999. Also, in connection with
the loan and equipment lease, Impresse issued fully vested and nonforfeitable
warrants to purchase 80,308 shares of Series C convertible preferred stock at
$12.39 per share. These warrants expire in January 2010. The value of the
warrants of $823,157 was determined using the Black-Scholes model and the
following assumptions: volatility of 75%, interest rate of 6%, dividend yield of
0% and a life of ten years will be amortized to interest expense over the 36
month term of the loan and equipment lease.
F-22
<PAGE>
IMPRESSE CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
CO-BRANDING AGREEMENT
In March 2000, Impresse entered into a co-branding agreement with
VerticalNet, under which VerticalNet agreed to develop, host and maintain
certain areas on its own web sites as well as a web site co-branded with
Impresse for a period of 15 months. As part of the agreement, Impresse is
required to pay VerticalNet certain minimum fees and a percentage of the
services revenue from VerticalNet-sourced customers. VerticalNet will also
purchase a minimum level of sponsorship and promotional items from Impresse. In
connection with this agreement, Impresse issued a fully vested, non-forfeitable
and immediately exercisable warrant to VerticalNet to purchase 68,966 shares of
its common stock at $14.50 per share. The warrant expires in September 2000. The
value of the warrant of $142,000 was determined using the Black-Scholes model
and the following assumptions: volatility of 75%; interest rate of 6%; dividend
yield of 0%; and a life of six month, this amount will be amortized over the
15-month term of the agreement.
F-23
<PAGE>
[IMPRESSE LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN 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 Impresse Corporation in
connection with the sale of common stock being registered. All amounts are
estimates except the SEC registration fee and the NASD filing fee and the Nasdaq
National Market listing fee.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
----------
<S> <C>
SEC registration fee........................................ $ 13,814
NASD filing fee............................................. 7,000
Nasdaq National Market listing fee.......................... 90,000
Printing and engraving expenses............................. 225,000
Legal fees and expenses..................................... 400,000
Accounting fees and expenses................................ 250,000
Blue Sky qualification fees and expenses.................... 5,000
Transfer Agent and Registrar fees........................... 15,000
Miscellaneous fees and expenses............................. 4,186
----------
Total................................................... $1,010,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "Delaware Law")
authorizes a court to award, or a corporation's Board of Directors to grant,
indemnity to directors and officers in terms sufficiently broad to permit
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933
(the "Securities Act"). Article Four of Impresse's Certificate of Incorporation
(Exhibit 3.2 hereto) and Article V of Impresse's Bylaws (Exhibit 3.4 hereto)
provide for indemnification of Impresse's directors, officers, employees and
other agents to the maximum extent permitted by Delaware Law. In addition, prior
to the closing of the offering, Impresse will enter into Indemnification
Agreements (Exhibit 10.3 hereto) with its officers and directors. The
Underwriting Agreement (Exhibit 1.1 hereto) also provides for
cross-indemnification between Impresse and the underwriters for some matters,
including matters arising under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since inception in October 1997, Impresse has issued and sold the following
unregistered securities:
1. Since inception Impresse has issued 6,835,700 options net of repurchases
and cancellations to purchase common stock of Impresse with a weighted average
exercise price of $.44 per share to a number of employees and directors of and
consultants to Impresse.
2. In October and December 1997, Impresse issued and sold 3,760,000 shares
of its common stock, net of repurchases, to its founders and employees.
3. In December 1997, April 1998 and August 1998, Impresse issued and sold
8,530,000 shares of its Series A preferred stock to investors for a total cash
consideration of $4,265,480. In December 1998, February 1999 and May 1999,
Impresse issued and sold 3,507,928 shares of its Series B preferred stock to
investors for a total cash consideration of $11,049,973. In November 1999 and
January 2000, Impresse issued and sold 4,399,100 shares of its Series C
preferred stock for a total cash consideration of $54,504,849.
II-1
<PAGE>
4. In June 1998, Impresse issued a warrant to purchase 50,000 shares of its
Series A preferred stock with an exercise price of $.50 per share to Lighthouse
Capital Partners in connection with the attainment of an equipment lease line.
In June 1999, Impresse issued warrants to purchase 171,428 shares of its
Series B preferred stock with an exercise price of $3.15 per share to entities
affiliated with Meier Mitchell in connection with the attainment of a credit
facility. In November 1999, Impresse issued a warrant to purchase 240,000 shares
of common stock at an exercise price of $.50 per share to Adobe Ventures III in
connection with a co-branding agreement with Adobe Systems Incorporated in
November 1999. In December 1999, Impresse, in connection with the execution of a
lease, issued a warrant to De Anza Properties to purchase 22,000 shares of
Impresse's Series C preferred stock at a price of $12.39 per share.
The issuances of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act as transactions by an issuer not involving any public offering.
In addition, certain issuances described in Item 2 were deemed exempt from
registration under the Securities Act in reliance upon Rule 701 promulgated
under the Securities Act. The recipients of securities in each transaction
represented their intentions to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution and
appropriate legends were affixed to the share certificates and warrants issued
in those transactions. All recipients had adequate access, through their
relationships with Impresse, to information about Impresse.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
1.1** Form of Underwriting Agreement (subject to negotiation).
3.1** Certificate of Incorporation of Impresse.
3.2* First Amended and Restated Certificate of Incorporation of
Impresse (proposed).
3.3** Bylaws of Impresse.
3.4* Amended and Restated Bylaws of Impresse (proposed).
4.1 Specimen Stock Certificate.
5.1 Opinion of Venture Law Group regarding the legality of the
common stock being registered.
10.1*+ Alliance Agreement dated November 15, 1999 between Impresse
and Adobe Systems Incorporated.
10.2*+ Strategic Supply, Services and Promotion Agreement dated
August 29, 1999 between Impresse and Hewlett-Packard
Company.
10.3* Form of Indemnification Agreement between Impresse and each
of its Officers and Directors.
10.4* 1997 Stock Option Plan.
10.5* 2000 Employee Stock Purchase Plan.
10.6* 2000 Directors' Stock Option Plan.
10.7* Standard Office Lease dated May 15, 1998 and amendments.
10.8* Offer Letter dated June 24, 1999 with Sanjai Bijawat.
10.9* Offer Letter dated January 29, 1999 with Scott Yetter.
10.10+ License Agreement with Henry B. Freedman dated January 20,
2000.
10.11+ Co-Branding Agreement with VerticalNet, Inc. dated March 3,
2000.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Counsel (see Exhibit 5.1).
24.1* Power of Attorney (see page II-4).
27.1* Financial Data Schedule (EDGAR-filed version only).
</TABLE>
- ------------------------
* Previously filed.
** To be supplied by amendment.
+ Confidential treatment requested as to certain portions of this Exhibit.
II-2
<PAGE>
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information
required to be disclosed or listed is not applicable or is shown in the
financial statements or notes to the financial statements.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements certificates in the
denominations and registered in the names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant the registrant has been advised that in the opinion of the Securities
and Exchange Commission this form of indemnification is against public policy as
expressed in the Act, and is, therefore, unenforceable. If a claim for
indemnification against liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer, or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether this form of indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of the issue.
The undersigned registrant 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 the registrant under 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 these securities at that time shall be deemed
to be the initial BONA FIDE offering.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Amendment No. 2 to Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the city of
Sunnyvale, State of California on March 22, 2000.
IMPRESSE CORPORATION
By: /s/ SANJAI BIJAWAT
--------------------------------------
Sanjai Bijawat
CHIEF FINANCIAL OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints, jointly and severally, Nimish Mehta and
Sanjai Bijawat, and each of them, as his attorney-in-fact, with full power of
substitution, for him in any and all capacities, to sign any and all amendments
to this Registration Statement (including post-effective amendments), and any
and all Registration Statements filed pursuant to Rule 462 under the Securities
Act, as amended, in connection with or related to the offering contemplated by
this Registration Statement and its amendments, if any, and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorney to any and all amendments
to said Registration Statement.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
*/s/ NIMISH MEHTA
------------------------------------ President, Chief Executive Officer and March 22, 2000
Nimish Mehta Director (Principal Executive Officer)
/s/ SANJAI BIJAWAT
------------------------------------ Chief Financial Officer (Principal March 22, 2000
Sanjai Bijawat Financial and Accounting Officer)
*/s/ SIVA KUMAR
------------------------------------ Vice President, Marketing and Chairman March 22, 2000
Siva Kumar of the Board
*/s/ ERIC ARCHAMBEAU
------------------------------------ Director March 22, 2000
Eric Archambeau
*/s/ BRUCE DUNLEVIE
------------------------------------ Director March 22, 2000
Bruce Dunlevie
*/s/ STEVEN J. GILBERT
------------------------------------ Director March 22, 2000
Steven J. Gilbert
*/s/ PAUL LEVY
------------------------------------ Director March 22, 2000
Paul Levy
*/s/ RUSSELL SIEGELMAN
------------------------------------ Director March 22, 2000
Russell Siegelman
*/s/ HATIM TYABJI
------------------------------------ Director March 22, 2000
Hatim Tyabji
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ SANJAI BIJAWAT
-------------------------------
Sanjai Bijawat
ATTORNEY-IN-FACT
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
1.1** Form of Underwriting Agreement (subject to negotiation).
3.1** Certificate of Incorporation of Impresse.
3.2* First Amended and Restated Certificate of Incorporation of
Impresse (proposed).
3.3** Bylaws of Impresse.
3.4* Amended and Restated Bylaws of Impresse (proposed).
4.1 Specimen Stock Certificate.
5.1 Opinion of Venture Law Group regarding the legality of the
common stock being registered.
10.1*+ Alliance Agreement dated November 15, 1999 between Impresse
and Adobe Systems Incorporated.
10.2*+ Strategic Supply, Services and Promotion Agreement dated
August 29, 1999 between Impresse and Hewlett-Packard
Company.
10.3* Form of Indemnification Agreement between Impresse and each
of its Officers and Directors.
10.4* 1997 Stock Option Plan (as amended).
10.5* 2000 Employee Stock Purchase Plan.
10.6* 2000 Directors' Stock Option Plan.
10.7* Standard Office Lease dated May 15, 1998 and amendments.
10.8* Offer Letter dated June 24, 1999 with Sanjai Bijawat.
10.9* Offer Letter dated January 29, 1999 with Scott Yetter.
10.10+ License Agreement with Henry B. Freedman dated January 20,
2000.
10.11+ Co-Branding Agreement with VerticalNet, Inc. dated March 3,
2000.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Counsel (see Exhibit 5.1).
24.1* Power of Attorney (see page II-4).
27.1* Financial Data Schedule (EDGAR-filed version only).
</TABLE>
- ------------------------
* Previously filed.
** To be supplied by amendment.
+ Confidential treatment requested as to certain portions of this Exhibit.
<PAGE>
EXHIBIT 4.1
================================================================================
COMMON STOCK [LOGO OF IMPRESSE CORPORATION] COMMON STOCK
NUMBER SHARES
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFICATE IS TRANSFERABLE SEE REVERSE FOR CERTAIN
IN DEFINITIONS AND A STATEMENT
AS TO THE RIGHTS,
PREFERENCES, PRIVILEGES AND
RESTRITIONS ON SHARES
CUSIP
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK,
$.001 PAR VALUE PER SHARE, OF
IMPRESSE CORPORATION
transferable on the books of the Corporation by the holder hereof in person
or by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned by a Transfer
Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
/s/ Sanjai Bijawat [CORPORATE SEAL /s/ Nimish Mehta
OF IMPRESSE CORPORATION]
CHIEF FINANCIAL OFFICER PRESIDENT AND
CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
TRANSFER AGENT AND REGISTRAR
BY /s/
AUTHORIZED SIGNATURE
================================================================================
<PAGE>
EXHIBIT 5.1
March 21, 2000
Impresse Corporation
1309 South Mary Avenue
Sunnyvale, CA 94087
REGISTRATION STATEMENT ON FORM S-1 (File No. 333-35923)
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 (File No.
333-95923) (the "REGISTRATION STATEMENT") to be filed by you with the
Securities and Exchange Commission on February 1, 2000, in connection with
the registration under the Securities Act of 1933 of shares of your Common
Stock (the "SHARES"). As your legal counsel in connection with this
transaction, we have also examined the company's Articles of Incorporation
and Bylaws and minutes relating to meetings of its Board of Directors and
shareholders.
It is our opinion that the Shares, when issued and sold in the
manner described in the Registration Statement, will be legally and validly
issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the
Registration Statement and further consent to the use of our name wherever it
appears in the Registration Statement and in any amendment to it.
Sincerely,
VENTURE LAW GROUP
A Professional Corporation
/s/ VENTURE LAW GROUP
JEG
<PAGE>
[Confidential Treatment Requested]
EXHIBIT 10.10
LICENSE AGREEMENT
This Agreement effective the 20th day of January 2000 ("Effective
Date") is by and between Henry B. Freedman, an individual having an address
of Box 2413, Springfield, Virginia 22152 (hereinafter "Licensor"); and
Impresse Corporation, a California corporation, having a place of business at
1309 South Mary Avenue, Sunnyvale, California 94087 (hereinafter "Licensee")
(collectively, the "Parties").
RECITALS
WHEREAS, Licensor is the owner of the Licensed Patent; and
WHEREAS, Licensee is desirous of acquiring from Licensor a
non-exclusive license under the Licensed Patent; and
WHEREAS, Licensee has paid Licensor a total of [*] in two payments
in November and December 1999, as consideration to enter into license
negotiations and as an advance against the License Fee (hereinafter "The
Standstill Money").
NOW, THEREFORE, for and in consideration of the foregoing premises
and of the mutual covenants set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the Parties, intending to be legally bound, covenant and agree as follows:
DEFINITIONS
As used herein the term "Licensed Patent" shall mean U.S. Patent No.
4,839,829 entitled Automated Printing Control System (hereinafter "the '829
Patent") and all divisionals continuations, continuations-in-part, reissues,
reexaminations, and/or extensions thereof, including all foreign counterparts
of the foregoing, and all other patents and/or patent applications that have
been or shall be filed and/or issued in the United States and all foreign
countries on any of the improvements included in the '829 Patent.
ARTICLE I - GRANT OF LICENSE
A. Licensor hereby grants to Licensee under the terms and
conditions hereinafter stated (i) a non-exclusive right and license to make,
advertise, have made, use and import into the United States systems (which
may include hardware, software and/or combinations of hardware and software)
embodying the claimed invention of the Licensed Patent (hereafter "Systems")
for its own use; and (ii) a non-exclusive right and license to allow others
("End-Users") to make use of and/or to otherwise access (but not to copy,
download, disseminate or otherwise obtain or appropriate) such Systems
through Licensee's Internet Web Site ("Web Site Use rights"). As used herein,
the term Web Site shall mean a computer-based resource, including the
hardware and/or software thereof, which can be reached by other computers or
network-capable appliances over one or more computer networks using a Uniform
Resource Locator (URL) and a Web Browser or similar application, or by other
such means. It is expressly
Freedman - Impresse Patent License Agreement Page 1 of 7
* Represents confidential information for which Impresse Corporation is
seeking confidential treatment with the Securities and Exchange Commission.
<PAGE>
[Confidential Treatment Requested]
understood and agreed between Licensor and Licensee that (i) Licensee may
deploy Systems within/as part of one or more hosted environments that are
physically separate from Licensee's address noted above, (ii) Licensor
reserves the exclusive right to grant further licenses to other users of
Systems of the Licensed Patent, and (iii) third parties, other than
Licensee's direct End-Users, acquire no license or other rights to make, use
or sell Systems under this Agreement.
B. Licensee shall not have the right to grant any sub-license or
other rights to third parties, other than the Web Site Use rights specified
above, under the rights granted to it by this Agreement.
C. Licensor hereby releases, acquits and forever discharges
Licensee; its subsidiaries and affiliated companies; its successors in
interest; its sales representatives, distributors and customers (collectively
referred to as "the Released Entities"); and each of the Released Entities'
respective owners, agents, representatives, attorneys, employees, officers,
directors, and stockholders from and against any and all claims, demands,
causes of action or liabilities of any kind, character or nature whatsoever,
for past and/or present infringements of the Licensed Patent arising out of
the offering for sale, making, having made, using, selling or importing of
Systems. The purpose and intent of this release is to ensure that Licensee,
its various representatives, distributors and customers are immune from suit
for any past and/or present infringement, including any claims of direct
infringement, contributory infringement and/or inducement of infringement by
others, of the Licensed Patent arising out of the offering for sale, making,
having made, using, selling or importing of Systems and/or parts thereof.
ARTICLE II - COMPENSATION A. As partial consideration for the
license and release granted herein and during the Term of this Agreement,
License agrees to pay Licensor [*] (the "Licensee Fee") to be paid pursuant
to the following schedule:
(ON OR BEFORE) DATE PAYMENT AMOUNT
------------------- --------------
1999 December 31 $ [*]
Within one (1) week following the Effective Date $ [*]
2001 January 14 $ [*]
2002 January 14 $ [*]
2003 January 14 $ [*]
2004 January 14 $ [*]
2005 January 14 $ [*]
It is agreed by both Parties that The Standstill Money shall be deemed the 31
December 1999 payment.
Freedman - Impresse Patent License Agreement Page 2 of 7
* Represents confidential information for which Impresse Corporation is
seeking confidential treatment with the Securities and Exchange Commission.
<PAGE>
[Confidential Treatment Requested]
B. As further consideration, Licensee also agrees to grant
Licensor, or the designee of Licensor, [*] shares of the common stock of
Licensee (the "Stock").
C. Licensee further agrees to pay Licensor within thirty (30)
days of the dates set forth below a Difference Fee, up to $100,000.00,
computed as follows:
Difference Fee = Shares*($2.00 - Share Price)
Where:
"Share Price" is equal to the actual price of one share of the
common stock of Licensee, adjusted for splits between the Effective Date and
the date of determination of the Difference Fee, if any; and
"Shares" is equal to the actual number of shares, adjusted for
splits between the Effective Date and the date of determination of the
Difference Fee, if any, of the Stock owned by Licensor on the date of
determination of the Difference Fee. The determination of "Shares" is to be
made with reference to the original [*] shares of the common stock of
Licensee granted hereunder and not any other shares of any class of stock of
Licensee that Licensor may subsequently acquire after the Effective Date.
DATES FOR DETERMINING THE DIFFERENCE FEE
----------------------------------------
2002 January 14
2003 January 14
2004 January 14
2005 January 14
If, on any of the above dates, the calculation of the Difference Fee results
in a sum equal to or less than zero dollars, no sums in addition to the
portion of the License Fee owed at that time shall be paid by Licensee to
Licensor for that date. Otherwise, Licensee will pay to Licensor, in addition
to any portion of the License Fee owed at that time, the Difference Fee for
that date.
For example, if on January 14, 2002, Licensor owns the original [*] shares
granted herein and one share of the common stock of Licensee has a market
value of fifty cents ($0.50), Licensor would receive an Difference Fee of [*]
($2.00 - 0.50)] in addition to the compensation due under Article II A.
As a further example, if on January 14, 2000, Licensor owns only 1000 shares
(adjusted for splits) of the original [*] shares granted herein and one
share of the common stock of Licensee has a market value of twenty-one
dollars ($21.00) (adjusted for splits), Licensor would not receive a
Difference Fee payment for
Freedman - Impresse Patent License Agreement Page 3 of 7
* Represents confidential information for which Impresse Corporation is
seeking confidential treatment with the Securities and Exchange Commission.
<PAGE>
that date, because the calculation of the Difference Fee would yield an
amount less than zero dollars [1000 * ($2.00 - 21.00) LESS THAN 0].
D. Notwithstanding any of the forgoing, if at any time after the
Effective Date Licensor enters into an agreement with any third party by
which said third party acquires a license under the '829 Patent or the
Licensed Patent with terms that are more favorable than those granted to
Licensee herein, Licensee shall be entitled to a discount of the Licensee Fee
in an amount equal to the difference between the License Fee due hereunder
and the terms granted to said third party, except that no refunds will be due
Licensee.
E. The payments of the Licensee Fee and Offset Fee and grant of
common stock set forth above shall be made even in the event that there is a
finding by a court of competent jurisdiction, that one or more claims of the
Licensed Patent is/are invalid, and such a finding shall not terminate, or
give rise to any rights by Licensee to terminate, this Agreement. Licensee
agrees that it will not challenge the validity or enforceability of the `829
Patent.
ARTICLE III - WARRANTIES AND OBLIGATIONS
A. Licensor warrants that, at the time of the execution of this
Agreement, it has the legal right and power to grant to Licensee the rights
granted under this Agreement.
B. Licensor warrants that it has not granted any rights or made
any commitments relative to the granting of any rights, which are
inconsistent with rights granted to Licensee under this Agreement.
C. Licensor makes no other representations or warranties,
express or implied, and does not assume any liability with respect to
infringement of patents or other rights of third parties due to Licensee's
operation under the license granted herein.
D. Licensor shall have no obligation to enforce the Licensed
Patent against any third party or to defend any action or suit that
challenges the validity of the Licensed Patent. Licensee shall have no rights
to enforce the Licensed Patent against any third party.
E. The Parties agree to take reasonable steps to ensure the
confidentiality of the terms of this Agreement and, accordingly, any release
of information relating to this Agreement must be reviewed and approved in
advance by each of the Parties, except that copies of this Agreement may be
made available to government agencies in compliance with regulations thereof
requiring the disclosure of material agreements. Neither party shall be
liable for disclosure of the terms of this Agreement if made in response
Freedman - Impresse Patent License Agreement Page 4 of 7
<PAGE>
to a valid order of a court or authorized agency of government; provided that
ten (10) days' notice first be given to the other party so a protective
order, if appropriate, may be sought by such party. Furthermore, either party
may disclose, in confidence, the terms of this Agreement to its financial
consultants, tax planners and/or advisors, attorneys, underwriters, and/or
third parties under an obligation to the disclosing party to preserve the
secrecy of the disclosing party's confidential information, without the
consent of the other party. Anything to the contrary notwithstanding,
Licensor may disclose the terms of this Agreement under suitable
confidentiality terms in connection with further licensing of the Licensed
Patent.
F. The Parties shall cooperate in reasonable efforts to
publicize the '829 Patent through the joint dissemination of a press release
in a form substantially similar to that attached hereto within sixty (60)
days of the Effective Date. Nothing herein shall preclude further
announcements by the Parties.
G. The Parties agree to a standstill period of fifteen (15) days
from the Effective Date during which time: (i) Licensor shall not engage in
any discussions or negotiations concerning the Licensed Patent with any third
party, and (ii) the parties shall, at Licensee's request, open negotiations,
to be conducted in good faith, towards an exclusive license of the Licensed
Patent in favor of Licensee. Nothing in this paragraph shall be construed as
requiring Licensee to open such negotiations or to take such an exclusive
license and the license granted in this Agreement shall remain in full force
and effect regardless of whether or not Licensee exercises its option to open
such negotiations.
ARTICLE IV - MARKING
Licensee shall mark and prominently display the legend "U.S. Patent
4,839,829" on all literature, users manuals and documentation produced that
promotes the system under the Licensed Patent and on all Web Sites that
promote or feature the system of the Licensed Patent. Furthermore, Licensee
must prominently list the Licensed Patent as licensed from henry B. Freedman
and must prominently list the web site and telephone number of Henry B.
Freedman as the owner of the Licensed Patent on Licensee's Internet Web Site.
ARTICLE V - TERM AND TERMINATION
A. Unless sooner terminated as provided below, this Agreement
shall remain in effect until the expiration of the last to expire of the
Licensed Patent (the Term).
B. If Licensee, at any time, defaults in any payments due
hereunder or breaches any material term of this Agreement, Licensor shall
have the right to give notice of such default or breach to Licensee, in
writing, and, if the default or breach is not cured within thirty (30) days
after receipt of the notice, Licensor, at its option, may immediately
terminate this Agreement and license granted herein by giving written notice
Freedman - Impresse Patent License Agreement Page 5 of 7
<PAGE>
of termination to Licensee. Upon termination, all Licensee Fee payments not
already paid shall be due and payable to Licensor.
ARTICLE VI - ADMINISTRATION
A. This Agreement shall be binding upon and shall inure to the
benefit of and be enforceable by Licensor and its successors in interest and
assigns. This Agreement and the rights granted hereunder are personal to
Licensee and Licensee may not sell, pledge, assign or transfer this Agreement
and the rights granted hereunder nor delegate any duties or obligations
hereunder, without the written consent of the Licensor, except that a change
of ownership or control of Licensee (whether by merger, operation of law, a
sale of all or substantially all of the assets of Licensee or otherwise)
shall not be deemed an impermissible assignment of this Agreement. Licensee
agrees to promptly notify Licensor of any change of ownership or control of
Licensee and upon such change of ownership or control all License Fee
payments due hereunder that have not been paid shall become immediately due
and payable to Licensor. For purposes of this Article VI, a change in
ownership or control with respect to Licensee means a transaction resulting
in (i) the sale, disposition or other transfer of greater than fifty percent
(50%) of the outstanding voting securities of Licensee by the current
stockholders of Licensee by way of merger, acquisition or operation of law;
(ii) a sale of all or substantially all of the assets of Licensee; or (iii)
the acquisition of the beneficial ownership (as determined with reference to
Rule 13d-3 of the General Rules and Regulations of the Securities Exchange
Act of 1934, as amended, in effect on the date of this Agreement) of greater
than fifty percent (50%) of the outstanding voting securities of Licensee.
B. This Agreement shall be construed interpreted and applied in
accordance with the law of the State of Virginia, without regard to that
State's body of law regarding conflicts of law.
C. The Parties agree that if in the event any either party shall
need to pursue its rights under this Agreement and license in a court of
competent jurisdiction, the court shall award to the prevailing party its
cost involved in pursuing the dispute, including reasonable attorneys' fees,
and such award shall be paid by the other party.
D. In the event that any provision of this Agreement is
determined by a court of competent jurisdiction to be unenforceable or
invalid the Parties hereto agree that such provision found to be
unenforceable or invalid shall be enforced to the full extent permitted and,
in any event, all other provisions of this Agreement shall remain valid and
enforceable as if the unenforceable or invalid portion had never been made a
part hereof. Furthermore, no damages for any act of infringement of the
Licensed Patent by Licensee or any of the Released Entities shall accrue from
the Effective Date.
Freedman - Impresse Patent License Agreement Page 6 of 7
<PAGE>
E. All notices required to be provided for by the terms of this
Agreement shall be given in writing and shall be deemed to have been duly
given if addressed and sent by registered or certified mail, return receipt
requested, with the postage prepaid, or by overnight courier service to the
address of such party as set forth above or to such other address as either
party may, by written notice, appoint for that purpose with a copy to counsel
for each party. Counsels are as follows:
<TABLE>
<CAPTION>
<S> <C>
Licensor: Licensee:
Ronald L. Panitch, Esq. Tarek N. Fahmi, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P. Blakely, Sokoloff, Taylor & Zafman LLP
One Commerce Square 1279 Oakmead Parkway
2005 Market Street, 22nd Floor Sunnyvale, California
Philadelphia, PA 19103 Telephone: (408) 720-8300
Telephone: (215) 965-1300 Facsimile: (408) 720-9397
</TABLE>
F. With respect to the subject matter of this Agreement, the
foregoing constitutes the entire and only understanding between the Parties,
and this Agreement supersedes any prior or collateral agreements or
understanding between the Parties with respect to the subject matter thereof.
No terms, conditions or statements purporting to modify, vary or waive the
terms of this Agreement shall be effective unless made in writing and signed
by the Parties hereto. This Agreement is the product of an arms-length
negotiation between the Parties, with each of the Parties being represented
by legal counsel of their choice. Nothing in this Agreement and the
negotiations leading to its consummation shall be construed as offering any
tax-related advice to either of the Parties by the other party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by its authorized representatives.
HENRY B. FREEDMAN IMPRESSE CORPORATION
/s/ Henry Freedman By: /s/ Sanjai Bijawat
- ------------------------ -----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Freedman - Impresse Patent License Agreement Page 7 of 7
<PAGE>
[Confidential Treatment Requested]
Exhibit 10.11
CO-BRANDING AGREEMENT
This Co-Branding Agreement (this "Agreement") dated March 3, 2000 (the
"Effective Date") is entered into between VerticalNet, Inc., a Pennsylvania
corporation having a principal place of business at 700 Dresher Road, Suite 100,
Horsham, Pennsylvania, 19044 ("VerticalNet"), and Impresse Corporation, a
California Corporation, having a principal place of business at 1309 South Mary
Avenue, Sunnyvale, California, 94087 ("Impresse").
BACKGROUND
WHEREAS, VerticalNet owns and operates a series of Online Communities
(defined below) that are accessible via the World Wide Web, each of which is
designed to be an online gathering place for businesses of a certain type or
within a certain industry; and
WHEREAS, Impresse desires to provide its commercial printing services
(the "Impresse Services") to Users (defined below) of VerticalNet Sites (defined
below); and
WHEREAS, Impresse and VerticalNet desire to create Co-Branded Site
(defined below) where users will be able to register to review and utilize the
Impresse Services and to promote such Co-Branded Site on VerticalNet Sites.
NOW, THEREFORE, in consideration of the mutual covenants herein, and
intending to be legally bound hereby, VerticalNet and Impresse agree as follows:
1. DEFINITIONS
1.1. AFFILIATE shall mean, when used with reference to a party, any
individual or entity directly or indirectly controlling, controlled by or under
common control with such party. For purposes of this definition, "control" means
the direct or indirect ownership of at least 50% of the outstanding voting
securities of a party, or the right to control the policy decisions of such
party.
1.2. BANNER shall mean a graphical image advertising the Impresse Site that
is posted in an area reasonably designated by VerticalNet for similar banner
advertisements and shall contain a Link (defined below) to the Co-Branded Site.
1.3. CO-BRANDED CONTENT shall mean all materials, data and similar
information presented on the pages of the Co-Branded Site.
1.4. CO-BRANDED SITE shall mean the Site (defined below) that contains both
a Frame (defined below) and a Window (defined below) which includes the Impresse
Area (defined below) and the VerticalNet Area (defined below) of the Co-Branded
Site.
1.5. CONFIDENTIAL INFORMATION shall mean, subject to the provisions of
Section 7.2, all proprietary and confidential information of a party, including,
without limitation, trade secrets, technical information, business information,
sales information, customer and potential customer lists and identities, product
sales plans, sublicense agreements, inventions, developments, discoveries,
software, know-how, methods, techniques, formulae, data, processes and other
trade secrets and proprietary ideas, whether or not protectable under patent,
trademark, copyright or other areas of law, that the other party has access to
or receives. For purposes of this Agreement,
1
* Represents confidential information for which Impresse Corporation is
seeking confidential treatment with the Securities and Exchange Commission.
<PAGE>
the Co-Branded Content shall not be considered Confidential Information of
Impresse. For purposes of this Agreement, this Agreement shall be considered
Confidential Information.
1.6. E-COMMERCE CENTER shall mean a web page on a VerticalNet Site which is
customized by VerticalNet to include a vendor's information, including the
vendor's branding; a Link to the vendor's catalog, auction item listings; the
vendor's career center including employment information; archives of; and Links
to other related content locations.
1.7. FRAME shall mean a portion of a Web page which surrounds a Window on
the top and left.
1.8. IMPRESSE AREA shall mean the Window portion of the Impresse Site
(defined below) less the Frame that will be placed around the Window of the
Co-Branded Site.
1.9. IMPRESSE MARK shall mean any trademark, service mark, trade name,
domain name, design or logo of Impresse or its Affiliates.
1.10. IMPRESSE SITE shall mean the Site located at www.impresse.com (and
any successor Site thereto).
1.11. IMPRESSE-VERTICALNET REVENUE shall have the meaning defined in
Section 4.6.2.
1.12. INTELLECTUAL PROPERTY shall mean any and all trade secrets, patents,
copyrights, trademarks, service marks, URLs, trade dress, brand features,
know-how and similar rights of any type under the laws of any applicable
governmental authority, including, without limitation, all applications and
registrations relating to any of the foregoing.
1.13. INTELLECTUAL PROPERTY RIGHTS shall mean all rights in and to
Intellectual Property, including, without limitation, all patent rights,
copyrights, trademarks, service marks, know-how and trade secrets.
1.14. LAUNCH DATE shall mean the day on which the Co-Branded Site and the
V-Solutions Area become fully operational and generally available on the
Internet.
1.15. LINK shall mean a link, including but not limited to a hyperlink,
button or banner, that connects two Sites in a manner so that when a User
clicks on the link, the User is transferred directly from one Site to a
second Site.
1.16. NEWSLETTER shall mean a text message containing information
supplied by Impresse and approved by VerticalNet (which approval shall not be
unreasonably withheld) that is transmitted via e-mail to Users of the
VerticalNet Sites who have provided their e-mail addresses to VerticalNet
along with permission to transmit such messages to the e-mail address.
1.17. ONLINE COMMUNITY shall mean a VerticalNet Site that acts as a
comprehensive source of information, dialogue and commerce for and links to
E-Commerce Centers and other Sites for a particular industry or service
market.
2
<PAGE>
1.18. PROPRIETARY FEATURE shall mean any name, trademark, service mark,
trade name, domain name, navigational element, copyright, or logo which is
proprietary to Impresse and/or VerticalNet, as appropriate.
1.19. SITE shall mean a site located on the World Wide Web portion of the
Internet.
1.20. TERM shall have the meaning set forth in Section 5.1
1.21. URL shall mean a universal resource locator used for the purpose of
identifying a Site located on the Internet.
1.22. USER shall mean a single person who accesses and views a Site whether
directly from a web browser or through a Link.
1.23. USER DATA shall mean all data generated by an Internet server that
relates to file requests, user identification, transaction logs, session times
and other information regarding the Users generated or collected by or through a
Co-Branded Site, but excluding any information that relates or refers to a
particular project of such User.
1.24. V-SOLUTIONS AREA shall mean a hub page accessible via a Link from the
home page of each VerticalNet Site which shall contain a list of categories of
business services, with each category further listing entities that provide such
services. Each individual company listing shall contain a Link to a Web page
hosted by VerticalNet that describes such company and the services it offers.
The V-Solutions Area will also feature the V-Solutions Link (defined below).
1.25. V-SOLUTIONS LINK shall mean the Link from the V-Solutions Area to the
Co-Branded Site.
1.26. VERTICALNET AREA shall mean the Frame area of the Co-Branded Site.
1.27. VERTICALNET MARK shall mean any trademark, service mark, trade name,
domain name, design or logo of VerticalNet.
1.28. VERTICALNET-IMPRESSE USERS shall have the meaning defined in Section
4.6.1
1.29. VERTICALNET SITE shall mean a Site owned and operated by VerticalNet
in the United States or a portion of such Site designated by VerticalNet.
1.30. WINDOW shall mean a portion of a Web page that is surrounded by a
Frame.
1.31. YEAR 2000 COMPLIANT shall mean with respect to any computer software
that to the extent that such software contains date-dependent functionality,
will: (1) contain four digit year codes, (2) properly process dates and date
values before, through and beyond January 1, 2000, including date calculations
with dates both before and after January 1, 2000, and (3) not suffer any impact
on performance as a result of dates beyond January 1, 2000; provided, however,
that for this warranty to apply the operating systems on which such software is
being run, and any network servers, Web browsers, databases and other software
that is used in conjunction with such software must also be Year 2000 Compliant
as defined herein.
3
<PAGE>
2. CO-BRANDED SITE
2.1. Impresse shall be responsible for: (a) the design, layout,
development, hosting and maintenance of the Impresse Area of the Co-Branded
Site; (b) providing VerticalNet with reasonable instructions and information
regarding the Impresse Services; (c) providing a tabbed area prominently
featured in a user interface within the Impresse Area of the Co-Branded Site
that points to a VerticalNet Online Community or Online Communities; (d)
modifying the Impresse online registration forms and system available on the
Co-Branded Site to require Impresse users to identify and match their business
activities with a VerticalNet Online Community or Online Communities; and (e)
providing VerticalNet with the URL addresses for the Co-Branded Site.
2.2. VerticalNet shall be responsible for: (a) the design, layout,
development, hosting and maintenance of the VerticalNet Area of the Co-Branded
Site; and (b) the design, layout, development, hosting and maintenance of the
V-Solutions Link.
2.3. Beginning on the Launch Date and continuing during the Term,
VerticalNet shall display the V-Solutions Area on the VerticalNet Sites.
VerticalNet shall likewise, during the Term, implement and maintain the
V-Solutions Link.
2.4. Beginning on the Launch Date and continuing during the Term,
VerticalNet shall not place advertising relating to the commercial printing
entities listed on Exhibit "A," or other such entities subsequently identified
by Impresse, on the VerticalNet Area of the Co-Branded Site.
2.5. Impresse hereby grants to VerticalNet a non-exclusive,
non-transferable, royalty-free, right and license to link to the Impresse Area
of the Co-Branded Site. Impresse shall permit Users who access the Co-Branded
Site to access and use Co-Branded Content from the Co-Branded Site for the
personal use of such Users in accordance with the then-current terms of
Impresse's standard license agreement governing the use of such Co-Branded
Content.
2.6. Nothing in this Agreement shall be construed as preventing Impresse or
VerticalNet from developing other co-branded versions of their materials, data,
information and content.
3. ONGOING SUPPORT
3.1. Impresse shall use commercially reasonable efforts to respond to all
support requests by VerticalNet relating to the Co-Branded Site within one
Business Day (as defined below) of Impresse's receipt of such notification.
Impresse shall use reasonable efforts to cure the reported problem as soon as
reasonably possible. VerticalNet shall provide Impresse with all information
reasonably requested by Impresse in connection with a reported problem for which
VerticalNet is requesting support under this Section 3.1. VerticalNet shall use
commercially reasonable efforts to respond to all support requests by Impresse
relating to the Co-Branded Site within one Business Day (as defined below) of
VerticalNet's receipt of such notification. VerticalNet shall use reasonable
efforts to cure the reported problem as soon as reasonably possible. Impresse
shall provide VerticalNet with all information reasonably requested by
VerticalNet in connection with a reported problem for which Impresse is
requesting support under this Section 3.1.
4
<PAGE>
[Confidential Treatment Requested]
3.2. Impresse will identify to VerticalNet primary and secondary contacts
who will be familiar with the Co-Branded Site and this Agreement. VerticalNet
will identify to Impresse primary and secondary contacts who will be familiar
with the Co-Branded Site and this Agreement.
3.3. VerticalNet shall have access to technical support from Impresse by
telephone from 8 a.m. Pacific Standard Time to 5 p.m. Pacific Standard Time,
Monday through Friday, Impresse holidays excluded (each a "Business Day,"
collectively "Business Days"). Impresse shall have access to technical support
from VerticalNet by telephone from 6 a.m. Eastern Standard Time to 6 p.m.
Eastern Standard Time, Monday through Friday, VerticalNet holidays excluded.
4. THE COMMERCIAL TERMS
4.1. DEVELOPMENT FEES. For the design, development and integration of the
V-Solutions Area and the VerticalNet Area of the Co-Branded Site, Impresse shall
pay to VerticalNet a one-time, nonrefundable development fee in the amount of
[*] payable on the Effective Date.
4.2. SLOTTING FEES. For the display of the V-Solutions Area and the
V-Solutions Link, Impresse shall pay to VerticalNet a slotting fee in the amount
of [*] payable pursuant to the terms of Section 4.5.
4.3. BANNER/NEWSLETTER PURCHASE COMMITMENT. During the Term of this
Agreement, Impresse agrees to purchase from VerticalNet Banners and
Newsletters for a total price of at least $[*] as set forth below in this
Section 4.3. All prices for such Banners and Newsletters shall be offered to
Impresse at a [*]% discount off of VerticalNet's then current prices for
similar Banners or Newsletters. All purchases shall be subject to
VerticalNet's standard terms and conditions governing advertising on
VerticalNet Sites. Impresse agrees to purchase at least $[*] of such Banners
and Newsletters in each calendar quarter after the Effective Date until a
total of $[*] have been purchased, provided, the total dollar amount
purchased by Impresse in any calendar quarter shall not consist of greater
than 70% of either Banners or Newsletters. Payment of the fees set forth in
this Section shall be made pursuant to the terms of Section 4.5.
4.4. HOSTING FEE. Impresse shall pay VerticalNet a service fee of $[*]
for the hosting and maintenance of the Co-Branded Site and the V-Solutions Link,
payable pursuant to the terms of Section 4.5.
4.5. PAYMENT TERMS. Impresse shall pay the fees set forth in Sections
4.2, 4.3 and 4.4 as an aggregate, totaling $[*] payable in four equal
quarterly installments of $[*] beginning on May 31, 2000 and thereafter on
August 31, 2000 November 30, 2000 and February 28, 2001, respectively.
4.6. REVENUE SHARING. Impresse shall pay VerticalNet [*]of Impresse
VerticalNet Revenue accruing during the term of this Agreement, payable to
VerticalNet on or before the thirtieth day of the calendar quarter
immediately following the quarter in which such revenue was collected by
Impresse. Such payments shall be accompanied by a statement containing
reasonable detail of the type and number of transactions from which the
Impresse
5
* Represents confidential information for which Impresse Corporation is
seeking confidential treatment with the Securities and Exchange Commission.
<PAGE>
VerticalNet Revenue was derived, the total Impresse VerticalNet Revenue for such
period and the total fees payable to VerticalNet pursuant to this Section 4.6.
4.6.1. "VerticalNet Impresse Users" are the Users that register with
Impresse through the Co-Branded Site, but specifically excluding those Users
who have previously registered with Impresse other than through the
Co-Branded Site.
4.6.2. The "Impresse VerticalNet Revenue" is Impresse's total net
transaction and subscription revenues collected by Impresse during the term
of this Agreement from VerticalNet Impresse Users.
4.6.3. If government regulations prevent Impresse from sharing any
revenues associated with Impresse Services, VerticalNet and Impresse shall
negotiate in good faith a compensation structure that seeks to provide
VerticalNet with compensation equal to that set forth in Section 4.6.
4.7. TAXES. All payments required under this Agreement are exclusive of
federal, state, local and foreign taxes, duties, tariffs, levies and similar
assessments. When applicable, such taxes shall appear as separate items on a
party's invoice or statement to the other party. Payment of such taxes or
charges shall be the responsibility of the party whose obligation it is under
this Agreement to make the payment in respect of which such taxes are assessed,
excluding any taxes based upon the other party's net income. In lieu thereof, a
party shall provide the other party with a tax or levy exemption certificate
acceptable to the taxing or levying authority.
4.8. AUDITS. During the term of this Agreement and for one year thereafter,
VerticalNet shall have the right to appoint a certified public accountant to
audit Impresse's financial records relating to such payment to verify the
accuracy of Impresse's financial records in order to verify the amount of the
payments owed and/or paid hereunder, but no more frequently than once per year.
If the amount owed by Impresse to VerticalNet was underpaid, the additional
amount owed shall be paid to VerticalNet within 15 days of notice of such
underpayment to Impresse. If the amount owed by Impresse to VerticalNet was
underpaid in excess of 10% of the amount owed, the fees of such audit shall also
be paid to VerticalNet within 15 days of notice of such to Impresse. If the
amount owed by Impresse to VerticalNet was overpaid, the excess amount paid
shall be returned by VerticalNet within 15 days of notice of such overpayment.
VerticalNet shall give reasonable advance notice to Impresse of such audit and
each audit shall be conducted in a manner that does not cause unreasonable
disruption to the conduct of business by Impresse. The results of any such audit
shall be deemed to be Confidential Information and may not be disclosed by
either party or its certified public accountants except as may be necessary to
enforce such party's rights.
4.9. INTEREST. All payments not paid by the date such payments are due
shall bear interest from the due date to the date payments are actually paid at
the lower of (i) 1% per month or (ii) the maximum rate permitted by law.
5. TERMINATION AND RENEWAL
5.1. The Term of this Agreement shall begin on the Effective Date and shall
end fifteen months therefrom.
6
<PAGE>
5.2. Either party may terminate this Agreement immediately upon written
notice to the other party in the event of any material breach of a term of this
Agreement by such other party that remains uncured 30 days after written notice
of such breach was received by such other party or, if the breach is not
reasonably capable of cure within 30 days, such longer period, not to exceed 60
days, so long as the cure is commenced within the 30-day period and thereafter
is diligently prosecuted to completion as soon as possible and in any event
within 60 days.
5.3. Upon termination or expiration of this Agreement, (i) Impresse shall
no longer have the right to use any VerticalNet Mark, (ii) VerticalNet shall no
longer have the right to use any Impresse Mark; (iii) Impresse may no longer
make any Co-Branded Content available for access and use through the Co-Branded
Site; (iv) VerticalNet shall cease framing the Window in the Co-Branded Site;
(v) VerticalNet shall remove the V-Solutions Link from the V-Solutions Area; and
(vi) VerticalNet shall cease displaying or transmitting all Banners and
Newsletters of Impresse.
5.4. Following expiration or termination of this Agreement, the terms and
provisions of Article 4 above shall continue to govern Impresse's payment
obligations for any payment obligations accruing during the term of this
Agreement. Following termination, Impresse shall provide VerticalNet with a
final accounting with respect to this Agreement and tender payment of amounts
due under Article 4 at the next scheduled payment date.
6. DISPUTE RESOLUTION
6.1. NEGOTIATION AND ESCALATION. If any controversy or claim arises
relating to this Agreement, the parties will attempt in good faith to negotiate
a solution to their differences, including progressively escalating any
controversy or claim through senior levels of management. If negotiation does
not result in a resolution within 30 days of the date one party first notifies
the other of the controversy or claim, either party may resort to arbitration
under Section 6.2.
6.2. ARBITRATION. Any controversy or claim between the parties concerning
any breach or alleged breach of this Agreement or performance or nonperformance
of any obligation under this Agreement which cannot be resolved by negotiation
will be resolved by binding arbitration under this Section 6.2 and the
then-current Commercial Rules and supervision of the American Arbitration
Association (the "AAA"). If any part of this Section 6.2 is held to be
unenforceable, it will be severed and will not affect either the duty to
arbitrate or any other part of this Section 6.2. The arbitration will be held
before a sole disinterested arbitrator who is knowledgeable in business
information and the Internet and experienced in handling commercial disputes.
The arbitrator shall be appointed jointly by the parties hereto within 30 days
following the date on which the arbitration is instituted. If the parties are
unable to agree upon the arbitrator within such 30-day period, the AAA shall be
instructed to select such arbitrator within 15 days thereafter. The arbitrator's
award will be final and binding and may be entered in any court having
jurisdiction. The arbitrator will not have the power to award punitive or
exemplary damages, or any damages excluded by, or in excess of, any damage
limitations expressed in this Agreement. Issues of arbitrability will be
determined in accordance solely with the federal substantive and procedural laws
relating to arbitration; in all other respects, the arbitrator will be obligated
to apply and follow the substantive law of the State of Delaware.
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6.3. EQUITABLE RELIEF. Notwithstanding anything to the contrary in this
Agreement, in the event of an alleged violation of Article 7 of this Agreement
by either party, the party alleging such a violation may seek temporary and
permanent injunctive or other appropriate equitable relief from any court of
competent jurisdiction pending appointment of an arbitrator. The party
requesting such relief shall simultaneously file a demand for arbitration of the
dispute, and shall request that the AAA proceed under its rules for an expedited
hearing.
6.4. COSTS. Unless the arbitrator, if any, determines otherwise, each party
will bear its own attorneys' fees and other costs associated with the
negotiation and arbitration provided for by this Article 6, except that costs
and expenses regarding the arbitrators shall be shared equally. If court
proceedings to stay litigation or compel arbitration are necessary, the party
who unsuccessfully opposes such proceedings will pay all associated costs,
expenses and attorneys' fees that are reasonably incurred by the other party. To
the extent that any claim in arbitration relates to the collection of amounts
owed under Article 4, the party entitled to collect such amounts shall be
entitled to recover all reasonable costs of collection, including expenses and
attorneys' fees that are incurred.
6.5. TWO YEAR LIMITATION. Except for claims under Sections 9.4 and 9.5
hereof, neither party may bring a claim or action regardless of form, arising
out of or related to this Agreement, including any claim of fraud or
misrepresentation, more than two years after the cause of action accrues or
becomes known, whichever is later.
6.6. CONFIDENTIALITY. In order to facilitate the resolution of
controversies or claims between the parties with respect to each party hereto,
such controversies or claims, including details regarding negotiations,
arbitration and settlement terms, shall be treated as Confidential Information
of the other party hereto in accordance with Article 7.
6.7. REMEDIAL MEASURES. In the event of (a) any material remediable breach
of this Agreement by the other party which remains uncured 30 days after notice
of such breach was received by the other party or (b) any material breach which
cannot be cured, the non-breaching party may take reasonable remediable measures
upon prior written notice and at the cost and expense of the breaching party
without prejudice and in addition to any other rights arising from such breach.
In addition, the non-breaching party shall take reasonable steps to mitigate
damages arising out of such breach.
7. CONFIDENTIALITY
7.1. CONFIDENTIALITY OBLIGATIONS. Except as permitted elsewhere under this
Agreement, each party agrees to take Reasonable Steps (as defined below) (a) to
receive and maintain the Confidential Information of the other party in
confidence and (b) not to disclose such Confidential Information to any third
parties, provided, the receiving party may disclose such Confidential
Information to its employees, representatives and agents who have a need to know
such information for purposes of carrying out the terms of this Agreement.
Neither party hereto shall use all or any part of the Confidential Information
of the other party for any purpose other than to perform its obligations under
this Agreement. The parties will take Reasonable Steps (as defined below) to
ensure that their employees, representatives and agents comply with this
provision. As used herein, "Reasonable Steps" means at least the same degree of
care that the
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receiving party uses to protect its own Confidential Information, and, in no
event, not less than reasonable care.
7.2. EXCLUSIONS. "Confidential Information" does not include information
that (a) is or becomes publicly available through no fault of the receiving
party; (b) was already known to the receiving party at the time it was disclosed
to the receiving party, as evidenced by records of the receiving party; (c) is
independently developed by employees of the receiving party who had no knowledge
of or access to such information, as evidenced by records of the receiving
party; (d) is received from a third party who is under no obligation of
confidentiality to the disclosing party; or (e) must be disclosed pursuant to
applicable laws, rules or regulations; provided, however, that the receiving
party first gives the disclosing party notice and a reasonable opportunity to
secure confidential protection of such Confidential Information.
7.3. TERMINATION. Subject to Section 10.11, upon termination of this
Agreement, all Confidential Information shall be returned to the disclosing
party or, at the request of the disclosing party, destroyed unless otherwise
specified or permitted elsewhere under this Agreement. Subject to Section 7.6,
the confidentiality obligations contained in this Article 7 shall survive
termination of this Agreement for a period of three years.
7.4. INJUNCTION. Each party acknowledges and agrees that the provisions of
this Article 7 are reasonable and necessary to protect the other party's
interests in its Confidential Information, that any breach of the provisions of
this Article 7 may result in irreparable harm to such other party, and that the
remedy at law for such breach may be inadequate. Accordingly, in the event of
any breach or threatened breach of the provisions of this Article 7 by a party
hereto, the other party, in addition to any other relief available to it at law,
in equity or otherwise, shall be entitled to seek temporary and permanent
injunctive relief restraining the breaching party from engaging in and/or
continuing any conduct that would constitute a breach of this Article 7, without
posting a bond or other security.
7.5. PUBLICITY. Neither party will originate any press release concerning
the relationship between the parties or the transactions described in this
Agreement without the prior written consent of the other party, which consent
shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, as
soon as reasonably practicable following the Effective Date, VerticalNet and
Impresse shall jointly issue a press release with respect to entering into this
Agreement.
7.6. USER DATA. Impresse shall provide VerticalNet with User Data on each
User that submits information through the Co-Branded Site by sending an email
with such information to an email address designated by VerticalNet at the time
the request occurs. User Data shall be maintained by each Party as Confidential
Information of the other Party during the Term and 5 years thereafter, provided
such User Data may be disclosed only as part of an aggregation or analysis of
all User Data but not as independent data. Upon termination of the Agreement,
VerticalNet and Impresse shall jointly own all User Data. Neither Party shall
use the User Data other than in accordance with the VerticalNet privacy policy
and all applicable laws during the Term and thereafter.
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8. REPRESENTATIONS AND WARRANTIES
8.1. REPRESENTATIONS AND WARRANTIES. Each party hereby represents,
covenants and warrants that:
8.1.1. It has the corporate power to enter into this Agreement
and to grant the rights and licenses granted herein and to otherwise perform
this Agreement;
8.1.2. It is not a party to any agreement or understanding and
knows of no law or regulation that would prohibit it from entering into and
performing this Agreement or that would conflict with this Agreement;
8.1.3. When executed and delivered by it, this Agreement will
constitute a legal, valid and binding obligation of it, enforceable against
it in accordance with this Agreement's terms, except as enforcement may be
limited by laws or regulations relating to bankruptcy, insolvency and
creditors rights or by principles of equity;
8.1.4. The portions of the Co-Branded Site provided by such
party are and will continue to be Year 2000 Compliant;
8.1.5. To the best of its knowledge, the portions of the
Co-Branded Site provided by such party and its own Site do not and will not
(i) contain any known viruses, Trojan Horse, worm or harmful code the purpose
of which is to disable or interrupt the operating of a computer system or
destroy, erase or otherwise harm any data, software or hardware, (ii) contain
any false, misleading, libelous or defamatory statements, (iii) constitute an
invasion of the rights of privacy or publicity of any third party, (iv)
violate any applicable laws, rules and regulations or (v) infringe, violate
or misappropriate any Intellectual Property Rights of any third party.
9. DISCLAIMER OF WARRANTY, LIMITATION OF LIABILITY AND INDEMNIFICATION
9.1. DISCLAIMER OF WARRANTIES BY VERTICALNET. EXCEPT AS EXPRESSELY SET
FORTH IN THIS AGREEMENT, VERTICALNET HEREBY DISCLAIMS ALL WARRANTIES, EXPRESS,
IMPLIED OR STATUTORY, WITH RESPECT TO THE VERTICALNET SITES, THE V-SOLUTIONS
AREA, THE V-SOLUTIONS LINK AND THE VERTICALNET AREA OF THE CO-BRANDED SITE,
INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE. VERTICALNET EXPRESSLY DISCLAIMS ANY AND ALL
WARRANTIES AS TO THE USER INTERFACE OR USER EXPERIENCE ASSOCIATED WITH THE
VERTICALNET SITES AND RESERVES THE RIGHT, IN ITS SOLE DISCRETION, TO MODIFY THE
PLACEMENT OF ALL LINKS, URLS AND PROPRIETARY FEATURES; PROVIDED, HOWEVER, THAT
IN THE EVENT VERTICALNET REDESIGNS THE USER INTERFACE, SUCH LINKS, URLS AND
PROPRIETARY FEATURES SHALL RECEIVE MUTUALLY AGREEABLE PLACEMENT SUBSTANTIALLY
SIMILAR TO THE ORIGINAL DESIGN.
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9.2. DISCLAIMER OF WARRANTIES BY IMPRESSE. EXCEPT AS EXPRESSLY SET FORTH
IN THIS AGREEMENT, IMPRESSE HEREBY DISCLAIMS ALL WARRANTIES, EXPRESS, IMPLIED
OR STATUTORY, WITH RESPECT TO THE IMPRESSE AREA OF THE CO-BRANDED SITE AND
THE IMPRESSE SITE, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
9.3. LIMITATION OF LIABILITY. EXCEPT IN CONNECTION WITH A BREACH BY EITHER
PARTY OF ARTICLE 7 OR SECTION 8.1.5 (v) AND THE INDEMNIFICATION OBLIGATIONS OF
IMPRESSE UNDER SECTION 9.4(i)(d) AND THE INDEMNIFICATION OBLIGATIONS OF
VERTICALNET UNDER SECTION 9.5(i)(d), NEITHER PARTY WILL BE LIABLE FOR ANY
SPECIAL, INDIRECT, CONSEQUENTIAL, EXEMPLARY OR INCIDENTAL DAMAGES ARISING OUT OF
OR RELATED TO THIS AGREEMENT, HOWEVER CAUSED AND UNDER ANY THEORY OF LIABILITY
(INCLUDING NEGLIGENCE), EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES.
9.4. INDEMNIFICATION BY IMPRESSE. Subject to Section 9.6, Impresse shall
(i) defend at its sole expense VerticalNet and its officers, directors,
employees and agents from and against any action, suit, proceeding or
investigation brought by a third party and caused by, relating to, based upon,
arising out of or in connection with (a) any breach by Impresse of the
representations, warranties or agreements made by it in Section 8 of this
Agreement, (b) negligence, recklessness or intentional misconduct on the part of
Impresse or its officers, directors, employees, agents or consultants, (c) any
claim arising out of VerticalNet's authorized use or possession of the portions
of the Co-Branded Site provided by Impresse and the Impresse Site as permitted
by this Agreement; or (d) any claim that any portion of the Impresse Site or the
Impresse Area of the Co-Branded Site violates, infringes or misappropriates any
Intellectual Property Right of any third party and (ii) pay all authorized
costs, expenses and disbursements incurred in such defense, and any damages,
liabilities, obligations, penalties or judgments awarded in any such action, or
any settlement amount agreed to by Impresse.
9.5. INDEMNIFICATION BY VERTICALNET. Subject to Section 9.6, VerticalNet
shall (i) defend at its sole expense Impresse and its officers, directors,
employees and agents from and against any action, suit, proceeding or
investigation brought by a third party, caused by, relating to, based upon,
arising out of or in connection with (a) any breach by VerticalNet of the
representations, warranties or agreements made by it in Section 8 of this
Agreement, (b) negligence, recklessness or intentional misconduct on the part of
VerticalNet or its officers, directors, employees, agents or consultants, (c)
any claim arising out of Impresse's use or possession of the portions of the
Co-Branded Site provided by VerticalNet and the VerticalNet Sites as permitted
by this Agreement; or (d) any claim that any portion of the VerticalNet Site or
the VerticalNet Area of the Co-Branded Site violates, infringes or
misappropriates any Intellectual Property Right of any third party and (ii) pay
all costs, expenses and disbursements authorized by the Indemnitor (defined
below) incurred in such defense, and any damages, liabilities, obligations,
penalties or judgments awarded in any such action, or any settlement amount
agreed to by VerticalNet.
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9.6. PROCEDURE. If any action shall be brought against a party in respect
to which indemnity may be sought from the other party pursuant to the provisions
of this Article 9, the party seeking indemnity (the "Indemnitee") shall follow
the procedures in this Section. If an Indemnitee receives any notice of a claim
or other allegation with respect to which the other party (the "Indemnitor") has
an obligation of indemnity hereunder, then the Indemnitee will, within 15 days
of receipt of such notice, give the Indemnitor written notice of such claim or
allegation setting forth in reasonable detail the facts and circumstances
surrounding the claim. The Indemnitee will not make any payment or incur any
costs or expenses with respect to such claim, except as requested by the
Indemnitor or as necessary to comply with this procedure. The Indemnitee will
not make any admission of liability or take any other action that limits the
ability of the Indemnitor to defend the case. The Indemnitor shall immediately
assume the full control of the defense or settlement of such claim or
allegation, including the selection and employment of counsel, and shall pay all
authorized costs and expenses of such defense. The Indemnitee will fully
cooperate, at the expense of the Indemnitor, in the defense or settlement of the
claim. The Indemnitee shall have the right, at its own expense, to employ
separate counsel and participate in the defense or settlement of the claim;
provided that the Indemnitor shall have no liability for costs or expenses
incurred by the Indemnitee, except to the extent authorized by the Indemnitor
pursuant to this procedure.
9.7. ESSENTIAL PART OF BARGAIN. The parties acknowledge that the
disclaimers and limitations set forth in this Article 9 are an essential element
of this Agreement between the parties and that the parties would not have
entered into this Agreement without such disclaimers and limitations.
10. MISCELLANEOUS
10.1. INTELLECTUAL PROPERTY.
10.1.1. Except for the express rights granted to Impresse under
this Agreement, Impresse acknowledges and agrees that the Intellectual
Property of VerticalNet is and shall remain the sole property of VerticalNet
and nothing in this Agreement shall confer in Impresse any right of ownership
or license rights in VerticalNet's Intellectual Property. In addition,
Impresse shall not now or in the future contest the validity of VerticalNet's
ownership of its Intellectual Property; provided, however, that Impresse may
contest the validity of VerticalNet's Intellectual Property in any proceeding
brought against Impresse alleging infringement or misappropriation of
VerticalNet's Intellectual Property.
10.1.2. Except for the express rights granted to VerticalNet
under this Agreement, VerticalNet acknowledges and agrees that the
Intellectual Property of Impresse is and shall remain the sole property of
Impresse and nothing in this Agreement shall confer in VerticalNet any right
of ownership or license rights in Impresse's Intellectual Property. In
addition, VerticalNet shall not now or in the future contest the validity of
Impresse's ownership of its Intellectual Property; provided, however, that
VerticalNet may contest the validity of Impresse's Intellectual Property in
any proceeding brought against VerticalNet alleging infringement or
misappropriation of Impresse's Intellectual Property.
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10.2. GOVERNING LAW. This Agreement shall be governed by and interpreted
under the laws of the State of Delaware without regard to its conflicts of law
provisions.
10.3. NO ASSIGNMENT. Except as otherwise set forth herein, neither party
shall transfer, assign or cede any rights or delegate any obligations hereunder,
in whole or in part, whether voluntarily or by operation of law, without the
prior written consent of the other party, which consent may be withheld at the
other party's reasonable business discretion; provided, however, that either
party may transfer this Agreement without prior written consent of the other to
an Affiliate of such party, or to the surviving party in a merger or
consolidation, or to a purchaser of all or substantially all of its assets.
10.4. GOOD FAITH. The parties undertake to display to each other the utmost
good faith, consistent with their respective rights and obligations set forth in
this Agreement.
10.5. INDEPENDENT CONTRACTORS. In connection with this Agreement, each
party is an independent contractor. This Agreement does not, and shall not be
construed to, create an employer-employee, agency, joint venture or partnership
relationship between the parties. Neither party shall have any authority to act
for or to bind the other party in any way, to alter any of the terms or
conditions of any of the other party's standard forms of invoices, sales
agreements, warranties or otherwise, or to warrant or to execute agreements on
behalf of the other or to represent that it is in any way responsible for the
acts, debts, liabilities or omissions of the other party.
10.6. NOTICES. All notices, reports, payments and other communications
required or permitted to be given under this Agreement (each, a "Notice") shall
be in writing and shall be given either by personal delivery against a signed
receipt, by express delivery using a nationally recognized overnight courier, or
by facsimile. All Notices shall be properly addressed as follows, or to such
other addresses as may be specified in a Notice given hereunder:
IF TO VERTICALNET:
Attn: General Counsel
VerticalNet, Inc.
700 Dresher Road, Suite 100
Horsham, Pennsylvania 19044
Tel No.: (215) 315-3200
Fax No.: (215) 784-1962
IF TO IMPRESSE:
Attn: Siva Kumar
Impresse Corporation
1309 South Mary Avenue
Sunnyvale, CA 94087
Phone No.: (408) 530-2022
Fax No.: (408) 245-8336
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A Notice shall be deemed to be effective upon personal delivery or, if sent via
overnight delivery, upon receipt thereof. A Notice sent via facsimile is deemed
effective on the same day (or if such day is not a business day, then on the
next succeeding business day) if such facsimile is sent before 3:00 p.m.
Prevailing Eastern Time and on the next day (or if such day is not a business
day, then on the next succeeding business day) if such Notice is sent after 3:00
p.m. Prevailing Eastern Time.
10.7. AMENDMENT OR MODIFICATION. No subsequent amendment, modification or
waiver of any of the provisions of this Agreement shall be effective unless in
writing and signed by the parties.
10.8. ENTIRE AGREEMENT. This Agreement sets out the entire agreement
between the parties with respect to the subject matter of this Agreement and
supersedes all prior agreements, proposals, arrangements and communications,
whether oral or written, with respect to the subject matter hereof.
10.9. SEVERABILITY. If any provision of this Agreement is held by a
tribunal of competent jurisdiction to be illegal, invalid, or otherwise
unenforceable in any jurisdiction, then to the fullest extent permitted by law
(a) the same shall not effect the other terms or provisions of this Agreement,
(b) such term or provision shall be deemed modified to the extent necessary in
the tribunal's opinion to render such term or provision enforceable, and the
rights and obligations of the parties shall be construed and enforced
accordingly, preserving to the fullest extent the intent and agreements of the
parties set forth herein and (c) such finding of invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
such term or provision in any other jurisdiction.
10.10. NO WAIVER. Failure to enforce any term of this Agreement is not a
waiver of future enforcement of that or any other term. No term or provision of
this Agreement will be deemed waived and no breach excused unless such waiver or
excuse is in writing and signed by the party against whom enforcement of such
waiver or excuse is sought.
10.11. SURVIVAL. Sections 5.3 and 5.4, and Articles 6, 7, 8, 9 and 10, any
payment obligations of the parties hereunder accruing prior to the date of
termination; and any other provision herein expressly surviving termination or
necessary to interpret the rights and obligations of the parties in connection
with the termination of the term of this Agreement will survive the termination
or expiration of this Agreement.
10.12. NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement is intended
to confer benefits, rights or remedies unto any person or entity other than the
parties and their permitted successors and assigns.
10.13. WAIVER OF JURY TRIAL. Each party hereby irrevocably waives all
rights a party may have to a trial by jury in any legal action or proceeding
arising out of or in connection with this Agreement or the transactions
contemplated hereby.
10.14. TITLES. The headings appearing at the beginning of the Sections
contained in this Agreement have been inserted for identification and reference
purposes only and shall not be used to determine the construction or
interpretation of this Agreement. The nomenclature of the
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defined terms in this Agreement shall only be used for the construction of
this Agreement, and are not to be used for any other purpose, including, but
not limited to, interpretation for accounting purposes.
10.15. FORCE MAJEURE. Neither party shall be held to be in breach of this
Agreement by reason of a force majeure event, including, but not limited to, act
of God, delay in transportation, fire, flood, earthquake, storm, war, act of a
public enemy, civil commotion or any law, rule, regulation, order or other
action by any public authority or any other matter reasonably beyond a party's
control. To the extent failure to perform is caused by such a force majeure
event, such party shall be excused from performance hereunder so long as such
event continues to prevent such performance, and provided the non-performing
party takes all reasonable steps to resume full performance.
10.16. COMPLIANCE WITH LAWS. Each party shall comply with all prevailing
laws, rules and regulations and obtain all necessary approvals, consents and
permits required by the applicable agencies of the government of the
jurisdictions that apply to its activities or obligations under this Agreement.
10.17. EXECUTION IN COUNTERPARTS, FACSIMILES. This Agreement may be
executed in one or more counterparts, each of which when delivered to the other
party shall be deemed an original and all of which together shall constitute one
and the same instrument. This Agreement shall become binding when any one or
more counterparts hereof, individually or taken together, bear the signatures of
both parties hereto. For the purposes hereof, a facsimile copy of this
Agreement, including the signature pages hereto, shall be deemed an original.
IN WITNESS WHEREOF, the parties to the Agreement by their duly authorized
representatives have executed this Agreement as of the date first written above.
VERTICALNET, INC. IMPRESSE CORPORATION
By: /s/ Michael Hagon By: /s/ Siva Kumar
------------------------------- ----------------------------
Name: Name:
----------------------------- --------------------------
Title: Title:
---------------------------- -------------------------
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EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Experts" and
"Selected Financial Data" and to the use of our report dated January 19, 2000
(except for Note 11, as to which the date is , 2000), in Amendment
No. 2 to the Registration Statement on Form S-1 (No. 333-95923) and the related
Prospectus of Impresse Corporation for the registration of shares of its common
stock.
San Jose, California
- --------------------------------------------------------------------------------
The foregoing consent is in the form that will be signed upon the consummation
of the Delaware reincorporation and other matters described in Note 11 to the
financial statements.
/s/ ERNST & YOUNG LLP
San Jose, California
March 21, 2000
