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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 0-19817
INTRANET SOLUTIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MINNESOTA 41-1652566
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
7777 GOLDEN TRIANGLE DRIVE
EDEN PRAIRIE, MINNESOTA 55344-3736
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(952) 903-2000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, PAR
VALUE $.01 PER SHARE
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the registrant's common stock held by
non-affiliates of the registrant as of June 20, 2001, was $673,480,636 based on
the closing sale price for the registrant's common stock on that date as
reported by The Nasdaq Stock Market. For purposes of determining such aggregate
market value, all officers and directors of the registrant are considered to be
affiliates of the registrant, as well as shareholders holding 10% or more of the
outstanding common stock as reflected on Schedules 13D or 13G filed with the
registrant. This number is provided only for the purpose of this report on Form
10-K and does not represent an admission by either the registrant or any such
person as to the status of such person.
As of June 20, 2001, the registrant had 22,178,619 shares of common stock
issued and outstanding.
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INTRANET SOLUTIONS, INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 2001
TABLE OF CONTENTS
DESCRIPTION PAGE
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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 10
Item 3. Legal Proceedings........................................... 10
Item 4. Submission of Matters to a Vote of Security Holders......... 10
Item 4A. Executive Officers of the Registrant........................ 10
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 11
Item 6. Selected Financial Data..................................... 11
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 11
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 11
Item 8. Financial Statements and Supplementary Data................. 11
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 11
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 12
Item 11. Executive Compensation...................................... 12
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 12
Item 13. Certain Relationships and Related Transactions.............. 12
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 12
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement dated for the
annual meeting of Shareholders to be held on August 29, 2001 and the Annual
Report to Shareholders for the year ended March 31, 2001 are incorporated by
reference in Parts II, III and IV of this Annual Report on Form 10-K. (The
Compensation Committee Report and the stock performance graph contained in the
registrant's Proxy Statement are expressly not incorporated by reference in this
Annual Report on Form 10-K). The Proxy Statement will be filed within 120 days
after the end of the fiscal year ended March 31, 2001.
PART I
ITEM 1. BUSINESS
FORWARD-LOOKING STATEMENTS
The information presented in this Annual Report on Form 10-K under the
headings "Item 1. Business" and "Item 2. Properties" are incorporated by
reference under "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" (including "Risk Factors") and contains
forward-looking statements within the meaning of the safe harbor provisions of
Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements are based on the beliefs of the company's management
as well as on assumptions made by and information currently available to us at
the time such statements were made. When used in the Annual Report on Form 10-K,
the words "anticipate," "believe," "estimate," "expect," "intend," and similar
expressions, as they relate to us, are intended to identify such forward-looking
statements. Although we believe these statements are reasonable, such statements
are subject to risks and uncertainties, including those discussed under "Risk
Factors" beginning on page 11 in Exhibit 13.1 of this Annual Report on Form 10-K
that could cause actual results to differ materially from those projected.
Because actual results may differ, readers are cautioned not to place undue
reliance on these forward-looking statements.
OVERVIEW
IntraNet Solutions, Inc., is a leading provider of business content
management solutions, providing browser-based Web and wireless access to
content-centric business Web sites and content-supported e-business
applications. IntraNet Solutions' products enable customers to rapidly deploy
business Web sites by automating the content contribution, editing, management,
and publishing processes for these sites. Business and Web content from a wide
variety of enterprise sources, including desktop applications, business
applications, and templates, is automatically converted to output formats. These
output formats, which include XML, HTML, WML, cHTML, and PDF, allow content to
be viewed on the Web with just a standard browser or on a wireless device.
Personalization and compatibility with corporate security models ensure that
users access only the information they need.
With headquarters in Eden Prairie, MN, the company maintains offices
throughout the United States, Europe, and Australia. The company currently has
more than 1,500 customers, primarily located throughout the United States and
Europe.
PRODUCTS
IntraNet Solutions' product line consists of Xpedio(R), our flagship
enterprise content management suite, our Transit product line for small and
medium-size businesses, and our Outside In content viewing and conversion
technology for developers and OEM customers. The company also provides
professional services, training, maintenance programs, and customer support.
XPEDIO CONTENT MANAGEMENT SUITE
For Global 2000 enterprise companies, IntraNet Solutions offers the Xpedio
Content Management Suite, the core of which consists of two products; Xpedio
Content Server and Xpedio Content Publisher. The Xpedio
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product line also includes add-on modules such as Xpedio PDF Converter, Xpedio
Content Categorizer, Xpedio Content Tracker, Xpedio Legacy and Xpedio Report
Parser. Xpedio's n-tier Web-based open architecture scales easily to support
enterprise-wide implementations and is designed to integrate with other
applications and application servers using common industry technologies such as
EJB, COM or a Java application programming interface (API). Xpedio products are
generally licensed on a per-server basis and are available for different numbers
of content contributors.
Key Xpedio features include:
- Ease of use and administration. Our products feature quick installation,
ease-of-use for individual users and simple maintenance procedures for
administrators. Xpedio's features automate many tasks that were
previously performed manually.
- Ease of integration. From inception, our products have been built on
open Web standards enabling seamless integration into existing corporate
environments. Our component architecture allows customers the ability to
integrate immediately with other system components. For example, our
compatibility with Windows NT Domain, LDAP, and Active Directory security
frameworks provides support for integrations with centralized corporate
security models.
- Scalability. Our customers' business-critical information needs continue
to expand and evolve. As volume and bandwidth increase across an
enterprise, we ensure that our customers' information investments are
protected and that they can continue to grow using our products.
- Flexibility. With our open Web standards, multi-platform Java-based
solution, and integration capabilities, we offer customers the
flexibility to address both current and future Web content management
needs while utilizing their existing Internet infrastructure.
XPEDIO CONTENT SERVER
Xpedio Content Server is a robust and scalable Web content management
system that helps users shorten enterprise Web development times. Due to the low
total cost of ownership, customers generally achieve a rapid return on
investment. Designed to be extremely easy-to-use, Xpedio Content Server gives
every content contributor the ability to automatically publish content to Web
sites from their desktop without compromising on corporate standards for control
and manageability. Web content management ensures content is always current and
accurate, and frees Webmasters from routine coding and updating.
Users at all levels of an organization and with widely varying technical
abilities can contribute business and Web content to the Content Server.
Contributors submit content using familiar desktop applications (e.g., Microsoft
Office, CAD, Visio, others), business applications (e.g., ERP, CRM, legacy
systems), Xpedio contribution templates, design applications (e.g., HTML, XML
editors, others), scanned documents or e-mail. Once content is contributed,
Xpedio Content Server assigns metadata to it and manages the content in its
original, native format. Robust library services, including version control,
check-in and check-out capabilities, help users manage the editing process.
Previous versions of content are available for rollback, auditing, or reference
purposes. Content Server also provides comprehensive workflow management
throughout the content lifecycle, from review and approval of original content
to Web page presentation, staging, and deployment.
XPEDIO CONTENT PUBLISHER
With Xpedio Content Publisher, users are able to automatically publish
content managed in Xpedio Content Server to the Web without the help of a
Webmaster. Advanced template-based technology separates the content itself from
the "look and feel". Web publishing is streamlined, combining business or Web
content elements into professional, well-designed and fully linked Web sites.
Xpedio Content Publisher extracts content from the Xpedio Content Server,
converts it automatically into the desired Web output format (XML, HTML, WML, or
cHTML -- depending on the device used),
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and publishes the resulting Web pages to a Web server or back to the Xpedio
Content Server for secure management and version control.
Full Web site production capabilities are also provided, including workflow
of a staged site, Webmaster collaboration and content preview capabilities. In
addition, Web site navigation can be personalized based on user profiles to meet
the needs of individual users.
ADD-ON MODULES
The following table highlights the features of our Xpedio Add-On Modules:
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PRODUCT NAME FEATURES
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Xpedio Outbound Refinery - Fast, efficient, on-demand content publishing
- Converts over 225 file formats to HTML, JPEF, GIF
- Rules-based templates to ensure consistent look and feel
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Xpedio Content Categorizer - Intelligently categorizes text-based content upon
submittal to Content Server
- For use in batch loading of large amounts of content, or
interactively with individual content items
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Xpedio Content Tracker - Enables Web site administrators to use Xpedio metadata to
define both static and dynamic reports
- Analyze site traffic, perform clickpath analysis, and
track users within Xpedio Content Server
- Highlight areas of improvement to site design, navigation,
and overall usability
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Xpedio Desktop - Installed on users' desktop systems
- Allows direct linkage between Content Server and client
applications
- Two options
- ODMA product -- for direct contribution from
ODMA-compliant applications such as Word, WordPerfect,
Excel, and PowerPoint
- Microsoft(TM) Outlook Integration product -- for direct
contribution of e-mail messages and attachments from
Microsoft Outlook
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Xpedio Report Parser - Capture reports from mainframe, legacy, and ERP systems
and other applications
- Store them in Xpedio and make them instantly available to
users online
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Xpedio Legacy - Automatically scan and convert an organization's
paper-based legacy data and content into Web-ready files
- Uses both Adobe Acrobat Capture and Kofax Ascent Capture
scanning technology
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Xpedio PDF Converter - Automatically convert original source files to
Web-viewable PDF upon check-in to the Content Server
- PDF format allows users to view the content without
opening the original application
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Xpedio XML Converter - Convert over 225 native file formats to XML automatically
upon check-in
- XML version is stored in Xpedio Content Server and is
available for reuse and further conversion to additional
formats
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PRODUCT NAME FEATURES
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Xpedio InterCAD - Access, manage, and publish native AutoCAD engineering
drawings in a Web-based format
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Xpedio TIFF Conversion - Check TIFF (Tagged Image File Format) files into Xpedio
and then Web-publish these as multiple-page PDF files
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Xpedio Compression - Check-in large image files and convert them automatically
to a compressed MrSID format
- MrSID file format is visible as a thumbnail on which users
can perform high-resolution zooming
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Xpedio PDF Merge - Combine multiple documents (converted to PDF) into a
single PDF document
- Use additional PDF Merge elements to achieve more
personalized composite documents -- including watermarks,
headers/footers, Table of Contents, and page numbering
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Xpedio Watermark - Specify various security attributes on a PDF file (overlay
or underlay a watermark, disable printing, disable text
selection, and disable note creation)
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Xpedio PDF Interchange - Convert PDF documents into HTML
- Display them in a Web browser without requirement of
Acrobat Reader or other client software
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Xpedio Enterprise Search - Search for documents over multiple Content Server
instances
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For small and medium-sized businesses with less need for the broad spectrum
of Xpedio's content management capabilities, IntraNet Solutions offers the
Transit product line. Transit products streamline publishing and offer these
customers a cost-effective solution for delivering content to their Web sites.
IntraNet Solutions' channel partners sell and distribute Transit throughout the
world -- including US, Europe, and Asia-Pacific countries.
HTML TRANSIT
HTML Transit lets users specify standard business documents as the source
content for their site and then easily publishes that content to the Web, using
HTML or XML. When source content changes, HTML Transit updates the site easily,
ensuring that it's well maintained with reliable links.
TRANSIT CENTRAL
Transit Central, a companion product, takes the publishing process one step
further by letting Webmasters specify directories where content can be
collected. Content authors can then easily publish information by dragging and
dropping documents into those directories. Administrators can schedule updates
to happen hourly, weekly, or as often as needed.
TRANSIT CENTRAL SDK
Transit Central SDK is the Software Developer's Kit for Transit Central.
The SDK provides powerful Web publishing functionality that can be integrated
into any business system or software application. Document management systems,
workflow, or other software systems that require efficient, highly automated Web
publishing solutions can benefit from the wide array of integration options
available.
OUTSIDE IN(R) CONTENT VIEWING AND CONVERSION TECHNOLOGY
IntraNet Solutions' industry-leading Outside In technology not only
provides core capabilities to the Xpedio Content Management suite, but also
offers software application developers, wireless service providers,
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and hardware manufacturers unparalleled business document viewing and conversion
functionality. Outside In supplies IntraNet Solutions' OEM customers with a
cost-effective solution for viewing and/or converting more than 225 file formats
in many different application environments -- from applications on desktop and
handheld device platforms to Web and wireless servers in high-throughput 7x24
environments. By embedding the Outside In technology into their application, our
customers leverage our expertise in document formats to cost-effectively add
information access to their product while continuing to focus on their
particular expertise.
Outside In's robust and flexible API ensures that customers can quickly
integrate the technology into their product, customizing it to suit their
particular application's requirements.
The Outside In Content Viewing and Conversion technology is used by over
350 OEMs as a mission-critical component for enabling information access in
enterprise applications, handheld devices, and service environments.
OUTSIDE IN VIEWER TECHNOLOGY (OIVT)
OIVT renders high-fidelity views of documents without accessing the
documents' native applications. The product enables file-viewing, printing and
copy/paste functionality for more than 225 file formats, including word
processing, spreadsheet, database, presentation, graphics and archive data
types. OIVT on Microsoft Windows CE and Symbian platforms offers high-fidelity
views of more than 70 file formats on mobile and wireless devices.
OUTSIDE IN CONTENT ACCESS
Content Access enables developers to extract document content from business
documents for such diverse applications as indexing and search technologies to
unified communications applications. Content Access extracts text and document
properties from more than 225 file formats, automatically translating the text
to a develop-defined character set.
OUTSIDE IN HTML EXPORT
HTML Export offers application developers a straightforward way to provide
browser-based Web access to business documents. HTML Export automatically
converts word processing, spreadsheet, presentation, drawing and bitmap files
into high-quality HTML, GIF and JPEG formats. HTML Export's template-driven
architecture supports customization of the resulting HTML to the look-and-feel
of the overall environment and takes advantage of the capabilities of the
consuming browser.
OUTSIDE IN WIRELESS EXPORT
Wireless Export enables applications and wireless service providers to
offer their users access to information stored in business documents from smart
phones, handheld devices, WAP-enabled devices and wireless device browsers.
Content is automatically converted to formats supported by wireless devices,
such as WML, cHTML/iMode, HDML, XHTML, AvantGo HTML, WCA HTML 1.1, HTML and
ASCII text.
OUTSIDE IN XML EXPORT
XML Export automatically converts more than 225 file formats to XML
(Extensible Markup Language), which is an industry-standard format commonly used
to store enterprise content. XML Export is designed for applications seeking to
normalize document information to XML or to obtain access to all information
contained in a document.
CONSULTING SERVICES
Our consulting services professionals employ a combination of applied
software installation, configuration, development and integration skills with
experience-based project methodology and management knowledge to facilitate the
rollout of content management solutions at all levels of a customer's
organization.
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Available on a worldwide basis, we act as a business partner to our customers by
providing a broad spectrum of services including:
- Technical needs analysis, e.g. software, security and metadata analysis
- Solutions development and deployment strategies
- Software installation and configuration
- Custom application development
- Third party product integration
- Project management and
- Knowledge transfer
These services are sold in conjunction with our software products and are
offered for fees, the amount of which depends on the nature and scope of the
project. We are currently focusing on expanding our consulting services
offerings in response to customer requests for on-going content management
solution guidance and support.
PRODUCT SUPPORT
We offer a suite of Product Support programs that allows the customer to
select the offering(s) that best satisfies its Xpedio maintenance and support
requirements. From the initial installation and configuration of Xpedio to the
point of application deployment, our Product Support resources strive to provide
exceptional customer service through quick response time, effective
trouble-shooting and the delivery of complete and comprehensive technical
solutions. Customers may access Product Support resources on a worldwide basis
for assistance during the customer's normal business hours. Additional support
offerings are available which supplement the customer's product support
requirements. Product Support offerings are renewable on an annual basis and are
priced as a percentage of the product license fees.
PRODUCT TRAINING
A suite of basic and advanced product training classes is available for
customers who have purchased the Xpedio content management system. Both
technical and end user training classes are provided, each of which may be
presented at designated worldwide training facilities or at a customer's site.
Pricing varies based on class duration and location.
SALES AND MARKETING
We market and sell our products using a combination of direct and indirect
distribution channels primarily in North America and Europe. Our primary
distribution channel is our direct sales force, which targets mid- and
large-size organizations. Our sales approach typically includes a technical
systems evaluation performed by our pre-sales personnel, followed by
demonstrations of our products' capabilities and direct negotiations with our
sales staff. In addition, we have an internal telemarketing operation that is
responsible for customer prospecting, lead generation and follow-up. These
activities identify and develop leads for further sales efforts by our direct
sales force. As of March 31, 2001, we had a worldwide total of 139 direct and
indirect sales and sales support and 31 marketing personnel, which includes
business development and alliances.
We also use indirect sales channels to increase the distribution and
visibility of our products through strategic alliances with resellers, OEMs, key
systems integrators and other channel partners in both domestic and
international markets.
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We currently have operations in Australia, Germany, the Netherlands, the
United Kingdom and the United States. Localized versions of our software are
anticipated to be introduced in European and Asian markets in fiscal year 2002.
We intend to further expand our global sales and marketing capabilities by
increasing the size of our direct sales and marketing organizations in Europe
and in Asia Pacific and by continuing to develop our indirect partner
relationships. Our ability to achieve significant revenue growth in the future
will depend in large part on how successfully we recruit, train and retain
sufficient direct and indirect sales and support personnel, and how well we
continue to establish and maintain relationships with our strategic partners
resellers, OEMs, key systems integrators and other channel partners.
We use a variety of marketing programs to build market awareness of our
brand name and of our products, as well as to attract potential customers to our
products. A broad mix of programs is used to accomplish these goals, including
market research, product and strategy updates with industry analysts, public
relations activities, direct mail and relationship marketing programs, seminars,
trade shows, speaking engagements, Web site marketing and joint marketing
programs. Our marketing organization produces marketing materials in support of
sales to prospective customers that include brochures, data sheets, white
papers, presentations and demonstrations.
RESEARCH AND DEVELOPMENT
We have made substantial investments in research and development through
both internal development and technology acquisitions. Our research and
development expenditures for fiscal 1999, 2000 and 2001, were approximately $2.2
million, $2.9 million and $9.8 million, respectively. This represented 13%, 13%
and 15%, respectively, of research and development expenses when compared to
total revenue. Additionally, we recognized as expense $10.4 million of acquired
in-process research and development in fiscal 2001 related to the acquisition of
the Information Exchange Division from eBT International, Inc. in July 2000. We
expect that we will continue to commit significant resources to research and
development in the future. All research and development costs have been expensed
as incurred. As of March 31, 2001 we had 125 employees engaged in research and
development activities and we plan to continue to hire additional engineers to
further our research and development activities.
In order to continue to provide product leadership in the Web content
management market, we intend to make major product releases each year. The
success of new introductions is dependent on several factors, including timely
completion and market introduction, differentiation of new products and
enhancements from those of our competitors and market acceptance of new products
and enhancements.
The market for our products is characterized by rapid technological change,
frequent new product introductions and enhancements, evolving industry standards
and rapidly changing customer requirements. The introduction of products
incorporating new technologies and the emergence of new industry standards could
render existing products obsolete and unmarketable. Our future success will
depend in part on our ability to anticipate changes, enhance our current
products, develop and introduce new products that keep pace with technological
advancements and address the increasingly sophisticated needs of our customers.
We may not be successful in developing and marketing new products and
enhancements that respond to competitive and technological developments and
changing customer needs.
ACQUISITIONS
In September 1999, we acquired InfoAccess, a Web-based software company, in
a transaction accounted for using the pooling-of-interests method. This further
enhanced our conversion of various file types to Web formats including XML and
HTML and our ability to publish business data to the Web. Accordingly, our
financial information includes the results of operations of InfoAccess for all
periods presented.
In July 2000, we acquired the Information Exchange Division ("IED") of eBT
International, Inc. (formerly Inso Corporation). IED is the market leader in
mobile and wireless device viewing technologies and applications and Web
conversion. IED's products provide conversion of over 225 different file types
to Web
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formats including XML, HTML or Wireless Markup Language (WML). Additionally, IED
provides viewing technology for the Windows CE and Symbian operating systems
that allows users of applicable mobile and wireless devices to readily view
files from desktop applications. The total cost of the acquisition, including
transaction costs, was approximately $55.3 million. The acquisition was
accounted for as a purchase business combination. Accordingly, the net fair
value of tangible and intangible assets acquired and liabilities assumed were
recorded at their estimated fair values at the effective date of the acquisition
and the results of operations of IED are included with those of the Company for
the periods subsequent to the date of the acquisition.
COMPETITION
The market for Web business content management solutions is intensely
competitive, subject to rapid technological change and significantly affected by
new product introductions and other market activities of industry participants.
We expect competition to persist and intensify in the future. Our primary source
of competition is from Web content management products offered by companies such
as Documentum, Inc., Eprise, Inc., Interwoven, Inc., Open Market, Inc. and
Vignette Corporation. We also compete with current or potential customers who
may develop solutions internally.
Many of our competitors have longer operating histories and significantly
greater financial, technical, marketing and other resources than we do and thus
may be able to respond more quickly to new or changing opportunities,
technologies and customer requirements. Also, many current and potential
competitors have greater name recognition and access to larger customer bases
than we have. Such competitors may be able to undertake more extensive
promotional activities and offer more attractive terms to purchasers than we
can. In addition, current and potential competitors have established or may
establish cooperative relationships among themselves or with third parties to
enhance their products. Accordingly, it is possible that new competitors or
alliances among competitors may emerge and rapidly acquire significant market
share.
Competition in our market could materially and adversely affect our ability
to obtain revenues from software license fees from new or existing customers on
terms favorable to us. Further, competitive pressures may require us to reduce
the price of our software. In either case, we cannot be sure that we will be
able to compete successfully with existing or new competitors or that
competition will not have a material adverse effect on our business, operating
results and financial condition.
CUSTOMERS
Our customer base has grown to over 1,500 customers, of which over 350 are
OEM customers, representing a diverse group of industries. Our customers range
from small manufacturing firms to Fortune 500 companies. We are not dependent on
any single customer or group of customers. Selected customers include:
AIRLINE AND TRANSPORTATION BANKING AND FINANCE CONSUMER GAS AND UTILITIES
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Allied Signal Agio Carlson Companies Natural Gas Company of
Trinidad & Tobago
Boeing Cargill ConAgra Foods
Britannia Airways Dean Witter Reynolds Cox Communications Sierra Pacific Power
British Aerospace Airbus Earnst Young Land O' Lakes Oglethorpe
(UK) International
Kia Motors Fidelity Los Angeles Times
Renault GE Capital Office Max
The Sabre Group ING Barings (Europe) Revlon
United Parcel Service KPMG Target
Merrill Lynch
Primerica
U.S. Bancorp Piper
Jaffray
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GOVERNMENT AND EDUCATION HEALTH CARE HIGH TECH./TELECOM. MANUFACTURING
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FBI Allina Health System Agilent Burlington Industries
Lawrence Livermore Premera Blue Cross Apple Computer Eaton
National Laboratory
Swiss Highway Authority Tuffs Health Care Compaq Ecolab
United Nations United Health Group Ericsson Fisher Controls
U.S. Department of Wellmark Blue Cross and Fujitsu General Motors
Justice Blue Shield
Genuity Honeywell, Inc.
Hewlett-Packard Maytag
IBM Mitsubishi
Intel Praxair
Lucent Technologies SKF
Siemens Microelectronics Toshiba
Sony Toyota
Verizon TRW
Xerox
OEM
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Cisco HP
Oracle Sun
Yahoo Intel
Lucent Nokia
PROPRIETARY RIGHTS AND LICENSING
We rely on a combination of copyright, trade secret, trademark,
confidentiality procedures and contractual provisions to protect our proprietary
rights. United States and international copyright laws provide limited
protections for our software, documentation and other written materials. We
license our products in object code format for limited use by customers. We
treat the source code for our products as a trade secret and we require all
employees and third-parties who need access to the source code to sign
non-disclosure agreements. We have registered the trademark IntraNet Solutions,
in the United States and Canada. We have been notified by a third party that it
believes our Xpedio mark infringes its trademark. We intend to cease the use of
this mark by September 30, 2001 and will develop and adopt a new mark.
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or to obtain and use information
that we regard as proprietary. Policing unauthorized use of our products is
difficult, and while we are unable to determine the extent to which piracy of
our software exists, software piracy can be expected to be a persistent problem.
Litigation may be necessary in the future to enforce our intellectual property
rights, to protect our trade secrets, to determine the validity and scope of the
proprietary rights of others or to defend against claims of infringement or
invalidity. However, the laws of many countries do not protect our proprietary
rights to as great an extent as do the laws of the United States. Any litigation
could result in substantial costs and diversion of resources and could have a
material adverse effect on our business, operating results and financial
condition. Our efforts to protect our proprietary rights may not be adequate or
our competitors may independently develop similar technology. Our failure to
meaningfully protect our property could have a material adverse effect on our
business, operating results and financial condition.
We have not received notice of any claims of infringement by us, except
with respect to our Xpedio mark as described above. We cannot be sure that third
parties will not make additional claims of infringement with respect to our
current or future products. We expect that developers of Web content management
products will increasingly be subject to infringement claims as the number of
products and competitors in our market grows and as the functionality of
products in different segments of the software industry increasingly overlaps.
Any claims, with or without merit, could be time consuming to defend, result in
costly litigation, divert management's attention and resources, cause product
shipment delays or require us to enter into royalty or licensing agreements.
Royalty or licensing agreements, if required, may not be available on terms
acceptable to us or at all. A successful claim of product infringement against
us and our failure or inability to license the infringed technology or develop
or license technology with comparable functionality could have a material
adverse effect on our business, operating results and financial condition.
9
12
EMPLOYEES
As of March 31, 2001, we had 435 employees. Our future success will depend
in part on our ability to attract, retain, integrate and motivate highly
qualified sales, technical and management personnel, for whom competition is
intense. From time to time we also employ independent contractors to support our
services, product development, sales and marketing departments. Our employees
are not represented by any collective bargaining unit, and we have never
experienced a work stoppage. We believe our relations with our employees are
good.
ITEM 2. PROPERTIES
In July 2000, the Company began a five-year lease of approximately 32,000
square feet in Eden Prairie, Minnesota, which is the corporate headquarters
facilities. The Company is currently sub-letting approximately 18,000 square
feet for its former headquarters pursuant to a lease expiring in July 2005.
Additionally, the Company leases approximately 16,000 square feet of office
space in Bellevue, Washington with a lease term expiring in May 2002, of which
approximately 5,000 square feet is sublet through May 2002, approximately 8,000
square feet of office space in Boston, Massachusetts with lease terms expiring
June 2001 through September 2006, approximately 17,000 square feet of space in
downtown Chicago, Illinois with a lease term expiring September 2006,
approximately 6,000 square feet of office space in Scottsdale, Arizona with a
lease term expiring in February 2004 and approximately 9,000 square feet in
London, United Kingdom with a lease term expiring in May 2016. Management
believes that our facilities are suitable and adequate for current office
requirements.
ITEM 3. LEGAL PROCEEDINGS
We are currently not a party to any material legal proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of our security holders during the fourth
quarter of the fiscal year ended March 31, 2001.
ITEM 4a. EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Executive Officers of the Registrant
The Executive Officers of the Company are:
NAME AGE POSITION
- ---- --- --------
Robert F. Olson...................... 45 Chief Executive Officer and Chairman of the Board
Vernon J. Hanzlik.................... 43 President
Gregg A. Waldon...................... 40 Chief Financial Officer, Secretary, Treasurer and
Director
Robert F. Olson founded our business and has served as Chief Executive
Officer and Chairman of the Board of IntraNet Solutions and its predecessor
company since October 2000 and as its President, Chief Executive Officer and
Chairman of the Board since 1990. From 1987 to 1990, he served as the General
Manager of the Greatway Communications Division of Anderberg-Lund Printing
Company, an electronic publishing sales and service organization. Prior to that
time, Mr. Olson held management and marketing positions in several electronic
publishing service organizations.
Vernon J. Hanzlik has served as our President since October 2000, as Vice
President of Sales from October 1999 to September 2000, as Vice President of
Strategic Development from April 1999 to October 1999 and as Vice President,
Product Marketing from June 1996 to April 1999. Prior to that time, Mr. Hanzlik
10
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held marketing and application consulting positions with Lee Data Corporation, a
computer hardware manufacturer.
Gregg A. Waldon has served as our Chief Financial Officer, Treasurer and
Secretary, and as a director, since April 1999. From 1992 to April 1999, he held
various financial management positions with GalaGen Inc., a publicly traded
biopharmaceutical and nutritional ingredients company, where he served as Chief
Financial Officer since November 1994. Prior to that time, Mr. Waldon was
employed by PricewaterhouseCoopers LLP.
Officers of the Company are chosen by and serve at the discretion of the
Board of Directors. There are no family relationships among any of the directors
or officers of the Company.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Incorporated herein by reference is the information appearing under the
heading "Market For Registrant's Common Equity and Related Shareholder Matters"
in our Annual Report to Shareholders for the year ended March 31, 2001 (the
"2001 Annual Report") included in this Form 10-K as Exhibit 13.1.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated herein by reference is the information appearing under the
heading "Selected Consolidated Financial Data" in the 2001 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Incorporated herein by reference is the information appearing under the
heading "Management's Discussion and Analysis of Financial Condition and Results
of Operations" in the 2001 Annual Report.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Incorporated herein by reference is the information appearing under the
heading "Quantitative and Qualitative Disclosures About Market Risk" in the 2001
Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated herein by reference is the information appearing under the
headings "Consolidated Balance Sheets", "Consolidated Statements of Operations",
"Consolidated Statements of Shareholders' Equity", "Consolidated Statements of
Cash Flows", "Notes to Consolidated Financial Statements", and "Report of
Independent Certified Public Accountants" in the 2001 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
11
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors of the Registrant
Incorporated herein by reference is the information appearing under the
headings "Election of Directors" and "Section 16(a) Beneficial Ownership
Reporting Compliance" in our definitive Proxy Statement for the annual meeting
of Shareholders to be held on August 29, 2001 (the "Proxy Statement").
(b) Executive Officers of the Registrant
Incorporated herein by reference is the information appearing herein under
Item 4a.
(c) Compliance with Section 16 (a) of the Exchange Act
Incorporated by reference is the information appearing under the heading
"Section 16(a) Beneficial Ownership Reporting Compliance" in our definitive
Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference is the information appearing under the
headings "Executive Compensation" in our Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference is the information appearing under the
heading "Security Ownership of Principal Shareholders" in our Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference is the information appearing under the
heading "Certain Relationships and Related Transactions" in our Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. Financial Statements:
The consolidated financial statements of the Company are incorporated
herein by reference from the information appearing under the headings
"Consolidated Balance Sheets," "Consolidated Statements of Operations,"
"Consolidated Statements of Shareholders' Equity," "Consolidated
Statements of Cash Flows," "Notes to Consolidated Financial Statements"
and "Report of Independent Certified Public Accountants" in the 2001
Annual Report.
2. The following consolidated financial statement schedules of the Company
are included in Item 14(d):
Schedule II Valuation and Qualifying Accounts
3. See Item 14(c) below for a listing of exhibits filed as part of this
Annual Report on Form 10K.
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15
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the quarter ended March 31, 2001.
(c) Exhibits:
The following exhibits are filed as part of this Annual Report on Form 10-K
for the year ended March 31, 2001.
EXHIBIT INDEX
FILE DESCRIPTION REFERENCE
- ---- ----------- ---------
3.1 Amended and Restated Articles of Incorporated by reference to Exhibit 3.1
Incorporation of the Registrant's Form 10-Q for the
quarter ended September 30, 2000
3.2 Bylaws Incorporated by reference to Exhibit A of
the Registrant's Definitive Proxy
Statement Schedule 14A, filed with the
Securities and Exchange Commission July
22, 1997, File No. 0-19817
4.7 Warrant to purchase 225,000 shares of Electronic transmission
common stock to Merrill, Lynch, Pierce,
Fenner & Smith dated February 22, 2000
10.4 IntraNet Solutions, Inc. 1994-1997 Stock Incorporated by reference to Exhibit A of
Option and Compensation Plan* the Registrant's Definitive Proxy
Statement Schedule 14A, filed with the
Securities and Exchange Commission July
28, 1998
10.20 Stock Purchase Warrant Agreement dated Incorporated by reference to Exhibit
December 20, 1996, by and between the 10.20 of the Registrant's Form 10-KSB for
Registrant and Rita M. Olson the fiscal year ended March 31, 1997
10.26 Employment Agreement Dated April 1, 1999, Incorporated by reference to Exhibit
by and between the Registrant and Gregg 10.26 of the Registrant's Statement on
A. Waldon* Form S-1, File No. 333-77389
10.28 InfoAccess, Inc. 1990 Stock Option Plan Incorporated by reference to Exhibit 99.1
as amended September 29, 1999 of the Registrant's statement on Form
S-8, File No. 333-90843
10.29 InfoAccess, Inc. 1995 Stock Option Plan Incorporated by reference to Exhibit 99.2
as amended September 29, 1999 of the Registrant's statement on Form
S-8, File No. 333-90843
10.30 Employment Agreement Dated August 1, Incorporated by reference to Exhibit
1999, by and between the Registrant and 10.30 of the Registrant's Form 10-Q for
Robert F. Olson* the quarter ended September 30, 1999
10.31 IntraNet Solutions, Inc. 1999 Employee Incorporated by reference to Exhibit
Stock Option and compensation plan 10.31 of the Registrant's Form 10-Q for
the three months ended September 30, 1999
13
16
FILE DESCRIPTION REFERENCE
- ---- ----------- ---------
10.32 Agreement and Plan of Merger among Incorporated by reference to Exhibit 2 to
IntraNet Solutions, Inc., IntraNet the Registrant's Current Report on Form
Chicago Acquisition Corporation, IntraNet 8-K dated July 10, 2000
Kansas City Acquisition Corporation, Inso
Chicago Corporation, Inso Kansas City
Corporation and Inso Corporation, dated
as of July 10, 2000
10.33 IntraNet Solutions, Inc. 2000 Stock Incorporated by reference to Exhibit B to
Incentive Plan* the Registrant's Definitive Proxy
statement on Schedule 14A, filed with the
Securities and Exchange Commission on
July 25, 2000
10.34 IntraNet Solutions, Inc. 2000 Employee Incorporated by reference to Exhibit
Stock Incentive Plan* 10.34 of the Registrant's Form 10-Q for
the three months ended June 30, 2000
10.35 IntraNet Solutions, Inc. 1997 Directors Incorporated by reference to Exhibit B of
Stock Option Plan* the Registrant's Definitive Proxy
Statement Schedule 14A, filed with the
Securities and Exchange Commission July
28, 1998
10.36 IntraNet Solutions, Inc. Employee Stock Incorporated by reference to Exhibit A of
Purchase Plan* the Registrant's Definitive Proxy
Statement filed with the Securities and
Exchange Commission July 29, 1999
11.1 Computation of earnings per share Electronic transmission
13.1 Annual Report to Shareholders Electronic transmission
21 Subsidiaries of Registrant Electronic transmission
23.1 Consent of Grant Thornton LLP Electronic transmission
24 Power of Attorney Included on the signature page hereof
- ---------------
* Management contract, compensation plan or arrangement.
14
17
(d) Schedule IntraNet Solutions, Inc and Subsidiaries
SCHEDULE II VALUATION OF QUALIFYING ACCOUNTS
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------- ---------- --------- ---------- ----------
BALANCE AT BALANCE AT
BEGINNING END OF
DESCRIPTION OF PERIOD ADDITIONS DEDUCTIONS PERIOD
- ----------- ---------- --------- ---------- ----------
(IN THOUSANDS)
Deducted From Assets:
Allowance for doubtful accounts:
Year ended March 31, 1999........................ $408 $ 692 $ 790 $ 310
==== ====== ====== ======
Year ended March 31, 2000........................ $310 $1,249 $1,029 $ 530
==== ====== ====== ======
Year ended March 31, 2001........................ $530 $3,273* $1,660 $2,143
==== ====== ====== ======
- ---------------
* Includes $1,389 of additions resulting from the acquisition of IED in July
2000, not recognized as expense, and a valuation allowance related to foreign
currency transactions.
15
18
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS ON SCHEDULE
To the Board of Directors and Shareholders
IntraNet Solutions, Inc.
In connection with our audits of the consolidated financial statements of
IntraNet Solutions, Inc. and subsidiaries referred to in our report dated April
25, 2001, which is included in the Annual Report to Shareholders and
incorporated by reference in Part II of this form, we have also audited Schedule
II for each of the three years in the period ended March 31, 2001. In our
opinion, this schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be set forth therein.
/s/ GRANT THORNTON LLP
Minneapolis, Minnesota
April 25, 2001
16
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on June 29, 2001.
INTRANET SOLUTIONS, INC.
By /s/ ROBERT F. OLSON
------------------------------------
Robert F. Olson, Chief Executive
Officer and Chairman of the Board
POWER OF ATTORNEY
Each of the undersigned hereby appoints Robert F. Olson and Gregg A.
Waldon, and each of them (with full power to act alone), as attorneys and agents
for the undersigned, with full power of substitution, for and in the name, place
and stead of the undersigned, to sign and file with the Securities and Exchange
Commission under the Securities Act of 1934, as amended, any and all amendments
and exhibits to this Annual Report on Form 10-K and any and all applications,
instruments, and other documents to be filed with the Securities and Exchange
Commission pertaining to this Annual Report on Form 10-K or any amendments
thereto, with full power and authority to do and perform any and all acts and
things whatsoever requisite and necessary or desirable. Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been signed
by the following persons on behalf of the registrant and in the capacities
indicated on June 29, 2001.
/s/ ROBERT F. OLSON
--------------------------------------
Robert F. Olson, Chief Executive
Officer and Chairman of the Board
(Principal Executive Officer)
/s/ GREGG A. WALDON
--------------------------------------
Gregg A. Waldon, Chief Financial
Officer, Secretary,
Treasurer (Principal Financial Officer
and Principal
Accounting Officer) and Director
/s/ KENNETH H. HOLEC
--------------------------------------
Kenneth H. Holec, Director
/s/ STEVEN C. WALDRON
--------------------------------------
Steven C. Waldron, Director
17
20
EXHIBIT INDEX
FILE DESCRIPTION REFERENCE
- ---- ----------- ---------
3.1 Amended and Restated Articles of Incorporated by reference to Exhibit 3.1
Incorporation of the Registrant's Form 10-Q for the
quarter ended September 30, 2000
3.2 Bylaws Incorporated by reference to Exhibit A of
the Registrant's Definitive Proxy
Statement Schedule 14A, filed with the
Securities and Exchange Commission July
22, 1997, File No. 0-19817
4.7 Warrant to purchase 225,000 shares of Electronic transmission
common stock to Merrill, Lynch, Pierce,
Fenner & Smith dated February 22, 2000
10.4 IntraNet Solutions, Inc. 1994-1997 Stock Incorporated by reference to Exhibit A of
Option and Compensation Plan* the Registrant's Definitive Proxy
Statement Schedule 14A, filed with the
Securities and Exchange Commission July
28, 1998
10.20 Stock Purchase Warrant Agreement dated Incorporated by reference to Exhibit
December 20, 1996, by and between the 10.20 of the Registrant's Form 10-KSB for
Registrant and Rita M. Olson the fiscal year ended March 31, 1997
10.26 Employment Agreement Dated April 1, 1999, Incorporated by reference to Exhibit
by and between the Registrant and Gregg 10.26 of the Registrant's Statement on
A. Waldon* Form S-1, File No. 333-77389
10.28 InfoAccess, Inc. 1990 Stock Option Plan Incorporated by reference to Exhibit 99.1
as amended September 29, 1999 of the Registrant's statement on Form
S-8, File No. 333-90843
10.29 InfoAccess, Inc. 1995 Stock Option Plan Incorporated by reference to Exhibit 99.2
as amended September 29, 1999 of the Registrant's statement on Form
S-8, File No. 333-90843
10.30 Employment Agreement Dated August 1, Incorporated by reference to Exhibit
1999, by and between the Registrant and 10.30 of the Registrant's Form 10-Q for
Robert F. Olson* the quarter ended September 30, 1999
10.31 IntraNet Solutions, Inc. 1999 Employee Incorporated by reference to Exhibit
Stock Option and compensation plan 10.31 of the Registrant's Form 10-Q for
the three months ended September 30, 1999
10.32 Agreement and Plan of Merger among Incorporated by reference to Exhibit 2 to
IntraNet Solutions, Inc., IntraNet the Registrant's Current Report on Form
Chicago Acquisition Corporation, IntraNet 8-K dated July 10, 2000
Kansas City Acquisition Corporation, Inso
Chicago Corporation, Inso Kansas City
Corporation and Inso Corporation, dated
as of July 10, 2000
10.33 IntraNet Solutions, Inc. 2000 Stock Incorporated by reference to Exhibit B to
Incentive Plan* the Registrant's Definitive Proxy
statement on Schedule 14A, filed with the
Securities and Exchange Commission on
July 25, 2000
10.34 IntraNet Solutions, Inc. 2000 Employee Incorporated by reference to Exhibit
Stock Incentive Plan* 10.34 of the Registrant's Form 10-Q for
the three months ended June 30, 2000
21
FILE DESCRIPTION REFERENCE
- ---- ----------- ---------
10.35 IntraNet Solutions, Inc. 1997 Directors Incorporated by reference to Exhibit B of
Stock Option Plan* the Registrant's Definitive Proxy
Statement Schedule 14A, filed with the
Securities and Exchange Commission July
28, 1998
10.36 IntraNet Solutions, Inc. Employee Stock Incorporated by reference to Exhibit A of
Purchase Plan* the Registrant's Definitive Proxy
Statement filed with the Securities and
Exchange Commission July 29, 1999
11.1 Computation of earnings per share Electronic transmission
13.1 Annual Report to Shareholders Electronic transmission
21 Subsidiaries of Registrant Electronic transmission
23.1 Consent of Grant Thornton LLP Electronic transmission
24 Power of Attorney Included on the signature page hereof
- ---------------
* Management contract, compensation plan or arrangement.
22
EXHIBIT 4.7
THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED WITHOUT: (i) AN
OPINION OF COUNSEL SATISFACTORY TO INTRANET SOLUTIONS AND ITS COUNSEL THAT SUCH
TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE 1933 ACT OR THE
SECURITIES LAWS OF ANY OTHER APPLICABLE STATE; OR (ii) SUCH REGISTRATION.
WARRANT
TO ACQUIRE
225,000 SHARES OF COMMON STOCK OF
INTRANET SOLUTIONS, INC.
No. SW-
Effective as of February 22, 2000
This certifies that, for value received, Merrill, Lynch, Pierce, Fenner &
Smith Incorporated, a Delaware corporation ("ML"), is entitled to subscribe for
and purchase from IntraNet Solutions, Inc., a Minnesota corporation ("IntraNet
Solutions"), up to 225,000 shares of IntraNet Solutions's $.01 par value Common
Stock, subject to the terms and conditions set forth herein, at the Exercise
Price set forth herein, subject to adjustment as hereinafter set forth.
1. DEFINITIONS
1.1 "Additional Shares of Common Stock" means all shares of Common Stock
issued by IntraNet Solutions after the date hereof, other than Warrant Stock.
1.2 "Agreement" shall have the meaning ascribed thereto in Section 2.1
hereto.
1.3 "Appraised Value" means, in respect of any share of Common Stock on any
date herein specified, the fair saleable value of such share of Common Stock
(determined without giving effect to the discount for a minority interest, (i) a
lack of voting power or (ii) any lack of liquidity of the Common Stock or to the
fact that IntraNet Solutions may have no class of equity registered under the
Exchange Act) as of the last day of the most recent fiscal month to end within
31 days prior to such date specified, based on the value of IntraNet Solutions,
as determined by an investment banking firm as described herein adjusted to
reflect the aggregate consideration receivable by IntraNet Solutions or the
aggregate principal amount of indebtedness of IntraNet Solutions extinguishable
upon the issuance of any and all securities not outstanding but deemed to be
outstanding in the computation, divided by the number of Fully Diluted
Outstanding shares of Common Stock.
1.4 "Business Day" means any day that is not a Saturday or Sunday or a day
on which banks in the City of New York are required or permitted to be closed.
1.5 "Change of Control" shall have the meaning set forth in the Agreement.
1.6 "Commission" means the Securities and Exchange Commission or any other
federal agency then administering the Securities Act and other federal
securities laws.
1.7 "Common Stock" means the common stock, par value $.01 per share, of
IntraNet Solutions as constituted on the date hereof, and any capital stock into
which such Common Stock may thereafter be changed, and shall also include (i)
capital stock of IntraNet Solutions of any other class (regardless of how
denominated) issued to the holders of shares of Common Stock upon any
reclassification thereof, excluding any class which provides for (A) dividends
at a fixed rate which rate does not vary based on the net income or
23
operating results of IntraNet Solutions and/or its subsidiaries, (B) a
preference as to liquidation which is limited to the consideration received by
IntraNet Solutions for such stock and (C) no right of redemption and (ii) shares
of common stock of any successor or acquiring corporation (as defined in Section
4.11) received by or distributed to the holders of Common Stock in the
circumstances contemplated by Section 4.11.
1.8 "Company Options" means the warrants or other rights to subscribe for
or purchase any Additional Shares of Common Stock or any Convertible Securities
issued in exchange for services performed on behalf of IntraNet Solutions.
1.9 "Convertible Securities" means evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for Additional
Shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.
1.10 "Current Market Price" means, in respect of any share of Common Stock
on any date herein specified, (i) if there shall then be no public market for
the Common Stock, the Appraised Value per share of Common Stock as at such date,
or (ii) if there shall then be a public market for the Common Stock, the average
of the daily market prices for 30 consecutive Business Days commencing 45 days
before such date. The daily market price for each such Business Day shall be (a)
the average of the last sale price on such day on the domestic stock exchanges
on which such Common Stock is then listed or admitted to trading, (b) if no sale
takes place on such day on any such exchange, the average of the last reported
closing bid and asked prices on such day as officially quoted on all such
exchanges, (c) if the Common Stock is not then listed or admitted to trading on
any stock exchange, the average of the last reported closing bid and asked
prices on such day in the over-the-counter market, as furnished by the National
Association of Securities Dealers Automatic Quotation System or the National
Quotation Bureau, Inc., (d) if neither such corporation at the time is engaged
in the business of reporting such prices, as furnished by any similar firm then
engaged in such business, (e) if there is no such firm, as mutually agreed to by
IntraNet Solutions ML, or (f) if IntraNet Solutions and Holder cannot agree
within fifteen days of such Business Day, as furnished by any member of the NASD
selected mutually by ML and IntraNet Solutions or, if they cannot agree upon
such selection, as selected by two such members of the NASD, one of which shall
be selected by ML and one of which shall be selected by IntraNet Solutions.
1.11 "Current Warrant Price" means the exercise price at which a share of
Common Stock may be purchased pursuant to the exercise of this Warrant on such
date.
1.12 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
1.13 "Exercise Date" means the date or dates of exercise of all or any
portion of this Warrant.
1.14 "Exercise Period" means the period during which this Warrant is
exercisable pursuant to Section 2.1.
1.15 "Exercise Price" has the meaning ascribed thereto in Section 2.1
hereto.
1.16 "Fair Market Value" has the meaning ascribed thereto in Section 2.1
hereto.
1.17 "Fully Diluted Outstanding" means, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all shares of Common Stock outstanding at such date and all shares of Common
Stock issuable in respect of this Warrant outstanding on such date, and other
options or warrants to purchase, or securities convertible or exchangeable into,
shares of Common Stock outstanding on such date which would be deemed
outstanding in accordance with GAAP for purposes of determining book value or
net income per share on a fully-diluted basis.
1.18 "GAAP" means generally accepted accounting principles in the United
States of America as from time to time in effect.
1.19 "Information" has the meaning ascribed thereto in Section 12(f).
2
24
1.20 "Inspectors" has the meaning ascribed thereto in Section 12(f).
1.21 "Intranet Solutions" has the meaning ascribed thereto in the preamble
hereto.
1.22 "Licensed Software" shall have the meaning set forth in the Agreement.
1.23 "ML" has the meaning ascribed thereto in the preamble hereto.
1.24 "ML's Counsel" has the meaning ascribed thereto in Section 12.
1.25 "NASD" means the National Association of Securities Dealers, Inc., or
any successor corporation thereto.
1.26 "Other Property" has the meaning ascribed thereto in Section 4.11.
1.27 "Outstanding" means, when used with reference to Common Stock, at any
date as of which the number of shares thereof is to be determined, all issued
shares of Common Stock, except shares then owned or held by or for the account
of IntraNet Solutions or any Subsidiary thereof, and shall include all shares
issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock.
1.28 "Permitted Issuances" shall mean (i) the issuance, after the date
hereof, in an amount not to exceed 10% in the aggregate for all such issuances
of the Company's Fully Diluted Outstanding shares of Common Stock, except for
currently issued and outstanding Company Options, of (a) stock options to
IntraNet Solutions's management employees and directors and (b) Common Stock or
stock options to lenders of IntraNet Solutions as partial consideration in
connection with IntraNet Solutions's incurrence of debt from such lenders and
(ii) the issuance of shares of Common Stock upon exercise of the currently
issued and outstanding Company Options and upon the exercise of the options
referred to in clause (i).
1.29 "Person" means any individual, sole proprietorship, partnership, joint
venture, trust, incorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
1.30 "Primary Shares" means at any time the authorized but unissued shares
of Common Stock or shares of Common Stock held by IntraNet Solutions in its
treasury.
1.31 "Private Client" has the meaning set forth in the Agreement.
1.32 "Private Client License Fee" has the meaning set forth in the
Agreement.
1.33 "Records" has the meaning ascribed thereto in Section 12 hereto.
1.34 "Registrable Shares" means any Restricted Shares issued pursuant to
the exercise of this Warrant.
1.35 "Registration Period" has the meaning set forth in Section 10 hereto.
1.36 "Research" has the meaning set forth in the Agreement.
1.37 "Research License Fee" has the meaning set forth in the Agreement.
1.38 "Restricted Common Stock" means shares of Common Stock which are, or
which upon their issuance on the exercise of this Warrant would be, evidenced by
a certificate bearing a restrictive legend.
1.39 "Restricted Shares" means, at any time, shares of Common Stock, and
includes: (i) Common Stock which may be issued as a dividend or distribution;
(ii) any other securities which by their terms are exercisable or exchangeable
for or convertible into Common Stock, including this Warrant (to the extent
vested); and (iii) any securities received in respect of the foregoing, in each
case in clauses (i) through (iii) which at any time are held by ML or its
transferee. As to any particular Restricted Shares, such shares shall cease to
be Restricted Shares when: (A) they have been registered under the Securities
Act, the registration statement in connection therewith has been declared
effective and they have been disposed of pursuant to and in the manner described
in such effective registration statement; (B) they are sold or distributed
pursuant to Rule 144; or (C) they have ceased to be outstanding.
3
25
1.40 "Rule 144" means Rule 144 promulgated under the Securities Act or any
successor rule thereto or any complementary rule thereto (such as Rule 144A).
1.41 "Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
1.42 "Subsidiary" means, with respect to any Person, any other Person of
which the securities having a majority of the ordinary voting power in electing
the board of directors (or other governing body) of such other Person, at the
time as of which any determination is being made, are owned by such first Person
either directly or through one or more of its Subsidiaries.
1.43 "Transfer" means any disposition of this Warrant or this Warrant Stock
or of any interest in either thereof, which would constitute a sale thereof
within the meaning of the Securities Act.
1.44 "Vesting Date" means the applicable date on which each portion of this
Warrant vests as set forth in Section 2.1.
1.45 "Warrant" shall mean this Warrant to purchase 225,000 shares of Common
Stock, as adjusted herein, and any warrant issued upon transfer, division or
combination of, or in substitution for, any thereof.
1.46 "Warrant Price" means an amount equal to (i) the number of shares of
Common Stock being purchased upon exercise of this Warrant, multiplied by (ii)
the Current Warrant Price as of the date of such exercise.
1.47 "Warrant Stock" means the shares of Common Stock purchasable by ML
pursuant to this Warrants upon the exercise of each, as adjusted pursuant to
Section 4.
2. EXERCISE OF WARRANT
2.1 Manner of Exercise. Subject to adjustment pursuant to Section 3.4(b)
and Section 4, this Warrant shall be exercisable at an exercise price (the
"Exercise Price") of $35.8875 per share (110% of the closing price of the Common
Stock on February 22, 2000), and shall vest and be exercisable as follows: (i)
50% of the shares of Common Stock purchasable under this Warrant shall vest and
become exercisable at the Exercise Price on the first anniversary of the
execution of that certain ML Master Software Agreement with IntraNet Solutions,
effective as of February 22, 2000 (the "Agreement") attached hereto as Exhibit
1; (ii) 25% of the shares of Common Stock purchasable under this Warrant shall
vest and become exercisable at the Exercise Price on the second anniversary of
the execution of the Agreement; and (iii) 25% of the shares of Common Stock
purchasable under this Warrant shall vest and become exercisable on the third
anniversary of the execution of the Agreement (each, a "Vesting Date" and
collectively, the "Vesting Dates"). ML may exercise this Warrant on any Business
Day, for all or any part of the number of vested shares of Common Stock
purchasable hereunder commencing on or after the applicable Vesting Date of this
Warrant being exercised and through 5:00 p.m. Eastern Standard Time on the fifth
anniversary of the execution of the Agreement (the "Exercise Period").
In order to exercise any portion of this Warrant, in whole or part, ML
shall deliver to IntraNet Solutions at its principal office at 8091, Wallace
Road, Eden Prairie, Minnesota 55344 (i) a written notice of ML's election to
exercise any portion of this Warrant, which notice shall specify the number of
shares of Common Stock to be purchased, (ii) payment of the Warrant Price and
(iii) this Warrant. Such notice shall be substantially in the form of the
subscription form appearing at the end of this Warrant as Exhibit 2, duly
executed by ML or its agent or attorney.
Upon receipt thereof, IntraNet Solutions shall, as promptly as practicable,
and in any event within ten (10) business days thereafter, execute or cause to
be executed and deliver or cause to be delivered to ML a certificate or
certificates representing the aggregate number of full shares of Common Stock
issuable upon such exercise, together with cash in lieu of any fraction of a
share, as hereinafter provided. The stock certificate or certificates so
delivered shall be, to the extent possible, in such denomination or
denominations as ML shall request in the notice and shall be registered in the
name of ML or such other name as shall be designated in the notice. This Warrant
shall be deemed to have been exercised and such certificate or
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certificates shall be deemed to have been issued, and ML or any other Person so
designated to be named therein shall be deemed to have become a holder of record
of such shares for all purposes, as of the date the notice, together with the
cash or check or checks, is received by IntraNet Solutions as described above
and all taxes required to be paid by ML, if any, pursuant to Section 2.2 prior
to the issuance of such shares have been paid. If this Warrant shall have been
exercised in part, IntraNet Solutions shall, at the time of delivery of the
certificate or certificates representing the shares of Common Stock purchasable
under this Warrant, deliver to ML a new Warrant evidencing the rights of ML to
purchase the unpurchased shares of Common Stock called for by said partially
exercised Warrant, which new Warrant shall in all other respects be identical
with said partially exercised Warrant.
Payment of the Warrant Price shall be made at the option of ML by certified
or official bank check. ML may, at its option, elect to pay some or all of the
Warrant Price payable upon an exercise of this Warrant by canceling a portion of
this Warrant exercisable for such number of Warrant Stock as is determined by
dividing (i) the total Warrant Price payable in respect of the number of Warrant
Stock being purchased upon such exercise by (ii) the excess of the Fair Market
Value (defined below) per share of Common Stock as of the Exercise Date (defined
below) over this Warrant Price per share. If ML wishes to exercise this Warrant
pursuant to this method of payment, with respect to the maximum number of
Warrant Stock purchasable pursuant to this method, then the number of Warrant
Stock, minus the product obtained by multiplying (x) the total number of Warrant
Stock by (y) a fraction, the numerator of which shall be the Warrant Price per
share and the denominator of which shall be the Fair Market Value per share of
Common Stock as of the Exercise Date. The Fair Market Value per share of Common
Stock shall be determined as follows:
(a) If the Common Stock is not listed on a national securities
exchange, the NASDAQ National Market or another nationally recognized
trading system on any Exercise Date, the Fair Market Value per share of
Common Stock shall be deemed to be the amount most recently determined by
the board of directors to represent the fair market value per share of the
Common Stock; and, upon request of ML, the board of directors (or a
representative thereof) shall promptly notify ML of the Fair Market Value
per share of Common Stock; notwithstanding the foregoing, if the board of
directors has not made such a determination within the three-month period
prior to the Exercise Date, then (i) the Fair Market Value per share of
Common Stock shall be the amount next determined by the board of directors
to represent the Fair Market Value per share of the Common Stock, (ii) the
board of directors shall make such a determination within 15 days of a
request by ML that it do so, and (iii) the exercise of this Warrant shall
be delayed until such determination is made.
(b) If the Common Stock is listed on a national securities exchange,
the NASDAQ National Market System or another nationally recognized trading
system as of the Exercise Date, the Fair Market Value shall be deemed to be
the average of the high and low reported sale prices per share of Common
Stock thereon on the trading day immediately preceding the Exercise Date
(provided that if no such price is reported on such day, the Fair Market
Value per share of the Common Stock shall be determined pursuant to clause
(i) above).
2.2 Payment of Taxes. All shares of Common Stock issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable. IntraNet Solutions shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issue or delivery thereof, unless such tax or
charge is imposed by law upon ML, in which case such taxes or charges shall be
paid by ML.
2.3 Fractional Shares. IntraNet Solutions shall not be required to issue a
fractional share of Common Stock upon exercise of this Warrant. As to any
fraction of a share which ML would otherwise be entitled to purchase upon such
exercise, IntraNet Solutions shall pay a cash adjustment in respect of such
final fraction in an amount equal to the same fraction of the Current Market
Price per share of Common Stock on the Exercise Date.
2.4 Continued Validity. A holder of shares of Common Stock issued upon the
exercise of this Warrant, in whole or in part (other than a holder who acquires
such shares after the same have been publicly sold pursuant to a Registration
Statement under the Securities Act or sold pursuant to Rule 144 thereunder),
shall
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continue to be entitled with respect to such shares to all rights to which it
would have been entitled under Section 9 of this Warrant. IntraNet Solutions
will, at the time of exercise of this Warrant, in whole or in part, upon the
request of the holder of the shares of Common Stock issued upon such exercise,
acknowledge in writing its continuing obligation to afford to such holder all
such rights; provided, however, that if such holder shall fail to make any such
request, such failure shall not affect the continuing obligation of IntraNet
Solutions to afford to such holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1 Transfer.
(a) Transfer of this Warrant and all rights hereunder, in whole or in
part, shall be registered on the books of IntraNet Solutions to be
maintained for such purpose, upon surrender of this Warrant at the
principal office of IntraNet Solutions referred to in Section 2.1 together
with a written assignment of this Warrant substantially in the form of
Exhibit 3 hereto duly executed by ML or its agent or attorney and funds
sufficient to pay any transfer taxes payable upon the making of such
transfer. Upon such surrender and, if required, such payment, IntraNet
Solutions shall execute and deliver a new warrant or warrants in the name
of the assignee or assignees and in the denomination specified in such
instrument of assignment, and shall issue to the assignor a new warrant
evidencing the portion of this Warrant not so assigned, and this Warrant
shall promptly be cancelled. This Warrant may be exercised by a new holder
for the purchase of shares of Common Stock without having a new Warrant
issued.
(b) Notwithstanding any provisions contained in this Warrant to the
contrary, neither this Warrant, nor the Warrant Shares, shall be
transferable except upon the conditions specified in this Section 3.1,
which conditions are intended, among other things, to ensure compliance
with the provisions of the Securities Act in respect of the transfer of
this Warrant or such Warrant Shares. This Warrant and the rights specified
herein shall inure to the benefit of and be binding upon the successors of
IntraNet Solutions and the successors and assigns of ML.
(c) The holder of this Warrant agrees that such holder will not
transfer this Warrant, nor the related Warrant Shares in each case, as
adjusted by Section 4 hereof; (i) prior to delivery to IntraNet Solutions
of an opinion of counsel reasonably satisfactory to IntraNet Solutions and
its counsel stating that such transfer is exempt from registration under
the Securities Act and applicable state securities laws; or (ii) until
registration of such Warrant and/or Warrant Shares under the Securities Act
has become effective and continues to be effective at the time of such
transfer. An appropriate legend may be endorsed on the Warrant and the
certificates representing this Warrant Shares evidencing these
restrictions, and a stop order may be placed on IntraNet Solutions's
transfer records.
3.2 Expenses. IntraNet Solutions shall prepare, issue and deliver at its
own expense (other than transfer taxes) a new Warrant or Warrant under this
Section 3.
3.3 Maintenance of Books. IntraNet Solutions agrees to maintain, at its
aforesaid office or agency, books for the registration and the registration of
transfer of this Warrant.
3.4 Change of Control.
(a) Notwithstanding anything to the contrary in this Warrant, if (i)
there is a Change of Control during the five-year period commencing on the
date of execution of the Agreement and (ii) ML does not terminate the
Agreement pursuant to the terms thereof as a result of such Change of
Control, then upon such Change of Control, all shares of Common Stock
subject to this Warrant, including all shares of Common Stock subject to
forfeiture pursuant to each of Sections 4.1, 4.2 and 4.3 herein (whether or
not Private Client and Research have failed to satisfy the conditions set
forth in each of Sections 4.1, 4.2 and 4.3 herein), shall vest and be
exercisable immediately prior to such Change of Control.
(b) The exercise price at which all shares of Common Stock subject to
this Warrant shall be exercisable upon a Change of Control shall be the
Exercise Price except that, the shares of Common Stock referred to in each
of Sections 4.1, 4.2 and 4.3 shall be exercisable at an exercise price per
share
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equal to 110% of the closing price of the Common Stock on the last trading
day preceding a Change of Control.
(c) IntraNet Solutions shall notify ML in writing at least ten (10)
Business Days in advance of any anticipated Change of Control.
4. ADJUSTMENTS
The number of shares for which this Warrant is exercisable and the Current
Warrant Price shall be subject to adjustment from time to time as set forth in
this Section 4. IntraNet Solutions shall give ML (i) notice of any event
described below which requires an adjustment pursuant to this Section 4 at the
time of such event in accordance with Section 5.1 and (ii) a certificate
reflecting the number of shares of Common Stock underlying this Warrant and the
exercise prices of this Warrant as adjusted (with a worksheet showing the
calculation thereof). Notwithstanding anything to the contrary in this Section
4, no adjustment under this Section 4 (other than Subsection 4.5(c)) shall
increase the Current Warrant Price or decrease the number of shares of Common
Stock for which this Warrant is exercisable except for any rescission adjustment
required to be made pursuant to the first sentence of Section 4.9.
4.1 ML shall forfeit the portion of this Warrant to purchase 25,000 shares
of Common Stock if Private Client fails to (i) pay IntraNet Solutions the
Private Client License Fee on or prior to 5:00 p.m. Eastern Standard Time on
December 31, 2000, or (ii) license the Licensed Software on or prior to 5:00
P.M. Eastern Standard Time on December 31, 2000. The shares of Common Stock
referred to in this Section 4.1 shall be exercisable at an exercise price per
share equal to 110% of the closing price of the Common Stock on the last trading
day preceding Private Client's performance of (i) and (ii) of this Section 4.1.
4.2 ML shall forfeit the portion of this Warrant to purchase 25,000 shares
of Common Stock if Research fails to (i) license the Licensed Software within 90
days of the execution of the Agreement by Direct Markets, or (ii) pay IntraNet
Solutions the Research License Fee on or prior to 5:00 p.m. Eastern Standard
Time on June 29, 2000. The shares of Common Stock referred to in this Section
4.2 shall be exercisable at an exercise price per share equal to 110% of the
closing price of the Common Stock on the last trading day preceding Research's
performance of (i) and (ii) of this Section 4.2.
4.3 ML shall forfeit the portion of this Warrant to purchase 25,000 shares
of Common Stock if Research fails to license the Licensed Software on or prior
to 5:00 p.m. Eastern Standard Time on September 30, 2000. The shares of Common
Stock referred to in this Section 4.3 shall be exercisable at an exercise price
per share equal to 110% of the closing price of the Common Stock on the last
trading day preceding Research's performance of the condition specified in this
Section 4.3.
4.4 Stock Dividends, Subdivisions and Combinations. If at any time
IntraNet Solutions shall:
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution
of, Additional Shares of Common Stock,
(b) subdivide its Outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its Outstanding shares of Common Stock into a smaller
number of shares of Common Stock, then (i) the number of shares of Common
Stock for which this Warrant is exercisable immediately after the
occurrence of any such event shall be adjusted to equal the number of
shares of Common Stock which a record holder of the same number of shares
of Common Stock for which this Warrant is exercisable immediately prior to
the occurrence of such event would own or be entitled to receive after the
happening of such event, and (ii) the Current Warrant Price shall be
adjusted to equal (A) the Current Warrant Price multiplied by the number of
shares of Common Stock for which this Warrant is exercisable immediately
prior to the adjustment divided by (B) the number of shares of Common Stock
for which this Warrant is exercisable immediately after such adjustment.
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4.5 Certain Other Distributions. If at any time IntraNet Solutions shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive any dividend or other distribution of:
(a) cash (other than a cash distribution or dividend payable out of
earnings for the year in which such dividend was declared or earned surplus
legally available for the payment of dividends under the laws of the
jurisdiction of incorporation of IntraNet Solutions),
(b) any evidences of its indebtedness, any shares of its stock or any
other securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock), or
(c) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock), then IntraNet
Solutions shall give ML 30 days' prior written notice of any of the
dividends or distributions described in paragraphs (a), (b) and (c) of this
Section 4.5 and shall permit ML to exercise any portion of this Warrant
which has vested.
4.6 Issuance of Additional Shares of Common Stock. If at any time IntraNet
Solutions after the date hereof (except as hereinafter provided) shall issue or
sell any Additional Shares of Common Stock, other than Permitted Issuances, in
exchange for consideration in an amount per Additional Share of Common Stock
which is less than the Current Warrant Price and less than the Current Market
Price at the time the Company Option is granted or the Additional Shares of
Common Stock are issued, (i) the Current Warrant Price as to the number of
shares of Common Stock for which this Warrant is exercisable prior to such
adjustment shall be reduced to a price determined by dividing (A) an amount
equal to the sum of (x) the number of shares of Common Stock Outstanding
immediately prior to such issue or sale multiplied by the then existing Current
Warrant Price, and (y) the consideration, if any, received by IntraNet Solutions
upon such issue or sale, by (B) the total number of shares of Common Stock
Outstanding immediately after such issue or sale; and (ii) the number of shares
of Common Stock for which this Warrant is exercisable shall be increased to
equal the product obtained by multiplying the Current Warrant Price in effect
immediately prior to such issue or sale by the number of shares of Common Stock
for which this Warrant is exercisable immediately prior to such issue or sale
and dividing the product thereof by the Current Warrant Price resulting from the
adjustment made pursuant to clause (i) above.
The provisions of this Section 4.6 shall not apply to any issuance of
Additional Shares of Common Stock for which an adjustment is provided under
Section 4.5. No adjustment of the number of shares of Common Stock for which
this Warrant shall be exercisable shall be made under this Section 4.6 upon the
issuance of any Additional Shares of Common Stock which are issued pursuant to
the exercise of any warrants or other subscription or purchase rights or
pursuant to the exercise of any conversion or exchange rights in any Convertible
Securities, if any such adjustment shall previously have been made upon the
issuance of such warrants or other rights or upon the issuance of such
Convertible Securities (or upon the issuance of any warrant or other rights
therefor) pursuant to Section 4.8 or Section 4.9.
4.7 Issuance of Warrants or Other. If at any time IntraNet Solutions shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a distribution of, or shall in any manner (whether directly or
by assumption in a merger in which IntraNet Solutions is the surviving
corporation) issue or sell, any warrants or other rights to subscribe for or
purchase any Additional Shares of Common Stock or any Convertible Securities
(other than Company Options) at an exercise price which is less than the Current
Warrant Price and less than the Current Market Price, whether or not the rights
to exchange or convert thereunder are immediately exercisable, then the Current
Warrant Price and the number of shares of Common Stock for which this Warrant is
then exercisable shall be adjusted as provided in Section 4.6 on the basis that
the maximum number of Additional Shares of Common Stock issuable pursuant to all
such warrants or other rights or necessary to effect the conversion or exchange
of all such Convertible Securities shall be deemed to have been issued and
outstanding and IntraNet Solutions shall have received all of the consideration
payable therefor, if any, as of the date of the actual issuance of such warrants
or other rights. No further adjustments of the Current Warrant Price or the
number of shares for which this Warrant is exercisable shall be made upon the
actual issue of such Common Stock or of such Convertible Securities upon
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exercise of such warrants or other rights or upon the actual issue of such
Common Stock upon such conversion or exchange of such Convertible Securities.
4.8 Issuance of Convertible Securities. If at any time IntraNet Solutions
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which IntraNet Solutions is the
surviving corporation) issue or sell, any Convertible Securities at an exercise
price which is less than the Current Warrant Price and less than the Current
Market Price, whether or not the rights to exchange or convert thereunder are
immediately exercisable, then the Current Warrant Price and the number of shares
of Common Stock for which this Warrant is then exercisable shall be adjusted as
provided in Section 4.6 on the basis that the maximum number of Additional
Shares of Common Stock necessary to effect the conversions or exchange of all
such Convertible Securities shall be deemed to have been issued and outstanding
and IntraNet Solutions shall have received all of the consideration payable
therefor, if any, as of the date of actual issuance of such Convertible
Securities. No adjustment of the Current Warrant Price or the number of shares
for which this Warrant is exercisable shall be made under this Section 4.8 upon
the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any such adjustment shall previously have been made upon the issuance of such
warrants or other rights pursuant to Section 4.7. No further adjustments of the
Current Warrant Price or the number of shares of Common Stock for which this
Warrant is exercisable shall be made upon the actual issue of such Additional
Shares of Common Stock or of such Convertible Securities upon exercise of such
warrants or other rights or upon the actual issue of such Additional Shares of
Common Stock upon such conversion or exchange of such Convertible Securities.
4.9 Superseding Adjustment. If, at any time after any adjustment of the
Current Warrant Price and the number of shares of Common Stock for which this
Warrant is exercisable shall have been made pursuant to Section 4.7 or Section
4.8 as the result of any issuance of warrants, rights or Convertible Securities,
(a) such warrants or rights, or the right of conversion or exchange in
such other Convertible Securities, shall expire, and all or a portion of
such warrants or rights, or the right of conversion or exchange with
respect to all or a portion of such other Convertible Securities, as the
case may be, shall not have been exercised, or
(b) the consideration per share for which shares of Common Stock are
issuable pursuant to such warrants or rights, or the terms of such other
Convertible Securities, shall be increased or decreased solely by virtue of
provisions therein contained for an automatic increase or decrease in such
consideration per share upon the occurrence of a specified date or event,
then such previous adjustment shall be rescinded and annulled and the
Additional Shares of Common Stock which were deemed to have been issued by
virtue of the computation made in connection with the adjustment so
rescinded and annulled shall no longer be deemed to have been issued by
virtue of such computation. Thereupon, a recomputation shall be made of the
effect of such warrants or rights or other Convertible Securities on the
basis of
(c) treating the number of Additional Shares of Common Stock or Other
Property, if any, theretofore actually issued or issuable pursuant to the
previous exercise of any such warrants or rights or any such right of
conversion or exchange, as having been issued on the date or dates of any
such exercise and for the consideration actually received and receivable
therefor, and
(d) treating any such warrants or rights or any such other Convertible
Securities which then remain outstanding as having been granted or issued
immediately after the time of such increase or decrease, as the case may
be, of the consideration per share for which shares of Common Stock or
Other Property are issuable under such warrants or rights or other
Convertible Securities; whereupon a new adjustment of the Current Warrant
Price and the number of shares of Common Stock for which this Warrant is
exercisable shall be made pursuant to Section 4.7 or Section 4.8, as
appropriate, which new adjustment shall supersede the previous adjustment
so rescinded and annulled;
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provided, that no rescission or recomputation adjustment shall be made
under this Section 4.9 in respect of this Warrant which has been exercised prior
to the occurrence of any action otherwise requiring such rescission or
recomputation adjustment.
4.10 Other Provisions Applicable to Adjustments under this Section. The
following provisions shall be applicable to the making of adjustments of the
Current Warrant Price and the number of shares of Common Stock for which this
Warrant is exercisable provided for in this Section 4:
(a) Computation of Consideration. To the extent that any Additional
Shares of Common Stock or any Convertible Securities or any warrants or
other rights to subscribe for or purchase any Additional Shares of Common
Stock or any Convertible Securities shall be issued for cash consideration,
the consideration received by IntraNet Solutions therefor shall be the
amount of the cash received by IntraNet Solutions therefor, or, if such
Additional Shares of Common Stock or Convertible Securities are offered by
IntraNet Solutions for subscription, the subscription price, or, if such
Additional Shares of Common Stock or Convertible Securities are sold to
underwriters or dealers for public offering without a subscription
offering, the initial public offering price (in any such case subtracting
(x) any amounts paid or receivable for accrued interest or accrued
dividends and (y) any compensation, discounts or expenses paid or incurred
by IntraNet Solutions for and in the underwriting of, or otherwise in
connection with, the issuance thereof). To the extent that such issuance
shall be for a consideration other than cash, then, except as herein
otherwise expressly provided, the amount of such consideration shall be
deemed to be the fair value of such consideration at the time of such
issuance as determined in good faith by the board of directors of IntraNet
Solutions. In case any Additional Shares of Common Stock or any Convertible
Securities or any warrants or other rights to subscribe for or purchase
such Additional Shares of Common Stock or Convertible Securities shall be
issued in connection with any merger in which IntraNet Solutions issues any
securities, the amount of consideration therefor shall be deemed to be the
fair value, as determined in good faith by the board of directors of
IntraNet Solutions, of such portion of the assets and business of the
nonsurviving corporation as such board in good faith shall determine to be
attributable to such Additional Shares of Common Stock, Convertible
Securities, warrants or other rights, as the case may be. The consideration
for any Additional Shares of Common Stock issuable pursuant to any warrants
or other rights to subscribe for or purchase the same shall be the
consideration received by IntraNet Solutions for issuing such warrants or
other rights plus the lowest amount of additional consideration payable to
IntraNet Solutions upon exercise of such warrants or other rights. The
consideration for any Additional Shares of Common Stock issuable pursuant
to the terms of any Convertible Securities shall be the consideration
received by IntraNet Solutions for issuing warrants or other rights to
subscribe for or purchase such Convertible Securities, plus the
consideration paid or payable to IntraNet Solutions in respect of the
subscription for or purchase of such Convertible Securities, plus the
lowest amount of additional consideration, if any, payable to IntraNet
Solutions upon the exercise of the right of conversion or exchange in such
Convertible Securities. In case of the issuance at any time of any
Additional Shares of Common Stock or Convertible Securities in payment or
satisfaction of any dividends upon any class of stock other than Common
Stock, IntraNet Solutions shall be deemed to have issued such Additional
Shares of Common Stock or Convertible Securities for no consideration.
(b) When Adjustments to Be Made. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur, except that any adjustment of the
number of shares of Common Stock for which this Warrant is exercisable that
would otherwise be required may be postponed (except in the case of a
subdivision or combination of shares of the Common Stock, as provided for
in Section 4.4) up to, but not beyond the date of exercise if such
adjustment either by itself or with other adjustments not previously made
adds or subtracts less than 0.1% of the shares of Common Stock for which
this Warrant is exercisable immediately prior to the making of such
adjustment. Any adjustment representing a change of less than such minimum
amount (except as aforesaid) which is postponed shall be carried forward
and made as soon as such adjustment, together with other adjustments
required by this Section 4 and not previously made, would result in a
minimum adjustment on the date of exercise. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the
close of business on the date of its occurrence.
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(c) Fractional Interests. In computing adjustments under this Section
4, fractional interests in Common Stock shall be taken into account to the
nearest 1/10th of a share.
(d) When Adjustment Not Required. If IntraNet Solutions shall take a
record of the holders of its Common Stock for the purpose of entitling them
to receive a dividend or distribution or subscription or purchase rights
and shall, thereafter and before the distribution to stockholders thereof,
legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be
required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.
(e) Escrow of Warrant Stock. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any
record of the holders of Common Stock, but prior to the occurrence of the
event for which such record is taken, ML exercises this Warrant, then any
additional shares of Common Stock and Other Property issuable upon exercise
solely by reason of such adjustment shall be held in escrow for Holder by
IntraNet Solutions to be issued to ML upon and to the extent that the event
actually takes place. Notwithstanding any other provision to the contrary
herein, if the event for which such record was taken fails to occur or is
rescinded, then such escrowed shares shall be canceled by IntraNet
Solutions and escrowed property returned.
(f) Challenge to Good Faith Determination. Whenever the board of
directors of IntraNet Solutions shall be required to make a determination
in good faith of the fair value of any item herein, such determination may
be challenged in good faith by ML, and any dispute shall be resolved by an
investment banking firm of recognized national standing selected by
IntraNet Solutions and acceptable to ML, with all costs thereof borne by
ML.
(g) Current Warrant Price Not Less than $.01. If, following any
reduction of the Current Warrant Price and increase in the number of shares
of Common Stock for which this Warrant is exercisable made pursuant to this
Section 4.10, except any reduction made pursuant to subsections 4.4(a) or
4.4(b), the Current Warrant Price is reduced to an amount less than $.01,
the Current Warrant Price shall be increased (without any further change in
the number of shares of Common Stock for which this Warrant is exercisable)
to equal the lesser of (x) the Current Warrant Price immediately prior to
such adjustment and (y) $.01. However, for purposes of calculating any
subsequent adjustment pursuant to this Section 4 (except this Section
4.10(g)) any increase in the Current Warrant Price pursuant to this Section
4.10(g) shall be disregarded.
Notwithstanding the terms of the adjustments to the shares of Common Stock
underlying this Warrant and Current Warrant Price set forth in Sections 4.4
through 4.10, such adjustments shall be made whether or any portion of this
Warrant shall have vested at the time of the adjustment. With respect to any
adjustment to any portion of this Warrant made pursuant to this Section 4, if a
Current Warrant Price has not been established for any portion of this Warrant
at the time such adjustment is to be made, an adjustment shall nevertheless be
made to the number of shares of Common Stock for which such portion of this
Warrant shall be exercisable using for purposes of the calculation an exercise
price for that portion of the Warrant which would equal the Current Warrant
Price as if the same had been established as of the date of the event requiring
adjustment.
4.11 Reorganization, Reclassification, Merger, Consolidation or Disposition
of Assets. In case IntraNet Solutions shall reorganize its capital, reclassify
its capital stock, consolidate or merge with or into another corporation (where
IntraNet Solutions is not the surviving corporation or where there is a change
in or distribution with respect to the Common Stock), or sell, transfer or
otherwise dispose of all or substantially all of its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock,
then ML shall have the right thereafter to receive, upon exercise of such
Warrant, the number of shares of common stock of the successor or acquiring
corporation or of IntraNet Solutions, if it is
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the surviving corporation, and Other Property receivable upon or as a result of
such reorganization, reclassification, merger, consolidation or disposition of
assets by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than IntraNet
Solutions) shall assume by written instrument the due and punctual observance
and performance of each and every covenant and condition relating to this
Warrant to be performed and observed by IntraNet Solutions and all the
obligations and liabilities hereunder, subject to such modifications as may be
deemed appropriate (as determined by resolution of the board of directors of
IntraNet Solutions) in order to provide for adjustments of shares of the Common
Stock for which this Warrant is exercisable which shall be as nearly equivalent
as practicable to the adjustments provided for in this Section 4. For purposes
of this Section 4.11, "common stock of the successor or acquiring corporation"
shall include (i) stock of such corporation of any class which does not provide
for (A) dividends at a fixed rate which does not vary based on the net income or
operating results of IntraNet Solutions and/or its subsidiaries, (B) a
preference as to liquidation which is limited to the consideration received by
IntraNet Solutions for such stock and (C) a right of redemption and (ii) any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 4.11 shall similarly apply to successive
reorganizations, reclassification, mergers, consolidations or disposition of
assets.
4.12 Certain Limitations. Notwithstanding anything herein to the contrary,
IntraNet Solutions agrees not to enter into any transaction which, by reason of
any adjustment hereunder, would cause the Current Warrant Price to be less than
the par value per share of Common Stock.
5. NOTICES TO WARRANT HOLDERS
5.1 Notice of Adjustments. Whenever the Current Warrant Price or the
number of shares of Common Stock for which this Warrant is exercisable shall be
adjusted pursuant to Section 4, IntraNet Solutions shall forthwith prepare a
certificate to be executed by the chief financial officer of IntraNet Solutions
setting forth, in reasonable detail, the event requiring the adjustment and the
method by which such adjustment was calculated (including a description of the
basis on which the board of directors of IntraNet Solutions determined the fair
value of any evidences of indebtedness, shares of stock, other securities or
property or warrants or other subscription or purchase rights referred to in
Section 4.8 or 4.9(a)), specifying the number of shares of Common Stock for
which this Warrant is exercisable and (if such adjustment was made pursuant to
Section 4.11) describing the number and kind of any other shares of stock or
Other Property for which this Warrant is exercisable, and any change in the
purchase price or prices thereof, after giving effect to such adjustment or
change. IntraNet Solutions shall promptly cause an executed copy of such
certificate to be delivered to ML. IntraNet Solutions shall keep at its office
copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by ML or any prospective
purchaser of this Warrant designated by ML thereof.
5.2 Notice of Certain Corporate Action. ML shall be entitled to the same
rights to receive notice of corporate action as any holder of Common Stock.
6. NO IMPAIRMENT
IntraNet Solutions shall not by any action avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate to protect the rights of ML against
impairment. Without limiting the generality of the foregoing, IntraNet Solutions
will (a) not increase the par value of any shares of Common Stock receivable
upon the exercise of this Warrant above the amount payable therefor upon such
exercise immediately prior to such increase in par value, (b) take all such
action as may be necessary or appropriate in order that IntraNet Solutions may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant, and (c) use its reasonable efforts to obtain
all such
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authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable IntraNet Solutions to perform
its obligations under this Warrant.
Upon the request of ML, IntraNet Solutions will, at any time during the
period this Warrant is outstanding, acknowledge in writing, the continuing
validity of this Warrant and the obligations of IntraNet Solutions hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR APPROVAL
OF ANY GOVERNMENTAL AUTHORITY
From and after the date hereof, IntraNet Solutions shall at all times
reserve and keep available for issue upon the exercise of this Warrant such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of this Warrant. All shares of Common
Stock which shall be so issuable, when issued upon exercise of this Warrant and
payment therefor in accordance with the terms of such Warrant, shall be duly and
validly issued and fully paid and nonassessable, and not subject to preemptive
rights.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of this Warrant, IntraNet Solutions shall take
reasonable corporate action which may be necessary in order that IntraNet
Solutions may validly and legally issue fully paid and nonassessable shares of
such Common Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the number
of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, IntraNet Solutions shall take all reasonable actions
required, including, without limitation, amending its certificate of
incorporation, to ensure that it has a sufficient number of shares of authorized
and unissued shares of Common Stock in order to permit the exercise of this
Warrant following such adjustment and obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
If any shares of Common Stock required to be reserved for issuance upon the
exercise of this Warrant require registration or qualification with any
governmental authority under any federal or state law before such shares may be
so issued, IntraNet Solutions will in good faith and as expeditiously as
possible and at its expense use its best efforts to cause such shares to be duly
registered.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by IntraNet Solutions
to the holders of its Common Stock with respect to which any provision of
Section 4 refers to the taking of a record of such holders, IntraNet Solutions
will in each such case take such a record and will take such record as of the
close of business on a Business Day. IntraNet Solutions will not at any time,
except upon dissolution, liquidation or winding up of IntraNet Solutions, close
its stock transfer books or Warrant transfer books so as to result in preventing
or delaying the exercise or transfer of this Warrant.
9. SUPPLYING INFORMATION
IntraNet Solutions shall cooperate with ML in supplying such information as
may be reasonably necessary for ML to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of this
Warrant or Restricted Shares.
10. REGISTRATION
(a) IntraNet Solutions shall prepare and file, and use its reasonable best
efforts to cause to become effective on or prior to the first anniversary of the
date of execution of the Agreement, a registration statement under the
Securities Act covering all of the Registrable Shares and shall cause such
registration statement to
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become effective -- and remain effective for seven years from the date of this
Warrant (but no more that two (2) years after the date of the full exercise of
this Warrant or until all Registrable Shares have been disposed of (if earlier)
(the "Registration Period"). Such registration statement shall be on Form S-3 or
any successor form promulgated by the SEC. In the event that IntraNet Solutions
shall not be eligible to use Form S-3, IntraNet Solutions shall be obligated to
prepare, file and use its reasonable best efforts to cause to become effective a
registration statement under the Securities Act covering all of the Registrable
Shares on Form S-3 at the earliest practicable date thereafter it shall become
eligible to use Form S-3. IntraNet Solutions shall use its best efforts to
remain eligible to use Form S-3 or any successor form promulgated by the SEC.
(b) IntraNet Solutions may, once each calender year, suspend sales of
Registrable Shares under such registration statement for a limited time, which
in no event shall be longer than 90 days, if (i) such sales would materially
adversely affect, or would be improper in view of (or improper without
disclosure in a prospectus or other filing with the SEC), a proposed financing,
reorganization, recapitalization, merger, acquisition, consolidation, or similar
transaction or other development involving or with respect to IntraNet Solutions
(including without limitation, through the premature disclosure thereof) or (ii)
IntraNet Solutions is conducting a public offering of capital stock (including
during the effectiveness of any registration statement pertaining thereto) and
the managing underwriter concludes in its reasonable judgment that sales of
Registrable Shares held by the selling shareholders would materially adversely
affect the success of the offering. IntraNet Solutions will promptly notify such
selling shareholders any time sales of Registrable Shares under such
registration statement are suspended and will promptly notify such selling
shareholders of the termination of any such suspension.
11. PIGGYBACK REGISTRATION
If IntraNet Solutions at any time within the Registration Period proposes
for any reason to register shares of Common Stock under the Securities Act
(other than on Form S-4, F-4 or S-8 promulgated under the Securities Act or any
successor forms thereto), it shall promptly give written notice to ML of its
intention to so register such shares and, upon the written request, delivered to
IntraNet Solutions within 20 days after delivery of any such notice by IntraNet
Solutions, of ML to include in such registration the Registrable Shares (which
request shall specify the number of the Registrable Shares proposed to be
included in such registration), IntraNet Solutions shall use its best efforts to
cause all such Registrable Shares to be included in such registration on the
same terms and conditions as the securities otherwise being sold in such
registration; provided, however, that,
(a) if a greater number of Warrant Shares is offered for participation in
the proposed offering than in the reasonable opinion of the managing underwriter
of the proposed offering can be accommodated without adversely affecting the
proposed offering, then the amount of Warrant Shares proposed to be offered by
ML for registration, as well as the number of securities of any other selling
shareholders participating in the registration, shall be proportionately reduced
to a number deemed satisfactory by the managing underwriter;
(b) if the offering to which the registration statement relates is to be
distributed by or through an underwriter, each holder of this Warrant Shares
shall agree, as a condition to the inclusion of such holder's securities in such
registration, to sell securities held by such holder through such underwriter on
the same terms and conditions as the underwriter agrees to sell securities on
behalf of IntraNet Solutions and not to sell, transfer, pledge, assign or
otherwise dispose of the Warrant Shares of IntraNet Solutions not sold by such
holder in such offering for such period (up to 180 days after the effective date
of the registration statement) as may be required by the underwriter;
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12. PREPARATION AND FILING
If, and whenever, IntraNet Solutions is under an obligation to effect the
registration of any of the Registrable Shares, it shall as expeditiously as
practicable:
(a) cause a registration statement that registers such Registrable
Shares to become and remain effective for the entire Registration Period or
until all such Registrable Shares to be sold thereunder have been disposed
of (if earlier);
(b) furnish, at least five Business Days before filing a registration
statement that registers such Registrable Shares, a prospectus relating
thereto or any amendments or supplements relating to such a registration
statement or prospectus, to counsel selected by ML ("ML's Counsel"), copies
of all such documents proposed to be filed (it being understood that such
five Business Day period need not apply to successive drafts of the same
document proposed to be filed so long as such successive drafts are
supplied to ML's Counsel in advance of the proposed filing by a period of
time that is customary and reasonable under the circumstances);
(c) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the entire Registration Period or until all of such
Registrable Shares to be sold thereunder have been disposed of (if
earlier), to comply with the provisions of the Securities Act with respect
to the sale or other disposition of such Registrable Shares and to comply
with all the reporting requirements of the Exchange Act as more fully
described in Section 15 herein.
(d) notify in writing ML's Counsel promptly of (i) the receipt by
IntraNet Solutions of any notification with respect to any comments by the
Commission with respect to such registration statement or prospectus or any
amendment or supplement thereto or any request by the Commission for the
amending or supplementing thereof or for additional information with
respect thereto, (ii) the receipt by IntraNet Solutions of any notification
with respect to the issuance by the Commission of any stop order suspending
the effectiveness of such registration statement or prospectus or any
amendment or supplement thereto or the initiation or threatening of any
proceeding for that purpose (and IntraNet Solutions shall use its best
efforts to prevent the issuance thereof or, if issued, to obtain its
withdrawal) and (iii) the receipt by IntraNet Solutions of any notification
with respect to the suspension of the qualification of such Registrable
Shares for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purposes;
(e) use its best efforts to register or qualify such Registrable
Shares under such other securities or blue sky laws of such jurisdictions
as ML reasonably requests, to keep such registrations or qualifications in
effect for so long as the registration statement covering such Registrable
Shares remains in effect and do any and all other acts and things which may
be reasonably necessary or advisable to enable ML to consummate the
disposition in such jurisdictions of the Registrable Shares owned by ML;
provided that IntraNet Solutions will not be required to (i) qualify to do
business generally in any jurisdiction where it would otherwise not be
required to qualify but for this subsection, (ii) subject itself to
taxation in any such jurisdiction or (iii) consent to general service of
process;
(f) furnish to ML such number of copies of a summary prospectus, if
any, or other prospectus, including a preliminary prospectus, in conformity
with the requirements of the Securities Act, and such other documents as
may reasonably request in order to facilitate the public sale or other
disposition of such Registrable Shares;
(g) notify on a timely basis ML at any time when a prospectus relating
to such Registrable Shares is required to be delivered under the Securities
Act within the appropriate period mentioned in subsection (a) of this
Section 12, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing and, at the request of ML, prepare and furnish to ML a reasonable
number of copies of a supplement to or an amendment of such prospectus as
may be necessary
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so that, as thereafter delivered to the offerees of such shares, such
prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing;
(h) make available upon reasonable notice and during normal business
hours, for inspection by ML, any underwriter participating in any
disposition pursuant to such registration statement and any attorney,
accountant or other agent retained by ML or underwriter (collectively, the
"Inspectors"), all pertinent financial and other records, pertinent
corporate documents and properties of IntraNet Solutions (collectively, the
"Records"), as shall be reasonably necessary to enable them to exercise
their due diligence responsibility, and cause IntraNet Solutions's
officers, directors and employees to supply all information (together with
the Records, the "Information") reasonably requested by any such Inspector
in connection with such registration statement. Any of the Information
which IntraNet Solutions determines in good faith to be confidential, and
of which determination the Inspectors are so notified, shall not be
disclosed by the Inspectors, unless (i) the disclosure of such Information
is necessary to avoid or correct a misstatement or omission in the
registration statement, (ii) the release of such Information is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction, or (iii) such Information has been made generally available
to the public. ML agrees that it will, upon learning that disclosure of
such Information is sought in a court of competent jurisdiction, give
notice to IntraNet Solutions and allow IntraNet Solutions, at IntraNet
Solutions's expense, to undertake appropriate action to prevent disclosure
of the Information deemed confidential;
(i) use its best efforts to obtain from its independent certified
public accountants "cold comfort" letters in customary form and at
customary times and covering matters of the type customarily covered by
cold comfort letters;
(j) use its best efforts to obtain from its counsel an opinion or
opinions in customary form, naming ML as an additional addressee or party
that may rely thereon;
(k) provide a transfer agent and registrar (which may be the same
entity and which may not be IntraNet Solutions) for such Registrable
Shares;
(l) issue to any underwriter to which ML may sell shares in such
offering certificates evidencing such Registrable Shares;
(m) list such Registrable Shares on any national securities exchange
on which any shares of Common Stock are listed or, if shares of Common
Stock are not listed on a national securities exchange, use its best
efforts to qualify such Registrable Shares for inclusion on the automated
quotation system of the NASD, or such other national securities exchange as
the holders of a majority of such Registrable Shares shall request; and
(n) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission and make available to its
securityholders, as soon as reasonably practicable, earnings statements
(which need not be audited) covering a period of 12 months beginning within
three months after the effective date of the registration statement, which
earnings statements shall satisfy the provisions of Section 11(a) of the
Securities Act.
Each holder of Registrable Shares which is being or has been registered
pursuant to this Section 12 shall provide to IntraNet Solutions, upon the
request of IntraNet Solutions, such written information and materials as
IntraNet Solutions may reasonably request in order to effect or maintain such
registration. Each holder of such Registrable Shares, upon receipt of any notice
from IntraNet Solutions of any event of the kind described in Section 12(g),
shall forthwith discontinue the disposition of such Registrable Shares pursuant
to the registration statement covering such Registrable Shares until such
holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 12(g), and, if so directed by IntraNet Solutions, such
holder shall deliver to IntraNet Solutions all copies, other than permanent file
copies then in such holder's possession, of the prospectus covering such
Registrable Shares at the time of receipt of such notice.
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13. EXPENSES
All expenses (other than underwriting discounts and commissions relating to
the Registrable Shares, as provided in the last sentence of this Section 13 and
fees and expenses of ML's Counsel) incurred by IntraNet Solutions in complying
with this Warrant, including, without limitation, all registration and filing
fees (including all expenses incident to filing with the NYSE, AMEX, NASD and
other domestic or foreign exchanges, as applicable), fees and expenses of
complying with securities and blue sky laws, printing expenses and fees and
expenses of IntraNet Solutions's counsel and accountants, shall be paid by
IntraNet Solutions; provided, however, that all underwriting discounts and
selling commissions applicable to the Registrable Shares and any other shares
shall be borne by the holders selling such Registrable Shares and other shares,
in proportion to the number of the Registrable Shares and such other shares sold
by each such holder.
14. INDEMNIFICATION
14.1 In connection with any registration of any of the Registrable Shares
under the Securities Act pursuant to this Warrant, IntraNet Solutions shall
indemnify and hold harmless each holder of Registrable Shares, each underwriter,
broker or any other Person acting on behalf of the holders of Registrable Shares
and each other Person, if any, who controls any of the foregoing Persons within
the meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several (or actions in respect thereof), to which any of
the foregoing Persons may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or allegedly untrue
statement of a material fact contained in the registration statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein or otherwise filed
with the Commission, any amendment or supplement thereto or any document
incident to registration or qualification of any of the Registrable Shares, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading or, with respect to any prospectus, necessary
to make the statements therein in light of the circumstances under which they
were made not misleading, or any violation by IntraNet Solutions of the
Securities Act or state securities or blue sky laws applicable to IntraNet
Solutions and relating to action or inaction required of IntraNet Solutions in
connection with such registration or qualification under such state securities
or blue sky laws; and shall reimburse the holders of Registrable Shares, such
underwriter, such broker or such other Person acting on behalf of the holders of
Registrable Shares and each such controlling Person for any legal or other
expenses reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that IntraNet Solutions shall not be liable in any such case to the extent that
any such loss, claim, damage, liability or action (including any legal or other
expenses incurred) arises out of or is based upon an untrue statement or
allegedly untrue statement or omission or alleged omission made in said
registration statement, preliminary prospectus, final prospectus, amendment,
supplement or document incident to registration or qualification of any of the
Registrable Shares in reliance upon and in conformity with written information
furnished to IntraNet Solutions through an instrument duly executed by the
holders of Registrable Shares specifically for use in the preparation thereof;
14.2 In connection with any registration of the Registrable Shares under
the Securities Act pursuant to this Warrant, any seller of Registrable Shares
shall indemnify and hold harmless (in the same manner and to the same extent as
set forth in Section 14.1) IntraNet Solutions, each director of IntraNet
Solutions, each officer of IntraNet Solutions who shall sign such registration
statement, each underwriter, broker or other Person acting on behalf of the
holders of Registrable Shares and each Person who controls any of the foregoing
Persons within the meaning of the Securities Act with respect to any statement
or omission from such registration statement, any preliminary prospectus or
final prospectus contained therein or otherwise filed with the Commission, any
amendment or supplement thereto or any document incident to registration or
qualification of any of the Registrable Shares, if such statement or omission
was made in reliance upon and in conformity with written information furnished
to IntraNet Solutions or such underwriter through an instrument duly executed by
such seller specifically for use in connection with the preparation of such
registration statement, preliminary prospectus, final prospectus, amendment,
supplement or document;
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provided, however, that the maximum amount of liability in respect of such
indemnification shall be in proportion to and limited to, in the case of each
seller of Registrable Shares, an amount equal to the net proceeds actually
received by such seller from the sale of Registrable Shares effected pursuant to
such registration.
14.3 Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in Sections 14.1 and
14.2, such indemnified party will, if a claim in respect thereof is made against
an indemnifying party, give written notice to the latter of the commencement of
such action. In case any such action is brought against an indemnified party,
the indemnifying party will be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be responsible for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof; provided, however, that, if any indemnified party shall have reasonably
concluded that there may be one or more legal or equitable defenses available to
such indemnified party which are additional to or conflict with those available
to the indemnifying party, or that such claim or litigation involves or could
have an effect upon matters beyond the scope of the indemnity agreement provided
in this Section 14, then the indemnifying party shall not have the right to
assume the defense of such action on behalf of such indemnified party and such
indemnifying party shall reimburse such indemnified party and any Person
controlling such indemnified party for that portion of the fees and expenses of
any counsel retained by the indemnified party which is reasonably related to the
matters covered by the indemnity agreement provided in this Section 14. The
indemnifying party shall not be liable to indemnify any indemnified party for
any settlement of any claim or action effected without the consent of the
indemnifying party. The indemnifying party may not settle any claim or action
brought against an indemnified party unless such indemnified party is released
from all and any liability as part of such settlement.
14.4 If the indemnification provided for in this Section 14 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage, liability or action referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amounts paid or payable by such indemnified
party as a result of such loss, claim, damage, liability or action in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions which resulted in such loss, claim, damage,
liability or action as well as any other relevant equitable considerations;
provided, however, that, if the circumstances described in either proviso of
Section 14.1 or Section 14.2 apply to the indemnified party, then the
indemnifying party shall not be obligated to contribute with respect to such
loss, claim, damage, liability or action to the extent set forth in such
proviso. The relative fault of the indemnifying party and of the indemnified
party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
14.5 IntraNet Solutions and the sellers of Registrable Shares agree that it
would not be just and equitable if contribution pursuant to Section 14.4 were
determined by pro rata allocation (even if the holders and any underwriters were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in
Sections 14.3 and 14.4. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages and liabilities referred to in Section
14.4 shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
15. ASSIGNMENT.
ML may assign its rights hereunder to any purchaser or transferee of
Registrable Shares; provided, however, that such purchaser or transferee shall,
as a condition to the effectiveness of such assignment, be
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required to execute an Investor Joinder, whereupon such purchaser or transferee
shall have the benefits of, and shall be subject to the restrictions contained
in, Sections 10-16 herein as if such purchaser or transferee was originally
included in the definition of "ML" herein and had originally been a party
hereto.
16. EXCHANGE ACT COMPLIANCE
IntraNet Solutions shall comply with all of the reporting requirements of
the Exchange Act applicable to it (whether or not it shall be required to do so)
and shall comply with all other public information reporting requirements of the
Commission, including, without limitation, requirements to ensure the
availability of Rule 144 for the sale of the Common Stock. IntraNet Solutions
shall cooperate with ML in supplying such information as may be necessary for ML
to complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of Rule 144.
17. NO RIGHTS AS SHAREHOLDERS: LIMITATION OF LIABILITY
This Warrant shall not entitle any holder hereof to any of the rights of a
shareholder of IntraNet Solutions. No provision hereof, in the absence of
affirmative action by the holder hereof to purchase shares of Common Stock, and
no mere enumeration herein of the rights or privileges of the holder hereof,
shall give rise to any liability of such holder for the exercise price of the
Warrant or as a shareholder of IntraNet Solutions, whether such liability is
asserted by IntraNet Solutions or by creditors of IntraNet Solutions.
18. GOVERNING LAW
This Warrant shall be governed by, and construed under and in accordance
with, the laws of the State of Delaware.
19. MISCELLANEOUS
This Warrant and any provision hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party (or any
predecessor in interest thereof) against which enforcement of the same is
sought. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any of the provisions hereof.
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IN WITNESS WHEREOF, IntraNet Solutions has caused this Warrant to be signed
by a duly authorized officer and attested effective as of the 22nd day of
February, 2000.
INTRANET SOLUTIONS, INC.
By:
--------------------------------------
Its:
--------------------------------------
Attested:
By:
- ----------------------------------------------------
It:
- -----------------------------------------------------
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EXHIBIT 2
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises this
Warrant for the purchase of Shares of Common Stock of IntraNet Solutions,
Inc,(the "Company") and herewith makes payment therefor, all at the price and on
the terms and conditions specified in this Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and any securities
or other property issuable upon such exercise) be issued in the name of and
delivered to whose address is and, if such shares of
Common Stock shall not include all of the shares of Common Stock issuable as
provided in this Warrant, that a new Warrant of like tenor and date for the
balance of the shares of Common Stock issuable hereunder be delivered to the
undersigned.
I understand that the Company is issuing these shares to me in accordance
with the exemption from registration under Section 4(2), 4(6) or 3(b) of the
Securities Act of 1933 ("Act") afforded to transactions not involving any public
offering and that the aforesaid exemption from registration is not available if
I acquire the shares with a view to distribution of said shares in a manner
prohibited by the provisions of the Act. I represent to the Company and its
counsel that I am a resident of the State of , that I am acquiring said
shares for my own account, and not as nominee for any other person or entity,
for investment and not for distribution. I also acknowledge receipt of all the
detailed information concerning the Company, including information regarding
risks related to the Company, and the Company's capitalization, properties,
management and contracts, that I have considered necessary to make a fully
informed investment decision.
I understand and agree that the stock certificate(s) evidencing the shares
will be stamped with the following legend and that I will comply with the terms
of said legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT"), BUT HAVE BEEN ISSUED PURSUANT TO AN
EXEMPTION THERETO. THE REGISTERED HOLDER OF SUCH SHARES HAS AGREED NOT TO EFFECT
A DISPOSITION OF SUCH SHARES UNTIL EITHER: (1) THE HOLDER HAS RECEIVED AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY AND ITS COUNSEL THAT REGISTRATION
UNDER THE ACT IS NOT REQUIRED; OR (2) A REGISTRATION STATEMENT UNDER THE ACT
COVERING SUCH SHARES AND SUCH DISPOSITION HAS BECOME EFFECTIVE UNDER THE ACT.
--------------------------------------
(Name of Registered Owner)
--------------------------------------
(Signature of Registered Owner)
--------------------------------------
(Street Address)
--------------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name
as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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EXHIBIT 3
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
Common Stock set forth below:
Name and Address of Assignee Number of Shares of Common Stock
and does hereby irrevocably constitute and appoint
attorney-in-fact to register such transfer on the books of
maintained for the purpose, with full power of substitution in
the premises.
Dated: ------------------------------------------- Print Name: -------------------------------------------
Signature: ---------------------------------------------
Witness: -----------------------------------------------
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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