<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended March 31, 2000 Commission File Number 000-20364
EPRESENCE, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2798394
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
120 FLANDERS ROAD
WESTBORO, MASSACHUSETTS 01581
(Address of principal executive offices)
(508) 898-1000
(Registrant's telephone number, including area code)
BANYAN SYSTEMS INCORPORATED
(Former name of registrant, if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Number of shares outstanding of each of the issuer's classes of Common Stock as
of April 30, 2000:
Class Number of Shares Outstanding
- -------------------------------------- -----------------------------
Common Stock, par value $.01 per share 23,351,813
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EPRESENCE, INC.
INDEX
PAGE NUMBER
-----------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
March 31, 2000 and December 31, 1999
Consolidated Statements of Operations 4
Three months ended March 31, 2000 and 1999
Consolidated Statements of Cash Flows 5
Three months ended March 31, 2000 and 1999
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 12
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About 16
Market Risk
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURE 18
EXHIBIT INDEX 19
This Quarterly Report on Form 10-Q contains forward-looking statements,
including information with respect to the Company's plans and strategy for its
business. For this purpose, any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes", "anticipates", "plans",
"expects" and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause actual
events or the Company's actual results to differ materially from those indicated
by such forward-looking statements. These factors include, without limitation,
those set forth below under the caption "Factors Affecting Future Operating
Results" included under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Part I, Item 2 of this Quarterly Report
on Form 10-Q.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
EPRESENCE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 68,562 $ 29,920
Marketable securities 126,732 91,653
Accounts receivable, less allowances of $1,041 and $869, 13,183 14,482
respectively
Other current assets 4,647 2,729
-------- --------
Total current assets 213,124 138,784
Property and equipment, net 4,426 3,784
Marketable securities 10,871 9,198
Deferred tax asset 9,102 21,655
Other assets, net of accumulated amortization of $867 and $596 9,029 1,029
-------- --------
Total assets $246,552 $174,450
======== ========
LIABILITIES
Current liabilities:
Accounts payable $ 4,212 $ 3,677
Accrued compensation 4,248 4,493
Accrued expenses 8,204 7,538
Income taxes payable 6,402 791
Net liabilities of discontinued operations 2,526 3,264
Other current liabilities 250 250
Deferred revenue 7,501 5,728
Long-term debt, current portion 600 600
-------- --------
Total current liabilities 33,943 26,341
Commitments and contingencies
Deferred tax liability 16,610 30,350
Minority interests in consolidated subsidiary 48,615 2,392
SHAREHOLDERS' EQUITY
Common stock, $.01 par value; authorized 35,000,000 shares; issued
and outstanding 25,289,078 and 24,783,670, respectively 252 248
Additional paid-in capital 127,194 93,648
Unearned compensation (317) (603)
Accumulated earnings/(deficit) 16,893 (3,436)
Accumulated other comprehensive income 31,926 54,074
Treasury stock at cost; 1,848,000 shares (28,564) (28,564)
-------- --------
Total shareholders' equity 147,384 115,367
-------- --------
Total liabilities and shareholders' equity $246,552 $174,450
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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EPRESENCE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
2000 1999
---- ----
<S> <C> <C>
Revenues:
Services $12,051 $ 7,966
Switchboard 3,818 1,128
------- -------
Total revenues 15,869 9,094
Cost of revenues:
Services 6,601 4,464
Switchboard 916 77
------- -------
Total cost of revenues 7,517 4,541
------- -------
Gross profit 8,352 4,553
Operating Expenses:
Sales and marketing 12,714 3,459
Product development 613 435
General and administrative 4,104 3,232
Amortization of goodwill and intangibles 236 -
------- -------
Total operating expenses 17,667 7,126
Operating loss from continuing operations (9,315) (2,573)
Other income/(expense):
Interest income 990 273
Interest expense (30) (30)
Other, net 47,461 (168)
------- -------
Total other income/(expense) 48,421 75
Income/(loss) from continuing operations before
income taxes 39,106 (2,498)
Provision for income taxes 18,778 136
Income/(loss) from continuing operations ------- -------
20,328 (2,634)
Discontinued operations:
Income from discontinued operations - 3,091
Net income ------- -------
$20,328 $ 457
======= =======
Net Income per Share:
Basic
Income/(loss) from continuing operations $0.88 $(0.14)
Net income $0.88 $0.02
Diluted
Income/(loss) from continuing operations $0.73 $(0.14)
Net income $0.73 $0.02
Weighted average number of common shares:
Basic 23,218 19,158
Diluted 27,910 19,158
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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EPRESENCE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 20,328 $ 457
Adjustments to reconcile net income to net cash provided by operating activites
Gain on sale of investments (44,556) -
Depreciation and amoritization 603 880
Amoritization of unearned compensation 198 283
Non-cash advertising and promotion 6,031 -
Changes in operating assets and liabilities:
Decrease in accounts receivable 2,459 5,117
(Increase) in inventories - (45)
Net (decrease) in net discontinued liabilities (832) -
(Increase) in other current assets (1,877) (83)
(Decrease) in other liabilities (1,828) (33)
Increase/(decrease) in accounts payable and accrued compensation and expenses 5,963 (871)
(Decrease) in accrued costs for restructuring and other charges - (269)
(Decrease) in software licenses payable, net - (75)
Decrease in deferred tax assets 12,553 -
Decrease in other assets 250 58
Increase/(decrease) in deferred revenue 1,851 (774)
-------- -------
Net cash provided by operating activities 1,143 4,645
Cash flows from investing activities:
Acquisition of business (8,931) -
Capital Expenditures (966) (481)
Proceeds from investment 45,278 -
(Purchase of)/proceeds from marketable securities, net (73,599) (2,099)
-------- -------
Net cash used in investing activities (38,218) (2,580)
Cash flows from financing activities:
Sale of equity in subsidiary, net 75,333 -
Net proceeds from issuance of warrants - 2,832
Proceeds from stock plan purchases and stock options 325 1,671
-------- -------
Net cash provided by financing activities 75,658 4,503
Effect of exchange rate changes on cash and cash equivalents 59 (80)
-------- -------
Net increase in cash and cash equivalents 38,642 6,488
Cash and cash equivalents at beginning of period 29,920 15,160
-------- -------
Cash and cash equivalents at end of the period 68,562 21,648
======== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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EPRESENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements include the
accounts of the Company and its subsidiaries as of March 31, 2000, and have
been prepared by the Company in accordance with generally accepted
accounting principles. In the opinion of management, the accompanying
unaudited consolidated financial statements contain all adjustments,
consisting only of those of a normal recurring nature, necessary for a fair
presentation of the Company's financial position, results of operations and
cash flows at the dates and for the periods indicated. While the Company
believes that the disclosures presented are adequate to make the
information not misleading, these consolidated financial statements should
be read in conjunction with the consolidated financial statements and
related notes included in the Company's 1999 Annual Report to Stockholders
and Annual Report on Form 10-K.
In March 2000, Switchboard consummated an initial public offering. Pre-
offering, the Company owned approximately 53% of Switchboard's outstanding
common stock and post offering the Company owns approximately 41% of
Switchboard's outstanding common stock. Due to the Company's control of the
Switchboard board of directors, Switchboard's results will continue to be
consolidated as part of the Company's financial results.
On May 9, 2000, the shareholders of the Company voted to change the name of
the Company to ePresence, Inc. from Banyan Systems Incorporated.
In January 2000, the Company sold its subsidiary Banyan Systems (France)
SARL ("Banyan France"). The Company has recorded in its results of
operations for the three-months ended March 31, 2000, a loss on disposal of
Banyan France of approximately $267,000. The transaction included the sale
of net assets of approximately $316,000.
In June 1998, the Financial Accounting Standard Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The new
standard establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. SFAS No. 133, as amended by SFAS No.
137, is effective for all fiscal quarters of fiscal years beginning after
June 15, 2000. The Company does not expect SFAS No. 133 to have material
effect on its financial position or results of operations. At March 31,
2000 the Company had no derivative investments in place. In the
three-months ended March 31, 2000, the Company entered in two hedging
contracts for its remaining 400,000 shares of Software.com common stock.
These arrangements are further described in footnote F, "Sale of
investment".
In March 2000, the Financial Accounting Standard Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation - an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44
clarifies the application of APB Opinion No. 25 and among other issues the
following: the definition of an employee for purposes of applying APB
Opinion No. 25; the criteria for determining whether a plan qualifies as a
noncompensatory plan; the accounting consequence of various modifications
to the terms of previously fixed stock options or awards; and the
accounting for an exchange of stock compensation awards in a business
combination. FIN 44 is effective July 1, 2000, but certain conclusions in
FIN 44 cover specific events that occurred after either December 15, 1998
or January 12, 2000. The Company does not expect the application of FIN 44
to have a material impact on the Company's financial position or results of
operations.
In the fourth quarter of 1999, the Board of Directors of the Company
approved a plan to exit its software business and to focus its resources on
its services and Switchboard businesses as its sole operating units. The
Company has classified its software business as a discontinued operation,
and included in the fourth quarter of 1999 in its results of operations is
an estimated loss from
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disposal of $3,000,000, net of tax. Accordingly, asset and liabilities for
the discontinued operations have been classified as net liabilities of
discontinued operations. Net operating losses totaling approximately
$653,000 from discontinued operations for the three-months ended March 31,
2000 have been netted against the reserve established in the Company's 1999
operating results for the disposal of its software business.
The results of operations for the three-month period ended March 31, 2000
are not necessarily indicative of the results expected for the full fiscal
year or any future interim period.
B. REPORTABLE SEGMENTS:
ePresence has two reportable segments: services and Switchboard. The
Company's services segment delivers professional services including web
site and web portal design and implementation; directory and security
planning, design and integration; network integration and optimization.
The Company's Switchboard segment, Switchboard Incorporated ("Switchboard")
consummated an initial public offering of its common stock on March 7,
2000, and is currently listed on the Nasdaq National Market under the
symbol SWBD. Switchboard is an Internet-based local merchant network
interconnecting consumer, merchants and national advertisers. Switchboard
connects consumers searching for specific products and services with
merchants that provide them. The Company's reportable segments are managed
separately because they market and distribute distinct products and
services.
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<PAGE>
SEGMENT INFORMATION FOR THE THREE-MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
Total
Services Switchboard Company
-------- ----------- -------
Revenues
<S> <C> <C> <C>
Services $ 12,051 $ - $ 12,051
Switchboard - 3,818 3,818
-------- ------- --------
Total revenue 12,051 3,818 15,869
Cost of revenues 6,601 916 7,517
-------- ------- --------
Gross profits 5,450 2,902 8,352
Operating expenses 7,593 10,074 17,667
-------- ------- --------
Operating loss $ (2,143) $(7,172) $ (9,315)
======== ======= ========
Total assets $157,716 $88,836 $246,552
======== ======= ========
</TABLE>
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C. BASIC AND DILUTED EARNINGS PER SHARE:
Basic earnings per share are based upon the weighted average number of
common shares outstanding during the period. Diluted earnings per share
include the dilution of weighted average potential common shares
outstanding during the period. Potential equivalent shares result from the
assumed exercise of outstanding stock options and warrants, the proceeds of
which are then assumed to have been used to repurchase outstanding Common
Stock using the treasury stock method, and the conversion of preferred
stock using the if converted method. The following table reconciles the
numerator and denominator of the basic and diluted earnings per share
computations shown on the Consolidated Statements of Operations:
<TABLE>
<CAPTION>
For the three months ended March 31, 2000 1999
-------------------------------------------------------------------
(in thousands except per share data)
<S> <C> <C>
Basic earnings per share
Numerator:
Net income $20,328 $ 457
Denominator:
Weighted average common shares outstanding 23,218 19,158
------- -------
Basic earnings per share $ 0.88 $ 0.02
======= =======
Diluted earnings per share
Numerator:
Net income $20,328 $ 457
Denominator:
Weighted average common shares outstanding 23,218 19,158
Weighted average potential common shares 4,692 -
------- -------
Total shares 27,910 19,158
------- -------
Diluted earnings per share $ 0.73 $ 0.02
======= =======
</TABLE>
There were no options or warrants to purchase shares of Common Stock
outstanding during the quarter ended March 31, 2000 that were excluded from
the calculation of diluted net income per share because the exercise price
of all options and warrants outstanding had an exercise price less than the
average market price of Common Stock during the quarter. Options to
purchase 4,235,000 shares of Common Stock outstanding during the quarter
ended March 31, 1999 were excluded from the calculation of diluted net
income per share as the effect of their inclusion would have been anti-
dilutive.
D. COMPREHENSIVE INCOME
Other comprehensive income includes unrealized gains or losses on the
Company's available-for-sale investments and foreign currency translation
adjustments.
<TABLE>
<CAPTION>
<S> <C> <C>
For the three months ended March 31, 2000 1999
------------------------------------------------------------
(in thousands)
Net income $ 20,328 $ 457
Other comprehensive (expense)/ income (22,148) 12
--------- -------
Comprehensive (loss)/income $ (1,820) $ 469
========= =======
</TABLE>
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<PAGE>
E. ACQUISITION OF BUSINESS
In January 2000, the Company acquired a privately held e-business services
company based in Red Bank, New Jersey that specializes in web design,
development and integration. Consideration for the acquisition is comprised
of $10,000,000 in cash, of which approximately $8,931,000 had been paid
through March 31, 2000, and the issuance of shares of the Company's common
stock based upon the achievement of certain performance measures. The
estimated purchase price of the acquisition, assuming the achievement of
the performance measures, is approximately $13,750,000 and has been
accounted for using the purchase method of accounting. The Company has
recorded an intangible of approximately $8,400,000, which will be amortized
over a ten year period. Upon execution of the purchase agreement, the
acquired company employed 45 services professionals.
The following are the Company's unaudited pro-forma results for the three-
months ended March 31, 1999 as compared to the three-months ended March 31,
2000, assuming the acquisition occurred on January 1, 1999 (in thousands,
except for per share data).
<TABLE>
<CAPTION>
Three-months ended March 31, 2000 1999
- -----------------------------------------------------------------------------------------------
(pro-forma)
<S> <C> <C>
Net revenues $15,869 $10,116
Net income/(loss) from continuing operations $20,328 $(2,197)
Net income $20,328 $ 894
Net earnings per common share:
Basic $ 0.88 $ 0.05
Diluted $ 0.73 $ 0.05
Weighted average number of common shares
Basic 23,218 19,158
Diluted 27,910 19,158
</TABLE>
These unaudited pro-forma results have been prepared for comparative
purposes only and do not purport to be indicative of the results of
operations which would have actually resulted had the combinations been in
effect on January 1, 1999, or of future results of operations.
F. SALE OF INVESTMENT
In 1996, the Company made an equity investment of approximately $2,001,000
in Software.com, Inc. ("Software.com"), a company which supplies Internet
messaging solutions to services providers. During the three-months ended
March 31, 2000, the Company sold 491,202 shares of commons stock of
Software.com, resulting in net proceeds of $45,276,000 and a realized gain
of approximately $44,556,000. At March 31, 2000, the Company held 400,000
shares of common stock of Software.com of which 300,000 and 100,000 of said
shares were valued at $114.50 and $115.90 per share, respectively, with a
total value of $45,940,000. The net unrealized gain of approximately
$29,025,000, net of taxes of approximately $16,308,000, is included in
other comprehensive income within shareholders' equity.
In January 2000, the Company entered into a hedging contract for 300,000
shares of Software.com common stock. The maturity date for the contract is
February 2, 2001. Upon maturity, the Company will receive payment for the
value of the Software.com common shares based upon the average closing
price of the ten consecutive trading days prior to, and including, the
maturity date. The settlement price can be no lower than $84.04 or higher
than $114.50 per common share.
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In February 2000, the Company entered into a hedging contract for 100,000
shares of Software.com common stock. The maturity date for the contract is
February 25, 2001. Upon maturity, the Company will receive payment for the
value of the Software.com common shares based upon the average closing
price of the ten consecutive trading days prior to, and including, the
maturity date. The settlement price can be no lower than $84.60 or higher
than $115.90 per common share.
G. SALE OF EQUITY IN SWITCHBOARD
On March 7, 2000, Switchboard sold, at an initial public offering price of
$15.00 per share, 5,500,000 shares of its common stock. On April 6, 2000,
Switchboard sold, at $15.00 per share, the remaining 825,000 shares of its
common stock pursuant to the underwriters' March 31, 2000 exercise of their
over-allotment option in full. All shares sold were for the account of
Switchboard. The managing underwriters for the offering were FleetBoston
Robertson Stephens Inc., J.P. Morgan Securities Inc., The Robinson-Humphrey
Company, LLC and SoundView Technology Group, Inc.
The aggregate gross proceeds raised in the offering were $94.9 million.
Total expenses in connection with the offering were approximately $8.5
million, of which $6.6 million was for underwriting discounts and
commissions, $21,000 was paid to or for underwriters and $1.8 million was
for professional services and other expenses. Payments of expenses were to
persons other than directors, officers, general partners of Switchboard or
their associates, persons owning 10% or more of any class of equity
securities of Switchboard or affiliates of Switchboard.
Switchboard's net proceeds from the offering were approximately $86.3
million, of which $74.8 million was received in March and $11.5 was
received in April. All payments of the offering proceeds were to persons
other than directors, officers, general partners of Switchboard or their
associates, persons owning 10% or more of any class of equity securities of
Switchboard or affiliates of Switchboard. From March 7, 2000 through March
31, 2000, Switchboard did not use any of the proceeds for working capital
or operations. As of March 31, 2000, Switchboard has invested these funds
in short-term, interest-bearing, investment-grade securities.
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ITEM 2.
- -------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- --------------------------------------------------------------------------
OPERATIONS
- ----------
RESULTS OF OPERATIONS
GENERAL
Total revenues for the three-month periods ended March 31, 2000 and 1999
were $15.9 million and $9.1 million, respectively. The increase in 2000 was
due to an increase in revenues from both our services and Switchboard
segments. Services revenues increased by 51% compared to the corresponding
period in 1999 from $8.0 million to $12.1 million. The increase in services
revenues was attributable primarily to revenues generated from consulting
services due to an increase in customer engagements, particularly in web-
site design and implementation; and directory and security planning.
Switchboard revenues increased by 238% compared to the corresponding period
in 1999 from $1.1 million to $3.8 million. The increase in Switchboard
revenues was due primarily to an increase in advertising revenue resulting
from increased traffic and productivity on the Switchboard web-site, an
increase in merchant services revenue as well as an increase in syndication
and licensing revenues due to new customer agreements. International
revenues for the three-month periods ended March 31, 2000 and 1999 were
$1.6 million and $2.1 million, respectively. The decrease in 2000 was due
primarily to the sale of the company's French subsidiary in January 2000.
International revenues accounted for 10% and 24% of total revenues for the
three-month periods ended March 31, 2000 and 1999, respectively.
Gross profits for Services were $5.5 million, or 45%, for the three-month
period ended March 31, 2000, compared with $3.5 million, or 44%, for the
corresponding period in 1999. The increase in both gross margin dollars and
percentage were due primarily to an increase in revenues from consulting
services, offset in part by an increase in consulting personnel and related
costs to expand the delivery of services, as well as an increase in third-
party product costs incurred as part of select consultancy engagements.
Gross profits for Switchboard were $2.9 million, or 76%, for the three-
month period ended March 31, 2000, compared with $1.1 million, or 93%, for
the corresponding period in 1999. The increase in gross profit dollars was
due to an increase in advertising revenues generated by Switchboard, offset
in part by an increase in variable costs related to advertising
arrangements. The decrease in gross profit percentage was due primarily to
additional costs in connection with Switchboard's merchant aggregation
program, deferred project costs and data licensing fees, offset in part by
additional advertising revenues.
Sales and marketing expenses increased 268% from $3.5 million to $12.7
million for the three-month period ended March 31, 2000, compared to the
corresponding period in 1999. This increase was due primarily to an
increase in promotional investment in Switchboard, particularly CBS non-
cash advertising, intended to increase site traffic, increases in sales
staff in our expanded consulting services activities and an increase in
variable sales costs, including commissions, which increased due to higher
revenues. Sales and marketing expenses as a percentage of revenues were 80%
and 38% for the three month periods ended March 31, 2000 and 1999,
respectively.
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Product development expenses increased 41% from $0.4 million to $0.6
million for the three-month period ended March 31, 2000, compared to the
corresponding period in 1999. This increase was due primarily to an
increase in resources devoted to advancing Switchboard technology and
services. Product development expenses as a percentage of revenues were 4%
and 5% for the three-month periods ended March 31, 2000 and 1999,
respectively. There were no software cost amounts capitalized during the
periods ended March 31, 2000 and 1999.
General and administrative expenses increased 27% from $3.2 million to $4.1
for the three-month period ended March 31, 2000, compared to the same
period in 1999. This increase was attributable to additional recruiting
expenses related to the staffing of our expanding consulting services
activities, as well as additional administrative staffing in the
Switchboard business segment. General and administrative expenses as a
percentage of revenues were 26% and 36% for the three-month periods ended
March 31, 2000 and 1999, respectively.
Other income and expense increased $48.3 million from $0.1 million for the
three-month period ended March 31, 2000, compared to the same period in
1999. This increase was due primarily to a gain of approximately $44.6
million from the sale of shares in Software.com, Inc. ("Software.com"), a
non-affiliated company, an increase in minority interest in subsidiary
losses and an increase in interest income from available funds invested in
marketable securities.
Our effective tax rate for the three-months ended March 31, 2000 was 48%.
This was negatively impacted by our deconsolidation of Switchboard for tax
purposes upon our percentage ownership change on June 30, 1999. No tax
provision, other than that required for foreign income and foreign
withholding taxes, was recorded for the three-months ended March 31, 1999
due to our previously recorded net operating losses.
In the fourth quarter of 1999, our Board of Directors approved a plan to
exit our software business and to focus on services and Switchboard
business as our sole operating units. Included in the fourth quarter of
1999 results of operations is an estimated loss from disposal of
discontinued operations of $3.0 million, net of tax. Net operating losses
totaling approximately $0.7 million from discontinued operations for the
three-months ended March 31, 2000 have been netted against the reserve
established in the Company's 1999 operating results for the disposal of its
software business.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased from $112.4 million at December 31, 1999 to
$179.2 million at March 31, 2000. At March 31, 2000, cash and cash
equivalents combined with marketable securities were $206.2 million,
compared with $130.8 million at December 31, 1999. Cash and cash
equivalents increased $38.6 million resulting in a cash balance of $68.6
million at March 31, 2000. This increase was due primarily to $75.3
million from the sale of equity in the Company's Switchboard subsidiary and
$45.3 million in proceeds from the sale of marketable securities. These
increases were offset in part by $73.6 million in net purchases of
marketable securities, $8.9 million for the acquisition of a privately held
e-business services company as well as other various operating, investing
and financing activities.
During the three-months ended March 31, 2000, we sold 491,202 shares of
Software.com's common stock resulting in net proceeds of approximately
$45.3 million and a net realized gain of approximately $44.6 million. At
March 31, 2000, we owned 400,000 shares of Software.com. During January
and February of 2000, we entered into hedging contracts for the remaining
400,000 shares of Software.com common stock.
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<PAGE>
If held to maturity on February 2, 2001, we will receive payment for the
value of Software.com common shares based upon the average closing price of
the ten consecutive trading days prior to, and including the maturity date
with a settlement price not lower than $84.04 or higher than $114.50 per
share for the first 300,000 shares. If held to maturity, on February 25,
2001, we will receive payment for the value of Software.com common shares
based upon the average closing price of the five consecutive trading days
prior to and including the maturity date with a settlement price not lower
than $84.60 or higher than $115.90 per share for the remaining 100,000
shares.
On January 11, 1999, we announced a strategic alliance with Microsoft
Corporation ("Microsoft"). As part of the agreement, Microsoft has
committed to contributing $10.0 million to us over a three-year period to
fund the training of at least 500 professionals, marketing and development
costs as well as the purchase of a warrant to purchase 1.75 million shares
of our Common Stock. The first of three payments to be made by Microsoft
to us was received in January 1999 in the amount of $5.9 million. The
second payment of $2.5 million was received in December 1999. The
remaining payment of $1.6 million is scheduled to be received on or before
December 31, 2000.
In January 2000, we acquired ePresence, Inc., a privately held e-business
services company based in Red Bank, New Jersey that specializes in web
design, development and integration. Consideration for the acquisition is
comprised of $10.0 million in cash and the issuance of shares of our common
stock based on the achievement of certain performance measures. The
estimated purchase price of the acquisition, assuming the achievement of
the performance measures, is approximately $13.75 million. The acquisition
is accounted for, assuming the achievement of the performance measures,
using the purchase method of accounting. At acquisition, ePresence employed
45 services professionals.
In March 2000, our subsidiary, Switchboard Incorporated, raised
approximately $82.5 million, prior to offering expenses, through an initial
public offering of its common stock. Subsequently, in April 2000,
Switchboard raised an additional $11.5 million through the sale of the over
allotment of shares by its underwriters.
We believe that existing cash and marketable securities, combined with cash
expected to be generated from operations, will be sufficient to fund the
Company's operations through at least the next twelve months.
FACTORS AFFECTING FUTURE OPERATING RESULTS
Certain of the information contained in this form 10-Q, including, without
limitation, information with respect to our plans and strategy for the
business, statements relating to the sufficiency of cash and cash
equivalent balances, anticipated expenditures, the intended effects of our
discontinuation of the software business and sales and marketing and
product development efforts, consists of forward-looking statements. Any
statements contained herein that are not statements of historical fact may
be deemed to be forward-looking statements. Without limiting the foregoing,
the words "believes," "expects," "anticipates," "plans," and similar
expressions are intended to identify forward-looking statements. Important
factors that could cause actual results to differ materially from the
forward-looking statements include the following factors:
In October 1999, we announced a plan to exit our software business. Until
the fourth quarter of 1998, a majority of our revenues were attributable to
the software business. While we will continue to provide consulting
services to our customers, we will no longer market software, nor will we
advance our software technology through product development. Our future
success will depend in part upon our ability to continue to grow our
services business, enter into new strategic alliances, acquire additional
services customers and adapt to changing technologies and customer
requirements. Any failure to do so could have a material adverse effect on
us. We have a limited operating history as a services company. There can be
no assurance we will be successful in our new strategic focus on services,
including e-services.
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In 1999, we announced our intention to acquire additional professional
services companies in an attempt to strengthen our expanding consulting
services business activities. Any failure by us to effectively identify,
acquire, integrate and assimilate acquisitions could have a material
adverse effect on us.
As part of our strategic focus on services, on January 11, 1999, we
announced a global alliance with Microsoft to deliver integrated messaging,
networking and Internet solutions and the collaboration on the design and
implementation of packaged services, solutions and support offerings based
on Microsoft's enterprise platform. The agreement contains various
obligations and milestones that must be met by us, including the
certification of 500 Microsoft-trained professionals. The failure to meet
such obligations and milestones could result in a termination of the
agreement, which could have a material adverse effect on us.
As part of CBS' June 1999 investment in Switchboard, Switchboard and we
entered into an Advertising and Promotion Agreement with CBS under which
CBS agreed to arrange for the placement of up to $95.0 million of
advertising and promotion of the Switchboard web site. Under this
agreement, we agreed to indemnify CBS for any breach by Switchboard of
Switchboard's representations, warranties or covenants in the agreement.
Our indemnification obligations with respect to the covenants expire upon
the first to occur of (i) the first business day after June 30, 2001 when
we own or control less than a majority of Switchboard's voting power and
(ii) the first business day after any person owns or controls more of
Switchboard's voting power than do we. Switchboard has agreed to indemnify
us for amounts that we may be required to pay CBS pursuant to our
indemnification obligations to CBS. If we are required under the
Advertising and Promotion Agreement to indemnify CBS it may have a material
adverse effect on us.
We own 9,802,421 shares of Switchboard's common stock, which is traded on
the Nasdaq National Market. The trading price of Switchboard's common
stock is likely to be volatile and may be influenced by many factors,
including, without limitation, variations in financial results, changes in
earnings estimates by industry research analysts, the failure or success of
branding and strategic initiatives (including Switchboard's relationship
with CBS) and investors' perceptions. Volatility in the trading price of
Switchboard's common stock could have a material adverse effect on our
financial results. In addition, due to our level of ownership of
Switchboard, the trading price of our common stock is likely to be
influenced by the trading price of Switchboard's common stock. If
Switchboard's trading price declines, the trading price of our common stock
will likely decline, as well.
Switchboard's results of operations are consolidated as part of our results
of operations. Switchboard has a history of incurring net losses, expects
its net losses to continue throughout 2000 as a result of planned increases
in operating expenses and may never achieve profitability. In addition,
Switchboard's quarterly results of operations have fluctuated significantly
in the past and are likely to fluctuate significantly from quarter to
quarter in the future. Factors that may cause Switchboard's results of
operations to fluctuate include:
. the addition or loss of relationships with third parties that are
Switchboard's source of new merchants for its local merchant network or
that license Switchboard's services for use on their own web sites;
. Switchboard's ability to attract and retain consumers, local merchants
and national advertisers to its web site;
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. the amount and timing of expenditures for expansion of Switchboard's
operations, including the hiring of new employees, capital expenditures and
related costs;
. technical difficulties or failures affecting Switchboard's systems or the
Internet in general;
. the cost of acquiring, and the availability of, content, including
directory information and maps; and
. that Switchboard's expenses are partially based on expectations regarding
future revenue and are largely fixed in nature, particularly in the short-
term.
In addition, Switchboard has only a limited operating history and until
March 2000, had no operating history as a stand-alone company and no
experience in addressing various business challenges without the support of
a corporate parent. It may not be successful as a stand-alone company.
William P. Ferry, the Company's Chairman of the Board, President and Chief
Executive Officer, is Switchboard's Chairman of the Board and both Richard
M. Spaulding, the Company's Senior Vice President and Chief Financial
Officer, and Robert M. Wadsworth, a director of ePresence, are also
directors of Switchboard. Serving as a director of Switchboard and either a
director or an officer of ePresence could create, or appear to create,
potential conflicts of interest when those directors and officers are faced
with decisions that could have different implications for us than for
Switchboard. Such conflicts, or potential conflicts, of interest could
hinder or delay our management's ability to make timely decisions regarding
significant matters relating to our business.
We sell our services principally through a direct sales force to customers
in a broad range of industries. We do not require collateral or other
security to support customer receivables. Our financial results and
condition could be adversely affected by credit losses.
We are dependent upon the continued services of our key management and
technical personnel. Competition for qualified personnel is intense, and
there can be no assurance we will be able to attract and retain qualified
management and other key employees.
Because of the foregoing factors and the other factors we have disclosed
from time to time, we believe that period-to-period comparisons of our
financial results are not necessarily meaningful and we expect that our
results of operations may fluctuate from period-to-period in the future.
EURO CONVERSION DISCLOSURE
On January 1, 1999, the participating member countries of the European
Union adopted the Euro as the common legal currency and fixed conversion
rates between their existing sovereign currencies and the Euro. We do not
believe that the Euro conversion will have a material impact on our
operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
Not applicable.
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ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the quarter ended March 31, 2000, the trading price of the
Company's Common Stock triggered the automatic conversion of the Company's
Series B Convertible Preferred Stock and Series C Convertible Preferred Stock
into Common Stock. Accordingly, the Warrants issued by the Company to
HarbourVest Venture Partners V-Direct Fund L.P. on March 5, 1998 to purchase
(i) 65,790 shares of Series B Convertible Preferred Stock at an exercise price
of $45.00 per share and (ii) 65,790 shares of Series C Convertible Preferred
Stock at an exercise price of $50.00 per share automatically converted into
Warrants to purchase (x) 657,900 shares of Common Stock at an exercise price of
$4.50 per share, and (y) 657,900 shares of Common Stock at an exercise price
of $5.00 per share, respectively. Previously, in June, 1999, the 263,158 shares
of Series A Convertible Preferred Stock issued by the Company to HarbourVest
automatically converted into 2,631,580 shares of Common Stock. As a result of
the foregoing conversions, the Company no longer has any outstanding shares of
Preferred Stock or Warrants to purchase Preferred Stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) The exhibits listed in the Exhibit Index filed as part of this
report are filed as part of or are included in this report.
(b) The Company filed no reports on Form 8-K during the fiscal
quarter for which this report is filed.
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<PAGE>
EPRESENCE, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EPRESENCE, INC.
Date: May 15, 2000 By: /s/ Richard M. Spaulding
------------------------
Richard M. Spaulding
Senior Vice President and Chief Financial
Officer,
Treasurer and Secretary
(Principal Financial Officer and Principal
Accounting Officer)
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<PAGE>
EXHIBIT INDEX
Exhibit Number TITLE OF DOCUMENT
- -------------- -----------------
10.1+ 1992 Stock Incentive Plan, as amended.
10.2+ 1992 Director Stock Option Plan, as amended.
27 Financial Data Schedule.
-------------------------------------------------------------------------
+ Management contract or compensation plan or arrangement required to be
filed as an exhibit pursuant to Item 6(a) of this Form 10-Q.
- Confidential treatment has been requested as to certain portions, which
portions have been omitted and filed separately with the Commission.
-19-
<PAGE>
EXHIBIT 10.1
BANYAN SYSTEMS INCORPORATED
1992 STOCK INCENTIVE PLAN
Section 1. Purpose
The purpose of this Stock Incentive Plan (the "Plan") is to advance the
interests of Banyan Systems Incorporated by enhancing its ability to attract and
retain key employees, consultants and others who are in a position to contribute
to the Company's future growth and success.
Section 2. Definitions
"Award" means any Option, Stock Appreciation Right, Performance Share,
Restricted Stock or Unrestricted Stock awarded under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to time.
"Committee" means a committee of not less than two members of the Board
appointed by the Board to administer the Plan, provided that if and when the
Common Stock is registered under Section 12 of the Securities Exchange Act of
1934, each member of the Committee shall be a "disinterested person" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934 ("Rule 16b-3").
"Common Stock" or "Stock" means the Common Stock, $.01 par value per share, of
the Company.
"Company" means Banyan Systems Incorporated and, except where the content
otherwise requires, all present and future subsidiaries of the Company as
defined in Sections 424(f) of the Code.
"Designated Beneficiary" means the beneficiary designated by a Participant, in
a manner determined by the Board, to receive amounts due or exercise rights of
the Participant in the event of the Participant's death. In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
"Fair Market Value" means, with respect to Common Stock or any other property,
the fair market value of such property as determined by the Board in good faith
or in the manner established by the Board from time to time.
"Incentive Stock Option" means an option to purchase shares of Common Stock
awarded to a Participant under Section 6 which is intended to meet the
requirements of Section 422 of the Code or any successor provision.
"Nonstatutory Stock Option" means an option to purchase shares of Common Stock
awarded to a Participant under Section 6 which is not intended to be an
Incentive Stock Option.
"Option" means an Incentive Stock Option or a Nonstatutory Stock Option.
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"Participant" means a person selected by the Board to receive an Award under
the Plan.
"Performance Shares" mean shares of Common Stock which may be earned by the
achievement of performance goals awarded to a Participant under Section 8.
"Reporting Person" means a person subject to Section 16 of the Securities
Exchange Act of 1934 or any successor provision.
"Restricted Period" means the period of time selected by the Board during
which shares subject to a Restricted Stock Award may be repurchased by or
forfeited to the Company.
"Restricted Stock" means shares of Common Stock awarded to a Participant
under Section 9.
"Stock Appreciation Right" or "SAR" means a right to receive any excess in
Fair Market Value of shares of Common Stock over the exercise price awarded to
a Participant under Section 7.
"Unrestricted Stock" means shares of Common Stock awarded to a Participant
under Section 9(c).
Section 3. Administration
The Plan will be administered by the Board. The Board shall have authority
to make Awards and to adopt, amend and repeal such administrative rules,
guidelines and practices relating to the Plan as it shall deem advisable from
time to time, and to interpret the provisions of the Plan. The Board's
decisions shall be final and binding. No member of the Board shall be liable
for any action or determination relating to the Plan made in good faith. To
the extent permitted by applicable law, the Board may delegate to one or more
executive officers of the Company the power to make Awards to Participants who
are not Reporting Persons and all determinations under the Plan with respect
thereto, provided that the Board shall fix the maximum amount of such Awards
to be made by such executive officers and a maximum amount for any one
Participant. To the extent permitted by applicable law, the Board may appoint
a Committee to administer the Plan and, in such event, all references to the
Board in the Plan shall mean such Committee or the Board. All decisions by the
Board or the Committee pursuant to the Plan shall be final and binding on all
persons having or claiming any interest in the Plan or in any Award.
Section 4. Eligibility
All of the Company's employees, officers, directors, consultants and advisors
who are expected to contribute to the Company's future growth and success, other
than persons who have irrevocably elected not to be eligible, are eligible to be
Participants in the Plan. Incentive Stock Options may be awarded only to persons
eligible to receive Incentive Stock Options under the Code.
Section 5. Stock Available for Awards
(a) Subject to adjustment under subsection (b) below, Awards may be made
under the Plan for up to 1,000,000 shares of Common Stock. If any Award in
respect of shares of Common Stock expires or is terminated unexercised or is
forfeited for any reason or settled in a manner that results in fewer shares
outstanding than were initially awarded, the shares subject to such Award or
so surrendered, as the case may be, to the extent of such expiration,
termination, forfeiture or decrease, shall again be available for award under
the Plan, subject, however, in the case of Incentive Stock Options, to any
limitation required under the Code. Shares issued under the Plan may consist
in whole or in part of authorized but unissued shares or treasury shares.
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(b) In the event that the Board, in its sole discretion, determines that any
stock dividend, extraordinary cash dividend, recapitalization, reorganization,
merger, consolidation, split-up, spin-off, combination or other similar
transaction affects the Common Stock such that an adjustment is required in
order to preserve the benefits or potential benefits intended to be made
available under the Plan, then the Board, subject, in the case of Incentive
Stock Options, to any limitation required under the Code, shall equitably adjust
any or all of (i) the number and kind of shares in respect of which Awards may
be made under the Plan, (ii) the number and kind of shares subject to
outstanding Awards, and (iii) the award, exercise or conversion price with
respect to any of the foregoing, and if considered appropriate, the Board may
make provision for a cash payment with respect to an outstanding Award, provided
that the number of shares subject to any Award shall always be a whole number.
(c) The Board may grant Awards under the Plan in substitution for stock and
stock based awards held by employees of another corporation who concurrently
become employees of the Company as a result of a merger or consolidation of the
employing corporation with the Company or a Subsidiary or the acquisition by the
Company or a subsidiary of property or stock of the employing corporation. The
substitute Awards shall be granted on such terms and conditions as the Board
considers appropriate in the circumstances. The shares which may be delivered
under such substitute Awards shall be in addition to the maximum number of
shares provided for in Section 5(a) only to the extent that the substitute
Awards are both (i) granted to persons whose relationship to the Company does
not make (and is not expected to make) them Reporting Persons; and (ii) granted
in substitution for awards issued under a plan approved, to the extent then
required under Rule 16b-3, by the stockholders of the entity which issued such
predecessor awards.
Section 6. Stock Options
(a) General.
(i) Subject to the provisions of the Plan, the Board may award Incentive
Stock Options and Nonstatutory Stock Options, and determine the number of
shares to be covered by each Option, the option price therefor and the
conditions and limitations applicable to the exercise of the Option. The terms
and conditions of Incentive Stock Options shall be subject to and comply with
Section 422 of the Code, or any successor provision, and any regulations
thereunder.
(ii) The Board shall establish the exercise price at the time each Option
is awarded. In the case of Incentive Stock Options, such price shall not be
less than 100% of the Fair Market Value of the Common Stock on the date of
award.
(iii) Each Option shall be exercisable at such times and subject to such
terms and conditions as the Board may specify in the applicable Award or
thereafter. The Board may impose such conditions with respect to the exercise
of Options, including conditions relating to applicable federal or state
securities laws, as it considers necessary or advisable.
(iv) Options granted under the Plan may provide for the payment of the
exercise price by delivery of cash or check in an amount equal to the exercise
price of such Options or, to the extent permitted by the Board at or after the
award of the Option, by (A) delivery of shares of Common Stock owned by the
optionee for at least six months (or such shorter period as is approved by the
Board), valued at their Fair Market Value, (B) delivery of a promissory note
of the optionee to the Company on terms determined by the Board, (C) delivery
of an irrevocable undertaking by a broker to deliver promptly to the Company
sufficient funds to pay the exercise price or delivery of irrevocable
instructions to a broker to deliver promptly to the Company cash or a check
sufficient to pay the exercise price, (D) payment of such other lawful
consideration as the Board may determine, or (E) any combination of the
foregoing.
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(v) The Board may provide for the automatic award of an Option upon the
delivery of shares to the Company in payment of the exercise price of an
Option for up to the number of shares so delivered.
(vi) The Board may at any time accelerate the time at which all or any
part of an Option may be exercised.
(b) Incentive Stock Options.
Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and conditions:
(i) All Incentive Stock Options granted under the Plan shall, at the
time of grant, be specifically designated as such in the option agreement
covering such Incentive Stock Options. The Option exercise period shall not
exceed ten years from the date of grant.
(ii) If any employee to whom an Incentive Stock Option is to be granted
under the Plan is, at the time of the grant of such option, the owner of stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company (after taking into account the attribution of stock
ownership rule of Section 424(b) and of the Code), then the following special
provisions shall be applicable to the Incentive Stock Option granted to such
individual:
(x) The purchase price per share of the Common Stock subject to such
Incentive Stock Option shall not be less than 110% of the Fair Market Value
of one share of Common Stock at the time of grant; and
(y) The option exercise period shall not exceed five years from the date
of grant.
(iii) For so long as the Code shall so provide, options granted to any
employee under the Plan (and any other incentive stock option plans of the
Company) which are intended to constitute Incentive Stock Options shall not
constitute Incentive Stock Options to the extent that such options, in the
aggregate, become exercisable for the first time in any one calendar year for
shares of Common Stock with an aggregate Fair Market Value (determined as of
the respective date or dates of grant) of more than $100,000.
(iv) No Incentive Stock Option may be exercised unless, at the time of
such exercise, the Participant is, and has been continuously since the date of
grant of his or her Option, employed by the Company, except that:
(x) an Incentive Stock Option may be exercised within the period of
three months after the date the Participant ceases to be an employee of the
Company (or within such lesser period as may be specified in the applicable
option agreement), provided, that the agreement with respect to such Option
may designate a longer exercise period and that the exercise after such
three-month period shall be treated as the exercise of a Nonstatutory Stock
Option under the Plan;
(y) if the Participant dies while in the employ of the Company, or
within three months after the Participant ceases to be such an employee, the
Incentive Stock Option may be exercised by the Participant's Designated
Beneficiary within the period of one year after the date of death (or within
such lesser period as may be specified in the applicable Option agreement);
and
(z) if the Participant becomes disabled (within the meaning of Section
22(e)(3) of the Code or any successor provision thereto) while in the employ
of the Company, the Incentive Stock Option may be exercised within the
period of one year after the date of death (or within such lesser period as
may be specified in the Option agreement).
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For all purposes of the Plan and any Option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.
Section 7. Stock Appreciation Rights
(a) The Board may grant Stock Appreciation Rights entitling recipients on
exercise of the SAR to receive an amount, in cash or Stock or a combination
thereof (such form to be determined by the Board), determined in whole or in
part by reference to appreciation in the Fair Market Value of the Stock between
the date of the Award and the exercise of the Award. A Stock Appreciation Right
shall entitle the Participant to receive, with respect to each share of Stock as
to which the SAR is exercised, the excess of the share's Fair Market Value on
the date of exercise over its Fair Market Value on the date the SAR was granted.
The Board may also grant Stock Appreciation Rights that provide that, following
a change in control of the Company (as defined by the Board at the time of the
Award), the holder of such SAR will be entitled to receive, with respect to each
share of Stock subject to the SAR, an amount equal to the excess of a specified
value (which may include an average of values) for a share of Stock during a
period preceding such change in control over the Fair Market Value of a share of
Stock on the date the SAR was granted.
(b) Stock Appreciation Rights may be granted in tandem with, or
independently of, Options granted under the Plan. A Stock Appreciation Right
granted in tandem with an Option which is not an Incentive Stock Option may be
granted either at or after the time the Option is granted. A Stock Appreciation
Right granted in tandem with an Incentive Stock Option may be granted only at
the time the Option is granted.
(c) When Stock Appreciation Rights are granted in tandem with Options, the
following provisions will apply:
(i) The Stock Appreciation Right will be exercisable only at such time
or times, and to the extent, that the related Option is exercisable and will
be exercisable in accordance with the procedure required for exercise of the
related Option.
(ii) The Stock Appreciation Right will terminate and no longer be
exercisable upon the termination or exercise of the related Option, except
that a Stock Appreciation Right granted with respect to less than the full
number of shares covered by an Option will not be reduced until the number of
shares as to which the related Option has been exercised or has terminated
exceeds the number of shares not covered by the Stock Appreciation Right.
(iii) The Option will terminate and no longer be exercisable upon the
exercise of the related Stock Appreciation Right.
(iv) The Stock Appreciation Right will be transferable only with the
related Option.
(v) A Stock Appreciation Right granted in tandem with an Incentive Stock
Option may be exercised only when the market price of the Stock subject to the
Option exceeds the exercise price of such option.
(d) A Stock Appreciation Right not granted in tandem with an Option will
become exercisable at such time or times, and on such conditions, as the Board
may specify.
(e) The Board may at any time accelerate the time at which all or any part
of the SAR may be exercised.
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Section 8. Performance Shares
(a) The Board may make Performance Share Awards entitling recipients to
acquire shares of Stock upon the attainment of specified performance goals. The
Board may make Performance Share Awards independent of or in connection with the
granting of any other Award under the Plan. The Board in its sole discretion
shall determine the performance goals applicable under each such Award, the
periods during which performance is to be measured, and all other limitations
and conditions applicable to the awarded Performance Shares; provided, however,
that the Board may rely on the performance goals and other standards applicable
to other performance plans of the Company in setting the standards for
Performance Share Awards under the Plan.
(b) Performance Share Awards and all rights with respect to such Awards may
not be sold, assigned, transferred, pledged or otherwise encumbered.
(c) A Participant receiving a Performance Share Award shall have the rights
of a stockholder only as to shares actually received by the Participant under
the Plan and not with respect to shares subject to an Award but not actually
received by the Participant. A Participant shall be entitled to receive a stock
certificate evidencing the acquisition of shares of Stock under a Performance
Share Award only upon satisfaction of all conditions specified in the agreement
evidencing the Performance Share Award.
(d) The Board may at any time accelerate or waive any or all of the goals,
restrictions or conditions imposed under any Performance Share Award.
Section 9. Restricted and Unrestricted Stock
(a) The Board may grant Restricted Stock Awards entitling recipients to
acquire shares of Stock, subject to the right of the Company to repurchase all
or part of such shares at their purchase price (or to require forfeiture of such
shares if purchased at no cost) from the recipient in the event that conditions
specified by the Board in the applicable Award are not satisfied prior to the
end of the applicable Restricted Period or Restricted Periods established by the
Board for such Award. Conditions for repurchase (or forfeiture) may be based on
continuing employment or service or achievement of pre-established performance
or other goals and objectives.
(b) Shares of Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as permitted by the Board, during the
applicable Restricted Period. Shares of Restricted Stock shall be evidenced in
such manner as the Board may determine. Any certificates issued in respect of
shares of Restricted Stock shall be registered in the name of the Participant
and, unless otherwise determined by the Board, deposited by the Participant,
together with a stock power endorsed in blank, with the Company (or its
designee). At the expiration of the Restricted Period, the Company (or such
designee) shall deliver such certificates to the Participant or if the
Participant has died, to the Participant's Designated Beneficiary.
(c) The Board may, in its sole discretion, grant (or sell at a purchase
price determined by the Board, which shall not be lower than 85% of Fair Market
Value on the date of sale) to Participants shares of Stock free of any
restrictions under the Plan ("Unrestricted Stock").
(d) The purchase price for each share of Restricted Stock and Unrestricted
Stock shall be determined by the Board of Directors and may not be less than the
par value of the Common Stock. Such purchase price may be paid in the form of
past services or such other lawful consideration as is determined by the Board.
(e) The Board may at any time accelerate the expiration of the Restricted
Period applicable to all, or any particular, outstanding shares of Restricted
Stock.
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Section 10. General Provisions Applicable to Awards
(a) Applicability of Rule 16b-3. Those provisions of the Plan which make an
express reference to Rule 16b-3 shall apply to the Company only at such time as
the Company's Common Stock is registered under the Securities Exchange Act of
1934, or any successor provision, and then only to Reporting Persons.
(b) Reporting Person Limitations. Notwithstanding any other provision of the
Plan, to the extent required to qualify for the exemption provided by Rule 16b-
3, (i) any Option, SAR, Performance Share Award or other similar right related
to an equity security issued under the Plan to a Reporting Person shall not be
transferable other than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code or Title
I or the Employee Retirement Income Security Act ("ERISA"), or the rules
thereunder, and shall be exercisable during the Participant's lifetime only by
the Participant or the Participant's guardian or legal representative, and (ii)
the selection of a Reporting Person as a Participant and the terms of his or her
Award shall be determined only in accordance with the applicable provisions of
Rule 16b-3.
(c) Documentation. Each Award under the Plan shall be evidenced by an
instrument delivered to the Participant specifying the terms and conditions
thereof and containing such other terms and conditions not inconsistent with the
provisions of the Plan as the Board considers necessary or advisable. Such
instruments may be in the form of agreements to be executed by both the Company
and the Participant, or certificates, letters or similar documents, acceptance
of which will evidence agreement to the terms thereof and of this Plan.
(d) Board Discretion. Each type of Award may be made alone, in addition to
or in relation to any other type of Award. The terms of each type of Award need
not be identical, and the Board need not treat Participants uniformly. Except as
otherwise provided by the Plan or a particular Award, any determination with
respect to an Award may be made by the Board at the time of award or at any time
thereafter.
(e) Termination of Status. Subject to the provisions of Section 6(b)(iv),
the Committee shall determine the effect on an Award of the disability, death,
retirement, authorized leave of absence or other termination of employment or
other status of a Participant and the extent to which, and the period during
which, the Participant's legal representative, guardian or Designated
Beneficiary may exercise rights under such Award.
(f) Mergers, Etc. In the event of a consolidation, merger or other
reorganization in which all of the outstanding shares of Common Stock are
exchanged for securities, cash or other property of any other corporation or
business entity (as "Acquisition") or in the event of a liquidation of the
Company, the Board of Directors of the Company, or the board of directors of any
corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions as to outstanding Awards: (i)
provide that such Awards shall be assumed, or substantially equivalent Awards
shall be substituted, by the acquiring or succeeding corporation (or an
affiliate thereof) on such terms as the Board determines to be appropriate, (ii)
upon written notice to Participants, provide that all unexercised Options or
SARs will terminate immediately prior to the consummation of such transaction
unless exercised by the Participant within a specified period following the date
of such notice, (iii) in the event of an Acquisition under the terms of which
holders of the Common Stock of the Company will receive upon consummation
thereof a cash payment for each share surrendered in the Acquisition (the
"Acquisition Price"), make or provide for a cash payment to Participants equal
to the difference between (A) the Acquisition Price times the number of shares
of Common Stock subject to outstanding Options or SARs (to the extent then
exercisable at prices not in excess of the Acquisition Price) and (B) the
aggregate exercise price of all such outstanding Options or SARs in exchange for
the termination of such Options and SARs, and (iv) provide that all or any
outstanding Awards shall become exercisable or realizable in full prior to the
effective date of such Acquisition.
7
<PAGE>
(g) Withholding. The Participant shall pay to the Company, or make provision
satisfactory to the Board for payment of, any taxes required by law to be
withheld in respect of Awards under the Plan no later than the date of the event
creating the tax liability. In the Board's discretion, and subject to such
conditions as the Board may establish, such tax obligations may be paid in whole
or in part in shares of Common Stock, including shares retained from the Award
creating the tax obligation, valued at their Fair Market Value. The Company may,
to the extent permitted by law, deduct any such tax obligations from any payment
of any kind otherwise due to the Participant.
(h) Foreign Nationals. Awards may be made to Participants who are foreign
nationals or employed outside the United States on such terms and conditions
different from those specified in the Plan as the Board considers necessary or
advisable to achieve the purposes of the Plan or comply with applicable laws.
(i) Amendment of Award. The Board may amend, modify or terminate any
outstanding Award, including substituting therefor another Award of the same or
a different type, changing the date of exercise or realization and converting an
Incentive Stock Option to a Nonstatutory Stock Option, provided that the
Participant's consent to such action shall be required unless the Board
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
(j) Cancellation and New Grant of Options. The Board of Directors shall have
the authority to effect, at any time and from time to time, with the consent of
the affected optionees, (i) the cancellation of any or all outstanding Options
under the Plan and the grant in substitution therefor of new Options under the
Plan covering the same or different numbers of shares of Common Stock and having
an option exercise price per share which may be lower or higher than the
exercise price per share of the cancelled Options or (ii) the amendment of the
terms of any and all outstanding Options under the Plan to provide an option
exercise price per share which is higher or lower than the then current exercise
price per share of such outstanding Options.
(k) Conditions on Delivery of Stock. The Company will not be obligated to
deliver any shares of Stock pursuant to the Plan or to remove restrictions from
shares previously delivered under the Plan (i) until all conditions of the Award
have been satisfied or removed, (ii) until, in the opinion of the Company's
counsel, all applicable federal and state laws and regulations have been
complied with, (iii) if the outstanding Stock is at the time listed on any stock
exchange, until the shares to be delivered have been listed or authorized to be
listed on such exchange upon official notice of notice of issuance, and (iv)
until all other legal matters in connection with the issuance and delivery of
such shares have been approved by the Company's counsel. If the sale of Stock
has not been registered under the Securities Act of 1933, as amended, the
Company may require, as a condition to exercise of the Award, such
representations or agreements as the Company may consider appropriate to avoid
violation of such Act and may require that the certificates evidencing such
Stock bear an appropriate legend restricting transfer.
Section 11. Miscellaneous
(a) No Right To Employment or Other Status. No person shall have any claim
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or service
for the Company. The Company expressly reserves the right at any time to dismiss
a Participant free from any liability or claim under the Plan, except as
expressly provided in the applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed under
the Plan until he or she becomes the record holder thereof.
8
<PAGE>
(c) Exclusion from Benefit Computations. No amounts payable upon exercise of
Awards granted under the Plan shall be considered salary, wages or compensation
to Participants for purposes of determining the amount or nature of benefits
that Participants are entitled to under any insurance, retirement or other
benefit plans or programs of the Company.
(d) Effective Date and Term. Subject to the approval of the stockholders of
the Company, the Plan shall be effective on June 23, 1992. Prior to such
approval, Awards may be made under the Plan expressly subject to such approval.
No Award may be made under the Plan after June 23, 2002, but Awards previously
granted may extend beyond that date.
(e) Amendment of Plan. The Board may amend, suspend or terminate the Plan or
any portion thereof at any time, provided that no amendment shall be made
without stockholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirement, including any requirements for
compliance with Rule 16b-3. Prior to any such approval, Awards may be made under
the Plan expressly subject to such approval.
(f) Governing Law. The provisions of the Plan shall be governed by and
interpreted in accordance with the laws of the Commonwealth of Massachusetts.
Adopted by the Board of Directors
on June 23, 1992
Approved by the stockholders
on July 24, 1992
9
<PAGE>
AMENDMENT NO. 1 TO THE 1992 STOCK INCENTIVE PLAN
OF BANYAN SYSTEMS INCORPORATED
Subsection 5(a) of the 1992 Stock Incentive Plan (the "Plan") of Banyan
Systems Incorporated is hereby amended, subject to stockholder approval, to
increase from 1,000,000 to 1,850,000 the number of shares of Common Stock
authorized for issuance under the Plan.
Subsection 6(a)(i) of the Plan is hereby amended and restated in its
entirety, subject to stockholder approval, to provide as follows:
(i) Subject to the provisions of the Plan, the Board may award Incentive
Stock Options and Nonstatutory Stock Options, and determine the number of
shares to be covered by each Option, the option price therefor and the
conditions and limitations applicable to the exercise of the Option. The
terms and conditions of Incentive Stock Options shall be subject to and
comply with Section 422 of the Code, or any successor provisions, and any
regulations thereunder. Subject to adjustment as provided in Subsection
5(b) above, the maximum number of shares with respect to which Options may
be granted to any employee under the Plan shall not exceed 300,000 shares
of Common Stock during any two consecutive calendar year period. For
purposes of calculating such maximum number, (a) an Option shall continue
to be treated as outstanding notwithstanding its repricing, cancellation or
expiration and (b) the repricing of an outstanding Option or the issuance
of a new Option in substitution for a cancelled Option shall be deemed to
constitute the grant of a new additional Option separate from the original
grant of the Option that is repriced or cancelled.
Adopted by the Board of Directors on
March 28, 1994
Approved by the Stockholders on
May 9, 1994
10
<PAGE>
AMENDMENT NO. 2 TO THE 1992 STOCK INCENTIVE PLAN
OF BANYAN SYSTEMS INCORPORATED
Subsection 5(a) of the 1992 Stock Incentive Plan (the "Plan") of Banyan
Systems Incorporated is hereby amended, subject to stockholder approval, to
increase from 1,850,000 to 2,700,000 the number of shares of Common Stock
authorized for issuance under the Plan.
Adopted by the Board of
Directors on February 2, 1995
Approved by the Stockholders on
May 9, 1995
11
<PAGE>
AMENDMENT NO. 3 TO THE 1992 STOCK INCENTIVE PLAN
OF BANYAN SYSTEMS INCORPORATED
The definition of "Committee" contained in Subsection 2 of the 1992 Stock
Incentive Plan (the "Plan") of Banyan Systems Incorporated is hereby amended
and restated in its entirety to read as follows:
" "Committee' means a committee of not less than two members of the Board
appointed by the Board to administer the Plan, provided that if and when the
Common Stock is registered under the Section 12 of the Securities Exchange Act
of 1934, each member of the Committee shall be a "Non-Employee Director,' as
such term is defined in Rule 16b-3 under the Securities Act of 1934 ("Rule
16b-3"), and an "Outside Director,' as such term is defined in the Code."
Adopted by the Board of Directors on
January 17, 1997
12
<PAGE>
AMENDMENT NO. 4 TO THE 1992 STOCK INCENTIVE PLAN
OF BANYAN SYSTEMS INCORPORATED
Subsection 5(a) of the 1992 Stock Incentive Plan, as amended (the "Plan"),
of Banyan Systems Incorporated is hereby amended, subject to stockholder
approval, to increase from 2,700,000 to 3,500,000 the number of shares of
Common Stock, $.01 par value per share, authorized for issuance under the
Plan.
Adopted by the Board of Directors on
February 11, 1998
Approved by the Stockholders on
May 12, 1998
13
<PAGE>
AMENDMENT NO. 5 TO THE 1992 STOCK INCENTIVE PLAN
OF BANYAN SYSTEMS INCORPORATED
Subsection 5(a) of the 1992 Stock Incentive Plan, as amended (the "Plan"),
of Banyan Systems Incorporated is hereby amended, subject to stockholder
approval, to increase from 3,500,000 to 4,450,000 the number of shares of
Common Stock, $.01 par value per share, authorized for issuance under the Plan.
Adopted by the Board of Directors on
March 4, 1999
Adopted by the Stockholders on
May 13, 1999
14
<PAGE>
AMENDMENT NO. 6 TO THE 1992 STOCK INCENTIVE PLAN
OF BANYAN SYSTEMS INCORPORATED
Subsection 5(a) of the 1992 Stock Incentive Plan, as amended (the "Plan"),
of Banyan Systems Incorporated is hereby amended, subject to stockholder
approval, to increase from 4,450,000 to 5,470,000 the number of shares of Common
Stock, $.01 par value per share, authorized for issuance under the Plan.
Adopted by the Board of Directors on
January 31, 2000
Adopted by the Stockholders on
May 9, 2000
15
<PAGE>
EXHIBIT 10.2
BANYAN SYSTEMS INCORPORATED
1992 DIRECTOR STOCK OPTION PLAN
1. Purpose
-------
The purpose of this 1992 Director Stock Option Plan (the "Plan") of
Banyan Systems Incorporated (the "Company") is to encourage ownership in the
Company by outside directors of the Company whose continued services are
considered essential to the Company's future progress and to provide them with a
further incentive to remain as directors of the Company.
2. Administration
--------------
The Board of Directors shall supervise and administer the Plan. Grants
of stock options under the Plan and the amount and nature of the awards to be
granted shall be automatic in accordance with Section 5. However, all questions
of interpretation of the Plan or of any options issued under it shall be
determined by the Board of Directors and such determination shall be final and
binding upon all persons having an interest in the Plan.
3. Participation in the Plan
-------------------------
Directors of the Company who are not employees of the Company or any
subsidiary of the Company shall be eligible to participate in the Plan.
4. Stock Subject to the Plan
-------------------------
(a) The maximum number of shares which may be issued under the Plan
shall be 100,000 shares of the Company's Common Stock, par value $.01 per share
("Common Stock"), subject to adjustment as provided in Section 9 of the Plan.
(b) If any outstanding option under the Plan for any reason expires
or is terminated without having been exercised in full, the shares allocable to
the unexercised portion of such option shall again become available for grant
pursuant to the Plan.
(c) All options granted under the Plan shall be non-statutory options
not entitled to special tax treatment under Section 422 of the Internal Revenue
Code of 1986, as amended to date and as it may be amended from time to time (the
"Code").
5. Terms, Conditions and Form of Options
-------------------------------------
Each option granted under the Plan shall be evidenced by a written
agreement in such form as the Board of Directors shall from time to time
approve, which agreements shall comply with and be subject to the following
terms and conditions:
(a) Option Grant Dates.
------------------
(i) Upon the closing of the initial public offering of Common
Stock of the Company, and on the date of each annual meeting of stockholders of
the Company, and on the date of each annual meeting of stockholders of the
Company thereafter, the Company shall grant to each eligible director an option
for 3,000 shares of Common Stock (the "Annual Option").
(ii) Upon the initial election of any eligible director as a
director of the Company, the Company shall grant to such director an option for
15,000 shares of Common Stock (the "Initial Option"), provided that no person
--------
serving as a director upon the adoption of this Plan shall receive such an
option.
(b) Option Exercise Price. The option exercise price per share for
---------------------
each option granted under the Plan shall equal (i) the last reported sales price
per share of the Company's Common Stock on the NASDAQ National Market System
(or, if the Company is traded on a nationally recognized securities exchange on
the date of grant, the reported closing sales price per share of the Company's
Common Stock by such exchange) on the date of grant (or if no such price is
reported on such date such price as reported on the nearest preceding day) or
(ii) if the Common Stock is not traded on NASDAQ or an exchange, the fair market
value per share on the date of grant as determined by the Board of Directors.
(c) Options Non-Transferable. Each option granted under the Plan by
------------------------
its terms shall not be transferable by the optionee otherwise than by will, or
by the laws of descent and distribution, and shall be exercised during the
lifetime of the optionee only by him. No option or interest therein may be
transferred, assigned, pledged or hypothecated by the optionee during his
lifetime, whether by operation of law or otherwise, or be made subject to
execution, attachment or similar process.
(d) Exercise Period. Each Initial Option shall become exercisable on
---------------
a cumulative basis as to one-fourth of the shares subject to the option on each
of the first, second, third and fourth anniversaries of the date of grant of
such option. Each
1
<PAGE>
Annual Option shall become exercisable 12 months after the date of grant of such
option (or, if earlier, the day prior to the first Annual Meeting of
Stockholders of the Company following the date of grant). In the event an
optionee ceases to serve as a director, each such option may be exercised by the
optionee (or, in the event of his death, by his administrator, executor or
heirs), at any time within 12 months after the optionee ceases to serve as a
director, to the extent such option was exercisable at the time of such
cessation of service. Notwithstanding the foregoing, no option shall be
exercisable after the expiration of ten years from the date of grant.
(e) Exercise Procedure. Options may be exercised only by written
------------------
notice to the Company at its principal office accompanied by (i) payment in cash
of the full consideration for the shares as to which they are exercised or (ii)
an irrevocable undertaking by a broker to deliver promptly to the Company
sufficient funds to pay the exercise price or delivery of irrevocable
instructions to a broker to deliver promptly to the Company cash or a check
sufficient to pay the exercise price.
6. Assignments
-----------
The rights and benefits of participants under the Plan may not be
assigned, whether voluntarily or by operation of law, except as provided in
Section 5(d).
7. Effective Date
--------------
The Plan shall become effective immediately upon its adoption by the
Board of Directors, but all grants of options shall be conditional upon the
approval of the Plan by the stockholders of the Company within 12 months after
adoption of the Plan by the Board of Directors.
8. Limitation of Rights
--------------------
(a) No Right to Continue as a Director. Neither the Plan, nor the
----------------------------------
granting of an option nor any other action taken pursuant to the Plan, shall
constitute or be evidence of any agreement or understanding, express or implied,
that the Company will retain a director for any period of time.
(b) No Stockholders' Rights for Options. An optionee shall have no
-----------------------------------
rights as a stockholder with respect to the shares covered by his options until
the date of the issuance to him of a
2
<PAGE>
stock certificate therefor, and no adjustment will be made for dividends or
other rights (except as provided in Section 9) for which the record date is
prior to the date such certificate is issued.
9. Changes in Common Stock
-----------------------
(a) If the outstanding shares of Common Stock are increased,
decreased or exchanged for a different number or kind of shares or other
securities, or if additional shares or new or different shares or other
securities are distributed with respect to such shares of Common Stock or other
securities, through merger, consolidation, sale of all or substantially all of
the assets of the Company, reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split or other distribution with
respect to such shares of Common Stock, or other securities, an appropriate and
proportionate adjustment will be made in (i) the maximum number and kind of
shares reserved for issuance under the Plan, (ii) the number and kind of shares
or other securities subject to then outstanding options under the Plan and (iii)
the price for each share subject to any then outstanding options under the Plan,
without changing the aggregate purchase price as to which such options remain
exercisable. No fractional shares will be issued under the Plan on account of
any such adjustments.
(b) In the event that the Company is merged or consolidated into or
with another corporation (in which consolidation or merger the stockholders of
the Company receive distributions of cash or securities of another issuer as a
result thereof), or in the event that all or substantially all of the assets of
the Company are acquired by any other person or entity, or in the event of a
reorganization or liquidation of the Company, the Board of Directors of the
Company, or the board of directors of any corporation assuming the obligations
of the Company, shall, as to outstanding options, either (i) provide that such
options shall be assumed, or equivalent options shall be substituted, by the
acquiring or successor corporation (or an affiliate thereof), or (ii) upon
written notice to the optionees, provide that all unexercised options will
terminate immediately prior to the consummation of such merger, consolidation,
acquisition, reorganization or liquidations unless exercised by the optionee
within a specified number of days following the date of such notice.
3
<PAGE>
10. Amendment of the Plan
---------------------
The Board of Directors may suspend or discontinue the Plan or review
or amend it in any respect whatsoever; provided, however, that without approval
of the stockholders of the Company no revision or amendment shall change the
number of shares subject to the Plan (except as provided in Section 9), change
the designation of the class of directors eligible to receive options, or
materially increase the benefits accruing to participants under the Plan. The
Plan may not be amended more than once in any six-month period.
11. Notice
------
Any written notice to the Company required by any of the provisions of
the Plan shall be addressed to the Treasurer of the Company and shall become
effective when it is received.
12. Governing Law
-------------
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the Commonwealth of Massachusetts.
Adopted by the Board of Directors
on June 23, 1992.
Approved by the stockholders
on July 24, 1992.
4
<PAGE>
AMENDMENT NO. 1 TO THE 1992 DIRECTOR STOCK OPTION PLAN
OF BANYAN SYSTEMS INCORPORATED
Subsection 5(c) of the 1992 Director Stock Option Plan (the "Plan") of
Banyan Systems Incorporated is hereby amended and restated in its entirety to
read as follows:
"(c) Options Non-Transferrable. Except as otherwise provided in the option
-------------------------
agreement evidencing the option grant, each option granted under the Plan shall
not be transferrable by the optionee otherwise than by will, or by the laws of
descent and distribution, and shall be exercised during the lifetime of the
optionee only by the optionee."
Subsection 10 of the Plan is hereby amended and restated in its entirety to
read as follows:
"10. Amendment of the Plan. The Board of Directors may at any time, and
---------------------
from time to time, modify, terminate or amend the Plan in any respect, except
that if at any time the approval of the stockholders of the Company is required
as to such modification or amendment under any applicable listing requirement or
any applicable tax or regulatory requirement, the Board of Directors may not
effect such modification or amendment without such approval."
Adopted by the Board of
Directors on January 16, 1997
AMENDMENT NO. 2 TO THE 1992 DIRECTOR STOCK OPTION PLAN
OF BANYAN SYSTEMS INCORPORATED
Section 4(a) of the 1992 Director Stock Option Plan (the "Plan") of Banyan
Systems Incorporated is hereby amended, subject to stockholder approval, to
increase from 100,000 to 200,000 the number of shares of Common Stock authorized
for issuance under the Plan.
Adopted by the Board of
Directors on February 27, 1997
Adopted by the Stockholders
on May 12, 1997
5
<PAGE>
AMENDMENT NO. 3 TO THE 1992 DIRECTOR STOCK OPTION PLAN OF BANYAN SYSTEMS
INCORPORATED
1. Subsection 5(a)(i) of the Plan is hereby amended to increase the Annual
Option from 3,000 to 8,000 shares of Common Stock.
2. Subsection 5(a)(ii) of the Plan is hereby amended to increase the Initial
Option from 15,000 to 32,000 shares of Common Stock.
3. Section 5 of the Plan is hereby amended to add subsection (a)(iii) as
follows:
"(iii) Upon the fourth anniversary of the grant of an Initial Option to an
eligible director, the Company shall grant to such director an option for 16,000
shares of Common Stock (the "Refresher Option"), provided that such director is
an eligible director on the date of such grant."
For each eligible director whose fourth anniversary of the grant of his
Initial Option occurred or will occur prior to May 9, 2000, he will receive his
Refresher Option on May 9, 2000.
4. The first sentence of Subsection 5(d) is hereby amended by adding the phrase
"and Refresher Option" between the words "Initial Option" and "shall."
5. Subsection 9(b) of the Plan is hereby amended and restated in its entirety
to read as follows:
"(b) In the event that the Company is merged or consolidated into or with
another corporation (in which consolidation or merger the stockholders of the
Company receive distributions of cash or securities of another issuer as a
result thereof), or in the event that all or substantially all of the assets of
the Company are acquired by any other person or entity, or in the event of a
reorganization or liquidation of the Company, then (i) all outstanding options
shall automatically become vested in full and fully exercisable immediately
prior to the consummation of such merger, consolidation, acquisition,
reorganization or liquidation, and (ii) the Board of Directors of the Company,
or the board of directors of any corporation assuming the obligations of the
Company, shall, as to outstanding options, either (A) provide that such options
shall be assumed, or equivalent options shall be substituted, by the acquiring
or successor corporation (or affiliate thereof), or (B) upon written notice to
the optionees, provide that all unexercised options will terminate immediately
following the vesting of such options in accordance with clause (i) above and
immediately prior to the consummation of such merger, consolidation,
acquisition, reorganization or liquidation unless exercised by the optionee
within a specified number of days following the date of such notice."
Adopted by the Board of Directors
on October 21, 1999
6
<PAGE>
AMENDMENT NO. 4 TO THE 1992 DIRECTOR STOCK OPTION PLAN OF
BANYAN SYSTEMS INCORPORATED
Subsection 4(a) of the 1992 Director Stock Option Plan, as amended (the
"Plan"), of Banyan Systems Incorporated is hereby amended, subject to
stockholder approval, to increase from 200,000 to 325,000 the number of shares
of Common Stock authorized for issuance under the Plan.
Adopted by the Board of Directors on
January 31, 2000
Adopted by the Stockholders on
May 9, 2000
7
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<PAGE>
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<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-2000 DEC-31-1999
<PERIOD-START> JAN-01-2000 JAN-01-1999
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 68,562 29,920
<SECURITIES> 137,603 100,851
<RECEIVABLES> 14,224 15,351
<ALLOWANCES> 1,041 869
<INVENTORY> 0 0
<CURRENT-ASSETS> 213,124 138,784
<PP&E> 31,639 30,525
<DEPRECIATION> 27,213 26,741
<TOTAL-ASSETS> 246,552 174,450
<CURRENT-LIABILITIES> 33,943 26,341
<BONDS> 0 0
0 0
0 0
<COMMON> 252 248
<OTHER-SE> 147,132 115,119
<TOTAL-LIABILITY-AND-EQUITY> 246,552 174,450
<SALES> 15,869 9,094
<TOTAL-REVENUES> 15,869 9,094
<CGS> 7,517 4,541
<TOTAL-COSTS> 25,184 11,667
<OTHER-EXPENSES> 48,451 105
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 30 30
<INCOME-PRETAX> 39,106 (2,498)
<INCOME-TAX> 18,778 136
<INCOME-CONTINUING> 20,328 (2,634)
<DISCONTINUED> 0 3,091
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 20,328 457
<EPS-BASIC> 0.88 0.02
<EPS-DILUTED> 0.73 0.02
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