<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For Quarterly Period Ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
Commission File Number: 0-28900
ROGUE WAVE SOFTWARE, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 93-1064214
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5500 Flatiron Parkway, Boulder, Colorado 80301
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(303) 473-9118
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
----- -----
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 2000
----- -----------------------------
Common Stock, $0.001 par value 10,806,042
1.
<PAGE>
ROGUE WAVE SOFTWARE, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I - FINANCIAL INFORMATION,
Item 1. Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at September 30, 1999
and March 31, 2000 ................................................3
Consolidated Statements of Operations for the three and the six
months Ended March 31, 1999 and 2000 ..............................4
Consolidated Statements of Cash Flows for the six months ended
March 31, 1999 and 2000 ...........................................5
Notes to Consolidated Financial Statements ........................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ...............................8
Item 3. Quantitative and Qualitative Disclosures about Market Risk........18
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Securities Holders.............20
Item 5. Exhibits and Reports on Form 8-K .................................21
SIGNATURES ...................................................................23
</TABLE>
2.
<PAGE>
ROGUE WAVE SOFTWARE, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 30, March 31,
1999 2000
-----------------------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................... $13,875 $18,551
Short term investments............................................ 13,789 15,755
------- -------
Total cash, cash equivalents and short term investments........ 27,664 34,306
Accounts receivable, net.......................................... 10,176 9,121
Prepaid expenses and other current assets......................... 2,660 2,437
------- -------
Total current assets........................................... 40,500 45,864
Equipment, net....................................................... 4,310 4,090
Goodwill, net........................................................ 11,922 11,257
Other assets, net.................................................... 2,738 1,949
------- -------
Total assets................................................... $59,470 $63,160
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $ 423 $ 409
Accrued expenses.................................................. 5,399 4,491
Deferred revenue.................................................. 11,306 11,723
------- -------
Total current liabilities...................................... 17,128 16,623
Stockholders' equity:
Common stock...................................................... 10 10
Additional paid-in capital....................................... 34,994 39,992
Retained earnings................................................. 7,084 6,465
Accumulated other comprehensive income............................ 254 70
------- -------
Total stockholders' equity..................................... 42,342 46,537
------- -------
Total liabilities and stockholders' equity..................... $59,470 $63,160
======= =======
</TABLE>
See accompanying notes.
3.
<PAGE>
ROGUE WAVE SOFTWARE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS
(in thousands, except per share data, unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31,
------------------ ------------------
<S> <C> <C> <C> <C>
1999 2000 1999 2000
---- ---- ---- ----
Revenue:
License revenue.................................................. $ 8,619 $ 7,013 $16,428 $13,825
Service and maintenance revenue.................................. 4,760 6,029 9,136 11,833
------- ------- ------- -------
Total revenue.................................................. 13,379 13,042 25,564 25,658
Cost of revenue:
Cost of license revenue.......................................... 561 364 1,057 808
Cost of service and maintenance revenue.......................... 1,764 1,998 3,338 3,925
------- ------- ------- -------
Total cost of revenue.......................................... 2,325 2,362 4,395 4,733
------- ------- ------- -------
Gross profit................................................... 11,054 10,680 21,169 20,925
Operating expenses:
Product development.............................................. 2,620 3,502 4,861 7,157
Sales and marketing.............................................. 5,665 5,781 11,073 11,353
General and administrative....................................... 1,384 1,381 2,597 2,729
Acquisition, relocation and goodwill amortization costs.......... 102 354 102 955
------- ------- ------- -------
Total operating expenses....................................... 9,771 11,018 18,633 22,194
Income (loss) from operations.................................. 1,283 (338) 2,536 (1,269)
Other income, net................................................. 408 356 523 691
------- ------- ------- -------
Income (loss) before income taxes.............................. 1,691 18 3,059 (578)
Income tax expense................................................ 592 130 1,071 41
------- ------- ------- -------
Net income (loss).............................................. $ 1,099 $ (112) $ 1,988 $ (619)
======= ======= ======= =======
Basic earnings (loss) per share................................... $0.10 $(0.01) $0.18 $(0.06)
======= ======= ======= =======
Diluted earnings (loss) per share................................. $0.10 $(0.01) $0.18 $(0.06)
======= ======= ======= =======
Shares used in basic per share calculation........................ 10,531 10,524 10,893 10,349
Shares used in diluted per share calculation...................... 11,185 10,524 11,091 10,349
Net income (loss).............................................. 1,099 (112) 1,988 (619)
Other comprehensive loss:
Foreign currency translation losses.............................. (186) (427) (92) (184)
------- ------- ------- -------
Total comprehensive income (loss).............................. $ 913 $ (539) $ 1,896 $ (803)
======= ======= ======= =======
</TABLE>
See accompanying notes.
4.
<PAGE>
ROGUE WAVE SOFTWARE, INC
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
<TABLE>
<CAPTION>
Six months ended
----------------
March 31,
----------
<S> <C> <C>
1999 2000
-------- -------
Cash flows from operating activities:
Net income (loss)............................................................. $ 1,988 $ (619)
Adjustments to reconcile net income (loss) to net cash from operating
activities:
Depreciation and amortization................................................. 1,853 2,354
Loss on disposal of assets.................................................... 58 --
Changes in assets and liabilities:
Accounts receivable.......................................................... (991) 1,055
Prepaid expenses and other current assets.................................... (230) 239
Deferred income taxes........................................................ -- (16)
Other noncurrent assets...................................................... (1,106) 222
Accounts payable and accrued expenses........................................ 1,678 (918)
Deferred revenue............................................................ 1,865 417
-------- -------
Net cash from operating activities.......................................... 5,115 2,734
-------- -------
Cash flows from investing activities :
Purchase of business net of cash acquired..................................... (11,840) --
Short term investments........................................................ 5,014 (1,966)
Equipment acquisitions........................................................ (692) (902)
-------- -------
Net cash from investing activities............................................ (7,518) (2,868)
-------- -------
Cash flows from financing activities:
Payments on long-term debt and capital lease obligations...................... (100) (4)
Net proceeds from issurance of common stock, net.............................. 337 --
Purchase of treasury stock.................................................... (1,627) --
Proceeds from exercise of stock options....................................... 272 4,998
-------- -------
Net cash from financing activities.......................................... (1,118) 4,994
-------- -------
Effect of exchange rate changes on cash........................................ (92) (184)
-------- -------
Net change in cash and cash equivalents....................................... (3,613) 4,676
Cash and cash equivalents at beginning of period............................... 13,981 13,875
-------- -------
Cash and cash equivalents at end of period..................................... $ 10,368 $18,551
======== =======
</TABLE>
See accompanying notes.
5.
<PAGE>
ROGUE WAVE SOFTWARE, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles. However, certain information or
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed, or omitted, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, the
statements include all adjustments necessary (which are of a normal and
recurring nature) for the fair presentation of the results of the interim
periods presented. These financial statements should be read in conjunction
with the Company's audited consolidated financial statements and notes
thereto (the Consolidated Financial Statements) for the year ended
September 30, 1999, as included in the Company's annual report on Form
10-K.
2. Revenue Recognition
The Company's revenue is recognized according to the criteria of the
American Institute of Certified Public Accountants Statements of Position
97-2, 98-4 and 98-9, relating to software revenue recognition. License
revenue is booked upon the execution of a license agreement or signed
written contract with fixed or determinable fees, shipment or electronic
delivery of the product, and determination that collection of the resulting
receivable is probable. Maintenance and service revenue includes
maintenance revenue that is deferred and recognized over the maintenance
period and service revenue that includes training and consulting, which is
recognized as services are performed.
3. Common Stock Repurchase
In October 1998, the Board of directors authorized the Company to
repurchase up to the lesser of 500,000 shares of the Company's common stock
or $10,000,000. In July 1999, the Board of Directors further authorized the
Company to repurchase the lesser of an additional 500,000 shares, or a
cumulative total of $8,500,000 for the full 1,000,000 shares. The Company
has purchased and subsequently issued a total of 358,300 shares for
employee benefit plans as of March 31, 2000.
4. Acquisition
On March 1, 1999, the Company acquired 100% of the outstanding stock of
NobleNet, Inc. (NobleNet) for $11.8 million in cash. The acquisition was
accounted for under the purchase method and, accordingly, the accompanying
financial statements include NobleNet's results beginning with the
acquisition date. The purchase price was allocated to the assets of
NobleNet based on their respective fair values. The excess of the purchase
price over net identifiable assets acquired approximated $12.0 million and
is being amortized over 10 years. The pro forma information that follows
assumes that the acquisition of NobleNet took place as of January 1, 1999.
The unaudited pro forma information is not necessarily indicative of either
the results of operations that would have occurred had the purchase been
made during the period presented or the future results of the combined
operations.
Three Months Ended
March 31, 1999
Revenue........................................................ $13,547
Net loss....................................................... (128)
Basic and diluted loss per share............................... (0.01)
6.
<PAGE>
5. Earnings (Loss) Per Share
Basic earnings (loss) per share is computed on the basis of the weighted
average number of common shares outstanding. Diluted earnings (loss) per
share is computed on the basis of the weighted average number of common
shares outstanding plus the effect of outstanding stock options using the
"treasury stock" method unless the impact is anti-dilutive. The difference
between basic earnings per share and diluted earnings per share is due to
the effect of outstanding stock options. For the three and six months ended
March 31, 2000, the dilutive effect of outstanding options would have been
467,111 and 332,151, respectively.
6. Comprehensive Income
During fiscal year 1999 the Company adopted Financial Accounting Standards
Board Statement No. 130 ("FASB 130"), "Reporting Comprehensive Income."
FASB 130 establishes new rules for reporting and displaying comprehensive
income and its components; however, the adoption has no impact on the
Company's net income or stockholders' equity. "Comprehensive Income"
includes foreign currency translation adjustments which, prior to the
adoption of FASB 130, were reported separately in stockholders' equity.
7.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in this section, as well as in
the section "Risk Factors" and "Business" in the Company's Annual Report on Form
10-K for the year ended September 30, 1999. Readers are cautioned not to place
undue reliance on these forward-looking statements which reflect management's
analysis only as of the date hereof. The Company undertakes no obligation to
publicly release the results of any revision to these forward-looking statements
which may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
Overview
Rogue Wave was founded in 1989 to provide reusable software components for
the development of object-oriented software applications. The Company operated
as a Subchapter S corporation until June 1994. In October 1995, Rogue Wave
merged with Inmark Development Corporation ("Inmark"), a privately held
corporation specializing in the development, distribution and support of an
object-oriented graphical user interface library written in the C++ programming
language. In February 1998, the Company merged with Stingray Software, Inc.
("Stingray"), a privately held corporation specializing in the development and
distribution of object-oriented development tools for Windows programmers and a
leading provider of Visual C++ class libraries. Both transactions were accounted
for as pooling-of-interests business combinations. In March 1999, the Company
merged with NobleNet, Inc. (NobleNet) in a purchase business combination.
NobleNet specialized in building and marketing software products that allow
existing information technology (IT) systems to communicate and interoperate
across corporate networks and the Internet. The products are used to build
sophisticated, enterprise-wide, distributed applications that run on more than
40 platforms.
To date, the Company's revenue has been derived from licenses of its
software products and related maintenance, training and consulting services.
License revenue is booked upon execution of a license agreement or signed
written contract with fixed or determinable fees, shipment or electronic
delivery of the product if no significant contractual obligations remain and
collection of the resulting receivable is probable. Allowances for credit risks
and for estimated future returns are provided upon shipment. Returns to date
have not been significant. Service and maintenance revenue consists of fees that
are charged separately from product licenses. Maintenance revenue consists of
fees for ongoing support and product updates and is recognized ratably over the
term of the contract, which is typically 12 months. Service revenue consists of
training and consulting services and is recognized upon completion of the
related activity. The Company's revenue recognition policies are in compliance
with American Institute of Certified Public Accountants Statements of Position
97-2, 98-4, and 98-9 relating to software revenue recognition.
The Company markets its products primarily through its direct sales force,
and to a lesser extent through the Internet and an indirect channel consisting
of OEMs, VARs, dealers and distributors. The Company's direct sales force
consists of an inside telesales group that focuses on smaller orders ($50,000 or
less), and a field sales force that focuses on larger site licenses. The Company
makes most of its products available for sale and distribution over the
Internet. Revenue through this channel has not been significant to date, and
there can be no assurance that the Company will be successful in marketing its
products through this channel.
8.
<PAGE>
International revenue accounted for approximately 28%, 24% and 23% of total
revenue in fiscal 1998, 1999 and the six months ended March 31, 2000,
respectively. In January 1996, the Company established a wholly owned subsidiary
in Germany to market and support the Company's products in Germany and
neighboring countries. In February 1997, the Company expanded its European
operations by acquiring Precision, a distributor of Rogue Wave software products
in Germany, the United Kingdom, France and the Benelux countries. In 1998, the
Company established a subsidiary in Italy. The Company anticipates further
expansion in foreign countries and expects that international license and
service and maintenance revenue will account for an increasing portion of its
total revenue in the future. The Company has committed and continues to commit
significant management time and financial resources to developing direct and
indirect international sales and support channels. The Company has initiated a
management reorganization that is expected to support accelerated European
growth. There can be no assurance, however, that the Company will be able to
maintain or increase international market demand for its products.
The majority of the Company's international revenue is generated by the
Company's European subsidiaries and is denominated in local currencies. The
Company may enter into forward foreign exchange contracts to reduce the risk
associated with currency fluctuations. Although exposure to currency
fluctuations to date has been insignificant, to the extent international revenue
is denominated in local currencies, foreign currency translations may contribute
to significant fluctuations in, and could have a material adverse effect upon,
the Company's business, financial condition and results of operations. See "Risk
Factors-Risks Associated with in International Operations."
The Company acquired a controlling interest in HotData, Inc. ("HotData")
for $1.3 million on October 1, 1997. HotData began operations during 1997 and
has developed technology relating to the collection and verification of data
across the Internet. On September 1, 1998 and on January 11, 1999, HotData
issued capital stock to additional investors thereby reducing the Company's
percentage ownership from 78% to 42% and 42% to 21%, respectively. The HotData
investment was accounted for using the equity method of accounting for fiscal
1998, 1999 and 2000. As of March 31, 2000, the Company's recorded investment
balance in HotData is zero as a result of the Company's share of HotData losses.
In February 1998, the Company acquired all of the outstanding shares of
Stingray common stock in a business combination accounted for as a pooling of
interests for approximately 1.65 million shares of Rogue Wave common stock.
Stingray was a privately held company that develops and distributes development
tools for Windows programmers. The merger added several new product lines to
Rogue Wave's current slate of object-oriented C++ and Java (TM) class libraries
and builders. Stingray offers an extensive line of add-on libraries that extend
and enhance the Microsoft Foundation Classes (MFC), providing additional,
prebuilt functionality for creating sophisticated GUI controls, grids, diagrams
and charts. Stingray also offers ActiveX components, and several Java class
libraries that will further strengthen Rogue Wave's offerings in the Java
marketplace. The financial results for all periods presented include the
accounts of the Company and Stingray.
In March 1999, the Company acquired all of the outstanding shares of
NobleNet common stock which were accounted for under the purchase method for
approximately $11.8 million in cash. NobleNet's Nouveau technology, expanded
Rogue Wave's product offering by providing a unified architecture for building
high performance, distributed applications that interoperate across an
enterprise or over the Internet.
9.
<PAGE>
Results of Operations
The following table sets forth for the periods indicated the percentage of
net revenue represented by certain line items in the Company's Consolidated
Statements of Operations.
<TABLE>
<CAPTION>
Percentage of Total Net Revenues
--------------------------------
-------------------------------------
Three months ended Six months ended
March 31, March 31,
------------------ ----------------
<S> <C> <C> <C> <C>
1999 2000 1999 2000
Revenue:
License revenue ................................. 64% 54% 64% 54%
Service and maintenance revenue ................. 36 46 36 46
---- ---- ---- ----
Total revenue ................................. 100 100 100 100
---- ---- ---- ----
Cost of revenue:
Cost of license revenue ......................... 4 3 4 3
Cost of service and maintenance revenue ......... 13 15 13 15
---- ---- ---- ----
Total cost of revenue ......................... 17 18 17 18
---- ---- ---- ----
Gross profit .................................. 83 82 83 82
---- ---- ---- ----
Operating expenses:
Product development ............................. 20 27 20 28
Sales and marketing ............................. 42 44 43 45
General and administrative ...................... 10 11 10 11
Acquisition, relocation and goodwill amortization 1 3 0 3
---- ---- ---- ----
Total operating expenses ...................... 73 85 73 87
---- ---- ---- ----
Income (loss) from operations ................. 10 (3) 10 (5)
Other income, net ................................ 3 3 2 3
---- ---- ---- ----
Income (loss) before income taxes ............. 13 -- 12 (2)
Income tax expense ............................... 5 1 4 --
---- ---- ---- ----
Net income (loss) ............................. 8% (1)% 8% (2)%
</TABLE>
Revenue
Total revenue for the three and six months ended March 31, 2000 was $13.0
million and $25.7 million, respectively, versus $13.4 million and $25.6 million
for the three and six months ended March 31, 1999, representing a decrease of 3%
and no change, respectively. License revenue for the three and six months ended
March 31, 2000 was $7.0 million and $13.8 million versus $8.6 million and $16.4
million, respectively, for the three and six months ended March 31, 1999,
respectively, representing a decrease of 19% and 16%, respectively. License
revenue decreased primarily as a result of a decrease in the number of licenses
sold to existing and new customers, reflecting a lack of additional product
offerings, and sales force turnover.
Service and maintenance revenue for the three and six months ended March
31, 2000 was $6.0 million and $11.8 million versus $4.8 million and $9.1 million
for the three and six months ended March 31, 1999 representing an increase of
27% and 30%, respectively. The increase in service and maintenance revenue was
primarily attributable to increased sales volume of the Company's support and
maintenance services during the last twelve months which are recognized ratably
over the term of the support agreement.
10.
<PAGE>
Cost of Revenue
Cost of license revenue for the three and six months ended March 31, 2000
was $364,000 and $808,000 versus $561,000 and $1.1 million for the three and six
months ended March 31, 1999, representing a decrease of 35% and 24%,
respectively. As a percentage of total revenue, cost of license revenue was 3%
for the three and six months ended March 31, 2000 versus 4% for the three and
six months ended March 31, 1999. The decrease in cost of license revenue is a
result of a decrease in the number of licenses and manuals sold. The Company
expects that the cost of license revenue as a percentage of total revenue will
remain constant in fiscal 2000.
Cost of service and maintenance revenue for the three and six months ended
March 31, 2000 was $2.0 million and $3.9 million versus $1.8 million and $3.3
million for the three and six months ended March 31, 1999 representing an
increase of 13% and 18%, respectively. As a percentage of total revenue, cost of
service and maintenance revenue was 15% for the three and six months ended March
31, 2000 versus 13% for the three and six months ended March 31, 1999. The
increase in cost of service and maintenance revenue was due primarily to a
higher mix of outside contractors used to provide consulting services. The
Company expects that service and maintenance revenue will continue to grow, the
Company does not believe the cost of such revenue will increase as a percentage
of total revenue.
Operating Expenses
Product development expense for the three and six months ended March 31,
2000 was $3.5 million and $7.2 million versus $2.6 million and $4.9 million for
the three and six months ended March 31, 1999 representing an increase of 17%
and 32%. As a percentage of total revenue, product development expenses were 34%
and 47%, respectively, for the three and six months ended March 31, 2000 versus
20% for the three and six months ended March 31, 1999. The increase in product
development expenses was primarily attributable to the expense of additional
product development personnel as a result of the acquisition of NobleNet. The
increase in product development expenses as a percentage of revenue is due
primarily to the slower growth of revenue relative to the growth in product
development activities. The Company anticipates that it will continue to devote
substantial resources to product development and that product development
expenses will increase throughout fiscal 2000.
Sales and marketing expense for the three and six months ended March 31,
2000 were $5.8 million and $11.4 million versus $5.7 million and $11.1 for the
three and six months ended March 31, 1999 representing an increase of 2% and 3%,
respectively. As a percentage of total revenue, sales and marketing expenses
were 44% for the three and six months ended March 31, 2000 versus 42% and 43%
for the three and six months ended March 31, 1999. The increase in sales and
marketing expense was primarily due to continued investment in systems and
personnel to expand the Company's sales channels. While the Company expects that
sales and marketing expenses will continue to grow, the Company does not believe
such expenses will increase as a percentage of total revenue.
General and administrative expense for the three and six months ended March
31, 2000 were $1.4 million and $2.7 million versus $1.4 million and $2.6 million
for the three and six months ended March 31, 1999 representing no change and an
increase of 5%, respectively. The slight increase in general and administrative
expenses was primarily due to continued investment in infrastructure and
associated expenses necessary to manage and support the Company's growing
operations.
11.
<PAGE>
Goodwill amortization and severance costs were $354,000 and $955,000 for
the three and six months ended March 31, 2000 versus $102,000 for the three and
six months ended March 31, 1999, respectively. The increase in costs relates to
goodwill amortization associated with the acquisition of NobleNet.
Other Income, Net
Other income for the three and six months ended March 31, 2000 and the
three and six months ended March 31, 1999, primarily consists of interest income
on the Company's short-term investments. The increase in the six months ended
March 2000 versus the six months ended March 31, 1999, is due to an increase in
short term investments as well as general increases in interest rates.
Income Tax Expense
Due to the non-deductibility of goodwill resulting from the NobleNet
acquisition, the Company has taxable income in 2000. Income taxes are provided
on an interim basis at the expected tax rate for the year.
Liquidity and Capital Resources
The decrease in cash flows from operations for the six months ended March
31, 2000 compared to the six months ended March 31, 1999, was due primarily to a
net loss for the six months ended March 31, 2000 and changes in components of
working capital. The Company's investing activities consist primarily of the
purchase and sale of short-term investments and purchases of equipment.
Short-term investments primarily consist of commercial paper with original
maturities of 180 days or less which are held as securities available for sale.
The Company believes that expected cash flows from operations combined with
existing cash and cash equivalents and short-term investments will be sufficient
to meet its cash requirements for the foreseeable future. See "Risk Factors -
Uncertainty of Future Operating Results"; "Fluctuations in Quarterly Operating
Results," and "Future Acquisitions."
Factors That May Affect Future Results
In evaluating the Company's business, prospective investors should
carefully consider the following factors in addition to the other information
presented in this report.
Uncertainty of Future Operating Results. Our future operating results are
difficult to predict due to a variety of factors, many of which are outside of
our control. These factors include:
. the demand for our products and services;
. the level of product and price competition;
. the size, type and timing of individual license transactions;
. the delay or deferral of customer implementations;
. our success in expanding our direct sales force and indirect distribution
channels;
. the timing of new product introductions and product enhancements; levels of
international sales;
. changes in our pricing policy or that of our competitors;
. publication of opinions about us, our products and object-oriented,
component technology by industry analysts;
. our ability to retain key employees and hire new employees; and
. our ability to develop and market new products and control costs.
12
<PAGE>
One or more of the foregoing factors may cause our operating expenses to be
disproportionately high during any given period or may cause our net revenue and
operating results to fluctuate significantly. Based on the preceding factors, we
may experience a shortfall in revenue or earnings or otherwise fail to meet
public market expectations, which could materially adversely affect our
business, financial condition and the market price of our common stock. For
example, our financial results for the third and fourth fiscal quarter of 1999
were below the expectations of public market financial analysts. The primary
factors leading to the lower than expected results were (1) a longer sales cycle
and product learning curve for the newly acquired Nouveau products, (2) lower
than expected European sales and (3) distractions associated with mergers and
reorganization. After each such announcement of financial results, the price of
our common stock declined materially.
Fluctuations in Quarterly Operating Results. We generally ship orders as
received and as a result typically have little or no backlog. The lack of
significant backlog means that quarterly revenue and operating results depend
substantially on the volume and timing of orders we receive during the quarter,
which are difficult to forecast due to a number of reasons, many of which are
outside our control. Such reasons include:
. lack of a reliable means to assess overall customer demand;
. historically we have earned a substantial portion of our revenue in the
last weeks, or even days, of each quarter;
. larger customer orders are subject to long sales cycles and are frequently
delayed; and
. our service and maintenance revenue tends to fluctuate as consulting
contracts are undertaken, renewed, completed or terminated.
We base operating expenses on anticipated revenue trends and a high
percentage of these expenses are relatively fixed. As a result, a delay in the
recognition of revenue from a limited number of transactions could cause
significant variations in operating results from quarter to quarter and could
lead to significant losses. As a result of these factors, operating results and
growth rates for any particular quarter or other fiscal period may not be
indicative of future operating results. Furthermore, fluctuations in our
quarterly operating results will likely result in volatility in the price of our
Common Stock in the future.
Management of Growth. Our business has grown in recent years. This growth
has placed a significant strain on our management systems and resources. To
manage future growth we must continue to (1) improve our financial and
management controls, reporting systems and procedures on a timely basis and (2)
expand, train and manage our employee work force. If we fail to manage our
growth effectively, our business, financial condition and results of operations
could be materially and adversely affected.
For example, the acquisition of Stingray Software, Inc. resulted in our
product development team being distributed in four separate sites across the
country. The difficulty of managing this distribution contributed to our
decision during 1998 to close two of our four development sites. The closures
resulted in one-time charges of approximately $580,000 and caused disruption to
our development efforts. In addition, in 1998 we moved our administrative
operations from Corvallis, Oregon, to Boulder, Colorado. This move resulted in
the distribution of our senior management team, which may make managing our
operations in the future more difficult. More recently, we completed the
acquisition of NobleNet in the Boston, Massachusetts area, and established a
development team in Boulder, Colorado, again adding to the number of development
sites and distribution of senior management.
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Dependence on Emerging Market for C++, Visual C++/MFC and Java. Our product
lines are designed for use in object-oriented software application development,
specifically the C++, Visual C++/MFC and Java programming languages. To date, a
substantial majority of our revenue has been attributable to sales of products
and related maintenance and consulting services related to C++ programming and
development. We believe that while the market for object- oriented technology is
growing, our growth depends upon broader market acceptance of object-oriented
technology. Object-oriented programming languages are very complex and the
number of software developers using them is relatively small compared to the
number of developers using other software development technology. Our financial
performance will depend in part upon continued growth in object-oriented
technology and markets and the development of standards that our products
address. There can be no assurance that the market will continue to grow or that
we will be able to respond effectively to the evolving requirements of the
market.
We have also developed several products for use in the Java market. We have
spent and will continue to devote resources to the development of new and
enhanced products that address the Java market. There can be no assurance that
we will be successful in marketing our Java products or that the market for Java
products will grow. If the Java market fails to grow, or grows more slowly than
we currently anticipate, our business could be adversely affected.
Competition. Our products target the emerging market for network-based
applications, C++, Visual C++/MFC, Visual Basic/ActiveX and Java software parts
and programming tools. Direct competitors in the network based application and
C++ market include Microsoft (with its Microsoft Foundation Classes, "MFC"),
IBM, ILOG, IONA Technologies, BEA Systems, and Inprise and several privately
held companies. Microsoft is a particularly strong competitor due to its large
installed base and the fact that it bundles its MFC library with its own and
other C++ compilers. Microsoft may decide in the future to devote more resources
to or broaden the functions of MFC in order to address and more effectively
compete with the functionality of our products. We face direct competition in
the Java market from Inprise, JavaSoft (a business unit of Sun Microsystems),
Microsoft, Sybase, Symantec and other companies for our Java products and expect
to face significant competition in the future from such companies with respect
to other Java products we may introduce.
Software applications can also be developed using our components in
environments other than C++ or Java. Indirect competitors with such offerings
include Microsoft (with its ActiveX technology), Inprise, Oracle, and Powersoft
(a subsidiary of Sybase). Many of these competitors have significantly greater
resources, name recognition and larger installed bases of customers than we do.
In addition, several database vendors, such as Informix, Oracle and Sybase are
increasingly developing robust software parts for inclusion with their database
products and may begin to compete with us in the future. These potential
competitors have well-established relationships with current and potential
customers and have the resources to enable them to more easily offer a single
vendor solution. Like our current competitors, many of these companies have
longer operating histories, significantly greater resources and name recognition
and larger installed bases of customers than we do. As a result, these potential
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements, or to devote greater resources to the
development, promotion and sale of their products than we may.
We also face competition from systems integrators and our customers'
internal information technology departments. Many systems integrators possess
industry specific expertise that may enable them to offer a single vendor
solution more easily, and already have a reputation among potential
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customers for offering enterprise-wide solutions to software programming needs.
Systems integrators may market competitive software products in the future.
There are many factors that may increase competition in the market for
object-oriented software parts and programming tools, including (1) entry of new
competitors, (2) alliances among existing competitors and (3) consolidation in
the software industry. Increased competition may result in price reductions,
reduced gross margins or loss of market share, any of which could materially
adversely affect our business, operating results and financial condition. If we
cannot compete successfully against current and future competitors or overcome
competitive pressures, our business, operating results and financial condition
may be adversely affected.
Risks Associated with New Versions and New Products; Rapid Technological
Change. The software market in which we compete is characterized by (1) rapid
technological change, (2) frequent introductions of new products, (3) changing
customer needs and (4) evolving industry standards. To keep pace with
technological developments, evolving industry standards and changing customer
needs, we must support existing products and develop new products. We may not be
successful in developing, marketing and releasing new products or new versions
of our products that respond to technological developments, evolving industry
standards or changing customer requirements. We may also experience difficulties
that could delay or prevent the successful development, introduction and sale of
these enhancements. In addition, these enhancements may not adequately meet the
requirements of the marketplace and may not achieve any significant degree of
market acceptance. If release dates of any future products or enhancements are
delayed, or if these products or enhancements fail to achieve market acceptance
when released, our business, operating results and financial condition could be
materially and adversely affected. In addition, new products or enhancements by
our competitors may cause customers to defer or forgo purchases of our products,
which could have a material adverse effect on our business, financial condition
and results of operations.
Risks of Future Acquisitions. We frequently evaluate strategic
opportunities available to us and may in the future pursue additional
acquisitions of complementary technologies, products or businesses. Future
acquisitions of complementary technologies, products or businesses may result in
the diversion of management's attention from the day-to-day operations of our
business and may include numerous other risks, including difficulties in the
integration of the operations, products and personnel of the acquired companies.
Future acquisitions may also result in dilutive issuance of equity securities
and the incurrence of debt and amortization expense related to goodwill and
other intangible assets. Our failure to successfully manage future acquisitions
may have a material adverse effect on our business and financial results.
In the second fiscal quarter of 1998 we completed a business combination
with Stingray Software, Inc. Completing the acquisition and commencing the
integration of the acquired business required significant attention from our
management and caused disruption to our ongoing business. We believe that such
disruption had a material adverse effect on the Company's financial results for
the second fiscal quarter of 1998. In the second fiscal quarter of 1999, we
completed the acquisition of NobleNet, Inc. We believe that the longer sales
cycle and product learning curve had a material adverse effect on our financial
results for the third and fourth fiscal quarters of 1999. In addition, the
continued integration of these acquisitions may result in material adverse
results in future quarters.
Risks Associated with International Operations. A significant portion of
our revenue is derived from international sources. To service the needs of these
companies, we must provide worldwide product support services. We have expanded,
and intend to continue expanding, our international operations and enter
additional international markets. This will require significant management
attention
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and financial resources that could adversely affect our operating margins and
earnings. We may not be able to maintain or increase international market demand
for our products. If we do not, our international sales will be limited, and our
business, operating results and financial condition could be materially and
adversely affected.
Our international operations are subject to a variety of risks, including
(1) foreign currency fluctuations, (2) economic or political instability, (3)
shipping delays and (4) various trade restrictions. Any of these risks could
have a significant impact on our ability to deliver products on a competitive
and timely basis. Significant increases in the level of customs duties, export
quotas or other trade restrictions could also have an adverse effect on our
business, financial condition and results of operations. In situations where
direct sales are denominated in foreign currency, any fluctuation in foreign
currency or the exchange rate may adversely affect our business, financial
condition and results of operations.
Dependence Upon Key Personnel. Our future performance depends in
significant part upon the continued service of our key technical, sales and
senior management personnel, none of whom is bound by an employment agreement.
We believe that the technological and creative skills of our personnel are
essential to establishing and maintaining a leadership position, particularly in
light of the fact that our intellectual property, once sold to the public
market, is easily replicated. The loss of the services of one or more of our
executive officers or key technical personnel could have a material adverse
effect on our business.
Our future success also depends on our continuing ability to attract and
retain highly qualified technical, sales and managerial personnel. In the past,
we have experienced some difficulty in attracting key personnel. Competition for
such personnel is intense, and there can be no assurance that we can retain key
employees or that we can attract, assimilate or retain other highly qualified
personnel in the future.
Variability of Sales Cycles. We distribute our products through two
different direct sales channels, a telesales force and a field sales force, each
of which is subject to a variable sales cycle. Products sold by our telesales
force may be sold after a single phone call or may require several weeks of
education and negotiation before a sale is made. As such, the sales cycle
associated with telesales typically ranges from a few days to two months. On the
other hand, the purchase of products from our field sales force is often an
enterprise-wide decision and may require the sales person to provide a
significant level of education to prospective customers regarding the use and
benefits of our products. For these and other reasons, the sales cycle
associated with the sale of our products through our field sales force typically
ranges from two to six months and is subject to a number of significant delays
over which we have little or no control. As a result, quarterly revenue and
operating results can be variable and are difficult to forecast, and we believe
that period-to-period comparisons of quarterly revenue are not necessarily
meaningful and should not be relied upon as an indicator of future revenue.
Proprietary Rights, Risks of Infringement and Source Code Release. We rely
primarily on a combination of copyright, trademark and trade secret laws,
confidentiality procedures and contractual provisions to protect our proprietary
rights. We also believe that factors such as the technological and creative
skills of our personnel, new product developments, frequent product
enhancements, name recognition and reliable product maintenance are essential to
establishing and maintaining a technological leadership position. We seek to
protect our software, documentation and other written materials under trade
secret and copyright laws, which afford only limited protection. Despite our
efforts to protect our proprietary rights, unauthorized parties may attempt to
copy aspects of our products or to obtain and use information that we regard as
proprietary. The nature of many of our products requires the release of the
source code to all customers. As such, policing unauthorized use of our products
is
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difficult, and while we are unable to determine the extent to which piracy of
our products exists, software piracy can be expected to be a persistent problem.
In addition, the laws of some foreign countries do not protect our proprietary
rights as fully as do the laws of the United States. There can be no assurance
that our means of protecting our proprietary rights in the United States or
abroad will be adequate or that competition will not independently develop
similar technology.
Although we do not believe that we are infringing any proprietary rights of
others, third parties may claim that we have infringed their intellectual
property rights. Furthermore, former employers of our former, current or future
employees may assert claims that such employees have improperly disclosed to us
the confidential or proprietary information of such former employers. Any such
claims, with or without merit, could (1) be time consuming to defend, (2) result
in costly litigation, (3) divert management's attention and resources, (4) cause
product shipment delays, and (5) require us to pay money damages or enter into
royalty or licensing agreements. A successful claim of intellectual property
infringement against us and our failure or inability to license or create a
workaround for such infringed or similar technology may materially and adversely
affect our business, operating results and financial condition.
Product Liability. Our license agreements with our customers typically
contain provisions designed to limit our exposure to potential product liability
claims. It is possible, however, that the limitation of liability provisions
contained in our license agreements may not be effective under the laws of
certain jurisdictions. A successful product liability claim brought against us
could have a material adverse effect upon our business, operating results and
financial condition.
Risk Of Product Defects. Software products frequently contain errors or
failures, especially when first introduced or when new versions are released.
Also, new products or enhancements may contain undetected errors, or "bugs", or
performance problems that, despite testing, are discovered only after a product
has been installed and used by customers. Errors or performance problems could
cause delays in product introduction and shipments or require design
modifications, either of which could lead to a loss in revenue. Our products are
typically intended for use in applications that may be critical to a customer's
business. As a result, we expect that our customers and potential customers have
a greater sensitivity to product defects than the market for software products
generally. Despite extensive testing by us and by current and potential
customers, errors may be found in new products or releases after commencement of
commercial shipments, resulting in loss of revenue or delay in market
acceptance, diversion of development resources, the payment of monetary damages,
damage to our reputation, or increased service and warranty costs, any of which
could have a material adverse effect upon our business and results of
operations.
Year 2000 Readiness
In preparation for the year 2000, we engaged in efforts to ensure that our
products and critical business systems properly recognize date-sensitive
information in the year 2000 and beyond. These efforts and their costs are
described below. We have not experienced any significant "year 2000 problems"
with our products and critical business systems and do not expect that we will
do so in the future.
State of Readiness. In 1999, we assessed the ability of our software and
critical business systems to operate properly in the year 2000 and beyond. We
investigated the year 2000 readiness of our software and hardware vendors and
conducted internal tests of the operation of our products and critical business
systems. The only year 2000-related issues we identified were some date handling
issues with five of our currently supported products: NobleNet RPC and EZ-RPC,
Tools.h++, Objective Grid and
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Objective Toolkit. These issues have all been addressed in subsequent releases
of those products and we are not aware that the earlier versions of the products
resulted in any material disruptions for our customers.
Cost of Assessment and Remidiation. We incurred direct costs of
approximately $200,000 in assessing and remediating year 2000 problems.
Risks. We could be exposed to a loss of revenues and our operating expenses
could increase if our products or critical business systems have year 2000
problems. Our potential areas of exposure include products purchased from third
parties, information technology, including computers and software, and
non-information technology, including telephone systems and other equipment used
internally. The reasonably likely worst case scenario for year 2000 problems
would be if a significant defect exists in key hardware or software and if a
solution for such a problem were not immediately available.
Contingency Plan. Although we have not experienced any year 2000-related
problems affecting our internal systems, we have developed contingency plans to
be implemented if our efforts to identify and correct year 2000 problems are not
effective. Depending on the systems affected, these plans include:
- - accelerated replacement of affected equipment or software;
- - short to medium-term use of back-up equipment and software or other
redundant systems;
- - increased work hours for our personnel or the hiring of additional
information technology staff; and
- - the use of contract personnel to correct, on an accelerated basis, any year
2000 problems that arise or to provide interim alternate solutions for
information system deficiencies.
The discussion of our efforts and expectations relating to year 2000
compliance are forward-looking statements. Our ability to achieve year 2000
compliance, and the level of incremental costs associated with compliance, could
be adversely affected by, among other things, the availability and cost of
contract personnel and external resources, third party suppliers' ability to
modify proprietary software, and unanticipated problems not identified in our
ongoing review.
ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk exposure is the potential loss arising from
changes in interest rates and its impact on short-term investments and foreign
currency exchange rate fluctuations.
As of March 31, 2000, short-term investments of $15.8 million were held
available for sale with maturities of less than 180 days. Short-term investments
consist primarily of high credit and highly liquid corporate commercial paper
and money market funds. A substantial change in overall interest rates would not
have a material affect on the financial position of the Company.
Exposure to variability in foreign currency exchange rates is managed
primarily through the use of natural hedges, whereby funding obligations and
assets are both managed in the local currency. In addition, the Company will
from time to time enter into foreign currency exchange agreements to manage its
exposure arising from fluctuating exchange rates, primarily in the Euro. The
Company does not enter into any derivative transactions for speculative
purposes. The sensitivity of earnings and cash flows to variability in exchange
rates is assessed by applying an appropriate range of potential rate
fluctuations to the Company's assets, obligations and projected results of
operations denominated in foreign currencies. Based on the Company's overall
foreign currency rate exposure at March 31, 2000, movements in foreign
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currency rates would not materially affect the financial position of the
Company. As of March 31, 2000, the Company had outstanding short-term forward
exchange contracts to exchange Euros for U.S. dollars in the amount of $2.4
million.
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PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company's annual meeting of stockholders was held on January 25, 2000
(the "Annual Meeting").
(c) The following matters were voted upon at the Annual Meeting:
(i) The first matter related to the election of five director nominees,
Thomas Keffer, Ph.D., Bruce T. Coleman, Thomas M. Atwood, Louis C. Cole and
Richard P. Magnuson as directors of the Company to serve until the next annual
meeting of stockholders. The votes cast and withheld for such nominees were as
follows:
NAMES FOR WITHHELD
------------------------- --------- --------
Thomas Keffer, PH.D 8,622,699 361,828
Bruce T. Coleman 8,593,925 390,602
Thomas M. Atwood 8,350,033 634,494
Louis C. Cole 8,604,706 379,821
Richard P. Magnuson 8,561,475 423,052
(ii) The second matter related to the approval of an amendment of the
Company's Employee Stock Purchase Plan, as amended and restated, to increase the
aggregate number of shares of Common Stock authorized for issuance under such
plan by 200,000 shares and to provide for future automatic increases in the
number of shares of Common Stock authorized for issuance under such plan.
3,870,006 votes were cast for approval, 1,381,155 votes were cast against
approval, and there were 26,731 abstentions and 3,706,635 broker non-votes.
(iii) The third matter related to the ratification of the appointment of
the selection of KPMG LLP as independent auditors of the Company for its fiscal
year ending September 30, 2000. 8,560,717 votes were cast for ratification,
43,234 votes were cast against ratification, and there were 380,576 abstentions.
Based on these reporting results, each director nominated was elected and the
second and third matters were approved.
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PART II - OTHER INFORMATION
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
2.1(1) Agreement and Plan of Reorganization between Registrant, Inmark
Development Corporation and RW Acquisitions, Inc., dated as of September
19, 1995.
2.2(1) Agreement and Plan of Merger between the Registrant and Rogue Wave
Software, Inc., an Oregon corporation.
2.3(3) Agreement and Plan of Merger and Reorganization among Rogue Wave
Software, Inc., a Delaware corporation, SR Acquisition Corp., a North
Carolina corporation, Stingray Software, Inc., a North Carolina corporation
and the shareholders of Stingray Software, Inc., dated as of January 19,
1998.
2.4(4) Articles of Merger and Plan of Merger dated February 27, 1998, filed
with the Secretary of State of North Carolina on February 27, 1998.
2.5(6) Agreement and Plan of Merger and Reorganization among Rogue Wave
Software, Inc., a Delaware corporation, NN Acquisition Corp., a Delaware
corporation, NobleNet, Inc., a Delaware corporation and Steve Lemmo, as
agent for the stockholders of NobleNet, dated as of February 11, 1999.
2.6(6) Certificate of Merger and Plan of Merger dated March 1, 1998, filed
with the Secretary of State of the State of Delaware on March 1, 1999.
3.1(2) Amended and Restated Certificate of Incorporation of Rogue Wave
Software, Inc., a Delaware corporation.
3.2(1) Bylaws of Rogue Wave Software, Inc., a Delaware corporation.
4.1(1) Reference is made to Exhibits 3.1 and 3.2.
4.2(1) Specimen Stock Certificate.
4.3(1) Amended and Restated Investors' Rights Agreement between the
Registrant and certain investors, dated November 10, 1995, as amended June
27, 1996.
4.4 Registration Rights Agreement between the Registrant and Intel 64
Fund LLC, dated February 22, 2000.
10.1(1) Registrant's 1996 Equity Incentive Plan.
10.2 Amended and Restated Employee Stock Purchase Plan, dated June 6, 1996,
as amended January 25, 2000.
10.3(1) Form of Indemnity Agreement entered into between the Registrant and
its officers and directors.
10.4(1) Lease Agreement between Registrant and the State of Oregon, dated
May 1, 1996.
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10.5(1) Lease Agreement between the Registrant and the Landmark, dated
April 22, 1996.
10.6(1) Loan and Security Agreement between the Registrant and Silicon
Valley Bank, dated October 16, 1996.
10.7(1) Collateral Assignment, Patent Mortgage and Security Agreement
between the Registrant and Silicon Valley Bank, dated October 16, 1996.
27 Financial Data Schedule.
(1) Filed as an Exhibit to the Registrant's Registration Statement on Form
SB- 2, as amended (No. 333-13517)
(2) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q
for the quarter ended December 31, 1996.
(3) Filed as Exhibit 2.1 to the Registrant's Form 8-K dated February 27,
1998 and filed on March 9, 1998.
(4) Filed as Exhibit 2.2 to the Registrant's Form 8-K dated February 27,
1998 and filed on March 9, 1998.
(5) Filed as Exhibit 4.1 to the Registrant's Form 8-K dated February 27,
1998 and filed on March 9, 1998.
(6) Filed as an exhibit to the Registrant's Form 8-K dated March 1, 1999
and filed on March 9, 1999.
Items 1, 2, 3, and 5 are not applicable and have been omitted.
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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.
ROGUE WAVE SOFTWARE, INC.
(Registrant)
Date: May 11, 2000 /s/ Merle Waterman
--------------------------------
MERLE WATERMAN
CHIEF FINANCIAL OFFICER)
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EXHIBIT 4.4
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is entered into as of
March 10, 2000 by and between ROGUE WAVE SOFTWARE, INC., a Delaware corporation
(the "Company"), and INTEL 64 FUND, LLC (together with its successors and
permitted assigns, the "Purchaser").
WHEREAS, the Purchaser has agreed to purchase shares of the Company's
Common Stock, $.001 par value per share (the "Common Stock"), pursuant to that
certain Stock Purchase Agreement between the Company and the Purchaser of even
date herewith (the "Stock Purchase Agreement").
WHEREAS, in connection with such purchase, the Company and the Purchaser
desire to enter into certain arrangements with respect to the registration for
public sale under the Securities Act of 1933, as amended (the "Securities Act"),
of the Common Stock.
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Purchaser
hereby agree as follows:
1. Definitions.
-----------
1.1 "Commission" shall mean the Securities and Exchange Commission or
----------
any other federal agency at the time administering the Securities Act.
1.2 "Company" shall mean Rogue Wave Software, Inc., a Delaware
-------
corporation.
1.3 "Common Shares" shall mean the shares of common stock, par value
-------------
$.001 per share, authorized by the Company's Certificate of Incorporation and
any additional shares of common stock which may be authorized in the future by
the Company, and any stock into which such Common Shares may hereafter be
changed.
1.4 "Public Offering" shall mean any offering of Common Shares to the
---------------
public, either on behalf of the Company or any of its security holders, pursuant
to an effective registration statement under the Securities Act.
1.5 "Purchaser" shall mean Intel 64 Fund, LLC, together with its
---------
successors and permitted assigns.
1.6 "Registrable Securities" shall mean (a) the Common Stock and (b)
----------------------
any additional securities issued with respect to the above-described securities
upon any stock split, stock dividend, recapitalization, or similar event. A
portion of Registrable Securities shall cease
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to be Registrable Securities when (x) a registration statement with respect to
the sale of such portion of securities shall have been declared effective under
the Securities Act and such portion of securities shall have been disposed of in
accordance with such registration statement, (y) such portion of securities
shall be eligible to be distributed pursuant to Rule 144 under the Securities
Act in a single three-month period by the holder thereof or (z) such portion of
securities shall have ceased to be outstanding.
1.7 "Registration Expenses" shall mean the expenses described in
---------------------
Section 6.
1.8 "Securities Act" shall mean the Securities Act of 1933, as
--------------
amended.
1.9 "Common Stock" shall mean the outstanding shares of common stock
------------
of the Company, $.001 per share, purchased by Purchaser pursuant to the Stock
Purchase Agreement.
1.10 "Stock Purchase Agreement" shall meant that certain Stock
------------------------
Purchase Agreement of even date herewith, by and between the Company and the
Purchaser relating to the purchase of Common Stock by the Purchaser.
2. Demand Registration.
-------------------
2.1 Subject to Sections 2.3, 2.4 and 2.5, if at any time after twelve
months has elapsed from the date of the closing of the transactions contemplated
by the Stock Purchase Agreement, the Company shall receive a written request
therefor from holder or holders of Registrable Securities, the Company shall
prepare and file a registration statement under the Securities Act covering such
number of Registrable Securities as are the subject of such request, the minimum
number of which shall not be less than the equivalent of $1,000,000 of such
securities' fair market value, and shall use commercially reasonable efforts to
cause such registration statement to become effective; provided that the holder
or holders of no less than all of the Registrable Securities shall have the
right to request the Company to prepare and file a registration statement
pursuant to this Section 2.1 at any time after six months has elapsed from the
date of the closing of the transactions contemplated by the Stock Purchase
Agreement if the Company does not qualify for the use of Form S-3 or any similar
registration form then in force. Upon the receipt of a registration request
meeting the requirements of this Section 2.1, the Company shall promptly give
written notice to all other record holders of Registrable Securities that such
registration is to be effected. The Company shall include in such registration
statement such additional Registrable Securities as such other record holders
request in writing within thirty (30) days after the date of the Company's
written notice to them. If (a) the holders of a majority of the Registrable
Securities for which registration has been requested pursuant to this Section
2.1 determines for any reason not to proceed with the registration at any time
before the related registration statement has been declared effective by the
Commission, (b) such registration statement, if
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theretofore filed with the Commission, is withdrawn and (c) the holders of the
Registrable Securities subject to such registration statement agree to bear
their own Registration Expenses incurred in connection therewith and to
reimburse the Company for the Registration Expenses incurred by it in such
connection or if such registration statement, if theretofore filed with the
Commission, is withdrawn at the initiative of the Company, then the holders of
the Registrable Securities shall not be deemed to have exercised their demand
registration right pursuant to this Section 2.1.
2.2 At the request of the holders of a majority of the Registrable
Securities to be registered, the method of disposition of all Registrable
Securities included in such registration shall be an underwritten Public
Offering. The managing underwriter of any such Public Offering shall be
selected by the Company. If in the good faith judgment of the managing
underwriter of such Public Offering, the inclusion of all of the Registrable
Securities the registration of which has been requested would interfere with
their successful marketing, the number of Registrable Securities to be included
in the underwritten Public Offering may be reduced in the discretion of the
managing underwriter pro rata, among the requesting holders thereof in
proportion to the number of Registrable Securities included in their respective
requests for registration, provided, however, that the number of Shares of
-------- -------
Registrable Securities shall not be reduced unless and until the Shares to be
offered by any other holder of securities are first excluded from such
registration. Registrable Securities that are so excluded from such underwritten
Public Offering shall be withheld from sale by the holders thereof for such
period, not exceeding one hundred and twenty (120) days, as the managing
underwriter reasonably determines is necessary to effect such Public Offering.
2.3 The Company shall be obligated to prepare, file and cause to be
effective not more than two (2) registration statements pursuant to Section 2.1.
2.4 Notwithstanding the foregoing, in the event that prior to the
preparation and filing of any registration statement requested pursuant to
Section 2.1 or Section 4, there is (a) material non-public information regarding
the Company which the Board of Directors reasonably determines to be in the best
interests of the Company not to disclose or (b) a significant business
opportunity (including but not limited to the acquisition or disposition of
assets other than in the ordinary course of business or any merger,
consolidation, tender offer or other similar transaction available to the
Company which the Board of Directors reasonably determines to be in the
Company's best interests not to disclose, the Company may delay initiating the
preparation and filing of such registration statement for a period not to exceed
ninety (90) days until such time as either of the events in clauses (a) or (b)
no longer exists; provided however, that the Company may not utilize this right
under this Section and Section 5.12 for more than an aggregate of ninety (90)
days in any twelve (12) month period.
2.5 Notwithstanding anything to the contrary contained herein, at any
time within thirty (30) days after receiving a demand for registration pursuant
to Section 2.1 or Section 4, the Company may elect to effect an underwritten
primary registration in lieu of the requested registration. If the Company so
elects, the Company shall give prompt written notice to all holders of
Registrable Securities of its intention to effect such a registration and shall
afford such holders the rights contained in Section 3 with respect to
"piggyback" registrations. In such event, the demand for registration pursuant
to Section 2.1 or Section 4 shall be deemed to have been withdrawn.
3
<PAGE>
3. Piggyback Registration.
----------------------
3.1 At any time from the date of the closing of the transactions
contemplated by the Stock Purchase Agreement, each time the Company shall
determine to proceed with the actual preparation and filing of a registration
statement under the Securities Act in connection with the proposed offer and
sale for money of any of its securities by it or any of its security holders
(other than a registration statement on Form S-8, Form S-4 or other limited
purpose form), the Company will give written notice of its determination to all
record holders of Registrable Securities. Upon the written request of a record
holder of any Registrable Securities given within 30 days after the date of any
such notice from the Company, the Company will, except as herein provided, cause
all Registrable Securities the registration of which is requested to be included
in such registration statement, all to the extent requisite to permit the sale
or other disposition by the prospective seller or sellers of the Registrable
Securities to be so registered; provided, however, that nothing herein shall
-------- -------
prevent the Company from, at any time, abandoning or delaying any registration;
and provided, further, that if the Company determines not to proceed with a
--------- -------
registration after the registration statement has been filed with the
Commission, and the Company's decision not to proceed is primarily based upon
the anticipated Public Offering price of the securities to be sold by the
Company, the Company shall promptly complete the registration for the benefit of
those selling security holders who wish to proceed with a Public Offering of
their Registrable Securities and who agree to bear all of the Registration
Expenses incurred by the Company as the result of such registration after the
Company has decided not to proceed. Notwithstanding the foregoing, in the
discretion of the holders of the Registrable Securities to be included in the
registration (provided that such holders are the record holders of at least 51%
of the Registrable Securities), such registration may count as a demand
registration under Section 2.1 (if it otherwise meets the requirements of
Section 2.1) for which the Company will pay all Registration Expenses.
3.2 If any registration pursuant to Section 3.1 is underwritten in
whole or in part, the Company may require that the Registrable Securities
included in the registration be included in the underwriting on the same terms
and conditions as the securities otherwise being sold through the underwriters.
Notwithstanding the foregoing, in connection with such underwriting the holders
shall not be required to provide representations and warranties regarding the
Company or indemnification of the underwriters for material misstatements or
omissions in the registrations statement or prospectus for such offering other
than misstatements and omissions based on information provided by the holders in
writing specifically for use in the preparation of the registration statement.
If, in the good faith judgment of the managing underwriter of the Public
Offering, the inclusion of all of the Registrable Securities originally covered
by requests for registration would reduce the number of shares to be offered by
the Company or interfere with the successful marketing of the shares offered by
the Company, the number of Registrable Securities to be included in the Public
Offering may be reduced pro rata among the holders of the Registrable Securities
requested to be included in the registration and the holders of other securities
proposed to be included in such registration (other than securities to be issued
by the Company), provided, however, that the remaining number of Registrable
-------- -------
Securities held by the holders thereof to be included in the Public Offering
shall not be less than
4
<PAGE>
30% of the aggregate number of Registrable Securities requested to be included
in such registration.
4. Short Form Registration. Subject to Sections 2.4 and 2.5, in addition
-----------------------
to the registration rights provided in Sections 2 and 3, if the Company
qualifies for the use of Form S-3 or any similar registration form then in
force, at the request of a majority of the holders of Registrable Securities
then outstanding, at any time after six months has elapsed from the date of the
closing of the transactions contemplated by the Stock Purchase Agreement, the
Company shall at its expense file a registration statement on such form covering
Registrable Securities on behalf of such holder or holders, provided, however,
-------- -------
that the Company shall not be required to effect any such registration pursuant
to this Section 4 if the holders of Registrable Securities propose to sell
Registrable Securities at less than the lesser of (i) an aggregate price to the
public of less than $1,000,000 or (ii) the amount of Registrable Securities then
outstanding. The holders may also require that the Company offer the
Registrable Securities on a delayed and continuous offering basis on Form S-3 or
any similar registration form then in force subject to the terms of Section 5.2
below. The Company shall give notice to all the holders of Registrable
Securities who did not join in such request and afford them a reasonable
opportunity to participate in such registration. The holders of Registrable
Securities shall not be entitle to make more than two (2) requests for
registration pursuant to this Section 4. Registration pursuant to this Section
4 shall not be deemed to be a demand registration as described in Section 2.
5. Registration Procedures. If and whenever the Company is required by
-----------------------
the provisions of Section 2, Section 3 or Section 4 to effect a registration of
Registrable Securities under the Securities Act, the Company will use reasonable
efforts to effect the registration and sale of such Registrable Securities in
accordance with the intended methods of disposition specified by the holders
participating therein. Without limiting the foregoing, the Company in each such
case will, as expeditiously as possible:
5.1 In the case of a demand registration pursuant to Section 2.1 or
Section 4, prepare and file with the Commission the requisite registration
statement to effect such registration (including such audited financial
statements as may be required by the Securities Act or the rules and regulations
thereunder) and use reasonable efforts to cause such registration statement to
become effective; provided, however, that as far in advance as practical before
-------- -------
filing such registration statement or any amendment thereto, the Company will
furnish counsel for the requesting holders of Registrable Securities with copies
of reasonably complete drafts of all such documents proposed to be filed, and
any such holder shall have the opportunity to object to any information
pertaining solely to such holder that is contained therein and the Company will
make the corrections reasonably requested by such holder with respect to such
information prior to filing such registration statement or amendment.
5.2 Prepare and file with the Commission such amendments and
supplements to such registration statement and any prospectus used in connection
therewith as may be necessary to maintain the effectiveness of such registration
statement and to comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities included in such registration
statement, in accordance with the intended methods of disposition
5
<PAGE>
thereof, until the earlier of (a) such time as all of the Registrable Securities
included in such registration statement have been disposed of in accordance with
the intended methods of disposition by the holder or holders thereof as set
forth in such registration statement or (b) ninety (90) days after such
registration statement becomes effective.
5.3 Promptly notify each requesting holder and the underwriter or
underwriters, if any:
(a) when such registration statement or any prospectus used in
connection therewith, or any amendment or supplement thereto, has been
filed and, with respect to such registration statement or any post-
effective amendment thereto, when the same has become effective;
(b) of any written request by the Commission for amendments or
supplements to such registration statement or prospectus;
(c) of any notification received by the Company from the Commission
regarding the Commission's initiation of any proceeding with respect to, or
of the issuance by the Commission of, any stop order suspending the
effectiveness of such registration statement; and
(d) of the receipt by the Company of any notification with respect to
the suspension of the qualification of any Registrable Securities for sale
under the applicable securities or blue sky laws of any jurisdiction.
5.4 Furnish to each holder of Registrable Securities included
in such registration statement such number of conformed copies of such
registration statement and of each amendment and supplement thereto, and such
number of copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 promulgated under the Securities Act relating to
such seller's Registrable Securities, and such other documents, as such holder
may reasonably request to facilitate the disposition of its Registrable
Securities.
5.5 Use reasonable efforts to register or qualify all
Registrable Securities included in such registration statement under the
securities or "blue sky" laws of such states as each holder of Registrable
Securities shall reasonably request within thirty (30) days following the
original filing of such registration statement and to keep such registration or
qualification in effect for so long as such registration statement remains in
effect, and take any other action which may be reasonably necessary or advisable
to enable such holder to consummate the disposition in such states of the
Registrable Securities owned by such holder, except that the Company shall not
for any such purpose be required (a) to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it would not but for the
requirements of this Section 5.5 be obligated to be so qualified, (b) to consent
to general service of process in any such jurisdiction or (c) to subject itself
to taxation in any such jurisdiction by reason of such registration or
qualification.
6
<PAGE>
5.6 Use its best efforts to cause all Registrable Securities
included in such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to enable
each holder thereof to consummate the disposition of such Registrable
Securities.
5.7 Notify each holder whose Registrable Securities are
included in such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event as a result of which any prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, and, subject to Section 5.12, at the request of any
such holder promptly prepare and furnish to such holder a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchaser of such Registrable
Securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
5.8 Otherwise use reasonable efforts to comply with all
applicable rules and regulations of the Commission.
5.9 Use reasonable efforts to cause all Registrable Securities
included in such registration statement to be listed, upon official notice of
issuance, on any securities exchange or quotation system on which any of the
securities of the same class as the Registrable Securities are then listed.
5.10 Furnish, at the request of any holder requesting
registration of Registrable Securities, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated as of such date, of
the counsel representing the Company for the purposes of such registration, in
form and substance as is customarily given to underwriters in an underwritten
public offering and reasonably satisfactory to the holders requesting
registration, addressed to the underwriters, if any, and to the holders
requesting registration of Registrable Securities and (ii) in the event that
such securities are being sold through underwriters, a "comfort" letter dated as
of such date, from the independent certified public accountants of the Company,
in form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering and reasonably
satisfactory to a majority in interest of the holders requesting registration,
addressed to the underwriters and to the holders requesting registration of
Registrable Securities.
5.11 In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement in usual and
customary form (including customary indemnification of the underwriters by the
Company), with the managing
7
<PAGE>
underwriter(s) of such offering. Each holder participating in such underwriting
shall also enter into and perform its obligations under such an agreement;
provided, however, that it shall not be considered customary to require any of
- -------- -------
the holders to provide representations and warranties regarding the Company or
indemnification of the underwriters for material misstatements or omissions in
the registration statement or prospectus for such offering other than
misstatements and omissions based on information provided by the holders in
writing specifically for use in the preparation of the registration statement.
5.12 The Company may require each holder whose Registrable
Securities are being registered to, and each such holder, as a condition to
including Registrable Securities in such registration statement, shall, furnish
the Company and the underwriters with such information and affidavits regarding
such holder and the distribution of such Registrable Securities as the Company
and the underwriters may from time to time reasonably in connection with such
registration statement. At any time during the effectiveness of any registration
statement covering Registrable Securities offered by a holder, if such holder
becomes aware of any change materially affecting the accuracy of the information
contained in such registration statement or the prospectus (as then amended or
supplemented) relating to such holder, it will immediately notify the Company of
such change.
5.13 Upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 5.7, each holder will
forthwith discontinue such holder's disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable Securities
until such holder receives the copies of the supplemented or amended prospectus
contemplated by Section 5.7 and, if so directed by the Company, shall deliver to
the Company all copies, other than permanent file copies, then in such holder's
possession of the prospectus relating to such Registrable Securities.
5.14 Notwithstanding anything contained herein to the contrary,
in the event that, during the period of time the Company is required to maintain
the effectiveness of the registration statement relating to the Registrable
Securities there is (a) material non-public information regarding the Company
which the Board of Directors reasonably determines to be in the best interests
of the Company not to disclose or (b) a significant business opportunity
(including but not limited to the acquisition or disposition of assets other
than in the ordinary course of business or any merger, consolidation, tender
offer or other similar transaction available to the Company which the Board of
Directors reasonably determines to be in the Company's best interests not to
disclose, the Company may suspend the effectiveness of such registration
statement for a period not to exceed ninety (90) days until such time as either
of the events in clauses (a) or (b) no longer exists; provided however, that the
Company may not utilize this right under this Section and Section 2.4 more than
once in any twelve (12) month period.
6. Expenses. With respect to any registration requested pursuant to
--------
Section 2 (except as otherwise provided in such Section with respect to a
registration voluntarily terminated at the request of the requesting holders of
Registrable Securities), Section 3 (except as otherwise provided in such Section
with respect to a registration continued by holders of Registrable Securities
who wish to proceed with a Public Offering that is withdrawn by the
8
<PAGE>
Company) or Section 4, the Company shall bear all of the expenses ("Registration
Expenses") incident to the Company's performance of or compliance with its
obligations under this Agreement in connection with such registration including,
without limitation, all registration, filing, securities exchange listing and
NASD fees, all registration, filing, qualification and other fees and expenses
or complying with state securities or "blue sky" laws, all word processing,
duplicating and printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits or "cold comfort"
letters required by or incident to such performance and compliance, premiums and
other costs of any policies of insurance against liabilities arising out of the
Public Offering of the Registrable Securities being registered obtained by the
Company (it being understood that the Company shall have no obligation to obtain
such insurance) and any fees and disbursements of underwriters customarily paid
by issuers or sellers of securities; but excluding underwriting discounts and
commissions and transfer taxes, if any, in respect of Registrable Securities and
any fees and disbursements of counsel and accountants to the holders of the
Registrable Securities, which discounts, commissions, transfer taxes, fees and
disbursements shall in any registration be payable by the holders of the
Registrable Securities being registered, pro rata in proportion to the number of
Registrable Securities being sold by them.
7. Indemnification.
---------------
7.1 The Company will, to the full extent permitted by law,
indemnify and hold harmless each holder of Registrable Securities which are
included in a registration statement pursuant to the provisions of this
Agreement, and its directors, officers, shareholders, employees, representatives
and partners and each other person, if any, who controls such holder within the
meaning of the Securities Act (collectively the "Related Entities"), from and
against any and all losses, claims, damages, expenses or liabilities, joint or
several (collectively, "Losses") to which such holder and its Related Entities
may become subject under the Securities Act or otherwise, insofar as such Losses
(or actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in a registration statement prepared and filed
hereunder, any preliminary, final or summary prospectus contained therein or any
amendment or supplement thereto or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein (in the case of a prospectus, in the light of the
circumstances under which they were made) not misleading or any violation or
alleged violation by the Company of the Securities Act, the Exchange Act, any
federal or state securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any federal or state securities law in
connection with the offering covered by such registration statement, and the
Company will reimburse the holder and any of its Related Entities for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending against any such Losses (or action or proceeding in respect
thereof); provided, however, that the Company will not be liable in any such
-------- -------
case to the extent that any such Losses arise out of or are based upon (a) an
untrue statement or alleged untrue statement or omission or alleged omission
made in conformity with written information furnished by such holder
specifically for use in the preparation of the registration statement or (b)
such holder's failure to
9
<PAGE>
send or give a copy of the final prospectus to the persons asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
person if such statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such holder or any of its Related Entities
and shall survive the transfer of such securities by such holder.
7.2 Each holder of Registrable Securities which are included in
a registration pursuant to the provisions of this Agreement will, to the full
extent permitted by law, indemnify and hold harmless the Company and its Related
Entities from and against any and all Losses to which the Company and its
Related Entities may become subject under the Securities Act or otherwise,
insofar as such Losses (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue or
alleged untrue statement of any material fact contained in a registration
statement prepared and filed hereunder, any preliminary, final or summary
prospectus contained therein or any amendment or supplement thereto, or arise
out of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein (in the case of a prospectus, in the light of the circumstances under
which they were made) not misleading, or arise out of or are based upon any
violation or alleged violation by the holder of the Securities Act, the Exchange
Act, any federal or state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any federal or state securities
law in connection with the offering covered by such registration statement, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission or violation was so
made in reliance upon and in strict conformity with written information
furnished by such holder specifically for use in the preparation of such
registration statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company or any of
its Related Entities. The holder of Registrable Securities included in a
registration statement shall also indemnify each other person who participates
(including as an underwriter) in the offering or sale of Registrable Securities,
their officers and directors, and partners, and each other person, if any, who
controls any such participating person within the meaning of the Securities Act
to the same extent as provided above with respect to the Company. The total
amounts payable in indemnity by a holder under this subsection shall not exceed
in the aggregate the net proceeds received by such holder in the registered
offering which triggered this indemnification unless such claim for
indemnification is based upon fraud committed by such holder.
7.3 Promptly after receipt by a party indemnified pursuant to
the provisions of Section 7.1 or Section 7.2 of notice of the commencement of
any action involving the subject matter of the foregoing indemnity provisions,
such indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of Section 7.1 or Section 7.2,
promptly notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve the indemnifying
party from any liability which it may have to any indemnified party except to
the extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against any indemnified party,
the indemnifying party shall have the right to participate in, and,
10
<PAGE>
to the extent that it may wish, jointly with any other indemnifying party, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party; provided, however, that if the defendants in any action
include both the indemnified party and the indemnifying party and the
indemnified party reasonably concludes that there is a conflict of interest that
would prevent counsel for the indemnifying party from also representing the
indemnified party, the indemnified party shall have the right to select separate
counsel to participate in the defense of such action on behalf of the
indemnified party or parties with the fees and expenses of such separate counsel
to be paid by the indemnifying party. After notice from the indemnifying party
to such indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of Section 7.1 or Section 7.2 for any legal or other expense
subsequently incurred by such indemnified party in connection with the defense
thereof unless (a) the indemnified party shall have employed counsel in
accordance with the proviso of the preceding sentence, (b) the indemnifying
party shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after the
notice of the commencement of the action or (c) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party. If the indemnifying party is not entitled to, or elects
not to, assume the defense of a claim, it will not be obligated to pay the fees
and expenses of more than one counsel for the indemnified parties with respect
to such claim. No indemnifying party shall consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation without the
consent of the indemnified party. No indemnifying party shall be subject to any
liability for any settlement made without its consent. An indemnified party may
at any time elect to participate in the defense of any claim or proceeding at
its own expense.
7.4 The foregoing indemnity agreements of the Company and
holders are subject to the condition that, insofar as they relate to any
violation (indemnifiable under this Section 7) made in a preliminary prospectus
but eliminated or remedied in the amended prospectus on file with the SEC at the
time the registration statement in question becomes effective or the amended
prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "Final
Prospectus"), such indemnity agreement shall not inure to the benefit of any
person if a copy of the Final Prospectus was timely furnished to the indemnified
party and was not furnished to the person asserting the loss, liability, claim
or damage at or prior to the time such action is required by the Securities Act.
7.5 The obligations of the Company and holders under this
Section 7 shall survive until the fifth anniversary of the completion of any
offering of Registrable Securities in a registration statement, regardless of
the expiration of any statutes of limitation or extensions of such statutes
8. Covenants Relating to Rule 144. If at any time the Company is
------------------------------
required to filed reports in compliance with either Section 13 or Section 15(d)
of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") the
Company will (a) file reports in compliance
11
<PAGE>
with the Exchange Act and (b) comply with all rules and regulations of the
Commission applicable to the use of Rule 144.
9. Underwritten Offerings. If a distribution of Registrable
----------------------
Securities pursuant to a registration statement is to be underwritten, the
holders whose Registrable Securities are to be distributed by such underwriters
shall be parties to such underwriting agreement. No requesting holder may
participate in such underwritten offering unless such holder agrees to sell its
Registrable Securities on the basis provided in such underwriting agreement and
completes and executes all questionnaires, powers of attorney, indemnities and
other documents reasonably required under the terms of such underwriting
agreement. Notwithstanding the foregoing, in connection with such underwriting
the holders shall not be required to provide representations and warranties
regarding the Company or indemnification of the underwriters for material
misstatements or omissions in the registrations statement or prospectus for such
offering other than misstatements and omissions based on information provided by
the holders in writing specifically for use in the preparation of the
registration statement. If any requesting holder disapproves of the terms of
an underwriting, such holder may elect to withdraw therefrom and from such
registration by notice to the Company and the managing underwriter, and each of
the remaining requesting holders shall be entitled to increase the number of
Registrable Securities being registered to the extent of the Registrable
Securities so withdrawn in the proportion which the number of Registrable
Securities being registered by such remaining requesting holder bears to the
total number of Registrable Securities being registered by all such remaining
requesting holders.
10. Amendment. This Agreement may be amended with the written
---------
consent of the Company and the holders of more than 50% of the Registrable
Securities. Without the prior written consent of the Purchaser, the Company
covenants and agrees that it shall not grant, or cause or permit to be created,
for the benefit of any person or entity any registration rights of any kind
(whether similar to the demand, "piggyback" or Form S-3 registration rights
described in this Section 7, or otherwise) relating to shares of the Company's
Common Stock or any other securities of the Company that are pari passu or
superior to the rights granted under this Agreement.
11. Termination. This Agreement, and all of the Company's
-----------
obligations hereunder (other than its obligations pursuant to Section 7, which
obligations shall survive such termination), shall terminate upon the earlier to
occur of (a) the date on which there are no Registrable Securities outstanding;
(b) the date on which Purchaser may sell all Common Stock pursuant to Rule 144
in a single three month period, or (c) two (2) years after the closing of the
transactions contemplated by the Stock Purchase Agreement.
12. Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant hereto may be assigned, in
whole or in part (but only with all related obligations), by a holder of
Registrable Securities to a transferee or assignee of such securities provided
such transferee agrees in writing to be bound by and subject to the terms and
conditions hereof.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed and delivered as of the day and year first above
written.
ROGUE WAVE SOFTWARE, INC.
By: /s/ Merle A. Waterman
----------------------
Name: Merle A. Waterman
Title: Chief Financial Officer
INTEL 64 FUND, LLC
By: INTEL 64 FUND OPERATIONS, INC.,
its Coordinating Member
By:/s/ Arvind Sodhani
------------------
Name: Arvind Sodhani
Title: Vice President
13
<PAGE>
EXHIBIT 10.2
ROGUE WAVE SOFTWARE, INC.
EMPLOYEE STOCK PURCHASE PLAN
Adopted June 6, 1996
Approved By Stockholders October 30, 1996
Amended October 13, 1998
Approved By Stockholders January 21, 1999
Amended October 21, 1999
Approved by Stockholders January 25, 2000
Termination Date: None
1. Purpose.
(a) The purpose of the Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of Rogue Wave Software, Inc., a Delaware
corporation (the "Company"), and its Affiliates, as defined in subparagraph
1(b), which are designated as provided in subparagraph 2(b), may be given an
opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
(d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. Administration.
(a) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the Company
shall be granted and the provisions of each offering of such rights (which need
not be identical).
(ii) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
<PAGE>
(iii) To construe and interpret the Plan and rights granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan, in a manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company and its Affiliates and to carry out the intent that the Plan be treated
as an "employee stock purchase plan" within the meaning of Section 423 of the
Code.
(c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee")
constituted in accordance with the requirements of Rule 16b-3 under the
Securities Exchange Act of 1934 (the "Exchange Act" and "Rule 16b-3"); provided
that the Committee shall be required to satisfy the foregoing requirements only
to the extent required to exempt transactions under the Plan pursuant to Rule
16b-3. If administration is delegated to a Committee, the Committee shall have,
in connection with the administration of the Plan, the powers theretofore
possessed by the Board, subject, however, to such resolutions, not inconsistent
with the provisions of the Plan, as may be adopted from time to time by the
Board. The Board may abolish the Committee at any time and revest in the Board
the administration of the Plan.
3. Shares Subject to the Plan.
(a) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock and subject to the increase in the number of reserved shares
described below, the stock that may be sold pursuant to rights granted under the
Plan shall not exceed in the aggregate six hundred fifty thousand (650,000)
shares of Common Stock (the "Reserved Shares"). As of each January 1, beginning
with January 1, 2001, and continuing through and including January 1, 2009, the
number of Reserved Shares will be increased automatically by the lesser of (i)
three percent (3%) of the total number of shares of Common Stock outstanding on
such January 1, or (ii) three hundred thousand (300,000) shares. If any right
granted under the Plan shall for any reason terminate without having been
exercised, the Common Stock not purchased under such right shall again become
available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. Grant of Rights; Offering.
The Board or the Committee may from time to time grant or provide for the
grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all employees granted rights to purchase stock under the Plan
shall have the same rights and privileges. The terms and conditions of an
Offering shall be
2
<PAGE>
incorporated by reference into the Plan and treated as part of the Plan. The
provisions of separate Offerings need not be identical, but each Offering shall
include (through incorporation of the provisions of this Plan by reference in
the document comprising the Offering or otherwise) the period during which the
Offering shall be effective, which period shall not exceed twenty-seven (27)
months beginning with the Offering Date, and the substance of the provisions
contained in paragraphs 5 through 8, inclusive.
5. Eligibility.
(a) Rights may be granted only to employees of the Company or, as the Board
or the Committee may designate as provided in subparagraph 2(b), to employees of
any Affiliate of the Company. Except as provided in subparagraph 5(b), an
employee of the Company or any Affiliate shall not be eligible to be granted
rights under the Plan, unless, on the Offering Date, such employee has been in
the employ of the Company or any Affiliate for such continuous period preceding
such grant as the Board or the Committee may require, but in no event shall the
required period of continuous employment be equal to or greater than two (2)
years. In addition, unless otherwise determined by the Board or the Committee
and set forth in the terms of the applicable Offering, no employee of the
Company or any Affiliate shall be eligible to be granted rights under the Plan,
unless, on the Offering Date, such employee's customary employment with the
Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
(b) The Board or the Committee may provide that, each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(i) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination of the exercise
price of such right;
(ii) the period of the Offering with respect to such right shall
begin on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board or the Committee may provide that if such person first
becomes an eligible employee within a specified period of time before the end of
the Offering, he or she will not receive any right under that Offering.
(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of
this subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
3
<PAGE>
(d) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) of fair market value of such stock (determined at the time such rights
are granted) for each calendar year in which such rights are outstanding at any
time.
(e) Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan, provided, however, that the Board
may provide in an Offering that certain employees who are highly compensated
employees within the meaning of Section 423(b)(4)(D) of the Code shall not be
eligible to participate.
6. Rights; Purchase Price.
(a) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable with a percentage designated
by the Board or the Committee not exceeding fifteen percent (15%) of such
employee's Earnings (as defined by the Board or the Committee in each Offering)
during the period which begins on the Offering Date (or such later date as the
Board or the Committee determines for a particular Offering) and ends on the
date stated in the Offering, which date shall be no later than the end of the
Offering. The Board or the Committee shall establish one or more dates during
an Offering (the "Purchase Date(s)") on which rights granted under the Plan
shall be exercised and purchases of Common Stock carried out in accordance with
such Offering.
(b) In connection with each Offering made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased by any
employee as well as a maximum aggregate number of shares that may be purchased
by all eligible employees pursuant to such Offering. In addition, in connection
with each Offering that contains more than one Purchase Date, the Board or the
Committee may specify a maximum aggregate number of shares which may be
purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
(c) The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Purchase Date.
7. Participation; Withdrawal; Termination.
4
<PAGE>
(a) An eligible employee may become a participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings during the
Offering (as defined by the Board or Committee in each Offering). The payroll
deductions made for each participant shall be credited to an account for such
participant under the Plan and shall be deposited with the general funds of the
Company. A participant may reduce (including to zero) or increase such payroll
deductions, and an eligible employee may begin such payroll deductions, after
the beginning of any Offering only as provided for in the Offering. A
participant may make additional payments into his or her account only if
specifically provided for in the Offering and only if the participant has not
had the maximum amount withheld during the Offering.
(b) At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides.
Such withdrawal may be elected at any time prior to the end of the Offering
except as provided by the Board or the Committee in the Offering. Upon such
withdrawal from the Offering by a participant, the Company shall distribute to
such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new participation agreement in order
to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating employee's employment with the
Company and any designated Affiliate, for any reason, and the Company shall
distribute to such terminated employee all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the terminated employee) under the Offering, without interest.
(d) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 14 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such rights
are granted.
8. Exercise.
(a) On each Purchase Date specified therefor in the relevant Offering, each
participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than the amount
required to purchase one share of stock on the
5
<PAGE>
final Purchase Date of an Offering shall be held in each such participant's
account for the purchase of shares under the next Offering under the Plan,
unless such participant withdraws from such next Offering, as provided in
subparagraph 7(b), or is no longer eligible to be granted rights under the Plan,
as provided in paragraph 5, in which case such amount shall be distributed to
the participant after such final Purchase Date, without interest. The amount, if
any, of accumulated payroll deductions remaining in any participant's account
after the purchase of shares which is equal to the amount required to purchase
whole shares of stock on the final Purchase Date of an Offering shall be
distributed in full to the participant after such Purchase Date, without
interest.
(b) No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the Plan is
in material compliance with all applicable state, foreign and other securities
and other laws applicable to the Plan. If on a Purchase Date in any Offering
hereunder the Plan is not so registered or in such compliance, no rights granted
under the Plan or any Offering shall be exercised on such Purchase Date, and the
Purchase Date shall be delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the Purchase Date shall
not be delayed more than twelve (12) months and the Purchase Date shall in no
event be more than twenty-seven (27) months from the Offering Date. If on the
Purchase Date of any Offering hereunder, as delayed to the maximum extent
permissible, the Plan is not registered and in such compliance, no rights
granted under the Plan or any Offering shall be exercised and all payroll
deductions accumulated during the Offering (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
9. Covenants of the Company.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.
(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.
10. Use of Proceeds from Stock.
Proceeds from the sale of stock pursuant to rights granted under the Plan
shall constitute general funds of the Company.
11. Rights as a Stockholder.
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the
6
<PAGE>
participant's shareholdings acquired upon exercise of rights under the Plan are
recorded in the books of the Company.
12. Adjustments upon Changes in Stock.
(a) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or other transaction
not involving the receipt of consideration by the Company), the Plan and
outstanding rights will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan and the class(es) and number of shares and
price per share of stock subject to outstanding rights. Such adjustments shall
be made by the Board or the Committee, the determination of which shall be
final, binding and conclusive. (The conversion of any convertible securities of
the Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company; (2)
a merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) the acquisition by any person,
entity or group within the meaning of Section 13(d) or 14(d) of the Exchange Act
or any comparable successor provisions (excluding any employee benefit plan, or
related trust, sponsored or maintained by the Company or any Affiliate of the
Company) of the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rule) of securities
of the Company representing at least fifty percent (50%) of the combined voting
power entitled to vote in the election of directors, then, as determined by the
Board in its sole discretion (i) any surviving or acquiring corporation may
assume outstanding rights or substitute similar rights for those under the Plan,
(ii) such rights may continue in full force and effect, or (iii) participants'
accumulated payroll deductions may be used to purchase Common Stock immediately
prior to the transaction described above and the participants' rights under the
ongoing Offering terminated.
13. Amendment of the Plan.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for rights under the
Plan;
(ii) Modify the provisions as to eligibility for participation in the
Plan (to the extent such modification requires stockholder approval in
order for the Plan to obtain employee stock purchase plan treatment under
Section 423 of the Code; or
7
<PAGE>
(iii) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code.
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee stock purchase plans
and/or to bring the Plan and/or rights granted under it into compliance
therewith.
(b) Rights and obligations under any rights granted before amendment of the
Plan shall not be impaired by any amendment of the Plan, except with the consent
of the person to whom such rights were granted, or except as necessary to comply
with any laws or governmental regulations, or except as necessary to ensure that
the Plan and/or rights granted under the Plan comply with the requirements of
Section 423 of the Code.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its sole discretion, may deliver such shares
and/or cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
15. Termination or Suspension of the Plan.
(a) The Board in its discretion, may suspend or terminate the Plan at any
time. No rights may be granted under the Plan while the Plan is suspended or
after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except as
expressly provided in the Plan or with the consent of the person to whom such
rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
rights granted under the Plan comply with the requirements of Section 423 of the
Code.
16. Effective Date of Plan.
8
<PAGE>
The Plan shall become effective on the same day that the Company's initial
public offering of shares of common stock becomes effective (the "Effective
Date"), but no rights granted under the Plan shall be exercised unless and until
the Plan has been approved by the stockholders of the Company within twelve (12)
months before or after the date the Plan is adopted by the Board or the
Committee, which date may be prior to the Effective Date.
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM COMPANY'S
QUARTERLY REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 18,551
<SECURITIES> 15,755
<RECEIVABLES> 10,242
<ALLOWANCES> 1,121
<INVENTORY> 95
<CURRENT-ASSETS> 45,864
<PP&E> 11,868
<DEPRECIATION> 7,778
<TOTAL-ASSETS> 63,160
<CURRENT-LIABILITIES> 16,623
<BONDS> 0
0
0
<COMMON> 10
<OTHER-SE> 46,527
<TOTAL-LIABILITY-AND-EQUITY> 63,160
<SALES> 25,658
<TOTAL-REVENUES> 25,658
<CGS> 4,733
<TOTAL-COSTS> 4,733
<OTHER-EXPENSES> 22,194
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9
<INCOME-PRETAX> (578)
<INCOME-TAX> 41
<INCOME-CONTINUING> (619)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (619)
<EPS-BASIC> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
