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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________________ to __________________
Commission File Number 0-14686
PYRAMID TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 94-2781589
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3860 N. FIRST STREET, SAN JOSE, CALIFORNIA 95134
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 428-9000.
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. /X/
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Based on the closing sale price of the Common Stock on the NASDAQ National
Market System on November 28, 1994, the aggregate market value of the voting
stock held by non-affiliates of the registrant was $125,327,943. Shares of
Common Stock held by each executive officer and director and by each person who
owns 5% or more of the outstanding Common Stock have been excluded in that such
persons may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.
The number of shares outstanding of the registrant's Common Stock, $.01 par
value, was 15,583,965 on November 28, 1994.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Annual Report to Shareholders for the fiscal year ended September 30,
1994 - Items 3, 5, 6, 7, 8 and 14(a)(1).
(2) Proxy Statement for the registrant's Annual Meeting of Stockholders to
be held on January 26, 1995 - Items 10, 11, 12 and 13.
Total number of pages, including cover page - 164
Index to exhibits page - 24
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PART I
ITEM 1 BUSINESS
GENERAL
Pyramid Technology Corporation ("Pyramid" or the "Company") was incorporated in
California in December 1981 and reincorporated in Delaware in June 1987. The
Company designs, manufactures, markets, and supports high-end, large-scale
servers that deliver mainframe-class performance for the open enterprise
client/server environment. These servers are aimed at the global 2000
marketplace which is comprised of certain Fortune 2000 businesses in the United
States, representative corporations in other countries, and government agencies
worldwide. Pyramid's high-availability, fault-resilient systems run large UNIX
relational databases, and are based on a symmetric multiprocessing (SMP)
architecture that combines an enhanced UNIX operating system with reduced
instruction set computing (RISC) processor technology. The Company's systems
support up to 2,160 MIPS (millions of instructions-per-second), thousands of
transactions-per-second, and more than 10,000 concurrent users in clustered
configurations.
Since its founding in 1981, Pyramid has consistently focused on meeting the
needs of customers at the high-end of the market, and more recently, on
fostering the move by major corporations toward open enterprise client/server
computing. Today, Pyramid is one of the leaders in the high-end, server market
with more than 3,500 systems installed worldwide.
With its mid- and high-end UNIX servers, the Company delivers on-line
transaction processing (OLTP), enterprise-wide messaging, data warehousing, and
decision support solutions. To support its hardware and software offerings,
Pyramid has developed strategic relationships with companies that provide
expertise in databases, application development tools, mainframe transition
toolsets, business solutions, communications, and data center integration.
Pyramid markets its open systems solutions via a combination of direct and
indirect sales channels. In line with changing market dynamics, during the
past two years, the Company has been transitioning to a direct-sales dominated
marketing strategy. Direct sales accounted for 62 percent of total product
revenue in fiscal 1994, the same as in fiscal 1993. Direct sales are handled
through a field sales and support network in the Americas, the United Kingdom,
Hong Kong, and Japan. Indirect sales are handled via ventures with joint sales
partners, original equipment manufacturers (OEMs), value-added resellers
(VARs), and distributors.
In fiscal 1994, the Company continued to build on the successful launch of its
new family of fault-resilient, SMP-based UNIX servers, the Pyramid Nile(TM)
Series. The first Pyramid Nile server, the Pyramid Nile 150, was introduced in
October 1993. It is the Company's most powerful server to date and features a
number of enhancements for reliability, availability, and serviceability. In
May 1994, the Company expanded the family with the Pyramid Nile 100. The
Pyramid Nile 100 is targeted at the mid-range of the scalable, open systems
market and offers the performance and availability of the high-end Pyramid Nile
150 at a size and price-point typical of mid-range systems.
Currently, the Company is developing a new product which is internally referred
to as MESHine. MESHine will enhance Pyramid's Nile- based SMP and clustering
competencies with massively parallel processing (MPP) technology to provide for
extending the Company's enterprise server capabilities within the areas of
OLTP, data warehousing and decision support, and electronic messaging. The
product is expected to be released sometime in fiscal 1995.
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PYRAMID'S ROLE IN THE ENTERPRISE
As Pyramid continues to expand it's focus on enterprise computing, the Company
is concentrating on delivering solutions for the most demanding OLTP,
messaging, and decision support business applications. The Company teams with
industry-leading database, tools, and application software companies to
optimize their software running on Pyramid servers. The investments the
Company has made in these long-term partnerships have enabled Pyramid to expand
its technology offerings and provide complete enterprise solutions for very
large corporations.
Pyramid's systems are increasingly used in four ways:
- OFF-LOADING -- Business-critical applications such as decision
support and OLTP are being off-loaded from mainframes to
powerful, scalable servers from Pyramid. Applications
developed in CICS/COBOL, SAS, and FOCUS can be migrated to
Pyramid systems. These migrations free up expensive mainframe
resources, improve performance, and enable users to maintain
and continue development of the application in a more
cost-effective, user-friendly environment.
- LARGE-SCALE NEW APPLICATION DEVELOPMENT -- Through strategic
partnerships with relational database partners -- Oracle,
Informix, Sybase, and Computer Associates (ASK/Ingres) --
Pyramid runs some of the largest RDBMS sites in production.
The Company has made substantial investments in core
engineering and joint development to ensure its servers are
optimized to run the largest, most demanding RDBMS solutions.
As a result, over 90 percent of Pyramid's installed systems
run RDBMSs.
- DECISION SUPPORT AND DATA WAREHOUSING -- Business process
re-engineering and the evolution of open systems are changing
the current role of corporate computer systems from an almost
exclusive focus on running day-to-day transaction processing
to running new information applications such as decision
support, Electronic Data Interchange (EDI), corporate
messaging, work flow, and document management. The evolution
of these new enabling technologies also has created emerging
multimedia applications, such as interactive entertainment and
video on- demand. Pyramid servers have the performance and
availability to run all of these emerging applications.
- PACKAGED APPLICATIONS -- According to a recent survey
conducted by the Gartner Group, a market research firm, there
is an increasing trend toward purchasing off-the-shelf
packaged applications. Pyramid has developed strong
relationships with most of the providers of leading
applications. These providers include Oracle Financials,
Uniplex, PeopleSoft, and FourGen. In addition, the Company
provides a wide range of solutions for its six key vertical
markets with such products as Cybors, Connect, Prism, Oracle
Manufacturing, and Avalon.
PRODUCTS
Pyramid's goal with platform technology is to develop high-end, large-scale
enterprise servers that deliver mainframe-class reliability, availability, and
serviceability. Five commercial enhancements differentiate Pyramid's platform
technology from that of its competitors today:
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- Leading System Architecture: Pyramid's servers are based on a
high-performance SMP architecture that offers both high
single-threaded performance and system scalability. The
Company's architecture uses the MIPS RISC processors, recognized
for their industry leading integer performance -- a requirement
for OLTP applications.
- Leading Open Operating System: All of Pyramid's servers run an
enhanced SMP version of the industry-standard System V Release 4
(SVR4) UNIX operating system, called DataCenter / OSx(R).
Compliant with the leading open system standards, DC/OSx also has
been enhanced to support coexistence with proprietary systems by
including features for mainframe- level resource management,
system administration, and security.
- Fault Resilience: Pyramid Nile servers can be configured to
provide for fault-tolerant levels of systems availability.
Pyramid has adopted the term "configurable fault resilience" to
describe its systems' automated recovery and reconfiguration
capabilities. These attributes of the Pyramid Nile systems,
together with on-line maintenance and component replacement,
result in industry leading availability of database and system
resources to user applications.
- Near-Linear Scalability: Pyramid's SMP delivers near-linear
scalability -- where each new CPU added to the system delivers
almost as much computing power as the first CPU. With the
Pyramid Nile Series, systems deliver 2,160 MIPS and support in
excess of 1000 transactions-per-second (TPS).
- Mainframe-Class Storage and Backup: To support the processing
and storage demands of global 2000 customers, Pyramid's
enterprise servers support a virtual disk technology,
mainframe-level backups, and a variety of disk management tools.
The Company's goal is to provide a full range of solutions for
storing, maintaining, and backing up terabytes of critical
business data in the UNIX environment.
Systems
Pyramid's enterprise product line today comprises two core, compatible product
families -- the Pyramid Nile Series and MIServer(R) ES Series -- plus two
high-availability, clustered computing configurations for each family. The
Company also continues to support its MIServer S and T Series of servers.
The Pyramid Nile, MIServer ES, and MIServer S Series use the MIPS RISC
microprocessor family. The Nile is based on the R4400 architecture, the
MIServer ES and S Series on the R3000 architecture. The MIServer T Series uses
Pyramid's own fourth-generation RISC technology.
Each Pyramid server can operate as an independent system or as a central server
for networks of workstations, terminals, and personal computers. Users can be
connected to Pyramid systems directly, or through local- and wide-area
networks.
Pyramid Nile Series
In October 1993, the Company announced the Pyramid Nile Series of Enterprise
Servers. Based on the MIPS R4400 architecture, the Pyramid Nile Series focuses
on reliability, availability, and serviceability in the enterprise
client/server market. The Pyramid Nile Series is designed specifically to run
business-critical, transaction-oriented applications. Scalable from
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2 to 16 processors, and supporting up to four gigabytes of main memory and
terabytes of disk subsystem capacity, the Pyramid Nile Series provides a
high-performance, fault-resilient alternative for migrating business-critical
applications to open systems.
The two family members -- the Pyramid Nile 150 and the Pyramid Nile 100 -- are
fully compatible and can operate on the same network for distributed data
sharing and easy migration.
- THE PYRAMID NILE 150, introduced in October 1993, is targeted
at the high-end of the UNIX multiprocessor marketplace, and
represents Pyramid's latest generation of SMP-based,
fault-resilient technologies. It provides more than double
the transactions-per-second and three- to four-times the
single thread performance of previous generations, while
incorporating standard-setting fault-resilient features for
very high availability.
- THE PYRAMID NILE 100, introduced in May 1994, is aimed at the
mid-range of the scalable, open systems market, and offers the
performance and availability of the high-end Pyramid Nile 150
at a size and price point typical of mid- range systems. The
Pyramid Nile 100 provides a scalable entry point for
business-critical OLTP and decision support/data warehousing
information management solutions.
MIServer ES Series
Based on the MIPS R3002A architecture, the MIServer ES Series was the first
mainframe-class open system for enterprise client/server computing. It is
scalable from 2 to 24 tightly coupled processors and features a three-bus
architecture, a scalable cache, and workload management tools for
multiprocessing configurations. The MIServer ES Series supports up to 768
MIPS, hundreds of transactions per second, and more than 1,000 concurrent
users.
Clustered Configurations
Both the Pyramid Nile Series and MIServer ES Series can be operated in
fault-resilient clustered computing configurations. Offering continuous
platform availability, clustered solutions are the highest availability option
for Pyramid systems today. The Company currently offers the following
clustered configurations:
- RELIANT CLUSTER provides for the dynamic allocation and
reallocation of computing resources across the entire cluster
from a single point of systems management. Switching over
applications, data, and other resources, such as networking, are
completely automated and can be customized to precisely
accommodate a unique recovery policy in the user's
business-critical environment.
- RELIANT FAULT-TOLERANT LOCK MANAGER OPTION can be implemented
within the Reliant Cluster environment in conjunction with the
ORACLE7 PARALLEL SERVER to provide a continuously available
operating environment for very large Oracle databases. Closely
integrated with Oracle7 Parallel Server, this scalable,
high-availability solution supports a loosely coupled systems
foundation that provides dynamic sharing of a single database
resource.
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Networking
Given the multi-vendor orientation of most large computing environments, Pyramid
believes networking and communications are an essential part of its total
solutions approach to enterprise computing. Pyramid's servers not only support
a wide range of networking standards for local- and wide-area networks, but
also include intelligent communications controllers designed to enhance
performance and scalability. The Company's OpenNet enterprise communications
software is designed to meet specific communications requirements for
rightsizing including:
- Coexistence with mainframe and networking environments including
support of SNA and BSC protocols, and high-speed connections
using Token Ring and HYPERchannel.
- Full suite of "open" networking solutions, including TCP/IP,
X.400, DCE, OSI, NFS, and management capabilities supplied via
SNMP and CMIP.
- PC integration strategy implemented through support of Netware
and PC/NFS.
- Client/server strategy that includes integration of Netware,
DCE, DECnet, and industry-leading databases. High- performance
interconnections are provided via support for Ethernet, Token
Ring, HYPERchannel, and FDDI.
Enterprise Software Solutions
Because of the nature of its customer base, Pyramid's software solutions are
oriented toward global 2000-class organizations with business-critical needs.
These organizations often must support thousands of users who are performing
transactions on very large databases. The Company's software offering includes
a broad array of software development tools, as well as vertical and horizontal
business applications. These software solutions include industry-leading
databases and application development tools; leading technologies that allow
customers to move their existing mainframe applications to open systems
platforms; and leading technologies that support enterprise data access. The
Company provides what it calls "best of class" software solutions for its
target markets.
Pyramid supports industry-leading database technology and application
development tools. Currently, several databases run on Pyramid systems,
including databases from Oracle, Informix, Sybase, Computer Associates, and
Information Builders FOCUS. Many of these databases can support systems with
more than 100 gigabytes of data, and some can support as much as 300 gigabytes
of data. The Company also provides best-of-class application development tools
that are available to help customers more easily test and deploy new
client/server applications across the enterprise. These products include
Uniface, Oracle CDE, Dynasty, and Informix's New Era.
To serve the needs of today's enterprise client/server environment, Pyramid
also provides end-user application packages including cross-industry
(horizontal) solutions such as Oracle Financials and PeopleSoft as well as
solutions that serve the specific vertical markets such as Oracle Manufacturing
or Anasazi for the hospitality industry. As more off-the-shelf applications
become available, Pyramid is working to provide broad support of these
applications to its customers. To date, more than 750 third-party software
products are available for Pyramid systems through the Company's Software
Vendor program.
To help its customers migrate applications from mainframes to open systems, the
Company is working to improve the data integration between legacy applications
and newer client/server-
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based technologies. Pyramid has developed strong relationships with systems
integrators including Electronic Data Systems, Price Waterhouse, AT&T Federal,
SHL Systemhouse, and Perot Systems.
Finally, to help customers who lack adequate systems network management tools,
Pyramid is working with leading vendors in this field, including Computer
Associates, Eco Systems, and Fourth Dimension.
PRODUCT DEVELOPMENT
The Company's research and product development programs are intended to sustain
and enhance its competitive position by incorporating the latest advances in
hardware and software technologies. Pyramid's current product development
efforts are aimed at increasing the price/performance and reliability,
availability, and serviceability of its enterprise servers and DC/OSx operating
system, as well as increasing its range of service and support products. In
fiscal 1994, major research and development projects included:
- Development of the Pyramid Nile 100, which is a derivative of
the Pyramid Nile 150, a high-end R4400 based SMP system.
- Continued development of MESHine, an MPP based system providing
enterprise server capabilities within the areas of OLTP, data
warehousing and decision support, and electronic messaging.
Research and development expenses and capitalized software development costs
amounted to $34.7 million, $36.5 million, and $34.4 million in fiscal 1994,
1993, and 1992, respectively.
CUSTOMERS AND MARKETING
Pyramid sells to and supports its customers worldwide through a combination of
direct and indirect channels. An integral part of the Company's marketing
strategy during the last two years has been to transition from selling
primarily through indirect channels - - namely OEMs -- to selling direct
through its worldwide sales force.
The Company's sales force is organized on a geographic basis. Through this
organization, Pyramid sells direct to end users in the Americas, the United
Kingdom, Hong Kong, and Japan. The sales force focuses on six target vertical
markets: financial services, telecommunications, transportation/hospitality,
health care, manufacturing, and government. Indirect sales are handled via
ventures with joint sales partners, OEMs, VARs, and distributors.
Joint sales partners include Anasazi, AT&T Federal, Electronic Data Systems,
ICL PLC, and Fujitsu/ICL Australia. OEMs, VARs, and distributors include
Olivetti Systems and Networks Division, Siemens Nixdorf Informationssysteme AG,
Group Bull, ICL, Hyundai Electronic Industries, Sharp Electronics Corporation,
and Kobe Steel. System integrators include Electronic Data Systems, Perot
Systems, and SHL Systemhouse, Inc.
In fiscal 1994, Pyramid and Fujitsu Australia Limited formed Pyramid Data
Centre Systems to market the Pyramid Nile Series of scalable enterprise servers
along with complementary Fujitsu and ICL hardware and mainframe connectivity
software. This joint venture represents an expansion for Pyramid into the
Australian mainframe market.
During fiscal 1994, 1993, and 1992, the Company had export sales of
approximately 15%, 18%, and 19%, respectively. Export sales by geographic
areas as a percentage of total
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revenues for fiscal 1994, 1993, and 1992 were 11%, 14%, and 17%, respectively,
to Europe, and 4%, 4%, and 2%, respectively, to the Asia Pacific region.
During fiscal 1994, 1993, and 1992, product revenue was 70%, 75%, and 72% of
total revenue and service revenue was 30%, 25%, and 28% of total revenue,
respectively. Backlog as of September 30, 1994 was not material to the
Company, as was the case for each of the last two fiscal year ends.
SERVICE AND SUPPORT
To meet the service and support needs of its global 2000 customers, Pyramid has
worked to consistently increase the availability, reliability, and
serviceability of its products.
A key element of Pyramid's corporate strategy, customer services, generated 30%
of gross revenue in fiscal 1994. Pyramid's support offerings include a series
of services and tools that address the entire information technology
environment. Available around the world, these services leverage the Company's
experience with open systems and UNIX technology. They include start-up
services, an automatic system monitoring and analysis reporting system, project
management, multi-vendor integration, porting of custom software, performance
analysis, capacity planning, and other supplements to internal staff
capabilities.
Pyramid has regional customer support centers in Japan, Hong Kong, Australia,
the United Kingdom, and the United States. These centers are linked together
via an on-line central repository of technical information for Pyramid support
personnel worldwide. In addition, Pyramid partners with other worldwide
companies who can expand its geographic reach and better oversee solutions for
customers. These service partners include associations with Bull HN (for North
America) and Siemens Nixdorf (for Europe).
For customers covered by a Pyramid warranty or maintenance contract, the
Company has Customer Support Centers (CSCs) located at its corporate
headquarters in San Jose, California, and in the United Kingdom and Australia.
Both hardware and software problems may be remotely evaluated by a CSC through
a system support facility built in to every Pyramid system. Customers
experiencing system problems may contact a CSC at any time through a toll-free
telephone service.
Both Nile and MIServer systems have a 90-day warranty on the base system CPU
and memory. No rights of return, other than warranty rights, accompany
Pyramid's sales of its products. The warranty period begins with the date of
installation, which the Company believes is consistent with industry practice.
Pyramid offers fixed-fee maintenance contracts ranging from 5-day, 8-hour per
day to 7-day, 24-hour per day coverage, as well as service on time, materials,
and travel. The Company has reached agreements with distributors in other
parts of the world to provide 4-hour, on-site response capability.
MANUFACTURING AND SUPPLIERS
Pyramid principally uses standard components and parts for its Pyramid Nile and
MIServer systems. Currently, the Company has a sole source for the gate arrays
used in its MIServer T Series products. Additionally, the Company has single
and sole sources for the acquisition of gate arrays used in its MIServer S
Series, ES Series, and Pyramid Nile Series products. The inability of the
Company to obtain these components would require the Company to redesign its
products in order to use components from other manufacturers, which would delay
shipments, and could have a material adverse effect on the Company. Pyramid
has no significant contractual commitments for future requirements from the
vendor of these components, however, to date, the Company had not experienced
any significant problems in obtaining them.
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COMPETITION
The market for Pyramid's products is intensely competitive and is characterized
by rapid technological advances in both hardware and software. These advances
result in frequent product introductions, short product life cycles, and
increased capabilities that typically represent significant price/performance
improvements. Competition is based on a variety of factors including price,
performance, product features, product quality, commitment to open system
standards, marketing and distribution capabilities, customer support, name
recognition, and financial strength. Further, given the Company's reliance on
its strategic partners and system resellers, the Company's competitive position
is affected by its partners' competitive positions and strengths. Pyramid
believes that it competes favorably on the basis of price, performance, product
features, commitment to open system standards, customer support, and marketing
and distribution capabilities.
The Company competes directly with other system manufacturers for system
product sales to end users as well as with OEM, VAR, and other reseller
customers. Main competitors include Data General, Digital Equipment
Corporation, Hewlett-Packard Company, IBM, NCR, Sequent Computer Systems, Sun
Microsystems, and Unisys. Many of the Company's direct and indirect competitors
are major corporations with substantially greater technical, financial, and
marketing resources, and with greater name recognition than Pyramid. There can
be no assurances that Pyramid will have the financial resources, technical
expertise, or marketing, distribution, or support capabilities to compete
successfully in the future.
PATENTS AND LICENSES
Pyramid has applied for a number of patents for its technology in the past two
years, and is in the process of applying for additional patents. The Company,
however, believes that patents are less significant in its industry than such
factors as innovation, technological experience, and the abilities of its
personnel.
Pyramid has acquired certain licenses that permit the Company to grant object
code sublicenses to its customers. These include software to support database
management, networking applications, and software development tools.
Pyramid licenses operating system software for use on the MIServer T Series,
MIServer S Series, MIServer ES Series, and Pyramid Nile Series from Novell's
UNIX Systems Division. Pyramid has enhanced this software under the trademark
OSx(R) and DC(TM)/OSx. Additionally, the Company licenses operating system
software for use on the MIServer T Series from the University of California,
Berkeley.
EMPLOYEES
As of September 30, 1994, the Company had 849 full-time employees. The Company
believes that its future success will depend in large part upon its ability to
attract and retain highly skilled and motivated technical, marketing, and
managerial personnel. Competition for qualified personnel in the computer
industry is intense and there is no assurance that the Company can continue to
attract and retain the required personnel. The Company has never experienced a
work stoppage, and none of its employees are represented by a labor union. The
Company believes that its employee relations are good.
- - -------------------------------------------------------------------------------
Nile, DC/OSx, and ServiceExpert are trademarks, and MIServer, Reliant, and OSx
are registered trademarks of Pyramid Technology Corporation; all other
trademarks used herein are the property of their respective companies.
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ITEM 2 PROPERTIES
Pyramid's headquarters are located in three buildings in San Jose, California.
Pyramid occupies these leased buildings, two of which are approximately 90,000
square feet each and the other of which is approximately 101,000 square feet.
This complex houses the Company's manufacturing, technology, marketing,
customer support, and general and administrative personnel. The Company's
previous headquarters were in Mountain View, California where one building
still remains under a lease. This building is being subleased to an
unaffiliated company. The Company also leases sales, marketing, and customer
support offices elsewhere in the United States, and sales and customer support
offices in Australia, Canada, France, Germany, Hong Kong, Japan, the People's
Republic of China, Sweden, Taiwan, and the United Kingdom.
The Company believes that its existing facilities are adequate to meet current
requirements, and that suitable additional or substitute space will be
available as needed to accommodate further physical expansion of corporate
operations and for additional sales and customer support offices.
ITEM 3 LEGAL PROCEEDINGS
Incorporated by reference from the information under the caption "Commitments"
in the Notes to Consolidated Financial Statements on page 29 of the Annual
Report to Shareholders for the fiscal year ended September 30, 1994.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1994.
Executive Officers of the Registrant
- - ------------------------------------
The following sets forth certain information with respect to the executive
officers of Pyramid:
Richard H. Lussier (age 57) joined the Company as President, Chief Executive
Officer, and Chairman of the Board in November 1986. He held the title of
President until June 1993.
John S. Chen (age 39) joined the Company as Executive Vice President in August
1991. In October 1992, he became Chief Operating Officer, then in June 1993,
became President. Prior to joining Pyramid, he held various management and
executive positions with Unisys Corporation, a computer company, for twelve
years, the last position being Vice President and General Manager of its UNIX
Systems Group, and prior to that, Vice President and General Manager of its
RISC Technology Platform Division.
Edward W. Scott, Jr. (age 56) joined the Company as Vice President of Marketing
in September 1988. He was promoted to Executive Vice President in October
1991.
Mitchell Mandich (age 46) joined the Company in January 1993 as Vice President,
Americas Sales. He was promoted to Senior Vice President in July 1993 and from
that time to September 1993, he was also responsible for Worldwide Corporate
Marketing. From 1982 to
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joining the Company, he was employed by Tandem Computers, where he was Director
of Sales for the Western Region in his last management position.
Dr. Raj Nathan (age 41) joined the Company in November 1991 as Vice President
of Systems Management. In June 1993, he was named Vice President of
Engineering. He was promoted to Senior Vice President in October 1994. From
1985 to joining the Company, he held progressively responsible engineering
management positions for Unisys Corporation and its predecessor, Burroughs
Corporation.
S. Boyd Pierce (age 49) joined the Company in October 1994 as Vice President of
Marketing. Prior to joining the Company, he was employed by Teradata/NCR/AT&T,
a computer company, where he was most recently Vice President and General
Manager for their Torrey Pines Development Center. From 1986, he served at
Teradata in several senior marketing, sales, and strategic planning management
positions.
Kent L. Robertson (age 53) first joined the Company in February 1987 as Vice
President, Chief Financial Officer and Secretary. He was promoted to Senior
Vice President in April 1990. After serving as Executive Vice President, Chief
Financial Officer and Secretary of RasterOps, a company that markets
microcomputer peripherals, from March 1992 to December 1993, he rejoined the
Company in January 1994 as Senior Vice President, Chief Financial Officer and
Secretary.
Allan D. Smirni (age 54) joined the Company as Vice President and General
Counsel in September 1989. He also held the additional position of Corporate
Secretary of the Company from February 1992 to January 1994. He held a similar
position with Memorex Corporation, a computer company, from 1987 to 1989.
William M. Wishart (age 54) was promoted to Vice President of Human Resources
and Administration in February 1992. He joined Pyramid in March 1989 as
Director of Human Resources and Administration, after seven years as Manager of
Human Resources for Litton Applied Technology, a manufacturer of early warning
radar systems.
Executive officers are elected annually by the Board of Directors and serve at
the discretion of the Board. There is no family relationship between any
director or executive officer of the Company and any other director or
executive officer of the Company.
12
<PAGE> 13
PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Incorporated by reference from the information under the captions "Borrowing
Arrangements" on page 31 and "Stock Information" on the inside back cover of
the Annual Report to Shareholders for the fiscal year ended September 30, 1994.
ITEM 6 SELECTED FINANCIAL DATA
Incorporated by reference from the information under the caption "Selected
Financial Data" on page 17 of the Annual Report to Shareholders for the fiscal
year ended September 30, 1994.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Incorporated by reference from the information under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 18 - 21 of the Annual Report to Shareholders for the fiscal year ended
September 30, 1994.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference from the consolidated financial statements and the
notes thereto on pages 22 - 35 of the Annual Report to Shareholders for the
fiscal year ended September 30, 1994.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
- - -------------------------------------------------------------------------------
With the exception of the information incorporated by reference from the Annual
Report to Shareholders for the fiscal year ended September 30, 1994 in Parts I,
II, and IV of this Form 10-K, the Company's Annual Report to Shareholders for
the fiscal year ended September 30, 1994 is not to be deemed filed as part of
this report.
13
<PAGE> 14
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to directors, including two directors who are also
executive officers of Pyramid, is incorporated by reference from the
information under the caption "Proposal No.1 - Election of Directors" in the
Proxy Statement for the registrant's Annual Meeting of Stockholders to be held
on January 26, 1995.
ITEM 11 EXECUTIVE COMPENSATION
Incorporated by reference from the information under the caption "Executive
Compensation" in the Proxy Statement for the registrant's Annual Meeting of
Stockholders to be held on January 26, 1995.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the information under the captions "Record Date
and Voting Securities" and "Security Ownership of Certain Beneficial Owners and
Management" in the Proxy Statement for the registrant's Annual Meeting of
Stockholders to be held on January 26, 1995.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the information under the caption "Certain
Transactions" in the Proxy Statement for the registrant's Annual Meeting of
Stockholders to be held on January 26, 1995.
14
<PAGE> 15
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(a)(1) The following consolidated financial statements of Pyramid Technology
Corporation and the Report of Independent Auditors are incorporated
herein by reference to the registrant's Annual Report to Shareholders
for the fiscal year ended September 30, 1994.
<TABLE>
<CAPTION>
Page(s) in
Annual
Report
------
<S> <C>
Consolidated Balance Sheet -
September 30, 1994 and 1993 23
Consolidated Statement of Operations -
Years ended September 30, 1994, 1993, and 1992 22
Consolidated Statement of Shareholders' Equity -
Years ended September 30, 1994, 1993, and 1992 24
Consolidated Statement of Cash Flows -
Years ended September 30, 1994, 1993, and 1992 25
Notes to Consolidated Financial Statements 26 - 34
Report of Independent Auditors 35
</TABLE>
(a)(2) The following financial statement schedules for the years ended
September 30, 1994, 1993, and 1992 are submitted herewith and should
be read in conjunction with the Consolidated Financial Statements:
<TABLE>
<CAPTION>
Page in
Form 10-K
---------
<S> <C> <C>
Schedule I - Summary of Short-Term Investments 20
Schedule II - Amounts Receivable from Directors,
Officers, and Employees 21
Schedule VIII - Valuation and Qualifying Accounts 22
Schedule X - Supplementary Income Statement Information 23
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements
or notes thereto.
(a)(3) Exhibits included herein (numbered in accordance with Item 601 of
Regulation S-K):
<TABLE>
<CAPTION>
Exhibit
Number Description
- - ------ -----------
<S> <C>
3.1 Certificate of Incorporation, as amended (3)
</TABLE>
15
<PAGE> 16
<TABLE>
<S> <C> <C>
3.2 Bylaws, as amended (3)
10.1 * Amended 1982 Incentive Stock Option Plan (4)
10.23 Agreement between the Company and Nixdorf Computer AG dated
May 3, 1985 (1)(2)
10.26 Lease Agreement for premises at 1295 Charleston Road, Mountain
View, California dated November 1, 1983 (1)
10.28 Software Agreement between the Company and American Telephone
and Telegraph Company dated January 1, 1982, as amended (1)
10.29 License Agreement between the Company and the Regents of the
University of California dated December 30, 1981 (1)
10.34 * Employee Stock Purchase Plan (4)
10.35 * 1986 Executive Officers' Nonstatutory Stock Option Plan (4)
10.40 Lease Agreement for premises at Solartron Road, Farnborough,
Hampshire, United Kingdom, dated November 27, 1989 (7)
10.41 Lease Agreement for premises at 3870 North First Street,San
Jose, California dated May 30, 1990 (5)
10.42 Lease Agreement for premises at 3850 North First Street,San
Jose, California dated May 30, 1990 (5)
10.43 Lease Agreement for premises at 3860 North First Street,San
Jose, California dated May 30, 1990 (5)
10.45 * Directors' Option Plan, as amended (5)
10.46 Purchase Agreement between the Company and Olivetti Systems and
Networks s.r.l dated December 21, 1990 (6)
10.47 $20,000,000 Revolving Credit Agreement with The First National
Bank of Boston dated July 30, 1993 (8)
10.48 $10,500,000 Collateralized Loan Agreement (letter) with GE
Capital dated September 10, 1993 and Master Security
Agreement dated October 6, 1993 (8)
10.49 First Amendment to the Revolving Credit Agreement with Limited
Waivers with the Bank of Boston dated May 31, 1994 (9)
10.50 Partnership Agreement with Fujitsu Data Centre Systems PTY
Limited and Fujitsu Australia Limited dated June 10, 1994 (9)
10.51 Common Stock and Warrant Purchase Agreement with Siemens
Nixdorf Information Systems, Inc. dated August 21, 1994
</TABLE>
16
<PAGE> 17
<TABLE>
<S> <C>
10.52 Software and Hardware License Agreement with Siemens Nixdorf
Informationssysteme AG dated August 25, 1994 (10)
10.53 $10,000,000 Revolving Credit Agreement (letter) with Comerica
dated October 20, 1994
11.1 Computation on Net Income per Common and Common Equivalent
Share
13.1 Annual Report to Shareholders for the fiscal year ended
September 30, 1994
21.1 Schedule of Subsidiaries
23.1 Consent of Independent Auditors
24.1 Power of Attorney (included on pages 18 and 19)
27.1 Financial Data Schedule
</TABLE>
- - -------------------------------------------------------------------------------
(1) Incorporated by reference to identically numbered exhibits
filed in response to Item 16(a), "Exhibits," of the
Registrant's Registration Statement on Form S-1 and Amendment
No. 1 and Amendment No. 2 thereto, which became effective on
December 4, 1985.
(2) Confidential treatment has previously been granted with
respect to this exhibit pursuant to an order dated December 4,
1985.
(3) Incorporated by reference to Exhibits B and C filed with the
Registrant's Proxy Statement dated May 14, 1987.
(4) Incorporated by reference from the Registrant's Proxy
Statement dated January 21, 1988.
(5) Incorporated by reference from the Registrant's Annual Report
on Form 10-K for the fiscal year ended September 30, 1990.
(6) Nonconfidential portions incorporated by reference from the
Annual Report on Form 10-K for the fiscal year ended September
30, 1991.
(7) Incorporated by reference from the Registrant's Annual Report
on Form 10-K for the fiscal year ended September 30, 1989.
(8) Incorporated by reference from the Registrant's Annual Report
on Form 10-K for the fiscal year ended September 30, 1993.
(9) Incorporated by reference from the Registrant's Quarterly
Report on Form 10-Q for the quarter ended July 1, 1994.
(10) The registrant has applied for confidential treatment for
portions of this agreement.
* Indicates management compensatory plan, contract, or
arrangement.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended September 30, 1994.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
PYRAMID TECHNOLOGY CORPORATION
Registrant
By:
/s/ Richard H. Lussier
----------------------
Richard H. Lussier
Chairman and
Chief Executive Officer
December 22, 1994
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard H. Lussier and Allan D. Smirni, jointly
and severally, his attorneys-in-fact, each with the power of substitution, for
him in any and all capacities, to sign any amendments to this Report on Form
10-K and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys- in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Richard H. Lussier Chairman and
- - ------------------------------- Chief Executive Officer December 22, 1994
Richard H. Lussier (Principal Executive Officer)
/s/ John S. Chen President and
- - ------------------------------- Chief Operating Officer December 22, 1994
John S. Chen
/s/ Kent L. Robertson Senior Vice President,
- - ------------------------------- Chief Financial Officer December 22, 1994
Kent L. Robertson and Secretary
(Principal Financial Officer)
/s/ James J. Nelson Vice President,
- - ------------------------------- Corporate Controller December 22, 1994
James J. Nelson (Principal Accounting Officer)
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Dr. Rudolf Bodo
- - ------------------------------- Director December 22, 1994
Dr. Rudolf Bodo
/s/ Paul J. Chiapparone
- - ------------------------------- Director December 22, 1994
Paul J. Chiapparone
/s/ Donald E. Guinn
- - ------------------------------- Director December 22, 1994
Donald E. Guinn
/s/ Jack L. Hancock
- - ------------------------------- Director December 22, 1994
Jack L. Hancock
/s/ Clarence W. Spangle
- - ------------------------------- Director December 22, 1994
Clarence W. Spangle
/s/ George D. Wells
- - ------------------------------- Director December 22, 1994
George D. Wells
</TABLE>
19
<PAGE> 20
PYRAMID TECHNOLOGY CORPORATION
SCHEDULE I - SUMMARY OF SHORT-TERM INVESTMENTS
Year ended September 30, 1994
(In thousands)
<TABLE>
<CAPTION>
Type of Short-Term Investment Cost Market Value Carrying Amount
- - ----------------------------- ---- ------------ ---------------
<S> <C> <C> <C>
Commercial Paper $20,651 $20,651 $20,651
</TABLE>
20
<PAGE> 21
PYRAMID TECHNOLOGY CORPORATION
SCHEDULE II - AMOUNTS RECEIVABLE FROM DIRECTORS, OFFICERS,
AND EMPLOYEES
Year ended September 30,
(In thousands)
<TABLE>
<CAPTION>
Balance at End of Period
Balance at ------------------------
Beginning
Year Name of Debtor of Period Additions Deductions Currents Noncurrent
---- --------------------------- ----------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
1992 Edward W. Scott, Jr. (1) $300 $- $100 $- $200
John S. Chen (1) $100 $- $- $- $100
1993 Edward W. Scott, Jr. (1) $200 $- $133 $- $67
John S. Chen (1) $100 $- $- $- $100
1994 Edward W. Scott, Jr. (1) $67 $- $67 $- $-
John S. Chen (1) $100 $- $100 $- $-
</TABLE>
(1) See "Certain Transactions" in the Company's Proxy Statement for its Annual
Meeting of Stockholders to be held on January 26, 1995.
21
<PAGE> 22
PYRAMID TECHNOLOGY CORPORATION
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
Year ended September 30,
(In thousands)
<TABLE>
<CAPTION>
Additions
Balance at Charged to Write-offs
Beginning Costs and Net of Balance at
Allowance for Doubtful Accounts: of Year Expenses Recoveries End of Year
------- -------- ---------- -----------
<S> <C> <C> <C> <C>
1992 $1,506 $425 ($83) $2,014
1993 $2,014 $291 $285 $2,020
1994 $2,020 $102 $462 $1,660
</TABLE>
22
<PAGE> 23
PYRAMID TECHNOLOGY CORPORATION
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
Year ended September 30,
(In thousands)
<TABLE>
<CAPTION>
Charged to Costs and Expenses
-----------------------------------------
Item 1994 1993 1992
- - ------------------------------ ---- ---- ----
<S> <C> <C> <C>
Maintenance and repairs $2,271 * $2,094
</TABLE>
* Does not exceed 1% of sales.
23
<PAGE> 24
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------- ------------------------------------------------------
<S> <C>
10.51 Common Stock and Warrant Purchase
Agreement with Siemens Nixdorf
Information Systems, Inc. dated August 21, 1994
10.52 Software and Hardware License Agreement
with Siemens Nixdorf Informationssysteme AG dated
August 25, 1994
10.53 $10,000,000 Revolving Credit Agreement
(letter) with Comerica dated October 20, 1994
11.1 Computation of Net Income per Common and
Common Equivalent Share
13.1 Annual Report to Shareholders for the fiscal
year ended September 30, 1994
21.1 Schedule of Subsidiaries
23.1 Consent of Independent Auditors
27.1 Financial Data Schedule
</TABLE>
24
<PAGE> 1
EXHIBIT 10.51
Common Stock and Warrant Purchase Agreement
with Siemens Nixdorf Information Systems Inc.
dated August 21, 1994
<PAGE> 2
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT (the "Agreement") is
dated as of August 21, 1994, by and between Pyramid Technology Corporation, a
Delaware corporation (the "Company") and Siemens Nixdorf Information Systems,
Inc., a Massachusetts corporation (the "Purchaser").
SECTION 1
SALE OF COMMON STOCK AND WARRANT
1.1 Sale of Common Stock and Warrant. Subject to the terms and
conditions hereof, the Company will issue and sell to the Purchaser, and the
Purchaser will purchase from the Company, at the Closing (as defined below),
for an aggregate purchase price of $17,250,000 (i) 2,000,000 shares (the
"Shares") of the Company's common stock, $.01 par value (the "Common Stock"),
and (ii) a warrant to purchase up to 1,330,000 shares of Common Stock (the
"Warrant Shares") at an exercise price of $10.00 per share and on such other
terms and conditions as are specified in substantially the form of warrant
attached as Exhibit A hereto (the "Warrant").
1.2 Closing Date. The closing of the purchase and sale of the
Shares and the Warrant (the "Closing") shall be held at the law offices of
Wilson, Sonsini, Goodrich & Rosati, P.C., 650 Page Mill Road, Palo Alto,
California at 10:00 a.m. not later than the third business day following
expiration or early termination of all waiting periods imposed by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and
satisfaction of all closing condi-tions set forth in Sections 4 and 5 hereof or
at such other time and place upon which the Company and the Purchaser shall
mutually agree (the date of the Closing is hereinafter referred to as the
"Closing Date").
1.3 Delivery. At the Closing, the Company will deliver to the
Purchaser (i) a certificate registered in the name of the Purchaser
representing the Shares, against payment of the purchase price of $17,250,000
therefor by check payable to the order of the Company or by wire transfer in
same day funds to the Company's account, (ii) the duly executed Warrant, and
(iii) all documents and certificates required to be delivered under Section 4
of this Agreement.
1.4 Legend. The certificate for the Shares and the Warrant shall
be subject in each case to a legend restricting transfer under the Securities
Act of 1933, as amended (the "Securities Act"), and referring to restrictions
on transfer and rights of first refusal herein, such legend to be substantially
as follows:
<PAGE> 3
"The securities represented by this certificate have been
acquired for investment and have not been registered under the
Securities Act of 1933. Such securities may not be sold or
transferred in the absence of such registration or an exemp-tion from
such registration.
"The securities represented by this certificate are subject to
restrictions on transfer, including any sale, pledge or other
hypothecation, and rights of first refusal set forth in a certain
Common Stock and Warrant Purchase Agreement dated as of August 19,
1994, a copy of which may be obtained at no cost by written request
made by the holder of record of this certificate to the secretary of
the Company at the Company's principal executive offices."
None of the Shares or the Warrant may be sold, assigned, transferred or
otherwise disposed of unless registered under the Securities Act of 1933, as
amended (the "Securities Act"), or unless an exemption from such registration
is available and perfected.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in the disclosure statement dated the date hereof
(the "Disclosure Schedule"), delivered in connection with this Agreement, the
Company hereby represents and warrants to the Purchaser as follows:
2.1 Organization. The Company is a corporation duly organized and
validly existing under the laws of the State of Delaware and is in good
standing under such laws. The Company has all requisite corporate power and
authority to own, lease and operate its properties and assets, and to carry on
its business as presently conducted and as proposed to be conducted. The
Company is qualified to do business as a foreign corporation in each
jurisdiction in which the ownership of its property or the nature of its
business requires such qualification, except where failure to so qualify would
not have a material adverse effect on the Company or any of its Subsidiaries,
their condition (financial or otherwise), their results of operations, their
assets, their liabilities or their business, taken as a whole ("Material
Adverse Effect"). The Company has furnished to the Purchaser true and correct
copies of its Certificate of Incorporation and Bylaws, as amended to date, and
will furnish true and correct copies of any amendments thereto through the term
of this Agreement.
- 2 -
<PAGE> 4
2.2 Capitalization. The authorized capital stock of the Company
consists of 30,000,000 shares of Common Stock, $.01 par value, of which at
August 11, 1994, 13,418,189 shares were issued and outstanding. All such
issued and outstanding shares have been duly authorized and validly issued and
are fully paid and nonasses-sable. As of August 11, 1994, the Company has duly
reserved a total of 6,116,666 shares of its Common Stock for issuance under its
Amended 1982 Incentive Stock Option Plan, of which 2,670,788 shares are duly
reserved for issuance upon exercise of outstanding options; a total of 400,000
shares for issuance under its Executive Officers Nonstatutory Stock Option
Plan, of which 20,313 shares are duly reserved for issuance upon exercise of
outstanding options; a total of 160,000 shares for issuance under its Amended
and Restated Directors' Option Plan, of which 99,500 shares are duly reserved
for issuance upon exercise of outstanding options; and a total of 1,150,000
shares for issuance under its 1987 Employee Stock Purchase Plan. On December
8, 1988, the Company entered into a Common Shares Rights Agreement (the "Rights
Agreement") with Bank of America, NT & SA, and has announced the distribution
of rights under the Rights Agreement to all stockholders of record as of
January 17, 1989. In addition, effective upon the Closing, the Company has
duly authorized the reservation of such number of shares of Common Stock as
shall be necessary to provide for the exercise of the Warrant. Except as
provided or described in this Agreement, there are no other options, warrants,
conversion privileges, convertible securities or other contractual rights
presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of any of the Company's capital stock or other securities.
Schedule 2.2 to the Disclosure Statement identifies, assuming the consummation
at the Closing of the transactions contemplated hereby (1) to the best of the
Company's knowledge, based upon filings pursuant to Section 13(g) of the
Securities Exchange Act of 1934 (the "Exchange Act") received by the Company as
of December 31, 1993, and based upon filings pursuant to Section 13(d) of the
Exchange Act received as of the date hereof, each record and beneficial owner
of 5% or more of the outstanding Common Stock, including the name, address and
number of shares of Common Stock held by each such holder. Except as provided
in this Agreement, immediately prior to the Closing there were, and upon the
Closing there will be, no preemptive or similar rights to purchase or otherwise
acquire shares of Voting Stock of the Company or its Subsidiaries pursuant to
any provision of law, the Certificates of Incorporation or By-laws of the
Company, in each case as amended to the date hereof, or any agreement to which
the Company is a party, or otherwise; there was, and upon the Closing there
will be, no agreement, restriction or encumbrance (such as a right of first
refusal, right of first offer, proxy, voting trust, etc.) with respect to the
sale or voting of any
- 3 -
<PAGE> 5
shares of the Company's Voting Stock (whether outstanding or issuable upon
conversion or exercise of outstanding securities), except as contemplated by
this Agreement. To the best of the Company's knowledge, the Company has not
violated Section 5 of the Securities Act or any state securities or blue sky
laws in connection with the issuance of any shares of Common Stock or other
securities prior to or on the date hereof to the extent any such violation
would have a material adverse effect on the Company or any of its Subsidiaries,
taken as a whole.
Subject to normal year-end adjustment and except for obligations
incurred in the normal course of business that are not required to be
reflected, reserved against, accrued for or otherwise disclosed on the
Company's unaudited consolidated balance sheet in order for such balance sheet
to fairly present the financial condition of the Company and the Subsidiaries
as of July 1, 1994 in accordance with generally accepted accounting principles
consistently applied, to the best of the Company's knowledge (a) the Company
and the subsidiaries of the Company which are consolidated with the Company for
financial accounting purposes (the "Subsidiaries") had no liabilities,
obligations, payments or commitments exceeding $100,000 (whether matured or
unmatured, fixed or contingent) that were not provided for on such balance
sheet or described in the notes thereto and (b) all reserves established by the
Company and set forth on the balance sheet were adequate in all material
respects.
2.3 Authorization. The Company has all corporate right, power and
authority to enter into this Agreement, the Registration Rights Agreement in
substantially the form attached hereto as Exhibit B (the "Registration Rights
Agreement") and the Warrant and to consummate the transactions contemplated
hereby and thereby. All requisite corporate and stockholder action on the part
of the Company, its directors and stockholders necessary for (i) the
authorization, execution, delivery and performance of this Agreement, the
Registration Rights Agreement and the Warrant by the Company, (ii) the
authorization, sale, issuance and delivery of the Shares and the Warrant Shares
upon exercise of the Warrant pursuant to the terms thereof, and (iii) the
performance of the Company's obligations hereunder and under the Registration
Rights Agreement and the Warrant have been duly authorized and taken. This
Agreement and, as of the Closing, the Registration Rights Agreement and the
Warrant will have been duly executed and delivered by the Company and
constitute legal, valid and binding obligations of the Company enforceable in
accordance with their respective terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable
- 4 -
<PAGE> 6
remedies, and to limitations of public policy as they may apply to Section 7 of
the Registration Rights Agreement. Upon their issuance and delivery pursuant
to this Agreement, the Shares will be duly authorized, validly issued, fully
paid and nonassessable. Upon exercise of the Warrant in accordance with the
terms thereof, the Warrant Shares will be duly authorized, validly issued,
fully paid and nonassessable. The issuance and sale of the Shares, the Warrant
and the Warrant Shares upon exercise of the Warrant will not give rise to any
preemptive rights or rights of first refusal on behalf of any person in
existence either on the date hereof or immediately prior to the Closing.
2.4 No Conflict. Subject to compliance with the HSR Act, the
execution and delivery of this Agreement, the Registration Rights Agreement and
the Warrant do not, and the consummation of the transactions contemplated
hereby and thereby and compliance with the provisions hereof and thereof will
not, conflict with, or result in any violation of, or default under (with or
without notice or lapse of time, or both), or give rise to the creation of any
lien, security interest or encumbrance, or give rise to a right of termination,
cancellation or acceleration of any obligation or to a loss of a material
benefit, under, any provision of (i) the Certificate of Incorporation or Bylaws
of the Company or any judgment, order decree, statute, law, ordinance, rule ore
regulation applicable to the Company, its properties or assets, or (ii) any
mortgage, indenture, lease or other agreement or instrument, permit,
concession, franchise, license, which violation under this Section 2.4(ii)
would have a Material Adverse Effect on the Company or any of its Subsidiaries,
taken as a whole, or materially impair or restrict its power to perform its
obligations as contemplated hereby or thereby.
2.5 Accuracy of Reports. The Company has, since September 30,
1990, filed with the Securities and Exchange Commission ("SEC") all forms,
reports and documents (collectively, the "SEC Reports") which it has been
required to file under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated thereunder. Each of
the SEC Reports complied as of its filing date in all material respects with
all applicable requirements of the Exchange Act. Except as subsequently
disclosed or corrected in an SEC Report filed prior to the date of this
Agreement, none of such SEC Reports, including, without limitation, any
financial statement, schedule or footnote included therein, contained at the
time filed any untrue statement of a material fact or omitted to state a
material fact required to be stated therein, or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
- 5 -
<PAGE> 7
2.6 Financial Statements and Changes. The Company's (a) unaudited
consolidated balance sheet as of July 1, 1994 and the related consolidated
statement of income, cash flows and stockholders' equity for the interim period
then ended contained in the Company's Quarterly Report on Form 10-Q for the
quarter ended July 1, 1994 (together with footnotes), and (b) audited
consolidated balance sheets as of September 30, 1993 and 1992 and the related
audited consolidated statements of income, cash flows and stockholders' equity
for the fiscal years then ended contained in the Company's Annual Report on
Form 10-K for the years ended September 30, 1993 and 1992 (together with
footnotes) (i) comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, (ii) are in accordance with the books and records of the
Company and its Subsidiaries, (iii) have been prepared in accordance with
generally accepted accounting principles (except to the extent that certain
footnote disclosures regarding any period may have been omitted in accordance
with the applicable rules of the SEC under the Exchange Act) consistently
applied except as noted therein and except, in the case of unaudited interim
financial statements, for normal year-end adjustments, (iv) fairly present the
consolidated financial position of the Company and its consolidated
Subsidiaries as of the respective dates set forth therein and the results of
operations and cash flows for the Company and its consolidated Subsidiaries for
the respective fiscal periods set forth therein and (v) are true and correct in
all material respects. Except as otherwise disclosed herein or in the SEC
Reports, since July 1, 1994, there has been no material adverse change in the
business condition (financial or otherwise), results of operations, assets,
liabilities or obligations of the Company and its consolidated Subsidiaries,
taken as a whole. Except as set forth on Schedule 2.6 to the Disclosure
Schedule, since July 1, 1994 there has not been (a) any material adverse change
in the condition (financial or otherwise), operations, results of operations,
assets, liabilities, or business of the Company or any of the Subsidiaries, (b)
any liabilities or obligations that involve payments or commitments in excess
of $100,000 (whether contingent or otherwise) incurred by the Company or any of
the Subsidiaries, other than current liabilities or obligations incurred in the
ordinary course of business, (c) any assets or properties of the Company or any
of the Subsidiaries having a value in excess of $100,000 individually or
$250,000 in the aggregate made subject to a lien of any kind, (d) any
cancellation of any debts or claims held by the Company or any of the
subsidiaries, in either case having a value in excess of $100,000 individually
or $250,000 in the aggregate, (e) any payment of dividends on, or otherwise
distributions with respect to, or any direct or indirect redemption or
acquisition of, any shares of the capital stock of the Company
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<PAGE> 8
or any of the Subsidiaries, or any agreement or commitment therefor, (f) any
issuance of any stock, bonds or other securities of the Company or any of the
Subsidiaries except as contemplated by this Agreement and except for the grant
or exercise of options and the issuance of stock to directors, officers,
employees and consultants in connection with their service to the Company and
the Subsidiaries, (g) any sale, assignment, transfer or other disposition
(other than in the ordinary course of business) of any tangible or intangible
assets of the Company or any of the Subsidiaries, having a value in excess of
$100,000 individually or $250,000 in the aggregate, (h) any loan by the Company
to any officer, director, employee or stockholder of the Company or any of the
Subsidiaries, or any agreement or commitment therefor other than travel
advances or other advances not in excess of $2,500 as to any such person or
$25,000 as to all such persons, (i) any increase, direct or indirect, in the
compensation paid or payable to any officer, director, employee or agent of the
Company or any of the Subsidiaries by an amount exceeding 10% of such
compensation prior to such increase or (j) any change in the accounting methods
or practices followed by the Company or any of the Subsidiaries or any change
in depreciation policies or rates therefore adopted.
2.7 Consents, etc. No consent, approval or authorization of or
designation, declaration or filing with (i) any governmental authority or (ii)
any third party (pursuant to any of the Company's contracts or otherwise) which
absence of such third party consent would have a Material Adverse Effect on the
Company or any of its Subsidiaries, taken as a whole, or materially impair or
restrict its power to perform its obligations hereunder, on the part of the
Company is required in connection with the valid execution and delivery of this
Agreement, or the offer, sale or issuance of the Shares, the Warrant or the
Warrant Shares upon exercise of the Warrant, or the consummation of any other
transaction contemplated hereby, except the filing of such forms with the
United States Department of Justice and the Federal Trade Commission as shall
be required by the HSR Act and the expiration of any waiting periods thereunder
and such filings as may be required to be made with the SEC and the NASD,
filings or notices, if any, to be made in compliance with applicable blue sky
requirements and any other filings agreed by counsel to the Company and counsel
to the Purchaser to be required under applicable law.
2.8 Amendment to Rights Agreement. All necessary corporate action
required under the Rights Agreement to amend the Rights Agreement has been duly
authorized and taken (or will have been duly authorized and taken prior to the
Closing) so that the issuance of the Shares, the Warrant and the Warrant Shares
upon exercise of the Warrant and any purchases by the Purchaser of
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<PAGE> 9
Voting Stock pursuant to Section 7.8 below shall not cause the Purchaser to
become an "Acquiring Person" or cause a "Shares Acquisition Date",
"Distribution Date" or "Triggering Event" to occur (each as defined in the
Rights Agreement).
2.9 Intellectual Property Rights. In each case, except as set
forth on Schedule 2.9 to the Disclosure Schedule:
(a) each of the Company and the Subsidiaries owns,
possesses, and has the right to use, has the right to bring actions for the
infringement of, or where necessary, has made timely and proper application
for, all Intellectual Property Rights (as hereinafter defined) necessary or
required for the conduct of its business as currently conducted.
(b) no royalties, honorariums or fees in excess of
$50,000 per annum are payable by the Company or its Subsidiaries to other
persons by reason of the ownership or use of said Intellectual Property Rights;
(c) to the best of the Company's knowledge, no product or
service that is manufactured, marketed, performed or sold by the Company or the
Subsidiaries violates any license or infringes any Intellectual Property Rights
of another, nor is there any pending or written threat of a claim or litigation
against the Company or Subsidiaries (nor does there exist any basis therefor)
contesting the validity of, or right to use, any of the foregoing Intellectual
Property Rights;
(d) none of the Company or the Subsidiaries has received
notice that any of such Intellectual Property Rights, or that the operation or
proposed operation of the Company's or the Subsidiaries' businesses, conflicts
or will conflict with the asserted rights of others; and
(e) the Company has not granted any exclusive rights to
any third party to develop, manufacture, use, market or service the Company's
current products.
As used herein, the term "Intellectual Property Rights" means all
industrial and intellectual property rights, including, without limitation,
Proprietary Technology (as hereinafter defined), patents, patent applications,
patent rights, trademarks, trademark applications, trade names, service marks,
service mark applications, copyrights, knowhow, certificates of public
convenience and necessity, franchises, licenses, trade secrets, proprietary
processes and formulae used by the Company in its businesses. As used herein,
"Proprietary Technology" means all source code,
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<PAGE> 10
designs, algorithms, layouts, processes, inventions, trade secrets, knowhow and
other proprietary rights owned or licensed by the Company or the Subsidiaries
pertaining to any product or service manufactured, marketed, performed or sold,
or proposed to be manufactured, marketed, performed or sold (as the case may
be), by the Company or the Subsidiaries or used, employed or exploited in the
development, license, sale, marketing, distribution or maintenance thereof, and
all documentation and media embodying or relating to the above, including,
without limitation, manuals, models, prototypes, memoranda, knowhow, notebooks,
patents and patent applications, trademarks and trademark applications,
copyrights and copyright applications, records and disclosures.
2.10 Litigation. Except as set forth on Schedule 2.10 to the
Disclosure Schedule, there are no actions, suits, claims, investigations or
legal or administrative or arbitration proceedings (collectively, "Claims"),
pending and served or of which the Company or any Subsidiary has received
written notification or, to the Company's best knowledge, threatened against
the Company or any of the Subsidiaries, whether at law or in equity, whether
civil or criminal in nature or whether before or by any Federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign; except as set forth on Schedule 2.10
to the Disclosure Schedule, to the best of the Company's knowledge, there are
no orders, judgments or decrees of any court or governmental agency which would
have a Material Adverse Effect on the Company or any of its Subsidiaries, taken
as a whole, that apply to the Company or any of the Subsidiaries. Also set
forth on Schedule 2.10 are all lawsuits filed and served by or against the
Corporation or any Subsidiary during the previous two (2) years that involves
claims in excess of $500,000.
2.11 Taxes. The Company and the Subsidiaries have filed all
Federal, state, local and foreign tax returns that are required to be filed by
them on or prior to the Closing and all such returns are true and complete.
The Company and the Subsidiaries have paid all taxes pursuant to such returns
or pursuant to any assessments received by them or which they are obligated to
withhold from amounts owing to any employee, creditor or third party. Except
as disclosed on Schedule 2.11 to the Disclosure Schedule, the Company has not
been notified in writing of any examination by the Internal Revenue Service or
by appropriate state or departmental tax authorities of any Federal, state or
local income tax or franchise tax returns of or with respect to the Company or
any of the Subsidiaries through all relevant periods. The liability for taxes
payable on the Company's unaudited consolidated balance sheet as of July 1,
1994 are sufficient for the future payment of all accrued
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<PAGE> 11
and unpaid Federal, state, local and foreign taxes as of such date, the failure
for which to provide would have a Material Adverse Effect on the Company or any
of its Subsidiaries, taken as whole. Except as set forth on Schedule 2.11 to
the Disclosure Schedule, the Company and the Subsidiaries have not waived any
statute of limitations with respect to taxes or agreed to any extension of time
with respect to any tax assessment or deficiency.
2.12 Agreements. Except as set forth on Schedule 2.12 to the
Disclosure Schedule, to the best of the Company's knowledge, the Company and
the Subsidiaries are not parties to any material written or oral contract or
commitment not made in the ordinary course of business and, whether or not made
in the ordinary course of business, the Company and the Subsidiaries are not
parties to any written or oral (i) contract or commitment with any labor union,
(ii) contract or commitment for the future purchase of fixed assets in excess
of $250,000 in the aggregate or for the future purchase of materials, supplies
or equipment in excess of normal operating requirements, (iii) contract or
commitment for the employment of any officer, individual employee or other
person on a full-time basis or any contract with any individual on a consulting
basis, except for such similar contracts listed in the documents filed by the
Company with the SEC pursuant to the Exchange Act, (iv) bonus, pension,
profit-sharing, retirement, stock purchase, stock option, or extraordinary
hospitalization, medical insurance or similar plan, contract or understanding
in effect with respect to employees or any of them or the employees of others,
(v) agreements, indentures or commitments relating to the borrowing of money in
excess of $250,000 in the aggregate or to the mortgaging, pledging or otherwise
placing a lien on any assets of the Company or the Subsidiaries (other than
relating to equipment held under capitalized leases or secured by purchase
money security interests), (vi) guaranty of any obligation (other than any
obligation of a Subsidiary) in excess of $250,000 in the aggregate, (vii) lease
or agreement under which the Company or the Subsidiaries are lessees of or hold
or operate (A) any real property or (B) personal property pursuant to which
annual rental payments to the lessor thereof exceed $250,000 (other than as
incidental to the leasing of any real property), (viii) lease or agreement
under which the Company or the Subsidiaries are lessor of or permits any third
party to hold or operate any property, real or personal, owed or controlled by
the Company or the Subsidiaries, (ix) agreement or other commitment for capital
expenditures in excess of $250,000 individually, (x) contract or agreement
under which the Company or the Subsidiaries are obligated to pay any broker's
fees, finder's fees or any such similar fees to any third party (other than as
are incidental to the operation of its business in the ordinary course of
business consistent with industry practices), (xi) contract or agreement for
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<PAGE> 12
the payment or receipt of any royalty, (xii) license for the use of any patent,
knowhow, trademark, trade name, copyright or other intellectual property which
is material to the financial condition or operations of the Company or (xiii)
any other contract, agreement, arrangement or understanding that is material to
the financial condition or operations of the Company and the Subsidiaries,
taken as a whole. The Company has furnished or made available to counsel for
the Purchaser true and correct copies of all such agreements and such other
documents as have been requested by the Purchaser or their authorized
representatives. Each of the foregoing contracts are valid, binding and in
full force and effect in accordance with its terms.
2.13 Compliance. Except as set forth on Schedule 2.13 to the
Disclosure Schedule, to the best of the Company's knowledge, the Company and
the Subsidiaries have (or have applied for and which none of the Company or any
Subsidiary has any reason to believe and does not believe will not be obtained
in due course) all governmental approvals, authorizations, consents,
qualifications, licenses and permits necessary or required to conduct their
business as currently conducted or as planned to be conducted where the failure
to obtain such approvals, authorizations, consents, qualifications, licenses
and permits would result in liability in excess of $200,000 or materially
impede the timely development of any of the products being developed by the
Company or any Subsidiary. To the best of the Company's knowledge, the Company
and the Subsidiaries are currently and at all times since inception have been
in compliance with all Federal, state, local or foreign laws, ordinances,
regulations and orders (including, without limitation, those relating to the
provisions of health insurance, environmental protection, occupational safety
and health, Federal securities laws, equal employment opportunity, consumer
protection, credit reporting, "truth-in-lending", warranties and trade
practices) applicable to their business where the failure to be in compliance
would result in liability in excess of $250,000 or materially impede the timely
development of any of the products being developed by the Company or any
Subsidiary; and, to the best of the Company's knowledge, all such licenses,
qualifications and permits are in full force and effect and no violations exist
in respect of any such licenses or permits and no proceeding is pending or
threatened to revoke or limit any thereof.
2.14 Disclosure. Neither this Agreement, the Disclosure Schedule,
the Warrant, or the Registration Rights Agreement contains any untrue statement
of a material fact or omits to state a material fact necessary, in light of the
circumstances under such statements were made, in order to make the statements
contained herein and therein, not misleading.
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<PAGE> 13
2.15 Certain Transactions. Except as set forth in the Company's
SEC Reports, no executive officer or director of the Company or any Subsidiary
has engaged in any transaction since September 30, 1990 that would require
disclosure in the document filed with the Commission pursuant to Item 404 of
Regulation S-K promulgated under the Securities Act.
2.16 Insurance. Each of the Company and the Subsidiaries maintains
such insurance coverage, including amounts, described on Schedule 2.16 to the
Disclosure Schedule. Such insurance listed on Schedule 2.16 to the Disclosure
Schedule is outstanding and in full force and effect and all premiums with
respect to such policies are currently paid. Each of the Company and the
Subsidiaries has not during the past three (3) fiscal years been denied or had
revoked or rescinded any insurance policy.
2.17 Definitions. As used in this Section 2, the term "to the best
of the Company's knowledge" shall mean actual knowledge of the officers,
directors and key employees of the Company or the Subsidiaries obtained in the
management of his or her business affairs after making due inquiry of officers,
directors, and key employees of the Company and the Subsidiaries.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company as follows:
3.1 Investment. The Purchaser will acquire the Shares, the
Warrant and any Warrant Shares purchased from the Company pursuant to this
Agreement for investment for its own account, not as a nominee or agent, and
not with a view to, or for resale in connection with, any distribution thereof.
The Purchaser understands that the Shares, the Warrant and any Warrant Shares
purchased by it from the Company pursuant to this Agreement have not been, and
will not be, registered (unless sold in connection with a public offering by
the Company or pursuant to a demand registration under the Registration Rights
Agreement) under the Securities Act by reason of a specific exemption from the
registration provisions of the Securities Act which depends upon, among other
things, the bona fide nature of the Purchaser's investment intent and the
accuracy of the Purchaser's representations as expressed in this Section 3.1.
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<PAGE> 14
3.2 Organization. The Purchaser is a corporation duly organized
and validly existing and in good standing under the laws of the state of its
incorporation, with all requisite corporate power and authority to own, lease
and operate its properties and assets and to carry on its business as presently
conducted and as proposed to be conducted.
3.3 Authority. The Purchaser has all corporate right, power and
authority to enter into this Agreement and the Registration Rights Agreement
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Registration Rights Agreement
by the Purchaser and the consummation by the Purchaser of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on behalf of the Purchaser. This Agreement and the
Registration Rights Agreement have been duly executed and delivered by the
Purchaser and constitute legal, valid and binding obligations of the Purchaser,
enforceable in accordance with their respective terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy as they may apply
to Section 7 of the Registration Rights Agreement. Subject to compliance with
the HSR Act and such filings as may be required to be made with the SEC and any
exchange or quotation system on which the Purchaser's securities are listed or
designated, the execution and delivery of this Agreement and the Registration
Rights Agreement do not, and the consummation of the transactions contemplated
hereby and thereby will not, conflict with or result in any violation of any
obligation under any provision of the Certificate or Articles of Incorporation
or Bylaws of the Purchaser or any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Purchaser.
3.4 Government Consents, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Purchaser is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of the
Shares or the Warrant, the issuance of the Warrant Shares upon exercise of the
Warrant or the consummation of any other transaction contemplated hereby,
except the filing of such forms with the United States Department of Justice
and the Federal Trade Commission as shall be required by the HSR Act and the
expiration of any waiting periods thereunder and such filings as may be
required to be made with the SEC and any exchange or quotation system on which
the Purchaser's securities are listed or principally traded.
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<PAGE> 15
3.5 Investigation. The Purchaser has had a reasonable opportunity
to discuss the Company's business management and financial affairs with the
Company's management.
3.6 Financing. The Purchaser has or will have the funds to
provide the Company with the funds necessary to consummate the transactions to
occur at the Closing.
SECTION 4
CONDITIONS TO OBLIGATIONS OF THE PURCHASER
The obligation of the Purchaser to purchase the Shares and the Warrant
at the Closing is subject to the fulfillment on or prior to the Closing Date of
the following conditions, any or all of which may be waived at the option of
the Purchaser:
4.1 Representations and Warranties Correct. The representations
and warranties made by the Company in Section 2 hereof shall be true and
correct in all material respects when made, and shall be true and correct in
all material respects on the Closing Date with the same force and effect as if
they had been made on and as of said date.
4.2 Covenants. All covenants, agreements and conditions
(including corporate proceedings) contained in this Agreement to be performed
by the Company on or prior to the Closing Date shall have been performed or
complied with in all material respects.
4.3 Opinion of Company's Counsel. The Purchaser shall have
received from Wilson Sonsini Goodrich & Rosati, P.C., counsel to the Company,
an opinion addressed to it, dated the Closing Date, in substantially the form
attached hereto as Exhibit C.
4.4 No Order Pending. There shall not then be pending or
threatened in writing any order, injunction or other action by any court,
arbitrator or governmental body or authority enjoining or restraining the
transactions contemplated by this Agreement or imposing any material condition
on the consummation thereof.
4.5 HSR Act. The Purchaser and the Company shall have filed such
forms with the United States Department of Justice and the Federal Trade
Commission as shall be required by the HSR Act and the applicable waiting
periods under such HSR Act shall have expired (or been terminated) without
notice from such governmental agencies that additional inquiries are being
made.
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<PAGE> 16
4.6 No Law Prohibiting or Restricting Such Sale. There shall not
be in effect any law, rule or regulation prohibiting or restricting such sale,
or imposing material conditions on such sale, or requiring any consent or
approval of any person which shall not have been obtained (including blue sky
filings) to issue the Shares, the Warrant or the Warrant Shares (except as
otherwise provided in this Agreement).
4.7 Compliance Certificate. The Company shall have delivered to
the Purchaser a certificate in substantially the form attached hereto as
Exhibit D, executed on behalf of the Company by the Chief Executive Officer and
Chief Financial Officer of the Company, dated the Closing Date, and certifying
to the fulfillment of the conditions specified in Sections 4.1 and 4.2 of this
Agreement.
4.8 Technology Agreement. The Company shall have delivered to the
Purchaser a duly executed counterpart of the license and OEM agreements on
terms and conditions satisfactory to Purchaser in its sole discretion, which
agreement shall include at a minimum the terms and conditions set forth on
Exhibit E attached hereto (the "Technology Agreement"). Notwithstanding
anything to the contrary herein, in the event of a material breach by the
Company of its obligations under the Technology Agreement, all of the
restrictions on Purchaser's ability to transfer Voting Stock set forth in
Section 7.6 shall terminate and, except with respect to a transfer by the
Purchaser of Voting Stock then held by the Purchaser which represents 20% or
more of the Total Voting Power of the Company in a single transaction to a
single person or group (as defined hereinafter), the Company's right of first
refusal set forth in Section 8 hereof, shall terminate.
4.9 Registration Rights Agreement. The Company shall have
delivered to the Purchaser a duly executed counterpart of the Registration
Rights Agreement.
4.10 Material Adverse Change. There shall not have occurred or
been discovered (whether through due diligence review or otherwise) since July
1, 1994, the date of the Company's most recent balance sheet any material
adverse change in the condition (financial or otherwise), results of
operations, assets, liabilities or business of the Company and its
Subsidiaries, taken as a whole.
4.11 Corporate Authorizations. Purchaser shall have received (i)
certified copies of the resolutions adopted by the Company's Board of
Directors, authorizing the execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Warrant, the Technology
Agreement and (ii) copies of the
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<PAGE> 17
Company's Certificate of Incorporation and By-Laws, as in effect on the Closing
Date.
SECTION 5
CONDITIONS TO OBLIGATIONS OF COMPANY
The Company's obligation to sell and issue the Shares and the Warrant
at the Closing is subject to the fulfillment on or prior to the Closing Date of
the following conditions, any or all of which may be waived at the option of
the Company:
5.1 Representations and Warranties Correct. The representations
and warranties made by the Purchaser in Section 3 hereof shall be true and
correct in all material respects when made, and shall be true and correct in
all material respects on the Closing Date with the same force and effect as if
they had been made on and as of said date.
5.2 Covenants. All covenants, agreements and conditions
(including corporate proceedings) contained in this Agreement to be performed
by the Purchaser on or prior to the Closing Date shall have been performed or
complied with in all material respects.
5.3 No Order Pending. There shall not then be pending or
threatened in writing in effect any order, injunction or other action by any
court, arbitrator or governmental body or authority enjoining or restraining
the transactions contemplated by this Agreement or imposing any material
condition on the consummation thereof.
5.4 HSR Act. The Purchaser and the Company shall have filed such
forms with the United States Department of Justice and the Federal Trade
Commission as shall be required by the HSR Act and the applicable waiting
periods under such HSR Act shall have expired (or been terminated)without
notice from such governmental agencies that additional inquiries are being
made.
5.5 No Law prohibiting or Restricting Such Sale. There shall not
be in effect any law, rule or regulation prohibiting or restricting such sale,
or imposing material conditions on such sale, or requiring any consent or
approval of any person which shall not have been obtained (including blue sky
filings) to issue the Shares, the Warrant or the Warrant Shares (except as
otherwise provided in this Agreement).
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<PAGE> 18
5.6 Compliance Certificate. The Purchaser shall have delivered to
the Company a certificate substantially in the form attached hereto as Exhibit
E, executed on behalf of the Purchaser by an executive officer of the
Purchaser, dated the Closing Date, and certifying to the fulfillment of the
conditions specified in Sections 5.1 and 5.2 of this Agreement.
5.7 Technology Agreement. The Purchaser shall have delivered to
the Company a duly executed counterpart of the Technology Agreement on terms
and conditions satisfactory to the Company in its sole discretion, which
agreement shall include at a minimum the terms and conditions set forth on
Exhibit E hereto.
5.8 Registration Rights Agreement. The Purchaser shall have
delivered to the Company a duly executed counterpart of the Registration Rights
Agreement.
SECTION 6
COVENANTS OF THE COMPANY
Until the termination of this Agreement in accordance with Section
10.2 hereof or the particular covenant, as the case may be:
6.1 Sale of Additional Shares. The Company shall take such action
as is reasonably necessary, including any necessary amendment to the Rights
Agreement and any action required under the Registration Rights Agreement,
subject to compliance with applicable law (including federal and state
securities laws), to issue and sell to the Purchaser any Shares or Warrant
Shares or any additional securities which the Purchaser shall be entitled to
purchase from the Company pursuant to this Agreement.
6.2 Membership on the Board of Directors.
(a) Upon or after the Closing, the Company shall cause to
be appointed as a director to the Company's Board of Directors, at the request
of the Purchaser, any person designated by the Purchaser and approved by the
Company, which approval shall not unreasonably be withheld. Any such person
shall serve until such person's successor has been duly elected and qualified.
Thereafter, the Company shall include in the slate of nominees recommended by
the Company's Board of Directors or management to stockholders for election as
directors at each annual meeting of stockholders of the Company any person
designated pursuant to this paragraph, or such substitute as may be designated
by the Purchaser and who is reasonably acceptable to the Company, and the
Company
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<PAGE> 19
shall use its best efforts to cause the shares for which the Company's
management or directors hold proxies or are otherwise entitled to vote to be
voted in favor of the election of such designee to the extent necessary to
ensure his election, assuming that all Voting Stock beneficially owned by the
Purchaser is voted for such designee. In the event that any such designee
shall cease to serve as a director for any reason, the Company shall use its
best efforts to fill such vacancy by a designee of the Purchaser approved by
the Company, which approved shall not be unreasonably withheld.
Notwithstanding the foregoing, the Company's obligation under this paragraph
and under paragraphs 6.3, 6.4 and 6.5 below shall terminate if the percentage
interest of the Purchaser in the Total Voting Power of the Company, after
adjustment for the exercise, or failure to exercise, of the right to maintain
by the Purchaser pursuant to Section 7.8 below (except in the event of a
delaying notice pursuant to Section 7.8(e)) is less than 5% (even if the
Purchaser's percentage interest should subsequently increase for any reason to
5% or more).
(b) The Company shall be entitled to excuse any designee
of the Purchaser serving as a director on the Company's Board of Directors from
all discussions and deliberations of the Board of Directors of the Company (or
any committee constituted by the Board) concerning competitors of the Purchaser
or relationships between the Company and the Purchaser. Upon notice to the
Purchaser's designee, the Company may refrain from sending or providing to the
Purchaser, or the Purchaser may refuse to receive, any information otherwise
disseminated to the directors of the Company concerning competitors of the
Purchaser or relationships between the Company and the Purchaser. The Company
shall not be obligated to compensate a designee-director of the Purchaser on
the same terms as other outside directors but shall provide all rights and
benefits of indemnity to such designee- director as are provided such other
directors.
6.3 Information Rights. So long as Purchaser holds at least 5% of
the Total Voting Power of the Company, the Company shall provide to the
Purchaser copies of all SEC Reports filed by Company with the Securities and
Exchange Commission and all business plans, budgets, financial statements and
other information made available to the Company's Board of Directors, subject
to the Company's fiduciary duties and obligations to keep such materials
confidential.
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<PAGE> 20
6.4 Access to Records. Each of the Company and the Subsidiaries
shall afford to the Purchaser and the Purchaser's authorized employees,
counsel, accountants and other representatives free and full access, at all
reasonable times to all of the books, records and properties of the Company or
the Subsidiaries, as the case may be, and to all officers of the Company or the
Subsidiaries, as the case may be, upon reasonable advance notice by the
Purchaser to the Company or its Subsidiaries, as the case may be, in order to
verify the representations and warranties made and information delivered to the
Purchaser pursuant to this Agreement.
6.5 Affirmative Covenants. Each of the Company and the
Subsidiaries covenants and agrees with the Purchasers as follows:
(a) Corporate Existence Properties, Etc. Each of the
Company and the Subsidiaries shall, and shall cause each of its Affiliates (as
defined in Section 10.1(i) below) to: maintain, preserve, and keep in full
force and effect its corporate existence and all rights, franchises, licenses,
insurance policies and permits necessary to the proper conduct of its business
and to the ownership, lease, or operation of its properties which, if not so
maintained, could reasonably be expected to have a $100,000 or greater adverse
effect on it, except that this provision shall not restrict the Company's
ability to effect merger of the Subsidiaries of the Company. The Company
agrees to take all action that may be reasonably required to obtain, preserve,
renew and extend all material licenses, permits, authorizations, trade names,
trademarks, service names, service marks, copyrights and patents that are
necessary for the continuance of the operation of any such property by it.
(b) Payment of Taxes. Each of the Company and the
Subsidiaries shall, and shall cause each of its Affiliates to, pay all taxes,
assessments and governmental charges or liens imposed upon it or upon its
income or receipts or upon any of its properties (except with respect to taxes
being contested in good faith by appropriate legal proceedings), which if not
so paid could reasonably be expected, individually or in the aggregate, to have
a Material Adverse Effect on the Company or any of its Subsidiaries, taken as a
whole.
6.6 Three-Year Business Plan. The Company agrees to provide to
the Purchaser, as soon as practicable after it is available, copies of the
Company's Three-Year Business Plan.
6.7 Emergency Business Plan. The Company will provide the
Purchaser prior to Closing with copies of its emergency business plans.
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<PAGE> 21
SECTION 7
COVENANTS OF THE PURCHASER
Until the termination of this Agreement in accordance with the
provisions of Section 10.2 hereof or the particular covenant, as the case may
be:
7.1 Limitation on Ownership of Voting Stock. The Purchaser shall
not (and Purchaser shall not permit any of its Affiliates to) acquire, directly
or indirectly, beneficial ownership of any Voting Stock, any securities
convertible into or exchangeable for Voting Stock, or any other right to
acquire Voting Stock (except, in any case, as provided in this Agreement or the
Warrant or by way of stock dividends or other distributions or offerings made
available to holders of any Voting Stock generally) or authorize or make a
tender, exchange or other offer, without the written consent of the Company, if
the effect of such acquisition or offer would be to increase the Voting Power
of all Voting Stock then owned by Purchaser or its Affiliates or which it has a
right to acquire to more than the percentage of the Total Voting Power of the
Company which Purchaser is entitled to hold at such time as provided in this
Section 7.1:
(a) The Purchaser shall be entitled to hold Voting Stock
up to, and not to exceed except as permitted by this Agreement, 25% of the
Total Potential Voting Power of the Company. Subject to such limitation,
shares of Voting Stock not acquired by the Purchaser from the Company upon
exercise of the Warrant or pursuant to Section 7.8 may be acquired by the
Purchaser in the open market, from third parties or otherwise, so long as the
Warrant has been exercised prior to such purchases.
(b) The Purchaser may acquire Voting Stock without regard
to the limitations in this Section 7.1 if a tender offer is made (as evidenced
by the filing with the SEC of a Schedule 14D-1 (or any successor schedule or
form promulgated or adopted for such purpose by the SEC) and the actual
dissemination of tender offer materials to security holders) by another person
or group to purchase or exchange for cash or other consideration any Voting
Stock which, if successful, would result in such person or group owning or
having the right to acquire shares of Voting Stock with aggregate Voting Power
of at least 40% of the Total Voting Power of the Company then in effect;
provided, however, that this provision shall not be effective until such time
as the Purchaser in the exercise of the sole reasonable judgment of its Board
of Directors, after consultation with its advisors, shall reasonably conclude
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that such tender offeror can finance such tender offer. If an offer or
proposed acquisition is made by any person or group which pursuant to this
Section 7.1(b) releases the Purchaser from the limitations set forth herein,
which offer or proposed acquisition subsequently expires, is enjoined or
terminated prior to any purchases thereunder or is otherwise withdrawn, upon
the effectiveness of such expiration, injunction or termination the limitations
of this Section 7.1(b) shall be reimposed, except that the Purchaser shall not
be obligated to dispose of any Voting Stock acquired of record or beneficially
during the pendency of such tender offer or proposed acquisition.
(c) Purchaser may acquire Voting Stock (or rights to
acquire Voting Stock) without regard to the limitations in this Section 7.1 as
soon as it is publicly disclosed or Purchaser otherwise learns that another
person or group subject to the filing requirements of Section 13(d)(i) of the
Exchange Act with respect to such purchase has acquired, whether from the
Company or otherwise, any Voting Stock (or rights to acquire Voting Stock),
which results in such person or group owning or having the right to acquire
Voting Stock with Total Voting Power of not less than 20%.
(d) The Purchaser will not be obligated to dispose of any
shares of Voting Stock if the aggregate percentage ownership of the Purchaser
in the Total Voting Power of the Company is increased as a result of a
recapitalization of the Company or a repurchase of securities by the Company or
any other action taken by the Company or its affiliates, but the Purchaser
shall not acquire any additional Voting Stock above the limitations then
applicable pursuant to Section 7.1, unless such acquisition would otherwise be
permitted under this Agreement. If, after the Purchaser has acquired Voting
Stock in response to the acquisition of Voting Stock by another person or
group, as permitted by this Section 7.1, then the Purchaser shall not be
obligated to dispose of any shares of Voting Stock if the aggregate percentage
ownership of such third party or group is thereafter reduced.
(e) Notwithstanding the other provisions of this Section
7.1, the covenants and agreements of the Purchaser under this Section 7.1 shall
terminate September 1, 1996.
7.2 Voting. The Purchaser shall take such action as may be
required so that all shares of Voting Stock owned by the Purchaser are voted
for the Purchaser's nominee to the Board of Directors of the Company in
accordance with the recommendation of the Board of Directors consistent with
the provisions of Section 6.2. Unless the Company otherwise consents in
writing, the Purchaser shall take such action as may be required so that all
shares of Voting Stock
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owned by the Purchaser are voted in accordance with the recommendations of the
Board of Directors on all matters to be voted on by holders of Voting Stock in
not less than the same proportion as the votes cast by the other holders of
Voting Stock with respect to such matters; provided, however, that Voting Stock
owned by Purchaser may be voted as the Purchaser determines in its sole
discretion on any Significant Event (as defined in Section 10.1(c) below)
presented to be voted on by the holders of Voting Stock. The Purchaser, as a
holder of shares of Voting Stock, shall be present, in person or by proxy, at
all meetings of stockholders of the Company so that all shares of Voting Stock
beneficially owned by the Purchaser may be counted for the purposes of
determining the presence of a quorum at such meetings. Notwithstanding any
other provision of this Section 7.2, the provisions of this Section 7.2 shall
terminate and be of no further force and effect should the provisions of
Sections 7.1 and 7.6 be terminated for any reason.
7.3 Voting Trust, etc. So long as Section 7.1 hereof is in effect
and has not been terminated for any reason, the Purchaser shall not deposit any
shares of Voting Stock in a voting trust or, except as otherwise provided
herein, subject any Voting Stock to any arrangement or agreement with respect
to the voting of such Voting Stock.
7.4 Solicitation of Proxies. So long as Section 7.1 hereof is in
effect and has not been terminated for any reason, without the Company's prior
written consent, the Purchaser shall not solicit proxies with respect to any
Voting Stock or become a "participant" in any "election contest" (as such terms
are used in Rule 14a-11 of Regulation 14A under the Exchange Act relating to
the election of directors of the Company); provided, however, that the
Purchaser shall not be deemed to be a "participant" by reason of the exercise
of any right permitted by Section 6.2.
7.5 Acts in Concert with Others. So long as Section 7.1 hereof is
in effect and has not been terminated for any reason, the Purchaser shall not
join a partnership, limited partnership, syndicate or other group, or otherwise
act in concert with any third person, for the purpose of acquiring, holding, or
disposing of Voting Stock; provided, however, that Purchaser shall be permitted
to act in concert with any of its Affiliates or Subsidiaries to transfer the
Voting Stock the Purchaser is then authorized to hold pursuant to this Section
7 among such entities.
7.6 Restrictions on Transfer of Voting Stock. Prior to September
1, 1996, Purchaser and its Affiliates shall not, directly or indirectly,
without the written consent of the Company, sell or
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transfer any Voting Stock except (i) to the Company or any person or group
approved by the Company; (ii) to any Subsidiary or Affiliate of the Purchaser,
all of the voting stock of which is owned by the Purchaser or its Affiliates (a
"Wholly-Owned Subsidiary"); (iii) pursuant to a bona fide public offering
registered under the Securities Act of either Voting Stock or securities
exchangeable or exercisable for Voting Stock or pursuant to a rights offering
or a dividend or other ratable distribution to stockholders of the Purchaser;
(iv) pursuant to Rule 144 under the Securities Act (but only to the extent the
sale or transfer of Voting Stock at any time is in compliance with the volume
limitations under paragraph (e) thereunder); (v) in any other transactions not
otherwise described in this Section 7.6 (including open market transactions),
subject to the Company's right of first refusal as set forth in Section 8.1
hereof or in response to (1) an offer to purchase or exchange for cash or other
consideration any Voting Stock (a) which is made by or on behalf of the Company
or (b) which is made by another person or group and is not opposed by the Board
of Directors of the Company within the time such Board is required, pursuant to
regulations under the Exchange Act, to advise the Company's stockholders of
such Board's position on such offer, or (2) subject to the Company's right of
first refusal as set forth in Section 8.2, any other offer made by another
person or group to purchase or exchange for cash or other consideration any
Voting Stock which, if successful, would result in such person or group owning
or having the right to acquire Voting Stock with aggregate Voting Power of more
than 40% of the Total Voting Power of the Company then in effect.
Notwithstanding the foregoing, with respect to Section 7.6(v), Purchaser shall
not sell or transfer any Voting Stock in single transactions exceeding 5% of
the Total Voting Power of the Company to any single person or group and such
sales or transfers shall not directly or indirectly, result, to the best
knowledge of the Purchaser after reasonable inquiry, in any single person or
group owning or having the right to acquire Voting Stock with aggregate Voting
Power of 10% or more of the Total Voting Power of the Company then in effect.
Notwithstanding the foregoing, upon the acquisition by a single person
or group (as defined hereinafter) of Voting Stock, whether from the Company or
otherwise, representing 20% or more of the Company's Total Voting Power, the
restrictions set forth in this Section 7.6 shall terminate.
7.7 Confidential Information. The Company may from time to time
pursuant to this Agreement (including pursuant to Section 6.4 hereof) disclose
to Purchaser certain strategic, technical, financial or other information which
the Company deems to be confidential. The Purchaser agrees that all such
confidential information
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will be kept confidential unless such information (i) is already lawfully in
the Purchaser's or its Affiliates' possession, (ii) becomes generally available
to the public other than as a result of a disclosure by the Purchaser or any of
its directors, officers, employees, agents, advisors or Affiliates, (iii)
becomes available to the Purchaser or its Affiliates on a nonconfidential basis
from a source other than the Company or its advisors, provided that such source
is not known to the Purchaser or its Affiliates to be bound by a
confidentiality agreement with or other obligation of secrecy to the Company or
another party, (iv) is required to be disclosed by the Purchaser or its
Affiliates by operation of law, (v) is disclosed by the Purchaser or its
Affiliates with the Company's prior written approval, (vi) has been held by the
Purchaser or its Affiliates for not less than two (2) years from the date of
receipt, provided that the confidentiality of confidential information
furnished to an individual designated by the Purchaser as a director on the
Company's Board of Directors (and not additionally furnished to other
representatives of the Purchaser) shall not lapse by virtue of this clause, or
(vii) is independently developed by the Purchaser or its Affiliates.
Notwithstanding anything to the contrary, the Purchaser may disclose such
confidential information to its directors, officers, employees, agents or
advisors so long as it takes appropriate measures to protect the
confidentiality thereof, which measures shall include at least the same degree
of care that the Purchaser uses to protect its own confidential information of
a similar nature. In the event that the Purchaser or any of its
representatives is requested or required to disclose any of the confidential
information referred to above, the Purchaser will provide the Company with
prompt notice of such request or requirement so that the Company may, at the
Company's expense, seek a protective order or waive the Purchaser's compliance
with this Section 7.7, as appropriate. The Purchaser further acknowledges and
understands that any information so obtained which may be considered "insider"
nonpublic information will not be utilized by the Purchaser in connection with
purchases and/or sales of the Company's securities except in compliance with
applicable state and federal securities laws.
7.8 Right to Maintain.
(a) If the percentage interest of the Purchaser in the
Total Potential Voting Power of the Company is at or less than 25%, (the
"Threshold Interest"), and is reduced as a result of an issuance by the Company
of any Voting Stock (including any issuance following conversion of any
security convertible into or exchangeable for Voting Stock or upon exercise of
any option, warrant or other right to acquire any Voting Stock, but excluding
issuance of
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the Warrant Shares), the Purchaser shall have the right to purchase from the
Company for cash upon the terms set forth in this Section 7.8 up to and
including that number of shares of Voting Stock which, if purchased by the
Purchaser, would result in the Purchaser's retaining the Threshold Interest
held by the Purchaser immediately prior to such reduction of the Purchaser's
interest.
(b) The purchase price per share at which the Purchaser
shall be entitled to purchase Voting Stock under this Section 7.8 shall be
determined as follows:
(i) If the event giving rise to the
Purchaser's rights is one or more issuances of Voting Stock (including any
issuance resulting from the conversion or exercise of any security or other
right to acquire Voting Stock, but excluding issuance of the Warrant Shares)
pursuant to the Company's present or future stock option, stock purchase or
other stock plans for the benefit of employees, directors, officers,
consultants or others, the price shall be the Average Market Price per share of
Voting Stock determined as of the date of the issuance and sale of such Voting
Stock.
(ii) If the event giving rise to the
Purchaser's rights is a sale or issuance of Voting Stock for cash or property,
including, without limitation, for securities or assets or by way of merger in
connection with the acquisition of another company, and is not treated under
paragraph 7.8(b)(i) above, the price shall be the price per share specified in
the agreement relating to such issuance or, if no such price is specified, the
Average Market Price per share of Voting Stock determined as of the date of
issuance and sale of such Voting Stock;
(iii) If the event giving rise to the
Purchaser's rights is an issuance of Voting Stock upon conversion of any
security convertible into or exchangeable for Common Stock or upon exercise of
any option, warrant or right to acquire any Voting Stock, but excluding
issuance of the Warrant Shares, and is not treated under paragraph 7.8(b)(i) or
(ii) above, the price shall be the Average Market Price per share of Voting
Stock determined as of the date of such conversion or exercise.
(iv) If the event giving rise to the
Purchaser's rights is an underwritten public offering or an institutional
private placement, the price shall be the price per share at which the Voting
Stock was sold by the Company.
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(v) In all other cases, the price shall
be the Average Market Price per share of Voting Stock determined as of the date
of the issuance and sale of such Voting Stock.
(c) The Company shall notify the Purchaser by written,
dated notice not later than ten (10) business days after an issuance giving
rise to the Purchaser's rights under this Section 7.8 and, if such offer is
accepted in writing within thirty (30) days of such offer (except as provided
in the next sentence), effect the sale of the securities to the Purchaser in
accordance with this paragraph. If the event giving rise to the Purchaser's
rights is an underwritten public offering or an institutional private placement
of securities by the Company, and if the Company gives the Purchaser notice of
such offering at least fifteen (15) days in advance of the effective date of
the offering, then unless the Purchaser notifies the Company of its irrevocable
acceptance of such offer within the first ten (10) days of such 15-day period
(for the purpose of permitting the Company to disclose the fact of the
Purchaser's intention in the prospectus relating to such underwritten public
offering or institutional private placement), the Company shall be under no
obligation to sell securities to the Purchaser under this Section 7.8 as a
result of such underwritten public offering or institutional private placement.
(d) The purchase and sale of any shares of Voting Stock
pursuant to any offer made under this Section 7.8 that is accepted by the
Purchaser shall take place at 10:00 a.m. on the third business day following
the expiration or early termination of all waiting periods imposed on such
purchase and sale by the HSR Act and the receipt of all other applicable
regulatory approvals, or, if no waiting period is imposed on such purchase and
sale by the HSR Act, on the third business day following the Purchaser's
acceptance of such offer and compliance with applicable laws and regulations,
at the offices of the Company located at the address set forth in this
Agreement, or at such other time and place as the Company and the Purchaser may
agree. The purchase price shall be payable by wire transfer in same day funds.
The Company and the Purchaser shall comply with all federal and state laws and
regulations and requirements of the NASD, or any securities exchange on which
the Company's securities may then be listed, applicable to any purchase and
sale of shares of Voting Stock under this Section 7.8.
(e) Notwithstanding the foregoing, if any issuance of
securities requiring the Company to make an offer of Voting Stock to the
Purchaser under this Section 7.8 shall be for a number of securities
representing less than 2% of the Total Voting Power of the Company immediately
following such issuance, the Company shall
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have the right to delay giving the notice otherwise required by Section 7.8(c)
until the earlier of (i) the next issuance which, together with all issuances
after which notice was delayed pursuant to this sentence, shall represent an
aggregate of 2% or more of the Total Voting Power of the Company then in effect
or (ii) the 45th calendar day preceding the last day of the Company's fiscal
year for accounting purposes, and, thereupon, the Company shall give such
notice with respect to all shares of Voting Stock which it shall be obligated
to offer to sell to the Purchaser at the price determined in Section 7.8(b)
hereof and which shall not have been the subject of a previous notice pursuant
to Section 7.8(c); provided, however, that the Purchaser shall have the right
to request the purchase of all shares of Voting Stock which the Purchaser has a
right to acquire under this Section 7.8 at any time (a) if a bona fide tender
or exchange offer is made by another person or group to purchase or exchange
for cash or other consideration any Voting Stock from the Company's
stockholders generally, or (b) upon the Company's publication or setting of a
record date of its stockholders; and, in either such event and upon the receipt
of such request, the Company shall use its reasonable efforts to issue all such
shares to the Purchaser pursuant to the provisions of this Section 7.8.
(f) If Purchaser sells any Voting Stock, or fails to
exercise its right to acquire additional Voting Stock as permitted in this
Section 7.8 within the time period prescribed, the Threshold Interest which the
Purchaser is then entitled to maintain under this Section 7.8 shall be reduced
to the Purchaser's percentage ownership that results immediately following such
sale or failure to exercise.
(g) The Purchaser shall forfeit all rights under this
Section 7.8 if at any time the Purchaser's Voting Stock represents less than 5%
(inclusive of the shares the Purchaser is entitled to purchase under an
outstanding offer pursuant to this Section 7.8) of the Total Voting Power the
Company (even if the Purchaser's percentage interest should subsequently
increase for any reason to 5% or more).
7.9 Acquisition of Stock. The Purchaser shall advise management
of the Company as to the Purchaser's general plans to acquire any additional
shares of Voting Stock, or rights thereto, reasonably in advance of any such
acquisitions; provided, however, that if advance notice of acquisitions of
Voting Stock, or rights thereto, in the open market is not reasonably
practicable, notice of any such acquisition shall be made promptly following
such acquisition. All of the Purchaser's purchases of Voting Stock
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shall be in compliance with applicable laws and regulations and the provisions
of this Agreement.
7.10 Termination of Certain Sections. Notwithstanding any other
provision in this Section 7, the provisions of Sections 7.1, 7.2, 7.3, 7.4,
7.5, 7.6, 7.8 and 7.9 shall terminate and be of no further force and effect on
the earliest of (i) September 1, 1996, (ii) such time as Purchaser holds less
than 5% of the Total Voting Power of the Company, or (iii) such earlier time as
may be provided in the relevant section of this Agreement.
7.11 Further Termination. Notwithstanding any other provision in
this Section 7, the provisions of Sections 7.1, 7.2, 7.3, 7.4, 7.5 and 7.6 of
this Agreement shall terminate upon the commencement of any bankruptcy,
insolvency or reorganization action by the Company or against the Company by
any other party.
7.12 Repurchase Option. A separate agreement will be negotiated
between the Company and the Purchaser covering measures to ensure continuity of
core management. As part of this agreement, the Purchaser will offer to the
Company the option to repurchase to 300,000 shares of the Shares purchased by
the Purchaser under this Agreement at $8.625 per share.
SECTION 8
COMPANY RIGHT OF FIRST REFUSAL
8.1 Right of First Refusal. Prior to making any sale or transfer
of Voting Stock of the Company pursuant to Section 7.6(v), Purchaser shall give
the Company the opportunity to purchase such Voting Stock in the following
manner:
(a) The Purchaser shall give notice (the "Transfer
Notice") to the Company in writing of such intention specifying the names of
the proposed purchasers or transferees, the amount of Voting Stock proposed to
be sold or transferred, the proposed price per share therefor (the "Transfer
Price") and the other material terms upon which such disposition is proposed to
be made.
(b) The Company shall have the right, exercisable by
written notice given by the Company to the Purchaser within twenty (20) days
after receipt of such Transfer Notice, to purchase all or any portion of the
Voting Stock specified in such Transfer Notice for cash per share equal to the
Transfer Price.
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(c) If the Company exercises its right of first refusal
hereunder, the closing of the purchase of the Voting Stock with respect to
which such right has been exercised shall take place within sixty (60) days
after the Company gives notice of such exercise, which period of time shall be
extended if necessary to comply with applicable securities laws and
regulations. Upon exercise of its right of first refusal, the Company and the
Purchaser shall be legally obligated to consummate the purchase contemplated
thereby and shall use their best efforts to secure any approvals required in
connection therewith.
(d) If the Company does not exercise its right of first
refusal hereunder within the time specified for such exercise, the Purchaser
shall be free, during the period of ninety (90) days following the expiration
of such time for exercise, to sell the Voting Stock specified in such Transfer
Notice on terms no less favorable to the Purchaser than the terms specified in
such Transfer Notice, which period shall be extended, if necessary, to comply
with applicable securities laws and regulations. The transferee shall acquire
such Voting Stock free from any of the provisions of this Agreement, provided,
however, such Voting Stock shall be subject to any restrictions imposed under
applicable securities laws and regulations.
(e) The right of first refusal granted under this Section
8.1 shall expire on September 1, 1996, subject to the provisions of Sections
4.8 and 7.6 above.
8.2 Tender Offer Sale. Prior to making any sale or exchange of
Voting Stock pursuant to Section 7.6(vi)(2) in response to a tender or exchange
offer, Purchaser shall give the Company the opportunity to purchase such Voting
Stock in the following manner:
(a) The Purchaser shall give notice (the "Tender Notice")
to the Company in writing of such intention no later than ten (10) days prior
to the latest time (as the same may be extended) by which Voting Stock must be
tendered in order to be accepted pursuant to such offer or to qualify for any
proration applicable to such offer (the "Tender Date"), specifying the amount
of Voting Stock proposed to be tendered. For purposes hereof, a tender offer
to purchase Voting Stock shall be deemed to be an offer at the price specified
therein, without regard to any provisions thereof with respect to proration or
conditions to the offeror's obligation to purchase (assuming such conditions
are not impossible to fulfill when the offer is made, without giving effect to
the Company's right of first refusal).
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(b) If the Tender Notice is given, the Company shall have
the right, exercisable by giving notice (the "Purchase Notice") to the
Purchaser at least five (5) business days prior to the Tender Date, to purchase
all or any portion of the Voting Stock specified in the Tender Notice for cash.
If the Company exercises such right by giving such notice, the closing of the
purchase of such Voting Stock shall take place on the fifth business day after
the tender offer is consummated, or such earlier time as the Company and
Purchaser shall agree; provided that the Company's obligation to purchase such
shares of Voting Stock following delivery of any Purchase Notice shall be
contingent on consummation of the tender offer referred to in the corresponding
Tender Notice. As a condition to the effectiveness of any exercise by the
Company of its rights to purchase under this Section 8.2, at the time the
Company delivers a Purchase Notice, it shall have provided for the payment to
the Purchaser of the purchase price for such shares by an escrow of funds,
letter of credit facility, bank guarantee or similar arrangement reasonably
acceptable to the Purchaser. Upon exercise of this right of first refusal
(including provision for payment as described above), the Company and the
Purchaser shall be legally obligated to consummate the purchase contemplated
thereby and shall use their best efforts to secure any approvals required in
connection therewith, subject only to consummation of the tender offer referred
to in the corresponding Tender Notice.
(c) The purchase price to be paid by the Company pursuant
to this Section 8.2, if such tender offer is consummated, shall be the purchase
price that the Purchaser would have received if it had tendered the Voting
Stock purchased by the Company and all such Voting Stock had been purchased in
such tender offer, including any increases in the price paid by the tender
offeror after exercise by the Company of its right of first refusal hereunder.
If the purchase price paid by the tender offeror includes any property other
than cash, the value of such property shall be determined in good faith by the
Board of Directors of the Company. The Company and the Purchaser shall use
their best efforts to cause any determination of the value of any such property
included in the purchase price to be made within two (2) business days after
consummation of the tender offer. The Company and the Purchaser shall each
share equally the costs of any investment banking firm selected hereunder.
(d) If the Company does not exercise such right by giving
such notice or fails to complete the purchase, then the Purchaser shall be free
to accept the tender offer with respect to which the Tender Notice was given.
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(e) The provisions of this Section 8.2 shall expire on
September 1, 1996, subject to the provisions of Sections 4.8 and 7.6 above.
8.3 Assignment of Rights. In the event that the Company elects to
exercise a right of first refusal under this Section 8, the Company may specify
prior to closing such purchase another person as its designee to purchase all
or part of the Voting Stock to which such notice relates. Any such designee
shall be subject to the approval of the Purchaser proposing to sell or tender,
as the case may be, any of its Shares, which approval shall not unreasonably be
withheld. If the Company shall designate another person as the purchaser
pursuant to this Section 8, the giving of notice of acceptance of the right of
first refusal by the Company shall constitute a legally binding obligation of
the Company to complete such purchase if such person shall fail to do so.
8.4 Termination. Notwithstanding any other provision of this
Section 8, the provisions of this Section shall terminate and be of no further
force and effect if the Total Voting Power then held by the Purchaser becomes
less than five percent (5%) of the Total Voting Power of the Company.
SECTION 9
INDEMNIFICATION
9.1 Survival of Representations and Warranties. Notwithstanding
any right of Purchaser fully to investigate the affairs of the Company and
notwithstanding any knowledge of facts determined or determinable by Purchaser
pursuant to such investigation or right of investigation, the Purchaser has the
right to rely fully upon the representations, warranties, covenants and
agreements of the Company contained in this Agreement. All representations and
warranties here shall survive the execution and delivery of this Agreement for
a period of two and one-half (2 1/2) years after the Closing and all covenants
and agreements shall survive until performed or waived.
9.2 Obligation to Indemnify.
(a) The Company agrees to indemnify, defend and hold
harmless the Purchaser and its Affiliates (and the directors, officers,
employees, successors and assigns of each of them) from and against all claims,
actions, suits, losses, liabilities, damages, deficiencies, judgments,
settlements, costs of investiga-
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tion or other expenses (including but not limited to interest, penalties and
reasonable attorneys' fees and disbursements incurred in connection with
enforcing this indemnification or otherwise in connection with any of the
foregoing) (collectively, the "Losses") based upon, arising out of or otherwise
in respect of any inaccuracy in or any breach of any representation or warranty
or non- performance or noncompliance of any covenant of the Company contained
in this Agreement, the Registration Rights Agreement (except as otherwise
provided therein) and the Warrant.
(b) The Purchaser agrees to indemnify, defend and hold
harmless the Company and its Affiliates (and the directors, officers,
employees, successors and assigns of each of them) from and against all Losses
based upon, arising out of or otherwise in respect of any inaccuracy in or any
breach of any representation or warranty of the Purchaser or nonperformance or
noncompliance of any covenant of the Purchaser contained in this Agreement, the
Registration Rights Agreement (except as otherwise provided therein) and the
Warrant.
9.3 Notice and Opportunity to Defend.
(a) In the event that any party hereto shall sustain or
incur any Losses in respect of which indemnification may be sought by such
person pursuant to Section 9.2, the person seeking such indemnification (the
"Indemnitee") shall assert a claim for indemnification by giving prompt written
notice thereof (a "Claims Notice") which shall describe in reasonable detail
the facts and circumstances upon which the asserted claim for indemnification
is based, to the party providing indemnification (the "Indemnitor") and shall
thereafter keep the Indemnitor reasonably informed with respect thereto;
provided that failure of the Indemnitee to give the Indemnitor prompt notice as
provided herein shall not relieve the Indemnitor of any of its obligations
hereunder, except to the extent that the Indemnitor is materially prejudiced by
such failure. In case any claim, action, suit, hearing or other proceeding (a
"Claim") is brought against any Indemnitee, the Indemnitor shall have the right
to assume, conduct and control the defense, compromise or settlement thereof,
by written notice to the Indemnitee of its intention to do so within ten (10)
days after receipt of the Claims Notice, with counsel reasonably satisfactory
to the Indemnitee, at the Indemnitor's own expense, and thereupon to prosecute
in the name and on behalf of the Indemnitee any available cross-claims,
counterclaims or third- party claims arising with respect to the Claim. If the
Indemnitor shall assume the defense of such Claim, it shall not settle such
Claim unless such settlement includes as an unconditional term thereof the
giving by the claimant or the plaintiff of a release of the Indemnitee,
satisfactory
- 32 -
<PAGE> 34
to the Indemnitee, from all liability with respect to such Claim nor shall the
Indemnitor settle such Claim without the written consent of the Indemnitee. As
long as the Indemnitor is contesting any such Claim in good faith and on a
timely basis, the Indemnitee shall not pay or settle any such Claim.
Notwithstanding the assumption by the Indemnitor of the defense of any Claim as
provided in this Section 9.3.(a) and without limiting the Indemnitor's right to
assume, conduct and control the defense, compromise or settlement thereof, the
Indemnitee shall be permitted to join in the defense of such Claim and to
employ counsel at its own expense, so long as such joining does not interfere
with the Indemnitor's right to conduct and control such matter.
(b) If the Indemnitor shall fail to notify the Indemnitee
of its desire to assume the defense of any such Claim within the prescribed ten
(10) day period set forth in Section 9.3.(a), or shall notify the Indemnitee
that it will not assume the defense of any such Claim, or if the Indemnitee
shall have defenses available to it which conflict with or are different than
the defenses of the Indemnitor, then the Indemnitee may assume the defense of
any such Claim at the Indemnitor's expense, in which event it may do so in such
manner as it may deem appropriate, and the Indemnitor shall be bound by any
determinations made in any litigation or other proceeding with respect to such
Claim or any settlement thereof effected by the Indemnitee.
SECTION 10
MISCELLANEOUS
10.1 Certain Definitions. As used in this Agreement:
(a) The term "Total Voting Power of the Company" means
the total number of votes which may be cast in the election of directors of the
Company at any meeting of stockholders of the Company if all securities
entitled to vote in the election of directors of the Company were present and
voted at such meeting.
(b) The term "Voting Stock" means the Common Stock and
any other securities issued by the Company, including the Warrant Shares when
issued upon exercise of the Warrant, having the ordinary power to vote in the
election of directors of the Company.
(c) The term "Significant Event" means (i) any proposed
amendment to the Certificate of Incorporation or Bylaws of the Company (other
than a proposal to create an authorized class of Preferred Stock or increase
the number of authorized shares of
- 33 -
<PAGE> 35
Common Stock or Preferred Stock), (ii) disposition of the Company (by way of
merger, sale of stock or disposition of all or substantially all assets or
otherwise), (iii) recapitalization, (iv) liquidation or dissolution, (v) any
vote pursuant to any provision of law or the Company's Certificate of
Incorporation or Bylaws requiring or permitting stockholders to approve any
business combination proposed by or with another person or its affiliates which
have acquired a certain percentage of the Company's shares or to grant voting
rights to such person or to waive or adopt provisions requiring such a vote, or
(vi) any action, including a change in the size, structure or membership of the
Company's Board of Directors which the Purchaser, in its sole discretion,
determines would be materially adverse to the Purchaser's interest in the
Company (other than actions contemplated by this Agreement).
(d) "Average Market Price" of the Voting Stock at any
date shall be the average, based on the ten (10) consecutive trading days
ending on the trading date last preceding the date of determination of such
price (the "Average"), of the closing prices for a share of such security on
the principal national securities exchange on which such security is listed,
or, if such security is not listed on any national securities exchange, the
Average of the closing prices for a share of such security on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") or, if
such closing prices shall not be reported on NASDAQ, the Average of the mean
between the closing bid and asked prices of a share of such security in such
case as reported by The Wall Street Journal, or, if such prices shall not be so
reported, as the same shall be reported by the National Quotation Bureau
Incorporated, or, in all other cases, the value as determined by a single
nationally recognized investment banking firm jointly selected by the Company
and the Purchaser. For this purpose, the parties shall use their best efforts
to cause any determination of the value to be made within ten (10) business
days after the date on which the value is to be measured. The determination by
the investment banking firm selected in the manner set forth above shall be
conclusive.
(e) The terms "beneficial ownership" or "beneficial
owner" refer to the meaning of such terms as provided in Rule 13d-3 promulgated
under the Exchange Act. References to the acquiring, holding or ownership of
Voting Stock hereunder mean beneficial ownership.
(f) The term "group" shall have the meaning comprehended
by Section 13(d)(3) of the Exchange Act and the rules and regulations
promulgated thereunder.
- 34 -
<PAGE> 36
(g) The term "person" shall mean any person, individual,
corporation, partnership, trust or other nongovernmental entity or any
governmental agency, court, authority or other body (whether foreign, federal,
state, local or otherwise).
(h) The term "Total Potential Voting Power," as it
relates to Purchaser's equity position in the Company shall mean Purchaser's
percentage of Total Voting Power after taking into account the exercise by
Purchase of the Warrant and any other securities or other instruments held by
Purchaser which are convertible into Voting Stock.
(i) The term "Affiliate" shall mean any person that
controls, is controlled by or is under common control with the referenced
person.
10.2 Termination of Agreement. This Agreement may be terminated:
(a) by either party prior to the Closing if the other
party violates or fails to perform any of the material covenants or agreements
of the other party under this Agreement; provided, however, that neither party
shall be entitled to terminate this Agreement pursuant to this sentence unless
it shall have delivered written notice of such default to the other party and
such default shall not have been cured within thirty (30) days after delivery
of such notice;
(b) by Purchaser or the Company if the Closing shall not
have taken place on or before October 31, 1994; or
(c) upon mutual consent of Purchaser of the Company.
10.3 Effect of Termination. From and after the termination of this
Agreement, the covenants, obligations and agreements of the parties set forth
herein shall be of no further force or effect and the parties shall be under no
further obligation with respect thereto; provided, however, that in the event
of such termination, to the extent the terms thereof continue to be applicable,
the covenant of the Purchaser contained in Section 7.7 shall continue in full
force and effect.
10.4 Best Efforts. The Company and Purchaser shall use their
respective best efforts to take all actions required under the HSR Act and
under any law, rule or regulation adopted subsequent to the date hereto in
order that the Company may sell the Shares and the Warrant to the Purchaser and
the Purchaser may purchase the Shares and the Warrant and any Voting Stock it
may wish to purchase in the
- 35 -
<PAGE> 37
future and to ensure that the conditions to the Closing set forth herein are
satisfied on or before the scheduled date of such Closing.
10.5 Governing Law; Disputes. This Agreement is made subject to
and shall be construed under the laws of the State of Delaware as applied to
contracts entered into solely between residents of, and to be performed
entirely within, such state. The parties agree that the state and federal
courts situated in the State of Delaware shall have exclusive jurisdiction to
resolve any disputes with respect to this Agreement, with each party
irrevocably consenting to the jurisdiction thereof for any actions, suits or
proceedings arising out of or relating to this Agreement. The parties hereto
irrevocably waive trial by jury. In the event of any litigation hereunder, the
prevailing party shall be entitled to costs and reasonable attorneys' fees. In
the event of any breach of the provisions of this Agreement, the parties shall
be entitled to equitable relief, including in the form of injunctions and
orders for specific performance, where the applicable legal standards for such
relief in such courts are met, in addition to all other remedies available to
the parties with respect thereto at law or in equity. Notwithstanding anything
to the contrary herein or which may be based on facts or circumstances
pertaining to this Agreement, the Company hereby irrevocably and
unconditionally waives and releases all rights and claims that it may now or
hereafter have that Purchaser's parent, Siemens Aktiengesellschaft or any of
Purchaser's Affiliates organized outside the United States (including Siemens
Nixdorf Informationssysteme AG, ("SNI")), is subject to the jurisdiction of the
federal or state courts of the United States with respect to this Agreement,
provided that nothing in such waiver and release shall affect the Company's
rights, if any, to pursue any claim whatsoever against Siemens
Aktiengesellschaft or SNI in the courts of the Federal Republic of Germany. In
addition, Purchaser hereby irrevocably and unconditionally waives and releases
all rights and claims that it may now or hereafter have that the Company is
subject to the jurisdiction of the courts of the Federal Republic of Germany
with respect to this Agreement, provided that nothing in such waiver and
release shall affect Purchaser's rights, if any, to pursue any claim whatsoever
against the Company in the federal or state courts of the United States.
10.6 Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. This Agreement may not be assigned by a party
without the prior written consent of the other party; provided, however, that
the Purchaser shall have the right, upon prior notice to the Company, to assign
this Agreement
- 36 -
<PAGE> 38
to any Wholly-Owned Subsidiary of the Purchaser, the principal offices of which
are located in the United States.
10.7 Entire Agreement; Amendment. This Agreement and the other
documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof and thereof and supersede all prior agreements and understandings
among the parties relating to the subject matter hereof. Neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought.
10.8 Notices and Dates. Any notice or other communication given
under this Agreement shall be sufficient if in writing and sent by registered,
certified mail or facsimile, return receipt requested, postage prepaid, to a
party at its address set forth below (or at such other address as shall be
designated for such purpose by such party in a written notice to the other
party hereto):
(a) if to the Company, to it at:
Pyramid Technology Corporation
3860 North First Street
San Jose, CA 95134
Attn: General Counsel
(408) 428-8820 (fax)
with a copy to:
Larry W. Sonsini, Esq.
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
(415) 496-4084 (fax)
(b) if to Purchaser, to it at:
Siemens Nixdorf
Information Systems, Inc.
c/o Siemens Nixdorf Informationssysteme AG
Postcach 2160
Furstenalle 7W-4790
Paderborn, Germany
Attn: Mr. G. Schulmeyer
011-4989-636-2519 (fax)
- 37 -
<PAGE> 39
with a copy to:
Siemens Corporation
1301 Avenue of the Americas, 42nd Floor
New York, NY 10019
Attn: E. Robert Lupone, Esq., Legal Department
(212) 258-4945 (fax)
All such notices and communications shall be effective when received by the
addressee. In the event that any date provided for in this Agreement falls on
a Saturday, Sunday or legal holiday, such date shall be deemed extended to the
next business day.
10.9 Brokers.
(a) The Company has not engaged, consented to or
authorized any broker, finder or intermediary, except Smith Barney Inc. ("Smith
Barney"), to act on its behalf, directly or indirectly, as a broker, finder or
intermediary in connection with the transactions contemplated by this
Agreement. All fees, commissions and other payments owing to Smith Barney as a
result of its or its employees' participation, negotiations, or other actions,
taken in connection with this Agreement are the sole responsibility and
obligation of the Company. The Company hereby agrees to indemnify and hold
harmless the Purchaser from and against all fees, commissions or other payments
owing to Smith Barney or any other party acting on behalf of the Company
hereunder.
(b) The Purchaser has not engaged, consented to or
authorized any broker, finder or intermediary to act on its behalf, directly or
indirectly, as a broker, finder or intermediary in connection with the
transactions contemplated by this Agreement. The Purchaser hereby agrees to
indemnify and hold harmless the Company from and against all fees, commissions
or other payments owing to any party acting on its behalf.
10.10 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restriction of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
10.11 Injunctive Relief. Purchaser, on the one hand, and
the Company, on the other, acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that
- 38 -
<PAGE> 40
the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement and to enforce specific
performance of the terms and provisions hereof in any court of the United
States or any state thereof having jurisdiction, this being in addition to any
other remedy to which they may be entitled at law or equity.
10.12 Attorneys' Fees. The prevailing party in any
litigation between Purchaser and the Company involving this Agreement, the
Registration Rights Agreement or the Warrant shall be entitled to recover from
the other party its reasonable attorneys' fees and costs.
10.13 Costs and Expenses. Each party hereto shall pay its
own costs and expenses incurred in connection herewith, including the fees of
its counsel, auditors and other representatives, whether or not the
transactions contemplated herein are consummated.
10.14 No Third Party Rights. Nothing in this Agreement
shall create or be deemed to create any rights in any person or entity not a
party to this Agreement.
10.15 Publicity. Purchaser and the Company shall not,
without the prior approval of each other party hereto, make or cause to be made
any press release or other public statement concerning the transactions
contemplated from time to time by this Agreement, except as and to the extent
that any party hereto is so obligated by law or the regulations of any stock
exchange or the NASD (but only after the Company or the Purchaser, as the case
may be, shall have consulted with the other party in advance regarding the form
and substance of such press release or public statement).
10.16 Counterparts. This Agreement may be executed in
counterpart copies, each of which shall be deemed as original and all of which,
when taken together, shall constitute one instrument.
- 39 -
<PAGE> 41
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective authorized officers as of the date aforesaid.
- 40 -
<PAGE> 42
"COMPANY" PYRAMID TECHNOLOGY CORPORATION
By: /s/ Richard H. Lussier
-----------------------------
Name: Richard H. Lussier
Title: Chairman & CEO
"PURCHASER" SIEMENS NIXDORF INFORMATION SYSTEMS, INC.
By: /s/ Gerhard Schulmeyer
-----------------------------
Name: Gerhard Schulmeyer
Title: Chairman
By: /s/ Robert F. Hoogstraten
-----------------------------
Name: Robert F. Hoogstraten
Title: Member of the Board
- 41 -
<PAGE> 1
EXHIBIT 10.52
Software and Hardware License Agreement
with Siemens Nixdorf Informationssysteme AG
dated August 25, 1994
<PAGE> 2
Software and Hardware License Agreement
between
Pyramid Technology Corporation
and
Siemens Nixdorf Informationssysteme AG
This Software and Hardware License Agreement (hereinafter referred to
as the "Agreement"), by and between Pyramid Technology Corporation, a
corporation duly incorporated in the State of Delaware, United States of
America, and with a principal place of business at 3860 North First Street, San
Jose, CA 95134 (hereinafter referred to as "PTC"), and Siemens Nixdorf
Informationssysteme AG, a German business association whose address is Heinz
Nixdorf Ring 1, 33106 Paderborn, Federal Republic of Germany (hereinafter
referred to as "SNI").
WITNESSETH:
WHEREAS, PTC is the sole owner or licensor of the computer components
today named MESHine and MILE and directly related software products such as
MESH SSI; and
WHEREAS, SNI desires to obtain the right to manufacture and sublicense
in object code form, for use under its own name and mark, such computer
software programs owned by PTC and to obtain certain support and maintenance
services from PTC with respect to such programs; and
WHEREAS, PTC offers to grant to SNI a license to use internally, copy
and modify the source code for such software programs that will be the subject
of this Agreement, as well as the right to copy and modify such software for
distribution in object code form; and
WHEREAS, SNI desires to obtain the right to manufacture for use under
its own name and mark, such computer hardware components owned by PTC and to
obtain certain support and maintenance services from PTC with respect to such
computer components; and
WHEREAS, PTC is willing to grant such rights and provide such services
to SNI on the terms and conditions set forth in this Agreement; and
WHEREAS, PTC and SNI hold valid source and distribution licenses for
UNIX SYSTEM V Rel. 4; and
Version: PSSHLAGR.END Date: August 25, 1994 (22:55)
PTC: SNI:
---- ----
1
<PAGE> 3
Software and Hardware License Agreement
between
Pyramid Technology Corporation
and
Siemens Nixdorf Informationssysteme AG
WHEREAS, PTC and SNI have entered into several contracts in the past,
that are not amended, modified or superceded by this Agreement and remain in
full power and effect; and
WHEREAS the parties have entered into a contract entitled "Pyramid
Technology Corporation and Siemens Nixdorf Informationssysteme AG
OEM-Agreement", dated at the Effective Date hereof (hereinafter referred to as
the "OEM-Agreement"),
NOW, THEREFORE, PTC and SNI, in consideration of the promises and
covenants set forth herein, do hereby agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following words and phrases,
whether used in the singular or plural, shall be defined as follows:
a. The term "Acceptance Criteria" shall be defined as the criteria set
forth in Article 7.e on Page 17.
b. The term "Affiliate" shall mean each and all business associations 50%
or more owned or controlled directly or indirectly by either SNI or
PTC, as is apparent from the context of its usage.
c. The term "Agreement" shall mean this Software and Hardware License
Agreement as defined on Page 1 of this document, including all the
Exhibits which are referenced in this Agreement, and are attached
hereto, all of which Exhibits are incorporated herein by reference.
d. The term "Base System" shall mean a basic entry configuration of a
particular computer system model. Such configuration must include
processor (or in case of a multi-processor system the amount of
processors included in the specific configuration), random access
memory, fixed disk and removable disk or tape storage device (except
for diskless workstations, where the network connection is included
instead).
e. The term "Binary Copy" shall mean a copy of a computer software program
in machine readable form suitable for execution directly on computer
hardware.
Version: PSSHLAGR.END Date: August 25, 1994 (22:55)
PTC: SNI:
---- ----
2
<PAGE> 4
Software and Hardware License Agreement
between
Pyramid Technology Corporation
and
Siemens Nixdorf Informationssysteme AG
f. The term "Component" shall mean a part or element of a computer
software program or hardware unit which performs a separately
identifiable function or which is marketed as a distinct computer
software product.
g. The term "Derivative Work" shall mean the recasting, transforming,
or adapting of a prior existing work such that the succeeding work
includes more than a trivial addition, although the addition or
additions may or may not be substantial in nature when compared to
the underlying work as a whole.
h. The term "Distributor" shall mean any non-employee representative of
SNI or any Affiliates of SNI, which has been granted the right by SNI
or any of SNI's Affiliates to use and grant sublicenses to a Product.
i. The term "Documentation" shall mean technical, programming, maintenance
and support manuals, user guides and other documentation, including
modifications, updates, Derivative Works thereof, and translations
relating to the Products, whether in written, graphical, human readable
or machine readable form and in any media.
j. The term "Effective Date" shall have the meaning as defined on Page 42
of this Agreement.
k. The term "End-User" means any end-user licenses of Product supplied by
SNI, an Affiliate of SNI or a Distributor.
l. The term "Enhancement" shall mean a change or changes to a version of a
computer software program or a hardware unit incorporating one or more
new functions or features compared to the last prior version.
m. The term "Extended Software License" shall have the meaning set forth
in Article 2.c on Page 8 of this Agreement.
n. The term "Hardware Product" shall mean the computer units specified in
Exhibit A.
o. The term "Improvement" shall mean a change or changes to a version of
a computer software program or a hardware unit incorporating upgrades
to existing functions or which improves performance compared to the
last prior version.
Version: PSSHLAGR.END Date: August 25, 1994 (22:55)
PTC: SNI:
---- ----
3
<PAGE> 5
Software and Hardware License Agreement
between
Pyramid Technology Corporation
and
Siemens Nixdorf Informationssysteme AG
p. The term "Maintenance Fee" shall have the meaning set forth in Article
12.d on Page 24 of this Agreement.
q. The term "Maintenance Procedures" shall have the meaning set forth in
Article 12.b on Page 21 of this Agreement.
r. The term "Major Default by PTC" shall have the meaning set forth in
Article 23.a on Page 34 of this Agreement.
s. The term "Major Default by SNI" shall have the meaning set forth in
Article 23.b on Page 35 of this Agreement.
t. The term "Manufacturing License" shall be defined as the irrevocable,
worldwide and perpetual right, license and interest to, directly or
indirectly, including through any Affiliates, market, promote, display,
manufacture, distribute, use, support, develop, enhance, improve,
modify, produce Derivative Works, or integrate with any other products,
the subject computer hardware component in any form; any Component
thereof; any Enhancement, Improvement and Modification thereto; any
technology incorporated therein; and includes a license under PTC's
patents, copyrights and proprietary rights related to the subject
computer hardware component, and a license to use Trademarks.
u.
v.
w. The term "Modification" means the bug fixes, error corrections and
minor functional changes in the computer software program or hardware
unit developed by or for or provided by PTC, and intended to correct
errors or instances of nonconformity with technical specifications in
the functionality.
x. The term "NILE" shall mean the PTC computer systems currently known as
"NILE" and future versions and generations thereof based on the micro
processors MIPS R4X00 and T5.
Version: PSSHLAGR.END Date: August 25, 1994 (22:55)
PTC: SNI:
---- ----
4
<PAGE> 6
Software and Hardware License Agreement
between
Pyramid Technology Corporation
and
Siemens Nixdorf Informationssysteme AG
y. The term "Object Code" means the form of computer software programs
resulting from the translation or processing of Source Code by a
computer into machine language or intermediate code, and which is in
a form of computer software programs that would not be convenient to
human understanding of the program logic, but which is appropriate for
execution or interpretation by a computer.
z. The term "OEM-Agreement" shall have the meaning as set forth on Page 1
of this Agreement.
aa. The term "Product" shall mean Software Product and/or Hardware Product.
ab. The term "Product Release(s)" shall mean, as is apparent from the
context of its usage, one or more current editions of a Product
distributed for the purposes of codification of all previously created
Enhancements, Modifications and Improvements.
ac. The term "Protected Parties" shall have the meaning set forth in
Article 13.a on Page 25 of this Agreement.
ad. The term "PTC" shall refer to PTC Technology Corporation, the named
party to this Agreement.
ae. The term "PTC Group" shall refer to PTC and the Affiliates of PTC.
af. The term "PTC Price List" shall mean PTC's United States standard
commercial end user price list (today named Corporate Price List).
ag. The term "Reference System(s)" shall mean, as is apparent from the
context of its usage, one or more computer systems on which PTC has
delivered and thereafter supports, and SNI has accepted, one or more
of the Products.
ah.
Version: PSSHLAGR.END Date: August 25, 1994 (22:55)
PTC: SNI:
---- ----
5
.
<PAGE> 7
Software and Hardware License Agreement
between
Pyramid Technology Corporation
and
Siemens Nixdorf Informationssysteme AG
ai. The term "Royalty Fee" shall mean the payments owed to PTC and SNI for
sublicenses of Product as set forth in Article 17 on Page 28 in this
Agreement.
aj. The term "Royalty Report" shall have the meaning set forth in Article
17.g on Page 31 of this Agreement.
ak. The term "Rules" shall have the meaning set forth in Article 24.1 on
Page 39 of this Agreement.
al. The term "Selected Components" shall mean the Software Products
specified in Exhibit A.
am. The term "Siemens" shall mean the German business association named
Siemens AG, whose address is Wittelsbacher Platz 2, 80XXX Munich,
Federal Republic of Germany.
an. The term "SNI" shall refer to Siemens Nixdorf Informationssysteme AG,
the named party to this Agreement.
ao. The term "SNI Group" shall refer to SNI and the Affiliates of SNI.
ap.
.
aq.
.
ar. The term "Engineering Support" shall mean the resource provided to
support personnel and development personnel to assist them in their
diagnostic work by providing design, specification information, back
ground materials; in case of any computer software program Source Code
changes, Object Code changes and change/fix testing; and in case of
computer hardware units schematics and logic design.
as. The term "Software Product" shall mean the computer software programs
specified in Exhibit A, attached hereto and incorporated herein by
reference; and all Enhancements and Improvements of such
Version: PSSHLAGR.END Date: August 25, 1994 (22:55)
PTC: SNI:
---- ----
6
<PAGE> 8
Software and Hardware License Agreement
between
Pyramid Technology Corporation
and
Siemens Nixdorf Informationssysteme AG
computer software program, which the PTC Group includes in its standard
operating systems for MESHine and MILE; and all Modifications of the
computer software programs listed above; and all related documentation
to such computer software programs listed above.
at. The term "Source Code" shall mean a copy of a computer software program
in a form convenient for reading and review by an individual, such as a
printed or written listing of the programs, but which is not in a form
that would be suitable for execution directly on computer hardware.
au. The term "Term" shall have the meaning set forth in Article 22.a on
Page 34 of this Agreement.
av. The term "Trademark" means any of PTC's trademarks and service marks
for the Products which PTC may adopt from time to time, either alone
or in association with other words, names or symbols.
aw. The term "User Documentation" shall mean Documentation designed for
End-Users and not confidential to PTC.
Other terms used in this Agreement are defined in the context in which
they are used and shall have the respective meanings there indicated.
2. GRANT OF LICENSE
a. Software License on MESHine and MILE Systems
Subject to the limitation expressed in Article 2.f, PTC grants to the
SNI Group
.
Version: PSSHLAGR.END Date: August 25, 1994 (22:55)
PTC: SNI:
---- ----
7
<PAGE> 9
Software and Hardware License Agreement
between
Pyramid Technology Corporation
and
Siemens Nixdorf Informationssysteme AG
b. Software License on SNI Systems for Selected Components
Subject to the limitation expressed in Article 2.f,
.
c. Extended Software License on SNI Systems
Subject to the limitation expressed in Article 2.f, PTC grants to the
SNI Group
.
The term as used in this Article 2.c,
.
d. Hardware License for the
PTC grants to the SNI Group a
.
e. Distribution Exclusivity
.
.
Version: PSSHLAGR.END Date: August 25, 1994 (22:55)
PTC: SNI:
---- ----
8
<PAGE> 10
Software and Hardware License Agreement
between
Pyramid Technology Corporation
and
Siemens Nixdorf Informationssysteme AG
Notwithstanding the above grant, SNI understands and recognizes that
PTC will have to honor any other PTC worldwide re-marketing agreements
in effect at the Effective Date hereof.
f. Source Sublicense Limitation
Any sublicense granted by the SNI Group to any third party pursuant to
this Agreement for the use of the Source Code of the Product shall be
limited in scope
Source Code sublicenses shall be granted pursuant to this Agreement
only to third parties holding and maintaining a valid UNIX System V
Rel. 4 Source License.
g. Source License for Support
PTC grants to the SNI Group a
.
h. Documentation
PTC grants to the SNI Group a
.
i. User Documentation
PTC grants to the SNI Group a
.
j. Distributors
Each member of the SNI Group
subject only to the limitations of this Article 2.
.
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Software and Hardware License Agreement
between
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and
Siemens Nixdorf Informationssysteme AG
pursuant to agreements that substantially comply in all applicable
respects with the terms and conditions of this Agreement.
k. Use of Trademarks
PTC hereby consents and grants to the SNI Group the
solely or in connection with the Trademarks,
trademarks, service marks, trade names, logos and brand names other
than any of the Trademarks in association with the marketing,
promotion, licensing, sublicensing, displaying and distribution of the
Products, such that, except for the inclusion in the Product and
documentation of PTC's proprietary rights notice, the Products and all
Documentation may be identified by other than the Trademarks.
l. Third Party Rights
PTC shall inform SNI of all portions of any Software Product generated
by third parties. PTC shall assist SNI, as required, in obtaining
from these third parties such rights as will allow SNI to exercise
fully its rights granted under this Agreement or grant such rights to
SNI directly, if PTC is authorized to do so by such third party.
m. Technology Licenses in the Event of Default
PTC hereby grants to SNI, a
for all intellectual property
rights (including patents and copyrights), technology, technical
information (including Documentation, Source Code), and know-how
related to Products which PTC now or any time during the Term of this
Agreement (including any renewals or extensions) owns or has rights to
license and/or use, upon the following terms and conditions:
In the event of any
SNI Group under this Agreement or any other agreement between SNI and
PTC relating to the Products, for any reason including by reason of
insolvency, force majeure, any filing for protection under the
bankruptcy or insolvency laws or commencmenet of bankruptcy
proceedings, appointment of any trustee or receiver over any matrial
portion of business or assets of PTC, or as a
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Software and Hardware License Agreement
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and
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result of the occurrence of any material event or condition where
the same, maintenance and support, and performing SNI
Groups's obligation to third parties; such license may be used to
dispose of inventories, and is not in lieu of any other rights or
remedies SNI Group may have at law, in equity or other wise.
n. Surviving Rights in Bankruptcy
The Rights and License granted under this Agreement are intended to
survive any proceedings in bankruptcy as per Section 365(n) of the
U.S. Bankruptcy Code.
o. Extending Rights to Future Affiliates
3. TERMS FOR NEW PRODUCTS AND SNI PRODUCTS
a. Information about New Products
Each party hereto agrees to keep the other party informed about its
development and marketing plans for any new software product including
software products which will or might significantly or functionally
replace any Product, or which will or might be com-
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Software and Hardware License Agreement
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and
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petitive with any Product or any horizontal or vertical applications
marketed on Products during the Planning Meetings.
b. Terms for New Products
This Agreement and its Exhibits specify terms and conditions for
Products. Terms and conditions, including licensing and pricing, for
future products and developments will be negotiated in good faith
from time to time to reach agreement.
c. License for SNI Computer Software Programs
the parties agree to enter into good faith negotiations on
the agreement intended to accomplish such result. The parties agree
that such negotiations shall be conducted as expeditiously as possible.
,
the parties agree to enter into good faith negotiations on the
agreement intended to accomplish such a result. The parties agree that
such negotiations shall be conducted as expeditiously as possible.
d. Licensing of Applications
4. DEVELOPMENT PLAN.
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Software and Hardware License Agreement
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and
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a.
The development plan is a finalized plan for the development of
the Products.
b.
Each future Product Release shall be delivered to
SNI on or before such scheduled delivery date.
PTC shall provide to SNI notice of any anticipated delay in any
scheduled delivery date of any Product Release as soon as PTC is aware
that such delay is likely to occur.
c. Planning Meetings shall be held on a periodic basis as set forth in
Article 5.a, to discuss and mutually agree upon any necessary change
to the then-current development plan. If the parties mutually agree
upon changes, such changes shall be added to and become part of the
development plan.
5. PLANNING MEETING
a. Product Planning Meetings
PTC and SNI agree to conduct Product Planning Meetings on a periodic
and regular basis,
for the primary purposes of reviewing the development status
and progress, modifying and changing the then current Development Plan,
if necessary, and discussing other areas of mutual interest.
b. Product Managers
The product manager of the Products for SNI and the product manager of
the Products for PTC shall serve as focal points for liaison between
the parties for the purpose of product planning, requirements,
specifications and delivery. To resolve day to day issues between the
parties both product managers will meet at
. These meetings shall include an
assessment of unresolved errors as defined in Article 12.b.
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Software and Hardware License Agreement
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and
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6. DELIVERY
a. Delivery Commitment
PTC agrees that for each Software Product on a Product Release basis
for all then-current Reference Systems, to deliver to SNI
PTC agrees that for each Hardware Product on a Product Release basis
for all then-current Reference Systems, to deliver to SNI
These deliveries of Products shall include, without limitation, the
development environment and tools used to develop the Products, only
to the extent that PTC has the right to deliver such materials and is
not limited due to third party obligation, and any other information
which PTC has created or has been created on behalf of PTC relating to
any Product Release or such other Reference System related releases.
b. Product Deliverables
In each delivery of each Product Release by PTC to SNI, PTC shall
include at least the following deliverables:
(1)
(2)
(3)
(4)
only to the extent that PTC has the
right to deliver such materials and is not limited due to
third party obligation.
(5)
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Software and Hardware License Agreement
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and
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(6)
c. Documentation Deliverables
With the delivery of any Product Release by PTC to SNI, PTC shall
provide to SNI at least the following Documentation:
(1)
(2)
(3)
(4)
(5) All class and training materials including instructor and
student materials.
d.
The copies of the Software Product(s), as such exists on the
Effective Date of the Agreement, shall be delivered by PTC
specified above, upon execution of this Agreement.
Thereafter, each new version of the of each Product Release
shall be delivered to specified above, no later
then when such Product Release is generally available to any other
licensee of PTC or of any Affiliate of PTC.
e.
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Software and Hardware License Agreement
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and
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7. ACCEPTANCE
a. Certificates
SNI shall use its reasonable efforts after receipt by SNI of any
Product Release to verify whether any such Product Release meets the
Acceptance Criteria. If any such Product Release, either initially or
following a cure within a cure period of a maximum of
, meets the Acceptance Criteria,
SNI shall promptly, but no later than after receipt
of the Product Release by SNI, provide PTC with an acceptance
certificate, or, if any such Product Release does not meet the
Acceptance Criteria, then SNI shall promptly,
provide PTC with a non-acceptance certificate.
On failure to issue a non-acceptance certificate within said
the Product Release shall be deemed accepted.
b. Acceptance
c. Non-Acceptance
Any such
failures that cannot be, upon request of PTC, reproduced by SNI
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Software and Hardware License Agreement
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d. Payment Reduction as a Remedy for Non-Acceptance
If one or more Products do not meet every element of the Acceptance
Criteria,
e. Acceptance Criteria
Each Product Release which is delivered to SNI much meet the Acceptance
Criteria. The Acceptance Criteria are set forth in Exhibit C.
Furthermore each Product Release, in order to meet the Acceptance
Criteria, shall be of high quality.
The high quality of subsequent Product Releases shall be considered
to be achieved if such subsequent Product Release meets the following
criteria:
(1)
(2)
(3)
(4)
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Software and Hardware License Agreement
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and
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8. DOCUMENTATION
If requested by SNI, PTC shall provide SNI with machine readable copies
of Documentation as described in Article 6.c.
During the Term of this Agreement, PTC shall supply SNI with materials
reflecting any changes to be made in the machine readable copies of
documentation to keep them current.
9. TRADEMARKS
Other than as expressly provided herein, nothing in this Agreement
shall be deemed to grant one party any right, title or interest in the
trademarks, tradenames or service marks of the other party. Any use by one
party of the other's trademarks, tradename or service marks shall be subject to
and be strictly in accordance with this Agreement.
10. SUBLICENSING AGREEMENTS
a. SNI agrees that each recipient of any Source Code or Binary Copy of the
Product(s) from SNI, its Affiliates or a Distributor shall be bound by
a sublicense agreement that requires compliance by the recipient in
accordance with the same terms and conditions of this Agreement that
are applicable to such sublicense.
b. Any sublicense may allow for a transfer of any sublicensed Source Code
or Binary Copy of the Product(s) to another computer system or location
of the sublicensee, provided that the terms on which such transfer may
occur shall adequately protect against continued use of one sublicensed
Source Code or Binary Copy of the Product(s) on more than one computer
system, except as is technically necessary to support the use of a
Product on a network of computers of an end-user.
11. PROTECTION OF PROPRIETARY RIGHTS
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Software and Hardware License Agreement
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and
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a. PTC hereby represents and SNI recognizes and agrees that the Product
and Documentation (i) is considered by PTC to contain trade secrets
of PTC or PTC's licensors, (ii) is furnished by PTC to SNI, and
through SNI to Affiliates of SNI and Distributors, in confidence, and
(iii) contains propietary and confidential information of PTC. Title
to, ownership of, and all proprietary rights in the Product and
Documentation are reserved to and will at all times remain with PTC.
PTC's placement of a copyright notice on any portion of the Product
and Documentation will neither be construed to mean that such portion
has been published, nor derogate from any claim that such portion is
a trade secret or contains proprietary and confidential information
of PTC.
b. SNI will (i) maintain the Product and Documentation in confidence,
(ii) use at least the same degree of care to maintain its secrecy as
it uses in maintaining the secrecy of its own proprietary and
confidential information, (iii) always use at least a reasonable degree
of care in maintaining its secrecy, (iv) use it only to perform its
obligations and in exercising rights under this Agreement. SNI will
properly reproduce on each copy it makes of the Product or Documentation
all notices of the patent, copyright, trademark or trade secret rights
of PTC in the Product or Documentation.
c. Other than as contemplated by this Agreement SNI will not disclose,
furnish, transfer or otherwise make available any portion of Product
or Documentation to any person except to its Affiliates and to
Distributors, End-Users and to those of its and their employees,
agents or contractors whose access is necessary for use of the Product
or Documentation in accordance with this Agreement. SNI, its Affiliates
or Distributors will by instruction, agreement and otherwise with each
of its Distributors and its End-User or its contractors, inform them
of the proprietary and confidential nature of the Product or
Documentation and obtain their compliance with the terms of this
Article 11. SNI will be liable for any non-compliance with the
provisions of this Article 11 by its Affiliates.
d. Notwithstanding anything in this Article 11 to the contrary, SNI will
not have any obligation with respect to that portion of the Product
and Documentation that (i) was known to it prior to receipt from PTC,
(ii) is lawfully obtained from a third party under no obligation of
confidentiality, or (iii) is or becomes publicly
Version: PSSHLAGR.END Date: August 25, 1994 (22:55)
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Software and Hardware License Agreement
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available other than as a result of any act or failure to act of SNI,
(iv) the disclosure of which is required to enforce this Agreement, or
(v) the disclosure of which is required by a governmental authority of
competent jurisdiction.
e. Each of the parties shall at all times use reasonable care to avoid
disclosure to third parties of any information during the Term of this
Agreement that is received from the other party to this Agreement,
which information is considered confidential and identified by the
disclosing party, such as the terms and conditions of this Agreement,
marketing plans, financial information, price lists and information
contained in the Royalty Report and in the Development Plan.
12. SUPPORT AND MAINTENANCE
a. PTC's Support Obligations
PTC agrees to provide the following support for the Products:
(1)
(2)
(3)
(4)
(5)
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Software and Hardware License Agreement
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and
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(6) PTC shall inform SNI of PTC's educational contact who shall
assist SNI in educational issues, such as development of
classes, class content, class presentation, and knowledge
transfer to facilitate the teaching of classes for the Product.
(7)
(8)
(9) PTC shall provide to SNI telephone support from PTC to SNI
personnel with respect to Product during PTC's normal business
hours.
(10) PTC shall provide reasonable additional Engineering Support,
marketing support, educational support and beta test support to
SNI upon SNI's request at PTC's then current rates.
(11)
Such Product Release shall be of at least the same
workmanlike quality as the preceding Product Release.
(12) PTC shall make reasonable efforts to offer the necessary
training for each Product Release to enable SNI: to develop the
expertise required to market, promote, license, support,
develop, and integrate with other products, the Products and to
provide End-User training for the Products. All available
student material shall be provided by PTC and hands-on practice
and exercises will be utilized.
b. Maintenance Procedure
As used in this Agreement, the term "Maintenance Procedure" means that
procedure PTC shall institute in order to avoid and correct any errors
in the most recent and next prior general Product Releases delivered
to SNI, but at least for all Product Releases
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Software and Hardware License Agreement
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which were accepted by SNI during the
This procedure shall meet the following requirements:
(i)
(ii) Upon receipt by PTC of a report of an error, PTC shall
confirm or adjust the severity reported by SNI for the error and
shall respond to the error in the manner described below. If an
adjustment is made from the severity stated by SNI for an error,
that adjustment and the underlying reason for the adjustment shall be
immediately reported by PTC to SNI. If SNI disagrees with PTC's
decision, SNI will notify PTC and the parties shall in good faith
negotiate so as to agree to the correct severity of the reported error.
(iii) PTC shall respond to reported errors as follows:
After said period and until a code
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Software and Hardware License Agreement
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and
Siemens Nixdorf Informationssysteme AG
correction is delivered to SNI, PTC shall fully report to SNI
in writing PTC's continuing efforts and progress in producing
a code correction.
PTC
shall use reasonable efforts to provide a code correction with
the next scheduled release. After said period
and until a code correction is delivered to SNI, PTC shall
fully report to SNI in writing PTC's continuing efforts and
progress in producing an avoidance or a code correction.
c. Default
PTC agrees to respond to all reported errors in the Product as
specified in Article 12.b above.
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Software and Hardware License Agreement
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d. Maintenance Fee
In consideration of the support and maintenance services supplied
by PTC to SNI as specified in Articles 12.a and 12.b above, SNI
shall pay a quarterly fee (herinafter referred to as "Maintenance
Fee") for such services.
SNI may terminate the support and maintenance services by notice
to be received at least before the beginning of
the calendar quarter the termination shall become effective.
Such fee may be adjusted annually to reflect changes in
engineering labor rate as determined by good faith negotiations
between SNI and PTC.
e. Additional Assistance
In the event that SNI requires assistaance from PTC in addition to
the maintenance adn support services set forth above with respect
to the configuration, lusage or presentation of operation of a
Product, then PTC shall provide such assistance, on mutually
agreeable dates, subject to the availability of necessary PTC per-
sonnel,
Such charges will be payable by SNI within
of receipt of an invoice covering the servies, which invoice
shall not be forwarded to SNI prior to the end of the month in
which services are rendered.
f. Support Period
PTC shall provide support and maintenance services for each Pro-
duct to SNI as provided in Articles 12.a and 12.b above, for a
following the announcement
of discontinuation of such Product to SNI by PTC unless such
support and maintenance is explicitly discontinued pursuant to
Article 23.
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Software and Hardware License Agreement
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and
Siemens Nixdorf Informationssysteme AG
g. Reference System
The which
are available to SNI under the OEM Agreement.
For the purpose of support, maintenance, error verification and
acceptance, the specific configuration shall be used as defined in
Exhibit C. Such systems shall be current with the latest versions
available to PTC's End-User.
At least one Reference System of each
type shall be maintained during the Term of this Agreement.
Subject to the rights granted to the SNI Group in Article 2, SNI is
free to determine to which and for how many computer systems will port
the Products.
Additional or replacement Reference Systems may be defined by mutual
written agreement. SNI will not unreasonably withhold such agreement.
13. INDEMNIFICATION AND LIMITATIONS OF RELATED LIABILITIES
a. PTC shall defend, save and hold harmless from, and indemnify SNI,
Affiliates of SNI, Distributors and End-Users (hereinafter the
"Protected Parties") against, any and all claims, demands, losses,
costs, damages, suits, judgments, penalties, expenses and liabilities
of any kind or nature whatsoever, including reasonable attorneys' fees
and arising directly or indirectly out of any
provided that the SNI shall give PTC prompt notice within
of any such claim and shall provide reasonable
cooperation in the defense of any such claim.
PTC shall have no liability arising under this Article 13.a for damages
which accrue on or after following an appropriate
notice and delivery by PTC to SNI of a subsequent
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Software and Hardware License Agreement
between
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and
Siemens Nixdorf Informationssysteme AG
b. PTC shall indemnify the Protected Parties against, any and all direct
damages of any kind or nature whatsoever, including reasonable
attorneys' fees, and the payment of legal judgments and reasonable
settlements,
provided that SNI shall give PTC
prompt notice following SNI's actual knowledge of any such claim that
would constitute
c. For claims under this article 13, whether in
contract, tort or otherwise, for any damages arising out of this
Agreement shall be limited to
Should PTC acccept a higher liability than specified above in any other
contract with a third party, PTC shall offer the same coverage to SNI.
Should PTC purchase insurance protection to cover its liability under
this Article 13, PTC shall offer SNI to be name beneficiary under
such insurance policy.
14. LIMITATION OF LIABILITY
OTHER THAN PURSUANT TO THE PRECEDING ARTICLE 13 OF THIS AGREEMENT, IN
NO EVENT WILL EITHER PARTY BE LIABLE FOR (i) SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, OR (ii) ANY DAMAGES RESULTING FROM LOSS OF USE, DATA OR
PROFITS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR THE USE OR
PERFORMANCE OF ANY PRODUCT. THIS EXCLUSION WILL APPLY REGARDLESS OF THE CAUSE
OF ACTION, WHETHER BASED ON CONTRACT OR TORT, INCLUDING NEGLIGENCE. FURTHER,
OTHER THAN PURSUANT TO THE PRECEDING ARTICLE 13 OF THIS AGREEMENT, IN NO EVENT
WILL EITHER PARTY'S TOTAL LIABILITY FOR ANY DAMAGES IN ANY ACTION BASED ON
CONTRACT OR TORT ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT EXCEED THE
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Software and Hardware License Agreement
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15. WARRANTY
a. PTC represents and warrants to SNI that PTC has full power and
authority to grant all Right And Licenses and all other rights
granted or conveyed to SNI under this Agreement and has full power
and authority to enter into this Agreement.
b. PTC further warrants that the Products and the use of the Products
as delivered to SNI shall not
c. PTC further warrants to SNI that the Products shall conform to the
functional specifications as described in Exhibit A and in the
Documentation for the Products, and shall be free of problems or
errors which would materially affect its performance in accordance
with such functional specifications.
d.
e. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, PTC AND SNI MAKE NO
OTHER WARRANTIES AND HEREBY EXPRESSLY DISCLAIM ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, CONCERNING THE PRODUCTS,
INCLULDING ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
16. EXPORT CONTROL
a. This Agreement is made subject to any laws, regulations, orders or
other restrictions on the export of Product, Documentation or
related information which may be imposed at any time or from time
to time by the government of the United States of America. Both
parties (i) will comply with all such laws, regulations, orders
and other restrictions to the extent that they are applicable to
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such party, and (ii) will not, directly or indirectly, export or
re-export such items to any country for which the U.S. government
or any agnecy thereof requires an export license or other governmental
approval, without first obtaining the same.
b. PTC shall obtain any necessary licenses to export or re-export Product,
Documentation and related information from the United States. This
commitment by PTC does not constitute a guarantee that a favorable
classification for Product will be available.
17. ROYALTIES AND FEES
a. License Fee
In consideration of the rights granted pursuant to Article 2 to SNI by
PTC, SNI will pay a license fee of
which
Upon payment of the license
fee the Right And Licenses granted to SNI under this Agreement except
the Extended Software License as described in Article 2.c shall be
This license fee is due upon execution of this Agreement and receipt by
SNI of an appropriate invoice referencing this Agreement and shall be
paid by SNI within
following its receipt of such invoice by SNI.
b.
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Software and Hardware License Agreement
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This option is valid until December 31, 1996.
The license fee for the Extended Software License is due
following notice by SNI of its election of this option
by SNI and receipt by SNI of an appropriate invoice referencing this
Agreement.
c. Third Party Fees
Should a third party, except for the product listed above, duly request
royalties and/or other fees to be paid, PTC shall be responsible for
these fees.
*
*
*
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Software and Hardware License Agreement
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d. Royalty Fees
Notwithstanding the above, for sublicenses granted pursuant to this
Agreement for Modifications, Enhancements and Improvements of a Product
for the use on a computer system,
e. Royalty Fee Calculation
The Royalty Fee for a Binary Copy sublicense granted according to
Article 2.c pursuant to this Agreement for a Software Product
The Royalty Fee for a Source Code sublicese granted pursuant to this
Agreement shall be as specified in Exhibit B.
The Royalty Fee for a Binary Copy sublicense grated according to
Article 2.c pursuant to this Agreement for a Software Product
f. Due Dates
The payment of Royalty Fees due to PTC for a calendar quarter shall
accompany the Royalty Report for such calendar quarter.
SNI shall pay all valid invoices under this Agreement within
from date of receipt of such invoice.
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g. Royalty Reports
For so long as SNI is required to pay Roylaty Fees to PTC under this
Agreement, SNI shall,
following the Effective Date, delivered
to PTC a written statement calculating the Royalty Fees for such
calendar quarter (herein referred to as "Royalty Report").
Each Royalty Report shall identify the name and address of any Source
Code sublicensee granted a Source Code sublicense during the preceding
calendar quarter.
h. Non-Delivery / Non-Acceptance Rememdy
PTC shall meet all scheduled delivery dates as specified in the
Development Plan as specified in Exhibit C and meet the specified
Acceptance Criteria.
The parties hereby recognize and agree that in the event that
of which will be
difficult or impossible to ascertain.
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Software and Hardware License Agreement
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i. Price List
PTC shall provide SNI with a copy of the relevant sections of each new
PTC Price List upon availabilty.
SNI shall provide PTC with a copy of the relevant sections of each new
SNI Price List upon availability.
18. PAYMENT METHOD
a. Transfer of Payments
Payments shall be to a bank in the United States designated by the
party which is to receive them, or to such other location as such
party shall reasonably direct the other party to make such payments.
All Royalty Fees and payments shall be made in dollars.
b. Payment Set Off
Neither party shall, at any time, set off amounts owed by it to the
other party under this Agreement, against any amounts owed to it by the
other party under this Agreement, except as specified in Article 19.b.
if not explicitly stated in this Agreement
otherwise and if not used to reduce Royalty Fees due, and are not
c. Exchange Rates
For the purpose of determining the Royalty Fees due to PTC based on the
as of the last working
day of the calendar quarter for which payments are due, to
dollars by using the
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19. AUDITS
a. No more than once each during the Term of this
Agreement, PTC shall, at its cost, have the right to have an
independent certified public accountant not used by PTC to audit
its financial records,
and report to
PTC on the amount of payments that should have been made for the
period audited. Such audit shall take place at such location as
SNI will designate as the location of its such records, during
SNI's regular business hours and upon not less that
Such audit shall not be
scheduled to occur during the time that SNI's own outside auditing
firm is auditing SNI's records and, subject to Article 19.b below,
by SNI. Each certified public accountant shall execute for SNI a
confidentiality agreement requiring that no information obtained
during the audit other than that permitted in this provision of
the Agreement shall be disclosed to PTC or any third party.
b. Any underpayment or overpayment by SNI disclosed to PTC by such
audit shall, as applicable, be paid in full by SNI or reimbursed
in full by PTC after the notification to PTC and
SNI of such underpayment or overpayment. Nevertheless SNI may set
off any overpayment from its next quarterly Royalty Fee payment(s)
due to PTC, if not reimbursed by PTC. If an underpayment
disclosed as a result of an audit exceeds of all
royalty payments due to PTC for the audited period.
20. TAXES
All taxes shall be owed by the party against which those taxes are
assessed by the applicable governmental authority.
According to the double taxation agreement between the Federal Republic
of Germany and the United States of America, German withholding tax
payments for Royalty Fees will not be levied. PTC will apply for a
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Software and Hardware License Agreement
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and
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certificate of tax exemption in respect of Royalty Fees from the German
government. Unless such certificate is submitted, SNI will be entitled
to postpone or withhold payments under this Agreement in accordance
with the double taxation agreement.
21.
In the event that PTC or it Affiliates provide any third party
for the Product(s), or any service of PTC, including equal or lower
prices, which
writing shall provide a full and detailed explanation of the same. SNI
may thereafter obtain, at its option,
22. TERM
a. The term of this Agreement (herein referred to as "Term") shall
commence on the Effective Date and shall continue as long as this
Agreement is not terminated in accordance with the terms and
conditions contained in this Agreement.
b. All sublicenses issued by SNI, Affiliates of SNI or Distributors
during the Term of this Agreement, that by their terms, remain in
effect beyond the Term of this Agreement shall remain in effect
according to their provisions.
23. TERMINATION
a.
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Software and Hardware License Agreement
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and
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immediately upon further notice given by SNI to PTC after the end
of any such
b.
Any such termination shall be effective immediately upon further
notice given by PTC to SNI after the end of any such
c. Termination by PTC
In the event PTC gives notice of its intent to voluntarily
terminate this Agreement, such termination shall be effective
In the event of a termination under this Article 23.c, PTC shall
perform all the obligations set out in Article 12, for so long as
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Software and Hardware License Agreement
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and
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those obligations would otherwise continue to exist
d. Termination by SNI
In the event SNI gives notice of its intent to voluntarily
terminate this Agreement, such termination shall be effective.
e. Surviving Rights and Obligations
(1) The following shall survive and continue without any limi-
tation as to time after any termination of this Agreement:
the Rights and Licenses and any other rights granted to SNI
in Articles 2.a, 2.b, 2.c, 2.d, 2.f, 2.g, 2.h, 2.i, 2.j, 2.k,
2.m, 2.n, 2.o; and the terms and conditions of Articles 8,
9, 10, 13, 14, 15.a, 15.b, 16, 18, 23, 24.b, 24.g, 24.k,
24.1.
In all events, the obligations as set forth in Article 11
shall survive and continue for after any
termination of this Agreement.
(2) The following shall survive termination so long as SNI is
obligated to pay to PTC any Royalty Fees: Articles 17, 18, 19,
and 20.
24. MISCELLANEOUS
a. Assignment and Successors
Neither party hereto may assign any of its rights nor delegate any
of its duties under this Agreement, without the express prior
written consent of the other party, except that SNI may assign its
rights and delegate their attendant duties under this Agreement in
whole or in part to any Affiliates of SNI or to Siemens.
All terms and conditions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their succes-
sors in interest.
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Software and Hardware License Agreement
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Pyramid Technology Corporation
and
Siemens Nixdorf Informationssysteme AG
b. Notices
Wherever under this Agreement one party is required or permitted
to give notice to the other, such notice shall be in writing and
deemed given when delivered by hand, by registered or certified
mail, return receipt requested, postage prepaid, or by telex or
facsimile, receipt of which is confirmed by telex or facsimile and
addressed as follows:
In the case of SNI:
Siemens Nixdorf Informationssysteme AG
Heinz Nixdorf Ring 1
33106 Paderborn
Attn: Rechtsabteilung (Legal Department)
CC: Midrange Systems Unit
In the case of PTC:
Pyramid Technology Corporation
3860 North First Street
San Jose, CA 95134
Attention: General Counsel
Either party hereto may from time to time change its address for
notification purposes by giving the other prior notice hereunder,
duly acknowledged by the other in writing, of the new address and
the date on which it will become effective.
c. Headings
The article and section headings used herein are for reference and
convenience only and shall not enter into the interpretation
hereof.
d. Language of Agreement
The official language of the Agreement is English.
e. Relationship of Parties
Either party, in furnishing services to the other party hereunder,
is acting only as an independent contractor. Neither party
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Software and Hardware License Agreement
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and
Siemens Nixdorf Informationssysteme AG
undertakes by this Agreement or otherwise to perform any obligation of
the other party whether regulatory or contractual, or to assume any
responsibility for the others party's business or operations.
f. Representations
Each of the parties agree that it shall not, without the prior,
express, written permission of the other party, make any
representations, statements, or suggestions to any third party which
purport to be or might reasonably be construed to be on behalf of the
other party.
g. Severability
If any provision of this Agreement is declared or found to be
illegal, unenforceable or void, then both parties shall be relieved of
all obligations arising under such provision, but only to the extent
that such provision is illegal, unenforceable or void. If the
remainder of this Agreement shall not be affected by such declaration
or finding and is capable of substantial performance, then each
provision not so affected shall be enforced to the extent permitted by
law. If the elimination of such provision(s) materially affects this
Agreement, the Agreement shall be renegotiated so that any change in
the rights and obligations hereunder is shared as equitably as is
feasible.
h. Waiver
No delay or omission by either party hereto exercise any right or power
hereunder shall impair such right or power or be construed to be a
waiver thereof. A waiver by either of the parties hereto of any of
the covenants to be performed by the other or any breach thereof shall
not be construed to be a waiver of any succeeding breach or of any
other covenant herein.
i. Force Majeure
If the performance of this Agreement or any obligation hereunder is
prevented, restricted or interfered with by reason of fire or other
casualty or accident; strikes or labor disputes; war or other
violence; any law, order, proclamation, regulation, ordinance, demand
or requirement of any governmental agency; or any
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Software and Hardware License Agreement
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and
Siemens Nixdorf Informationssysteme AG
other act or condition whatsoever beyond the reasonable control of the
party required to perform, excluding weather conditions other than
catastrophic weather conditions, the party whose performance is so
affected, upon giving prompt notice to the other party, shall be
excused from such performance to the extent of such prevention,
restriction or interference; provided, however, that the part so
affected shall take all reasonable steps to avoid or remove such
causes of non-performance and shall immediately continue performance
hereunder whenever such causes are removed.
j. Entire Agreement and Amendment
Amendments and modifications to this Agreement or to the Development
Plan shall be valid only if in writing and signed by duly authorized
representatives of PTC and SNI.
Certificates as set forth in Exhibit D shall be valid only if in
writing and signed by duly authorized representatives of either
PTC or SNI, as the certificate may require.
This Agreement supersedes all prior agreements and understandings and
reflects the entire agreement between the parties with respect to the
matters contained herein.
k. Governing Law / Choice of Venue
This Agreement shall be governed by and construed in accordance with
the laws of the .
The "Convention Relating to a Uniform Law on the International Sale of
Goods" is not intended by the parties to apply to this Agreement and
shall not apply to this Agreement.
All action, suits and proceedings instituted by the parties and arising
out of, related to or concerning this Agreement shall be instituted and
maintained in the Federal District Court
l. Arbitration
SNI and PTC agree that all disputes arising out of or in connection
with this Agreement,
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<PAGE> 41
Software and Hardware License Agreement
between
Pyramid Technology Corporation
and
Siemens Nixdorf Informationssysteme AG
shall be decided by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association (hereafter referrred to as "Rules"). Either party may
submit such matter to arbitration.
The parties agree that the arbitration proceedings shall be held and
determined by impartial arbitrators. The decision of a majority
of the arbitrators shall be binding upon the parties. Said
arbitrators shall be appointed pursuant to the Rules and all
arbitrators must be familiar with computer systems, and two of which
shall have at least five (5) years of work experience in the computer
industry, and one of which shall hold a legal degree and all shall
have no prior work experience with either SNI or PTC or their
Affiliates. The cost of the arbitration proceedings shall be shared
equally by the parties. All arbitration proceedings shall be in
English and take place in . The findings of such
arbitration may be enforced by either party in a court of competent
jurisdiction.
m. Publicity
PTC and SNI hereby agree that each of them and their Affiliates shall
not announce or disclose the existence of this Agreement, its terms and
conditions and the relationship described herein to any third parties
without the prior, written consent of PTC and SNI, which consent shall
not be unreasonable withheld, particularly as such disclosure is
required by the financial or securities rules and laws governing a
party. The parties will jointly agree on the form and content of any
public announcement, including press releases, of the existence of this
Agreement, its terms and conditions and the relationship described
herein and the method by which such announcement is made.
n. EEC Approval
The parties will give appropriate notice of this Agreement to the
EEC-Commission for anti-trust clearance. The parties will assist each
other with respect to the EEC-procedure and provide each other with
all information requested by the EEC-Commission.
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Software and Hardware License Agreement
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and
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parties shall use their best efforts to submit the notification to the
EEC-Commission as soon as possible.
25. EXHIBITS
The following Exhibits are attached to and incorporated by reference
into this Agreement.
Exhibit A Products Specifications
Exhibit B Pricing
Exhibit C Development Plan
Exhibit D Certificates
Exhibit E Countries
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Software and Hardware License Agreement
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and
Siemens Nixdorf Informationssysteme AG
IN WITNESS WHEREOF, PTC and SNI have each caused this Agreement to be
signed and delivered by its duly authorized officers, all as of September 1,
1994 ("Effective Date"):
PYRAMID TECHNOLOGY CORP. SIEMENS NIXDORF
INFORMATIONSSYSTEME AG
By: By: /s/ Klaus Gewald
------------------------- -------------------------
Name: Name: Klaus Gewald
----------------------- -----------------------
(print or type) (print or type)
Title: Title: Vice President
---------------------- ----------------------
By: /s/ Dr. Heinrich Spatz
-------------------------
Name: Dr. Heinrich Spatz
-----------------------
(print or type)
Title: Vice President
----------------------
<PAGE> 1
EXHIBIT 10.53
$10,000,000 Revolving Credit Agreement (letter)
with Comerica dated October 20, 1994
<PAGE> 2
[LETTERHEAD,COMERICA]
October 20, 1994
Kent Robertson
Senior Vice President
Pyramid Technology Corporation
3860 North First Street
San Jose, CA 95134
Dear Kent,
Comerica Bank - California ("Bank") is pleased to commit to Pyramid Technology
Corporation ("Borrower") the following credit facility:
TYPE/AMOUNT: $10,000,000 revolving line of credit
including a within line facility for standby
and documentary letters of credit up to
$5,000,000.
FOREIGN EXCHANGE: Availability for spot and forward foreign
exchange contracts in addition to the
revolving line of credit.
PURPOSE: To provide cash for short term operating
needs, letters of credit and foreign exchange
transactions.
ADVANCES: Advances are subject to being in compliance
with all the terms and conditions of the Loan
Agreement.
PRICING: Interest Rate: Prime rate.
Labor and Fixed rate options are available.
Facility fee: .3% p.a. on the commitment
amount due upon acceptance. ($35,000,000 for
14 months).
Standby letter of credit fees vary on the
maturity and the dollar amount. Standard
documentary letter of credit fees.
REPAYMENT: Interest is to be paid monthly.
EXPIRATION: December 31, 1995. Documentary Letters of
Credit up to 120 days and Standby Letters of
Credit up to 1 year with no letter of credit
to letter of credit to extend beyond 120 days
after line expiration. Letters of credit
expiring beyond the line expiration without a
line renewal will be cash secured.
SECURITY: First security interest in Borrower's
Domestic Accounts Receivable and Domestic
Inventory. The security interest would be
released upon the Borrower (a) achieving two
consecutive quarters of increasing revenues
and positive increasing operating and after
tax profitability of at least $500,000 per
quarter and
<PAGE> 3
Page 2
$2,000,000 on a cumulative basis beginning
with the first quarter in Borrower's fiscal
year 1995 evidenced by 10 Q reports and (b)
being in compliance with the terms and
conditions of the loan agreement and (c)
meeting the unsecured financial covenants.
Utilization of the unsecured facility
(including letters of credit) will be
governed by a certificate being required with
each advance and at least monthly indicating
that the borrower maintains a minimum of $10
million of money market funds, commercial
paper or other money market instruments.
OTHER CONDITIONS:
This credit facility will be subject to a satisfactory pre-loan accounts
receivable audit (limited to a $750 cost) and execution of documentation
including a loan agreement which will include but will not be limited to the
following conditions:
1) Borrower is to maintain the following financial covenants when secured:
a) Minimum quick ratio of 1.0.
b) Maximum debt to tangible net worth of 1.0.
c) Minimum tangible net worth of $90,000,000 increasing by 75% of
quarterly profits and 90% of new equity raised after 6-30-94.
d) Borrower is not to lose in excess of $1,500,000 on an
operating and after tax basis for the quarter ending December
31, 1994. Borrower is to be profitable on a quarterly
operating and after tax basis with the exception of any one
quarter in a fiscal year which may be a loss of up to
$1,500,000. Borrower is not to have two consecutive loss
quarters with the exception of the first and second quarters
of fiscal year 1995.
e) Borrower is to be profitable for fiscal year 1995.
2) Borrower is to maintain the following financial covenants when unsecured:
a) Minimum quick ratio of 1.25.
b) Maximum debt to tangible net worth of .75.
c) Minimum tangible net worth covenant is the same as 1 c).
d) Quarterly profitability covenant is the same as 1 d).
e) Annual profitability is the same as 1 e).
3) Borrower to provide Bank with:
a) Quarterly 10Q and the company prepared consolidated and
consolidating financial statements the sooner of when they are
publicly available or within 45 days of quarter end.
<PAGE> 4
Page 3
b) Annual unqualified CPA audited consolidated financial
statements and 10K within ninety (90) days of fiscal year end.
c) Copies of all SEC reports.
d) Budgets, sales projections or other financial exhibits which
Bank may reasonably request.
e) Quarterly Accounts Receivable and Payable agings within 15
days of quarter end. Monthly within 15 days of month end when
borrowing.
f) Quarterly Covenant Compliance Certificate.
g) "Minimum Money Market Investment" certificate with each
advance and at least monthly when borrowing under the
unsecured facility.
4) Without Bank's prior written approval, Borrower will not:
a) Pledge assets other than to Bank except for purchase money
transactions for capital equipment. When Borrower is
unsecured no lien is to exist on current assets. Borrower is
not to grant a non-pledge agreement to any other party.
b) Enter into direct borrowings except for normal trade credit
for purchase money transactions. Guarantees are not to exceed
$3,000,000 or those mutually agreed upon.
c) Enter into any merger or acquisition except with company
stock. In addition to company stock the Borrower may use cash
not to exceed $5,000,000 on a cumulative basis.
d) Declare or pay cash dividends or repurchase company stock.
e) Make capital expenditures in excess of $18,000,000 per fiscal
year.
f) Create indebtedness for financing of specific capital assets
in excess of $18,000,000 per fiscal year.
5) Bank shall have the right to audit Borrower's financial records. Audit
costs are for the account of the Borrower. Audits will be annual if
there is no utilization and semi-annual when borrowing. Audit costs are
to be limited to $750 per audit.
6) Borrower is to provide evidence of full risk insurance covering all
assets pledged to the Bank with the Bank named as loss payee.
7) There shall be a cross default and secured provision between this credit
and any existing or future credit arrangements.
8) Out of pocket costs, documentation costs including legal fees are for
the account of the Borrower. Legal costs for loan agreement preparation
are to be limited to $5,000.
9) Borrower is to maintain its primary depository accounts with the Bank.
<PAGE> 5
Page 4
If the above credit facility meets with your approval, acknowledge your
acceptance by signing and returning this letter along with a check for the
facility fee to Comerica Bank - California by the close of business on Monday,
October 31, 1994. This commitment will expire unless it is accepted in writing
by October 31, 1994.
We appreciate the opportunity of being able to provide this credit facility to
Pyramid Technology Corporation and hope this will be a solid foundation for the
beginning of a growing relationship.
Sincerely,
/s/ Alan Sepsen
-------------------------------
Alan Jepsen
Vice President and Assistant Manager
High Technology Division
Comerica Bank - California
Agreed to and accepted by Pyramid Technology Corporation
- - --------------------------------------
Kent Robertson
Senior Vice President
Pyramid Technology Corporation
Date: -------------------------------
<PAGE> 1
EXHIBIT 11.1
PYRAMID TECHNOLOGY CORPORATION
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
Year ended September 30,
(In thousands except for per share amounts)
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
PRIMARY:
<S> <C> <C> <C>
Weighted average common shares outstanding 13,467 12,405 11,962
Dilutive common stock equivalents:
Common stock options, using treasury stock method - 485 -
-------- -------- --------
Shares used in computing net income (loss) per share 13,467 12,890 11,962
======== ======== ========
Net income (loss) ($22,413) $8,634 ($59,707)
======== ======== ========
Net income (loss) per share ($1.66) $0.67 ($4.99)
======== ======== ========
FULLY DILUTED:
Weighted average common shares outstanding 13,467 12,405 11,962
Dilutive common stock equivalents:
Common stock options, using treasury stock method - 485 -
-------- -------- --------
Shares used in computing net income (loss) per share 13,467 12,890 11,962
======== ======== ========
Net income (loss) ($22,413) $8,634 ($59,707)
======== ======== ========
Net income (loss) per share ($1.66) $0.67 ($4.99)
======== ======== ========
</TABLE>
<PAGE> 1
EXHIBIT 13.1
Annual Report to Shareholders for the fiscal year
ended September 30, 1994
<PAGE> 2
[LOGO] PYRAMID TECHNOLOGY 1994 Annual Report
SERVING INTERNATIONAL MARKETS WITH THE
RIGHT PEOPLE, THE RIGHT PRODUCTS, THE RIGHT
TECHNOLOGIES, AND THE RIGHT PARTNERS
[PHOTO]
<PAGE> 3
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year ended September 30,
(in thousands) 1994 1993 1992
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total revenues $218,515 $233,698 $192,226
Investment in research and development activities:
Research and development expenses 25,488 27,831 28,371
Additions to capitalized software development costs 9,223 8,695 6,051
- - ----------------------------------------------------------------------------------------------------------
34,711 36,526 34,422
Net income (loss)* (22,413) 8,634 (59,707)
Cash and short-term investments 42,209 31,358 26,458
Working capital 81,917 76,780 50,116
Total assets 190,713 191,658 176,191
Shareholders' equity $136,038 $137,616 $117,729
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
*Fiscal 1992 includes restructuring charges of $41,180,000.
CORPORATE PROFILE
Founded in 1981, Pyramid Technology Corporation delivers mid-range to high-end
open enterprise servers that provide the performance required to run very large
databases, critical on-line transaction processing applications, complex
decision support programs, and corporate-wide messaging systems. Pyramid's
business-critical solutions, comprising hardware platform technology, software
solutions, and strategic professional services, enable large cor-porations
worldwide to migrate from proprietary data centers to open systems. Some of the
world's largest UNIX(R) relational databases run on Pyramid's fault-resilient
systems, based on a symmetric multiprocessing (SMP) architecture that combines
an enhanced UNIX operating system with RISC processor technology. A leader in
scalable, open systems that provides top price/performance and increased system
throughput, Pyramid is committed to delivering reliability, availability, and
serviceability across its products and services.
Unix is a registered trademark of UNIX System Laboratories, Inc. in the U.S.A.
and other countries.
<PAGE> 4
Pyramid Technology: 1994 Annual Report 1
THE RIGHT DIRECTION. Pyramid Technology closed fiscal year 1994 with strong
forward momentum, evidence that our strategies for the open enterprise
client/server market continue to be on target. Pyramid's strategy to address
the computing needs of the global market center on four key objectives:
aggressively increasing our direct sales force to address the business issues
faced by our customers; strengthening our focus on global business
opportunities by securing global partnerships; placing greater resources and
emphasis on specific vertical markets; and refining our support services to
encompass project management, system integration, and training to ensure our
customers' success. In our three key regions -- the Americas, Europe, and
Asia-Pacific -- this strategic focus should help us balance the business cycle
fluctuations and competitive pressures of conducting business in a
multinational setting. THE RIGHT PEOPLE. We believe that bringing together
the right people -- employees, customers, and partners -- is vital to our
continued success. This year, we focused on strengthening the Pyramid team by
recruiting seasoned management professionals to our executive staff and adding
an experienced base of direct sales and professional service employees.
Existing customers continued to validate our direction, product strategy, and
service offering through repeat business, while new customers chose Pyramid
systems to run their business critical, enterprise-wide applications. Our
partnerships with Siemens Nixdorf Informationssysteme AG (Siemens Nixdorf), and
International Computers Limited (ICL), and our joint venture with Fujitsu
Australia Limited (FAL) broadened our resources and reach, while our existing
partnerships with Oracle, Informix, Sybase, and Ingres helped distin-guish our
product offering. THE RIGHT TECHNOLOGY Pyramid continues to develop and
deliver products -- based on the very latest technologies -- to meet the
evolving information management challenges faced by today's global 2000
companies. In fiscal year 1994, we introduced the Pyramid Nile 100 and Pyramid
Nile 150 scalable, enterprise servers targeting the mid-range and high-end open
enterprise server market. THE RIGHT TIME Pyramid offers powerful solutions
that support very large databases running critical on-line transaction
processing applications (OLTP), and more recently, enterprise-wide messaging
and decision support for essential business operations. In addition, we are
continuing to extend our technology with massively parallel architecture for
future product generations that will complement our existing offering. With the
right customers and the right partners, Pyramid continues to move in the right
direction.
<PAGE> 5
Pyramid Technology: 1994 Annual Report 2
LETTER TO SHAREHOLDERS
Despite a difficult year, Pyramid Technology closed fiscal year 1994 with
strong forward momentum, evidence that our strategies for the open enterprise
client/server environment are on target. In the past 12 months, Pyramid forged
important strategic part-nerships that strengthened our financial outlook and
extended our global business operations and reach. We introduced and received
broad acceptance for our new enterprise server family, the Pyramid Nile
Series.(TM) We further bolstered our direct sales force and won business from a
number of new and repeat customers around the world. Most significantly, in
fiscal year 1994 we concentrated on strengthening our overall offering by
bringing together the right people, the right products, and the right services
- - -- all at the right time.
FINANCIAL PERFORMANCE
While we are encouraged by this progress, fiscal year 1994 proved to be a
challenging year for Pyramid. As part of a long-term strategy to reduce costs
and improve operating efficiencies over the past five years, we had been
reticent to invest significant resources in our direct sales force. In ramping
up to introduce our Pyramid Nile Series last fiscal year, we re-evaluated this
strategy and made a substantial commitment to grow our sales organization by
adding seasoned sales management and personnel to our worldwide staff. This
growth in staff, however, did not keep pace adequately with our needs,
particularly in light of declining business with Pyramid's traditional OEM
partners. In addition, we discovered that because of the complexity and number
of partners involved in selling more sophisticated systems to global 2000-class
companies, the typical sales cycle extended to 9 to 12 months, longer than
Pyramid had experienced in the past.
Our financial performance for the year fell short of expectations as a
result of these and other develop-ments, but we are encouraged by the progress
made in the last two quarters to revitalize our operations and to return the
Company to a growth position. For the year ended September 30, 1994, revenues
were $218,515,000 compared with $233,698,000 for fiscal year 1993. Net loss for
fiscal 1994 was $22,413,000, or $1.66 per share, compared with net income of
$8,634,000, or $0.67 per share, in fiscal 1993.
INDUSTRY-LEADING TECHNOLOGY
Indications that we are on the right track involve our leadership on the
technology front, and our corre-sponding ability to win new and repeat business
at major corporations worldwide. We introduced a powerful new family of
enterprise servers with the high-end Pyramid Nile 150 in October 1993. As one
of the industry's highest performance open enterprise servers, it was met with
enthusiastic acceptance. We have sold an increasing number of very large Nile
150 configurations in multi-system clusters running Oracle Parallel Server --
validation that our systems are used to run the most critical business
applications. We are already receiving repeat orders from our existing Nile
customers, which is extremely gratifying this early in the product life.
In May, we expanded the breadth of Pyramid Nile solutions with the
introduction of the Pyramid Nile 100. Designed and priced for mid-range
customers, the Nile 100 allows customers to run business-critical applications
without investing in a large-scale system. In the first full quarter following
introduction, we shipped as many Nile 100 servers as we did Nile 150 systems.
The Nile 150 and Nile 100 are fully compatible and can operate on the same
network for distributed data sharing and easy migration.
We have continued to expand our Customer Services organization to include a
broader comple-ment of services required to support mission-critical systems --
from standard hardware maintenance to project management, capacity planning,
and training. We believe that Customer Services will play an increasingly
important role in our offering and will contribute to our revenue in the
future.
BROAD CUSTOMER ACCEPTANCE
We continued to focus our sales, service, and support activities on a select
group of vertical markets, including finance, telecommunications, hospitality,
government, healthcare, and manufacturing, winning significant new and repeat
business in these markets. In the telecommunications field, where we have long
held a leadership role, we now count a number of the
<PAGE> 6
Pyramid Technology: 1994 Annual Report 3
world's premier telecommunications companies as our customers, including
Ameritech, Telecom Australia, Bell Atlantic, British Telecom, DACOM, Korea PC
Telecom, Southwestern Bell, US West, and Vodafone.
Key among our new customers in fiscal year 1994 were Chrysler Corporation,
Morgan Grenfell & Co. Ltd., Standard & Poor's, and the Stock Holding
Corporation of India Limited (SHCIL). A growing number of existing customers
also validated our technology direction, product strategy, and commitment to
customer service with additional orders. Key among these were Fidelity
Investments, which is now one of our largest and most complex installations,
and Sharp Electronics, a Pyramid customer from our earliest days.
STRATEGIC ALLIANCES
Forging strong alliances and partnerships is crucial to our business. During
fiscal year 1994, we made significant progress in extending our partnerships
around the world. One of our most significant new transactions involves an
expansion to our cooperative agreement with Siemens Nixdorf. The new
arrangement, completed in September 1994, is a critically important corporate
development for Pyramid -- cementing an already significant OEM relationship,
endorsing our next-generation massively parallel processing (MPP) technology
direction, strengthening the Company's financial position through an equity
sale, and extending our global business operations and reach.
Another important alliance involves our ongoing relationship with Fujitsu
Limited. In May, we formed a joint venture between Pyramid Technology Australia
PTY, Ltd. and Fujitsu Australia Limited, called Pyramid Data Centre Systems,
that allows us to deliver targeted, scalable, enterprise solutions to large
Australian companies migrating to open systems. This is the first joint venture
of this magnitude in Australia.
To provide strategic direction in key areas of our business, we are
continuing to add selectively to our worldwide management team. In September
1994, S. Boyd Pearce Jr., a veteran of IBM and more recently of the
Teradata/NCR/AT&T Corporation's, Development Center, joined Pyramid as Vice
President of Marketing. In addition, David Koch was named Vice President of
European Sales, based in the United Kingdom, and Raymond Chiu was named General
Manager for Asia, based in Hong Kong. Finally, Kent L. Robertson, Pyramid's
former Chief Financial Officer, rejoined the Company as Senior Vice President,
Chief Financial Officer, and Secretary.
According to market analysts, the market for high-end open systems, selling
for $350,000 or more, is expected to be one of the fastest growing segments of
the computer industry. At no time in our history has the market opportunity
appeared so strong. Our commitment to introduce new technologies every 12 to 18
months to meet evolving market needs -- as we did with the Pyramid Nile Series
- - -- is on track. Development is progressing for the introduction of our next
generation of servers -- based on a massively parallel processing architecture
- - -- that will complement our symmetric multiprocessing family.
While fiscal year 1994 was a challenging year for the Company, we are
confident we have taken the necessary short-term and long- term measures to
position Pyramid for future growth by bringing together the right people, the
right products, and the right services -- all at the right time.
[PHOTO]
/s/ Richard H. Lussier
------------------
RICHARD H. LUSSIER
Chairman and Chief Executive Officer
<PAGE> 7
Pyramid Technology: 1994 Annual Report 4
The Americas region remains one of the most dynamic markets for Pyramid's
scalable, enterprise-wide servers. Pyramid's strong list of satisfied North
American customers validates our technology strength. We are successfully
developing and introducing products and services to meet our customers'
evolving needs -- from on-line transactions processing (OLTP) to decision
support and data warehousing, to enterprise-wide messaging. We believe the
company we keep says a great deal about our commitment to meeting the
mission-critical information processing needs of major corpo-rations.
Corporations such as Chrysler, MCI, Oxford Health Plans, and Standard & Poor's
have joined Allied Signal, Chemical Bank, EDS, Fidelity Investments, First
Boston, John Hancock, Private Healthcare Systems, Southwestern Bell, Toronto
Stock Exchange, and US West as Pyramid customers. By relying on Pyramid's
fault- resilient, scalable, enterprise-wide servers, these industry-leading
companies have increased the responsiveness and profitability of their
operations.
<PAGE> 8
Pyramid Technology: 1994 Annual Report 5
[PHOTO]
THE AMERICAS REMAIN A PRIMARY FOCUS FOR PYRAMID
HIGH-END SYSTEMS. DURING FISCAL 1994, WE ADDED
A NUMBER OF IMPRESSIVE NEW CUSTOMERS TO OUR
GROWING PORTFOLIO OF MULTINATIONAL BUSINESSES.
<PAGE> 9
Pyramid Technology: 1994 Annual Report 6
[PHOTO]
PHOTO CAPTION:
AMERICAS' PARTNER: ORACLE CORPORATION Pyramid's advanced platform for Oracle
technology continues to lead the industry in scalability, performance, and
functionality. "Our mutual customers demand seemless integration with their
mainframe systems and mission-critical support needed to implement large-scale
solutions. The technology exchange between Oracle and Pyramid this past year
has resulted in the successful delivery of highly available production business
systems," says Ray Lane, President, Worldwide Operations, Oracle Corporation.
BUILDING A STRONG CUSTOMER BASE WITH PARTNERSHIPS
US West Mass Markets Organization, located in Phoenix, Arizona, provides all
sales, service, product development, and marketing throughout US West's 14
state region. US West needed to build a comprehensive decision support system
to understand the needs of their customers and to create new products to
address those needs. "At US West our decision support system will ultimately
span the globe. Pyramid gives us the open environment, performance, and
configuration flexibility that we needed to implement a very large data
warehouse. Oracle reduces our in-house development effort by providing many of
the application tools and database management components that we need to
complete the solution," says Stephen A. Archuleta, Director of Systems, US West
Mass Market Service Delivery.
Private Healthcare Systems, a major player in the managed health care
industry, is responsible for providing accurate and timely decision support
information to member insurance companies. To help them maintain their
leadership position, Private Healthcare Systems chose the combined power of the
Pyramid Nile 150 and the flexibility of Oracle's relational database
technology. According to Chris Carreira, Director of Operations and Technical
Support, Private Healthcare Systems, "There were few tools on the market that
could handle both the growth and diversity of Private Healthcare. The new
health care scenario required both a high-capacity and scalable hardware
platform and a powerful database." Private Healthcare Systems had already
selected Oracle as its database vendor. "We needed a hardware platform that
would complement Oracle and would give us an integrated solution," states
Carreira. "Pyramid's partnership with Oracle and cooperation on Oracle7 and
the Oracle Parallel Server played an important role in our decision to go with
Pyramid."
This is further evidence that we are not only attracting customers with our
leading platform technology, but also with complete system solutions that
address specific market requirements. Our partnerships with Information
Builders Incorporated, Informix Software, Oracle, Prism Solutions, SAS, and
others allow us to provide very high-performance solutions for a wide range of
business needs.
JOINT SUCCESS WITH CUSTOMERS
"We provide solutions to our customers that help them gain a competitive
advantage, and therefore become more successful in their marketplace," says
Mitch Mandich, Senior Vice President, North American
<PAGE> 10
Pyramid Technology: 1994 Annual Report 7
Sales. By greatly expanding the direct sales force, Pyramid is reaching new
customers more effectively and efficiently than ever in the Company's history.
"We are proud of our customers, and our joint success has resulted in strong
customer endorsement for Pyramid's capabilities," adds Mandich.
[PHOTO]
PHOTO CAPTION:
AMERICAS' PARTNER: EDS EDS -- both customer and partner to Pyramid --
installed five Pyramid Nile systems to run several of its business-critical
applications. Marty McGuinness, EDS Vice President of Manufacturing, Strategic
Business Unit, sees "tremendous interest in migrating business-critical
applications to open systems platforms -- particularly on the Pyramid
platform."
EDS AND PYRAMID: A PLATFORM OF CHOICE
The relationship between Pyramid and EDS paid off in business advantages for
both companies and our mutual customers. EDS -- both a Pyramid customer and
partner -- is a world leader in the application of information technology to
improve business performance. EDS delivers a broad range of services -- from
initial consulting through system integration to outsourcing of the finished
installation. EDS's Corporate Information Services (CIS) group plays a vital
role in the development and delivery of these services. Recently, the EDS CIS
group chose Pyramid Nile servers to run several of its business-critical
applications. Additionally, EDS has partnered with Pyramid in accounts such as
Detroit Diesel, National Car Rental, and BlueCross BlueShield.
PYRAMID AND ORACLE: KEY TECHNOLOGY EXCHANGE
Global market demands are shaping our customers needs for information services
today. The combined resources of Oracle's advanced relational database
management systems and Pyramid's enterprise-level servers, give customers
access to leading-edge technology and a distinct competitive advantage. Both
companies maintain a full staff of engineers dedicated to collaborative
engineering, rapid development, delivery, and support of products for Pyramid
platforms. Pyramid's advanced platform for Oracle technology continues to lead
the industry in scalability, performance, and functionality. "Our mutual
customers demand seemless integration with their mainframe systems and
mission-critical support needed to implement large-scale solutions. The
technology exchange between Oracle and Pyramid this past year has resulted in
the successful delivery of highly available production business systems," says
Ray Lane, President, Worldwide Operations, Oracle Corporation.
CUSTOMER SERVICES ADVANTAGE
Customer services are a key element of our corporate strategy. The past year's
emphasis has strengthened our Customer Services organization putting the
customer at the core of our business. Our support centers use the latest
technologies to diagnose and correct system problems. Pyramid's commitment to
superior customer satisfaction is backed by our large support staff, which is
available 24 hours per day, seven days per week, to help resolve customer
issues quickly. At Pyramid, excellence in customer service is more than a
slogan, it is part of an overall philosophy of total customer satisfaction that
we promote and protect.
<PAGE> 11
Pyramid Technology: 1994 Annual Report 8
No single company can address all the information processing demands of large
corporations in today's fast-changing, multi-vendor computing world. In no
region is this more true than in Europe. Accordingly, Pyramid's strategy for
building our business in Europe focused on two key objectives: strengthening
our direct sales force to better respond to our European customers' business
issues and challenges, and establishing strong partnerships to broaden our
reach and resources. This strategy is paying off. We added a number of key
European customers to our roster, stepped up our direct channel, and
established strong partnerships with two key European companies: International
Computers Limited (ICL), one of Europe's leading computer systems and services
companies, and Siemens Nixdorf Informationssysteme AG (Siemens Nixdorf), the
largest supplier of information technology of European origin. These alliances
made enormous product and service resources available to our customers. The
level of involvement sought by each of these partners affirmed the strength of
Pyramid's offerings in general and especially our Pyramid Nile Series.
<PAGE> 12
Pyramid Technology: 1994 Annual Report 9
[PHOTO]
GIVEN THE COLLABORATIVE NATURE OF THE EUROPEAN
ECONOMIC COMMUNITY, PARTNERSHIPS ARE KEY TO OUR
SUCCESS IN EUROPE. IN FISCAL 1994, WE EXPANDED TWO
KEY PARTNERSHIPS -- WITH SIEMENS NIXDORF AND ICL -- THAT
BROADENED OUR REACH AND RESOURCES.
<PAGE> 13
Pyramid Technology: 1994 Annual Report 10
"At Pyramid, we understand that our products must incorporate both technology
and service. Pyramid's employees and Customer Services organization have made
a contribution to the delivery of business-critical solutions to the European
marketplace," explains David Koch, Vice President of European Sales.
Designing solutions is especially challenging within European vertical markets
because of factors such as government control of certain industries, including
telecommunications and health care services. However, Pyramid is finding
increased opportunities with key vertical markets in Europe including
hospitality, local government, telecommunications, leisure, and manufacturing.
[PHOTO]
PHOTO CAPTION:
EUROPEAN CUSTOMER: BRITISH SHOE As part of its corporate-wide re-engineering
plan, British Shoe took delivery of two Nile 150 servers to run its new
merchandising application. "Our business development plans require accurate,
timely management of our supply chain. Pyramid has been able to demonstrate
its expertise in providing systems which will handle the large amount of data
involved in operating our enterprise." John Wheeler, IS Director at British
Shoe.
PYRAMID HELPS ITS CUSTOMERS RE-ENGINEER THEIR ENTERPRISES
The increased activity through sales channels added new large customers to the
region. One of our new European customers was the British Shoe Corporation
(BSC), which sells 50 million pairs of shoes per year in the U.K. through 1,700
retail outlets. As part of its corporate-wide, re-engineering plan, BSC took
delivery of two Pyramid Nile 150 servers to run its new supply chain and
merchandising applications. The Nile cluster is replacing the existing
mainframe application that delivers critical merchandise information to the
company's head office. The flexibility of the Pyramid system provides BSC
instant access to inventory and supply requirements at each branch which
ensures that the right quantities and styles are delivered to the correct
branches to suit the needs of its customers.
Forte Hotels, headquartered in London with facilities in the United Kingdom
and North America, chose Pyramid enterprise servers as the foundation for its
entire reservation system. A pace-setter in the hospitality industry, Forte
Hotels needed a system that would allow reservations agents to query the
database quickly in numerous ways -- by location, price, facilities, nearby
attractions, upcoming events and more -- depending on the caller's
requirements. "Pyramid is helping us meet our goal," said Eric Unruh, Vice
President of Management Information Systems, Forte Hotels. "We wanted to
convert a greater rate of calls to reservations by having the most accurate
information available as fast as possible."
Competition was fierce for the Forte Hotels business. After intensive
comparative studies, Forte Hotels chose a Pyramid Reliant(R) Cluster as the
only server solution on the market at the time that could provide the
processing power they required. A Pyramid Reliant cluster solution provides for
the automatic recovery of applications and computing resources to functional
'nodes' during system maintenance or system failure. "This is truly a global
project," Unruh says. "Having the same software on both sides of the Atlantic
is easier and more cost-effective for software support, training, and
cross-selling."
British Shoe and Forte Hotels are only two of the many European customer
relationships that help
<PAGE> 14
Pyramid Technology: 1994 Annual Report 11
Pyramid reinforce our leadership position within the client/server marketplace.
[PHOTO]
PHOTO CAPTION:
EUROPEAN PARTNER: SIEMENS NIXDORF "We expect that new application areas, such
as decision support, will generate performance requirements that can only be
satisfied with massively parallel architectures. Pyramid will provide us with
leading-edge MPP technology on a MIPS processor platform, complementing our
existing UNIX line." Dr. Rudolf Bodo, Vice President and General Manager of the
Midrange Systems Unit, Siemens Nixdorf.
STRONG PARTNERSHIPS THAT BROADEN OUR REACH
In addition to Pyramid's direct sales channel in Europe, we have also developed
strong partnerships with ICL and Siemens Nixdorf to respond to major growth in
the telecommunications industry and to the emergence of intelligent networks.
Pyramid's partnership with Siemens Nixdorf provides a complete solution for
network operators and system suppliers across Europe. Pyramid's Customer
Services complement the combined efforts of direct sales and partner
relationships to deliver a complete solution to customers.
ICL: A STRONG RELATIONSHIP BASED ON MUTUAL SUPPORT
In Austria, France, Italy, Spain, and Switzerland, we rely on our distribution
partners to provide customers with the broadest range of products and services.
Our new OEM alliance with ICL is just such an agreement. ICL, which operates in
more than 80 countries worldwide, specializes in systems integration for
selected markets. Our new OEM alliance allows ICL to sell the Pyramid Nile
Series as part of its high-end, open systems solution for enterprise customers
outside North America. "Pyramid and ICL have developed a strong relationship
based on mutual support for our respective technologies and strategies," says
John Chen, President and Chief Operating Officer of Pyramid. "ICL has
extensive experience in selling and servicing customers in mainframe
environments and will be a powerful ally." Tom Hinchliffe, Managing Director of
ICL Corporate Systems added, "Ewe see the Pyramid Nile Series as an important
complement to our existing product offerings."
SIEMENS NIXDORF: EXPANDING A KEY PARTNERSHIP
An extension of the cooperative agreement between Pyramid and Siemens Nixdorf
in August expanded another critically important OEM alliance. Siemens Nixdorf's
German operation is the largest supplier of information technology of European
origin, and has a work force of more than 40,000 people and representation in
45 countries. Under the new technology licensing and OEM agreements, Siemens
Nixdorf will license Pyramid's enhanced UNIX operating system for massively
parallel processing (MPP) architecture and will purchase the related MPP
hardware product under the OEM agreement. Siemens Nixdorf will thus expand its
existing range of UNIX systems, to include MPP technology.
The alliance further expands Pyramid's business operations and reach, and
significantly endorses Pyramid's MPP technology. The relationship with Siemens
Nixdorf exemplifies the increasing shift to cross-cultural partnering between
multinational technology corporations as an aid to gaining entry to new
markets.
<PAGE> 15
Pyramid Technology: 1994 Annual Report 12
The Asia-Pacific region is one the most dynamic business regions in the world,
with fast economic growth projected for many of the countries Pyramid has
targeted for business. Pyramid currently operates in Australia, Korea, Japan,
Hong Kong, People's Republic of China, Malaysia, India, and Taiwan. Providing a
sound business solution is the primary requirement for success in Asia-Pacific,
but pre and post-sales support are a close second. As Pyramid grows within this
region, alliances with Fujitsu, Fujitsu ICIM, Tatung, Olivetti, and Hyundai
have supplied the name recognition necessary to gain market share for Pyramid's
enterprise servers. In line with corporate strategy, Pyramid's Asia-Pacific
region has focused on specific vertical markets. Although the industry sectors
are less clearly defined within this region, Pyramid continues to succeed in
telecommunications, with systems installed at Telecom Australia, Korea PC
Telecom, NOWCOM, and DACOM. Pyramid and Fujitsu Australia Limited broke new
ground on July 2, 1994, when we formed Pyramid Data Centre Systems.
<PAGE> 16
Pyramid Technology: 1994 Annual Report 13
[PHOTO]
PYRAMID WAS ONE OF THE FIRST HIGH-END UNIX SYSTEMS
COMPANIES TO RECOGNIZE THE HUGE POTENTIAL OF
THE ASIA-PACIFIC MARKETPLACE. WE HAVE ESTABLISHED
RELATIONSHIPS WITH KEY PLAYERS TO BETTER SELL,
SERVICE AND SUPPORT OUR HIGH-END ENTERPRISE SERVERS
IN THESE FAST-DEVELOPING MARKETS.
<PAGE> 17
Pyramid Technology: 1994 Annual Report 14
The new operation will market the Pyramid Nile Series of scalable enterprise
servers along with complementary Fujitsu and ICL hardware and mainframe
connectivity software. This joint venture represents a significant channel
expansion for Pyramid into the Australian mainframe market. No other computer
company has undertaken such a venture in Australia. International Data
Corporation recently identified Pyramid as the number two mid-range open
systems UNIX supplier in Australia.
PYRAMID'S THREE-WAY BUSINESS RELATIONSHIPS
The three-way relationship among Pyramid, our customers, and our partners has
been uniquely successful in Australia. As the deregulated telecom business
moved from government control to a commercial enterprise, Pyramid's solutions
helped Telecom Australia develop a competitive profile and revamp its telephone
business. On the partnership side, Fujitsu not only brought its reputation,
size, and leadership to the agreement, but also added its knowledge of
mainframe technology and Pyramid's client/server technology - - providing a
comprehensive solution to Telecom Australia.
[PHOTO]
PHOTO CAPTION:
ASIA-PACIFIC CUSTOMER. STOCK HOLDING CORPORATION OF INDIA, LIMITED Pyramid
scored a major win in India in 1994 at the Stock Holding Corporation of India,
Limited (SHCIL). Established and funded by seven of India's major financial
institutions, SHCIL provides a range of services to these and other
institutions for financial dealings in the secondary market. Working with our
partner Fujitsu ICIM, Pyramid won the SHCIL business by demonstrating the
Nile's high performance as well as showcasing our understanding of -- and
commitment to -- mainframe-class customer support.
PYRAMID SCORES A MAJOR WIN IN INDIA
In fiscal year 1994, Pyramid developed a strong partnership with Fujitsu ICIM,
India's fourth largest computer systems company. Fujitsu ICIM has supplied
information, technology, and services to the Indian market for decades. In
addition to manufacturing for local and international sales, Fujitsu ICIM
developed a substantial software organization for localized solutions and
services and began marketing services such as turnkey development, project
management, and consulting. A Fujitsu ICIM software-oriented joint venture in
Australia, Fujitsu ICIM Software Technology (FIST), will soon market Indian
software development services in Australia, Japan, and throughout the
Asia-Pacific region.
Our partnership with Fujitsu ICIM was instrumental in attracting and
winning business with the Stock Holding Corporation of India, Limited (SHCIL).
Established and funded by seven of India's major financial institutions, SHCIL
provides a range of services to these and other institutions for financial
dealings in the secondary market.
To run its operations, SHCIL needed a powerful and reliable SMP-based
platform that could grow with their business throughout the '90s. In keeping
with Asian business philosophy, SHCIL put weight on the vendor relationship as
a major criterion for awarding the contract. Working with our partner, Fujitsu
ICIM, we demonstrated the Pyramid Nile's high performance and our commitment to
mainframe-class customer support.
<PAGE> 18
Pyramid Technology: 1994 Annual Report 15
[PHOTO]
PHOTO CAPTION:
ASIA-PACIFIC PARTNER: FUJITSU ICIM In 1994, Pyramid developed a strong
partnership with Fujitsu ICIM, India's fourth largest computer systems company.
Fujitsu ICIM has long been a leader in supplying information, technology, and
services to the Indian market, and for many years has sold ICL's proprietary
mainframes, mid-range SPARC-based servers, and Intel PCs.
SUCCESSFUL VERTICAL SEGMENTATION -- KOREA'S ON-LINE DATABASE PROVIDERS
Fiscal year 1994 also saw marked success in Korea, the installed base of
Pyramid systems grew from over 150 systems to more than 200. We dominated the
telecommunications on-line database provider marketplace, having all three
providers, Korea PC Telecom, NOWCOM, and DACOM as customers. Korea PC Telecom,
the leading on-line database company in Korea, has more than 160,000
subscribers. Pyramid also completed an application migration project for DACOM
this year, preparing for a projected one million future users by 1996. In this
application, 10 Pyramid systems were linked in a client/server configuration
serving approximately 5,000 concurrent users with the capability to extend to
over 10,000 users.
Pyramid's strategic partner, Hyundai, is one of the largest corporations in
Korea; Hyundai shipped more than $10 million of Pyramid's MIServer ES
Series(TM) and Pyramid Nile Series systems in this past fiscal year. In
addition to the telecommunications market, universities, hospitals, and
newspapers have proven also to be strong vertical markets for Pyramid's
products in Korea.
PYRAMID SPEEDS DECISION
The People's Republic of China (PRC) is emerging as a strong marketplace for
Pyramid. Chinese govern-ment and business entities are adopting the latest
technologies in networking, communications, and open computing systems. The
past year's successes include some branches of the People's Construction Bank
of China (PCBC), which put its front office business on Pyramid MIS-ES
clusters. According to the PCBC branches, Pyramid performance exceeds
proprietary performance by 300 to 400 percent. The China Joint Liaison Office,
a government body, uses a Pyramid MIS-2ES as a departmental server, and plans
expansion into a nationwide network. The Joint Chiefs' Department, part of
PRC's Army, uses a Pyramid cluster system for mapping and survey analysis
applications.
After a difficult start, Japan also shows promise. The slumping Japanese
economy brought deflation, low-priced competition, and a rising yen. Through it
all, however, plans for a national information system developed opportunities
for UNIX open systems providers. Among Pyramid's first successes in this market
was the installation of a Pyramid MIServer system to run a mission- critical
accounting application for Sharp. The Pyramid implementation is one of the
biggest UNIX systems in Japan. Such successes help to introduce Pyramid's
solutions to the broader market, to project a strong company image, and play a
critical role in helping us to expand our presence in Asia-Pacific.
<PAGE> 19
Pyramid Technology: 1994 Annual Report 16
Pyramid Product Review
PYRAMID MISERVER ES SERIES AND NILE SERIES
Pyramid Technology's MIServer ES Series offers a complete entry-level solution
for fast-growing data centers. From small work groups to large corporate
environments, our scalable, high-performance servers provide all the power and
dependability needed to enhance productivity while preparing for future growth.
Our Pyramid Nile Series expands our recognized leadership in mid-range
computing into the high-end, open-systems market. Meeting the requirements of
enterprise-wide support, our scalable, high-performance series provides the
capacity and accessibility needed to move forward in today's mission-critical
markets.
Designed with the latest technology, these products provide:
- - - Superior mainframe-class performance based on MIPS RISC.
- - - Unsurpassed scalability for flexible future expansion.
- - - Unparalleled support of large mission-critical OLTP environments
via the enhanced DC(TM)/OSx(R) operating system and system
clustering.
- - - Dependable data center support with a broad range of value-added
services.
- - - Comprehensive partner programs and third party solutions optimized
for DC/OSx.
- - - Innovative service offerings to support business-critical
environments.
<TABLE>
<CAPTION>
MIS-2ES MIS-4ES MIS-12ES NILE 100 NILE150
<S> <C> <C> <C> <C> <C>
CPUs 2 - 4 2 - 8 2 - 24 2 - 8 2 - 16
CACHE 9 - 18 MB 9 - 36 MB 9 - 108 MB 2 - 32 MB 16 - 64 MB
MIPS 64 - 128 64 - 256 64 - 768 270 - 1080 540 - 2160
PROCESSOR MIPS R3000 MIPS R3000 MIPS R3000 MIPS R4400 MIPS R4400
MEMORY (MIN-MAX) 32 - 256 MB 32 - 512 MB 32 - 1024 MB 64 MB - 2 GB 128 MB - 4 GB
DISK 1 GB - 23 GB 1 GB - 250+ GB 1 GB - 250+ GB 2 GB - 250+ GB 2GB - 1+ TB
ETHERNET CONNECTIONS 4 8 8 8 8
NO. OF SYSTEM BAYS 1 - 2 1 - 3 1 - 3 1 - 2 2 - 5
ENVIRONMENT Office Computer Computer Office & Computer
Room Room Computer Room Room
OPERATING SYSTEM DC/OSx DC/OSx DC/OSx DC/OSx DC/OSx
I/O SLOTS 5 - 14 XTEND(R) 10 - 36 XTEND 18 - 36 XTEND 26 XTEND 72 XTEND
POWER 115/208V 208V 208V 220V 220V
</TABLE>
<PAGE> 20
Pyramid Technology: 1994 Annual Report 17
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year ended September 30,
(in thousands, except per share amounts) 1994 1993 1992 1991 1990
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues $218,515 $233,698 $192,226 $227,948 $179,728
Total cost of products sold and services 138,583 132,121 123,529 121,367 83,303
Research and development 25,488 27,831 28,371 24,277 20,269
Net income (loss)* (22,413) 8,634 (59,707) 12,042 16,835
Net income (loss) per share $ (1.66) $ 0.67 $ (4.99) $ 1.02 $ 1.61
Shares used in computing net income
(loss) per share 13,467 12,890 11,962 11,864 10,436
BALANCE SHEET DATA:
Cash and short-term investments $ 42,209 $ 31,358 $ 26,458 $ 31,589 $ 16,729
Working capital 81,917 76,780 50,116 89,590 94,878
Total assets 190,713 191,658 176,191 222,212 194,333
Long-term obligations 1,563 487 1,878 2,776 715
Shareholders' equity $136,038 $137,616 $117,729 $174,819 $154,316
- - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* Fiscal 1992 includes restructuring charges of $41,180,000.
<PAGE> 21
Pyramid Technology: 1994 Annual Report 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto.
OVERVIEW
Fiscal 1994 results reflect the impact on revenues of lengthening sales cycles
and declining sales to traditional OEM partners, the impact on profit margins
of competitive pressures and a shortfall in revenues, and the impact on
expenses of an increase in direct sales and marketing personnel.
The Pyramid Nile Series 150 and 100, which incorporate MIPS R4400 RISC
technology and an enhanced UNIX System V Release 4 operating system,
contributed the majority of the Company's product revenues during fiscal 1994
and the MIServer S and ES Series product lines, which incorporate MIPS R3000
RISC technology and an enhanced UNIX System V Release 4 operating system,
contributed to a lesser extent.
During the fourth quarter of fiscal 1993, the Company began shipping its
Pyramid Nile 150. This product is designed to run business-critical,
transaction-oriented applications, is scalable from two to sixteen processors,
and supports up to four gigabytes of main memory and one terabyte of disk
subsystem capacity. The Nile 150 supports up to 2,160 MIPS, thousands of
transactions per second, and thousands of concurrent users.
In May 1994, Pyramid formally introduced the Pyramid Nile 100. This
product, targeted at the mid-range, open systems server market, expands the
breadth of solutions that Pyramid offers to companies reengineering their
applications and is designed as a scalable entry point for fault-resilient
computing for business critical on-line transaction processing (OLTP), decision
support, and data warehouse information management. The Nile 100 is fully
compatible with the Nile 150.
RESULTS OF OPERATIONS
Total revenues for fiscal 1994 decreased 7% from fiscal 1993 to $218,500,000.
The decline in product revenues for fiscal 1994 was the result of the
lengthening of sales cycles experienced in selling larger, more sophisticated
systems to global 2000 class companies and declining sales to traditional OEM
partners. Direct product revenues as a percentage of total product revenues
remained at 62% for fiscal 1994, the same as in fiscal 1993. Total nonrecurring
operating system and manufacturing license fees were $5,000,000 in fiscal 1994
compared to $9,600,000 in fiscal 1993. Offsetting the decrease was an increase
in service revenues which continued to benefit from the increasing base of
installed Pyramid systems. Total revenues increased 22% from fiscal 1992 to
fiscal 1993 as a result of the October 1992 introduction of the Company's
MIServer ES products and increases in the direct revenue channels, especially
to commercial end-user customers in the United States. Direct product revenues
as a percentage of total product revenues were 45% in fiscal 1992.
Additionally, total nonrecurring operating system and manufacturing license
fees were $4,900,000 in fiscal 1992.
Domestic product revenues as a percentage of total product revenues were
61%, 60%, and 54% in fiscal 1994, 1993, and 1992, respectively. The dollar
value of domestic revenues decreased 11% from fiscal 1993 to fiscal 1994 as
decreases in revenues from the AT&T, Telecom, Government, and Western business
units were partially offset by increases in revenues from Canada and the
Eastern business units. Total revenues from AT&T were $38,400,000, $40,700,000,
and $39,300,000 or 18%, 17%, and 20% of total revenue in fiscal 1994, 1993, and
1992, respectively. The dollar value of domestic revenues increased 39% from
fiscal 1992 to fiscal 1993 as increases in revenues from the AT&T, Telecom,
Canada, Eastern, and Western business units were partially offset by a decrease
in revenues from the Government business unit.
International product revenues as a percentage of total product revenues
were 39%, 40%, and 46% in fiscal 1994, 1993, and 1992, respectively. The dollar
value of international revenues decreased 15% from fiscal 1993 to fiscal 1994
as decreases in revenues from Hyundai, Sharp, Olivetti Systems and Networks
(Olivetti), Siemens Nixdorf Informationssysteme AG (Siemens Nixdorf), and
United Kingdom direct customers were partially offset by an increase in
revenues from International Computers Limited (ICL) and Australia direct
customers. Revenues from
<PAGE> 22
Pyramid Technology: 1994 Annual Report 19
Olivetti, Siemens Nixdorf, and ICL were each less than 10% of total revenues in
fiscal 1994, 1993, and 1992. The dollar value of international revenues
increased 10% from fiscal 1992 to fiscal 1993 as increases in revenues from
Hyundai and ICL were partially offset by a decrease in revenues from Olivetti.
Gross profit as a percentage of revenues was 37%, 43%, and 36% in fiscal
1994, 1993, and 1992, respectively. The decrease in gross profit in fiscal 1994
compared to fiscal 1993 was due to lower than anticipated product revenues
which resulted in lower overhead absorption, lower nonrecurring operating
system and manufacturing license fees which historically have yielded higher
margins, growing competitive pressures, and a higher proportion of service
revenues which historically have had lower margins than product revenues. The
increase in gross profit in fiscal 1993 compared to fiscal 1992 was due to
increased direct revenues and nonrecurring operating system and manufacturing
license fees which historically have yielded higher margins, improved margins
on service revenues, and lower manufacturing and service overhead costs
resulting from fiscal 1992 restructurings. In the future, gross profit as a
percentage of revenue may be adversely affected by a decrease in nonrecurring
operating system and manufacturing license fees, significant fluctuations in
currency exchange rates, and intensified competitive pressures.
Research and development expenses as a percentage of revenues were 12%,
12%, and 15% in fiscal 1994, 1993, and 1992, respectively. Research and
development expenses and capitalized software development costs amounted to
approximately $34,700,000, $36,500,000, and $34,400,000 in fiscal 1994, 1993,
and 1992, respectively. In accordance with Statement of Financial Accounting
Standards No. 86, the Company capitalized software development costs of
approximately $9,200,000, $8,700,000, and $6,100,000 in fiscal 1994, 1993, and
1992, respectively. During fiscal 1994, the majority of the capitalized
software development costs related to the porting of Locus Computing technology
to the UNIX System V Release 4 operating system and to the development of high
availability and scalable high performance software, data center applications,
and distributed storage devices and services. During fiscal 1993, the majority
of the capitalized software development costs related to the development of
data center and distributed computing environment features. During fiscal 1992,
the majority of the capitalized software development costs related to the
development of data center software features. Aggregate research and
development costs combined with capitalized software development costs
decreased in fiscal 1994 compared to fiscal 1993 primarily due to a decrease in
research and development personnel. The dollar increase in aggregate research
and development costs combined with capitalized software development costs in
fiscal 1993 compared to fiscal 1992 was due to increased personnel and
equipment costs. The Company believes the enhancement of existing products and
the development of new products is essential to maintaining a competitive
position. Accordingly, the Company is committed to a high level of research and
development expenditures. However, because of the inherent uncertainties of
product development projects in the Company's technology-intensive industry,
there can be no assurance that research and development efforts will result in
successful product enhancements or introductions, or, ultimately in increased
revenues.
Sales, marketing, and general and administrative expenses as a percentage
of revenues were 34%, 28%, and 34% in fiscal 1994, 1993, and 1992,
respectively. In absolute dollars, these expenses increased $9,300,000 from
fiscal 1993 to fiscal 1994 due primarily to the increase in the number of
revenue-producing direct sales people and marketing personnel who were added to
enhance the Company's direct sales capacity. From fiscal 1992 to fiscal 1993,
these expenses decreased $330,000 in absolute dollars due primarily to the
benefits of the restructuring actions taken during fiscal 1992. These benefits
were partially offset by increases in sales and marketing personnel, and
commission expense resulting from higher revenue.
Interest income in fiscal 1994 was less than that of fiscal 1993 due to a
lower average monthly cash balance. The slight decrease in interest income in
fiscal 1993 compared to fiscal 1992 was due to lower interest rates available
during fiscal 1993. The decrease was partially offset by a higher level of
invested funds during fiscal 1993. The Company intends to continue investing
its available funds in short-term, highly-liquid income producing obligations.
Interest expense increased in fiscal 1994 compared to fiscal 1993 as a result
of increased debt obligations. Interest expense decreased in fiscal 1993
compared to fiscal 1992 as a result of significantly lower capital lease
obligations.
<PAGE> 23
Pyramid Technology: 1994 Annual Report 20
The Company recorded an income tax provision of $2,935,000 for fiscal 1994
based on a pretax loss of $19,478,000. The fiscal 1994 tax provision was due
primarily to a $2,523,000 charge for a write-off of the Company's deferred tax
assets. The Company recorded an income tax provision of 10%, or $959,000, for
fiscal 1993 based on pretax income of $9,593,000. The fiscal 1993 tax provision
was less than the statutory rate of 34% primarily due to the benefit of net
operating loss and tax credit carryovers. The Company recorded an income tax
benefit of 10.4%, or $6,929,000, for fiscal 1992 based on a pretax loss of
$66,636,000. The fiscal 1992 tax benefit was less than the statutory rate of
34% primarily due to tax losses incurred in foreign jurisdictions without
offsetting tax benefits and limitations on the benefit of United States loss
carrybacks due to the alternative minimum tax and prior year tax credits. The
Company expects its fiscal 1995 effective income tax rate to be approximately
15%; however, this rate could change based on the Company's results during
fiscal 1995. In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 109 ''Accounting for
Income Taxes,'' which establishes a new method of accounting for income taxes.
The Company adopted the statement in its fiscal year ended September 30, 1994.
Adoption of SFAS 109 had no material effect on the Company's financial position
and results of operations.
The Company's agreements with its OEM partners and distributors, including
the Treasury Multiuser Acquisition Contract ''TMAC'' agreement through AT&T, do
not require minimum purchase quantities and, therefore, there can be no
assurance that the Company will receive future revenues under these agreements.
A substantial portion of the Company's revenues in each quarter generally
results from shipments during the last month of that quarter, and principally
for that reason, the Company's revenues are subject to quarterly fluctuations.
In addition, the Company establishes its expenditure-level targets based on
expected revenue. If anticipated orders and shipments in any quarter do not
occur when expected, expenditure levels could be disproportionately high and
the Company's operating results for that quarter could be adversely affected.
The Company's operating results may also be subject to quarterly fluctuations
as a result of a number of factors including the timing of orders from and
shipments to major customers, product mix, availability of product components,
variations in product costs, the mix of revenue, nonrecurring license fees,
increased competition, customer acceptance of new products, and general
economic conditions.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operating expenses and working capital needs
primarily through a combination of internally generated cash and cash balances,
and an equity issuance. Net cash provided by operating activities was
$15,700,000, $16,400,000, and $16,100,000 in fiscal 1994, 1993, and 1992,
respectively. Net cash used for investing activities was $45,800,000,
$21,500,000, and $22,500,000 in fiscal 1994, 1993, and 1992, respectively. Net
cash provided by financing activities was $20,200,000, $10,000,000, and
$1,300,000 in fiscal 1994, 1993, and 1992, respectively. In fiscal 1994,
financing activities providing cash consisted of a $17,250,000 issuance of
common stock and a warrant to Siemens Nixdorf and a $3,150,000 loan under a
capital equipment financing agreement with a lending company.
Cash and cash equivalents were $21,600,000 at September 30, 1994 and
short-term investments in commercial paper with original maturities of
approximately four months were $20,700,000. For purposes of hedging its foreign
currency exposures, the Company has available a bank facility which provides
for up to $70,000,000 of foreign exchange contracts. At September 30, 1994,
$61,300,000 was available under the foreign exchange line of credit as
$8,700,000 was utilized for foreign currency hedging contract positions. This
credit facility expired on October 31, 1994. During October 1994, the Company
entered into a new revolving line of credit agreement with a bank which
provides it with the ability to borrow up to $10,000,000. Amounts borrowed
under the line of credit are secured by the Company's accounts receivable and
inventory. The agreement also provides for up to $50,000,000 of foreign
exchange contract availability in addition to the $10,000,000 revolving line of
credit. This line of credit expires on
<PAGE> 24
Pyramid Technology: 1994 Annual Report 21
December 31, 1995. The above facilities do not permit the Company to pay cash
dividends and they set limitations on the Company with regard to other
indebtedness, pledging of assets, guarantees, mergers and acquisitions, and
annual capital expenditure levels as well as requiring the Company to maintain
certain financial requirements.
In order to reduce the impact of currency fluctuations on intercompany
balances, the Company enters into foreign currency forward exchange contracts,
which require the Company to exchange foreign currencies for U.S. dollars at
rates agreed to at the inception of the contracts. The contracts generally have
maturities that do not exceed one month. The objective of these contracts is to
neutralize the impact of foreign currency exchange rate move-ments on the
Company's operating results. These contracts do not subject the Company to
significant market risk from exchange rate movements because the contracts
offset gains and losses on the balances being hedged. At September 30, 1994,
the Company had foreign exchange contracts outstanding to sell the equivalent
of $1,800,000, which approximates fair value, in Japanese and Swedish
currencies, and to buy the equivalent of $6,900,000, which approximates fair
value, in Australian, British, and German currencies.
Based upon its current operating plan, the Company anticipates that
internally generated funds and cash balances, together with existing credit
facilities, capital leases, and loan agreements, will be sufficient to satisfy
capital requirements through fiscal 1995. However, the Company may raise
additional capital through debt or equity financing to take advantage of market
opportunities.
<PAGE> 25
Pyramid Technology: 1994 Annual Report 22
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year ended September 30,
(in thousands, except per share amounts) 1994 1993 1992
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Product revenues $152,590 $174,364 $138,916
Service revenues 65,925 59,334 53,310
- - ---------------------------------------------------------------------------------------------------------------------
218,515 233,698 192,226
Cost of Sales:
Cost of products sold 87,708 86,828 78,743
Cost of services 50,875 45,293 44,786
- - ---------------------------------------------------------------------------------------------------------------------
138,583 132,121 123,529
Gross profit 79,932 101,577 68,697
Operating expenses:
Research and development 25,488 27,831 28,371
Sales, marketing, general and administrative 73,744 64,411 64,741
Restructuring - - 41,180
Legal settlement - - 900
- - ---------------------------------------------------------------------------------------------------------------------
Total operating expenses 99,232 92,242 135,192
- - ---------------------------------------------------------------------------------------------------------------------
Operating income (loss) (19,300) 9,335 (66,495)
Interest income 655 781 826
Interest expense (704) (523) (967)
Loss on investment in joint venture (129) - -
- - ---------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (19,478) 9,593 (66,636)
Provision (benefit) for income taxes 2,935 959 (6,929)
- - ---------------------------------------------------------------------------------------------------------------------
Net income (loss) $(22,413) $ 8,634 $(59,707)
=====================================================================================================================
Net income (loss) per share $ (1.66) $ 0.67 $ (4.99)
=====================================================================================================================
Shares used in computing net income (loss) per share 13,467 12,890 11,962
=====================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 26
Pyramid Technology: 1994 Annual Report 23
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 30,
(in thousands, except par value and number of shares) 1994 1993
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 21,558 $ 31,358
Short-term investments 20,651 -
Accounts receivable, net of allowance for doubtful
accounts of $1,660 in 1994 and $2,020 in 1993 49,310 51,392
Inventories 25,840 35,712
Prepaid expenses and deposits 15,270 11,873
- - ---------------------------------------------------------------------------------------------------------------------
Total current assets 132,629 130,335
Property and equipment, at cost:
Machinery and equipment 85,825 79,675
Furniture and fixtures 6,546 5,674
Leasehold improvements 9,627 9,924
- - ---------------------------------------------------------------------------------------------------------------------
101,998 95,273
Less accumulated depreciation and amortization 74,386 60,686
- - ---------------------------------------------------------------------------------------------------------------------
27,612 34,587
Capitalized software development costs 18,381 15,959
Service spare parts and other assets 12,091 10,777
- - ---------------------------------------------------------------------------------------------------------------------
$190,713 $191,658
=====================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 16,398 $ 20,312
Accrued payroll and related liabilities 4,493 7,043
Accrued commissions 2,424 2,419
Deferred revenue 8,272 7,197
Other accrued liabilities 10,932 8,764
Restructuring accruals 3,075 4,464
Income taxes payable 3,678 1,561
Current portion of long-term debt 1,440 1,795
- - ---------------------------------------------------------------------------------------------------------------------
Total current liabilities 50,712 53,555
Noncurrent portion of long-term debt 1,563 487
Deferred income taxes payable 2,400 -
Commitments
SHAREHOLDERS' EQUITY:
Common stock - $.01 par value; 30,000,000 shares
authorized, 15,567,000 issued and outstanding
in 1994 and 13,177,000 in 1993 156 132
Additional paid-in capital 174,652 155,078
Accumulated deficit (37,927) (15,514)
Accumulated translation adjustment (843) (2,080)
- - ---------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 136,038 137,616
- - ---------------------------------------------------------------------------------------------------------------------
$190,713 $191,658
=====================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 27
Pyramid Technology: 1994 Annual Report 24
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Retained Accumulated Total
------------ Paid-In Earnings Translation Shareholders'
(in thousands) Shares Amount Capital (Deficit) Adjustment Equity
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1991 11,807 $118 $138,149 $ 35,559 $ 993 $174,819
Stock options exercised 119 1 972 - - 973
Sales under employee stock purchase plan 221 2 2,051 - - 2,053
Compensation related to stock
option grants - - 45 - - 45
Net loss - - - (59,707) - (59,707)
Foreign currency translation adjustment - - - - (641) (641)
Tax benefit of stock options exercised - - 187 - - 187
- - ----------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1992 12,147 121 141,404 (24,148) 352 117,729
Stock options exercised 837 9 9,794 - - 9,803
Sales under employee stock purchase plan 193 2 1,922 - - 1,924
Compensation related to stock
option grants - - 45 - - 45
Net income - - - 8,634 - 8,634
Foreign currency translation adjustment - - - - (2,432) (2,432)
Tax benefit of stock options exercised - - 1,913 - - 1,913
- - ----------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1993 13,177 132 155,078 (15,514) (2,080) 137,616
Stock options exercised 90 1 745 - - 746
Sales under employee stock purchase plan 300 3 2,079 - - 2,082
Issuance of common shares to
Siemens Nixdorf, net of issuance costs 2,000 20 16,735 - - 16,755
Compensation related to stock
option grants - - 15 - - 15
Net loss - - - (22,413) - (22,413)
Foreign currency translation adjustment - - - - 1,237 1,237
- - ----------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1994 15,567 $156 $174,652 $(37,927) $(843) $136,038
======================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 28
Pyramid Technology: 1994 Annual Report 25
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended September 30,
(in thousands) 1994 1993 1992
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(22,413) $ 8,634 $(59,707)
Adjustments to reconcile net income (loss) to net cash
from operating activities:
Depreciation and amortization 28,455 29,961 31,118
Non-cash portion of restructuring charges - - 18,826
Compensation related to option grants 15 45 45
Changes in:
Accounts receivable, net 2,082 (14,729) 16,605
Inventories 9,872 (5,143) 743
Prepaid expenses and deposits and income tax receivable (3,397) 500 (2,497)
Accounts payable, accrued liabilities, and other 1,085 (2,839) 10,945
- - ---------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 15,699 16,429 16,078
- - ---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments (20,651) - -
Investment in property and equipment (11,970) (13,722) (16,848)
Increase in capitalized software development costs (9,223) (8,695) (6,051)
Decrease (increase) in other assets (3,885) 870 354
- - ---------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (45,729) (21,547) (22,545)
- - ---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (2,503) (1,709) (1,690)
Borrowings under loan agreement 3,150 - -
Issuance of common stock 19,583 11,727 3,026
- - ---------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 20,230 10,018 1,336
- - ---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (9,800) 4,900 (5,131)
Cash and cash equivalents, at beginning of year 31,358 26,458 31,589
- - ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, at end of year $ 21,558 $31,358 $ 26,458
=====================================================================================================================
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Tax benefit from exercise of stock options $ - $ 1,913 $ 187
Acquisition of equipment under capital lease obligations 73 246 1,360
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest 704 523 967
Cash paid (received) for income taxes $ 374 $(4,967) $ 907
- - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 29
Pyramid Technology: 1994 Annual Report 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of Pyramid Technology Corporation (the "Company") and its wholly owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated. Certain prior year information has been reclassified to conform to
the current year presentation.
REVENUE RECOGNITION The Company generally recognizes revenue at the time of
shipment and provides for the estimated cost to repair or replace products
under warranty provisions in effect at the time of sale. Deferred revenue on
maintenance contracts is recognized ratably over the contract period.
INCOME TAXES Effective for the fiscal year ended September 30, 1994, the
Company adopted Statement of Financial Accounting Standard No. 109, "Accounting
for Income Taxes." In accordance with this statement, deferred income taxes are
provided for temporary differences between financial statement income and
income for tax purposes using enacted tax laws and rates for the years in which
the taxes are expected to be paid. Adoption of this statement did not have a
material effect on the Company's consolidated financial statements. During
fiscal 1993 and 1992, the Company accounted for income taxes pursuant to
Statement of Financial Accounting Standard No. 96, "Accounting for Income
Taxes."
NET INCOME (LOSS) PER SHARE Net income (loss) per share is computed based on
the weighted average number of common and common equivalent shares outstanding
during the period. Equivalent shares are calculated using the treasury stock
method or the modified treasury stock method (whichever applies) and consist of
outstanding stock options that have a dilutive effect on income per share.
During fiscal 1994 and 1992, no common stock equivalents were included in the
computation of loss per share as their effect would have been antidilutive.
CASH AND CASH EQUIVALENTS The Company classifies certain investments as cash
equivalents if the original maturity from the date of acquisition of such
investments is three months or less. These investments are carried in the
balance sheet at cost, which approximates fair value. The effect of
foreigncurrency exchange rate fluctuations on cash flows has not been material.
SHORT-TERM INVESTMENTS Short-term investments consist of commercial paper with
original maturities from the date of acquisition greater than three months and
less than twelve months. These investments are carried at cost which
approximates fair value due to the short period of time to maturity.
ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES Effective
September 30, 1994, the Company adopted Statement of Financial Accounting
Standards No. 115, ''Accounting for Certain Investments in Debt and Equity
Securities.'' This statement addresses the accounting and reporting for
investments in mar-ketable equity securities that have readily determinable
fair values and for all investments in debt securities. These securities are
required to be classified at the time of purchase and re-evaluated at each
reporting date as either (1) held-to-maturity, (2) trading, or (3)
available-for-sale.
The Company classifies its investment in commercial paper and money market
funds ($15,889,000 in cash equivalents and $20,651,000 in short-term
investments) as held-to-maturity given the Company's positive intent and
ability to hold the securities to maturity. In accordance with the statement,
held-to-maturity securities are carried at amortized cost, therefore, there was
no impact of adopting the statement on current period operations or
shareholders' equity.
INVENTORIES Inventories are stated at the lower of cost (first-in, first-out)
or market and consist of the following:
<TABLE>
<CAPTION>
Year ended September 30,
(in thousands) 1994 1993
- - -----------------------------------------------------
<S> <C> <C>
Raw materials $10,617 $12,236
Work in process 8,320 14,517
Finished goods 6,903 8,959
- - -----------------------------------------------------
$25,840 $35,712
=====================================================
</TABLE>
<PAGE> 30
Pyramid Technology: 1994 Annual Report 27
PROPERTY AND EQUIPMENT Property and equipment, including assets held under
capital leases, are stated at cost. Depreciation and amortization are computed
using the straight-line method. Useful lives of three to five years are used
for machinery and equipment and furniture and fixtures; leasehold improvements
are amortized over the shorter of their useful lives or the term of the lease.
Maintenance and repairs are expensed as incurred.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS The Company capitalizes software
development costs as the resulting products become "technologically feasible."
Amortization of capitalized software development costs begins when the products
are available for general release to customers, and is computed on a
product-by-product basis as the greater of: (a) the ratio of current gross
revenues for a product to the total of current and anticipated future gross
revenues for the product; or (b) the straight-line method over a period not to
exceed three years. Amortization expense for fiscal 1994, 1993, and 1992 was
$6,802,000, $7,323,000, and $6,069,000, respectively.
SERVICE SPARE PARTS AND OTHER ASSETS Net service spare parts at September 30,
1994 and 1993 were $10,677,000 and $8,821,000, respectively (with related
accumulated amortization of $11,032,000 and $10,122,000, respectively).
Amortization for service spare parts is provided using the straight-line method
over five years. Purchased technology and the excess of the cost over the fair
value of the net assets of acquired businesses, which are included in other
assets, are amortized on a straight-line basis over a period of seven years.
Amortization expense of $635,000, $635,000, and $724,000 was recorded in fiscal
1994, 1993, and 1992, respectively.
PREPAID ROYALTIES The Company has entered into several agreements for the
purpose of further enhancing the Company's competitive position in offering
relational database management and other applications software. Under these
agreements, the Company has made commitments, some of which were prepaid, to
provide minimum amounts of license royalties to the licensor. As software
packages are sold with the Company's systems or into the Company's existing
customer base, the Company will receive credit towards the minimum license
royalty commitments. Amortization of prepaid royalties is computed as the
greater of (a) the royalty per unit as the products are shipped; or (b) on a
straight-line basis over the lesser of the term of the agreement or three years
starting when the products are available for general release to customers. Net
prepaid royalties at September 30, 1994 and 1993 were $1,915,000 and
$1,377,000, respectively. As of September 30, 1994, the remaining minimum
license royalty payment commitments amounted to $150,000.
JOINT VENTURE During the third quarter of fiscal 1994, a partnership agreement
between Pyramid Technology Australia PTY, Ltd., a wholly owned subsidiary of
the Company, and Fujitsu Australia Limited was signed. Pyramid Data Centre
Systems, the new joint venture created by the agreement, began operations on
July 2, 1994. The new venture will market Pyramid's Nile Series of scalable
enterprise servers along with complementary Fujitsu and ICL hardware and
mainframe connectivity software. Pyramid Data Centre Systems' focus will be the
high-end commercial data center computing market, with emphasis on major
Australian corporations that are downsizing their mainframe operations.
Pyramid's share of the joint venture is 49% and is being accounted for using
the equity method.
RESTRUCTURING During fiscal 1992, the Company recorded restructuring costs
totaling $41,180,000 in connection with two restructuring programs designed to
reduce costs and improve operating efficiencies. These restructuring plans
reflect a realignment of corporate infrastructure, downsizing or discounting
less profitable business units, and a more focused research and development
effort. The cost reductions included a consolidation of facilities, a write-off
of nonproductive assets, and a reduction in workforce. At September 30, 1994,
$3,075,000 remained accrued for excess facilities in Mountain View, California
and the United Kingdom which will be used to offset excess facility costs over
the next two to four years.
CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject
the Company to concentrations of credit risk consist principally of cash
investments and trade receivables. The Company sells its products to customers
in diversified industries primarily in North America, Europe, and Asia-Pacific.
The Company performs ongoing credit evaluations of its customers and generally
does not require collateral. The Company maintains reserves for potential
credit losses and such losses were not material during the three years
reported.
The Company invests its excess cash in deposits with major banks, in money
market funds, and in commercial paper of companies with strong credit ratings
and in diversified industries. Generally, the investments mature within 120
days and, therefore, are subject to little risk. The Company has not
experienced losses related to these investments.
FOREIGN EXCHANGE CONTRACTS In order to reduce the impact of currency
fluctuations on intercompany balances, the Company enters into foreign currency
forward exchange contracts, which require the Company to exchange
<PAGE> 31
Pyramid Technology: 1994 Annual Report 28
foreign currencies for U.S. dollars at rates agreed to at the inception of the
contracts. The contracts generally have maturities that do not exceed one
month. The objective of these contracts is to neutralize the impact of foreign
currency exchange rate movements on the Company's operating results. These
contracts do not subject the Company to significant market risk from exchange
rate movements because the contracts offset gains and losses on the balances
being hedged. At September 30, 1994, the Company had foreign exchange contracts
outstanding to sell the equivalent of $1,779,000, which approximates fair
value, in Japanese and Swedish currencies, and to buy the equivalent of
$6,883,000, which approximates fair value, in Australian, British, and German
currencies.
FOREIGN CURRENCY TRANSLATION Substantially all assets and liabilities of the
Company's foreign operations are translated into United States dollars at
exchange rates prevailing at the fiscal year-end. The resulting translation
adjustments are recorded as cumulative translation adjustments to shareholders'
equity. Revenues and expenses for the year are translated at the average
exchange rates in effect during the year. Foreign currency exchange gains or
losses were not material during the three years reported.
RELATED PARTY TRANSACTIONS During the second quarter of fiscal 1994, a senior
executive of a major customer and vendor of the Company was elected to the
Company's Board of Directors. The related party accounted for approximately 4%,
2%, and 1% of the Company's revenue during fiscal 1994, 1993, and 1992,
respectively. Additionally, the Company has contracted with the related party
to perform consulting services ranging from a minimum of $6,000,000 to
$7,000,000 per year over the next eight years.
During the third quarter of fiscal 1994, the Company made a sale to a
customer which accounted for less than 1% of the Company's fiscal 1994
revenues, and also purchased $900,000 of prepaid software licenses from the
customer. The Company's chairman of the board is a member of the customer's
board of directors.
During the fourth quarter of fiscal 1994, Pyramid and Siemens Nixdorf
announced an expansion of their cooperative agreement for high-end UNIX systems
by entering into a new software and hardware licensing agreement and amending
its existing OEM agreement. Siemens Nixdorf licensed Pyramid's enhancement of
the UNIX operating system for massively parallel processing (MPP) and received
the right to purchase the related MPP hardware product, internally known as
MESHine, under the OEM agreement. In addition, Siemens Nixdorf paid $17,250,000
for 2,000,000 shares of Common Stock and a warrant to purchase an additional
1,330,000 shares at $10.00 per share. The warrant expires on September 30,
1995. Siemens Nixdorf's ownership in Pyramid increased to approximately 18%
with the initial purchase of shares and would increase to approximately 24% if
the warrant is exercised. A senior executive of Siemens Nixdorf was also
elected to the Company's Board of Directors. Siemens Nixdorf accounted for
approximately 5%, 6%, and 8% of the Company's revenue during fiscal 1994, 1993,
and 1992, respectively. At September 30, 1994, Siemens Nixdorf owed the Company
approximately $6,000,000 for the purchase of products.
COMMITMENTS
LEASING ARRANGEMENTS The Company leases its corporate headquarters,
manufacturing facilities, and sales offices under noncancelable operating lease
agreements which expire at various dates through 2014. Rental expense under
operating leases, including month to month facilities and equipment rentals was
approximately $11,763,000, $12,501,000, and $12,112,000 in 1994, 1993, and
1992, respectively. In connection with the fiscal 1992 restructurings, which
included a consolidation of facilities, the Company subleases certain of its
facilities under noncancelable subleases. The minimum future rentals to be
received under these subleases are $951,000, $949,000, and $647,000 in fiscal
1995, 1996, and 1997, respectively.
The Company has entered into capital lease agreements for certain machinery
and equipment which are accounted for as the acquisition of an asset and
incurrence of a liability. Assets held under capital leases included in
property and equipment are as follows:
<TABLE>
<CAPTION>
Year ended September 30,
(in thousands) 1994 1993
- - -------------------------------------------------------------------------
<S> <C> <C>
Machinery and equipment $3,252 $2,972
Furniture and fixtures 4,880 4,359
- - -------------------------------------------------------------------------
8,132 7,331
Less accumulated amortization 4,418 4,091
- - -------------------------------------------------------------------------
$3,714 $3,240
=========================================================================
</TABLE>
<PAGE> 32
Pyramid Technology: 1994 Annual Report 29
Minimum future payments under all capital and operating lease agreements as
of September 30, 1994 are as follows:
<TABLE>
<CAPTION>
Year ending September 30, Operating Capital
(in thousands) Leases Leases
- - ----------------------------------------------------------------------------------------------
<S> <C> <C>
1995 $9,510 $446
1996 8,654 131
1997 7,183 14
1998 6,281 -
1999 6,072 -
Thereafter 26,319 -
- - ----------------------------------------------------------------------------------------------
Total minimum lease payments $64,019 591
==============================================================================================
Amount representing interest (37)
- - ----------------------------------------------------------------------------------------------
Present value of minimum lease payments 554
Current obligations under capital leases (415)
- - ----------------------------------------------------------------------------------------------
Noncurrent obligations under capital leases $139
==============================================================================================
</TABLE>
DISMISSAL OF SHAREHOLDER CLASS ACTION COMPLAINTS During the first quarter of
fiscal 1994, two shareholder class action complaints were filed naming as
defendants the Company and certain of its officers and directors, and alleging
violations of federal securities laws as well as a state law fraud claim. The
complaints alleged that the Company made false and misleading statements in
press releases and other public statements and that some of the individual
defendants traded the Company's Common Stock on inside information. The
complaints sought an award of an unspecified amount of damages. The cases were
consolidated by order of the District Court on July 14, 1994. After review of
initial disclosures made by the Company and discussions with the Company's
attorneys, counsel for the plaintiffs agreed to dismiss the actions. On July
26, 1994, pursuant to a stipulation of the parties, the District Court entered
an order for dismissal without prejudice of the consolidated actions.
COMMON STOCK
COMMON SHARES RIGHTS AGREEMENT The Company has a plan to protect shareholders'
rights in the event of a proposed takeover of the Company. Under the plan, the
Board of Directors declared a dividend of one common share purchase right (a
"right") for each share of the Company's Common Stock. Each right entitles the
shareholder to purchase one share of the Company's Common Stock at an exercise
price of $64. The rights become exercisable following the tenth day after a
person or group (a) acquires beneficial ownership of 20% or more of the
Company's Common Stock or (b) announces a tender or exchange offer which would
result in ownership by a person or group of 30% or more of the Company's Common
Stock.
If any person or group acquires 20% of the Company's Common Stock, each
right not held by the acquiring person will entitle the holder to purchase $128
worth of the Company's Common Stock for $64. If the Company is acquired in a
merger or other business combination transaction, each right not held by the
acquiring person will entitle its holder to purchase $128 worth of the common
stock of the acquiring company for $64.
The rights are redeemable at the Company's option for $0.01 per right.
Additionally, the exercise price and number and kind of shares covered by each
right are subject to adjustment for stock splits, stock dividends, and certain
other events. The rights expire on December 12, 1998.
In the fourth quarter of fiscal 1994, all necessary corporate action
required under the Rights Agreement to amend the Rights Agreement was
authorized and taken so that the potential exercise of a warrant to purchase
1,330,000 shares of Common Stock or any other purchase of Common Stock by
Siemens Nixdorf would not make Siemens Nixdorf an acquiring person.
INCENTIVE STOCK OPTION PLAN The Company has an Incentive Stock Option Plan
(the ''Plan") under which officers, consultants and key employees may be
granted options to purchase the Company's Common Stock. Options are granted at
a price not less than fair market value on the date of grant, as determined by
the Board of Directors.
<PAGE> 33
Pyramid Technology: 1994 Annual Report 30
At September 30, 1994, 6,116,666 shares of Common Stock had been reserved
for issuance under the Plan. The options are generally exercisable at the rate
of 25% commencing one year after the date of grant and in monthly increments of
1/36 of the remaining balance thereafter. Expiration dates are determined by
the Board of Directors, but in no event will they exceed ten years from the
date of grant. Unexercised options are cancelable three months after the date
of termination of employment.
Plan transactions for the years ended September 30, 1993 and 1994 were as
follows:
<TABLE>
<CAPTION>
Price
---------------------------------
(in thousands, except share and per share amounts) Number of Shares Per Share Total
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at September 30, 1992 2,528,042 $1.31 - $29.00 $37,089
Grants 1,192,500 $7.75 - $20.25 12,854
Exercises (834,314) $1.31 - $18.50 (9,773)
Cancellations (432,326) $6.50 - $29.00 (6,243)
- - ----------------------------------------------------------------------------------------------------------------
Options outstanding at September 30, 1993 2,453,902 $1.31 - $29.00 33,927
Grants 1,117,500 $6.63 - $20.50 14,358
Exercises (89,927) $1.31 - $18.00 (738)
Cancellations (526,823) $1.31 - $29.00 (7,653)
- - ----------------------------------------------------------------------------------------------------------------
Options outstanding at September 30, 1994 2,954,652 $1.31 - $29.00 $39,894
================================================================================================================
</TABLE>
At September 30, 1994, there were 1,722,581 shares exercisable under this
Plan at $1.31 to $29.00 per share, and options for 781,043 shares of Common
Stock were available for grant. At September 30, 1993, there were 1,178,800
shares exercisable under this plan at $1.31 to $29.00 per share.
EXECUTIVE OFFICERS' NONSTATUTORY STOCK OPTION PLAN The Company has an
Executive Officers' Nonstatutory Stock Option Plan (the "Plan") under which
400,000 shares of Common Stock were reserved for issuance to executive officers
of the Company. Under the Plan, the Board of Directors determines the number of
shares, option price, and exercisability of options. Options expire ten years
after the date of grant. There were no option grants, exercises, or
cancellations under the Plan during fiscal 1994 and 1993. At September 30,
1994, there were 20,313 shares outstanding and exercisable under this Plan at
$17.00 per share and options for 7,000 shares of Common Stock were available
for grant. At September 30, 1993, there were 20,313 shares outstanding and
12,500 shares exercisable under the Plan at $17.00 per share.
DIRECTORS' OPTION PLAN The Company has a Directors' Option Plan (the "Plan")
under which 160,000 shares of Common Stock were reserved for issuance to
nonemployee directors as of September 30, 1994. The Plan provides for the
automatic grant of an option to purchase 12,000 shares of Common Stock to
nonemployee directors on the date on which such person first becomes a
director, and the annual grant of an option to purchase 6,000 shares on each
January 31 thereafter. The per share exercise price of the Common Stock subject
to an option shall be 100% of the fair market value per share on the date of
the option grant. As of September 30, 1994, options for 58,000 shares were
available for grant. At September 30, 1994, there were 61,500 shares
exercisable under this plan at $13.50 to $18.25 per share. At September 30,
1993, there were 30,000 shares exercisable under this plan.
<PAGE> 34
Pyramid Technology: 1994 Annual Report 31
<TABLE>
<CAPTION>
Price
--------------------------------
(in thousands, except share and per share amounts) Number of Shares Per Share Total
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at September 30, 1992 42,000 $14.75 - $18.25 $ 693
Grants 18,000 $14.75 266
Exercises (2,500) $14.75 (37)
- - --------------------------------------------------------------------------------------------------------------
Options outstanding at September 30, 1993 57,500 $14.75 - $18.25 922
Grants 42,000 $13.50 - $14.50 585
- - --------------------------------------------------------------------------------------------------------------
Options outstanding at September 30, 1994 99,500 $13.50 - $18.25 $1,507
==============================================================================================================
</TABLE>
EMPLOYEE BENEFIT PROGRAMS
EMPLOYEE STOCK PURCHASE PLAN In September 1987, the Company adopted the 1987
Employee Stock Purchase Plan (the "Plan"). As of September 30, 1994, 1,150,000
shares of Common Stock have been reserved for issuance under the Plan. The Plan
permits eligible employees to purchase Common Stock through payroll deductions
of up to a maximum of 10% of their eligible compensation at 85% of the fair
market value. During fiscal 1994, 300,074 shares were purchased at prices of
$6.69 to $7.23 per share. At September 30, 1994, 31,626 shares were available
for future issuance.
410(K) PLAN The Company has adopted a tax deferred savings plan ("401(k) Plan"
or the "Plan") in which virtually all domestic employees are eligible to
participate. Participating employees may contribute up to 15% of qualified
earnings. The Company matches employee contributions at a 50% rate up to the
first 5% of each employee's salary deferral contribution. Employee
contributions are fully vested, whereas vesting in matching Company
contributions occurs at a rate of 331/3% per year of employment. All
contributions to the Plan are transferred to a trustee and are invested at the
employee's discretion in six separate funds. During fiscal 1994, 1993, and
1992, the Company's contribution amounted to approximately $1,122,000,
$887,000, and $946,000, respectively.
BORROWING ARRANGEMENTS
For the purposes of hedging its foreign currency exposures, the Company had
available a bank facility which provides for up to $70,000,000 of foreign
exchange contracts. At September 30, 1994, $61,338,000 was available under the
foreign exchange line of credit as $8,662,000 was utilized for foreign currency
hedging contract positions. This credit facility expired on October 31, 1994.
During October 1994, the Company entered into a new revolving line of credit
agreement with a bank which provides it with the ability to borrow up to
$10,000,000. Amounts borrowed under the line of credit are secured by the
Company's accounts receivable and inventory. The interest rate on borrowings
under the line of credit is at the bank's prime rate. The agreement also
provides for up to $50,000,000 of foreign exchange contract availability in
addition to the $10,000,000 revolving line of credit. This line of credit
expires on December 31, 1995. The above facilities do not permit the Company to
pay cash dividends and they set limitations on the Company in regard to other
indebtedness, pledging assets, guarantees, mergers and acquisitions, and annual
capital expenditure levels as well as requiring the Company to maintain certain
financial requirements.
During fiscal 1994, the Company financed $3,150,000 of equipment under a
capital equipment financing agreement with a lending company. The loans, which
have an average interest rate of approximately 8%, are repaid on a monthly
basis over a three-year period
<PAGE> 35
Pyramid Technology: 1994 Annual Report 31
INCOME TAXES
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
Year ended September 30,
(in thousands) 1994 1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT:
Federal $(1,039) $ 912 $(4,046)
State 144 298 -
Foreign 1,307 231 21
- - --------------------------------------------------------------------------------
412 1,441 (4,025)
- - --------------------------------------------------------------------------------
DEFERRED:
Federal 2,523 (482) (2,596)
State - - (308)
- - --------------------------------------------------------------------------------
2,523 (482) (2,904)
$ 2,935 $ 959 $(6,929)
================================================================================
</TABLE>
Pretax income (loss) from foreign operations amounted to $3,214,000,
$1,262,000, and $(10,098,000) for fiscal 1994, 1993, and 1992, respectively.
The total provision (benefit) for income taxes differs from the amount
computed by applying the statutory federal rate of 34% to income (loss) before
taxes as follows:
<TABLE>
<CAPTION>
Year ended September 30,
(in thousands) 1994 1993 1992
- - ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed expected tax provision (benefit) $(6,623) $3,262 $(22,656)
State tax, net of federal benefit 144 197 (203)
Losses not benefited and income taxed at other
than U.S. rates 10,084 - 14,200
Utilization of operating loss carryforward (670) (1,185) -
Utilization of general business credits - (923) 1,947
Other - (392) (217)
- - ----------------------------------------------------------------------------------------------
$ 2,935 $ 959 $ (6,929)
==============================================================================================
</TABLE>
Effective October 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 ''Accounting for Income Taxes.'' As permitted by
SFAS 109, the Company has elected not to restate the financial statements of
any prior years. The effect of adoption of this standard was not material to
the Company's financial position or results of operations for the year ended
September 30, 1994.
<PAGE> 36
Pyramid Technology: 1994 Annual Report 33
Deferred income taxes reflect tax credit and loss carryforwards and the tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income
tax purposes. Significant components of the Company's deferred tax liabilities
and assets as of September 30, 1994 are as follows:
<TABLE>
<CAPTION>
Year ended September 30,
(in thousands) 1994
- - ----------------------------------------------------------------------
<S> <C>
Deferred tax liabilities:
Capitalized software development costs and other $(7,181)
- - ----------------------------------------------------------------------
Total deferred tax liabilities (7,181)
Deferred tax assets:
Tax credits 4,274
Depreciation 1,998
Special charge and other reserves 13,193
Loss carryforwards and other 10,034
- - ----------------------------------------------------------------------
Total deferred tax assets 29,499
Valuation allowance for deferred tax assets (22,318)
- - ----------------------------------------------------------------------
Net deferred taxes $ 0
======================================================================
</TABLE>
The valuation allowance increased $9,426,000 in the year ended September
30, 1994. Approximately $3,279,000 of the valuation reserve is related to
benefits of stock option deductions which will be allocated directly to
additional paid-in capital when realized.
For federal income tax purposes at September 30, 1994, the Company had
$29,100,000 of net operating loss carryforwards which expire in the year 2009.
The Company had research and development credit carryforwards of approximately
$3,500,000 which expire through the year 2006. The Company had alternative
minimum tax credit carryforwards of approximately $800,000 which do not expire.
The Company had foreign net operating losses of approximately $2,900,000.
Significant components of the deferred income tax in the provision for
income taxes for the years ended September 30, 1993 and September 30, 1992 are
as follows:
<TABLE>
<CAPTION>
Year ended September 30,
(in thousands) 1993 1992
- - ---------------------------------------------------------------------------
<S> <C> <C>
Depreciation $(754) $ (10)
Inventory valuation differences (241) (589)
Capitalized software development 309 (383)
Allowance for doubtful accounts (4) (62)
Unrealized profits on intercompany transactions (90) 28
Restructuring costs 1,061 (1,704)
Deferred revenue (645) 12
Other, net (118) (196)
- - ---------------------------------------------------------------------------
Total deferred taxes $(482) $(2,904)
===========================================================================
</TABLE>
<PAGE> 37
Pyramid Technology: 1994 Annual Report 34
INDUSTRY SEGMENT, SIGNIFICANT CUSTOMER, AND GEOGRAPHIC INFORMATION
The Company operates in one principal industry segment: the design,
manufacture, marketing, and service of high-performance open system servers and
related software that combine the advantages of the UNIX multi-user operating
system with a system architecture based on the principles of reduced
instruction set computing (RISC).
During fiscal 1994, 1993, and 1992, the Company had export sales of
approximately 15%, 18%, and 19% of total revenues, respectively. Export sales
by geographic areas were 11%, 14%, and 17% to Europe and 4%, 4%, and 2%
primarily to Asia and the Far East as a percentage of total revenues for fiscal
1994, 1993, and 1992, respectively. Dur-ing fiscal 1994, AT&T accounted for 18%
($38,372,000) of the Company's total revenues. Sales to AT&T in fiscal 1993 and
1992 were 17% ($40,676,000) and 20% ($39,297,000), respectively.
The Company's operations by geographic area are as follows:
<TABLE>
<CAPTION>
United United Asia-
(in thousands) States Kingdom Pacific Eliminations Consolidated
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Revenues:
Sales to unaffiliated customers $169,535 $25,411 $23,569 $ - $218,515
Intercompany sales 10,986 - - (10,986) -
- - ---------------------------------------------------------------------------------------------------------------------
Total revenues 180,521 25,411 23,569 (10,986) 218,515
- - ---------------------------------------------------------------------------------------------------------------------
Operating income (loss) (27,742) 1,261 1,602 5,579 (19,300)
- - ---------------------------------------------------------------------------------------------------------------------
Identifiable assets 210,492 14,823 7,026 (41,628) 190,713
- - ---------------------------------------------------------------------------------------------------------------------
1993
Revenues:
Sales to unaffiliated customers 186,883 26,328 20,487 - 233,698
Intercompany sales 31,691 - - (31,691) -
- - ---------------------------------------------------------------------------------------------------------------------
Total revenues 218,574 26,328 20,487 (31,691) 233,698
- - ---------------------------------------------------------------------------------------------------------------------
Operating income (loss) 9,481 1,197 (130) (1,213) 9,335
- - ---------------------------------------------------------------------------------------------------------------------
Identifiable assets 216,694 16,928 12,837 (54,801) 191,658
- - ---------------------------------------------------------------------------------------------------------------------
1992
Revenues:
Sales to unaffiliated customers 146,302 24,263 21,661 - 192,226
Intercompany sales 25,808 - - (25,808) -
- - ---------------------------------------------------------------------------------------------------------------------
Total revenues 172,110 24,263 21,661 (25,808) 192,226
- - --------------------------------------------------------------------------------------------------------------------
Operating income (loss) (55,010) (4,233) (5,987) (1,265) (66,495)
- - ---------------------------------------------------------------------------------------------------------------------
Identifiable assets $193,751 $15,739 $12,631 $(45,930) $176,191
=====================================================================================================================
</TABLE>
Intercompany sales are accounted for at prices which approximate arm's
length transactions and include systems and spare parts.
<PAGE> 38
Pyramid Technology: 1994 Annual Report 35
FINANCIAL INFORMATION BY QUARTER (unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
(in thousands, except per share amounts) Quarter Quarter Quarter Quarter
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994
Revenues $60,018 $46,548 $53,812 $58,137
Gross profit 24,969 12,599 18,838 23,526
Net income (loss) 635 (15,973) (5,940) (1,135)
Net income (loss) per share 0.05 (1.19) (0.44) (0.08)
1993
Revenues $55,103 $58,024 $60,022 $60,549
Gross profit 22,700 24,842 27,175 26,860
Net income 468 1,440 3,334 3,392
Net income per share 0.04 0.12 0.25 0.25
- - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Pyramid Technology Corporation
We have audited the accompanying consolidated balance sheet of Pyramid
Technology Corporation as of September 30, 1994 and 1993, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended September 30, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and signifi-cant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Pyramid
Technology Corporation at September 30, 1994 and 1993 and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended September 30, 1994 in conformity with generally accepted
accounting principles.
/s/ Ernst & Young
-----------------
Palo Alto, California
October 25, 1994
<PAGE> 39
Pyramid Technology: 1994 Annual Report 35
REPRESENTATIVE CUSTOMERS
<TABLE>
<S> <C> <C>
TELECOMMUNICATIONS INSURANCE AND HEALTH CARE MAJOR COMMERCIAL
Ameritech Services, Inc. BlueCross BlueShield of AFG Management Limited
AT&T Massachusetts Ahlsell
Bell Atlantic Corporation Great-West Life Assurance Arnold Clark
Bell Communications Company British Shoe Corporation
Research, Inc. H. Lee Moffitt Cancer Center & BSkyB
BellSouth Telecommunications Research Institute Chrysler Corporation
British Telecommunications Health Information Designs, Inc. Cott Corporation
C&P Telephone John Hancock Mutual Life Damark International
Connect, Inc. Insurance Co. Datapoint
DACOM Corporation Nottingham City Hospital Trust Detroit Diesel
Integretel Oxford Health Plan Electronic Data Systems Corp.
Korea PC Telecom Private Healthcare Systems, Inc. Equitable Resources
Korea Telecom Value Rx Pharmacy Program, Inc. Fujitsu Australia Limited
MCI Western National Warranty Fujitsu ICIM Limited
NOWCOM, LTD Corporation G. Heileman Brewing
NTT Corporation Company, Inc.
Southwestern Bell Telephone HOSPITALITY & TRANSPORTATION Geac Computer, Inc.
Company Granada Television
Telecom Australia Choice Hotels International Hyundai Electronics
US West Communications Dallas/Fort Worth International Industries Co., LTD
Vodafone, Ltd. Airport International Computers Limited
Forte Hotels Jennings House
FINANCIAL SERVICES Hospitality Franchise Kuwait Petroleum
Systems, Inc. London Weekend Television
AE Sharp National Car Rental Olivetti Systems & Networks
Chemical Bank Qantas Airways Oracle Corporation
Churchill Management Services Red Lion Hotels & Inns Pacific Dunlop Corporation
Commonwealth Bank Yellow Technology Services Rothman Tobacco Australia
Ernst & Young LLP Sharp Corporation
Fidelity Investments GOVERNMENT Siemens Nixdorf
Hewitt Associates Informationssysteme AG
M&G Carlton University Software AG
Morgan Grenfell & Co. Ltd. City of Mississauga Space Systems/Loral
National & Provincial Building Employment Services (UK) SurfAir
Society London Borough of Haringey Swedish Air
Novus Financial Corporation Metropolitan Water District Tilney
PKA of Southern California TSMS
ScotiaMcLeod, Inc. Public Works Department (AUST) Vernons Pools
Standard & Poor's Compustat Texas Natural Resources
Stock Holding Corporation of Conservation Commission
India, Ltd. United States Air Force
Toronto Stock Exchange United States Army
Trimark Investment United States Department of
Management, Inc. Agriculture
United States Department of
Treasury
United States Department of
Veteran Affairs
Nile and DC are trademarks and Reliant, OSx,
and MIServer are registered trademarks of
Pyramid Technology Corp. All other trademarks
are the property of their respective owners.
</TABLE>
<PAGE> 40
CORPORATE DIRECTORY
<TABLE>
<S> <C> <C>
BOARD OF DIRECTORS Mitchell Mandich OTHER INFORMATION
Richard H. Lussier Senior Vice President Independent Auditors
Chairman & Chief Executive Officer Dr. Raj Nathan Ernest & Young LLP
John S. Chen Senior Vice President Palo Alto, California
President & Chief Operating Officer Kent L. Robertson
Donald E. Guinn (1) (2) Senior Vice President, Chief OUTSIDE LEGAL COUNSEL
Chairman Emeritus Financial Officer & Secretary Wilson, Sonsini, Goodrich, & Rosati, P.C.
Pacific Telesis Group S. Boyd Pearce Palo Alto, California
Clarence W. Spangle (1) (2) Vice President
Retired Computer Executive Allan D. Smirni TRANSFER AGENCY AND REGISTRAR
George D. Wells (2) (3) Vice President & General Counsel Chemical Trust Company
President & Chief Executive Officer William M. Wishart Securityholder Relations Department
Exar Corporation Vice President 50 California Street, 10th Floor
John L. Hancock (1) (3) San Francisco, California 94111
Retired OTHER OFFICERS
Executive Vice President S. Joseph Bookataub FORM 10-K
Pacific Bell Vice President A copy of the Pyramid Technology
Paul J. Chiapparone (1) (2) Richard J. D'Angelo Corporation Form 10-K as filed
Senior Vice President Vice President with the Securities and Exchange
Electronic Data Systems Catherine A. Fitzgerald Commission is available without
Dr. Rudolf Bodo (3) Vice President charge upon written request to:
Vice President & General Manager, H. William Gimple
Midrange Systems Unit Vice President Shareholder Relations
Siemens Nixdorf Robert E. Howells Pyramid Technology Corporation
Informationssysteme AG Vice President 3860 N. First Street
David J. Koch San Jose, California 95134-1702
(1) Member of Audit Committee Vice President
(2) Member of Compensation Committee Richard J. Moore ANNUAL MEETING
(3) Member of Nominating Committee Vice President The annual meeting of shareholders
James J. Nelson will be January 26, 1995 at
EXECUTIVE OFFICERS Vice President 9:00 A.M. at the Westin Hotel
Richard H. Lussier Pete E. Pappanastos 5101 Great America Parkway
Chairman & Chief Executive Officer Vice President Santa Clara, California
John S. Chen Stephen S. Weller
President & Chief Operating Officer Vice President
Edward W. Scott, Jr.
Executive Vice President
</TABLE>
STOCK INFORMATION
Pyramid Technology Corporation's Common Stock is quoted on the NASDAQ National
Market System under the symbol PYRD. The following table sets forth the range
of high and low closing sales prices for the quarters indicated:
<TABLE>
<CAPTION>
Fiscal 1994 Fiscal 1993
---------------------------------------------------------
High Low High Low
- - -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter $21 1/4 $12 3/4 $11 $6
Second Quarter 16 1/4 7 7/8 17 9 3/4
Third Quarter 9 5 5/8 20 3/4 11 1/4
Fourth Quarter 9 3/16 5 1/2 23 1/4 17 1/2
- - -------------------------------------------------------------------------------------------
</TABLE>
The Company had 830 shareholders of record as of September 30, 1994. The
Company has not paid cash dividends on its Common Stock and is restricted from
doing so by agreements with its lenders and presently intends to continue to
retain its earnings for the development of its business.
<PAGE> 41
[LOGO] PYRAMID
TECHNOLOGY
Pyramid Technology Corporation
3860 North First Street
San Jose, California 95134-1702
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES
SUBSIDIARIES
<TABLE>
<CAPTION>
COUNTRY OF
INCORPORATION
NAME ADDRESS OR ORGANIZATION
- - ---- ------- ---------------
<S> <C> <C>
Pyramid Technology Japan Co. Ltd. Shinkawa M Bldg. JAPAN
1-5-17 Shinkawa
Chuo-Ku, Tokyo 104
JAPAN
Pyramid Technology Corporation PTY. Ltd. 173 Pacific Highway AUSTRALIA
North Sydney, NSW 2059
AUSTRALIA
Pyramid Technology Ltd. Pyramid House UNITED KINGDOM
Solartron Road
Farnborough, Hants. GU14 7QL
UNITED KINGDOM
Pyramid Technology GmbH Technopark GERMANY
Bretonischer Ring 11
D-85630 Grasbrunn
GERMANY
Pyramid Technology Asia Limited 20/F Tower I HONG KONG
(Government sales only) Suite 2001-4, The Gateway
25-27 Canton Road
Kowloon
HONG KONG
Pyramid Technology (Canada) Corporation 2235 Sheppard Avenue East CANADA
(Inactive) Suite 1501
Willowdale, Ontario M2J 5B5
CANADA
</TABLE>
<PAGE> 2
BRANCHES
<TABLE>
<CAPTION>
NAME ADDRESS
- - ---- -------
<S> <C>
Pyramid Technology Corporation 20/F Tower I
Suite 2001-4, The Gateway
25-27 Canton Road
Kowloon
HONG KONG
Pyramid Technology Corporation 4F, 200, Sec. 1
KeeLung Road
Taipei, Taiwan
R.O.C.
Pyramid Technology Corporation Room 2020, New Century Hotel
No. 6 Southern Road, Capital Gym
Beijing
CHINA
Pyramid Technology Corporation Torshamnsgatan 23
164 40 Kista
SWEDEN
Pyramid Technology Corporation 2235 Sheppard Avenue East
Suite 1501
Willowdale, Ontario M2J 5B5
CANADA
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Pyramid Technology Corporation of our report dated October 25, 1994,
included in the 1994 Annual Report to Shareholders of Pyramid Technology
Corporation.
Our audits also included the financial statement schedules of Pyramid
Technology Corporation listed in item 14(a). These schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, the financial statement
schedules referred to above, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
We also consent to the incorporation by reference in the Registration
Statements of Pyramid Technology Corporation (Form S-8 Nos. 33-3806, 33-7820,
33-11439, 33-13673, 33-17001, 33-19169, 33-27983, 33-40276, 33-50184, and
33-59102) with respect to the consolidated financial statements incorporated
herein by reference, and our report included in the preceding paragraph with
respect to the financial statement schedules included in this Annual Report
(Form 10-K) of Pyramid Technology Corporation.
Palo Alto, California
December 22, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-START> OCT-1-1993
<PERIOD-END> SEP-30-1994
<EXCHANGE-RATE> 1
<CASH> 21,558
<SECURITIES> 20,651
<RECEIVABLES> 50,970
<ALLOWANCES> 1,660
<INVENTORY> 25,840
<CURRENT-ASSETS> 132,629
<PP&E> 101,998
<DEPRECIATION> 74,386
<TOTAL-ASSETS> 190,713
<CURRENT-LIABILITIES> 50,712
<BONDS> 1,563
<COMMON> 156
0
0
<OTHER-SE> 135,882
<TOTAL-LIABILITY-AND-EQUITY> 190,713
<SALES> 152,590
<TOTAL-REVENUES> 218,515
<CGS> 87,708
<TOTAL-COSTS> 138,583
<OTHER-EXPENSES> 99,232
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 704
<INCOME-PRETAX> (19,478)
<INCOME-TAX> 2,935
<INCOME-CONTINUING> (22,413)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,413)
<EPS-PRIMARY> (1.66)
<EPS-DILUTED> (1.66)
</TABLE>
