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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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(Mark One) _X__ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30,
1996
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934 For the transition period from ______ to ______.
Commission File Number: 0-28100
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AXENT TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 87-0393420
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2400 Research Boulevard
Suite 200
Rockville, Maryland 20850
(Address of principal executive offices)
(301) 258-5043
(Registrant's telephone number including area code)
----------------
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes___X___ No______
As of October 31, 1996, there were 10,096,874 shares outstanding of the
Registrant's Common Stock, par value $.02 per share.
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<PAGE>
<TABLE>
<CAPTION>
AXENT TECHNOLOGIES, INC.
TABLE OF CONTENTS
<S> <C>
PART I: FINANCIAL INFORMATION..................................................................1
ITEM 1: FINANCIAL STATEMENTS................................................................1
Condensed Consolidated Balance Sheets
as of September 30, 1996, and December 31, 1995........................................2
Condensed Consolidated Statements of Operations
for the Three and Nine Months Ended September 30, 1996 and 1995........................3
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1996 and 1995..................................4
Notes to Condensed Consolidated Financial Statements...................................5
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS....................................................................8
PART II: OTHER INFORMATION....................................................................16
ITEM 6: EXHIBITS...........................................................................16
SIGNATURES.....................................................................................18
</TABLE>
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
The financial statements set forth below for the three month and nine month
periods ended September 30, 1996 and 1995 are unaudited, and have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations.
These financial statements should be read in conjunction with the latest audited
consolidated financial statements and the notes thereto for the fiscal year
ended December 31, 1995, which are included in the Company's Amendment No. 3 to
its registration statement on Form S-1 filed on April 22, 1996 (File No.
333-01368).
<PAGE>
<TABLE>
<CAPTION>
AXENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
.........
<S> <C> <C>
September 30, 1996 December 31,
(unaudited) 1995
--------------------- ------------------
ASSETS
Current assets:
Cash and cash equivalents $ 15,660 $ 6,083
Short-term investments 17,316 ---
Accounts receivable, net 4,337 5,071
Prepaid expenses and other current assets 882 338
--------------------- ------------------
Total current assets 38,195 11,492
--------------------- ------------------
Property and equipment, net 1,430 1,097
Other assets 14 57
--------------------- ------------------
Total assets $ 39,639 $ 12,646
===================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 3,906 $ 5,035
Note payable 826 900
Deferred revenue 2,357 2,290
Net identifiable liabilities from discontinued operations 458 1,319
--------------------- ------------------
Total current liabilities 7,547 9,544
--------------------- ------------------
Long-term deferred revenue, net of current portion 69 126
--------------------- ------------------
Total liabilities 7,616 9,670
--------------------- ------------------
Stockholders' equity:
Common stock, par value $ 0.02: 10,007,489 and 7,953,464 shares
issued, respectively 200 159
Additional paid-in capital 47,324 22,133
Accumulated deficit (15,406) (19,277)
Cumulative currency translation adjustments (95) (39)
--------------------- ------------------
Total stockholders' equity 32,023 2,976
--------------------- ------------------
Total liabilities and stockholders' equity $ 39,639 $ 12,646
===================== ==================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
<TABLE>
<CAPTION>
AXENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
(unaudited)
<S> <C> <C> <C> <C>
For the Three Months Ended For the Nine Months
September 30, Ended September 30,
------------------------------ -------------------------------
1996 1995 1996 1995
-------------- ------------ ------------- -------------
Net Revenues:
Product licenses $ 3,124 $ 1,547 $ 9,727 $ 5,785
Maintenance and support services 957 827 2,673 2,486
Consulting services 871 413 1,959 759
-------------- ------------ ------------ ------------
Total net revenues 4,952 2,787 14,359 9,030
-------------- ------------ ------------- -------------
Cost of net revenues 456 421 1,319 1,298
-------------- ------------ ------------- -------------
Gross profit 4,496 2,366 13,040 7,732
Operating expenses:
Sales and marketing 2,891 2,689 8,672 8,491
Research and development 1,253 951 3,510 2,928
General and administrative 620 566 1,772 1,676
-------------- ------------ ------------ ------------
Total operating expenses 4,764 4,206 13,954 13,095
-------------- ------------ ------------- -------------
Income (loss) from continuing
operations before royalties, interest
and taxes (268) (1,840) (914) (5,363)
-------------- ------------ ------------- -------------
Royalty income 794 --- 2,398 ---
Interest income (expense) 339 (34) 668 (103)
Income tax (provision) benefit (365) 830 (425) 2,422
-------------- ------------ ------------- -------------
Income (loss) from continuing
operations 500 (1,044) 1,727 (3,044)
Income from discontinued operations 591 1,338 2,144 3,970
-------------- ------------ ------------- -------------
Net income $ 1,091 $ 294 $ 3,871 $ 926
=============== ============ ============= =============
Net income (loss) per common share:
Continuing operations $ 0.05 $ (0.12) $ 0.17 $ (0.33)
Discontinued operations 0.05 0.15 0.21 0.43
-------------- ------------ ------------- -------------
Net income per common share $ 0.10 $ 0.03 $ 0.38 $ 0.10
============== ============ ============= =============
Weighted average number of
common shares 10,886 9,126 10,302 9,126
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
<TABLE>
<CAPTION>
AXENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
<S> <C> <C>
For the Nine Months Ended
September 30,
----------------------------
1996 1995
------------ ------------
CASH INFLOWS (OUTFLOWS)
Operating activities:
Net income (loss) from continuing operations $ 1,727 $ (3,044)
Depreciation and amortization 443 200
Change in assets and liabilities (1,371) (3,810)
------------ ------------
Net cash provided by (used in) continuing operations 799 (6,654)
Net cash provided by discontinued operations 750 6,978
------------ ------------
Net cash provided by operating activities 1,549 324
------------ ------------
Investing activities:
Capital expenditures (733) (767)
Payments for Datamedia Corporation acquisition (100) (895)
Purchases of short-term investments (17,316) --
Proceeds from sale of Helpdesk business 300 --
------------ ------------
Net cash used in continuing operations (17,849) (1,662)
Net cash provided by discontinued operations 701 1,354
------------ ------------
Net cash used in investing activities (17,148) (308)
------------ ------------
Financing activities:
Proceeds from initial public offering of common stock (net of costs
of $910,000) 25,132 --
Proceeds from issuance of common stock 100 --
------------ ------------
Net cash provided by financing activities 25,232 --
------------ ------------
Effect of exchange rate changes on cash (56) (494)
------------ ------------
Net increase (decrease) in cash and cash equivalents 9,577 (478)
Cash and cash equivalents, beginning of period $ 6,083 $ 6,612
============ ============
Cash and cash equivalents, end of period $ 15,660 $ 6,134
============ ============
</TABLE>
<PAGE>
AXENT TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Basis of Presentation
The accompanying condensed consolidated financial statements include the
accounts of AXENT Technologies, Inc. and its wholly owned subsidiaries
(collectively, the "Company" or "AXENT"). The Company develops, markets,
licenses and supports enterprise-wide information security solutions for
client/server computing environments and provides related services.
The accompanying unaudited condensed consolidated financial statements reflect
all the adjustments, consisting of normal recurring adjustments that in the
opinion of management, are necessary for a fair presentation of the results for
the interim periods presented. The results for the three month and nine months
ended September 30, 1996 may not necessarily be indicative of the results for
the entire year. The December 31, 1995 condensed consolidated balance sheet was
derived from audited financial statements as of the same date but does not
include all disclosures required by generally accepted accounting principles.
These financial statements should be read in conjunction with the Company's
annual audited financial statements for the year ended December 31, 1995, which
are included in Amendment No. 3 to the Company's registration statement on Form
S-1 that was filed with the Securities and Exchange Commission on April 22,
1996.
Short-Term Investments
At September 30, 1996, short-term investments which mature within one year and
consist primarily of certificates of deposit and government securities have been
categorized as available-for-sale and are recorded at fair value. Fair values
for available-for-sale securities are based on quoted market prices. The
estimated fair value of each investment approximates cost, and therefore there
are no unrealized gains or losses as of September 30, 1996.
Short-term investments as of September 30, 1996, consisted of the following:
Certificates of deposit $ 1,505
Government securities 15,811
===========
$ 17,316
===========
Product Acquisition
In August 1996, the Company entered into an agreement with a third party to
purchase a nonexclusive source code license for approximately $1,500,000.
Pursuant to this agreement, the Company will pay the third party (i) an
acquisition fee of $500,000, $300,000 due upon closing of the agreement and
$200,000 due upon acceptance of the source code and (ii) a royalty up to
$1,000,000 over a three year period based on the net revenues from the source
code license. The Company is obligated to make a $400,000 non-refundable
prepayment associated with the royalty upon acceptance of the source code.
During the third quarter ended September 1996, the Company paid $300,000 in
accordance with the agreement.
<PAGE>
Initial Public Offering
In February 1996, the Company filed a registration statement with the Securities
and Exchange Commission permitting the Company to sell 2,000,000 shares of its
common stock to the public. The registration statement also permitted certain
non-officer stockholders of the Company to sell up to 990,000 shares to the
public, including up to 390,000 shares to cover over-allotments. The
registration statement became effective on April 23, 1996. The initial public
offering resulted in proceeds to the Company of approximately $25.13 million,
net of approximately $3.46 million in underwriting fees and offering expenses.
The Company received no proceeds from the sale of shares by selling stockholders
in the initial public offering.
Discontinued Operations
In mid-1994 the Company made a strategic decision to focus its business on the
information security market and to divest itself of products and services
unrelated to such business. The following businesses have been divested by the
Company: (i) the storage management products business, which was sold in 1994
for cash, notes and the assumption of certain liabilities, (ii) the OpenVMS
utility software distribution business, which was conveyed to Raxco Software,
Inc. ("Raxco") in a spin-off effective December 31, 1995 and (iii) the Helpdesk
products business, which was sold in February 1996, for cash, a note, royalties
and the assumption of certain liabilities. The results of operations for these
divested businesses have been accounted for as discontinued operations in
accordance with Accounting Principles Bulletin No. 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions" ("APB
30").
Prior to the divestment of those businesses, the Company utilized centralized
systems for cash management, payroll, purchasing, distribution, employee benefit
plans, insurance and administrative services. As a result, substantially all of
the cash receipts of the Company and the discontinued operations were
commingled. Similarly, operating expenses, capital expenditures and other cash
outlays were centrally disbursed and charged directly or allocated to the
discontinued operations. In the opinion of management, the Company's methods for
allocating costs among the continued and discontinued operations are reasonable.
However, the historical results are not necessarily indicative of the costs that
would have been incurred by the Company had the divestments occurred prior to
the beginning of those periods.
In February 1996, the Company disposed of its Helpdesk operations for
approximately $2.0 million, consisting of an initial cash payment of $150,000, a
non-interest bearing note of $150,000, assumption of approximately $400,000 in
obligations and liabilities, and the payment of a royalty up to a maximum of
$1.3 million on future gross revenues from all Helpdesk product license and
maintenance fees. The Company transferred to the buyer the Helpdesk products and
the related fixed assets and customer base. The buyer assumed all of the
Company's obligations related to the Helpdesk products including obligations
related to sales, marketing, support and development employees, telephone
support obligations for the existing customers and the facility lease
obligations. The Company did not recognize a material gain associated with the
transaction. In June 1996, the Company received $150,000 in full payment of the
non-interest bearing note associated with the sale of the Helpdesk operations.
Income Tax
The Company files a consolidated federal income tax return in the U.S. with its
U.S. subsidiaries. Deferred income taxes have been established by each entity
based upon its temporary differences, the reversal of which will result in
taxable or deductible amounts in future years when the related asset or
liability is recovered or settled.
The Company recorded a tax benefit on the loss from continuing operations which
was substantially offset by a tax provision on the income from discontinued
operations at December 31, 1995. The Company also recorded a valuation allowance
against its deferred tax asset at December 31, 1995. For the nine months ended
September 30, 1996, the Company recorded a tax provision on the income from
continuing and discontinued operations. The effective tax rate for the nine
months ended September 30, 1996, differs from the federal statutory tax rate due
<PAGE>
to the carryforward benefit of net operating losses and the change in the
reserve for deferred tax assets. As of September 30, 1996, the Company has
general business credits of $200,000 expiring between 1997 and 2006. The Company
also has alternative minimum tax credits of approximately $200,000, which do not
expire.
Note Payable
The Company acquired Datamedia Corporation in 1994 for $5.0 million in cash and
notes. As of September 30, 1996, the remaining note payable to former Datamedia
stockholders included accrued interest of $104,000 and is due December 9, 1996.
Common Stock
In February 1996, the Company's Certificate of Incorporation was amended and
restated, which resulted in (among other things) an increase in the authorized
capitalization of the Company from 10,000,000 shares of common stock to
50,000,000 shares of common stock and 5,000,000 shares of preferred stock.
Stock Option Plan
In January 1996, the Company adopted the 1996 Stock Option Plan and the 1996
Directors' Stock Option Plan, providing for the issuance of up to 1,000,000 and
200,000 shares, respectively. Of the 1,000,000 shares provided in the 1996 Stock
Option Plan, options covering an aggregate of 274,500 and 26,400 shares were
issued in March 1996 and July 1996, respectively. In October 1996, the Company
issued 160,600 shares in accordance with the 1996 Stock Option Plan.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based Compensation" ("SFAS
123"). SFAS 123 allows companies which grant stock options a choice to either
continue the current accounting treatment under Accounting Principles Bulletin
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), or adopt
a new set of fair value accounting rules for recognizing compensation expense
related to stock awards. Companies continuing under APB 25 must measure option
values and disclose the pro forma effects that the new fair value accounting
would have on earnings, if recorded. The Company has determined that it will
continue the current accounting treatment under APB 25 and will provide pro
forma disclosures as of December 31, 1996 for the effect the new fair value
accounting rule would have on earnings, if adopted.
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements which involve risk and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Certain
Factors Affecting Future Performance", below, and the "Risk Factors" set forth
in the Company's Registration Statement on Form S-1 (File No. 333-01368).
Three Months Ended September 30, 1995 Compared to
Three Months Ended September 30, 1996
Net Revenues
The Company's net revenues from product licenses increased approximately 101%,
or $1.57 million, from $1.55 million for the three months ended September 30,
1995 to $3.12 million for the three months ended September 30, 1996. For those
periods in 1995 and 1996, net revenues from product licenses represented 56% and
63% of total net revenues, respectively. The increase in product license revenue
is primarily attributable to the expansion of the Company's product offerings,
with the introduction, general release and increased market acceptance of
additional products comprising the OmniGuard(TM) family of software products
throughout 1995, offset in part by a decrease in license revenues derived from
the Company's other (primarily OpenVMS) computer security software products.
OmniGuard/Intruder Alert(R), OmniGuard/Enterprise Access Control(R) for UNIX and
OmniGuard/Enterprise Access Control(R) for PCs were released commercially during
the second quarter of 1995.
The Company's net revenues from maintenance and support services increased
approximately 16%, or $130,000, from $827,000 for the three months ended
September 30, 1995, to $957,000 for the three months ended September 30, 1996.
The increase in net revenues from maintenance and support services is
attributable to a larger base of customers on maintenance agreements resulting
from the increased licensing of the Company's OmniGuard products, offset in part
by a decrease in maintenance revenues derived from the Company's other
(primarily Open VMS) computer security software products. For those periods in
1995 and 1996, net revenues from maintenance and support services represented
30% and 19% of total net revenues, respectively.
The Company's net revenues from consulting services increased approximately
111%, or $458,000, from $413,000 for the three months ended September 30, 1995,
to $871,000 for the three months ended September 30, 1996. The increase in
consulting service revenues is attributable to an increase in the size and
number of engagements associated with licensing of the Company's OmniGuard
products. For those periods in 1995 and 1996, net revenues from consulting
services represented 14% and 18% of total net revenues, respectively.
The Company currently believes that period-to-period comparisons of net revenues
from the licensing of different software products and the provision of related
services are not necessarily meaningful as an indication of future performance.
Revenues derived from North American and from international operations as a
percent of total net revenues were 78% and 22%, respectively, for the three
months ended September 30, 1996, as compared to 71% and 29%, respectively, for
the same period of 1995.
Cost of Net Revenues
The Company's cost of net revenues includes cost of media, product packaging,
documentation and other production costs, amortization of purchased software
costs, product royalties, and direct and indirect costs of
<PAGE>
providing training, technical support and consulting services to the Company's
customers. Cost of net revenues increased approximately 8%, or $35,000 from
$421,000 for the three months ended September 30, 1995, to $456,000 for the
three months ended September 30, 1996. For those periods in 1995 and 1996, cost
of net revenues represented 15% and 9% of net revenues, respectively. The
increase in cost of net revenues is directly related to the increased number of
consulting services engagements and an increase in staff of the Company's
customer support and services operations necessary to support a larger customer
base and the additional products offered by the Company. The increase in the
cost of net revenues is offset in part by the following: 1) an increase in
production efficiency due to the consolidation of worldwide production in 1996;
2) a change in product media to CD-ROM resulting in a decrease in production and
shipping expenses; and 3) an increase in the average size of the transactions
recorded in the three months ended September 30, 1996 compared to the same three
month period of 1995. Cost of net revenues as a percentage of net revenues may
fluctuate from period to period due to a change in product mix, a change in the
number or size of transactions recorded in a quarter or an increase or decrease
in licenses of royalty bearing products.
Sales and Marketing
Sales and marketing expenses consist primarily of personnel costs, including
commissions, salaries, benefits and bonuses, travel, telephone, costs of
advertising, public relations seminars and trade shows. Sales and marketing
expenses increased 7%, or $200,000, from $2.69 million for the three months
ended September 30, 1995, to $2.89 million for the three months ended September
30, 1996. For those periods in 1995 and 1996, sales and marketing expenses
represented 96% and 58% of total net revenues, respectively. The increase in
dollar amount was due primarily to additional investments in the Company's US
and UK operations, increased commissions associated with the additional revenues
and increased investment in indirect distribution, offset in part by the closing
of the Company's German and Swiss direct offices during the fourth quarter of
1995. The decrease in sales and marketing expense as a percent of total net
revenues is attributable to the increase in total net revenues for the quarter
ended September 30, 1996.
Research and Development
Research and development expenses consist primarily of personnel costs,
including salaries, benefits and bonuses, travel and other personnel-related
expenses of the employees engaged in ongoing research and development projects
and third party development contracts. Costs related to research and development
of products generally are expensed as incurred. Research and development
expenses increased 31%, or $299,000, from $951,000 for the three months ended
September 30, 1995, to $1.25 million for the three months ended September 30,
1996. For those periods in 1995 and 1996, research and development expenses
represented 34% and 25% of total net revenues, respectively. The increase in
dollar amount resulted primarily from the addition of internal and third-party
contract developers needed to develop, maintain and enhance the OmniGuard family
of software products, including the Company's OmniGuard/Enterprise Resource
Manger(TM) product currently under development. The decrease in research and
development expenses as a percentage of total net revenues was due primarily to
the increase in total net revenues. The Company currently anticipates that
research and development expenses may increase in absolute dollars as the
Company continues to commit substantial resources to research and development in
future periods.
General and Administrative
General and administrative expenses consist primarily of personnel costs,
including salaries, benefits and bonuses and related costs for management,
finance and accounting, legal and other professional services. General and
administrative expenses increased 10%, or $54,000 from $566,000 for the three
months ended September 30, 1995, to $620,000 for the three months ended
September 30, 1996. For those periods in 1995 and 1996 general and
administrative expenses represented 20% and 13% of total net revenues,
respectively. The decrease in general and administrative expenses as a
percentage of total net revenues was due primarily to the increase in total net
revenues.
In 1996, certain general and administrative expenses are offset in part by the
Administrative Services Agreement between the Company and Raxco. That agreement
provides for Raxco to pay the Company on an annual basis, the greater of
$750,000 or the actual cost of providing certain operational and system support
services including
<PAGE>
bookkeeping, personnel processing, administrative support, facilities management
and product packaging and mailing. For the three month period ended September
30, 1996, the Company received $188,000 from Raxco under the Administrative
Services Agreement.
Royalty Income
For the three months ended September 30, 1996, the Company recorded royalty
income of $794,000 pursuant to the Exclusive Distributor License Agreement with
Raxco. That agreement provides for payment by Raxco to the Company of the
greater of (i) a 30% royalty on license and services fees related to the OpenVMS
utility software products owned by the Company and marketed exclusively by Raxco
or (ii) $2.0 million for 1996, $1.5 million for 1997 and $1.0 million for 1998,
and a 30% royalty thereafter for two additional years.
During the three months ended September 30, 1996, Raxco reported to the Company
gross revenues of approximately $2.70 million, which included approximately
$2.65 million of revenues from licensing of the Company's OpenVMS utility
products. As of September 30, 1996, Raxco has fully paid the royalty income due
to the Company. Raxco reported to the Company a net loss of $140,000 for the
three month period ended September 30, 1996.
Interest Income (Expense)
Interest income increased 1,097%, or $373,000, from an expense of $34,000 for
the three months ended September 30, 1995, to income of $339,000 for the three
months ended September 30, 1996. The increase is primarily attributable to
interest on the proceeds from the Company's initial public offering, as well as
a decrease in the amortization of discount on the note payable.
Income Taxes
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires
the Company to record an asset with respect to the expected future temporary
differences. The Company's history of net operating losses makes the realization
of its net operating loss carryforwards uncertain. Accordingly, the Company has
placed a valuation allowance against its deferred tax assets. Under the Tax
Reform Act of 1986, the amount of and benefit from net operating losses that can
be carried forward may be impaired or limited in certain circumstances.
The Company recorded a tax benefit for the three months ended September 30, 1995
related to a loss from continuing operations. The Company recorded a provision
for the three months ended September 30, 1996 related to its income from
continuing operations. The effective rate for the three months ended September
30, 1996 differs from the federal statutory rate due to the carryforward benefit
of net operating losses and the change in the reserve for deferred tax assets.
Income (Loss) from Continuing Operations
As a result of the above, the Company recorded income from continuing operations
of $500,000 for the three months ended September 30, 1996, an increase of $1.54
million from the loss of $1.04 million for the three months ended September 30,
1995.
Income from Discontinued Operations
Income from discontinued operations consists of the net results of operations
from the divested businesses of the Company, which for financial statement
purposes have been accounted for in accordance with APB 30 and classified as
discontinued operations. The Company's income from discontinued operations
decreased 56% , or $749,000, from $1.34 million for the three months ended
September 30, 1995, to $591,000 for the three months ended September 30, 1996.
For those periods in 1995 and 1996, income from discontinued operations
represented
<PAGE>
48% and 12% of total net revenues, respectively. The Company anticipates a
continued decline in income from discontinued operations over the next several
quarters.
Nine Months Ended September 30, 1995, Compared to
Nine Months Ended September 30, 1996
Net Revenues
The Company's net revenues from product licenses increased approximately 68%, or
$3.94 million, from $5.79 million for the nine months ended June 30, 1995, to
$9.73 million for the nine months ended September 30, 1996. For those periods in
1995 and 1996, net revenues from product licenses represented 64% and 68% of
total net revenues, respectively. The increase in product license revenue is
primarily attributable to the expansion of the Company's product offerings, with
the introduction, general release and increased market acceptance of additional
products comprising the OmniGuard family of software products throughout 1995,
offset in part by a decrease in license revenues derived from the Company's
other (primarily OpenVMS) computer security software products.
OmniGuard/Intruder Alert and OmniGuard/Enterprise Access Control for both UNIX
and PCs were released commercially during the second quarter of 1995.
The Company's net revenues from maintenance and support services increased
approximately 7%, or $180,000, from $2.49 million for the nine months ended
September 30, 1995, to $2.67 million for the nine months ended September 30,
1996. The increase in net revenues from maintenance and support services is
attributable to a larger base of customers on maintenance agreements resulting
from the increased licensing of the Company's OmniGuard products, offset in part
by a decrease in maintenance revenues derived from the Company's other
(primarily OpenVMS) computer security software products. For those periods in
1995 and 1996, net revenues from maintenance fees and other services represented
28% and 19% of total net revenues, respectively. The decrease of net revenues
from maintenance and support services as a percentage of total net revenues is
attributable to the increase in total revenues, particularly net revenues from
product licenses.
The Company's net revenues from consulting services increased approximately
158%, or $1.20 million, from $759,000 for the nine months ended September 30,
1995 to $1.96 million for the nine months ended September 30, 1996. The increase
in consulting services revenues is attributable to an increase in the size and
number of engagements associated with licensing of the Company's OmniGuard
products. For those periods in 1995 and 1996, net revenues from consulting
services represented 8% and 13% of total net revenues, respectively.
The Company currently believes that period-to-period comparisons of net revenues
from the licensing of different software products and the provision of related
services are not necessarily meaningful as an indication of future performance.
Revenues derived from North American and from international operations as a
percent of total net revenues were 74% and 26%, respectively, for the nine
months ended September 30, 1996 as compared to 77% and 23%, respectively, for
the same period of 1995.
Cost of Net Revenues
The Company's cost of net revenues includes cost of media, product packaging,
documentation and other production costs, amortization of purchased software
costs, product royalties, and direct and indirect costs of providing training,
technical support and consulting services to the Company's customers. Cost of
net revenues increased approximately 2%, or $20,000 from $1.30 million for the
nine months ended September 30, 1995, to $1.32 million for the nine months ended
September 30, 1996. For those periods in 1995 and 1996, cost of net revenues
represented 14% and 9% of net revenues, respectively. The increase in cost of
net revenues is directly related to the increased number of consulting services
engagements and an increase in staff of the Company's customer support and
services operations necessary to support a larger customer base and the
additional products offered by the Company. The increase in the cost of net
revenues is offset in part by the following: 1) an increase in production
efficiency due to the consolidation of worldwide production in 1996; 2) a change
in product media
<PAGE>
to CD-ROM resulting in a decrease in production and shipping expenses; and 3) an
increase in the average size of the transactions recorded in the nine months
ended September 30, 1996 compared to the same nine month period of 1995. Cost of
net revenues as a percentage of net revenues may fluctuate from period to period
due to a change in product mix, a change in the number or size of transactions
recorded year over year or an increase or decrease in licenses of royalty
bearing products.
Sales and Marketing
Sales and marketing expenses consist primarily of personnel costs, including
commissions, salaries, benefits and bonuses, travel, telephone, costs of
advertising, public relations seminars and trade shows. Sales and marketing
expenses increased 2%, or $180,000, from $8.49 million for the nine months ended
September 30, 1995 to $8.67 million for the nine months ended September 30,
1996. The increase in dollar amount was due primarily to additional investment
in the Company's US and UK operations, increased commissions associated with the
additional revenues and increased investment in indirect distribution, offset in
part by the closing of the Company's German and Swiss direct offices during the
fourth quarter of 1995. For those periods in 1995 and 1996, sales and marketing
expenses represented 94% and 60% of total net revenues, respectively. The
decrease in sales and marketing expenses as a percent of total net revenue is
attributable to the increase in total net revenues for the nine months ended
September 30, 1996.
Research and Development
Research and development expenses consist primarily of personnel costs,
including salaries, benefits and bonuses, travel and other personnel-related
expenses of the employees engaged in ongoing research and development projects
and third party development contracts. Costs related to research and development
of products generally are expensed as incurred. Research and development
expenses increased 20%, or $580,000, from $2.93 million for the nine months
ended September 30, 1995 to $3.51 million for the nine months ended September
30, 1996. For those periods in 1995 and 1996, research and development expenses
represented 32% and 24% of total net revenues, respectively. The increase in
dollar amount resulted primarily from the addition of internal and third-party
contract developers needed to develop, maintain and enhance the OmniGuard family
of software products including the Company's Enterprise Resource Manager product
currently under development. The decrease in research and development expenses
as a percentage of total net revenues was due primarily to the increase in total
net revenues. The Company currently anticipates that research and development
expenses may increase in absolute dollars as the Company continues to commit
substantial resources to research and development in future periods.
General and Administrative
General and administrative expenses consist primarily of personnel costs,
including salaries, benefits and bonuses and related costs for management,
finance and accounting, legal and other professional services. General and
administrative expenses increased 5%, or $90,000 from $1.68 million for the nine
months ended September 30, 1995 to $1.77 million for the nine months ended
September 30, 1996. For those periods in 1995 and 1996, general and
administrative expenses represented 19% and 12% of total net revenues,
respectively. The decrease in general and administrative expenses as a
percentage of total net revenues was due primarily to the increase in total net
revenues.
In 1996, certain general and administrative expenses are offset in part by the
Administrative Services Agreement between the Company and Raxco. That agreement
provides for Raxco to pay the Company on an annual basis, the greater of
$750,000 or the actual cost of providing certain operational and system support
services including bookkeeping, personnel processing, administrative support,
facilities management and product packaging and mailing. For the nine months
ended September 30, 1996, the Company received $562,500 from Raxco under the
Administrative Services Agreement.
Royalty Income
<PAGE>
For the nine months ended September 30, 1996, the Company recorded royalty
income of $2.40 million pursuant to the Exclusive Distributor License Agreement
with Raxco. The Agreement provides for payment by Raxco to the Company the
greater of (i) a 30% royalty on license and services fees related to the OpenVMS
utility software products owned by the Company and marketed exclusively by Raxco
or (ii) $2.0 million for 1996, $1.5 million for 1997 and $1.0 million for 1998,
and a 30% royalty thereafter for two additional years.
During the nine months ended September 30, 1996, Raxco reported to the Company,
gross revenues of approximately $8.70 million, which included approximately
$8.00 million of revenues from licensing of the Company's OpenVMS utility
products. As of September 30, 1996, Raxco has fully paid the royalty income due
to the Company. Raxco reported to the Company, a net loss of $735,000 for the
nine months ended September 30, 1996.
Interest Income (Expense)
Interest income increased 749%, or $771,000, from an expense of $103,000 for the
nine months ended September 30, 1995, to income of $668,000 for the nine months
ended September 30, 1996. The increase is primarily attributable to interest on
the proceeds from the Company's initial public offering, as well as a decrease
in the amortization of discount on the note payable.
Income Taxes
The Company accounts for income taxes under SFAS 109 which requires the Company
to record an asset with respect to the expected future temporary differences.
The Company's history of net operating losses makes the realization of its net
operating loss carryforwards uncertain. Accordingly, the Company has placed a
valuation allowance against its deferred tax assets. Under the Tax Reform Act of
1986, the amount of and benefit from net operating losses that can be carried
forward may be impaired or limited in certain circumstances.
The Company recorded a tax benefit for the nine months ended September 30, 1995
related to a loss from continuing operations. The Company recorded a provision
for the nine months ended September 30, 1996 related to the income from
continuing operations. The effective rate for the nine months ended September
30, 1996 differs from the federal statutory rate due to the carryforward benefit
of net operating losses and the change in the reserve for deferred tax assets.
Income (Loss) from Continuing Operations
As a result of the above, the Company recorded income from continuing operations
of $1.73 million for the nine months ended September 30, 1996, an increase of
$4.77 million, from the loss of $3.04 million for the nine months ended
September 30, 1995.
Income from Discontinued Operations
Income from discontinued operations consists of the net results of operations
from the divested businesses of the Company, which for financial statement
purposes have been accounted for in accordance with APB 30 and classified as
discontinued operations. The Company's income from discontinued operations
decreased 46% , or $1.83 million, from $3.97 million for the nine months ended
September 30, 1995 to $2.14 million for the nine months ended September 30,
1996. For those periods in 1995 and 1996 income from discontinued operations
represented 44% and 15% of total net revenues, respectively. The Company
anticipates a continued decline in income from discontinued operations over the
next several quarters.
Financial Condition- Liquidity and Capital Resources
The Company's overall cash and cash equivalents were $15.66 million at September
30, 1996, an increase of approximately $9.58 million from $6.08 million at the
beginning of the year. During the nine months ended September 30, 1995, the
Company financed its operations primarily through cash flows generated from
<PAGE>
discontinued operations and available working capital. The Company's continuing
operating activities used cash of $6.65 million for the nine months ended
September 30, 1995 and provided $799,000 for the nine months ended September 30,
1996 resulting from increased licensing of the Company's OmniGuard products in
the nine months ended September 30, 1996. Total cash provided by operating
activities of the Company's discontinued operations was $6.98 million and
$750,000 for the nine months ended September 30, 1995 and 1996, respectively.
The Company made capital expenditures of approximately $767,000 and $733,000 for
the nine months ended September 30, 1995 and 1996, respectively. These purchases
have generally consisted of computer workstations, networking equipment, office
furniture and equipment. The Company had no firm commitments for capital
expenditures as of September 30, 1996.
During the nine months ended September 30, 1996, the Company's cash position was
also affected by the following: 1) the Company received proceeds from its
initial public offering of approximately $25.13 million, net of approximately
$3.46 million in underwriting fees and offering expenses; 2) the Company
invested approximately $17.32 million in certificates of deposit and government
securities; 3) the Company received $300,000 as a result of the disposal of the
Helpdesk products in February 1996; 4) the Company paid $100,000 to former
Datamedia stockholders as part of the December 1994 Datamedia acquisition; and
5) the Company received $748,000 as payment on the note receivable related to
the sale of the Company's storage management products in 1994.
The Company had a revolving credit facility commitment with a bank for up to
$2.50 million which expired in May 1996. The were no amounts outstanding under
this revolving credit facility commitment at the time of expiration.
As of September 30, 1996, Raxco fully paid all amounts due to the Company under
the Exclusive Distributor License Agreement, the Administrative Services
Agreement and the Line of Credit Loan Agreement.
The Company believes that the net proceeds from the initial public offering,
cash generated from operations, cash generated under the Administrative Services
Agreement and the Exclusive Distributor License Agreement with Raxco, together
with existing sources of liquidity, will be sufficient to meet its capital
expenditures, working capital and other cash requirements both for the next
twelve months and for the foreseeable future.
Certain Factors Affecting Future Performance
Although the Company has experienced significant growth in revenues from the
OmniGuard family of software products, the Company does not believe prior growth
rates are indicative of future operating results. In addition, the Company
expects increased competition and intends to invest significantly in its product
development. As a result, there can be no assurance that the Company will remain
profitable on a quarterly or annual basis. Due to the Company's limited
operating history with respect to the OmniGuard family of software products,
predictions as to future operating results are difficult. Future operating
results may fluctuate due to factors such as: demand for the Company's products;
the size and timing of customer orders; the introduction of new products and
product enhancements by the Company or its competitors; the budgeting cycle of
customers; changes in the proportion of revenues attributable to license fees
and consulting services; changes in the level of operating expenses; and
competitive conditions in the industry.
The market for the Company's software products is highly competitive, and the
Company expects that it will face increasing price pressures from its current
competitors and new market entrants. Any material reduction in the price of the
Company's software products would negatively affect gross margins and could
materially adversely affect the Company's financial condition and results of
operations.
Licensing of the Company's security products generally involves significant
testing by and education of prospective customers as well as a commitment of
resources by both parties. For these and other reasons, the sales cycle
associated with the licensing of the Company's security products is typically
long and subject to a number of significant risks over which the Company has
little or no control and, as a result, the Company may expend significant
resources pursuing potential license opportunities that will not be consummated.
<PAGE>
The Company anticipates that international sales will continue to represent a
significant percentage of revenue in the foreseeable future. International sales
are subject to a number of risks, including unexpected changes in regulatory
requirements, tariffs and other trade barriers, political and economic
instability in foreign markets, difficulty in the staffing, management and
integration of foreign operations, longer payment cycles, greater difficulty in
accounts receivable collection, currency fluctuations and potentially adverse
tax consequences. The uncertainty of the monetary exchange values has caused,
and may in the future, contribute to fluctuations in the Company's financial
condition and results of operations. Although the Company's results of
operations have not been materially adversely affected to date as a result of
currency fluctuations, the long-term impact of currency fluctuations, including
any possible effect on the business outlook in other countries, cannot be
predicted.
The foregoing Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements which involve risk and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed above and in
the "Risk Factors" set forth in the Company's Registration Statement on Form S-1
(File No.333-01368).
<PAGE>
PART II: OTHER INFORMATION
<TABLE>
<CAPTION>
Item 6: Exhibits
<S> <C>
Exhibit
Number Exhibit Description
--------------
3.1* Amended and Restated Certificate of Incorporation of the Company.
3.2** Amended and Restated Bylaws of the Company.
4.1* Specimen stock certificate for shares of Common Stock of the Company.
10.1* The Company's 1991 Amended and Restated Stock Option Plan.
10.2* The Company's 1996 Stock Option Plan.
10.3* The Company's 1996 Directors' Stock Option Plan.
10.7* Registration Rights Agreement dated as of December 10, 1992, by and among the Company and
the parties thereto.
10.8* Settlement Agreement effective as of September 13, 1991, by and among the Company and the
parties thereto.
10.9* Form of Indemnification Agreement between the Company and its directors and executive
officers.
10.10* Agreement of Merger dated as of November 17, 1994, among the Company, Datamedia
Corporation and Raxco Acquisition Corporation
10.11* Lease Agreement dated as of September 6, 1995, by and between Research Grove Associates
and the Company.
10.12* Lease of Real Property dated as of March 7, 1995, by and between TNK Associates and the
Company.
10.13* Deed of Lease dated as of March 14, 1995 by and between Bill Harris Music, Inc. and the
Company.
10.14* Agreement dated as of December 30, 1987, by and between the Company and William R. Davy.
10.15* Agreement dated as of September 20, 1990, by and between the Company and William R. Davy.
10.16* Agreement dated as of November 7, 1991, by and between the Company and William R. Davy.
10.17* Severance Arrangement for Richard A. Lefebvre, dated October 16, 1992.
10.18* Severance Arrangement for John C. Becker, dated October 16, 1992.
10.19* Severance Arrangement for Brett Jackson, dated October 16, 1992.
10.20* The Company's Officer/Vice President Severance Policy.
10.21* Exclusive Distributor License Agreement, effective as of December 31, 1995, between the
Company and Raxco Software, Inc
10.22* Administrative Services Agreement, effective as of
December 31, 1995, between the Company and Raxco
Software, Inc.
10.23* Line of Credit Loan Agreement, effective as of December
31, 1995, between the Company and Raxco Software, Inc.
10.24* Agreement and Plan of Separation, effective as of
December 31, 1995, between the Company and Raxco
Software, Inc.
10.28* Purchase Agreement, date as of February 29, 1996, by and between the Company and Silvon
Software, Inc.
<PAGE>
11.1** Computation of Earnings (Loss) Per Common Share for the
nine months ended September 30, 1996 and 1995.
27** Financial Data Schedule
</TABLE>
There were no reports on Form 8-K filed by the Company during the three
month period ended September 30, 1996.
- --------------------------------------------------------------------------------
* Previously filed as an exhibit to the Company's Registration
Statement Number 333-01368 on Form S-1 and incorporated herein
by reference.
** Filed herewith.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AXENT TECHNOLOGIES, INC.
Date: November 14, 1996 By: /s/ Robert B. Edwards, Jr.
----------------------
Robert B. Edwards, Jr.
Vice President and
Chief Financial Officer
(Principal Financial and Accounting
Officer)
EXHIBIT 3.2
AXENT TECHNOLOGIES, INC.
(a Delaware corporation)
AMENDED AND RESTATED BYLAWS
As adopted by the Board of Directors on January 30,
1996 and amended on October 22, 1996.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
Page
I. OFFICES ............................................................................................. 1
1. Registered Office........................................................................ 1
2. Additional Offices....................................................................... 1
II. MEETINGS OF STOCKHOLDERS............................................................................... 1
1. Time and Place........................................................................... 1
2. Annual Meeting........................................................................... 1
3. Notice of Annual Meeting................................................................. 1
4. Special Meetings......................................................................... 1
5. Notice of Special Meeting................................................................ 2
6. List of Stockholders..................................................................... 2
7. Presiding Officer; Order of Business..................................................... 2
8. Quorum; Adjournments..................................................................... 3
9. Voting................................................................................... 3
10. Action by Consent........................................................................ 4
III. DIRECTORS.............................................................................................. 4
1. General Powers; Number; Tenure........................................................... 4
2. Vacancies................................................................................ 4
3. Classes; Terms of Office................................................................. 4
4. Removal; Resignation..................................................................... 5
5. Place of Meetings........................................................................ 5
6. Annual Meeting........................................................................... 5
7. Regular Meetings......................................................................... 5
8. Special Meetings......................................................................... 5
9. Quorum; Adjournments..................................................................... 5
10. Compensation............................................................................. 6
11. Action by Consent........................................................................ 6
12. Meetings by Telephone or Similar Communications.......................................... 6
IV. COMMITTEES............................................................................................. 6
1. Executive Committee...................................................................... 6
2. Powers................................................................................... 6
3. Procedure; Meetings...................................................................... 6
4. Quorum................................................................................... 7
5. Other Committees......................................................................... 7
6. Vacancies; Changes; Discharge............................................................ 7
7. Compensation............................................................................. 7
8. Action by Consent........................................................................ 7
9. Meetings by Telephone or Similar Communications.......................................... 7
V. NOTICES................................................................................................ 7
1. Form; Delivery........................................................................... 7
2. Waiver................................................................................... 8
<PAGE>
VI. OFFICERS .............................................................................................. 8
1. Designations............................................................................. 8
2. Term of Office; Removal.................................................................. 8
3. Compensation............................................................................. 8
4. The Chairman of the Board................................................................ 8
5. The President............................................................................ 9
6. Chief Operating Officer...................................................................9
7. The Vice Presidents...................................................................... 9
8. The Secretary............................................................................ 9
9. The Assistant Secretary.................................................................. 10
10. The Treasurer............................................................................ 10
11. The Assistant Treasurer.................................................................. 10
VII. INDEMNIFICATION........................................................................................ 10
1. Indemnification in Actions, Suits or Proceedings Other Than Those
by or in the Right of the Corporation..................................................... 10
2. Indemnification in Actions, Suits or Proceedings by or in the
Right of the Corporation.................................................................. 11
3. Authorization of Indemnification.......................................................... 12
4. Advancement of Expenses................................................................... 12
VIII. AFFILIATED TRANSACTIONS AND INTERESTED DIRECTORS......................................................... 12
1. Affiliated Transactions.................................................................. 12
2. Determining Quorum....................................................................... 13
IX. STOCK CERTIFICATES..................................................................................... 13
1. Form; Signatures......................................................................... 13
2. Registration of Transfer................................................................. 13
3. Registered Stockholders.................................................................. 14
4. Record Date.............................................................................. 14
5. Lost, Stolen or Destroyed Certificates................................................... 14
X. GENERAL PROVISIONS..................................................................................... 14
1. Dividends................................................................................ 14
2. Reserves................................................................................. 15
3. Fiscal Year.............................................................................. 15
4. Seal..................................................................................... 15
XI. AMENDMENTS............................................................................................. 15
SECRETARY'S CERTIFICATE................................................................................ 16
</TABLE>
<PAGE>
AMENDED AND RESTATED BYLAWS
AXENT TECHNOLOGIES, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be at Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, State of Delaware.
Section 2. Additional Offices. The Corporation may also have offices at
such other places, both within and without the State of Delaware, as the Board
of Directors may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place. A meeting of stockholders for any purpose may be
held at such time and place, within or without the State of Delaware, as the
Board of Directors may fix from time to time and as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meeting. Annual meetings of stockholders, commencing with
the year 1992, shall be held on the second Wednesday of May, if not a legal
holiday, or, if a legal holiday, then on the next secular day following, at
10:00 A.M., or at such other date and time as shall, from time to time, be
designated by the Board of Directors and stated in the notice of the meeting. At
such annual meeting, the stockholders shall elect a Board of Directors and
transact such other business as may properly be brought before the meeting.
Section 3. Notice of Annual Meeting. Written notice of the annual meeting,
stating the place, date and time thereof, shall be given to each stockholder
entitled to vote at such meeting not less than 10 (unless a longer period is
required by law) nor more than 60 days prior to the meeting.
Section 4. Special Meetings. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the Chairman of the Board, if
any, or the President and shall be called by the President or Secretary at the
request in writing of a majority of the Board of Directors, or at the request in
writing of the stockholders owning a majority of the shares of capital stock of
the Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting.
Section 5. Notice of Special Meeting. Written notice of a special meeting,
stating the place, date and time thereof and the purpose or purposes for which
the meeting is called, shall be
<PAGE>
given to each stockholder entitled to vote at such meeting not less than 10
(unless a longer period is required by law) nor more than 60 days prior to the
meeting.
Section 6. List of Stockholders. The officer in charge of the stock ledger
of the Corporation or the transfer agent shall prepare and make, at least 10
days before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least 10 days prior to the meeting, at a place within the city
where the meeting is to be held, which place, if other than the place of the
meeting, shall be specified in the notice of the meeting. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present in person
thereat.
Section 7. Presiding Officer; Order of Business
(a) Meetings of stockholders shall be presided over by the
Chairman of the Board, if any, or, if he is not present (or, if there is none),
by the President, or, if he is not present, by a Vice President, or, if he is
not present, by such person who may have been chosen by the Board of Directors,
or, if none of such persons is present, by a chairman to be chosen by the
stockholders owning a majority of the shares of capital stock of the Corporation
issued and outstanding and entitled to vote at the meeting and who are present
in person or represented by proxy. The Secretary of the Corporation, or, if he
is not present, an Assistant Secretary, or, if he is not present, such person as
may be chosen by the Board of Directors, shall act as secretary of meetings of
stockholders, or, if none of such persons is present, the stockholders owning a
majority of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote at the meeting and who are present in person or
represented by proxy shall choose any person present to act as secretary of the
meeting.
(b) The following order of business, unless otherwise ordered
at the meeting, shall be observed as far as practicable and consistent with the
purposes of the meeting:
1. Call of the meeting to order.
2. Presentation of proof of mailing of the notice of the meeting and, if
the meeting is a special meeting, the call thereof.
3. Presentation of proxies.
4. Announcement that a quorum is present.
5. Reading and approval of the minutes of the previous meeting.
6. Reports, if any, of officers.
7. Election of directors, if the meeting is an annual meeting or a
meeting called for that purpose.
<PAGE>
8. Consideration of the specific purpose or purposes for
which the meeting has been called (other than the
election of directors), if the meeting is a special
meeting.
9. Transaction of such other business as may properly come before the
meeting.
10. Adjournment.
Section 8. Quorum Adjournments. The holders of a majority of the shares of
capital stock of the Corporation issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall be necessary to, and
shall constitute a quorum for, the transaction of business at all meetings of
the stockholders, except as otherwise provided by statute or by the Certificate
of Incorporation. If, however, a quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have the power to adjourn the
meeting from time to time, without notice of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken, until a quorum shall be present or represented. Even if a quorum shall be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
the power to adjourn the meeting from time to time for good cause, without
notice of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken, until a date which is not more
than 30 days after the date of the original meeting. At any such adjourned
meeting, at which a quorum shall be present in person or represented by proxy,
any business may be transacted which might have been transacted at the meeting
as originally called. If the adjournment is for more than 30 days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote thereat.
Section 9. Voting
(a) At any meeting of stockholders, every stockholder having
the right to vote shall be entitled to vote in person or by proxy. Except as
otherwise provided by law or the Certificate of Incorporation, each stockholder
of record shall be entitled to one vote for each share of capital stock
registered in his name on the books of the Corporation.
(b) All elections shall be determined by a plurality vote,
and, except as otherwise provided by law or the Certificate of Incorporation,
all other matters shall be determined by a vote of a majority of the shares
present in person or represented by proxy and voting on such other matters.
Section 10. Action of Consent. Except as restricted, limited or prohibited
by the Certificate of Incorporation, any action required or permitted by law to
be taken at any meeting of stockholders may be taken without a meeting, without
prior notice and without a vote, if a written consent, setting forth the action
so taken, shall be signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present or
<PAGE>
represented by proxy and voted. Such written consent shall be filed with the
minutes of meetings of stockholders. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not so consented in writing thereto.
ARTICLE III
DIRECTORS
Section 1. General Powers; Number; Tenure. The business of the Corporation
shall be managed by its Board of Directors, which may exercise all powers of the
Corporation and perform all lawful acts and things which are not by law, the
Certificate of Incorporation or these Bylaws directed or required to be
exercised or performed by the stockholders. Within the limits specified in this
Section 1, the number of directors shall be determined by the Board of
Directors, except that if no such determination is made, the number of directors
shall be eight (8). The directors shall be elected at the annual meeting of the
stockholders, except as provided in Sections 2 and 3 of this Article, and each
director elected shall hold office until his successor is elected and shall
qualify. Directors need not be stockholders.
Section 2. Vacancies. If any vacancies occur in the Board of Directors, or
if any new directorships are created, they may be filled by vote of a majority
of the directors then in office, although less than a quorum, or by a sole
remaining director. Each director so chosen shall hold office until the annual
meeting of stockholders at which the term of his class expires and until his
successor is duly elected and shall qualify. If there are no directors in
office, any officer may call a special meeting of stockholders in accordance
with the provisions of the Certificate of Incorporation or these Bylaws, at
which meeting such vacancies shall be filled.
Section 3. Classes; Terms of Office. Unless otherwise provided in the
Certificate of Incorporation, the Board of Directors shall divide the directors
into three classes, which shall be as equal in number as possible; and, when the
number of directors is changed, shall determine the class or classes to which
the increased or decreased number of directors shall be apportioned, which shall
be done so as to maintain as equal a number of directors in each class as
possible; provided, however, that no decrease in the number of directors shall
affect the term of any director then in office. At each annual meeting of
stockholders, directors elected to succeed those whose terms are expiring shall
be elected for a term of office expiring at the annual meeting of stockholders
held in the third year following their election and until their respective
successors are elected and qualified, or until such director's earlier death,
resignation or removal.
Section 4. Removal; Resignation
(a) Except as otherwise provided by law or the Certificate of
Incorporation, any director or directors (but not the entire Board of Directors)
may be removed, only for cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
(b) Any director may resign at any time by giving written
notice to the Board of Directors, the Chairman of the Board, the President or
the Secretary of the Corporation. Unless
<PAGE>
otherwise specified in such written notice, a resignation shall take effect upon
delivery thereof to the Board of Directors or the designated officer. It shall
not be necessary for a resignation to be accepted before it becomes effective.
Section 5. Place of Meetings. The Board of Directors may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 6. Annual Meeting. The annual meeting of each newly elected Board
of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present.
Section 7. Regular Meetings. Additional regular meetings of the Board of
Directors may be held without notice, at such time and place as may from time to
time be determined by the Board of Directors.
Section 8. Special Meetings. Special meetings of the Board of Directors may
be called by the Chairman of the Board, the President or by 2 or more directors
on at least twenty-four (24) hours' notice to each director, if such notice is
delivered personally or sent by telegram or telecopy, or on at least three (3)
days' notice if sent by mail. Special meetings shall be called by the Chairman
of the Board, President, Secretary or two or more directors in like manner and
on like notice on the written request of one-half or more of the number of
directors then in office. Any such notice need not state the purpose or purposes
of such meeting except as provided in Article XI.
Section 9. Quorum; Adjournments. At all meetings of the Board of Directors,
a majority of the directors then in office shall constitute a quorum for the
transaction of business, and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by law or the
Certificate of Incorporation. If a quorum is not present at any meeting of the
Board of Directors, the directors present may adjourn the meeting, from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 10. Compensation. Directors shall be entitled to such compensation
for their services as directors and to such reimbursement for any reasonable
expenses incurred in attending directors' meetings as may from time to time be
fixed by the Board of Directors. The compensation of directors may be on such
basis as is determined by the Board of Directors. Any director may waive
compensation for any meeting. Any director receiving compensation under these
provisions shall not be barred from serving the Corporation in any other
capacity and receiving compensation and reimbursement for reasonable expenses
for such other services.
Section 11. Action by Consent. Any action required or permitted to be taken
at any meeting of the Board of Directors may be taken without a meeting if a
written consent to such action is signed by all members of the Board of
Directors and such written consent is filed with the minutes of its proceedings.
<PAGE>
Section 12. Meetings by Telephone or Similar Communications. The Board of
Directors may participate in a meeting by means of conference telephone or
similar communications equipment by means of which all directors participating
in the meeting can hear each other, and participation in such meeting shall
constitute presence in person by such director at such meeting.
ARTICLE IV
COMMITTEES
Section 1. Executive Committee. The Board of Directors, by resolution
adopted by a majority of the whole Board, may appoint an Executive Committee
consisting of not more than five (5) directors, one of whom shall be designated
as Chairman of the Executive Committee. Each member of the Executive Committee
shall continue as a member thereof until the expiration of his term as a
director, or his earlier resignation, unless sooner removed as a member or as a
director.
Section 2. Powers. Unless circumscribed by resolution of the Board
appointing the Executive Committee or except as otherwise provided by law, the
Executive Committee shall have and may exercise all of the powers and authority
of the Board of Directors in the management of the business and affairs of the
Corporation including, without limitation, the power and authority to declare a
dividend in cash, property or its own shares and to authorize the issuance of
any shares of capital stock of the Corporation of any class now or hereafter
authorized, and any options or warrants for, and rights to subscribe to, such
shares, and any securities convertible into or exchangeable for such shares; and
may authorize the seal of the Corporation to be affixed to all papers which may
require it.
Section 3 Procedure: Meetings. The Executive Committee shall fix its own
rules of procedure and shall meet at such times and at such place or places as
may be provided by such rules or as the members of the Executive Committee shall
provide. The Executive Committee shall keep regular minutes of its meetings and
deliver such minutes to the Board of Directors.
The Chairman of the Executive Committee, or, in his absence, a member
of the Executive Committee chosen by a majority of the members present, shall
preside at meetings of the Executive Committee, and another member thereof
chosen by the Executive Committee shall act as Secretary of the Executive
Committee.
Section 4. Quorum. A majority of the Executive Committee shall constitute a
quorum for the transaction of business, and the affirmative vote of a majority
of the members of the Executive Committee shall be required for any action of
the Executive Committee; provided, however, that when an Executive Committee of
one member is authorized under the provisions of Section 1 of this Article, such
one member shall constitute a quorum.
Section 5. Other Committees. The Board of Directors, by resolutions adopted
by a majority of the whole Board, may appoint such other committee or committees
as it shall deem advisable and with such functions and duties as the Board of
Directors shall prescribe.
<PAGE>
Section 6. Vacancies; Changes; Discharge. The Board of Directors shall have
the power at any time to fill vacancies in, to change the membership of, and to
discharge any committee.
Section 7. Compensation. Members of any committee shall be entitled to such
compensation for their services as members of any such committee and to such
reimbursement for any reasonable expenses incurred in attending committee
meetings as may from time to time be fixed by the Board of Directors. Any member
may waive compensation for any meeting. Any committee member receiving
compensation under these provisions shall not be barred from serving the
Corporation in any other capacity and from receiving compensation and
reimbursement of reasonable expenses for such other services.
Section 8. Action by Consent. Any action required or permitted to be taken
at any meeting of any committee of the Board of Directors may be taken without a
meeting if a written consent to such action is signed by all members of the
committee and such written consent is filed with the minutes of its proceedings.
Section 9. Meetings by Telephone or Similar Communications. The members of
any committee designated by the Board of Directors may participate in a meeting
of such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in such meeting can hear
each other and participation in such meeting shall constitute presence in person
at such meeting.
ARTICLE V
NOTICES
Section 1. Form; Delivery. Whenever, under the provisions of law, the
Certificate of Incorporation or these Bylaws, notice is required to be given to
any director or stockholder, it shall not be construed to mean personal notice
unless otherwise specifically provided, but such notice may be given in writing,
by mail, addressed to such director or stockholder, at his address as it appears
on the records of the Corporation, with postage thereon prepaid. Such notices
shall be deemed to be given at the time they are deposited in the United States
mail. Notice to a director may also be given personally or by telegram sent to
his address as it appears on the records of the Corporation.
Section 2. Waiver. Whenever any notice is required to be given under the
provisions of law, the Certificate of Incorporation or these Bylaws, a written
waiver thereof, signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed to be equivalent to
such notice. In addition, any stockholder who attends a meeting of stockholders
in person, or is represented at such meeting by proxy, without protesting at the
commencement of the meeting the lack of notice thereof to him, or any director
who attends a meeting of the Board of Directors without protesting, at the
commencement of the meeting, such lack of notice, shall be conclusively deemed
to have waived notice of such meeting.
<PAGE>
ARTICLE VI
OFFICERS
Section 1. Form; Delivery. The officers of the Corporation shall be chosen
by the Board of Directors. The Board of Directors may choose a Chairman of the
Board, a President, a Vice President or Vice Presidents, a Secretary, a
Treasurer, one or more Assistant Secretaries and/or Assistant Treasurers and
other officers and agents as it shall deem necessary or appropriate. All
officers of the Corporation shall exercise such powers and perform such duties
as shall from time to time be determined by the Board of Directors. Any number
of offices may be held by the same person, unless the Certificate of
Incorporation or these Bylaws otherwise provide.
Section 2. Term of Office; Removal. The Board of Directors at its annual
meeting after each annual meeting of stockholders shall choose a President, a
Secretary and a Treasurer. The Board of Directors may also choose a Chairman of
the Board, a Vice President or Vice Presidents, one or more Assistant
Secretaries and/or Assistant Treasurers, and such other officers and agents as
it shall deem necessary or appropriate. Each officer of the Corporation shall
hold office until his successor is chosen and shall qualify. Any officer elected
or appointed by the Board of Directors may be removed, with or without cause, at
any time by the affirmative vote of a majority of the directors then in office.
Such removal shall not prejudice the contract rights, if any, of the person so
removed. Any vacancy occurring in any office of the Corporation may be filled
for the unexpired portion of the term by the Board of Directors.
Section 3. Compensation. The salaries of all officers of the Corporation
shall be fixed from time to time by the Board of Directors and no officer shall
be prevented from receiving such salary by reason of the fact that he is also a
director of the Corporation.
Section 4. The Chairman of the Board. The Chairman of the Board, if any,
shall be an officer of the Corporation and, subject to the direction of the
Board of Directors, shall perform such executive, supervisory and management
functions and duties as may be assigned to him from time to time by the Board of
Directors. He shall, if present, preside at all meetings of stockholders and of
the Board of Directors.
Section 5. The President
(a) The President shall be the chief executive officer of the
Corporation and, subject to the direction of the Board of Directors, shall have
general charge of the business, affairs and property of the Corporation and
general supervision over its other officers and agents. In general, he shall
perform all duties incident to the office of President and shall see that all
orders and resolutions of the Board of Directors are carried into effect. In
addition to and not in limitation of the foregoing, the President shall be
empowered to authorize any change of the registered office or registered agent
(or both) of the Corporation in the State of Delaware.
(b) Unless otherwise prescribed by the Board of Directors, the
President shall have full power and authority on behalf of the Corporation to
attend, act and vote at any meeting of security holders of other corporations in
which the Corporation may hold securities. At such meeting the President shall
possess and may exercise any and all rights and powers incident to the ownership
of such securities which the Corporation might have possessed and exercised if
<PAGE>
it had been present. The Board of Directors may from time to time confer like
powers upon any other person or persons.
Section 6. Chief Operating Officer. The Chief Operating Officer, subject to
the direction of the President, shall have general charge of the business
operations and the properties and assets utilized by the Corporation in the
conduct of its business, shall be responsible for operating decisions and issues
concerning the Corporation and supervision over its other officers and agents.
Section 7. The Vice Presidents. The Vice President, if any (or in the event
there be more than one, the Vice Presidents in the order designated, or in the
absence of any designation, in the order of their election), shall, in the
absence of the President or in the event of his disability, perform the duties
and exercise the powers of the President and shall generally assist the
President and perform such other duties and have such other powers as may from
time to time be prescribed by the Board of Directors.
Section 8. The Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all votes and the
proceedings of the meetings in a book to be kept for that purpose and shall
perform like duties for the Executive Committee or other committees, if
required. He shall give, or cause to be given, notice of all meetings of
stockholders and special meetings of the Board of Directors, and shall perform
such other duties as may from time to time be prescribed by the Board of
Directors, the Chairman of the Board or the President, under whose supervision
he shall act. He shall have custody of the seal of the Corporation, and he, or
an Assistant Secretary, shall have authority to affix the same to any instrument
requiring it, and, when so affixed, the seal may be attested by his signature or
by the signature of such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing thereof by his signature.
Section 9. The Assistant Secretary. The Assistant Secretary, if any (or in
the event there be more than one, the Assistant Secretaries in the order
designated, or in the absence of any designation, in the order of their
election), shall, in the absence of the Secretary or in the event of his
disability, perform the duties and exercise the powers of the Secretary and
shall perform such other duties and have such other powers as may from time to
time be prescribed by the Board of Directors.
Section 10. Treasurer. The Treasurer shall have the custody of the
corporate funds and other valuable effects, including securities, and shall keep
full and accurate accounts of receipts and disbursements in books belonging to
the Corporation and shall deposit all moneys and other valuable effects in the
name and to the credit of the Corporation in such depositories as may from time
to time be designated by the Board of Directors. He shall disburse the funds of
the Corporation as may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the Chairman of the Board,
the President and the Board of Directors, at regular meetings of the Board, or
whenever they may require it, an account of all his transactions as Treasurer
and of the financial condition of the Corporation.
<PAGE>
Section 11. The Assistant Treasurer. The Assistant Treasurer, if any (or in
the event there shall be more than one, the Assistant Treasurers in the order
designated, or in the absence of any designation, in the order of their
election), shall, in the absence of the Treasurer or in the event of his
disability, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as may from time to
time be prescribed by the Board of Directors.
ARTICLE VII
INDEMNIFICATION
Section 1. Indemnification in Actions, Suits or Proceedings Other Than
Those by or in the Right of the Corporation. (a) The Corporation shall 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) by reason of the fact that such
person is or was a director or officer of the Corporation, or is or was serving
at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust, employee benefit plan 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 which 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 that such
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which 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 reasonable cause to believe that such
conduct was unlawful.
(b) The Corporation may 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) by
reason of the fact that such person is or was an employee or agent of the
Corporation, or is or was serving at the request of the Corporation as an
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan 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 which 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 that such conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which 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
reasonable cause to believe that such conduct was unlawful.
Section 2. Indemnification in Actions, Suits or Proceedings by or in
the Right of the Corporation. (a) The Corporation shall 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 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 or officer of the Corporation, or is or was serving at the request of
the Corporation as a director of officer of another corporation, partnership,
joint venture, trust, employee benefit plan or other
<PAGE>
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 such person acted in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interest of the
Corporation. No such indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the Corporation unless and only to the extent that the court 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
such court shall deem proper.
(b) The Corporation may 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 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 an employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as an employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan 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 such person acted in
good faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Corporation. No such indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the Corporation unless and only to the extent
that the court 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 such court shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification under
this Article VII shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because such person or
persons have met the applicable standard of conduct set forth in Sections
Section 1 and Section 2 hereof. Such determination shall be made (1) by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opinion, or (3) by the stockholders.
Section 4. Advancement of Expenses. The Corporation may advance
expenses (including attorneys' fees) incurred by a director or officer in
advance of the final disposition of such action, suit or proceeding upon the
receipt of an undertaking by or on behalf of the director of officer to repay
such amount if it shall ultimately be determined that such director or officer
is not entitled to indemnification.
The Corporation may advance expenses (including attorneys' fees)
incurred by an employee or agent in advance of the final disposition of such
action, suit or proceeding upon such terms and conditions, if any, as the Board
of Directors deems appropriate.
ARTICLE VIII
AFFILIATED TRANSACTIONS AND INTERESTED DIRECTORS
Section 1. Affiliated Transactions. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction or solely because his or their votes are
counted for such purpose, if:
<PAGE>
(a) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or
(b) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified by the Board of Directors,
a committee thereof, or the stockholders.
Section 2. Determining Quorum. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee thereof which authorizes the contract or
transaction.
ARTICLE IX
STOCK CERTIFICATES
Section 1. Form; Signatures
(a) Every holder of stock in the Corporation shall be entitled
to have a certificate, signed by the Chairman of the Board or the President and
the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Corporation, exhibiting the number and class (and series, if
any) of shares owned by him, and bearing the seal of the Corporation. Such
signatures and seal may be facsimile. A certificate may be manually signed by a
transfer agent or registrar other than the Corporation or its employee but may
be a facsimile. In case any officer who has signed, or whose facsimile signature
was placed on, a certificate shall have ceased to be such officer before such
certificate is issued, it may nevertheless be issued by the Corporation with the
same effect as if he were such officer at the date of its issue.
(b) All stock certificates representing shares of capital
stock which are subject to restrictions on transfer or to other restrictions may
have imprinted thereon such notation to such effect as may be determined by the
Board of Directors.
Section 2. Registration of Transfer. Upon surrender to the Corporation or
any transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation or its transfer agent to issue
a new certificate to the person entitled thereto, to cancel the old certificate
and to record the transaction upon its books.
<PAGE>
Section 3. Registered Stockholders
(a) Except as otherwise provided by law, the Corporation shall
be entitled to recognize the exclusive right of a person who is registered on
its books as the owner of shares of its capital stock to receive dividends or
other distributions, to vote as such owner, and to hold liable for calls and
assessments any person who is registered on its books as the owner of shares of
its capital stock. The Corporation shall not be bound to recognize any equitable
or legal claim to or interest in such shares on the part of any other person.
(b) If a stockholder desires that notices and/or dividends
shall be sent to a name or address other than the name or address appearing on
the stock ledger maintained by the Corporation (or by the transfer agent or
registrar, if any), such stockholder shall have the duty to notify the
Corporation (or the transfer agent or registrar, if any) in writing, of such
desire. Such written notice shall specify the alternate name or address to be
used.
Section 4. Record Date. In order that the Corporation may determine the
stockholders of record who are entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution, or to make a determination of the
stockholders of record for any other proper purpose, the Board of Directors may,
in advance, fix a date as the record date for any such determination. Such date
shall not be more than 60 nor less than 10 days before the date of such meeting,
nor more than 60 days prior to the date of any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting taken pursuant to
Section 8 of Article II; provided, however, that the Board of Directors may fix
a new record date for the adjourned meeting.
Section 5. Lost, Stolen or Destroyed Certificates. The Board of Directors
may direct a new certificate to be issued in place of any certificate
theretofore issued by the Corporation which is claimed to have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the Corporation a bond in such sum, or other security in such form, as
it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate claimed to have been lost, stolen or
destroyed.
ARTICLE X
GENERAL PROVISIONS
Section 1. Dividends. Subject to the provisions of the Certificate of
Incorporation, dividends upon the outstanding capital stock of the Corporation
may be declared by the Board of Directors at any regular or special meeting,
pursuant to law, and may be paid in cash, in property or in shares of the
Corporation's capital stock.
<PAGE>
Section 2. Reserves. The Board of Directors shall have full power, subject
to the provisions of law and the Certificate of Incorporation, to determine
whether any, and, if so, what part, of the funds legally available for the
payment of dividends shall be declared as dividends and paid to the stockholders
of the Corporation. The Board of Directors, in its sole discretion, may fix a
sum which may be set aside or reserved over and above the paid-in capital of the
Corporation for working capital or as a reserve for any proper purpose, and may,
from time to time, increase, diminish or vary such fund or funds.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be as
determined from time to time by the Board of Directors.
Section 4. Seal. The corporate seal shall have inscribed thereon the name
of the Corporation, the year of its incorporation and the words "Corporate Seal"
and "Delaware".
ARTICLE XI
AMENDMENTS
The Board of Directors shall have the power to make, alter and repeal
these Bylaws, and to adopt new bylaws, by an affirmative vote of a majority of
the whole Board, provided that notice of the proposal to make, alter or repeal
these Bylaws, or to adopt new bylaws, must be included in the notice of the
meeting of the Board of Directors at which such action takes place. Neither this
Article XI nor Article III may be amended by the stockholders unless the
amendment is approved by at least two-thirds of the voting power of the
outstanding capital stock of the Corporation.
<PAGE>
SECRETARY'S CERTIFICATE
I, Gary M. Ford, Secretary of AXENT Technologies, Inc. (the
"Corporation"), a Delaware corporation, DO HEREBY CERTIFY that the foregoing is
a true and correct copy of the Corporation's Amended and Restated Bylaws, as
further amended by the Board of Directors of the Corporation on October 22,
1996.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the
Corporate Seal of the Corporation as of the 23rd day of October, 1996.
-----------------------------------
Gary M. Ford, Secretary
[Corporate Seal]
<PAGE>
EXHIBIT 11.1
<TABLE>
<CAPTION>
AXENT TECHNOLOGIES, INC.
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
<S> <C> <C> <C> <C>
Three Months Nine Months
Ended September 30, Ended September 30,
----------------------------- -------------------------------
1996 1995 1996 1995
-------------- -------------- --------------- ---------------
Income (loss) from continuing operations $ 500,000 $(1,044,000) $ 1,727,000 $ (3,044,000)
Income from discontinued operations 591,000 1,338,000 2,144,000 3,970,000
-------------- -------------- --------------- ---------------
Net income $ 1,091,000 $ 294,000 $ 3,871,000 $ 926,000
============== ============== =============== ===============
Weighted average common shares outstanding 10,886,465 9,007,831 10,301,807 9,007,831
Common shares issued within one year of initial filing --- 9,075 --- 9,075
Stock options issued within one year of initial filing
(using the treasury stock method and public offering price
of $14.00 per share) --- 108,958 --- 108,958
-------------- -------------- --------------- ---------------
Weighted average number of common shares outstanding 10,886,465 9,125,864 10,301,807 9,125,864
Net income (loss) per common share and common share equivalents:
Continuing operations $ 0.05 $ (0.12) $ 0.17 $ (0.33)
Discontinued operations 0.05 0.15 0.21 0.43
============== ============== =============== ===============
$ 0.10 $ 0.03 $ 0.38 $ 0.10
============== ============== =============== ===============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
AXENT TECHNOLOGIES, INC.
FINANCIAL DATA SCHEDULE
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet and statement of operations of AXENT
Technologies, Inc. as of and for the nine months ended September 30, 1996, and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001007997
<NAME> Axent Technologies, Inc.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> SEP-30-1996
<CASH> 15660000
<SECURITIES> 17316000
<RECEIVABLES> 4793000
<ALLOWANCES> (456000)
<INVENTORY> 0
<CURRENT-ASSETS> 38195000
<PP&E> 4464000
<DEPRECIATION> (3034000)
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0
0
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</TABLE>
