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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-25871
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INFORMATICA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 77-0333710
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3350 WEST BAYSHORE, PALO ALTO, CALIFORNIA 94303
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (650) 687-6200
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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 [ ]
As of April 30, 2000, there were 34,235,847 shares of the registrant's
Common Stock outstanding.
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INFORMATICA CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
TABLE OF CONTENTS
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PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements................. 3
Condensed Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999....................................... 3
Condensed Consolidated Statements of Operations -- Three
Months Ended March 31, 2000 and 1999........................ 4
Condensed Consolidated Statements of Cash Flows -- Three
Months Ended March 31, 2000 and 1999........................ 5
Notes to Condensed Consolidated Financial Statements........ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 9
Item 3. Quantitative and Qualitative Disclosures about Market
Risk........................................................ 18
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................ 19
Signature............................................................ 20
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INFORMATICA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
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MARCH 31, DECEMBER 31,
2000 1999
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(UNAUDITED)
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Current assets:
Cash and cash equivalents................................. $47,982 $57,521
Accounts receivable, net of allowances of $2,046 and
$1,977, respectively................................... 13,006 8,119
Prepaid expenses and other current assets................. 1,979 1,272
------- -------
Total current assets.............................. 62,967 66,912
Property and equipment, net................................. 2,630 1,482
Intangible assets, net...................................... 8,604 --
Other assets................................................ 1,345 129
------- -------
Total assets...................................... $75,546 $68,523
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $13,335 $ 7,999
Accrued compensation and related expenses................. 4,051 6,264
Income taxes payable...................................... 1,070 813
Current portion of capital lease obligations.............. 153 150
Current portion of notes payable to stockholders.......... -- 2,075
Deferred revenue.......................................... 11,811 9,660
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Total current liabilities......................... 30,420 26,961
Capital lease obligations, less current portion............. 57 66
Notes payable to stockholders, less current portion......... -- 1,372
Stockholders' equity........................................ 45,069 40,124
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Total liabilities and stockholders' equity........ $75,546 $68,523
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</TABLE>
See notes to condensed consolidated financial statements.
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INFORMATICA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
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THREE MONTHS ENDED
MARCH 31,
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2000 1999
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Revenues:
License................................................... $16,836 $ 7,347
Service................................................... 9,097 3,633
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Total revenues.................................... 25,933 10,980
Cost of revenues:
License................................................... 434 142
Service................................................... 4,621 1,876
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Total cost of revenues............................ 5,055 2,018
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Gross profit................................................ 20,878 8,962
Operating expenses:
Research and development.................................. 4,088 2,353
Sales and marketing....................................... 13,434 6,533
General and administrative................................ 1,953 934
Stock-based compensation.................................. 399 125
Amortization of intangible assets......................... 374 --
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Total operating expenses.......................... 20,248 9,945
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Income (loss) from operations............................... 630 (983)
Interest income (expense), net.............................. 301 (42)
------- -------
Income (loss) before income taxes........................... 931 (1,025)
Income tax provision........................................ (233) (150)
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Net income (loss)........................................... $ 698 $(1,175)
======= =======
Net income (loss) per share:
Basic..................................................... $ 0.02 $ (0.14)
======= =======
Diluted................................................... $ 0.02 $ (0.14)
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Shares used in calculation of net income (loss) per share:
Basic..................................................... 32,822 8,367
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Diluted................................................... 39,046 8,367
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</TABLE>
See notes to condensed consolidated financial statements.
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INFORMATICA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
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THREE MONTHS ENDED
MARCH 31,
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2000 1999
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OPERATING ACTIVITIES
Net income (loss)........................................... $ 698 $(1,175)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization............................. 117 93
Other receivable allowances............................... 59 70
Amortization of stock-based compensation.................. 399 125
Amortization of intangible assets......................... 374 --
Interest expense related to notes payable................. 125 69
Changes in operating assets and liabilities:
Accounts receivable.................................... (4,956) 331
Prepaid expenses and other assets...................... (1,905) (170)
Accounts payable and accrued liabilities............... 4,506 (252)
Accrued compensation and related expenses.............. (2,213) 99
Income taxes payable................................... 78 --
Deferred revenue....................................... 2,032 1,310
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Net cash provided by (used in) operating activities......... (686) 500
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INVESTING ACTIVITIES
Purchase of property and equipment, net..................... (1,183) (85)
Acquisition, net of cash acquired........................... (7,940) --
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Net cash used in investing activities....................... (9,123) (85)
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FINANCING ACTIVITIES
Proceeds from issuance of common stock, net of payments for
repurchases............................................... 3,995 92
Proceeds from notes payable to stockholders................. -- 251
Payments on notes payable to stockholders................... (3,572) (803)
Payments on capital lease obligations....................... (6) (113)
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Net cash provided by (used in) financing activities......... 417 (573)
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Effect of foreign currency translation on cash and cash
equivalents............................................... (147) (35)
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Decrease in cash and cash equivalents....................... (9,539) (193)
Cash and cash equivalents at beginning of period............ 57,521 7,167
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Cash and cash equivalents at end of period.................. $47,982 $ 6,974
======= =======
SUPPLEMENTAL DISCLOSURES:
Interest paid............................................... $ 137 $ 8
======= =======
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Deferred stock-based compensation related to common stock
options granted........................................... $ 354 $ 870
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
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INFORMATICA CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
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 our audited consolidated financial statements
for the year ended December 31, 1999.
2. REVENUE RECOGNITION
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 1 01, "Revenue in Financial Statements." SAB 101
provides guidance with respect to the recognition, presentation and disclosure
of revenue in financial statements of all public registrants. The Company has
not fully assessed the impact of the adoption of SAB 101 and have not determined
the effect, if any, that it will have on the Company's reported revenues or
results of operations in future periods.
The Company generates revenues through two sources, software licenses and
services. The Company's license revenues are generated from licensing the
Company's products directly to end users and indirectly through resellers and
original equipment manufacturers. Service revenues are generated from
maintenance contracts and training and consulting services performed for
customers that license the Company's products directly and indirectly through
resellers.
License revenues are recognized when a noncancelable license agreement has
been signed, the product has been shipped, the fees are fixed and determinable,
collectibility is probable and vendor-specific objective evidence exists to
allocate the total fee to elements of the arrangement. Vendor-specific objective
evidence is based on the price charged when an element is sold separately. In
the case of an element not sold separately, the price is established by
authorized management. If an acceptance period is required, revenue is
recognized upon customer acceptance or the expiration of the acceptance period.
The Company also enters into reseller arrangements that typically provide for
sublicense fees based on a percentage of list price. For direct sales, revenue
is recognized upon shipment to the end user and when collectibility is probable.
For sales through resellers, revenue is recognized upon shipment to the end user
and when collectibility is probable or upon cash collections based on credit
history with the reseller. The Company's agreements with its customers and
resellers do not contain product return rights.
Revenues from services, which consist of fees for ongoing support and
product updates, are recognized ratably over the term of the contract, typically
one year. Consulting revenues are primarily related to implementation services
and product enhancements performed on a time-and-materials basis under separate
service arrangements related to the installation of the Company's software
products. Training revenues are generated from classes offered both on-site and
at customer locations. Revenues from consulting and training services are
recognized as the services are performed. When a contract includes both license
and service elements, the license fee is recognized on delivery of the software,
provided services do not include significant customization or modification of
the base product, and the payment terms for licenses are not dependent on
additional acceptance criteria.
Deferred revenue includes deferred license and maintenance revenue and
prepaid training and consulting fees. Deferred license revenue amounts do not
include items which are both deferred and unbilled. The Company's practice is to
net such deferred items against the related receivables balances.
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INFORMATICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. STOCK SPLIT
On January 26, 2000, the Board of Directors approved a two-for-one split of
its $.001 par value common stock to be effected in the form of a stock dividend.
The stock split was effected by distribution of one share of the Company's
common stock for each share of common stock held to each stockholder of record
as of February 18, 2000. All references in the financial statements to number of
shares, per share amounts and stock option data of the Company's common stock
have been restated for the effect of the stock split.
4. INITIAL PUBLIC OFFERING
On April 29, 1999, the Company completed an initial public offering and
issued 6,000,000 shares of its common stock, including 500,000 shares in
connection with the exercise of the underwriters' overallotment option, at a
price of $8.00 per share. The Company received $43.5 million in cash, net of
underwriting discounts, commissions and other offering costs. As of the closing
date of the offering, all of the preferred stock outstanding was converted into
an aggregate of 15,880,000 shares of common stock.
5. NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed using the weighted average
number of common shares outstanding during the period. Diluted earnings per
share reflects the potential dilution of securities by adding other common stock
equivalents, including stock options, warrants and convertible preferred stock,
to the weighted average number of common shares outstanding during the period,
if dilutive. Potentially dilutive securities have been excluded from the
computation of diluted net loss per share for the three months ended March 31,
1999 as their inclusion would be antidilutive.
The calculation of basic and diluted net income (loss) per share is as
follows (in thousands, except per share data):
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THREE MONTHS ENDED
MARCH 31,
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2000 1999
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(UNAUDITED) (UNAUDITED)
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Net income (loss)................................... $ 698 $(1,175)
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Weighted average shares of common stock outstanding
used in calculation of net income (loss) per
share:
Basic............................................. 32,822 8,367
Effect of dilutive securities:
Common stock equivalents....................... 6,224 0
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Diluted........................................ 39,046 8,367
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Net income (loss) per share:
Basic............................................. $ 0.02 $ (0.14)
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Diluted........................................... $ 0.02 $ (0.14)
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</TABLE>
If the Company had reported net income for the three months ended March 31,
1999, the calculation of diluted earnings per share would have included the
shares used in the computation of basic net loss per share as well as an
additional 4,641,000 common equivalent shares related to the outstanding options
and warrants not included in the calculations above (determined using the
treasury stock method at the estimated fair value).
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INFORMATICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. COMPREHENSIVE INCOME (LOSS)
The following is a calculation of comprehensive income (loss), in
thousands:
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THREE MONTHS ENDED
MARCH 31,
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2000 1999
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(UNAUDITED) (UNAUDITED)
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Net income (loss)................................... $ 698 $(1,175)
Other comprehensive income (loss):
Foreign currency translation adjustment........... (147) (35)
----- -------
Comprehensive income (loss)......................... $ 551 $(1,210)
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7. INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
requires the use of the liability method in accounting for income taxes. Under
this method, deferred tax assets and liabilities are measured using enacted tax
rates and laws that will be in effect when the differences are expected to
reverse. Valuation allowances are established, when necessary, to reduce the
deferred tax assets to the amounts expected to be realized.
8. BUSINESS COMBINATION
In February 2000, the Company acquired Delphi Solutions AG, a distributor
of Informatica products in Switzerland. The agreement was structured as a share
purchase and accounted for as a purchase transaction. The estimated purchase
price includes payments associated with 1999 revenues and projections for 2000
revenues. The first payment of approximately $3.6 million was paid in February
2000, and the estimated second payment of approximately $5.6 million is payable
in January 2001. The purchase price of the transaction was allocated to the
acquired assets and liabilities based on their estimated fair values as of the
date of the acquisition. Amounts allocated to intangible assets are being
amortized on a straight-line basis over a two-year period.
Pro forma results of operations have not been presented since the effects
of the acquisition were not material to the Company's consolidated financial
position, results of operations or cash flows for the periods presented.
9. SUBSEQUENT EVENT
In April 2000, the Company announced a strategic alliance with
PricewaterhouseCoopers ("PwC") to jointly develop, sell and support end-to-end
analytic solutions for the business-to-business e-commerce market worldwide. In
connection with the agreement, PwC will receive approximately $30.0 million of
common stock in exchange for transferring ownership of intellectual property,
personnel and other assets to the Company.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Quarterly Report includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. All statements other than statements of historical fact are
"forward-looking statements" for purposes of these provisions, including any
statements referencing revenues and operating expenses as a percentage of total
revenues; expected hiring of additional sales and marketing personnel; the
sufficiency of our cash balances and cash flows for the next twelve months; the
impact of recent changes in accounting standards; costs, liabilities, exposure,
and plans related to the Year 2000 problem; our ability to mitigate risks
associated with the Year 2000 problem; and assumptions underlying any of the
foregoing. In some cases, forward-looking statements can be identified by the
use of terminology such as "may," "will," "expects," "intends," "plans,"
"anticipates," "estimates," "potential," or "continue," or the negative thereof
or other comparable terminology. Although we believe that the expectations
reflected in the forward-looking statements contained herein are reasonable,
these expectations or any of the forward-looking statements could prove to be
incorrect, and actual results could differ materially from those projected or
assumed in the forward-looking statements. Our future financial condition and
results of operations, as well as any forward-looking statements, are subject to
risks and uncertainties, including but not limited to the factors set forth
below and in "Factors That May Affect Our Operating Results" and elsewhere in
this report. All forward-looking statements and reasons why results may differ
included in this report are made as of the date hereof, and we assume no
obligation to update any such forward-looking statements or reasons why actual
results may differ.
BUSINESS COMBINATIONS
In February 2000, we acquired Delphi Solutions AG ("Delphi"), a distributor
of Informatica products in Switzerland. The agreement was structured as a share
purchase and accounted for as a purchase transaction. The estimated purchase
price includes payments associated with 1999 revenues and projections for 2000
revenues. The first payment of approximately $3.6 million was paid in February
2000, and the estimated second payment of approximately $5.6 million is payable
in January 2001. The purchase price of the transaction was allocated to the
acquired assets and liabilities based on their estimated fair values as of the
date of the acquisition. Amounts allocated to intangible assets are being
amortized on a straight-line basis over a two-year period.
REVENUES
Our total revenues for the three months ended March 31, 2000 increased to
$25.9 million from $11.0 million for the three months ended March 31, 1999,
representing growth of 136%. Our license revenues increased to $16.8 million in
the three months ended March 31, 2000 from $7.3 million in the three months
ended March 31, 1999, representing growth of 129%. These increases were due
primarily to increases in the number of licenses sold and the average
transaction size, reflecting increased acceptance of PowerCenter, PowerMart and
Informatica Application Products as well as expansion of our direct sales
organization and reseller channels. Service revenues increased to $9.1 million
for the three months ended March 31, 2000 from $3.6 million for the three months
ended March 31, 1999, representing growth of 150%. The increases in our service
revenues were due primarily to an increase in consulting, training and
maintenance fees associated with both the increased number of licenses sold and
the increased average transaction size, along with a larger installed license
base. Service revenues have increased modestly as a percentage of total revenues
as our installed license base grew and as we continued to provide additional
services to our customer base and may increase modestly in future periods to the
extent these trends continue.
COST OF REVENUES
Cost of License Revenues
Our cost of license revenues consists primarily of product packaging,
documentation, production costs and software royalties. Cost of license revenues
was $0.4 million and $0.1 million in the three months ended March 31, 2000 and
1999, respectively, representing 2% and 1% of total revenues in each of those
periods. The
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increase in our cost of license revenues was due primarily to increases in
license revenues and increases in royalty expense.
Cost of Service Revenues
Our cost of service revenues is a combination of costs of maintenance,
training and consulting revenues. Our cost of maintenance revenues consists
primarily of costs associated with software upgrades, telephone support services
and on-site visits. Cost of training revenues consists primarily of the costs of
providing training classes and materials, which are provided both off-site and
at our headquarters. Cost of consulting revenues consists primarily of personnel
costs and expenses incurred in providing consulting services at customers'
facilities. Because we believe that providing a high level of support to
customers is a strategic advantage, we have invested significantly in personnel
and infrastructure. Cost of service revenues was $4.6 million and $1.9 million
in the three months ended March 31, 2000 and 1999, representing 51% and 52% of
service revenues, respectively. Cost of service revenues as a percent of service
revenues decreased slightly in the three months ended March 31, 2000 due
primarily to economies of scale achieved as our revenues and operations grew.
For the remainder of 2000, we expect our cost of service revenues as a
percentage of total revenues to remain at or slightly above our March 31, 2000
level as we grow and expand our consulting business
OPERATING EXPENSES
Research and Development
Our research and development expenses consist primarily of salaries and
other personnel-related expenses associated with the development of new
products, the enhancement and localization of existing products, quality
assurance and development of documentation for our products. Research and
development expenses increased to $4.1 million in the three months ended March
31, 2000 from $2.4 million in the three months ended March 31, 1999. The
increase was due primarily to an increase in personnel costs for development of
future products and enhancement of existing products. Research and development
expenses represented 16% and 21% of total revenues in the three months ended
March 31, 2000 and 1999, respectively. The decrease as a percentage of total
revenues was due primarily to growth in our total revenues. To date, all
software and development costs have been expensed in the period incurred because
costs incurred subsequent to the establishment of technological feasibility have
not been significant. We believe that continued investment in research and
development is critical to attaining our strategic objectives, and, as a result,
we expect research and development expenses to increase in absolute dollars in
future periods. For the remainder of 2000, we expect research and development
expense to be at or slightly above our March 31, 2000 level.
Sales and Marketing
Our sales and marketing expenses consist primarily of personnel costs,
including commissions, as well as costs of public relations, seminars, marketing
programs, lead generation, travel and trade shows. Sales and marketing expenses
increased to $13.4 million in the three months ended March 31, 2000 from $6.5
million in the three months ended March 31, 1999. The increases were due
primarily to the hiring of additional sales and marketing personnel in
connection with the building of our direct, original equipment manufacturer and
reseller channels, higher sales commissions associated with increased sales
volume, and increased spending associated with tradeshows and other marketing
programs. Sales and marketing expenses for the three months ended March 31, 2000
and 1999 represented 52% and 59% of total revenues, respectively. The decline in
sales and marketing expenses as a percentage of total revenues for these periods
was due primarily to growth in total revenues. We expect to continue hiring
additional sales and marketing personnel and to increase promotion and other
marketing expenditures in the future. For the remainder of 2000, we expect sales
and marketing expense as a percentage of total revenue to remain at or slightly
below the March 31, 2000 level.
General and Administrative
Our general and administrative expenses consist primarily of personnel
costs for finance, human resources, legal and general management, as well as
professional services associated with recruiting, legal and
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accounting. General and administrative expenses increased to $2.0 million in the
three months ended March 31, 2000 from $0.9 million in the three months ended
March 31, 1999, representing 8% and 9% of our total revenues, respectively.
Expenses increased due primarily to increased staffing in finance, human
resources, legal, information technology and administration to manage and
support our growth as well as increased costs paid to outside professional
service providers and increased facilities costs. The decrease as a percentage
of our total revenues was due primarily to the growth in our total revenues. We
expect that for the remainder of 2000, our general and administrative expenses
as a percentage of total revenue will remain at or slightly below our March 31,
2000 level.
Bad debt expense charged to operations was $0.1 million for the three
months ended March 31, 2000 and 1999, representing less than 1% of total
revenues. The expense declined in absolute dollars and as a percentage of
revenues in each year due primarily to an increase in repeat business with
existing customers which contributed to more successful collection efforts.
Stock-based Compensation
We use the intrinsic value method of accounting for our employee
stock-based compensation plans. Accordingly, no compensation cost is recognized
for any of our stock options when the exercise price of each option equals or
exceeds the fair value of the underlying common stock as of the grant date for
each stock option with respect to the options granted. From inception through
March 31, 2000, we recorded deferred stock-based compensation of $4.1 million
for the difference at the grant date between the exercise price and the fair
value of the common stock underlying the options. This amount is included as a
component of stockholder's equity and is being amortized on a graded vesting
method by charges to operations over the vesting period of the options. Such
amortization amounted to $0.4 million and $0.1 million for the three months
ended March 31, 2000 and 1999, respectively.
Amortization of intangible assets
Intangible assets consist of goodwill, which represents the excess of the
aggregate purchase price over the fair value of the tangible and identifiable
intangible assets we have acquired. In February 2000, we acquired Delphi
Solutions AG, a distributor of Informatica products in Switzerland. The
agreement was structured as a share purchase and accounted for as a purchase
transaction. Amounts allocated to intangible assets are being amortized on a
straight-line basis over a two-year period. The amortization amounted to $0.4
million for the three months ended March 31, 2000.
NET INTEREST INCOME (EXPENSE)
Interest income (expense) represents interest income earned on our cash and
cash equivalents and interest expense on capital equipment leases and
stockholder loans. Net interest income increased to $0.3 million in the three
months ended March 31, 2000 from net interest expense of $42,000 in the three
months ended March 31, 1999. The increase in March 31, 2000 was primarily due to
an increased average cash balance as a result of the completion of our initial
public offering of our common stock with net proceeds of $43.5 million in April
1999.
PROVISION FOR INCOME TAXES
In each of the three months ended March 31, 2000 and 1999, we recorded an
income tax provision of $0.2 million, for state and foreign income taxes.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations primarily through private sales of preferred
equity securities, capital equipment leases and with the completion of our
initial public offering of common stock in April 1999. As of March 31, 2000, we
had $48.0 million in cash and cash equivalents.
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Our operating activities resulted in net cash outflows of $0.7 million in
the three months ended March 31, 2000. The sources of cash were primarily due to
increases in accounts payable and accrued liabilities and deferred revenue. Uses
of cash in operating activities were due primarily to increases in accounts
receivable, prepaid expenses and other assets, and accrued compensation and
related expenses.
For the three months ended March 31, 1999, our operating activities
resulted in a net cash inflow of $0.5 million. The sources of cash were
primarily due to increases in accounts payable and accrued liabilities, accrued
compensation and related expenses, and deferred revenue. Uses of cash in
operating activities were primarily due to net operating losses and increases in
accounts receivable.
Investing activities used cash of $9.1 million in the three months ended
March 31, 2000 and $0.1 million in the three months ended March 31, 1999. Of the
$9.1 million used in investing activities in the three months ended March 31,
2000, $7.9 million was associated with acquisition of our distributor in
Switzerland, Delphi Solutions, AG. The other $1.2 million was for the purchase
of capital equipment. The use of cash in investing activities in the three
months ended March 31, 1999 was due primarily to the purchase of capital
equipment.
Financing activities provided cash of $0.4 million for the three months
ended March 31, 2000. The sources of cash were from the exercise of stock
options, partially offset by final payments on notes payable to stockholders
associated with the acquisition of Influence Software, Inc. ("Influence") in
December 1999. Financing activities used cash of $0.6 million for the three
months ended March 31, 1999, primarily due to payments on notes payable to
stockholders and capital lease obligations, partially offset by proceeds from
notes payable to stockholders and the exercise of stock options.
As of March 31, 2000, our principal commitments consisted of obligations
under operating and capital leases. As of March 31, 2000 and 1999, we had $0.2
million and $0.3 million, respectively, in outstanding borrowings under capital
lease agreements which are payable through 2001. In addition, the principal and
accrued interest on the notes to stockholders of 3.6 million were fully repaid
in February 2000.
On February 22, 2000, we entered into two lease agreements for new
corporate headquarters in Redwood City, California. The facility is under
construction and is expected to be complete in June 2001. The lease expires
twelve years after occupancy. As part of these leases, we have agreed to provide
letters of credit totaling $12.0 million as a security deposit for one year's
lease payments or until certain financial covenants are met.
Deferred revenues consist primarily of the unrecognized portion of revenues
received under maintenance contracts. For international customers, thinly
capitalized resellers and OEMs, revenue is recognized upon cash collections, and
is not recorded on the balance sheet or income statement until collectibility is
no longer determined to be uncertain. As of March 31, 2000, we had $10.6 million
of sales related to shipments to international customers, thinly capitalized
resellers and OEMs for which revenue had not been recognized.
We believe that our cash balances and the cash flows generated by
operations will be sufficient to satisfy our anticipated cash needs for working
capital and capital expenditures for at least the next 12 months. Thereafter, we
may require additional funds to support our working capital requirements, or for
other purposes, and may seek to raise such additional funds through public or
private equity financings or from other sources. We may not be able to obtain
adequate or favorable financing at that time. Any financing we obtain may dilute
your ownership interests.
A portion of our cash may be used to acquire or invest in complementary
businesses or products or to obtain the right to use complementary technologies.
From time to time, in the ordinary course of business, we may evaluate potential
acquisitions of such businesses, products or technologies.
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<PAGE> 13
FACTORS THAT MAY AFFECT OUR OPERATING RESULTS
OUR FUTURE OPERATING RESULTS MAY FLUCTUATE WHICH COULD CAUSE OUR STOCK PRICE TO
FLUCTUATE OR DECLINE
Our future quarterly operating results have fluctuated in the past and are
likely to do so in the future. These fluctuations could cause our stock price to
also significantly fluctuate or experience declines. Some of the factors which
could cause our operating results to fluctuate include:
- the size and timing of customer orders, which can be affected by customer
order deferrals in anticipation of future new product introductions or
product enhancements and customer budgeting and purchasing cycles;
- market acceptance of our products, particularly our new analytics
products;
- the length and variability of our sales cycle for our products;
- introduction or enhancement of our products or our competitors' products
and changes in our or our competitors' pricing policies;
- our ability to develop, introduce and market new products on a timely
basis;
- the mix of our products and services sold and the mix of distribution
channels utilized;
- our success in expanding our sales and marketing programs;
- technological changes in computer systems and environments; and
- general economic conditions, which may affect our customers' capital
investment levels.
Our product revenues are not predictable with any significant degree of
certainty. Historically, we have recognized a substantial portion of our
revenues in the last month of the quarter. If customers cancel or delay orders,
it can have a material adverse impact on our revenues and results of operations
for the quarter. To the extent any such cancellations or delays are for large
orders, this impact will be greater. To the extent that the average size of our
orders increases, customers' cancellations or delays of orders will more likely
have a material adverse impact on our revenues and results of operations.
Our quarterly product license revenues are difficult to forecast because we
historically have not had a substantial backlog of orders, and therefore
revenues in each quarter are substantially dependent on orders booked and
shipped in that quarter. Our product license revenues are also difficult to
forecast because the market for our products is rapidly evolving, and our sales
cycles, which may last many months, vary substantially from customer to customer
and vary in general due to a number of factors over which we have little or no
control. Nonetheless, our short-term expense levels are relatively fixed and
based, in part, on our expectations of future revenues. The difficulty we have
in predicting our quarterly revenue means revenues shortfalls are likely to
occur at some time, and our inability to adequately reduce short-term expenses
means such shortfalls will affect not only our revenue, but also our overall
business, results of operations and financial conditions.
Due to the uncertainty surrounding our revenues and expenses, we believe
that quarter-to-quarter comparisons of our operating results are not a good
indication of our future performance. While we achieved significant
quarter-to-quarter revenue growth in the past, you should not take these recent
quarterly results to be indicative of our future performance. We do not expect
to sustain this same rate of sequential quarterly revenue growth in future
periods. Moreover, it is likely that in some future quarter, our operating
results will fall below the expectations of stock analysts and investors. If
this happens, the price of our common stock may fall.
IF THE MARKET IN WHICH WE SELL OUR PRODUCTS AND SERVICES DOES NOT GROW AS WE
ANTICIPATE, IT WILL ADVERSELY AFFECT OUR REVENUES
The market for software solutions that enable more effective business
decision making by helping companies aggregate and utilize data stored
throughout an organization is relatively new and still emerging.
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<PAGE> 14
Substantially all of our revenues are attributable to the sale of products and
services in this market. If this market does not grow at the rate we anticipate,
our business, results of operations and financial condition will be adversely
affected. One of the reasons this market might not grow as we anticipate is that
many companies are not yet fully aware of the benefits of using these software
solutions to help make business decisions or the benefits of our specific
product solutions. As a result, we believe large companies to date have deployed
these software solutions to make business decisions on a relatively limited
basis. Although we have devoted and intend to continue to devote significant
resources promoting market awareness of the benefits of these solutions, our
efforts may be unsuccessful or insufficient.
WE EXPECT SEASONAL TRENDS TO CAUSE OUR QUARTERLY REVENUES TO FLUCTUATE
We have experienced, and expect to continue to experience, seasonality with
respect to product license revenues. In recent years, there has been a
relatively greater demand for our products in the fourth quarter than in each of
the first three quarters of the year, particularly the first quarter. As a
result, we have historically experienced relatively higher bookings in the
fourth quarter and relatively lighter bookings in the first quarter. While some
of this effect can be attributed to the rapid growth of revenues in recent
years, we believe that these fluctuations are caused by customer buying patterns
(often influenced by year-end budgetary pressures) and the efforts of our direct
sales force to meet or exceed year-end sales quotas. In addition, European sales
may tend to be relatively lower during the summer months than during other
periods. We expect that seasonal trends will continue for the foreseeable
future. This seasonal impact may increase as we continue to focus our sales
efforts on large corporations.
BECAUSE WE SELL A FEW MAIN PRODUCTS, IF THEY DO NOT ACHIEVE BROAD MARKET
ACCEPTANCE, OUR REVENUES WILL BE ADVERSELY AFFECTED
To date, substantially all of our revenues were derived from our
PowerCenter, PowerMart, PowerConnect, Analytic Business Components for SAP R/3,
and Informatica Application Products and related services. We expect revenues
derived from these products and related services to comprise substantially all
of our revenues for the foreseeable future. Even if the emerging software market
in which these products are sold grows substantially, if either of these
products does not achieve market acceptance, our revenues will be adversely
affected. Market acceptance of our products could be materially adversely
affected if, among other things, applications suppliers integrate their products
to such a degree that the utility of the data integration functionality that our
products provide is minimized or rendered unnecessary.
RISKS ASSOCIATED WITH STRATEGIC ACQUISITIONS AND INVESTMENTS
In December 1999, we acquired Influence, a developer of analytic
applications for e-business, in a transaction accounted for as a
pooling-of-interests. In February 2000, we acquired Delphi, a distributor of
Informatica products in Switzerland, in a transaction accounted for as a
purchase. There can be no assurance that these acquisitions will be effectively
assimilated into our business. The integration of Influence and Delphi will
place a burden on our management and infrastructure. Such integrations are
subject to risks commonly encountered in making such acquisitions, including,
among others, loss of key personnel of the acquired company, loss of key
customers and business relationships of the acquired company, the difficulty
associated with assimilating and integrating the personnel, operations and
technologies of the acquired company, the potential disruption of our ongoing
business, and the maintenance of uniform standards, controls, procedures,
employees and clients. There can be no assurance that we will be successful in
overcoming these risks or any other problems encountered in connection with our
acquisitions.
From time to time, in the ordinary course of business, we may evaluate
potential acquisitions of such businesses, products or technologies. In
addition, future acquisitions could result in the issuance of dilutive equity
securities, the incurrence of debt or contingent liabilities. Furthermore, there
can be no assurance that any strategic acquisition of investment will succeed.
Any future acquisition or investment could have a material adverse effect on our
business, financial condition and results of operation.
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<PAGE> 15
Recently, the Financial Accounting Standards Board ("FASB") voted to
eliminate pooling of interests accounting for acquisitions and the ability to
write-off in-process research and development has been limited by recent
pronouncements. The effect of these changes would be to increase the portion of
the purchase price for any future acquisitions that must be charged to our cost
of revenues and operating expenses in the periods following any such
acquisitions. As a consequence, our results of operations in periods following
any such acquisitions could be materially adversely affected. Although these
changes would not directly affect the purchase price for any of these
acquisitions, they would have the effect of increasing the reported expenses
associated with any of these acquisitions. To that extent, these changes may
make it more difficult for us to acquire other companies, product lines or
technologies.
THE LOSS OF KEY PERSONNEL OR THE INABILITY TO ATTRACT AND RETAIN ADDITIONAL
PERSONNEL COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS
We believe our future success will depend upon our ability to attract and
retain highly skilled personnel, including Gaurav S. Dhillon, our Chief
Executive Officer, and Diaz H. Nesamoney, our President, and other key members
of management. We currently do not have any key-man life insurance relating to
our key personnel, and these employees are at-will and not subject to employment
contracts. We may not be successful in attracting, assimilating and retaining
key personnel in the future.
As we seek to expand our operations, the hiring of qualified sales and
technical personnel will be difficult due to the limited number of qualified
professionals. Competition for these types of employees is intense. We have in
the past experienced difficulty in recruiting qualified sales and technical
personnel. Failure to attract, assimilate and retain personnel, particularly
sales and technical personnel, would have a material adverse effect on our
business, results of operations and financial condition.
OUR MARKET IS HIGHLY COMPETITIVE
The market for our products is highly competitive, rapidly evolving and
subject to rapidly changing technology. Many of our competitors have longer
operating histories, substantially greater financial, technical, marketing or
other resources, or greater name recognition than we do. Our competitors may be
able to respond more quickly than we can to new or emerging technologies and
changes in customer requirements. Competition could seriously impede our ability
to sell additional products and services on terms favorable to us. Our current
and potential competitors may develop and market new technologies that render
our existing or future products obsolete, unmarketable or less competitive. We
believe we currently compete more on the basis of our products' functionality
than on the basis of price. If our competitors develop products with similar or
superior functionality, we may have difficulty competing on the basis of price.
Our current and potential competitors may make strategic acquisitions or
establish cooperative relationships among themselves or with other solution
providers, thereby increasing the ability of their products to address the needs
of our prospective customers. Our current and potential competitors may
establish or strengthen cooperative relationships with our current or future
channel or strategic partners, thereby limiting our ability to sell products
through these channels. Competitive pressures could reduce our market share or
require us to reduce our prices, either of which could materially and adversely
affect our business, results of operations or financial condition.
We compete principally against providers of decision support, data
warehousing and enterprise application software. Such competitors include Acta
Technology, Inc., Informix Corporation, Broadbase Information Systems, Inc.,
E.piphany, Inc., Information Builders, Inc., and Sagent Technology, Inc. In
addition, we compete or may compete against database vendors that currently
offer, or may develop, products with functionalities that compete with our
solutions. These products typically operate specifically with these competitors'
proprietary databases. Such competitors include IBM Corporation, Microsoft
Corporation and Oracle Corporation.
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<PAGE> 16
IF WE DO NOT MAINTAIN AND STRENGTHEN OUR RELATIONSHIPS WITH OUR CHANNEL AND
STRATEGIC PARTNERS, OUR ABILITY TO GENERATE REVENUE WILL BE ADVERSELY AFFECTED
We believe that our ability to increase the sales of our products and our
future success will depend in part upon maintaining and strengthening successful
relationships with our current or future partners. In addition to our direct
sales force, we rely on established relationships with a variety of channel
partners, such as systems integrators, resellers and distributors, for
marketing, licensing and support of our products in the United States and
internationally. We also rely on relationships with strategic technology
partners, such as enterprise resource planning providers, for the promotion of
our solutions. In particular, our ability to market our products depends
substantially on our relationships with such significant partners as Cambridge
Technology Partners, KPMG, PeopleSoft, PricewaterhouseCoopers and SAP. In
addition, our channel partners may offer products of several different
companies, including, in some cases, products that compete with our products. We
have limited control, if any, as to whether these strategic partners devote
adequate resources to promoting and selling our products.
We may not be able to maintain our channel or strategic partnerships or
attract sufficient additional channel or strategic partners who are able to
market our products effectively or who are qualified to provide timely and
cost-effective customer support and service. Further, we can give no assurance
that our relationships with our channel and strategic partners will generate
enough revenue to offset the significant resources used to develop these
channels.
THE LENGTHY SALES CYCLE FOR OUR PRODUCTS MAKES OUR REVENUES SUSCEPTIBLE TO
FLUCTUATIONS
Our sales cycle is generally long because the expense, complexity, broad
functionality and company-wide deployment of our products typically require
executive-level approval for investment in our products. In addition, to
successfully sell our products, we frequently must educate our potential
customers about the full benefits of our products, which can require significant
time. Due to these factors, the sales cycle associated with the purchase of our
products is subject to a number of significant risks over which we have little
or no control, including:
- customers' budgetary constraints and internal acceptance review
procedures;
- the timing of budget cycles;
- concerns about the introduction of our or our competitors' new products;
or
- product enhancements and potential downturns in general economic
conditions.
If our sales cycle lengthens unexpectedly, it could adversely affect the timing
of our revenues. Our sales cycle may lengthen as we continue to focus our sales
efforts on large corporations.
DIFFICULTIES WE MAY ENCOUNTER MANAGING OUR GROWTH COULD ADVERSELY AFFECT OUR
RESULTS OF OPERATIONS
We have experienced a period of rapid and substantial growth that has
placed and, if such growth continues, will continue to place a strain on our
administrative and operational infrastructure. If we are unable to manage this
growth effectively, our business, results of operations or financial condition
may be materially adversely affected. Our ability to manage our operations and
growth effectively requires us to continue to improve our operational, financial
and management controls, reporting systems and procedures and hiring programs.
We may not be able to successfully implement improvements to our management
information and control systems in an efficient or timely manner and may
discover deficiencies in existing systems and controls.
TECHNOLOGICAL ADVANCES AND EVOLVING INDUSTRY STANDARDS COULD ADVERSELY IMPACT
OUR FUTURE PRODUCT SALES
The market for our products is characterized by continuing technological
development, evolving industry standards and changing customer requirements. The
introduction of products by our direct competitors or others embodying new
technologies, the emergence of new industry standards or changes in customer
requirements could render our existing products obsolete, unmarketable or less
competitive. In particular, an industry-wide adoption of uniform open standards
across heterogeneous analytic applications could minimize the importance of the
integration functionality of our products and materially adversely affect the
competitive-
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<PAGE> 17
ness and market acceptance of our products. Our success depends upon our ability
to enhance existing products, to respond to changing customer requirements and
to develop and introduce in a timely manner new products that keep pace with
technological and competitive developments and emerging industry standards. We
have in the past experienced delays in releasing new products and product
enhancements and may experience similar delays in the future. Future delays or
problems in the installation or implementation of our new releases may cause
customers to forego purchases of our products and purchase those of our
competitors instead. Failure to develop and introduce new products, or enhance
existing products, in a timely manner in response to changing market conditions
or customer requirements, will materially and adversely affect our business,
results of operations and financial condition.
OUR INTERNATIONAL OPERATIONS EXPOSE US TO GREATER INTELLECTUAL PROPERTY,
COLLECTIONS, REGULATORY AND OTHER RISKS
Our international business is subject to a number of risks, including the
following:
- greater difficulty in protecting intellectual property;
- greater difficulty in staffing and managing foreign operations;
- greater risk of uncollectible accounts;
- longer collection cycles;
- potential unexpected changes in regulatory practices and tariffs;
- potential unexpected changes in tax laws;
- sales seasonality;
- the impact of fluctuating exchange rates between the U.S. dollar and
foreign currencies in markets where we do business; and
- general economic and political conditions in these foreign markets.
It is difficult to predict the extent of the future impact of these conditions.
These factors and other factors could have a material adverse effect on our
future international revenues and consequently on our business, results of
operations and financial condition.
RISK ASSOCIATED WITH GEOGRAPHIC EXPANSION
A majority of our revenue historically has been derived from clients
located in the United States. Our ability to achieve significant future revenue
growth will in large part depend on our ability to get new customers in the
United States and internationally.
Growth and geographic expansion, such as our recent acquisition of Delphi
in Switzerland, have resulted in new and increased responsibilities for
management personnel and have placed and continue to place a strain on our
management and operating and financial systems. We will be required to continue
to implement and accommodate the increased complexities of international and
multi currency transactions. Any failure to implement and improve our operating
and financial systems or to hire appropriate personnel to manage the operations
would have a material adverse effect on our business, financial condition and
result of operations.
IF OUR PRODUCTS CONTAIN SIGNIFICANT DEFECTS, THESE DEFECTS COULD CAUSE US TO
LOSE REVENUE AND EXPOSE US TO PRODUCT LIABILITY CLAIMS
The software products we offer are inherently complex and, despite
extensive testing and quality control, have in the past and may in the future
contain errors or defects, especially when we first introduce them. These
defects and errors could cause damage to our reputation, loss of revenue,
product returns, order cancellations or lack of market acceptance of our
products. Accordingly, these defects and errors could have a material adverse
effect on our business, results of operations or financial condition. We have in
the past and may in the future need to issue corrective releases of our software
products to fix these defects or errors. 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
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<PAGE> 18
agreements may not be effective as a result of existing or future national,
federal, state or local laws or ordinances or unfavorable judicial decisions.
Although we have not experienced any product liability claims to date, sale and
support of our products entails the risk of such claims, which could be
substantial in light of the use of our products in enterprise-wide 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 or
financial condition.
OUR INABILITY TO ADEQUATELY PROTECT OUR PROPRIETARY TECHNOLOGY COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS
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. It is possible that our pending patent applications will
not be allowed or that competitors will successfully challenge the validity or
scope of our allowed patent or any future allowed patents. Our patents alone may
not provide us with any significant competitive advantage.
Third parties could copy or otherwise obtain and use our products or
technology without authorization, or develop similar technology independently.
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 prevalent problem in our industry in general.
Effective protection of intellectual property rights is unavailable or limited
in certain foreign countries. The protection of our proprietary rights may be
inadequate and our competitors could independently develop similar technology,
duplicate our products or design around any patents or other intellectual
property rights we hold.
As is common in the software industry, we have received and may continue
from time to time to receive notices from third parties claiming infringement by
our products of third-party patent and other proprietary rights. Third parties
could claim that our current or future products infringe their patent or other
proprietary rights. Any claims, with or without merit, could be time-consuming,
result in costly litigation, cause product shipment delays or require us to
enter into royalty or licensing agreements, any of which could have a material
adverse effect upon our business, financial condition and operating results.
Such royalty or licensing agreements, if required, may not be available on terms
acceptable to us, or at all. Legal action claiming patent infringement could be
commenced against us, and we may not prevail in such litigation given the
complex technical issues and inherent uncertainties in patent litigation.
Moreover, the cost of defending patent litigation could be substantial,
regardless of the outcome. In the event a patent claim against us was successful
and we could not obtain a license on acceptable terms or license a substitute
technology or redesign to avoid infringement, our business, financial condition
and operating results would be materially adversely affected.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk for changes in interest rates relates primarily
to the increase or decrease in the amount of interest income we can earn on our
investment portfolio. We do not plan to use derivative financial instruments in
our investment portfolio. We plan to ensure the safety and preservation of our
invested principal funds by limiting default risks, market risk and reinvestment
risk. We plan to mitigate default risk by investing in high-credit quality
securities.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.16 Secured Promissory Note by Clive Harrison, dated April 6, 2000.
10.17 Security Agreement for Secured Promissory Note of Clive Harrison,
dated April 6, 2000.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
19
<PAGE> 20
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Informatica Corporation has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
INFORMATICA CORPORATION
By: /s/ EARL E. FRY
------------------------------------
Earl E. Fry
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial and Accounting
Officer)
Dated: May 12, 2000
20
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.16 Secured Promissory Note by Clive Harrison, dated April 6,
2000.
10.17 Securities Agreement for Secured Promissory Note of Clive
Harrison, dated April 6, 2000.
27.1 Financial Data Schedule.
</TABLE>
21
<PAGE> 1
EXHIBIT 10.16
SECURED PROMISSORY NOTE
$2,600,000.00 April 6, 2000
Palo Alto, California
This Secured Promissory Note is made between the undersigned Clive
Harrison ("Maker") at his address 51 La Honda Ct., Clayton, CA 94517 and
Informatica Corporation, a Delaware corporation (the "Company") at its address
3350 West Bayshore Road. Palo Alto, California 94303. Maker, for value received,
promises to pay to the Company the principal sum of $2,600,000.00 with interest
from the date hereof at a rate of 6.27% per annum, compounded semiannually on
the unpaid balance of such principal sum.
Such principal and interest shall be due and payable within thirty (30)
days upon the earlier of (i) the date of termination for any reason, with or
without cause, of Maker's employment with the Company as a full-time employee
and (ii) June 30, 2000; provided however, that no interest shall be due if
Maker remains continuously employed as a full-time employee of the Company from
the date hereof through June 30, 2000.
Interest shall be computed on the basis of a year of 360 days. All
amounts payable under this Note are payable in lawful money of the United
States, without notice, demand, offset or deduction. For purposes of interest
accrual, checks will constitute payment upon receipt.
This is the Secured Promissory Note referred to in the Security
Agreement of even date herewith between Maker and the Company, and the Company
is entitled to all the benefits provided therein.
Should the undersigned fail to make full payment of any installment of
principal or interest for a period of 10 days or more after the due date
thereof, the whole unpaid balance on this Note of principal and interest shall
become immediately due at the option of the holder of this Note. Payments of
principal and interest shall be made in lawful money of the United States of
America.
Maker promises to pay on demand all reasonable out-of-pocket costs of
and expenses of the Company in connection with the collection of amounts due
hereunder, including, without limitation, attorneys' fees incurred in connection
therewith, whether or not any lawsuit is ever filed with respect thereto.
Maker and any endorsers or guarantors of this Note for themselves, their
heirs, legal representatives, successors and assigns, respectively, severally
waive diligence, presentment, protest and demand and also notice of protest,
demand, dishonor and nonpayment of this Note.
1
<PAGE> 2
This Note shall inure to the benefit of the Company and its successors
and assigns. The obligations of Maker hereunder shall not be assignable without
the consent of the Company.
This Note shall be governed by and construed in accordance with the laws
of the State of California. If there is a lawsuit on this Note, the parties
agree to submit to the jurisdiction of the courts of Santa Clara County,
California.
IN WITNESS WHEREOF, the undersigned has executed and delivered this Note
as of the date first above written.
MAKER
------------------------------------
2
<PAGE> 1
EXHIBIT 10.17
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is made and entered into as of this 6th day of
April, 2000, by and between Informatica Corporation, a Delaware corporation
("Secured Party"), and Clive Harrison, an individual residing at 51 La Honda
Ct., Clayton, CA 94517 ("Debtor").
In consideration of the mutual covenants contained herein and for other
good and valuable consideration, the adequacy and receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. Definitions. The following terms have the following meanings:
(a) The term "Collateral" shall mean (i) the tangible assets
owned by Debtor as of the date hereof and described in Exhibit A attached hereto
and (ii) all Proceeds of the foregoing Collateral. For purposes of this Security
Agreement, the term "Proceeds" includes whatever is receivable or received when
Collateral or proceeds thereof is sold, collected, exchanged or otherwise
disposed of, whether such disposition is voluntary or involuntary, and includes,
without limitation, all rights to payment, including return premiums, with
respect to any insurance relating thereto.
(b) The term "Obligations" shall mean all of the unpaid
principal sum of that certain Secured Promissory Note in the original principal
amount of $2,600,000.00 of even date herewith (the "Note") evidencing the
indebtedness of Debtor to Secured Party.
(c) The term "UCC" shall mean the Uniform Commercial Code as the
same may, from time to time, be in effect in the State of California.
(d) Capitalized terms used herein shall have the meaning set
forth in the UCC unless otherwise set forth herein.
(e) The term "Event of Default" shall have the meaning set forth
in the Note.
2. Grant of Security Interest. As collateral security for prompt and
complete payment and performance under the Obligations, Debtor hereby assigns,
conveys, grants, pledges and transfers to and creates in favor of Secured Party
a security interest in the Collateral, including all Proceeds of the foregoing
and all accessions to, substitutions and replacements for the foregoing. Debtor
shall, upon execution of this Security Agreement, and of the Note as Maker (as
such term is defined in the Note), deliver all certificates representing the
Collateral together with a stock power executed in blank by Debtor and Debtor's
spouse with respect to such stock certificates to the Secretary of Secured Party
to be held in escrow until full satisfaction of Debtor's obligations hereunder
and under the Note with the authority to take all such actions and to
<PAGE> 2
effectuate all such transfers and/or releases as may be necessary or appropriate
to accomplish the objectives of this Security Agreement and the Note. In the
event that the Proceeds from the disposition of the Collateral are insufficient
to fully satisfy the amounts due and owing under the Note, Debtor shall, subject
to the limitations set forth in the UCC, be liable for any deficiency.
3. Representations, Warranties and Covenants. Debtor represents,
warrants and covenants that:
(a) Title. Apart from the security interest in the Collateral
granted to Secured Party hereunder, Debtor has good and valid title to the
Collateral, free and clear of any and all liens, charges, claims, security
interests or encumbrances of any kind whatsoever.
(b) Transfer of Collateral. Debtor shall not sell, assign,
transfer, encumber or otherwise dispose of any of the Collateral or any interest
therein without the prior written consent of Secured Party. If any such
encumbrance is imposed, Debtor shall give Secured Party immediate written
notice.
(c) Perfection. Debtor shall, upon demand, do all such acts as
Secured Party may reasonably request to establish and maintain a perfected
security interest in the Collateral, including, without limitation, executing a
financing statement in the form prescribed by the California Secretary of State.
4. Remedies. Upon the occurrence of any Event of Default hereunder, the
entire unpaid principal balance of the Note shall, at the option of the Secured
Party and without notice or demand of any kind to Debtor or any other person,
immediately become due and payable, and Secured Party may proceed to exercise
any and all of the rights and remedies of a secured party under the UCC and any
other remedies available at law or in equity, with respect to the Collateral.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be executed as of the date first above written.
SECURED PARTY
INFORMATICA CORPORATION
a Delaware corporation
By:
---------------------------------
Its:
--------------------------------
DEBTOR
------------------------------------
Clive Harrison
<PAGE> 4
EXHIBIT A
DESCRIPTION OF COLLATERAL
30,000 shares of Common Stock of Informatica Corporation
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 47,982
<SECURITIES> 0
<RECEIVABLES> 15,052
<ALLOWANCES> 2,046
<INVENTORY> 0
<CURRENT-ASSETS> 62,967
<PP&E> 3,930
<DEPRECIATION> 1,300
<TOTAL-ASSETS> 75,546
<CURRENT-LIABILITIES> 30,420
<BONDS> 0
0
0
<COMMON> 71,369
<OTHER-SE> (26,300)
<TOTAL-LIABILITY-AND-EQUITY> 75,546
<SALES> 25,933
<TOTAL-REVENUES> 25,933
<CGS> 5,055
<TOTAL-COSTS> 5,055
<OTHER-EXPENSES> 20,248
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 137
<INCOME-PRETAX> 931
<INCOME-TAX> 233
<INCOME-CONTINUING> 698
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 698
<EPS-BASIC> 0.02<F1>
<EPS-DILUTED> 0.02
<FN>
<F1>EPS INFORMATION HAS BEEN RESTATED TO REFLECT A TWO-FOR-ONE STOCK SPLIT,
EFFECTED IN THE FORM OF A STOCK DIVIDEND TO EACH STOCKHOLDER OF RECORD AS OF
FEBRUARY 18, 2000.
</FN>
</TABLE>
