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As filed with the Securities and Exchange Commission on October 12, 2000
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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USINTERNETWORKING, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 52-2078325
(State or Other Jurisdiction of (IRS Employer Identification
Incorporation or Organization) Number)
One USi Plaza
Annapolis, Maryland 21401-7478
(410) 897-4400
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
William T. Price, Esq.
Vice President, Secretary and General Counsel
One USi Plaza
Annapolis, Maryland 21401-7478
(410) 897-4400
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service) with a copy to:
John D. Watson, Jr., Esq.
Latham & Watkins
1001 Pennsylvania Avenue, N.W., Suite 1300
Washington, D.C. 20004
(202) 637-2200
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Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this registration statement as
determined by market conditions.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 (the "Securities Act"), other than securities offered
only in connection with dividend or interest reinvestment plans, please check
the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
TITLE OF SECURITIES PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED AGGREGATE OFFERING PRICE (1) REGISTRATION FEE
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Common Stock $150,000,000 $ 39,600
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(1) Estimated solely for the purpose of computing the amount of the
registration fee in accordance with Rule 457 (o) under the Securities Act
of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
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PROSPECTUS
[USI LOGO]
USINTERNETWORKING, INC.
BY THIS PROSPECTUS WE MAY OFFER UP TO
$150,000,000 OF OUR COMMON STOCK
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This prospectus will allow us to issue common stock over time. This means:
- we will provide a prospectus supplement each time we issue common stock;
- the prospectus supplement will inform you about the specific terms of
that offering and also may add, update or change information contained in
this document;
- you should read this document and any prospectus supplement carefully
before you invest; and
- this prospectus may not be used to offer or sell the common stock unless
accompanied by a prospectus supplement.
Our common stock is quoted on The Nasdaq National Market under the symbol
"USIX." On October 11, 2000, the last reported sale price of the common stock
was $3.41 per share.
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INVESTING IN OUR COMMON STOCK INVOLVES SUBSTANTIAL RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 5.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is October 12, 2000
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TABLE OF CONTENTS
PAGE
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Summary.............................. 3
Risk Factors......................... 5
Special Note Regarding
Forward-Looking Statements
Contained in this Prospectus....... 14
Use of Proceeds...................... 15
Business............................. 16
PAGE
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Plan of Distribution................. 26
Experts.............................. 27
Legal Matters........................ 27
Incorporation of Documents by
Reference.......................... 27
Where You Can Find More
Information........................ 27
This prospectus references and depicts certain trademarks, service marks and
trade names of other companies. "USinternetworking" and "USi" are our registered
trademarks. We have applied for federal registration of the marks "Internet
Managed Application Provider," "iMAP," "Making Software Simple,"
"PriorityPeering," "USiView," "AppHost," "Global Enterprise Management Center,"
"USiLink," "USiConnects," "USiMirror," "USiAccelerate," "USi Global Services
Platform," "USiGSP" and "GEMC."
WE HAVE NOT AUTHORIZED ANY PERSON TO GIVE YOU ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. YOU SHOULD NOT
RELY ON ANY INFORMATION OR REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. THIS PROSPECTUS IS NOT ANY OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE COMMON STOCK. IT IS NOT AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY SECURITIES IF THE OFFER OR
SOLICITATION WOULD BE UNLAWFUL. THE AFFAIRS OF USINTERNETWORKING MAY HAVE
CHANGED SINCE THE DATE OF THIS PROSPECTUS. YOU SHOULD NOT ASSUME THAT THE
INFORMATION IN THIS PROSPECTUS IS CORRECT AT ANY TIME SUBSEQUENT TO ITS DATE.
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SUMMARY
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. Under
this shelf process, we may from time to time sell any number of the shares of
common stock in one or more offerings up to a total aggregate dollar value of
$150,000,000.
Each time we sell shares of common stock, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change information
contained in this prospectus. You should read both this prospectus and any
prospectus supplement together with the additional information described below
under the heading "Where You Can Find More Information."
The registration statement that contains this prospectus, including the
exhibits to the registration statement and the information incorporated by
reference, contains additional information about the common stock offered under
this prospectus. That registration statement can be read at the Securities and
Exchange Commission, or SEC, web site or at the SEC offices mentioned below
under the heading "Where You Can Find More Information."
You should rely only on the information provided in this prospectus and in
any prospectus supplement, including the information incorporated by reference.
We have not authorized anyone to provide you with different information. You
should not assume that the information in this prospectus, or any supplement to
this prospectus, is accurate at any date other than the date indicated on the
cover page of these documents.
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
It is not complete, and does not contain all the information you should consider
before investing in our common stock. To fully understand this offering and its
consequences to you, you should read the entire prospectus carefully, including
the "Risk Factors" section, the "Special Note Regarding Forward-Looking
Statements Contained in this Prospectus" and the financial data and the
documents that we incorporate by reference into this prospectus.
USINTERNETWORKING
USi's service offerings combine leading packaged software applications with
computing hardware, network connectivity, security, integration into other
applications, and the ongoing operational support to meet the needs of Global
1000 and middle market companies for business functions such as e-commerce,
human resource and financial management, customer relationship management,
procurement, and messaging and collaboration. We deploy these applications in
our data centers and enable our clients to access and utilize the applications
over the Internet or a private network connection. We take full responsibility
for providing these services to our clients, freeing them from the need to own
and manage the related computer systems, networks and software. In addition to
the iMAP solution, we also provide applications management and technical support
services in our data centers for those clients who have already developed a
solution. Our clients benefit from an accelerated time to market for the use of
these applications, predictable monthly costs, a scalable infrastructure and a
lower total cost of ownership.
We are able to deliver these benefits to our clients in part because we
have designed and implemented Enterprise Data Centers located in Annapolis, and
Silicon Valley, with redundant data center capabilities in Amsterdam and Tokyo.
The data centers are linked by a dedicated network and by robust transit
connections to twelve major Internet backbones -- eight in North America, two in
Europe and two in Asia. Our data centers comprise standardized hardware
environments to support our applications, embedded security, EMC disk arrays for
storage and real-time back-up and significant levels of infrastructure
redundancy. Our network is monitored and managed through USiView, which enables
a client engineer to see all hardware, software
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and network elements of a client application in a single view. Cisco assisted in
the design of our network and has designated it as a Cisco Powered Network.
We believe that controlling all elements of the network from the client's
Internet backbone provider or LAN enables us to deliver superior response time,
reliability and security for our clients. We can substantially reduce
implementation time because we implement our applications in a consistent and
pre-configured environment. Moreover, our clients do not need to mediate among
disparate vendors, because we take total responsibility for application support
and system performance and availability.
We implement and manage applications that are developed by others. To
execute this strategy, we have established agreements with leading software
vendors in key application areas, including:
- BroadVision and Microsoft in e-commerce;
- Ariba in business-to-business e-commerce;
- Siebel in customer relationship management;
- Lawson and PeopleSoft in human resources and financial management;
- Microsoft in enterprise messaging and collaboration;
Our iMAP clients sign contracts that provide for fixed monthly service
fees, typically for a three- to five-year term, in exchange for the service we
provide. Once a client signs an iMAP contract, we invest in the additional
hardware, software and implementation needed to deliver that client's service.
This requires a substantial investment in the early years to build our client
base. Since we own or provide most of the elements and operational support for a
client's implementation, we anticipate that we will experience a high level of
client retention, even at the end of the contract's term. We also benefit from
our ability to cross-sell clients on additional applications and our clients'
desire to add additional functionality and users to existing solutions we have
implemented for them. We believe that our demonstrated ability to cross-sell and
upsell our clients will generate substantial growth and future positive cash
flow.
We introduced our iMAP services in late 1998. For the year ended December
31, 1999, we generated $35.5 million in revenues, and for the six months ended
June 30, 2000 we generated $44.0 million in revenues. As of June 30, 2000, we
had 187 signed contracts with 146 clients for our iMAP services. The total
expected revenue from these contracts, assuming payment over the full contract
terms, exceeds $320.0 million.
USinternetworking was incorporated in Delaware in January 1998. Our
executive offices are located at One USi Plaza, Annapolis, Maryland 21401-7478;
and our telephone number is (410) 897-4400.
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RISK FACTORS
Investing in our common stock involves risk. You should carefully consider
the risks and uncertainties described below before making an investment
decision. These risks and uncertainties are not the only ones that we face or
that may adversely affect our business. If any of the following risks or
uncertainties actually occur, our business, financial condition or results of
operations could be materially adversely affected. This prospectus also contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ from those described in the forward-looking statements. This
could occur because of the risks described below and elsewhere in this
prospectus.
WE EXPECT TO CONTINUE TO INCUR LOSSES AND EXPERIENCE NEGATIVE CASH FLOW.
We expect to have significant operating losses and to record significant
net cash outflow before financing in the near term. Our business has not
generated sufficient cash flow to fund our operations without resorting to
external sources of capital. Starting up our company and building our network as
well as expanding our infrastructure and work force to service our growing
customer base required substantial capital and other expenditures. As a result,
we reported a net loss of $81.9 million for the six month period ended June 30,
2000 and EBITDA of negative $41.3 million for the same period. For the year
ended 1999, we reported a net loss of $103.3 million and EBITDA of negative
$65.5 million for the same period. Further developing our business and expanding
our network will require significant additional capital and other expenditures.
WE WILL NEED ADDITIONAL CAPITAL TO FUND OUR OPERATIONS AND FINANCE OUR GROWTH,
AND WE MAY NOT BE ABLE TO OBTAIN IT ON TERMS ACCEPTABLE TO US OR AT ALL.
We will require additional funds to finance our operations for the next
twelve months. We are currently actively pursuing additional equity, debt and
capital lease financing, including the sale of some or all of the shares of
common stock to which this prospectus relates. There can be, however, no
assurance that such efforts will be successful. If we raise additional funds by
selling our common stock or securities convertible into common stock, the
relative ownership of our existing investors could be diluted or the new
investors could obtain terms more favorable than those of our existing
investors. If we cannot obtain financing on terms acceptable to us or at all, we
may be forced to curtail our planned business expansion.
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED OPERATING
HISTORY IN A RELATIVELY NEW MARKET.
We began operating in January 1998. Our limited operating history makes
predicting future results difficult. Since our inception, we have focused on
developing our business and only since September 1998 have we begun to contract
with customers for our iMAP offerings. Because of our limited operating history
and the emerging nature of our markets, our historical financial information is
of limited value in projecting our future results. Additionally, our market, the
Application Service Provider (or "ASP") market is relatively new and has not yet
received universal acceptance by the enterprises we target. Therefore, it is
difficult to evaluate our business and prospects.
OUR INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH.
Our debt leverage is indicated in the chart below.
AS OF JUNE 30, 2000
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(DOLLARS IN
THOUSANDS)
Total long term liabilities................. $203,120
Stockholders' equity........................ $152,825
Debt to equity ratio........................ 1.33:1
Our leverage could have important consequences to you. For example, it
could:
- limit our ability to fund future working capital, capital expenditures,
acquisitions and other general corporate requirements;
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- limit our ability to borrow additional funds;
- require us to dedicate a substantial portion of our cash flow from
operations to repaying indebtedness, thereby reducing the availability of
our cash flow to fund working capital, capital expenditures, acquisitions
and other general corporate purposes;
- make it more difficult for us to satisfy our obligations with respect to
our indebtedness;
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our flexibility in planning for, or reacting to, changes in our
business and industry; and
Any additional borrowings would further increase the amount of our leverage
and the associated risks.
WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH TO SERVICE OUR INDEBTEDNESS.
Our ability to make payments on our indebtedness, and to fund planned
capital expenditures, development and operating costs will depend on our ability
to generate cash in the future through sales of our services. We cannot assure
you that our available liquidity will be sufficient to service our indebtedness,
or to fund our other cash needs. We may need to refinance all or a portion of
our indebtedness, on or before maturity, but we may not be able to do so on
commercially reasonable terms, or at all. Without sufficient funds to service
our indebtedness, we would have serious liquidity constraints and would need to
seek additional financing from other sources, but we may not be able to do so on
commercially reasonable terms, or at all.
IF WE FAIL TO MEET COVENANTS OR DEFAULT UNDER OUR EQUIPMENT LEASES OUR ABILITY
TO SERVICE OUR CLIENTS COULD BE HARMED.
We have financed a large percentage of our hardware purchases under various
lease and sale-leaseback agreements. Some of these agreements contain financing
covenants and cross-default provisions which, if triggered, could have a
material adverse effect on our business and our ability to service our clients.
OUR SUCCESS DEPENDS ON THE ACCEPTANCE AND INCREASED USE OF INTERNET-BASED
BUSINESS SOFTWARE SOLUTIONS, AND WE CANNOT BE SURE THAT THIS WILL HAPPEN.
Our business model depends on the adoption of Internet-based business
software solutions by commercial users. Our business could suffer dramatically
if Internet-based solutions are not accepted or not perceived to be effective.
The market for Internet services, private network management solutions and
widely distributed Internet-enabled packaged application software has only
recently begun to develop and is now evolving rapidly.
The growth of Internet-based business software solutions could also be
limited by:
- concerns over transaction security and user privacy;
- inadequate network infrastructure for the entire Internet; and
- inconsistent performance of the Internet.
We cannot be certain that this market will continue to grow or to grow at
the rate we anticipate.
THE GROWTH IN DEMAND FOR OUTSOURCED BUSINESS SOFTWARE APPLICATIONS IS NOW
BEGINNING, BUT THE FUTURE IS STILL UNCERTAIN.
Future demand for and acceptance of outsourced business software
applications, including our iMAP offerings is uncertain. While there has been a
significant level of initial adoption of the ASP model, we believe that many of
our potential customers are still not fully aware of the benefits of outsourced
solutions. In addition, the rate of initial adoption may be slowed by
performance or financial problems among Application Service Providers. It is
possible that our iMAP offerings may never achieve broad market acceptance. If
the
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market for our offerings does not grow or grows more slowly than we currently
anticipate, our business, financial condition and operating results would be
materially adversely affected.
OUR BUSINESS STRATEGY MAY NOT EFFECTIVELY ADDRESS OUR MARKET AND WE MAY NEVER
REALIZE A RETURN ON THE RESOURCES WE HAVE INVESTED TO EXECUTE OUR STRATEGY.
We have made substantial investments to pursue our strategy. These
investments include:
- building a global network of data centers;
- allying with particular software providers;
- expanding our work force;
- investing to develop unique service offerings; and
- developing and acquiring implementation resources around specific
applications.
These investments may not be successful. More cost-effective strategies may
be available to compete in this market. We may have chosen to focus on the wrong
application areas or to work with the wrong partners. Potential customers may
not value the specific product features in which we have invested. There is no
assurance that our strategy will prove successful.
THE MARKETS WE SERVE ARE HIGHLY COMPETITIVE AND MANY OF OUR COMPETITORS HAVE
MUCH GREATER RESOURCES.
Our current and potential competitors include Applications Service
Providers and companies focused on the application hosting business such as
Applicast, Breakaway Solutions, Corio, Cyber.Solutions, Interliant, and
Interpath; Web hosting companies such as Exodus, Digex, Navisite, and XO
(Nextlink/Concentric); enterprise applications vendors, such as Oracle,
PeopleSoft, and SAP; business Internet Service Providers, such as MCI WorldCom,
PSINet and Verio/NTT; telecommunications companies, such as AT&T and GTE; and
systems integrators, such as Andersen Consulting, EDS, IBM and KPMG. While we
believe that our network of proprietary EDCs together with our level of service,
support and targeted business focus distinguish us from these competitors, some
of these competitors have significantly greater market presence, brand
recognition, and financial, technical and personnel resources than we do, and
have extensive coast-to-coast Internet networks.
Many of our competitors have substantially greater financial, technical and
marketing resources, larger customer bases, longer operating histories, greater
name recognition and more established relationships in the industry than we do.
We cannot be sure that we will have the resources or expertise to compete
successfully in the future. Our competitors may be able to:
- more quickly develop and expand their network infrastructures and service
offerings;
- better adapt to new or emerging technologies and changing customer needs;
- take advantage of acquisitions and other opportunities more readily;
- negotiate more favorable licensing agreements with software application
vendors;
- devote greater resources to the marketing and sale of their products; and
- adopt more aggressive pricing policies.
Some of our competitors may also be able to provide customers with
additional benefits at lower overall costs. We cannot be sure that we will be
able to match cost reductions by our competitors. In addition, we believe that
there is likely to be consolidation in our markets. Consolidation could increase
price competition and other competitive forces in ways that materially adversely
affect our business, results of operations and financial condition. Finally,
there are few substantial barriers to entry, and we have no patented technology
that would bar competitors from our market.
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OTHERS MAY SEIZE THE MARKET OPPORTUNITY WE HAVE IDENTIFIED BECAUSE WE MAY NOT
EFFECTIVELY EXECUTE OUR STRATEGY.
If we fail to execute our strategy in a timely or effective manner, our
competitors may be able to seize the marketing opportunities we have identified.
Our business strategy is complex and requires that we successfully and
simultaneously complete many tasks. In order to be successful, we will need to:
- build and operate a highly reliable, complex global network;
- negotiate effective partnerships and develop economically attractive
service offerings;
- attract and retain iMAP customers;
- attract and retain highly skilled employees;
- integrate acquired companies into our operations;
- evolve our business to gain advantages in an increasingly competitive
environment; and
- expand our international operations.
In addition, although most of our management team has worked together for
approximately two years, there can be no assurance that we will be able to
successfully execute all elements of our strategy.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE DUE TO THE NATURE OF OUR ASP
BUSINESS AND OTHER FACTORS AFFECTING OUR REVENUES AND COSTS, WHICH COULD CAUSE
OUR STOCK PRICE TO FALL.
Our financial results will also vary over time as our ASP business matures.
For our iMAP clients, we recognize all fees, including upfront and monthly fees,
over the balance of the contractual relationship. We expect that our financial
results will continue to vary over time as our iMAP revenue increases as a
proportion of total revenue. Changes in our revenue mix from professional
services revenues to application management services revenues could be difficult
to predict and could cause our quarterly results and stock price to fluctuate.
Other important factors that could cause our quarterly results and stock
price to fluctuate materially include:
- the number of clients we obtain in order to scale our business;
- the level of service we provide to our clients;
- cost of capital associated with the services we provide to our clients;
- the loss of or change in our relationship with important clients;
- the timing and magnitude of expanding our operations and of other capital
expenditures;
- changes in our pricing policies or those of our competitors;
- potential changes in the accounting standards associated with accounting
or stock or warrant issuances and for revenue recognition; and
- the loss of key members of, or other changes in, our management.
WE PLAN TO EXPAND VERY RAPIDLY, AND MANAGING OUR GROWTH MAY BE DIFFICULT.
We have rapidly expanded our operations since USi was founded in January
1998. The number of our employees has grown from approximately 300 at December
31, 1998, to approximately 1,450 at September 30, 2000. We expect our business
to continue to grow in terms of headcount, geographic scope,
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number of customers and in terms of the number of products and services we
offer. We cannot be sure that we will successfully manage our growth. In order
to successfully manage our growth we must:
- enlarge our network and infrastructure;
- maintain a high level of client service and support;
- improve our management, financial and information systems and controls;
and
- expand, train, manage and integrate our employee base effectively.
There will be additional demands on our customer service support and sales,
marketing and administrative resources as we increase our service offerings and
expand our target markets. The strains imposed by these demands are magnified by
our limited operating history. Any inability to expand our network, services and
employee base commensurate with the demand for our services could adversely
affect our revenues.
NETWORK OUTAGES COULD NEGATIVELY AFFECT OUR REVENUES.
We have built and currently maintain a very sophisticated data center
network to provide availability to our clients' applications over the Internet
and private connections. Complex networks are subject to the risk of outages.
Over the course of our operating history we have experienced network outages
lasting from minutes to hours. Each of our clients' contracts contain service
level guarantees which initially provide for revenue credits, and eventually
termination of the contract, if access to the client's application is
compromised. The total amount of service fee credits provided to our clients
during our operating history due to network outages has not been material.
Factors both in and outside of our control could cause additional outages
to our network which could cause a loss in revenue.
OUR GROWTH COULD BE LIMITED IF WE ARE UNABLE TO ATTRACT AND RETAIN QUALIFIED
PERSONNEL.
We believe that our short- and long-term success depends largely on our
ability to attract and retain highly skilled technical, managerial and marketing
personnel. We particularly require additional management personnel in the areas
of application integration and technical support. Individuals with information
technology skills are in short supply and competition for application
integration personnel is particularly intense. We may not be able to hire the
necessary personnel to implement our business strategy, or we may need to pay
higher compensation for employees than we currently expect. We cannot be sure
that we will succeed in attracting and retaining the personnel we need to
continue to grow, especially if our stock price declines or remains low.
WE DEPEND ON A LIMITED NUMBER OF KEY PERSONNEL WHO WOULD BE DIFFICULT TO
REPLACE.
Our success also depends in significant part on the continued services of
our key technical, sales and senior management personnel. Losing one or more of
our key employees could have a material adverse effect on our business, results
of operations and financial condition. We have employment agreements with most
of our vice presidents and other key employees, including Andrew A. Stern,
Stephen E. McManus, Jeffery L. McKnight, Harold C. Teubner, Jr., Mark J.
McEneaney and Gary J. Rogers.
WE MAY NOT BE ABLE TO DELIVER OUR IMAP SERVICES IF THIRD-PARTIES DO NOT PROVIDE
US WITH KEY COMPONENTS OF OUR INFRASTRUCTURE.
We depend on other companies to supply key components of our
telecommunications infrastructure and systems and network management solutions.
Any failure to obtain needed products or services in a timely fashion and at an
acceptable cost could have a material adverse effect on our business, results of
operations and financial condition. Although we lease redundant capacity from
multiple suppliers, a disruption in telecommunications capacity could prevent us
from maintaining our standard of service. Some of the key components of our
system and network are available only from sole or limited sources in the
quantities and
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quality we demand. We buy these components from time to time, do not carry
significant inventories of them and have no guaranteed supply arrangements with
our vendors.
OUR ABILITY TO PROVIDE OUR IMAP SERVICES DEPENDS ON STRATEGIC RELATIONSHIPS WITH
SOFTWARE VENDORS THAT WE MAY NOT BE ABLE TO MAINTAIN.
Our iMAP offerings are central to our business strategy. We obtain software
licenses, marketing and maintenance under agreements with BroadVision, Ariba,
Siebel, PeopleSoft, Lawson, Microsoft and Oracle, and package them as part of
our iMAP solutions. The license agreements are for terms ranging from one to
three years. All the agreements may be terminated upon a breach of the
agreement, subject to cure periods. We cannot be sure that one or more of our
agreements with software vendors will not be terminated in the future. If these
agreements were to be terminated or not renewed or we otherwise could not
continue to use this software, we might have to discontinue products or
services, delay or reduce their introduction unless we could find, license and
package equivalent technology or require our clients to purchase software
licenses directly from vendors.
All but one of our agreements with software vendors are non-exclusive. Our
agreement with SiebelNet, Inc., a wholly-owned subsidiary of Siebel Systems,
Inc., gives us exclusivity as the Application Service Provider of Siebel
enterprise relationship management applications for direct customers of
SiebelNet headquartered in North America. Our vendors may choose to compete with
us directly or to enter into strategic relationships with our competitors. These
relationships may take the form of strategic investments or marketing or other
contractual arrangements. Our competitors may also license and utilize the same
technology in competition with us. We cannot be sure that the vendors of
technology used in our products will continue to support this technology in its
current form. Nor can we be sure that we will be able to adapt our own products
to changes in this technology. In addition, we cannot be sure that the financial
or other difficulties of our vendors will not have a material adverse effect
upon the technologies incorporated in our products, or that, if these
technologies become unavailable, we will be able to find suitable alternatives.
WE WILL NEED TO PERFORM SOFTWARE UPGRADES FOR OUR CUSTOMERS, AND ANY INABILITY
TO SUCCESSFULLY PERFORM THESE UPGRADES COULD CAUSE INTERRUPTIONS OR ERRORS IN
OUR CUSTOMERS' SOFTWARE APPLICATIONS, WHICH COULD INCREASE OUR COSTS AND DELAY
MARKET ACCEPTANCE OF OUR SERVICES.
Our software vendors from time to time will upgrade their software
applications, and at such time we will be required to implement these software
upgrades for our customers. For example, PeopleSoft, from whom we license a
substantial amount of software applications, has scheduled a new release of its
software in the fourth quarter of 2000. Implementing software upgrades can be a
complicated and costly process, particularly implementation of an upgrade
simultaneously across multiple customers, and we have not performed a software
upgrade to date. Accordingly, we cannot assure you that we will be able to
perform these upgrades successfully or at a reasonable cost. We may also
experience difficulty implementing software upgrades to a large number of
customers, particularly if different software vendors release upgrades
simultaneously. If we are unable to perform software upgrades successfully and
to a large customer base, our customers could be subject to increased risk of
interruptions or errors in their business-critical software, our reputation and
business would likely suffer and the market would likely delay the acceptance of
our services. It will also be difficult for us to predict the timing of these
upgrades, the cost to us of these upgrades and the additional resources that we
may need to implement these upgrades. Additionally, if we evolve our business
model to charge customers for the cost of software upgrades, we may lose
prospective customers who choose not to pay for these upgrades. Therefore, any
such upgrades could strain our development and engineering resources, require
significant unexpected expenses and cause us to miss our financial forecasts or
those of securities analysts. Any of these problems could impair our customer
relations and our reputation and subject us to litigation.
TECHNOLOGY MAY CHANGE FASTER THAN WE CAN UPDATE OUR NETWORK AND TECHNOLOGY.
The markets we serve are characterized by rapidly changing technology,
evolving industry standards, emerging competition and the frequent introduction
of new services, software and other products. Our success
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depends partly on our ability to enhance existing or develop new products,
software and services that meet changing customer needs in a timely and
cost-effective way. We cannot be sure, however, that we will do some or all of
these things. For example, if software application architecture changes in
significant ways, the software for which we have licenses could become obsolete,
we may be forced to update our hardware and network configurations or we may be
forced to replace our mirroring technology. This may require substantial time
and expense, and even then we cannot be sure that we will succeed in adapting
our businesses to these and other technological developments.
WE COULD BE HARMED IF OUR SYSTEMS ARE NOT COMPATIBLE WITH OTHER PRODUCTS AND
SERVICES.
We believe that our ability to compete successfully also depends on the
continued compatibility of our services with products, services and
architectures offered by various vendors. Our failure to conform to a prevailing
standard, or the failure of a common standard to emerge, could have a material
adverse effect on our business, results of operations and financial condition.
Although we will work with vendors to test new products, we cannot be sure that
their products will be compatible with ours or that they will adequately address
changing customer needs. Although we currently plan to support emerging
standards, we cannot be sure what new industry standards will develop. We also
cannot be sure that we will be able to conform to these new standards quickly
enough to stay competitive. In addition, we cannot be sure that products,
services or technologies developed by others will not make ours noncompetitive
or obsolete.
THE LOSS OF A KEY CUSTOMER COULD DECREASE OUR REVENUES.
For the six months ended June 30, 2000, sales to SiebelNet accounted for
approximately 12% of our revenues. We expect sales to SiebelNet to continue to
constitute a significant portion of our revenues in the near term. During that
period, if our sales to SiebelNet decrease, our business may suffer.
IF WE CANNOT OBTAIN ADDITIONAL APPLICATION SOFTWARE, WE WILL BE UNABLE TO EXPAND
OR ENHANCE OUR IMAP SERVICE OFFERINGS.
Our business strategy also depends on obtaining additional application
software. We cannot be sure, however, that we will be able to obtain the new or
enhanced applications we may need to keep our iMAP solutions competitive. If we
cannot obtain these applications and as a result must discontinue, delay or
reduce the availability of our iMAP solutions or other products or services, our
business, results of operations and financial condition may be materially
adversely affected.
DEVELOPING AND EXPANDING OUR OPERATIONS WILL DEPEND, AMONG OTHER THINGS, ON OUR
MANAGEMENT'S ABILITY TO SUCCESSFULLY INTEGRATE NEWLY ACQUIRED OPERATIONS.
In August 2000, we acquired the assets of EnableVision, LLC. We cannot be
sure that our integration of EnableVision will result in the EnableVision
business performing as we expect. In addition, we cannot be sure that we will be
able to successfully integrate any business acquired in the future into our own.
Our failure to successfully integrate an acquired company or its subsequent
under performance could have a material adverse effect on our business, results
of operations and financial condition.
WE MAY UNDERTAKE ADDITIONAL ACQUISITIONS WHICH POSE RISKS TO OUR BUSINESS.
From time to time, we may undertake additional acquisitions. If we do, our
risks may increase because:
- we may pay more for the acquired company than the value we realize from
the acquisition;
- we may not fully understand the business we acquire;
- we may be entering markets in which we have little or no direct prior
experience;
- our ongoing business may be disrupted and resources and management time
diverted; and
- our accounting for acquisitions could require us to amortize substantial
goodwill, adversely affecting our reported results of operations.
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In addition, once we have made an acquisition we will face additional
risks:
- it may be difficult to assimilate acquired operations and personnel;
- we may not be able to retain the management and other key personnel of
the acquired business;
- we may not be able to maintain uniform standards, controls, procedures
and policies; and
- changing management may impair relationships with an acquired business's
employees or customers.
WE MAY MAKE INVESTMENTS IN ENTITIES THAT WE DO NOT CONTROL.
In August of 2000, we invested $5.0 million in C3i, Inc., a customer
relationship management service company in New York City. In the future, we may
make additional investments in joint ventures or other entities over which we do
not exercise control. We may make these investments in connection with entering
into strategic partnerships with software vendors, systems integrators or
Internet Service Providers or as strategic investments. Our inability to control
the entity in which we may invest may have consequences on our ability to
receive distributions from such entity or to implement our business plan. Debt
agreements, if entered into by a non-controled entity, may restrict or prohibit
such entity from paying distributions to us. Applicable state or local law may
also limit the amount that a non-controled entity is permitted to pay a
distribution on its equity interest, and we may not be able to influence the
payment of dividends. If any of the other investors in a non-control entity fail
to observe their commitments, that entity may not be able to operate according
to its business plans or we may be required to increase our level of commitment
to give effect to the plan. In addition, our ability to implement a business
plan for a non-controled entity may be limited or non-existent.
BECAUSE WE HAVE INTERNATIONAL OPERATIONS, WE FACE ADDITIONAL RISKS RELATED TO
FOREIGN POLITICAL AND ECONOMIC CONDITIONS.
We have established redundant EDC capabilities in Europe and Japan. We
intend to expand further into international markets. We cannot be sure that we
will be able to obtain the necessary telecommunications infrastructure in a
cost-effective manner or compete effectively in international markets. In
addition, there are risks inherent in conducting business internationally. These
include:
- unexpected changes in regulatory requirements;
- export restrictions;
- tariffs and other trade barriers;
- challenges in staffing and managing foreign operations;
- differing technology standards;
- employment laws and practices in foreign countries;
- political instability;
- fluctuations in currency exchange rates;
- imposition of currency exchange controls; and
- potentially adverse tax consequences.
Any of these could adversely affect our international operations. We cannot
be sure that one or more of these factors will not have a material adverse
effect on our current or future international operations and, consequently, on
our business, results of operations and financial condition.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD ADD ADDITIONAL COSTS TO
DOING BUSINESS ON THE INTERNET AND COULD LIMIT OUR CLIENTS' USE OF THE
INTERNET.
Laws and regulations directly applicable to communications or commerce over
the Internet are becoming more prevalent. The adoption or modification of laws
or regulations relating to the Internet could adversely affect our business. In
recent sessions, the United States Congress has enacted Internet laws regarding
children's privacy, copyrights, taxation and the transmission of sexually
explicit material and other similar
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proposals are continuously being considered. The European Union recently enacted
its own privacy regulations. The law of the Internet, however, remains largely
unsettled, even in areas where there has been some legislative action. It may
take years to determine whether and how existing laws such as those governing
intellectual property, privacy, libel and taxation apply to the Internet. In
addition, the growth and development of the market for online commerce may
prompt calls for more stringent consumer protection laws, both in the United
States and abroad, that may impose additional burdens on companies conducting
business online. For example, Germany and the European Union have enforced laws
and regulations on content distributed over the Internet that are more strict
than those currently in place in the United States.
THE OUTCOME OF PROPOSALS PUT TO A VOTE OF STOCKHOLDERS WILL BE DETERMINED BY OUR
EXISTING PRINCIPAL STOCKHOLDERS, EXECUTIVE OFFICERS AND DIRECTORS.
As of June 2000, our executive officers, directors, existing 5% or greater
stockholders and their affiliates, in the aggregate, own shares representing
approximately 53.6% of our outstanding voting capital stock. As a result, these
persons, acting together, are able to control all matters submitted to our
stockholders for approval and to control our management and affairs. For
example, these people, acting together, control the election and removal of
directors and any merger, consolidation or sale of all or substantially all of
our assets.
THE TRADING PRICE OF OUR COMMON STOCK COULD BE SUBJECT TO SIGNIFICANT
FLUCTUATIONS.
The trading price of our common stock has been volatile. Factors such as
announcements of fluctuations in our or our competitors' operating results and
market conditions for Internet related and other technology stocks in general
have had and could continue to have a significant impact on the trading price of
our common stock. In particular, the trading price of the common stock of many
Internet related and other technology companies has experienced extreme price
and volume fluctuations, which have at times been unrelated to the operating
performance of such companies whose stocks were affected. In addition, the
trading prices of our common stock could be subject to significant fluctuations
in response to variations in our prospects and operating results, which may in
turn be affected by changes in interest rates and other factors. There can be no
assurance that these factors will not have an adverse effect on the trading
prices of our common stock.
THE MARKET PRICE OF OUR COMMON STOCK COULD BE AFFECTED BY THE SUBSTANTIAL NUMBER
OF SHARES THAT ARE ELIGIBLE FOR FUTURE SALE.
As of September 30, 2000, we had 97,713,465 shares of common stock issued
and outstanding, excluding 1,174,004 shares issuable upon the exercise of
warrants and 31,565,991 shares issuable upon the exercise of options granted
under our 1998 Stock Option Plan and 7,545,272 shares issuable upon conversion
of 7% Convertible Subordinated Promissory Notes. We cannot predict the effect,
if any, that future sales of the notes or shares of common stock, including
common stock issuable upon conversion of the notes, or the availability of the
notes or shares of common stock for future sale, will have on the market price
of common stock prevailing from time to time.
INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS AGAINST US, EVEN WITHOUT MERIT, COULD
COST A SIGNIFICANT AMOUNT OF MONEY TO DEFEND AND DIVERT MANAGEMENT'S ATTENTION
AWAY FROM OUR BUSINESS.
As the number of software and hardware products in our target markets
increases and the functionality of these products further overlap, software and
hardware industry participants may become increasingly subject to infringement
claims. Someone may even claim that our technology infringes their proprietary
rights. Any infringement claims, even if without merit, can be time consuming
and expensive to defend. They may divert management's attention and resources
and could cause service implementation delays. They also could require us to
enter into costly royalty or licensing agreements. If successful, a claim of
product infringement against us and our inability to license the infringed or
similar technology could adversely affect our business.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
CONTAINED IN THIS PROSPECTUS
This prospectus includes forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements relate
to, among other things, analyses and other information that are based on
forecasts of future results and estimates of amounts not yet determinable. These
statements also relate to our future prospects, developments and business
strategies.
These forward-looking statements are identified by their use of terms and
phrases such as "anticipate," "believe," "could," "estimate," "expect,"
"intend," "may," "plan," "predict," "project," "will" or the negative of those
or other variations, or comparable expressions, including references to
assumptions. These statements are contained in sections entitled "Prospectus
Summary," "Risk Factors," "Business" and other sections of this prospectus and
the documents incorporated by reference into this prospectus.
The forward-looking statements in this prospectus, including statements
concerning projections of our future results, operating profits and earnings,
are based on current expectations and are subject to risks and uncertainties
that could cause actual results to differ materially from those expressed or
implied by those statements.
Our risks are more specifically described in "Risk Factors." If one or more
of these risks or uncertainties materializes, or if underlying assumptions prove
incorrect, our actual results may vary materially from those expected, estimated
or projected. Given these uncertainties, you should not place undue reliance on
forward-looking statements.
We undertake no obligation to update forward-looking statements or risk
factors other than as required by applicable law, whether as a result of new
information, future events or otherwise. You are advised, however, to consult
any additional disclosures we make in our Form 10-Q, 8-K and 10-K reports to the
SEC. Also note that we provide a cautionary discussion of risks and
uncertainties under "Risk Factors" on page 5 of this prospectus. These are
factors that we think could cause our actual results to differ materially from
expected results.
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USE OF PROCEEDS
We cannot guarantee that we will receive any proceeds in connection with
this offering.
We intend to use the net proceeds of this offering, if any, for general
corporate purposes, including working capital to fund anticipated operating
losses, expenses and capital expenditures. As of the date of this prospectus, we
cannot specify with certainty the particular uses for the net proceeds, if any,
to be received upon consummation of this offering. Accordingly, our management
will have broad discretion in the application of any net proceeds received.
Pending such uses, we intend to invest the net proceeds, if any, from this
offering in short-term, interest-bearing, investment grade securities.
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BUSINESS
ABOUT USi
USi's service offerings combine leading packaged software applications with
computing hardware, network connectivity, security, integration into other
applications, and the ongoing operational support to meet the needs of Global
1000 and middle market companies for business functions such as e-commerce,
human resource and financial management, customer relationship management,
procurement, and messaging and collaboration. We deploy these applications in
our data centers and enable our clients to access and utilize the applications
over the Internet or a private network connection. We take full responsibility
for providing these services to our clients, freeing them from the need to own
and manage the related computer systems, networks and software. In addition to
the iMAP solution, we also provide applications management and technical support
services in our data centers for those clients who have already developed a
solution. Our clients benefit from an accelerated time to market for the use of
these applications, predictable monthly costs, a scalable infrastructure and a
lower total cost of ownership.
MARKET TRENDS
We believe that there are four key market trends that drive our business
opportunity:
- the continued growth and acceptance of the Application Service Provider
model;
- the rapid growth of e-commerce and Internet-based communications;
- the competitive needs of automating key business processes and bringing
them to market quickly; and
- the availability of Internet-enabled packaged software applications.
Continued growth and acceptance of the Application Service Provider model.
The Application Service Provider model is being increasingly validated by
the continued emergence of new entrants into this market. The "pure play"
applications hosting companies today include companies such as Applicast,
Breakaway Solutions, Corio, Cyber.Solutions, Interliant, and Interpath. The
leading enterprise application companies such as Oracle, PeopleSoft, and SAP are
providing application hosting solutions. The Web hosting companies such as
Exodus, Digex, Navisite, XO (Nextlink/Concentric), and Verio/NTT, either by
themselves or in partnership with other companies are participants in the
Application Service Provider market.
Rapid growth of e-commerce and Internet-based communications.
An increasing number of companies use the Internet to enable fast and
efficient communications between various constituents of their enterprises. The
following examples illustrate this trend.
- E-commerce is a critical element of many businesses' strategy. Companies
increasingly demand that their vendors communicate ordering, invoicing
and payment transactions through Internet-enabled applications.
International Data Corporation estimates that commerce on the Internet
will be more than $2.5 trillion by 2004, reflecting a tenfold increase
over the next four years.
- Enterprises are relying on the Internet to communicate with employees who
are increasingly dispersed due to globalization and the development of
alternative workplaces. According to Forrester Research, Inc. there are
25 million telecommuters or home-based workers in the United States.
- To interact with customers, suppliers and remote employees efficiently,
an increasing number of businesses are implementing mission-critical
applications over Internet protocol based networks.
As more companies implement mission-critical business applications on the
Internet, the demand for the outsourced provision of key Internet infrastructure
and services, or Web hosting, has significantly increased. The outsourcing of
applications and Web sites is occurring because businesses recognize that they
do not have an infrastructure sufficient to ensure reliable and responsive
deployment of mission-critical business
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functionality on the Internet. Web site hosting providers address these concerns
by building substantial redundancy and capacious network bandwidth into their
facilities. Moreover, they provide a physically secure data center environment,
which helps to address businesses' security concerns as they begin to move
proprietary business information over the Internet.
Competitive needs of automating key business processes and bringing them to
market quickly.
Enterprises increasingly face competitive demands to automate business
processes, but they have frequently not been able to either allocate the
necessary resources or afford the functionality available to their competitors.
We believe that these enterprises have a significant need for packaged
application software to improve core business processes, reduce costs and
enhance their global competitive position.
We believe that many of the leading enterprise resource planning software
packages remain too complex and too costly to be effective solutions for middle
market companies. While many enterprise resource planning providers have begun
offering applications that are designed to be easily implemented, implementation
of these applications generally still requires specialized skill sets and
frequently takes three to twelve months. In addition, once implemented, these
applications require extensive infrastructure and specialized personnel to
support and maintain them. Faced with these costs and time frames, many
companies choose to forgo the capabilities of leading enterprise resource
planning applications in favor of less functional applications. We believe that
a lower cost, more easily implemented approach would allow these middle market
businesses to capitalize on the functionality of leading enterprise resource
planning packages and better position these businesses against larger
competitors.
Availability of Internet-enabled packaged software applications.
Until recently, companies wanting to implement Internet applications had to
develop their own software applications or customize existing packages. This
made each implementation unique and costly. It also made implementation time
frames and costs unpredictable. Over the past two years, however, major packaged
application providers, such as Siebel, PeopleSoft, Lawson, Oracle, J.D. Edwards
and others, have released versions of their software that can be accessed and
used over the Internet. Internet-enabled software is becoming an increasingly
common offering of providers of applications for distributed users such as
e-commerce, enterprise resource planning applications, and customer relationship
management, where the increasing ubiquity of the Internet makes it a
cost-efficient mechanism for implementing distributed functions.
We believe that the availability of Internet-enabled packaged software
makes it possible to implement these applications on the Internet in predictable
time frames, with predictable costs, and without writing custom code.
THE USI SOLUTION
We believe that we are well positioned to take advantage of these trends.
We have established our iMAP services as a leading single-source solution for
the Internet-enabled application software needs of the Global 1000 and middle
market enterprises. We take responsibility for the deployment and maintenance of
our iMAP best-of-breed packaged software application offerings. This allows our
clients to focus on their core competencies without mediating a solution among
disparate vendors. Our iMAP solutions enable clients to buy these
mission-critical functions as a service from a single vendor, rather than as a
collection of technologies from multiple vendors.
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We have teamed with major packaged application software providers to
implement our iMAP solutions. We have built a network of Enterprise Data Centers
(EDCs) through which our clients' business software applications are deployed.
The network offers fast, reliable and secure access to the client application
web sites that we manage, which serve as the "Internet gateways" for enterprises
and their employees, customers and partners to access and use business
application software and data. The servers are generally procured and maintained
by us and dedicated to specific clients. We provide packaged application
software and support along with our services on the basis of multi-year
contracts paid on a monthly basis. We believe that the combination of our
Internet communications capability along with Internet-enabled software
applications makes our iMAP offerings one of the only end-to-end integrated
Internet communications and computing solutions available in the marketplace.
Operate a specialized global network
We have constructed a highly reliable, fully redundant, global network
specifically designed to support our iMAP solutions. Our network is designed to
provide the fastest possible response time, the highest level of security and
99.9% availability to our clients. We have primary EDCs in Annapolis and Silicon
Valley with redundant EDC capabilities in Amsterdam and Tokyo. These EDCs are
monitored and managed from our Global Enterprise Management Center (GEMC) in
Annapolis and a remote back-up GEMC in Silicon Valley. The network is designed
around dual primary backbones connecting our EDCs and GEMCs. Our dedicated
network is linked to the Internet in North America via eight major backbone
providers, allowing our clients to bypass congested public exchange points. In
addition, our network is linked with two backbone providers in each of Europe
and Asia, enabling us to provide global connectivity to our clients. Large
storage arrays in Annapolis and Silicon Valley can provide real-time back-up of
North American client sites, enabling us to provide a high level of data
integrity. We use our network operations platform, USiView, to proactively
manage and monitor our network systems, telecommunications hardware, network
connectivity, operating systems and applications software. This specialized
network enables us to provide very high levels of reliability, security and
responsiveness to client constituents, whether they access our applications
through the Internet or from behind a client LAN.
Deliver integrated service offerings around business processes
We have expert product teams that specialize in designing iMAP solutions to
support specific business processes such as e-commerce, customer relationship
management, human resource and financial management, procurement, and messaging
and collaboration. Our consulting and implementation teams have specific
expertise in implementing our iMAP solutions for these specific business
processes. We also have a team that focuses on enterprise application
integration capabilities, which provide integration services between our iMAP
applications, for example, we have created tools and techniques to enable Siebel
and PeopleSoft to share the same customer information. These teams can implement
applications and generate value for customers very quickly. For example, we
designed our typical implementation of Siebel technology to be completed in 45
days. We believe that this provides a competitive advantage over a more
conventional implementation, which requires six months to more than a year for
completion. Our consulting and implementation teams not only implements our
services, but also supports these services through the entire development life
cycle.
Leverage strategic relationships with leading software application providers
We have established relationships in key application areas with vendors,
including BroadVision and Microsoft in e-commerce; Ariba in business-to-business
e-commerce; Siebel in customer relationship management; PeopleSoft and Lawson in
human resources and financials; and Microsoft in messaging and collaboration. We
are the exclusive Application Service Provider of Siebel enterprise relationship
management applications for customers of SiebelNet, Inc., which is headquartered
in North America, and are one of 13 PeopleSoft Application Service Providers.
The agreements with software providers generally enable us to deploy the
applications as a service, without the need to establish a separate licensing
arrangement for each client. The agreements also enable us to provide our
clients with an economically attractive service offering,
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and afford us co-marketing and co-branding opportunities. These agreements
provide us with a software portfolio that can meet a broad range of our clients'
enterprise resource planning, e-commerce and communication needs. In addition,
the agreements provide us with an accelerated path to developing our expert
product teams around the software applications and business processes these
applications support.
Implement services-based business model
We sell our iMAP solutions as a service, not as a technology. Accordingly,
our clients sign long-term contracts with fixed monthly payments made as the
service is delivered. We believe that selling our iMAP solutions as a service
reduces our clients' initial capital expenditures and makes it easier for
non-technical executives to purchase our products.
THE USI STRATEGY
The focus of our strategy is to deliver timely, reliable and secure iMAP
services to our clients. We believe that by doing so we will continue to rapidly
build our client base and secure long-term relationships. We intend to continue
investing resources to maintain a value advantage over our competitors and to
capitalize on our first mover advantages, as follows:
- Develop new business. We will exploit our name recognition and
relationships with our hardware, software and integration partners to
continue to develop new business by soliciting potential clients through
joint marketing campaigns advertising in industry specific periodicals
and newspapers, sponsoring seminars and trade shows in selected markets,
and conducting targeted mass mailings of marketing material.
- Cross-sell products to increase penetration of accounts. We are able to
provide a range of packaged software applications and complex web hosting
services to our clients. We actively seek to increase our sales to our
large and growing client base by cross-selling our products and services.
Our aim is to increase our implementation and provision of our clients'
mission-critical business processes.
- Expand our portfolio of iMAP solutions. We have entered into strategic
partnerships with numerous application software vendors. These vendors
are offering or developing additional applications in specific vertical
market segments which we expect to deploy in order to expand our
portfolio of iMAP solutions.
- Enhance the capacity and functionality of our global network. We will
use our experience in delivering our iMAP services to continue to deploy
enhanced value features into our network. In addition, as we begin to
address clients located in Europe and Asia, we will expand our capacity
in those regions.
IMAP OFFERINGS
Our current iMAP offerings provide integrated solutions to meet the needs
of the Global 1000 and middle market clients implementing distributed business
functions, whether based on applications we provide or where we are hosting
existing applications provided by the client. These solutions integrate four
basic components.
- Leading packaged application and database software. Our application
packages address major business process areas including e-commerce,
customer relationship management, human resource and financial
management, procurement, and messaging and collaboration. We have chosen
to focus on mission-critical business processes that serve distributed
users. These processes can gain maximum value from Internet
implementations, our management of database platforms and from our
infrastructure.
- USi-managed client application Web sites available via our global
network. USi-managed client application Web sites are housed on
dedicated USi-managed servers and available via a reliable, high-
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performance and secure global Internet network. Our network architecture is
designed to ensure responsiveness and maintain the security of the web sites we
manage.
- Consulting and systems integration services. iMAP consulting and systems
integration services define, develop and offer a service that provides
access to a combination of our network services, application software and
related hardware necessary to provide our service and meet a specific
client's needs. Within the iMAP solutions, we do not develop software nor
do we implement substantial customization of existing packages. Rather,
modular packages applications are configured to meet a client's
requirements.
- Integrated client service. Once implemented, iMAP solutions are
efficiently managed in our network of EDCs. We provide client support
twenty-four hours a day, seven days a week, from specially trained teams
with specific functional and technical knowledge of each client
implementation.
In addition to the specific application areas that we support, we allow
clients to host their own software applications in our highly reliable and
secure data center environment. We offer these clients all of the above elements
with the exception of the provision of application software. Our complex Web
hosting clients realize all the reliability, security and responsiveness
benefits of our network; however, we take limited responsibility for the Web
hosting client's business application itself.
Most of our iMAP contracts, including our contracts for complex Web
hosting, provide for a modest initial payment and are generally not less than
three years in length. However, client contracts signed under our agreement with
Siebel may have a term as short as six months and some complex Web hosting
contracts have shorter terms. Our contracts provide for prospective payment
reductions in the event that agreed service levels, as measured and quantified
by system performance benchmarks, are not met.
USI'S GLOBAL NETWORK
We designed our global network specifically to provide superior performance
for iMAP offerings. By maintaining architectural and operational control over
our network up to the point at which the client's traffic leaves its ISP
backbone or corporate LAN, our network is designed to:
- provide uptime of 99.9% or better to the entire network, which includes
the dedicated customer server;
- provide fast and predictable response time and access to customer content
globally; and
- provide reliable and customized network security.
Network uptime
Our global network is designed to ensure a minimum of 99.9% uptime by
following four specific principles:
- avoiding incompatibility through standardization;
- utilizing redundant components;
- offering the ability to mirror client servers in separate EDCs; and
- implementing USiView, our global end-to-end network management system.
Our network is designed around Cisco networking hardware, which minimizes
multi-vendor integration and reduces the risks of hardware incompatibility and
implementation delay. Cisco has designated our network as a Cisco Powered
Network, indicating that Cisco has reviewed and approved the network design. Our
network architecture relies on redundancy of network hardware, facilities
infrastructure such as power supplies and telecommunications circuits, which
maximizes the network availability. In addition, we have redundant EDCs, GEMCs
and wide area networks connecting our EDCs. The wide-area network connection can
be used to dynamically mirror or provide a duplicate site for each client at an
alternative EDC location. This mirroring feature protects the site from downtime
resulting from catastrophic failure at a specific
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geographic location. For clients requiring real time disaster recovery, we use
storage arrays that enable real time data mirroring and can be designed to
maintain the integrity of data to within minutes.
The GEMC staff manages and monitors the network systems environment,
telecommunications hardware and data content servers in all of our EDCs, both
domestic and international, using USiView, our global network operations
technology, an end-to-end network management platform. USiView consists of an
integrated suite of scalable software tools that allow the GEMC staff to
proactively monitor systems-level events, processes and thresholds. USiView is
the foundation of our systems and operations management strategy, providing us
with:
- a unified configuration and change management method;
- an event correlation facility that collects, processes and responds to
management event information from a variety of sources; and
- a central repository for inventory and asset management information.
Fast response time
In order to facilitate fast response times, we have designed our
PriorityPeering network to avoid congestion areas on the Internet and have
specifically designed our primary GEMC to support our integrated network. We
seek to avoid the known Internet congestion points at the Metro Area Exchanges
(MAEs) and at the network access points (NAPs). In order to bypass the MAEs and
NAPs, our network in North America connects directly with eight major Internet
Service Providers' backbones, which carry about 85% of all the traffic on the
Internet today. Client data is routed directly over an ISP's network to our
network, bypassing congested public exchange points.
Network security
Each EDC features multiple levels of security to isolate private
information from public information. Private network infrastructure is
physically isolated with cabling, switches and routers separately maintained
from the hardware for the public network infrastructure. In addition, access to
the EDCs and GEMCs is restricted to authorized personnel by hand scan readers,
which also monitor and record entrances and departures. The public network and
the private network have minimal electronic or logical interconnection. The
network also includes firewall products that enforce data security and
policy-based routing for clients who prefer secure access to server resources.
We believe that these measures ensure complete separation and security between
its public and private networks.
STRATEGIC SOFTWARE VENDOR RELATIONSHIPS
In developing our iMAP solutions, we have formed relationships with some of
the market-leading software providers whose applications support critical
business processes. These application providers include BroadVision, Ariba,
Siebel, Lawson, PeopleSoft, and Microsoft. We believe that we have proven to be
an attractive partner for these software companies because of our strategy to
deliver integrated solutions to the Global 1000 and middle market enterprises in
a cost-effective service model. Each of our software agreements is unique, but
most allow us to deploy packaged application software as a service without the
need to establish a separate licensing arrangement for each client. The
agreements also generally include co-marketing, specialized product training and
preferred pricing on the licenses to the software. We plan to enter into
additional agreements with other software vendors over time.
Each of our key application software relationships is described below.
BroadVision. We have agreed with BroadVision to offer BroadVision's
e-commerce application as an iMAP solution. BroadVision's e-commerce application
has been adopted by enterprises across a broad range of industries. The
agreement with BroadVision allows us to offer a robust set of e-commerce
solutions for business-to-business and business-to-consumer commerce.
BroadVision has named us as its first certified e-commerce Application Service
Provider worldwide.
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Our agreement with BroadVision allows for attractive discounts on licenses.
Our arrangement with BroadVision also provides for flexible use of licenses
worldwide, sharing of development methodology, technical support, joint sales
activity and co-marketing. We maintain iMAP solutions engineers, trained and
certified on BroadVision applications, in nine major metropolitan areas.
Ariba. Ariba is a leading provider of intranet- and Internet-based
business-to-business electronic commerce solutions. The company's products
efficiently connect requestors to approvers and buyers to suppliers to deliver
an automated solution for improving the acquisition and management of the goods
and services required to operate a company.
Our comprehensive partnership with Ariba includes product development,
application implementation and management services, as well as cooperative sales
and marketing. Under terms of the agreement, USi is a preferred ASP for the
Ariba B2B commerce platform.
Siebel. Siebel is the recognized leader in providing enterprise
relationship management eBusiness applications. Siebel eBusiness Applications
enable organizations to create a single source of customer information that
makes it easier to sell to, market to, and service customers across multiple
channels, including the Web, call centers, field resellers, retail and dealer
networks. We have entered into an agreement with SiebelNet, Inc., a wholly owned
subsidiary of Siebel Systems, Inc., pursuant to which we serve as the exclusive
application service provider of Siebel enterprise relationship management
applications for customers of SiebelNet that are headquartered in North America.
Under this agreement, SiebelNet pays us a monthly fee for services including
ready-to-service hardware, network connectivity and client support.
Our agreement with Siebel establishes a joint program in which the Siebel
sales force will offer outsourcing as a product option. While Siebel, in most
instances, retains control of the application licensing, we implement the
application in our EDCs, provide on-going management and support, and provide
our consulting and implementation services. Enterprise relationship management
opportunities identified by our sales force are handled in the same manner. In
return for the exclusivity of this relationship, we have agreed not to offer any
competing enterprise relationship management applications as part of our iMAP
solutions. The agreement mandates joint marketing programs, joint oversight of,
and agreement on, the program to sell enterprise relationship management
application outsourcing services, and commissioning of both Siebel's and our
sales representatives participating in each sale.
We have extended our strategic partnership with Siebel Systems, Inc., to
offer Siebel eBusiness 2000, Mid-Market Edition, a powerful suite of e-business
applications that automate the sales marketing and service functions of small to
mid-sized businesses. USi's Siebel eBusiness 2000 Mid-Market offering is focused
on providing mid-tier companies with Siebel business applications functionality
over secure Internet and dedicated network connections, hosted and managed out
of USi's EDCs. Additionally, USi provides as a free download from its web site
Siebel Sales, a single user sales marketing solution.
Lawson. Lawson is an established leader in the enterprise resource
planning software industry and one of the pioneers of fully Internet-enabling
its software products. Lawson is also a recognized leader in selling its
enterprise applications on a worldwide basis. Lawson's product functionality
includes human resources, financial management, supply chain, collaborative
commerce, enterprise budgeting and procurement. Lawson has selected USi as a
global Application Service Provider.
Our agreement with Lawson provides that qualified new ASP leads identified
by Lawson will be referred to USi for hosting and application management. ASP
leads identified by USi or Lawson will be jointly marketed and quoted. USi has
committed to provide marketing support and resources for our Lawson offering.
The term of the Lawson agreement is one year, and will renew annually for up to
five years unless either party provides notice of termination prior to the end
of any given year. In October 1999, we purchased the assets of Conklin and
Conklin, Inc. and in August 2000, we purchased EnableVision, LLC, both of which
are comprehensive providers of Lawson financial and human resources system
implementation services and certified resellers of Lawson software licenses.
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PeopleSoft. We have agreed with PeopleSoft to offer PeopleSoft human
resource and core financial applications as iMAP solutions. PeopleSoft is an
established leader in the enterprise resource planning software industry and the
recognized leader in human resource management solutions. We are one of 13
PeopleSoft Application Service Providers.
Our agreement with PeopleSoft provides that opportunities identified by our
sales force be jointly marketed and quoted. Opportunities identified by the
PeopleSoft sales force may be jointly marketed and quoted with us. Customers who
elect outsourcing through us will purchase our iMAP solutions. The agreement
also provides for the sharing of rapid deployment methodologies, complete
software support, the ability to joint market products and services, shared
visibility at industry events, sharing of sales leads and joint training
efforts.
Microsoft. We have agreed with Microsoft to offer Microsoft's Exchange and
Site Server products as iMAP solutions. Microsoft Exchange is the recognized
leader in messaging and collaboration management solutions. Microsoft Site
Server is a leading e-commerce platform.
Our multi-year Exchange agreement with Microsoft grants us the right to
distribute the Exchange software as part of our iMAP solution on a pay-per-user
licensing fee basis. Under our other licensing agreement with Microsoft we
implement, host and manage e-commerce solutions based on Microsoft Site Server.
SALES AND MARKETING
We offer our products and services through a direct sales organization
based in the U.S. Each sales representative is responsible for a limited number
of client relationships. We believe this approach enables our sales
representatives to understand each client's specific business needs thoroughly
and to provide top quality ongoing support. We currently have 49 field sales
representatives located throughout the U.S. We also have a dedicated team of
sales engineers and regional business development resources to assist the field
sales team. We intend to expand our sales engineering and business development
resources into all major U.S. markets.
Our sales teams target enterprises based in the U.S. Our sales strategy
emphasizes that iMAP solutions enable clients to avoid extensive initial capital
outlays, maintain focus on their core businesses, reduce technical and
integration risks and shorten implementation time for software applications.
We have developed programs to attract and retain high quality, motivated
sales representatives that have the technical skills and consultative selling
experience necessary to sell our iMAP solutions. In addition, our acquisitions
have augmented our sales and technical team and have created opportunities for
more rapid market penetration in their geographic region and access to
established business relationships for cross-selling.
We have established a marketing communications organization that is
responsible for the branding and marketing of all our iMAP solutions. The
marketing organization is responsible for all new service launches to ensure
both internal execution and marketplace acceptance. The marketing organization
has developed cooperative marketing and trade show participation programs in
conjunction with our strategic software and hardware partners. Our marketing
organization also has business development resources which are dedicated to
increasing our sales efforts with our strategic partners.
CLIENT CARE
A central element of the iMAP solution is a high level of responsive
personalized service, referred to as client care. Through our client care
process, a specific Engagement Owner is assigned to each client and support
teams are designated to back up the Engagement Owner. This structure is designed
to ensure service is available twenty-four hours a day, seven days a week.
Assigned support teams comprise senior client support specialists, network
engineers, and packaged application engineers. The teams have further support
from a group of product-specific application engineers who are trained in the
specific software applications that we offer.
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CLIENTS
We target primarily North American-based enterprises and divisions of
larger multinational organizations. We believe that these organizations will
gain the most competitive advantage from iMAP solutions and that they provide
the greatest opportunity for the outsourcing of information technology
operations. Currently, business software application vendors are providing
software predominantly to larger organizations. Historically, attempts to market
to middle market enterprises have generally been unsuccessful due to the high
up-front costs to obtain the required software, the long lead time to integrate
the software into the specific business process and the competition for and
shortage of IT resources in middle market companies.
We currently have clients for both our iMAP offerings and traditional
information technology services. Revenues from iMAP services comprise 81% of
total revenue for the six months ended June 30, 2000. As of June 30, 2000 we had
187 signed contracts with 146 clients for our iMAP services, representing over
$320.0 million in expected contract revenue (assuming payments over the full
contract terms) and approximately $87.1 million of 12 month backlog, which we
define as revenue under contract expected to be recognized in the next 12
months. As of September 30, 2000, selected clients of ours include:
American Cancer Society
AT&T
Baltimore Sun Company
Blue Cross Blue Shield
College Board
CornerStone Brands
e-Courier
EMC Corp
Franklin Covey
GE Investment Distributors
GoldPoints.Com
Hershey Foods
HP Shopping Village
(hpshopping.com)
Kinko's.com
Knoll Pharmaceutical
Leapsource
Legg Mason Wood Walker
Liberty Financial Companies
LHS Communications
Oxygen Media
Providian Bancorp Services
PSDI
Rohm and Haas Company
Sunburst Hospitality
The Motley Fool
The Street.com
Triangle Pharmaceutical
U S WEST
WoodMackenzie
XL Capital
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COMPETITION
The market for Internet-related services is extremely competitive. We
anticipate that competition will continue to intensify as the use of the
Internet grows. The tremendous growth and potential market size of the Internet
market have attracted many start-ups as well as extensions of existing
businesses from different industries. In the market for Internet-enabled
application software and network solutions, we compete on the basis of
performance, price, software functionality and overall network design. While our
competition comes from many industry segments, we believe that no single segment
provides the integrated, single-source solution that we provide.
Our current and potential competitors include Applications Service
Providers and companies focused on the application hosting business such as
Applicast, Breakaway Solutions, Corio, Cyber.Solutions, Interliant, and
Interpath; Web hosting companies such as Exodus, Digex, Navisite, and XO
(Nextlink/Concentric); enterprise applications vendors, such as Oracle,
PeopleSoft, and SAP; business Internet Service Providers, such as MCI WorldCom,
PSINet and Verio/NTT; telecommunications companies, such as AT&T and GTE; and
systems integrators, such as Andersen Consulting, EDS, IBM and KPMG. While we
believe that our network of proprietary EDCs together with our level of service,
support and targeted business focus distinguish us from these competitors, some
of these competitors have significantly greater market presence, brand
recognition, and financial, technical and personnel resources than we do, and
have extensive coast-to-coast Internet networks.
We compete with national, regional and local commercial systems integrators
who bundle their services with software and hardware providers and perform a
facilities management outsourcing role for the customer. These competitors
generally have greater name recognition or more extensive experience than we do.
Andersen Consulting, EDS and PricewaterhouseCoopers, among others, provide
professional consulting services in the use and integration of software
applications in single-project client engagements. Large systems integrators may
establish strategic relationships with software vendors to offer services
similar to our iMAP offerings. We expect that regional systems integrators are
likely to compete with us based on local customer awareness and relationships
with hardware and software companies. Additionally, regional systems integrators
may align themselves with ISPs to offer complex Web site management combined
with professional implementation services.
We compete with hardware and software companies in providing packaged
application solutions as well as network infrastructure. In order to build
market share, both hardware and software providers may establish strategic
relationships to enhance their service offerings. IBM currently provides
applications outsourcing for its Lotus Notes products and other non-IBM software
applications. J.D. Edwards & Company, a developer of enterprise resource
planning software, is offering its software in an outsourced model. Oracle is
offering Oracle Business Online, a hosted enterprise resource planning
application software solution. SAP has formed an outsourcing organization which
is developing key partnerships with leading consulting firms to offer SAP
software. We believe that additional hardware and software providers,
potentially including our strategic partners, may enter the outsourcing market
in the future.
All of the major long distance companies, including AT&T, MCI WorldCom,
Qwest Communications and Sprint, offer Internet access services. Qwest has
partnered with KPMG to deliver hosted enterprise resource planning solutions
over the Internet, and Qwest has acquired our customer and stockholder, U S
WEST. In order to address the Internet connectivity requirements of the current
business customers of long distance and local carriers, we believe that there is
a move toward horizontal integration through acquisitions of, joint ventures
with, and purchasing connectivity from, ISPs. Accordingly, we expect that we
will experience increased competition from the traditional telecommunications
carriers. Many of these telecommunications carriers, in addition to their
substantially greater network coverage, market presence, and financial,
technical and personnel resources, also have large existing commercial customer
bases. We believe that our local presence, our strong technical and
data-oriented sales force and our offering of branded software applications are
important features distinguishing us from the telecommunications companies.
It is possible that new competitors or alliances may emerge and gain market
share. Such competitors could materially affect our ability to obtain new
contracts. Further, competitive pressure could require us to reduce the price of
our products and services thus affecting our business, financial condition and
results from operations.
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PLAN OF DISTRIBUTION
We may offer the common stock:
- directly to purchasers;
- to or through underwriters;
- through dealers, agents or institutional investors; or
- through a combination of such methods.
Regardless of the method used to sell the common stock, we will provide a
prospectus supplement that will disclose:
- the identity of any underwriters, dealers, agents or investors who
purchase the common stock;
- the material terms of the distribution, including the number of shares
sold and the consideration paid;
- the amount of any compensation, discounts or commissions to be received
by the underwriters, dealers or agents;
- the terms of any indemnification provisions, including indemnification
from liabilities under the federal securities laws; and
- the nature of any transaction by an underwriter, dealer or agent during
the offering that is intended to stabilize or maintain the market price
of the common stock.
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EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and the consolidated financial statements of I.I.T.
Holdings, Inc. and subsidiaries included in our Annual Report on Form 10-K for
the year ended December 31, 1999, as set forth in their reports, which are
incorporated by reference in this prospectus and elsewhere in the registration
statement. These financial statements are incorporated by reference in reliance
on Ernst & Young LLP's reports, given on their authority as experts in
accounting and auditing.
LEGAL MATTERS
The validity of the issuance of common stock offered in this prospectus
will be passed upon for USi by Latham & Watkins, Washington, D.C. Partners of
Latham & Watkins own in total shares of our common stock representing less than
1% of the total number of shares of common stock outstanding.
INCORPORATION OF DOCUMENTS BY REFERENCE
The Commission allows us to incorporate by reference the information
contained in documents that we file with them. This means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus. Information in this prospectus supercedes information incorporated
by reference that we filed with the Commission prior to the date of this
prospectus, while information that we file later with the Commission will
automatically update and supercede this information. We incorporate by reference
the documents listed below and any future filings we will make with the
Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934:
- Our Annual Report on Form 10-K for the fiscal year ended December 31,
1999, filed on March 29, 2000, including all material incorporated by
reference therein;
- Our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
2000, filed on August 14, 2000, including all material incorporated by
reference therein;
- Our Current Reports on Form 8-K, dated February 18, 2000, March 6, 2000,
April 24, 2000 and July 26, 2000; and
- The description of our common stock contained in our registration
statement on Form 8-A filed on April 8, 1999.
WHERE YOU CAN FIND MORE INFORMATION
We are currently subject to the periodic reporting and other requirements
of the Securities Exchange Act of 1934. You may read and copy any document we
file or incorporate by reference into this prospectus at the Commission's public
reference rooms located at 450 5th Street, N.W., Washington, D.C. 20549. Please
call the Commission at 1-800-SEC-0330 for further information on the public
reference rooms. Our Commission filings are also available to the public from
commercial document retrieval services and at the web site maintained by the
Commission at: http://www.sec.gov. Our common stock trades on The Nasdaq
National Market.
You may request a copy of any of this information, at no cost, by writing
or telephoning us at the following address or phone number:
USinternetworking, Inc.
One USi Plaza
Annapolis, Maryland 21401-7478
(410) 897-4400
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USINTERNETWORKING, INC.
[USI LOGO]
30
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate of the amount of fees and expenses to
be incurred in connection with the issuance and distribution of the Notes and
common stock registered under this prospectus:
SEC Registration Fee $ 39,600
Printing and Mailing Costs 10,000
Legal Fees and Expenses 50,000
Accounting Fees and Expenses 10,000
Miscellaneous expenses 5,000
--------
Total $ 114,600
========
ITEM 15. LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 145 of the General Corporation Law of the State of Delaware
("Section 145") permits a Delaware corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee, or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee, or agent of another corporation, partnership,
joint venture, trust, or other enterprise, against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit, or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful.
In the case of an action by or in the right of the corporation, Section 145
permits the corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interest of the corporation. No indemnification may be made in respect of any
claim, issue, or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
To the extent that a present or former director or officer of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in the preceding two paragraphs, Section 145 requires
that such person be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
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Section 145 provides that expenses (including attorneys' fees) incurred by
an officer or director in defending any civil, criminal, administrative, or
investigative action, suit or proceeding may be paid the corporation in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in Section 145.
The Company's Certificate provides that an officer or director of the
Company will not be personally liable to the Company or its stockholders for
monetary damages for any breach of his fiduciary duty as an officer or director,
except in certain cases where liability is mandated by the DGCL. The provision
has no effect on any non-monetary remedies that may be available to the Company
or its stockholders, nor does it relieve the Company or its officers or
directors from compliance with federal or state securities laws. The Certificate
also generally provides that the Company shall indemnify, to the fullest extent
permitted by law, any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit, investigation,
administrative hearing or any other proceeding (each, a "Proceeding") by reason
of the fact that he is or was a director or officer of the Company, or is or was
serving at the request of the Company as a director, officer, employee or agent
of another entity, against expenses incurred by him in connection with such
Proceeding. An officer or director shall not be entitled to indemnification by
the Company if (i) the officer or director did not act in good faith and in a
manner reasonably believed to be in, or not opposed to, the best interests of
the Company, or (ii) with respect to any criminal action or proceeding, the
officer or director had reasonable cause to believe his conduct was unlawful.
The Bylaws of the Company provide that it shall indemnify any person who is
made a party to any threatened, pending or completed action, suit or proceeding
by reason of the fact that he or she is or was a director or officer of the
Company, and may indemnify any employee or agent of the Company in such
circumstances, against expenses, including attorneys fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding. No indemnification may be
provided for any person who shall have been finally adjudicated not to have
acted honestly or in the reasonable belief that his or her action was in or not
opposed to the best interests of the Company or who had reasonable cause to
believe that his or her conduct was unlawful. Indemnification must be provided
to any director, officer, employee or agent of the Company to the extent such
person has been successful, on the merits or otherwise, in defense of any action
or claim described above. Any indemnification under this provision of the
Bylaws, unless required under the Bylaws or ordered by a court, can be made only
as authorized in each specific case upon a determination by a majority of
disinterested directors or by independent legal counsel or by the stockholders
that such indemnification is appropriate under the standard set forth in the
preceding sentence.
ITEM 16. EXHIBITS
(a) Exhibits
EXHIBIT
NO. DESCRIPTION
------- -----------
4.1(a) Second Amended and Restated Certificate of Incorporation of
the Company.
4.2(a) Amended and Restated Bylaws of the Company.
4.3(c) First Amendment to the Company's Second Amended and Restated
Certificate of Incorporation.
4.4(b) Specimen Certificate for shares of Common Stock, $.001 par
value, of the Company.
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5.1(*) Opinion of Latham & Watkins with respect to the validity of
the Common Stock.
23.1(*) Consent of Ernst & Young LLP, independent auditors
(regarding the Company's financial statements).
23.2(#) Consent of Bassan & Associados S.C., independent
auditors (regarding IIT financial statements).
23.3(*) Consent of Ernst & Young LLP, independent auditors
(regarding IIT financial statements).
23.5(*) Consent of Latham & Watkins (included in Exhibit 5.1).
24.1(*) Powers of Attorney (included on signature page herein and as
previously filed).
* Filed herewith.
# To be filed by amendment.
(a) Incorporated by reference to the Company's Registration Statement on Form
S-3, as amended (Reg. No. 333-93299).
(b) Incorporated by reference to the Company's Registration Statement on Form
S-1, as amended (Reg. No. 333-70717)
(c) Incorporated by reference to Company's Registration's Statement on Form
S-1, as amended (Reg. No. 333-95543).
(b) Schedules
All schedules have been omitted because they are not required or because
the required information is given in the Consolidated Financial Statements or
Notes thereto.
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ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
- To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement. However, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii)To include any material information about the plan of
distribution not previously disclosed in this registration
statement or any material change to this information in this
registration statement.
However, subparagraphs (i) and (ii) do not apply if the information
required to be included in a post-effective amendment by those paragraphs
is contained in the periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
- That for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the Securities offered
herein, and the offering of such Securities at that time shall be
deemed to be the initial bona fide offering thereof.
- To remove from registration by means of a post-effective amendment any
of the Securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby further undertakes that, for
the purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in this registration statement shall be deemed to be a new registration
statement relating to the Securities offered herein, and the offering of such
Securities at that time shall be deemed to be the initial bona fide offering
thereof.
As far as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant under the provisions of this registration statement,
or otherwise (other than insurance), the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in such Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the Securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in such Act and
will be governed by the final adjudication of such issue.
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SIGNATURES
Each person whose signature appears below hereby appoints Andrew A. Stern and
William T. Price, and each of them, his true and lawful attorneys-in-fact and
agents with full power of substitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments thereto
(including post-effective amendments) to this Registration Statement, and to
sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or his or their
substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Pursuant to the requirements of the Securities Act, the registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-3, and has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Annapolis, State of Maryland on October 12, 2000.
USINETERNETWORKING, INC.
By: /s/ ANDREW A. STERN
------------------------------------
Andrew A. Stern
Chief Executive Officer
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Pursuant to the requirements of the Securities Act of 1933, the
registration statement has been signed below on October 12, 2000 by the
following persons in the capacities indicated.
SIGNATURE TITLE
--------- -----
/s/ CHRISTOPHER R. MCCLEARY Chairman of the Board
- ---------------------------
Christopher R. McCleary
/s/ ANDREW A. STERN Chief Executive Officer and Director
- ----------------------------
Andrew A. Stern
/s/ STEPHEN E. MCMANUS President -E-Commerce Business Unit and Director
- ----------------------------
Stephen E. McManus
/s/ MARK J. MCENEANEY Senior Vice President and Chief Financial Officer
- ----------------------------
Mark J. McEneaney
Director
- ----------------------------
R. Dean Meiszer
Director
- --------------------------
Benjamin Diesbach
/s/ RAY A. ROTHROCK Director
- --------------------------
Ray A. Rothrock
/s/ FRANK A. ADAMS Director
- --------------------------
Frank A. Adams
/s/ WILLIAM F. EARTHMAN Director
- ------------------------
William F. Earthman
/s/ JOHN H. WYANT Director
- ----------------------
John H. Wyant
Director
- ---------------------
Joseph R. Zell
/s/ MICHAEL C. BROOKS Director
- ---------------------
Michael C. Brooks
Director
- ---------------------
David J. Poulin
Director
- ---------------------
Cathy M. Brienza
Director
- ---------------------
Kenneth E. Sichau
II-6
36
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
------- -----------
4.1(a) Second Amended and Restated Certificate of Incorporation of
the Company.
4.2(a) Amended and Restated Bylaws of the Company.
4.3(c) First Amendment to the Company's Second Amended and Restated
Certificate of Incorporation.
4.4(b) Specimen Certificate for shares of Common Stock, $.001 par
value, of the Company.
5.1(*) Opinion of Latham & Watkins with respect to the validity of
the Common Stock.
23.1(*) Consent of Ernst & Young LLP, independent auditors
(regarding the Company's financial statements).
23.2(#) Consent of Bassan & Associados S.C., independent
auditors (regarding IIT financial statements).
23.3(*) Consent of Ernst & Young LLP, independent auditors
(regarding IIT financial statements).
23.5(*) Consent of Latham & Watkins (included in Exhibit 5.1).
24.1(*) Powers of Attorney (included on signature page herein and as
previously filed).
* Filed herewith.
# To be filed by amendment.
(a) Incorporated by reference to the Company's Registration Statement on Form
S-3, as amended (Reg. No. 333-93299).
(b) Incorporated by reference to the Company's Registration Statement on Form
S-1, as amended (Reg. No. 333-70717)
(c) Incorporated by reference to Company's Registration's Statement on Form
S-1, as amended (Reg. No. 333-95543).