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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 30, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
BEA SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 77-0394711
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
2315 NORTH FIRST STREET
SAN JOSE, CALIFORNIA 95131
(408) 570-8000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRAR'S PRINCIPAL EXECUTIVE OFFICES)
----------------
WILLIAM T. COLEMAN III
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
2315 NORTH FIRST STREET
SAN JOSE, CALIFORNIA 95131
(408) 570-8000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
MICHAEL C. PHILLIPS, ESQ.
CORI M. ALLEN, ESQ.
MORRISON & FOERSTER LLP
755 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304
(650) 813-5600
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SHARES TO BE TO BE AGGREGATE PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
Common Stock, $.001 par 7,682,945
value................. shares $17.438(1) $133,975,195(1) $37,246
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) based on the average of the high and low
reported sales prices on the Nasdaq National Market on October 27, 1998.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE AN AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY +
+NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN +
+OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE +
+SECURITIES IN ANY STATE WHERE THE OFFER OF SALE IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED OCTOBER 30, 1998
PROSPECTUS
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BEA SYSTEMS, INC.
7,682,945 SHARES OF COMMON STOCK
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7,682,945 shares of the Company's common stock were issued to certain former
stockholders of WebLogic, Inc. pursuant to the acquisition by the Company of
WebLogic, Inc. Some of these stockholders may wish to sell these shares in the
future, and this Prospectus allows them to do so. The Company will not receive
any of the proceeds from any sale of shares by such stockholders, but has
agreed to bear the expenses of registration of the shares by this Prospectus.
Nasdaq National Market symbol: BEAS
The last sale price of the common stock on the Nasdaq National Market on
October 29, 1998 was $17.50 per share.
-----------
THE SHARES REGISTERED HEREBY INVOLVE A HIGH LEVEL OF INVESTMENT RISK. YOU
SHOULD INVEST ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS"
BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-----------
, 1998
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TABLE OF CONTENTS
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PAGE
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<S> <C>
Available Information...................................................... 3
Incorporation of Certain Documents by Reference............................ 4
The Company................................................................ 5
Recent Events.............................................................. 6
Use of Proceeds............................................................ 7
Risk Factors............................................................... 8
Selling Stockholders....................................................... 18
Plan of Distribution....................................................... 19
Experts.................................................................... 20
Legal Matters.............................................................. 20
</TABLE>
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No person has been authorized to give any information or to make any
representations not contained or incorporated by reference in this Prospectus
in connection with the offer described in this Prospectus and, if given or
made, such information and representations must not be relied upon as having
been authorized by the Company or the Selling Securityholders. Neither the
delivery of this Prospectus nor any sale made under this Prospectus shall under
any circumstances create any implication that there has been no change in the
affairs of the Company since the date hereof or since the date of any documents
incorporated herein by reference. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any securities other than the
securities to which it relates, or an offer or solicitation in any state to any
person to whom it is unlawful to make such offer in such state.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith the Company files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information filed can be inspected and copied at the
Commission's Public Reference Section, 450 Fifth Street, N.W., Washington,
D.C., 20549, and at the following regional offices of the Commission: Seven
World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a web site (http://www.sec.gov) containing reports, proxy and
information statements and other information of registrants, including the
Company, that file electronically with the Commission. In addition, the Common
Stock is listed on the Nasdaq National Market and similar information
concerning the Company can be inspected and copied at the offices of the
National Association of Securities Dealers, Inc., 9513 Key West Avenue,
Rockville, Maryland 20850.
The Company has filed with the Commission a registration statement on Form S-3
(the "Registration Statement") (of which this Prospectus is a part) under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Shares. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. Statements contained
in this Prospectus as to the contents of any contract or other documents are
not necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference and the exhibits and schedules thereto. For further information
regarding the Company and the Shares, reference is hereby made to the
Registration Statement and such exhibits and schedules which may be obtained
from the Commission at its principal office in Washington, D.C. upon payment of
the fees prescribed by the Commission.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company under the Exchange
Act with the Commission and are incorporated herein by reference:
a. The Company's Annual Report on Form 10-KSB for the year ended January 31,
1998;
b. The Company's Quarterly Reports on Form 10-Q for the quarters ended April
30, 1998, as amended September 10, 1998, and July 31, 1998, respectively;
c. The Company's Current Reports on Form 8-K dated as of June 30, 1998,
September 10, 1998 and October 15, 1998, as amended October 29, 1998; and
d. The description of the Registrant's Common Stock contained in the
Company's Registration Statement on Form 8-A (File No. 000-22369).
Each document filed by the Company pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering made hereby shall be deemed to be
incorporated by reference in this Prospectus and to be part hereof from the
date of filing such documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein (or in the applicable Prospectus Supplement) or in
any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, to whom this
Prospectus is delivered upon written or oral request. Requests should be
directed to Kevin A. Faulkner, Senior Director--Investor Relations, 2315 North
First Street, San Jose 95131, telephone number: (408) 570-8000.
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THE COMPANY
BEA Systems, Inc. ("BEA" or the "Company") is a leading provider of cross-
platform middleware solutions for enterprise applications. BEA's products and
services enable mission-critical applications to work seamlessly in distributed
computing, Internet, and legacy environments. BEA provides transactional,
messaging, and distributed object-based software for developing and deploying
these enterprise applications. In addition, BEA provides complete enterprise
middleware solutions through its partner network, and a full range of services
including consulting, training and support. The flagship of the BEA enterprise
middleware solution is BEA TUXEDO, a software platform that manages
transactions and communications for enterprise-wide applications, enabling
organizations to realize the benefits offered by distributed computing
environments while preserving the traditional advantages of mainframe-based
systems. BEA products provide a middleware software infrastructure that
supports thousands of simultaneous users distributed worldwide.
BEA's products are marketed and sold by the Company's direct sales force
through a network of 51 offices in 24 countries worldwide and also indirectly
by its distribution partners. BEA's products have been adopted by customers in
a wide variety of industries, including telecommunications, banking and
finance, manufacturing, retail, technology and transportation. The total number
of customers using the Company's products is approximately 2,000 worldwide.
These customers include: The AT&T Corp., Bell Communications Research, Inc.,
The Boeing Company, Deutsche Telekom, Federal Express Corp., Fidelity
Investments, The Gap, Inc., McKesson Corp., Motorola, Inc., Nippon Telephone &
Telegraph, Norwest Corporation, United Airlines, Inc., U.K. Employment
Services, Union Pacific Railroad and Walgreen Co. In addition, the Company
partners with independent software vendors ("ISVs") such as PeopleSoft, Inc.
and Clarify, Inc. and computer hardware manufacturers such as Hewlett-Packard,
IBM and Unisys to sell BEA products to enterprise customers.
Over the past decade, the information systems of many organizations have been
evolving from traditional mainframe systems to distributed computing
environments. This evolution has been driven by the benefits offered by
distributed computing, including lower incremental technology costs, faster
application development and deployment, increased flexibility and improved
access to business information. However, the inherent technical and business
limitations of distributed computing have generally precluded its use for
complex, large-scale, mission-critical applications, such as airline
reservations, credit card processing and customer billing and support systems,
that enable and support fundamental business processes. These shortcomings
include the limited scalability, reliability and interoperability of
distributed computing environments. In addition, it has been difficult to
integrate distributed computing technologies with existing mission-critical
applications, limiting organizations' ability to leverage their substantial
investments in legacy systems and existing personnel and skills.
BEA's products and services enable companies to overcome the limitations of
distributed computing for mission-critical applications. The Company's
enterprise middleware solutions, featuring time-tested and market-proven BEA
TUXEDO technology, provide a middleware platform that addresses the
scalability, manageability, platform independence, interoperability, integrity,
reliability and security requirements of complex, large-scale, distributed
computing in the heterogeneous environments present in most major
organizations. The BEA solution allows companies to leverage
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their substantial investments in legacy systems, significantly extending the
useful lives of mainframe and programmer assets while exploiting the benefits
offered by distributed computing. The Company also offers solutions that enable
customers to quickly develop secure, reliable applications on the Internet that
interoperate with new and existing systems.
The Company's objective is to establish its middleware solutions as the
industry standard for developing, deploying and managing distributed mission-
critical applications. To this end, BEA intends to enhance its technological
leadership by adding new functionality to its products; expand its global
distribution facilities to complement its direct sales, services, training and
support capabilities; promote the embedding of BEA products into the product
offerings of ISVs to accelerate the acceptance of BEA products; leverage
strategic partnerships to augment the efforts of its direct sales force; and
provide the software and services necessary to conduct safe, reliable
enterprise transactions over the Internet.
From its inception, the Company has made a number of strategic acquisitions.
The Company acquired worldwide exclusive rights to TUXEDO from Novell, Inc.
("Novell") in February 1996, acquired Information Management Company ("IMC")
and Independence Technologies, Inc. ("ITI"), two leading distributors of
TUXEDO, in September 1995 and November 1995, respectively, and acquired a
number of other TUXEDO distribution, sales and support organizations between
May 1996 and December 1996. In March 1997, the Company acquired exclusive
rights to MessageQ, ObjectBroker and other related products from Digital
Equipment Corporation ("Digital"). See Note 4 of Notes to Consolidated
Financial Statements in the Company's Annual Report on Form 10-KSB. In the
quarter ended January 31, 1998, the Company acquired a business unit of Nocom
Nordic Communications AB ("Nocom"), and in the quarter ended April 30, 1998,
the Company acquired a business unit of Penta Systems Technology, Inc.
("Penta"). In April 1998, the Company acquired the Leader Group, Inc. ("Leader
Group"), a Denver-based consulting services firm. On June 16, 1998, the Company
purchased the TOP END enterprise middleware technology and product family ("TOP
END") from NCR Corporation ("NCR"). Most recently, on September 30, 1998 the
Company acquired WebLogic, Inc. See "Risk Factors--Risks Associated with Past
and Future Acquisitions."
The Company was incorporated in Delaware in January 1995 under the name BEA
Enterprises, Inc. and changed its name to BEA Systems, Inc. in September 1995.
References herein to "BEA" or the "Company" refer to BEA Systems, Inc., its
subsidiaries and predecessor entities acquired in previous acquisitions. The
Company's headquarters are located at 2315 North First Street, San Jose,
California, 95131, and its telephone number is (408) 570-8000.
RECENT EVENTS
ACQUISITION OF WEBLOGIC, INC.
Pursuant the terms of the Agreement and Plan of Reorganization dated as of
September 24, 1998 between and among the Company, WebLogic, Inc. ("WebLogic")
and Charlotte Acquisition Corp. ("Charlotte") (the "Merger Agreement"), the
Company completed the merger of Charlotte, a wholly-owned subsidiary of the
Company, with and into WebLogic (the "Merger"). The transaction was accounted
for using the pooling of interests method. As consideration for the
transaction,
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0.612750 share of the Company's common stock was issued for each outstanding
share of WebLogic common stock, subject to adjustment for cash paid in lieu of
fractional shares. The Company issued approximately 7.7 million shares of
common stock in exchange for the outstanding shares of WebLogic common stock,
subject to withholding of approximately 10 percent of such shares in escrow in
accordance with certain conditions in the Agreement. Outstanding options to
acquire shares of WebLogic common stock were automatically converted into
options to purchase the Company's common stock at the same exchange ratio.
The shares of Company Common Stock issued in the Merger were issued pursuant to
an exemption from registration under the Securities Act of 1993, as amended. In
accordance with the Merger agreement, the Company filed the registration
statement of which this Prospectus is a part to register certain of the Company
shares of Common Stock issuable pursuant to the Merger (the "Shares").
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of Shares by the
Selling Stockholders, but has agreed to bear certain expenses of registration
of the Shares under federal and state securities laws. This Registration
Statement is intended to satisfy certain of the Company's obligations under the
Merger Agreement.
7
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RISK FACTORS
Investors should carefully consider the following risk factors in evaluating an
investment in the Common Stock offered hereby. This Prospectus includes
"forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. All statements in this
prospectus other than statements of historical fact are "forward-looking
statements" for purposes of these provisions, including any projections of
earnings, revenues or other financial items, any statements of the plans and
objectives of management for future operations, any statements concerning
proposed new products or services, any statements regarding future economic
conditions or performance, and any statement of assumptions underlying any of
the foregoing. In some cases, forward-looking statements contain words an be
identified by the use of terminology such as "may," "will," "expects," "plans,"
"anticipates," "estimates," "potential," or "continue," or the negative thereof
or other comparable terminology. BEA's actual results could differ materially
from these projected or assumed in these forward-looking statements because of
risks and uncertainties, including risks and uncertainties described in the
risk factors below and elsewhere in this Prospectus. We assume no obligation to
update any such forward-looking statement or reason why actual results might
differ.
LIMITED OPERATING HISTORY; INTEGRATION OF ACQUISITIONS; NO ASSURANCE OF
PROFITABILITY
BEA was incorporated in January 1995 and therefore has a limited operating
history. We have generated revenues to date primarily from sales of BEA TUXEDO,
a product to which we acquired worldwide rights in February 1996, and from fees
for related services. We have also acquired a number of businesses,
technologies and products, most recently WebLogic, Inc. Our limited operating
history and the difficulties of integrating a number of separate and
independent business operations subject our business to numerous risks. At July
31, 1998, we had an accumulated deficit of approximately $173 million. In
addition, in connection with certain acquisitions completed prior to July 31,
1998, we recorded approximately $234.2 million as intangible assets,
approximately $158.7 million of which has been amortized and approximately
$75.5 million of which we expect to amortize in future periods through our
fiscal year ending January 31, 2004. We expect to expense to cost of revenues
and general and administrative expenses $26.0 million of such intangible assets
in the fiscal year ending January 31, 1999 and $30.8 million in the fiscal year
ended January 31, 2000. If we acquire additional businesses, products and
technologies in the future, we may report additional, potentially significant,
expenses related thereto. If future events cause the impairment of any
capitalized intangible assets, we may have to amortize expenses sooner than we
expect. For the foregoing reasons, there can be no assurance that we will be
profitable in any future period and recent operating results should not be
considered indicative of future financial performance.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
We expect to experience significant fluctuations in our future quarterly
operating results as a result of many factors, including:
. the size and timing of customer orders, introduction or enhancement of our
products or our competitors' products
. market acceptance of middleware products
. the lengthy sales cycle for our products
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. technological changes in computer systems and environments
. structure and timing of acquisitions of businesses, products and
technologies, including the acquisition of the TOP END enterprise middleware
technology and product family from NCR and the WebLogic application server
technology
. the impact and duration of deteriorating economic and political conditions in
Asia and related declines in Asian currency values
. general economic conditions which can affect our customers' capital
investment levels
. our ability to develop, introduce and market new products on a timely basis
. changes in our or our competitors' pricing policies, customer order deferrals
in anticipation of future new products and product enhancements
. our success in expanding our sales and marketing programs
. the mix of our products and services sold, mix of distribution channels
. our ability to meet the service requirements of our customers
. costs associated with acquisitions, including the acquisition of the TOP END
enterprise middleware technology and product family from NCR, and the
WebLogic acquisition
. the terms and timing of financing activities
. loss of key personnel and fluctuations in other foreign currency exchange
rates
. interpretations of the recently introduced statement of position on software
revenue recognition.
As a result of all of these factors, we believe that quarterly revenues and
operating results are difficult to forecast and period-to-period comparisons of
our results of operations are not necessarily meaningful and should not be
relied upon as indications of future performance.
Our revenues are derived from large orders as customers deploy our products
throughout their organizations. Increases in the revenue size of individual
license transactions also increase the risk of fluctuation in future quarterly
results. If we cannot generate large customer orders, or customers delay or
cancel such orders in a particular quarter, it will have a material adverse
effect on our revenues and, more significantly on a percentage basis, our net
income or loss in that quarter. Moreover, we typically receive and fulfill a
majority of our orders within the quarter, with a substantial portion occurring
in the last month of a fiscal quarter. As a result, we may not learn of revenue
shortfalls until late in a fiscal quarter. Additionally, our operating expenses
are based in part on our expectations for future revenue and are relatively
fixed in the short term. Any revenue shortfall below our expectations could
have an immediate and significant adverse effect on our results of operations.
As is common in the software industry, we believe that a variety of factors
cause our fourth quarter orders to be favorably impacted, including year-end
capital purchases by larger corporate customers and sales incentive programs.
This increase typically results in first quarter customer orders being lower
than orders received in the immediately preceding fourth quarter. We anticipate
that this seasonal impact is likely to increase as we continue to focus on
large corporate accounts.
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Similarly, shortfalls in our revenues and earnings from levels expected by
securities analysts could have an immediate and significant adverse effect on
the trading price of our Common Stock. Moreover, our stock price is subject to
the volatility generally associated with software and technology stocks and may
also be affected by broader market trends unrelated to our performance may also
affect our stock price.
RISKS ASSOCIATED WITH PAST AND FUTURE ACQUISITIONS
From our inception in January 1995, we have made a number of strategic
acquisitions. Integration of acquired companies, divisions and products
involves the assimilation of potentially conflicting operations and products,
which divert the attention of our management team and may have a material
adverse effect on our operating results in future quarters. We acquired
WebLogic, Inc. in September 1998 (discussed below), Leader Group and Penta in
the quarter ended April 30, 1998, the Entersoft Systems Corporation in July
1998, and TOP END (discussed below) in June 1998. We intend to make additional
acquisitions in the future, although there can be no assurance that suitable
companies, divisions or products will be available for acquisition. Such
acquisitions entail numerous risks, including the risk we will not successfully
assimilate the acquired operations and products, and retain key employees of
the acquired operations. There are also risks relating to the diversion of our
management's attention and difficulties and uncertainties in our ability to
maintain the key business relationships the acquired entities have established.
In addition, if we undertake future acquisitions, we may issue dilutive
securities, assume or incur additional debt obligations and large one-time
expenses, and acquire intangible assets that would result in significant future
amortization expense. Any of these events could have a material adverse effect
on our business, operating results and financial condition.
The recently completed WebLogic merger is subject to a number of risks that
could adversely affect our ability to achieve the anticipated benefits of this
transaction. These risks include the risk that we will not be able to
successfully integrate our products and business with WebLogic's and risks
relating to the diversion of the attention of the Company's management team,
particularly Alfred Chung, the Company's Chief Technical Officer, who will
oversee WebLogic's operations. There are also risks relating to competition
from other web application server providers, particularly those recently
acquired by companies with significantly greater resources than ours. The need
to focus our management's attention on establishing relationships with, and
procedures for communicating with, WebLogic employees may reduce our ability to
successfully pursue other opportunities for a period of time. Any departure of
key WebLogic employees or significant numbers of other WebLogic employees could
have a material adverse effect on our operations. We may face difficulties in
retaining WebLogic customers.
The recently-completed TOP END acquisition is also subject to a number of risks
that could adversely affect our ability to achieve benefits we anticipate from
the TOP END acquisition. The location of the TOP END operations and personnel
in San Diego, California, where we did not previously have any material
operations exacerbates the risks of this acquisition. The need to focus
management's attention on establishing relationships with, and procedures for
communicating with, TOP END employees may reduce our ability to successfully
pursue other opportunities for a period of time. Any departure of key TOP END
employees or significant numbers of other TOP END
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employees could have a material adverse effect on our operations. We may face
difficulties in retaining TOP END customers, and customers' uncertainties as to
our plans and abilities to support both the TOP END products and BEA TUXEDO
could adversely affect our ability to retain these customers, which could have
a material adverse effect on our operations. We wrote off $38.3 million in our
quarter ended July 31, 1998 for acquired in-process research and development
related to the TOP END acquisition, and we will incur substantial ongoing
amortization expenses, which will have a negative impact on our future
operating results. See "Recent Events."
PRODUCT CONCENTRATION
We currently derive the majority of our license and service revenues from BEA
TUXEDO and from related products and services. We expect these products and
services to continue to account for the majority of our revenues for the
foreseeable future. As a result, factors adversely affecting the pricing of or
demand for BEA TUXEDO, such as competition, product performance or
technological change, could have a material adverse effect on our business and
consolidated results of operations and financial condition.
LENGTHY SALES CYCLE
Our customers typically use our products to integrate large, sophisticated
applications that are critical to their business, and their purchases are often
part of their implementation of a distributed computing environment. Customers
evaluating our software products face complex decisions regarding alternative
approaches to the integration of enterprise applications, competitive product
offerings, rapidly changing software technologies and limited internal
resources due to other information systems requirements. For these and other
reasons, the sales cycle for our products is lengthy and is subject to delays
or cancellation over which we have little or no control. To the extent the
revenue size of our license transactions increases, we expect customer
evaluations and procurement processes to lengthen and thus extend the overall
sales cycle. We believe general economic conditions which impact customers'
capital investment decisions also affect our sales cycles. Any significant
change in our sales cycle could have a material adverse effect on our business,
results of operations and financial condition.
Although we use a standard license agreement which meets the revenue
recognition criteria under current generally accepted accounting principles, we
must often negotiate and revise terms and conditions of this standard
agreement, particularly in larger sales transactions. Negotiation of mutually
acceptable language can extend the sales cycle and in certain situations, may
require us to defer recognition of revenue on the sale. In addition, while we
do not expect the recently issued Statement of Position (SOP) 97-2, Software
Revenue Recognition (as amended by SOP 98-4), to have a material impact on our
revenues and earnings, detailed implementation guidance of these standards has
not yet been issued. Once issued, such guidance could require us to make
unanticipated changes in our current revenue recognition practices and such
changes could have an adverse impact on revenues and earnings.
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COMPETITION
The market for middleware software and related services is highly competitive.
Our competitors are diverse and offer a variety of solutions directed at
various segments of the middleware software marketplace. These competitors
include system and database vendors such as IBM and database vendors such as
Oracle, which offer their own middleware functionality for use with their
proprietary systems. Microsoft has released a product that includes certain
middleware functionality and has demonstrated and announced that it intends to
include this functionality in future versions of its Windows NT operating
system. In addition, there are companies offering and developing middleware and
integration software products and related services that directly compete with
products we offer. Further, software development tool vendors typically
emphasize the broad versatility of their toolsets and, in some cases, offer
complementary middleware software that supports these tools and performs
messaging and other basic middleware functions. Last, internal development
groups within prospective customers' organizations may develop software and
hardware systems that may substitute for those we offer. A number of our
competitors and potential competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources,
greater name recognition and a larger installed base of customers than us.
Our principal competitors currently include hardware vendors who bundle their
own middleware software products with their computer systems and database
vendors that advocate client/server networks driven by the database server. IBM
is the primary hardware vendor who offers a line of middleware and database
solutions for its customers. The bundling of middleware functionality in IBM
proprietary hardware and database systems requires us to compete with IBM in
its installed base, where IBM has certain inherent advantages due to its
significantly greater financial, technical, marketing and other resources,
greater name recognition and the integration of its enterprise middleware
functionality with its proprietary hardware and database systems. We need to
differentiate our products based on functionality, interoperability with non-
IBM systems, performance and reliability and establish our products as more
effective solutions to customers' needs. Oracle is the primary relational
database vendor offering products that are intended to serve as alternatives to
our enterprise middleware solutions.
Microsoft has demonstrated certain middleware functionality and announced that
it intends to include this functionality in future versions of its Windows NT
operating system. Microsoft has also introduced a product that includes certain
middleware functionality. The bundling of middleware functionality in Windows
NT will require us to compete with Microsoft in the Windows NT marketplace,
where Microsoft will have certain inherent advantages due to its significantly
greater financial, technical, marketing and other resources, greater name
recognition, its substantial installed base and the integration of its
middleware functionality with Windows NT. If Microsoft successfully
incorporates middleware software products into Windows NT or separately offers
middleware applications, we will need to differentiate our products based on
functionality, interoperability with non-Microsoft platforms, performance and
reliability and establish our products as more effective solutions to
customers' needs. There can be no assurance that we will be able to
successfully differentiate our products from those offered by Microsoft, or
that Microsoft's entry into the middleware market will not materially adversely
affect our business, operating results and financial condition.
12
<PAGE>
In addition, current and potential competitors may make strategic acquisitions
or establish cooperative relationships among themselves or with third parties,
thereby increasing the ability of their products to address the needs of our
current and prospective customers. Accordingly, it is possible that new
competitors or alliances among current and new competitors may emerge and
rapidly gain significant market share. Such competition could materially
adversely affect our ability to sell additional software licenses and
maintenance, consulting and support services on terms favorable to us. Further,
competitive pressures could require us to reduce the price of our products and
related services, which could materially adversely affect our business,
operating results and financial condition. There can be no assurance that we
will be able to compete successfully against current and future competitors and
the failure to do so would have a material adverse effect upon our business,
operating results and financial condition.
INTERNATIONAL OPERATIONS
International revenues accounted for 46 percent and 45 percent of our
consolidated revenues for the six months ended July 31, 1998 and 1997,
respectively. We sell our products and services through a network of branches
and subsidiaries located in 24 countries worldwide. In addition, we also market
through distributors in Europe and the Asia/Pacific region. We believe that our
success depends upon continued expansion of our international operations. Our
international business is subject to a number of risks, including unexpected
changes in regulatory practices and tariffs, greater difficulties in staffing
and managing foreign operations, longer collection cycles, seasonality,
potential changes in tax laws, greater difficulty in protecting intellectual
property and the impact of fluctuating exchange rates between the US dollar and
foreign currencies in markets where BEA does business, in particular the French
franc, the German mark, the British pound, the Japanese yen, the Australian
dollar and the Korean won. General economic and political conditions in these
foreign markets may also impact our international revenues. Since the late
summer of 1997, a number of Pacific Rim countries have experienced economic,
banking and currency difficulties that have led to economic downturns in those
countries. Among other things, the decline in value of Asian currencies,
together with difficulties obtaining credit, has resulted in a decline in the
purchasing power of our Asian customers, which in turn has resulted in the
delay of orders for our products from certain Asian customers and is likely to
result in further delays and, possibly the cancellation, of such orders. As a
result of such delays, our revenues from Asia for the six months ended July 31,
1998 comprised a lower percentage of total revenues than we have historically
experienced. We anticipate that weak Asian conditions will continue to
adversely impact our financial results. It is difficult for us to predict the
extent of the future impact of these conditions. There can be no assurances
that these factors and other factors will not have a material adverse effect on
our future international revenues and consequently on our business and
consolidated financial condition and results of operations.
MANAGEMENT OF GROWTH
We are continuing to experience a period of rapid and substantial growth that
has placed, and if such growth continues would continue to place, a strain on
the Company's administrative and operational infrastructure. We have increased
the number of our employees from 120 employees in three offices in the United
States at January 31, 1996 to approximately 1,200 employees in 51 offices in 24
countries at July 31, 1998. Our ability to manage our staff and growth
effectively requires us to
13
<PAGE>
continue to improve our operational, financial and management controls,
reporting systems and procedures. In this regard, we are currently updating our
management information systems to integrate financial and other reporting among
our multiple domestic and foreign offices. In addition, we intend to continue
to increase our staff worldwide and to continue to improve the financial
reporting and controls for our global operations. There can be no assurance
that we will be able to successfully implement improvements to our management
information and control systems in an efficient or timely manner or that,
during the course of this implementation, we will not discover deficiencies in
existing systems and controls. If we are unable to manage growth effectively,
our business, results of operations and financial condition will be materially
adversely affected.
DEPENDENCE ON GROWTH OF MARKET FOR MIDDLEWARE
We sell our products and services in the middleware market. This market is
emerging and is characterized by continuing technological developments,
evolving industry standards and changing customer requirements. Our success is
dependent in large part on large customers with substantial legacy mainframe
systems accepting our middleware software products. Our future financial
performance will depend in large part on continued growth in the number of
companies extending their mainframe-based, mission-critical applications to an
enterprise-wide distributed computing environment through the use of middleware
technology. There can be no assurance that the market for middleware technology
and related services will continue to grow. If the middleware market fails to
grow or grows more slowly than we currently anticipate, or if we experience
increased competition in this market, our business, results of operations and
financial condition will be adversely affected.
DEPENDENCE ON KEY PERSONNEL AND NEED TO HIRE ADDITIONAL PERSONNEL
We believe our future success will depend upon our ability to attract and
retain highly skilled personnel including the Company's founders, Messrs.
William T. Coleman III, Edward W. Scott, Jr., Alfred S. Chuang and key members
of management. Competition for these types of employees is intense, and there
can be no assurance that we will be able to retain our key employees or that we
will be successful in attracting, assimilating and retaining them in the
future. As we seek to expand our global organization, the hiring of qualified
sales, technical and support personnel will be difficult due to the limited
number of qualified professionals. Failure to attract, assimilate and retain
key personnel would have a material adverse effect on our business, results of
operations and financial condition.
EXPANDING DISTRIBUTION CHANNELS AND RELIANCE ON THIRD PARTIES
To date, we have sold our products principally through our direct sales force,
as well as through indirect sales channels, such as ISVs, hardware OEMs,
systems integrators, independent consultants and distributors. Our ability to
achieve significant revenue growth in the future will depend in large part on
our success in expanding our direct sales force and in further establishing and
maintaining relationships with distributors, ISVs and OEMs. In particular, a
significant part of our strategy is to embed our technology in products our ISV
customers offer. We intend to seek distribution arrangements with other ISVs to
embed our middleware technology in their products and expect that these
arrangements will account for a significant portion of our revenues in future
periods. There can
14
<PAGE>
be no assurance that we will be able to successfully expand our direct sales
force or other distribution channels, secure license agreements with additional
ISVs on commercially reasonable terms or at all, or otherwise further develop
our relationships with distributors and ISVs. There also can be no assurance
that any such expansion or additional license agreements would increase our
revenues. Although we believe that our investments in the expansion of our
direct sales force and in the establishment of other distribution channels
through third parties ultimately will improve our operating results, to the
extent that such investments are made and revenues do not correspondingly
increase, our business, results of operations and financial condition will be
materially and adversely affected.
We rely on informal relationships with a number of consulting and systems
integration firms to enhance our sales, support, service and marketing efforts,
particularly with respect to implementation and support of our products as well
as lead generation and assistance in the sale process. We will need to expand
our relationships with third parties in order to support license revenue
growth. Many such firms have similar, and often more established, relationships
with our principal competitors. There can be no assurance that these and other
third parties will provide the level and quality of service required to meet
the needs of our customers, that we will be able to maintain an effective, long
term relationship with these third parties, or that these third parties will
continue to meet the needs of our customers.
RAPID TECHNOLOGY CHANGE; DEPENDENCE ON NEW PRODUCTS AND PRODUCT ENHANCEMENTS
The market for our products is highly fragmented, competitive with alternative
computing architectures and characterized by continuing technological
development, evolving industry standards and changing customer requirements.
The introduction of products embodying new technologies, the emergence of new
industry standards or changes in customer requirements could render our
existing products obsolete and unmarketable. As a result, our success depends
upon our ability to enhance existing products, respond to changing customer
requirements and develop and introduce in a timely manner new products that
keep pace with technological developments and emerging industry standards.
There can be no assurance that our products will adequately address the
changing needs of the marketplace or that we will be successful in developing
and marketing enhancements to our existing products or products incorporating
new technology on a timely basis. Failure to develop and introduce new
products, or enhancements to existing products, in a timely manner in response
to changing market conditions or customer requirements, will materially and
adversely affect the Company's business, results of operations and financial
condition.
RISK OF SOFTWARE DEFECTS
The software products we offer are internally complex and, despite extensive
testing and quality control, may contain errors or defects, especially when we
first introduced them. We may need to issue corrective releases of our software
products to fix these defects or errors. These defects and errors could also
cause damage to our reputation, loss of revenue, product returns or order
cancellations, or lack of market acceptance of our products. Accordingly, these
defects and errors could have a material and adverse effect on our business,
results of operations and financial condition.
15
<PAGE>
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 as a result of existing or future federal,
state or local laws or ordinances or unfavorable judicial decisions. Although
we have not experienced any product liability claims to date, sale in and
supporting of our products entails the risk of such claims, which could be
substantial in light of the use of such products in mission-critical
applications. If a claimant successfully brings a product liability claim
against us, it could have a material adverse effect on our business, results of
operations and financial condition.
DEPENDENCE ON PROPRIETARY TECHNOLOGY; RISK OF INFRINGEMENT
Our success depends upon our proprietary technology. We rely on a combination
of patent, copyright, trademark and trade secret rights, confidentiality
procedures and licensing arrangements to establish and protect our proprietary
rights. No assurance can be given that competitors will not successfully
challenge the validity or scope of our patents or that such patents will
provide a competitive advantage to us.
As part of our confidentiality procedures, we generally enter into non-
disclosure agreements with our employees, distributors and corporate partners
and into license agreements with respect to our software, documentation and
other proprietary information. Despite these precautions, third parties could
copy or otherwise obtain and use our products or technology without
authorization, or to develop similar technology independently. In particular,
we have, in the past, provided certain hardware OEMs with access to our source
code and any unauthorized publication or proliferation of this source code
could materially adversely affect our business, operating results and financial
condition. It is difficult for us to police unauthorized use of our products,
and although we are unable to determine the extent to which piracy of our
software products exists, software piracy is a persistent problem. Effective
protection of intellectual property rights is unavailable or limited in certain
foreign countries. There can be no assurance that the protection of our
proprietary rights will be adequate or that our competitors will not
independently develop similar technology, duplicate our products or design
around any patents or other intellectual property rights we hold.
We do not believe that any of our products infringe the proprietary rights of
third parties. There can be no assurance, however, that third parties will not
claim the Company's current or future products infringe their rights. Any such
claims, with or without merit, could cause costly litigation that could absorb
significant management time, which could materially adversely effect our
business, operating results and financial condition. Such claims might require
us to enter into royalty or license agreements. If required, the Company may
not be able to obtain such royalty or license agreements, or obtain them on
terms acceptable to us, which could have a material adverse effect upon the
Company's business, operating results and financial condition.
CONTROL BY MANAGEMENT AND CURRENT STOCKHOLDERS
As of October 1, 1998, BEA's officers and directors and their affiliates, in
the aggregate, had voting control over approximately 53.2 percent of BEA's
voting Common Stock. In particular, Warburg, Pincus Ventures, L.P. ("Warburg")
had voting control over approximately 49 percent of BEA's voting Common Stock
and beneficially owned approximately 56.3 percent of BEA's Common Stock (which
16
<PAGE>
includes the non-voting Class B Common Stock owned by Warburg). As a result,
these stockholders will be able to control all matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions. The voting power of Warburg combined with BEA's
officers and directors under certain circumstances could have the effect of
delaying or preventing a change in control of BEA.
SIGNIFICANT LEVERAGE; DEBT SERVICE
In connection with our sale of 4% Convertible Subordinated Notes in June 1998,
we incurred $250 million in long-term indebtedness. Our principal and interest
payment obligations increased substantially because of this indebtedness. The
degree to which we are leveraged could materially and adversely affect our
ability to obtain financing for working capital, acquisitions or other purposes
and could make us more vulnerable to industry downturns and competitive
pressures. These notes are convertible into Common Stock, which conversion
could cause substantial dilution to stockholders and increase the number of
shares eligible for sale in the market, but would otherwise eliminate the need
for the Company to repay the principal amount of such converted notes. There
can be no assurance, however, that any of these notes will be converted. Our
ability to meet our debt service obligations will be dependent upon our future
performance, which will be subject to financial, business and other factors
affecting our operations, many of which are beyond our control.
We will require substantial amounts of cash to fund scheduled payments of
interest on these notes, payment of the principal amount of these notes,
payment of principal and interest on our other indebtedness, future capital
expenditures and any increased working capital requirements. If we cannot meet
our cash requirements out of cash flow from operations, there can be no
assurance that we will be able to obtain alternative financing. If we cannot
obtain such financing, our ability to respond to changing business and economic
conditions, to make future acquisitions, to absorb adverse operating results or
to fund capital expenditures or increased working capital requirements may be
adversely affected. If we do not generate sufficient increases in cash flow
from operations to repay these notes at maturity, we could attempt to refinance
these notes; however, such a refinancing may not be available on terms
acceptable to us, if at all. Any failure by us to satisfy our obligations with
respect to these notes at maturity (with respect to payments of principal) or
prior thereto (with respect to payments of interest or required repurchases)
would constitute a default under the indenture entered into in connection with
the issuance of these notes and could cause a default under agreements
governing other indebtedness, if any, of BEA.
17
<PAGE>
SELLING STOCKHOLDERS
The following table provides the names of and the number of shares of Common
Stock beneficially owned by each Selling Stockholder, and the number of shares
of Common Stock beneficially owned by each Selling Stockholder upon completion
of the offering or offerings pursuant to this Prospectus, assuming each Selling
Stockholder offers and sells all of its or his/her respective Shares. Selling
Stockholders may, however, offer and sell all, or some or none of their Shares.
The respective donees, pledgees and transferees or other successors in interest
of the Selling Stockholders may also sell the shares listed below as being held
by the Selling Stockholders. No Selling Stockholder will beneficially own one
percent or greater of the Company's outstanding Common Stock upon the sale of
their shares offered hereby.
<TABLE>
<CAPTION>
BENEFICIAL BENEFICIAL
OWNERSHIP PRIOR TO PERCENTAGE PRIOR TO OWNERSHIP AFTER
OFFERING THE OFFERING(1) THE OFFERING
------------------ ------------------- OFFERED ----------------
NUMBER OF SHARES % NUMBER OF SHARES NUMBER OF SHARES
------------------ ------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Paul Ambrose............ 1,422,376 2.4 1,422,376 0
TL Ventures III L.P..... 1,315,718 2.3 1,315,718 0
Bay Partners, L.P....... 817,044 1.4 817,044 0
Intel Corporation....... 571,944 * 571,944 0
Robert Pasker........... 551,475 * 551,475 0
Carl Resnikoff.......... 551,475 * 551,475 0
Regis P. & Dianne T.
McKenna Trust.......... 418,160 * 418,160 0
TL Ventures III Offshore
L.P.................... 275,409 * 275,409 0
Cambridge Technology
Capital................ 272,348 * 272,348 0
Laurie Pitman........... 183,825 * 183,825 0
Frank Caulfield......... 140,654 * 140,654 0
David Parker............ 98,040 * 98,040 0
Scott Dietzen........... 90,687 * 90,687 0
Cascade Capital Part-
ners................... 71,299 * 71,299 0
Robert and Sue Gersky... 64,353 * 64,353 0
William Donner.......... 61,287 * 61,287 0
Peter Nordberg.......... 50,178 * 50,178 0
TL Ventures III
Interfund L.P.......... 42,960 * 42,960 0
Alan Hu................. 36,834 * 36,834 0
Randy Risher............ 36,765 * 36,765 0
Eduardo Ceballos........ 29,871 * 29,871 0
Anne Langen............. 29,871 * 29,871 0
Sriram Srinivasan....... 29,871 * 29,871 0
Igor M. Sill............ 28,308 * 28,308 0
Bill Coffin............. 27,573 * 27,573 0
Chauncey Lufkin......... 25,668 * 25,668 0
Donald and Holly Dodge.. 22,346 * 22,346 0
Gary Aitken............. 19,608 * 19,608 0
Amber Benson............ 19,608 * 19,608 0
Jolly Chen.............. 19,608 * 19,608 0
Dean Jacobs............. 19,608 * 19,608 0
Peter Zadrozny.......... 17,647 * 17,647 0
Elizabeth Bechtold...... 16,873 * 16,873 0
Daniel Lankford & Linda
Crosta................. 16,873 * 16,873 0
David Schneider......... 16,873 * 16,873 0
Gary Cornell............ 16,870 * 16,870 0
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL BENEFICIAL
OWNERSHIP PRIOR TO PERCENTAGE PRIOR TO OWNERSHIP AFTER
OFFERING THE OFFERING(1) THE OFFERING
------------------ ------------------- OFFERED ----------------
NUMBER OF SHARES % NUMBER OF SHARES NUMBER OF SHARES
------------------ ------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Joe Weinstein........... 15,931 * 15,931 0
Home Family Trust....... 15,321 * 15,321 0
Rob Dunn................ 14,706 * 14,706 0
Judith Weintraub........ 13,497 * 13,497 0
Todd Karakashian........ 11,764 * 11,764 0
Peter Seibel............ 11,764 * 11,764 0
Michael Smith........... 11,764 * 11,764 0
John Blair.............. 11,498 * 11,498 0
Silicon Valley Bank..... 12,577 * 12,577 0
WS Investment Company
97A.................... 11,229 * 11,229 0
Jenena Hansson.......... 9,804 * 9,804 0
Kevin Eberman........... 9,068 * 9,068 0
Michael Kamerick........ 8,981 * 8,981 0
Ali Kutay............... 8,423 * 8,423 0
WS Investment Company
97B.................... 8,075 * 8,075 0
Lana Holmes............. 6,944 * 6,944 0
Diane Updyke............ 6,893 * 6,893 0
Parker Family Trust..... 6,416 * 6,416 0
Simon Clephan........... 4,467 * 4,467 0
Donald Dodge............ 4,357 * 4,357 0
FSD Investment Part-
ners................... 4,289 * 4,289 0
Kersti Hale............. 4,085 * 4,085 0
Soyeba Ahmed............ 3,921 * 3,921 0
John Fomook............. 3,734 * 3,734 0
Ellen Denebiem.......... 3,267 * 3,267 0
Doran Baruth............ 3,063 * 3,063 0
Alexia Smith............ 3,063 * 3,063 0
Mike Skurko............. 2,489 * 2,489 0
Karl Augat.............. 2,451 * 2,451 0
Kim David Greenwood..... 2,451 * 2,451 0
Enterprise Solutions.... 2,144 * 2,144 0
Estella Li.............. 1,764 * 1,764 0
Robert Cook............. 1,742 * 1,742 0
Tom Owen................ 1,742 * 1,742 0
Jane McKean............. 1,633 * 1,633 0
Larry W. Sonsini........ 1,531 * 1,531 0
Richard Porter.......... 1,493 * 1,493 0
Quan Nguyen............. 1,225 * 1,225 0
David Sturtz............ 1,148 * 1,148 0
Cathy Eddington......... 980 * 980 0
Nadine Williams......... 732 * 732 0
Ivan Brockman........... 612 * 612 0
</TABLE>
- --------
*Less than 1%
(1) Percentage of approximately 57,327,000 shares of voting Common Stock, based
on shares outstanding as of October 1, 1998. Does not include 17,823,550
shares of non-voting Class B Common Stock, which represents all outstanding
Class B Common Stock.
19
<PAGE>
PLAN OF DISTRIBUTION
This Prospectus relates to the offer and sale from time to time by the holders
of up to 7,682,945 shares of Common Stock. The Shares were issued in connection
with the Merger Agreement. This Prospectus has been prepared in connection with
registering the Shares to allow for sales of Shares by the applicable Selling
Stockholders to the public in accordance with the terms of the Merger
Agreement. The Company has registered the Shares for sale pursuant to the terms
of the Merger Agreement, but registration of such Shares does not necessarily
mean that any of such Shares will be offered and sold by the holders thereof.
The Company will not receive any proceeds from the offering by the Selling
Stockholders. The Shares may be sold from time to time to purchasers directly
by any of the Selling Stockholders, or donees, pledgees, transferees or other
successors in interest ("Transferees") thereof. Alternatively, the Selling
Stockholders, or Transferees thereof, may from time to time offer the Shares
through dealers or agents, who may receive compensation in the form of
commissions from the Selling Stockholders, or Transferees thereof, and/or the
purchasers of Shares for whom they may act as agent. The Selling Stockholders,
or Transferees thereof, and any dealers or agents that participate in the
distribution of Shares may be deemed to be "underwriters" within the meaning of
the Securities Act and any profit on the sale of Shares by them and any
commissions received by any such dealers or agents might be deemed to be
underwriting commissions under the Securities Act.
At a time a particular offer of Shares is made, a Prospectus Supplement, if
required, will be distributed that will set forth the names of any dealers or
agents and any commissions and other terms constituting compensation from the
Selling Stockholders, or Transferees thereof, and any other required
information. The Shares may be sold from time to time at varying prices
determined at the time of sale or at negotiated prices.
In order to comply with the securities laws of certain states, if applicable,
the Shares may be sold only through registered or licensed brokers or dealers.
In addition, in certain states, the Shares may not be sold unless they have
been registered or qualified for sale in such state or an exemption from such
registration or qualification requirement is available and is complied with.
The Shares may also be sold in one or more of the following transactions: (a)
block transactions (which may involve crosses) in which a broker-dealer may
sell all or a portion of such stock as agent but may position and resell all or
a portion of the block as principal to facilitate the transaction; (b)
purchases by any such broker-dealer as principal and resale by such broker-
dealer for its own account pursuant to a Prospectus Supplement; (c) ordinary
brokerage transactions and transactions in which any such broker-dealer
solicits purchasers; (d) sales "at the market" to or through a market maker or
into an existing trading market, on an exchange or otherwise, for such shares;
and (e) sales in other ways not involving market makers or established trading
markets, including direct sales to purchasers. In effecting sales, broker-
dealers engaged by the Selling Stockholders may arrange for other broker-
dealers to participate.
20
<PAGE>
EXPERTS
The consolidated financial statements of BEA Systems, Inc. included in the
Company's Annual Report on Form 10-KSB for the year ended January 31, 1998 and
the supplemental consolidated financial statements of BEA Systems, Inc.
included in the Company's current reports on Form 8-K dated September 10, 1998
and October 15, 1998, as amended October 29, 1998, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon, included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated by reference herein in reliance upon such report
given on the authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered pursuant to
this Prospectus will be passed upon for the Company by Morrison & Foerster LLP,
Palo Alto, California. Certain attorneys at Morrison & Foerster LLP own an
aggregate of 34,500 shares of Common Stock of the Company.
21
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated fees and expenses payable by the
Company in connection with the issuance and distribution of the Common Stock
registered hereby. All of such fees and expenses are estimates, except the
Securities Act registration fee.
<TABLE>
<S> <C>
Securities Act Registration Fee.................................. $37,246
Printing and duplicating fees.................................... 10,000
Legal fees and expenses.......................................... 15,000
Accounting fees and expenses..................................... 12,000
Miscellaneous expenses........................................... 5,000
-------
*Total....................................................... $79,246
=======
</TABLE>
- --------
*None of the expenses listed above will be borne by the Selling Stockholders.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the General Corporate Law of the State of Delaware, the
Registrant has broad powers to indemnify its directors and officers against
liabilities they may incur in such capacities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). The Registrant's
Amended and Restated Bylaws also provide for mandatory indemnification of its
directors and executive officers, and permissive indemnification of its
employees and agents, to the fullest extent permissible under Delaware law.
The Registrant's Amended and Restated Certificate of Incorporation provides
that the liability of its directors for monetary damages shall be eliminated to
the fullest extent permissible under Delaware law. Pursuant to Delaware law,
this includes elimination of liability for monetary damages for breach of the
directors' fiduciary duty of care to the Registrant and its Stockholders. These
provisions do not eliminate the directors' duty of care and, in appropriate
circumstances, equitable remedies such as injunctive or other forms of non-
monetary relief will remain available under Delaware law. In addition, each
director will continue to be subject to liability for breach of the director's
duty of loyalty to the Registrant, for acts or omissions not in good faith or
involving intentional misconduct, for knowing violations of law, for any
transaction from which the director derived an improper personal benefit, and
for payment of dividends or approval of stock repurchases or redemptions that
are unlawful under Delaware law. The provision also does not affect a
director's responsibilities under any other laws, such as the securities laws
or state or federal environmental laws. The Registrant maintains a policy of
directors' and officers' liability insurance that insures the Company's
directors and officers against the costs of defense, settlement or payment of a
judgment under certain circumstances.
Pursuant to written agreement between the respective Selling Securityholders
and the Company, the directors and officers of the Company are indemnified by
such Selling Securityholders against certain civil liabilities that they may
incur under the Securities Act in connection with this Registration Statement
and the related Prospectus.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<S> <C>
4.1 Restated Certificate of Incorporation of the Registrant (incorporated by reference
to Exhibit 3.1 to Registrant's Registration Statement on Form SB-2 (File No. 333-
20791))
4.2 Bylaws of the Registrant (incorporated by reference to Exhibit 3.3 to Registrant's
Registration Statement on Form SB-2 (File No. 333-20791))
5.1 Opinion of Morrison & Foerster LLP
10.1 Agreement and Plan of Reorganization among BEA Systems, Inc. and WebLogic, Inc.
and Charlotte Acquisition Corp., dated as of September 24, 1998 (incorporated by
reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated
October 15, 1998, as amended October 29, 1998)
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Morrison & Foerster LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on signature page hereto)
</TABLE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in this registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) any deviation from the low or
high and of the estimated maximum offering price may be reflected
in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate changes in volume and price
represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration
statement or any material change to such information in this
registration statement; provided, however, that subparagraphs (i)
and (ii) do not apply if the information required to be included
in a post-effective amendment by those paragraphs is contained in
the periodic reports filed by the Registrant pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered herein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of these securities being registered which remain unsold at the
termination of the offering.
II-2
<PAGE>
The undersigned Registrant hereby further undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual reports pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, when applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference to this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby further undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance under Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4), or 497(h) under the Securities Act of 1933 shall
be deemed to be part of this registration statement as of the time it
was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 of this
registration statement, or otherwise (other than insurance), the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in such Act and will be governed by the
final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF SAN JOSE, STATE OF CALIFORNIA ON OCTOBER 30, 1998.
BEA SYSTEMS, INC.
/s/ William T. Coleman, III
By: _________________________________
President, Chief Executive Officer
and Chairman of the Board
POWER OF ATTORNEY
THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS WILLIAM T. COLEMAN, III AND
STEVE L. BROWN AS HIS/HER TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, JOINTLY
AND SEVERALLY, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR AND IN
HIS/HER STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ON HIS/HER BEHALF THE
REGISTRATION STATEMENT ON FORM S-3 IN CONNECTION WITH THE SALE BY BEA SYSTEMS,
INC. OF SHARES OF OFFERED SECURITIES, AND TO EXECUTE ANY AMENDMENTS THERETO
(INCLUDING POST-EFFECTIVE AMENDMENTS) OR CERTIFICATES THAT MAY BE REQUIRED IN
CONNECTION WITH THIS REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND ALL OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE
SECURITIES AND EXCHANGE COMMISSION AND GRANTING UNTO SAID ATTORNEYS-IN-FACT AND
AGENTS, JOINTLY AND SEVERALLY, THE FULL POWER AND AUTHORITY TO DO AND PERFORM
EACH AND EVERY ACT AND THING NECESSARY OR ADVISABLE TO ALL INTENTS AND PURPOSES
AS HE/SHE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT
SAID ATTORNEYS-IN-FACT AND AGENTS, JOINTLY AND SEVERALLY, OR HIS/HER SUBSTITUTE
OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT ON FORM S-3 HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ William T. Coleman, III President, Chief Executive October 30, 1998
____________________________________ Officer, Chairman of the
William T. Coleman, III Board and Director
(Principal Executive
Officer)
/s/ Edward W. Scott, Jr. Executive Vice President of October 30, 1998
____________________________________ Worldwide Field Operations,
Edward W. Scott, Jr. Assistant Secretary and
Director
/s/ Steve L. Brown Executive Vice President, October 30, 1998
____________________________________ Chief Financial Officer and
Steve L. Brown Secretary (Principal
Financial and Accounting
Officer)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Carol A. Bartz Director October 30, 1998
____________________________________
Carol A. Bartz
/s/ Cary J. Davis Director October 30, 1998
____________________________________
Cary J. Davis
/s/ Stewart K.P. Gross Director October 30, 1998
____________________________________
Stewart K.P. Gross
/s/ William H. Janeway Director October 30, 1998
____________________________________
William H. Janeway
/s/ Dean O. Morton Director October 30, 1998
____________________________________
Dean O. Morton
</TABLE>
II-5
<PAGE>
EXHIBIT 5.1
OPINION OF MORRISON & FOERSTER LLP
October 30, 1998
BEA Systems, Inc.
2315 North First Street
San Jose, CA 95113
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form S-3 filed
by BEA Systems, Inc., a Delaware corporation (the "Company"), with the
Securities and Exchange Commission on October 30, 1998 (the "Registration
Statement") relating to the registration under the Securities Act of 1933, as
amended, of up to 7,682,945 shares of the Company's common stock, $.001 par
value (the "Stock"), being offered by certain selling stockholders specified
therein (the "Selling Stockholders").
As counsel to the Company, we have examined the proceedings taken by the
Company and the Selling Stockholders in connection with the sale by the Selling
Stockholders of up to 7,682,945 shares of Stock.
It is our opinion that the 7,682,945 shares of Stock that may be sold are
legally and validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us in the Registration
Statement, the prospectus constituting a part thereof and any amendments
thereto.
Very truly yours,
/s/ Morrison & Foerster LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference of our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of BEA Systems, Inc.
for the registration of the shares of its common stock issued in connection
with the acquisition of WebLogic, Inc. and to the incorporation by reference
therein of our report dated February 24, 1998, with respect to the Consolidated
Financial Statements of BEA Systems, Inc. included in its Annual Report (Form
10-KSB) for the year ended January 31, 1998; our report dated February 24,
1998, except for Note 18, as to which the date is September 10, 1998, with
respect to the Supplemental Consolidated Financial Statements of BEA Systems,
Inc. included in its current report on Form 8-K dated September 10, 1998; and
our report dated February 24, 1998, except for Note 18, as to which the date is
September 30, 1998, with respect to the Supplemental Consolidated Financial
Statements of BEA Systems, Inc. included in its current report on Form 8-K/A
dated October 29, 1998 and filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Palo Alto, California
October 29, 1998
