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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
[X] SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
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: 0-19395
SYBASE, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2941005
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6475 Christie Avenue, Emeryville, California 94608
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (510) 922-3500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
Preferred Share Purchase Rights
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 Registration 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]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant, based upon the closing sale price of the Common Stock on
March 24, 1997 as reported on the NASDAQ National Market System, was
approximately $723,396,258. Shares of Common Stock held by each officer and
director and by each person who owns 10% 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. As of March 24, 1997, Registrant had outstanding 78,439,005
shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for the
fiscal year ended December 31, 1996 are incorporated by reference in Parts II
and IV of this Form 10-K to the extent stated herein. The Registrant's
definitive Proxy Statement for the Annual Meeting of Stockholders to be held on
May 20, 1997 is incorporated by reference in Part III of this Form 10-K to the
extent stated herein.
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ITEM 1. BUSINESS
THE COMPANY
Sybase, Inc. ("Sybase" or the "Company") is a worldwide leader in
distributed, open computing solutions. Founded in 1984, the Company provides
customers and partners with software and services to create business solutions
for strategic, competitive advantage. The Company designs and develops products
geared toward open, distributed, high performance, end-to-end solutions which
include databases, middleware and application development tools for
client/server, Internet and intranet transaction processing and data mart and
data warehousing applications. Designed to work together as an integrated
system, the Company's products are intended to allow customers to develop and
deliver complete information solutions integral to the operations of their
enterprises. Sybase also provides comprehensive consulting, education and
technical support services to support implementation of its products by
customers. Unless otherwise specified, the terms "Sybase" or the "Company"
include Sybase and all of its direct and indirect consolidated subsidiaries.
ARCHITECTURE AND MARKET OVERVIEW
Sybase's advanced software product architecture allows users to build
and deploy applications that can be distributed across a heterogeneous networked
computing environment. Sybase's software product architecture is based on a
multi-tier model which is widely recognized as the most effective approach to
networked applications. From a hardware perspective, the model generally
consists of "client" desktop computers (e.g., personal computers and
workstations) networked to "server" computers (e.g., workstations servers,
minicomputers and mainframes) which supports middle-tier and database software.
From a software perspective, the model generally consists of a "client" or
"browser" handling the user interface and, in some cases, local data
manipulation functions. When employed, a "middle-tier" of the architecture
provides application logic and, in Internet applications, communication with the
web browser. The "back-end" of the architecture is the data source, which in
many cases is a database. A multi-tier configuration can support many concurrent
users at a high performance level across a range of hardware and software
environments.
Sybase believes its products and technology stand on four "pillars" of
technical strength:
- DISTRIBUTED COMPUTING. Sybase is committed to building products that
are designed to make distributed computing easier and more reliable. Sybase
believes its competitors see centralization around a closed, monolithic
architecture.
- HIGH PERFORMANCE. Sybase is committed to achieving and holding the
highest performance marks on virtually every platform, with better and faster
scalability than competing products.
- OPEN COMPUTING. Since the Company believes its customers will always
have more than one brand of database, it is committed to offering an open
product set that facilitates coexistence of databases, and coexistence with
mainframe computers so that customers can choose "best-of-breed" solutions
without being locked into one vendor.
- END-TO-END SOLUTIONS. The Company is committed to offering end-to-end
solutions which allow objects and programming logic on every tier and platform,
for distributed, high performance, open computing. To facilitate this, the
Company partners with leading application providers, integrators, and other
partners necessary to solve the problems of customers in its target markets.
Sybase software is primarily used to address customer needs for online
transaction processing ("OLTP") systems, datawarehouses and datamarts, and
Internet and intranet applications. Each of these three areas has unique
requirements. Sybase offers products that are designed to address each of these
areas, to operate together and to provide the flexibility of enabling customers
to also mix and match software from different vendors.
- ----------
Sybase, the Sybase logo, SQL Server, System 11, SQL Anywhere,
Replication Server, Sybase MPP, Replication Agent, Replication Toolkit,
Replication Driver, SQL Anywhere, Web.SQL, dbQ, Sybase IQ, QuickStart Datamart,
EnterpriseConnect, OmniConnect, DirectConnect, Open Client, Open Server, Open
ClientConnect, Open ServerConnect, Powersoft, PowerBuilder, Power++,
PowerScript, Object Cycle, InfoMaker, S-Designor, DataArchitect, ProcessAnalyst,
AppModeler, WarehouseArchitec, MetaWorks, Formula One, Optima ++, Power++,
Watcom, Formula One, First Impression, GeoPoint, Visual Speller, Visual Writer,
WebViewer, SupportPlus, SyBooks, SKILS, Transact SQL, Bitwise, and AnswerBase
are trademarks of Sybase, Inc. or its subsidiaries.
This Form 10-K also includes additional trademarks of other companies.
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OLTP applications, such as rental car reservation systems or securities
brokerage systems, are characterized by the need to process and store a high
rate of transactions. These applications are often critical to the customer's
business activities and require a relational database management system
("RDBMS") that provides high performance, high efficiency and dependability. The
increase in the amount of data captured and stored by OLTP and other
applications has created the opportunity for businesses to improve operational
efficiency or to gain competitive advantage through the analysis of that data.
Datawarehouse and datamart applications are designed to access and
analyze corporate data to provide information to enable the enterprise to make
proactive decisions. Datawarehousing is characterized by the need to rapidly
obtain answers to specific queries. For example, a retail clothing business may
need to know the number of sweaters sold in the months of January and February
in all stores in a particular region in order to more efficiently manage
inventory levels. As a result, datawarehousing requires products that enable
large amounts of corporate data, either stored centrally or in a number of
locations and systems, to be quickly and cost effectively queried on a planned
routine basis or on an ad-hoc or unplanned basis.
Internet and intranet applications historically have been used for the
dissemination of relatively static information; many current World Wide Web
sites, for instance, consist of marketing material or other general information
presented to the user's browser. Sybase believes that Internet and intranet
applications increasingly will be used to develop more dynamic Web sites -- that
is, sites integrated with RDBMSs, including those used for OLTP and data
warehousing applications. For this reason, the computing architecture used to
handle a range of business transactions within wide area network and local area
network environments must quickly adapt to the requirements of the broader
Internet paradigm.
The Company also believes that businesses will increasingly seek to
distribute applications or information to employees or other users throughout
the enterprise. These include mobile or other users occasionally connected to
network servers or other computing resources, as well as "extranet" users beyond
the enterprise, such as suppliers and customers. As a result, OLTP, data
warehouse, Internet, and intranet applications will need to facilitate
distributed computing environments.
PRODUCTS
The Company's distributed, high-performance, open, end-to-end solutions
include database, middleware and application development tools. Its database
products generally are marketed under the Sybase(R) brand name. Its middleware
database access products generally are marketed under the EnterpriseConnect(TM)
brand name, and its application development tools generally are marketed under
the Powersoft(R) brand name. The Company supports a wide variety of hardware
platforms and provides connectivity to other hardware platforms with large
installed bases. Sybase products are available for various UNIX environments,
Windows NT, NetWare, OS/2 and other software operating systems.
DATABASE PRODUCTS
An RDBMS is a core requirement for effective online networked computing
applications. Sybase's database management systems permit multiple users and
applications to access data concurrently while protecting the integrity of the
data against user and program errors and against computer and network failures.
Sybase's principal database products can be categorized as follows: Enterprise
Database Products, Data Movement Products, Workplace Database Products,
Distributed Transaction Products and Data Warehouse Products.
ENTERPRISE DATABASE PRODUCTS
SYBASE SQL SERVER(TM) 11. Sybase SQL Server 11 is the latest version of
the Company's flagship client/server RDBMS product designed specifically for
online mission critical applications. SQL Server is a high performance,
programmable RDBMS server designed for online networked, OLTP and data warehouse
applications. The SQL Server family of products includes versions of SQL Server
software for a wide variety of computer platforms and operating systems. This
server defines, stores, retrieves, updates and manages data by using an extended
relational database language based primarily on the Structured Query Language
("SQL"), the industry-standard data manipulation language for RDBMSs.
SQL Server products deliver the high throughput and fast response times
required to support online simultaneous transactions and queries from multiple
users. The Transaction Processing Performance Council (TPC) is an independent
organization focused on testing and auditing database software and hardware
server performance results. Its type "C" throughput and price/performance
benchmarks (TPC-C) simulate order entry environments in large enterprises and
exercise a system's breadth of components associated with such environments. As
of March 1997, SQL Server 11 had achieved the best TPC-C benchmarks recorded on
Hewlett-Packard Company's HP RISC UNIX-based symmetric multiprocessing (SMP)
system. As of January 1997, SQL Server 11 had achieved the highest TPC-C
benchmarks recorded for a SMP system on Sun Microsystems' Ultra(TM)
Enterprise(TM) 6000 server utilizing 20 processors
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with the Solaris(TM) 2.5.1 operating environment. SQL Server is fully compliant
with ANSI/ISO SQL-89 standard and with entry-level ANSI/ISO SQL-92, supports
applications written to the ODBC, X/Open and X/A standards and supports a wide
variety of network protocols.
New enhancements to SQL Server 11, including parallel querying and
application queues that separate users into different virtual servers, are
currently scheduled to be released in 1997. The foregoing statement regarding a
projected future date of product availability constitutes a forward-looking
statement and the ultimate actual results could differ materially because of a
number of factors, including those discussed below in the section headed
"Product Development".
SYBASE SQL SERVER WITH MPP. Sybase SQL Server with MPP (formerly named
Sybase MPP(TM)) provides powerful high performance massively parallel database
processing specifically designed to enable complex database queries to be
processed simultaneously on multiple processors and disks. This product is based
on Sybase's shared-nothing, Open Client/Open Server technology and supports SMP
(symmetric multiprocessor) systems, clusters of SMPs and massively parallel
processing (MPP) systems. This flexible architecture is designed to enable
customers to grow their business data from hundreds of gigabytes to terabytes
and receive answers to complex questions in minutes or seconds. In mid-1996,
Sybase announced general availability of MPP 11.0 for certain Hewlett-Packard,
Hitachi, IBM and Sun Microsystems platforms, as well as expanded availability
for NCR 5100 and 3600 computers.
DATA MOVEMENT PRODUCTS
REPLICATION SERVER(R). Sybase's Replication Server software provides
bi-directional replication across enterprise client/server and desktop systems,
and is designed to allow data sharing among operational and decision support
systems without affecting data integrity and consistency, and business
performance. Replication Server 11, the latest version of this product, contains
a number of new and enhanced features. Frequently, each piece of data in an
organization has a primary site which is the actual source of the data and is
the location where the data is updated or revised. Using Replication Server
software, organizations can allow remote sites to subscribe to the primary site
for the data they need, and Replication Server will deliver that data and
monitor the primary site for any transactions that change the primary site data.
The Replication Server product will then deliver the transactions to the remote
sites, thereby ensuring that the remote sites automatically have the updated
data. The Replication Server architecture uses store-and-forward asynchronous
replication. This transaction-based store-and-forward technology monitors and
replicates changes based on the activity at the primary data site and forwards
changes to replicated sites without the need for the system to query the primary
data manager. As a result, the Replication Server reduces the impact on the
primary data manager while providing near real-time data replication.
Other products within the Replication Server family include the
following: REPLICATION AGENT(TM) works in concert with Replication Server and
provides transparent asynchronous replication for non-Sybase information in
Oracle, DB2, IMS and VSAM data sources. REPLICATION TOOLKIT(TM) FOR MVS allows
customers and partners to develop and run MVS-based modules for the Replication
Server environment by providing a common log, configuration file and interface
for replication. REPLICATION DRIVER(TM) FOR ODBC is a component of Replication
Server that allows the replication of transactions to desktop databases
supported by ODBC, such as Lotus Notes, Microsoft Access and dBASE 5.x.
INFOPUMP(TM). InfoPump software automates the cross-server movement and
synchronization of dissimilar data from sources such as Sybase, Oracle,
Microsoft, Lotus Notes, DB2 and AS/400.
WORKPLACE DATABASE PRODUCTS
SQL ANYWHERE(TM). Sybase believes that businesses are increasingly
seeking to extend the information technology-enabled workplace beyond
traditional environments supported by centralized information systems to
anywhere people work or transactions occur. To accomplish that objective,
applications will be deployed across a broad range of distributed environments
including small branch offices, mobile PCs and customer sites. SQL Anywhere
(formerly named WATCOM SQL) is a full-featured SQL RDBMS that addresses the
requirements of enterprise wide deployment. SQL Anywhere was designed for
simplicity, low cost and scalability for mobile computers, standalone desktop
PCs and small networks of PCs. SQL Anywhere is fully compatible and
interoperable with Sybase SQL Server. In August 1996, the Company introduced SQL
Anywhere Professional 5.5, featuring NetImpact(TM) Dynamo, a Web enabling
component which allows organizations to replicate Web pages to their remote or
mobile workers. It also offers the facility to embed SQL scripts within HTML
pages so that each user receives a personalized version of Web pages and may be
authorized to conduct queries against the corporate database. This integration
enables Sybase to offer a comprehensive and scaleable RDBMS product line for
customer requirements ranging from single desktop or mobile system
configurations to enterprise-wide environments. SQL Anywhere products are
currently available for Windows 3.x, Windows 95, Windows NT, NetWare, OS/2 and
DOS operating systems.
SYBASE SQL SERVER PROFESSIONAL FOR WINDOWS NT. Released in December
1996, this product offers a complete solution for creating and managing
distributed client/server applications and database-driven Web sites. Sybase SQL
Server Professional for Windows NT integrates a high performance
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relational database with a full suite of productivity tools and technologies to
make it easier for database administrators to manage content in both databases
and Web sites. The Logical Memory Manager (LMM) of this product automatically
optimizes memory and block I/O based on the current workload, while its fully
symmetric kernel is designed to efficiently manage load balancing across all the
available CPU's allowing high performance without extensive tuning, plus the
ability and flexibility to directly tune LLM for even greater workload
performance results. SQL Server Professional can provide scalability across an
enterprise's range of computing needs. The products upward scalability by way of
compatible SQL Server implementations on high performance RISC UNIX platforms is
complemented by downward scalability by way of SQL Anywhere, from PC LANs to
mobile systems.
DISTRIBUTED TRANSACTION PRODUCTS
WEB.SQL(TM). The Company's Web.SQL product became generally available
in 1996. This product provides high-speed, open links between databases and Web
servers. It provides and manages persistent connections to a company's databases
so that Web pages can be dynamically updated with the most current data
available, such as stock quotes or order information. This capability allows
Internet and intranet developers to quickly and easily leverage the data held in
existing company databases and other data sources. The product is designed to
work with standard protocols and the leading Web browsers and servers.
Developers can insert database instructions into the text of Web pages so that
when the page is requested, the inserted database queries are executed and the
results are returned to the Web browser as pure HTML text. With this capability,
developers can write Web pages that automatically generate personalized content
for each individual user based on the user's preferences or prior behavior
without having to constantly rewrite HTML code. For example, rather than simply
posting a static, text-based product list on the Web, developers can publish a
catalog that is automatically customized for each user, highlighting products
that the customer is most likely to be interested in. In addition, developers
can use Web.SQL as the interface to support current OLTP and decision support
systems on the Web.
DBQ(TM). DbQ software is designed to integrate reliable message queuing
into the database management system. It enables asynchronous "fire-and-forget"
transaction processing over the Internet, with advantages over both synchronous
and general purpose messaging systems.
DATA WAREHOUSE PRODUCTS
SYBASE IQ(TM). As companies increasingly utilize data warehouses to
capture and store information for use in strategic decision support, there is a
need for new software products to enable users to rapidly access and analyze the
stored information in a client/server environment. Sybase IQ is an optional
extension to SQL Server designed specifically to provide substantially enhanced
performance for the complex, interactive ad hoc queries that dominate
client/server-based data warehouse applications in a multi-user environment.
Sybase IQ utilizes an innovative Bitwise(TM) indexing technology to provide
rapid responses with a minimum of tuning. Intelligent data storage, compression
and retrieval software features are designed to reduce storage requirements for
data in comparison to traditional index RDBMSs and to minimize the associated
hardware costs of data warehousing. Sybase IQ can work with standard commercial
hardware, import database information from a wide variety of data sources and
support a wide range of standard SQL tools and online analytical processing
middleware from companies such as Business Objects, Cognos and Prodea. In 1996,
version 11.0 of Sybase IQ became generally available on Hewlett-Packard
Company's HP9000, Digital Equipment Corporation's AlphaServer, Sun Microsystem's
Solaris-based SPARC Servers and IBM's AIX platform.
QUICKSTART DATAMART(TM). QuickStart DataMart is designed to provide a
fast, flexible and cost-effective solution for developing an interactive
warehouse, or data mart, within an enterprise architecture. Datamarts, which are
special-purpose data warehouses focused on a single strategic or departmental
application, have recently emerged as a popular solution for businesses seeking
to use their historical data to gain competitive advantage or to enter new
markets. Sybase's offering combines Sybase IQ with the tools needed for
extracting data from a mainframe and other operational systems as well as a
choice of popular query tools. Also included are systems integration services
and training from Sybase Professional Services. QuickStart DataMart prepackaged
on the IBM RS/6000 platform is currently scheduled to be available in the second
half of 1997. The foregoing statement regarding a projected future date of
product availability constitutes a forward-looking statement and the ultimate
actual results could differ materially because of a number of factors, including
those discussed below in the section headed "Product Development".
MIDDLEWARE
Within larger enterprises, data is generally stored in RDBMS and
non-RDBMS sources developed by different vendors, operating on different
hardware platforms running under different operating systems, operated or
managed by different departments or groups. Frequently, all of this data is
critical to an entity. Enterprise-wide computing increases the need for products
that can integrate and access data within a heterogeneous environment. Sybase's
EnterpriseConnect(TM) family of middleware products are designed to enable
information that is different in format, distributed in multiple locations and
stored in disparate computing systems to be integrated easily and transparently
for use in OLTP and data warehouse
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applications and to facilitate mass deployment. EnterpriseConnect products
provide access to multiple data sources, allowing developers to build
applications that can access RDBMSs from many vendors other than Sybase,
including DB2 from IBM, and products from Oracle Corporation, Informix
Corporation and Computer Associates, Inc., as well as a wide variety of
non-RDBMS data sources, transaction services and computer services such as
electronic mail, stock quote and wire feeds and telephone networking systems.
The Company believes that EnterpriseConnect products are installed in
approximately two-thirds of the Fortune 1,000 companies.
OMNICONNECT(TM). Users and developers within a distributed
heterogeneous environment generally do not want to have to be required to
identify where data is stored and in what database and in what SQL dialect, nor
do they want to change applications or queries if the data is moved within the
network. OmniConnect(TM) (formerly named OmniSQL Server) provides transparent
access to, and interoperability with, heterogeneous data sources. OmniConnect
simplifies enterprise-wide data access by enabling users and developers to
employ a single language for queries and application development that can access
data throughout the enterprise. The OmniConnect product allows users to access
remote data from over 25 different data sources, including Sybase SQL Server,
Oracle or DB2 databases, as well as local RMS or ISAM files, as though all data
was stored locally on a single client/server RDBMS. OmniConnect translates
Sybase Transact-SQL into the target RDBMS SQL dialect and automatically joins
data from multiple databases to respond to a single query. Because it enables
users to access multiple data sources as if data were stored in a single
database, users can reduce training costs because they need to learn only the
Sybase access language, rather than a separate access language for each of the
many databases that may be used in the enterprise. In addition, because the
OmniConnect catalogue stores the location of each table of information for all
DBMSs accessed, users do not need to know where each type of data resides within
each database or which server controls a database.
DIRECTCONNECT(TM). Sybase DirectConnect data access servers are
Sybase's middleware building blocks for connectivity between LAN-based clients
and enterprise data sources. The Company's current database gateways include
more than 16 turnkey, point-to-point database gateways that provide a high
performance solution for transferring data between mainframe or LAN-based data
sources. These gateways support access to IBM's DB/2, SQL/DS, AS/400, as well as
Oracle and Teradata, and incorporate the Open Server technology. The gateways
resolve differences in data formats, catalogs, and error handling to provide
transparent read/write update and data transfer between heterogeneous databases.
Users can use a DirectConnect server on its own to connect directly to a single
data source, or combine DirectConnect with other products in the Sybase
EnterpriseConnect family for enterprise data access, data movement, data
transparency, heterogeneous replication, and data warehousing. The DirectConnect
gateways are designed for high-performance single-source access, increased
simplicity and consistency and enhanced systems management.
INFOHUB. InfoHub, an add-on product to mainframe gateways from Sybase,
is designed to allow users to quickly and easily access, read, write, and update
nonrelational mainframe data, such as VSAM, IMS, IDMS and ADABAS, as if it were
Sybase SQL Server data instead of having to write mainframe-specific data access
code. Because the Sybase gateways are based on the Sybase Open Client
application programming interface (API), InfoHub users can access this
nonrelational data using any of 125 desktop applications that adhere to the Open
Client API, including PowerBuilder, Microsoft Access, and Visual BASIC.
OPEN CLIENTCONNECT(TM). Businesses rely on mainframe systems for many
high-speed transaction-oriented applications. Increasingly, these applications
also need to access data stored throughout the enterprise in the distributed LAN
environment. Sybase's Open ClientConnect(TM) for CICS and Open ClientConnect for
IMS and MVS bridge the gap, giving users the flexibility to use mainframes as a
client in a heterogeneous, client/server computing environment with the ability
to access data located in one or more LAN-based servers. Open ClientConnect
allows the mainframe to take on the initiating role of a client in a distributed
system. Open ClientConnect is a library of routines, programming services, and
run-time services that users can use to develop client/server applications. It
allows mainframe programs written in Assembler, C, COBOL II, COBOL, or PL/I to
communicate easily with Sybase SQL Server, with applications developed using
Open Server(TM), and with other LAN RDBMSs using DirectConnect gateways.
OPEN SERVERCONNECT(TM). Organizations need to access data from a wide
range of heterogeneous systems to formulate strategic decisions. Open
ServerConnect(TM) for CICS and Open ServerConnect for IMS and MVS, is designed
to allow users running their favorite LAN-based applications on desktops get
high-performance read/write access to data and online production applications
that reside on CICS, IMS, and MVS systems. At the same time, these products are
designed to allow mainframe managers to maintain control of data integrity and
security through existing mainframe security systems. Open ServerConnect for
CICS and Open ServerConnect for IMS and MVS allow mainframes to act as both an
application server and a data server in a distributed environment. These APIs
allow CICS, IMS, and MVS data and application programs to appear as Sybase data
to a calling program -- typically an Open Client application. These APIs are
designed to allow users to deliver critical CICS, IMS, and MVS data and services
to requesting clients through a single Sybase infrastructure.
OPEN CLIENT(TM). Open Client is a client-side application kit for
building interfaces to Sybase data sources, including SQL Server, Open Server,
Replication Server and OmniConnect. Open Client offers
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developers a choice of standards-based programming interfaces that are
consistent across a variety of hardware platforms.
OPEN SERVER(TM). The Company's Open Server products are based on
Sybase's client/server messaging protocol which consists of a multi-verb set
dialect supporting SQL remote procedure calls (RPCs) and message buffers passed
from client to server. These products enable customers to utilize more fully
their existing computing networks and database investments and to integrate more
effectively with independent data sources and application services. The Open
Server family of products provides an application programming interface for
developing gateways to other DBMSs, data sources and services. These products
integrate data from diverse sources such as real-time data feeds, networking
services and other relational and non-relational databases. Open Server for CICS
allows CICS applications on IBM/MVS mainframes to become servers in the Sybase
environment.
TOOLS
The Company's application development tools are designed to enable
users to develop, use and manage a wide variety of information-intensive, online
and decision support applications within client/server and Internet
environments. In February 1995, Sybase merged with Powersoft Corporation
("Powersoft"), the leading supplier of client/server application development
tools. The Company's application development tools are generally marketed under
the Powersoft(R) brand and include development tools, development tool add-ons,
design tools, productivity tools, languages and components.
DEVELOPMENT TOOLS
POWERBUILDER(R). The Company's principal application development tool
is PowerBuilder, a 4GL scalable tool for client/server and Internet application
development. Version 5.0 of PowerBuilder, which is available in Enterprise,
Professional and Desktop editions, was commercially released in 1996.
PowerBuilder combines an intuitive graphical interface with a powerful object
oriented development language, and enables developers to rapidly build
client/server and Internet applications without requiring specialized knowledge
or the operating system or complicated programming. The PowerBuilder development
environment takes advantage of Microsoft Corporation's Windows and Windows NT
operating systems. A developer using PowerBuilder can also build applications
which interoperate with other applications running under Windows. Because
PowerBuilder provides support for Windows features such as Dynamic Data Exchange
(DDE), Dynamic Link Libraries (DLLs) and Object Linking and Embedding (OLE), a
PowerBuilder application can exchange data with other applications such as
spreadsheet or word processing programs running under Windows, can call external
routines from other third-party programs written in C or other third-generation
languages, and can launch other Windows applications from within the
PowerBuilder application. For example, an end-user can link a Lotus 1-2-3 or
Excel spreadsheet to a PowerBuilder application, so that changes in the
spreadsheet will result in automatic updating of the related PowerBuilder data,
and vice versa.
PowerBuilder also permits simultaneous access to multiple databases
from within a single application. Access to these RDBMS products is provided
through direct links which, in addition to supporting industry-standard SQL
commands, also support features such as non-standard data types (e.g. images or
large documents), database extensions, stored procedures and other features
specific to each RDBMS.
POWER++(TM). In September 1996, Sybase released Version 1.5 of the
Power++ (formerly known as Optima++) product line, a family of rapid application
development (RAD) tools that simplifies the use of C++. Available in three
editions -- Developer, Professional and Enterprise -- Power++ is designed to
allow developers to build everything from simple, standalone applications to
advanced, enterprise-wide client/server and Internet applications. Power++ is
based on a component-centric architecture that utilizes an innovative "drag and
drop" programming techniques to enable developers to create native 32-bit C++
applications without an extensive knowledge of the C++ language. As an Internet
development tool, Power++ includes pre-built, re-usable ActiveX components
licensed from NetManage, Inc. to quickly integrate web browsing, mail, data
exchange and WinSock capabilities. OBJECT CYCLE(TM), a network based version
control product provides an environment for storing version information on
development projects, is included in PowerBuilder and Optima ++ Enterprise
editions.
DEVELOPMENT TOOL ADD-ONS
Sybase offers a wide range of development tool add-ons, including the
following: INTERNET DEVELOPER TOOLKIT allows users to build dynamic Web server
applications to extend existing PowerBuilder applications on the Internet.
ADVANCED DEVELOPER TOOLKIT, which is part of PowerBuilder Enterprise, includes
the PowerBuilder Foundation Class library and offers increased productivity.
POWERBUILDER LIBRARY FOR LOTUS NOTES, also included in PowerBuilder Enterprise,
is designed to provide seamless connectivity between PowerBuilder and Lotus
Notes R4 databases. TRANSLATION TOOLKIT(TM) is designed to allow the translation
of PowerBuilder and InfoMaker 5.0 applications into foreign languages. FUNCKY
FOR POWERBUILDER extends PowerBuilder's PowerScript(TM) language with nearly 500
additional functions,
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including string-handling, data conversion routines, disk access, system queries
and low level file manipulation.
DESIGN TOOLS
S-DESIGNOR(R). In May 1995, Sybase acquired SDP, S.A., a leading
developer of database design tools. The S-Designor tools are used for designing
and building highly optimized and functional databases, data warehouses and data
aware components. In July 1996, Sybase began shipping Version 5.1 of S-Designor.
S-Designor products allow database designers to translate logical concepts into
high-quality databases with the ability to define, generate and manage a
database's physical properties for more than 30 DBMSs. The S-Designor products
also interoperate with various popular development environments, including
PowerBuilder.
The S-Designor toolset includes separate integrated modules that allow
users to tailor application modeling to their particular needs:
DATAARCHITECT(TM) allows users to design relational databases with separate
conceptual and physical data models. PROCESSANALYST(TM) provides data-flow
diagramming, helping designers capture business processes and discover
organizational structures. APPMODELER(TM) offers a head start on PowerBuilder,
Optima ++, Visual Basic, Delphi and Web development. It offers rapid generation
of application objects based on a data model. WAREHOUSEARCHITECT(TM) helps users
design and generate data warehouses for high speed DSS applications. The product
also supports traditional DBMSs, plus Sybase IQ and Red Brick Warehouse.
METAWORKS(TM) provides for efficient management of modeling information with
dictionary facilities that complements a team environment. VIEWER provides
read-only access to data models, and allows users a high-level view of multiple
projects in an open, secure environment.
PRODUCTIVITY TOOLS
POWERSOFT PORTFOLIO(TM) combines PowerBuilder Desktop for development,
S-Designor AppModeler Desktop for data modeling, and the four-user edition of
SQL Anywhere Server.
INFOMAKER(TM) is a personal access and information management tool that
provides a feature set for developing queries and presentation-quality reports
with data management capabilities. InfoMaker is designed to complement
PowerBuilder applications and includes a SQL Anywhere database and connectivity
utilities.
LANGUAGES
WATCOM C++. The Company's Watcom(TM) C/C++ compilers are the industry
leading compiler tools using the C++ programming language for the building of
client/server applications. Developers can utilize these products to create
32-bit C++ applications that can exploit the user interface controls and
operating features of Windows 95 and Windows NT. WATCOM FORTRAN 77 delivers a
comprehensive 16- and 32-bit FORTRAN development system.
COMPONENTS
Components are, pre-built, reusable tools or applications that developers
can incorporate into their applications with minimal development time. In
February 1996, the Company formed the Powersoft Components Division and merged
with Visual Components, Inc., a leading supplier of components. Components
offered by the Company under the Visual Components(R) brand include the
following: FORMULA ONE(TM), an Excel-compatible spreadsheet with seamless
integration between SQL and spreadsheet data. FIRST IMPRESSION(TM), a
photorealistic charting tool for simple bar charts to complex 3D surface charts.
GEOPOINT(TM), a data-aware presentation tool designed to create mapping diagrams
from illustrations produced in popular graphic tools such as Auto/CAD. VISUAL
SPELLER(TM), a powerful spellchecker with full search and replace capabilities,
and comprehensive multilingual dictionaries. VISUAL WRITER(TM), a high
performance text control that lets users quickly add text editing functionality
to applications. WEBVIEWER(TM), which allows users to easily add HTML document
viewing capabilities to applications. SYSTEM TOOLS(TM) is a collection of user
interface components designed to make it easy for users to tap the functionality
of Windows 95.
HARDWARE AND SOFTWARE PLATFORMS SUPPORTED
Sybase's products are available for various operating systems and
hardware platforms. Computers and operating systems for which certain Sybase
products are available include, but are not limited to, (in alphabetical order)
the Bull DPX Series; Data General Aviion; all Digital Equipment Corporation
Alpha computers running Open VMS and OSF/1; Hewlett-Packard computers; the IBM
RS/6000; NEC computers; NCR System 3000 family; the Pyramid S Server family; the
Sequent Symmetry Series; Siemens Nixdorf SIE computers; Silicon Graphics
computers; Sony NEWS computers; Stratus VOS and FTX computers; all Sun
Microsystems computers; Unisys U 6000 65/75/85 computers; and personal computers
running on Apple MacIntosh; UNIX, OS/2, NetWare, DOS, SCO UNIX, Windows and
Windows NT operating systems.
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SERVICES
CONSULTING SERVICES. Sybase believes that it is essential in today's
networked heterogeneous hardware and software environments to offer
comprehensive consulting and integration services for its customers. The Company
provides these services through its professional services organization. The
combination of Sybase's client/server architecture and products and professional
services can provide users with complete solutions for building online,
enterprise-wide applications. Services include strategic business analysis and
modeling, architecture and resource planning, custom application design and
development, performance and migration services, system administration and
extensive SQL and Sybase product training. The Company's consulting organization
also provides business consulting services to help customers determine the
business process and infrastructure requirements that can result in performance
improvement and achievement of the customers' desired business objectives. As a
result, Sybase can offer customers implementing enterprise business solutions
both the business methodology and the technology, tools and services for
determining and implementing those solutions.
TECHNICAL SUPPORT AND MAINTENANCE SERVICES. The Company believes that
providing effective technical support to its customers is critical to customer
satisfaction. The Company provides technical support for North America and Latin
America primarily from its support centers in Emeryville, California and
Burlington, Massachusetts and for Asia/Pacific primarily from its support center
in Tokyo, Japan and Hong Kong. In Europe, support is provided from the Company's
support centers in France, Germany, Switzerland, The Netherlands and the United
Kingdom. Telephone support is available 24 hours a day, seven days a week. In
countries where the Company does not have a direct presence, support is offered
by the Company's distributors, with backup support by the Company's support
center personnel.
Sybase offers several SupportPlus (TM) maintenance and support plans to
enable customers to select the level of support desired for their particular
needs. These plans, consisting of desktop, standard, advantage and preferred
support alternatives, provide differing fees, response times, support hours,
training and other support services.
Historically software documentation has been bulky, expensive to
duplicate and tedious to update. In 1994 Sybase introduced its SyBooks(TM)
CD-ROM based product documentation. SyBooks provides an online product
documentation reference (with text search and retrieval capability) . A copy of
SyBooks is shipped with each product. Sybase also offers AnswerBase(TM), a
CD-ROM product containing Sybase's technical notes, internal support reference
and support bulletins. Customers receive AnswerBase free under each of the
various SupportPlus plans. The Company also makes available to customers through
the Internet certain technical support information and records relating to its
Powersoft products in order to provide customers with the same information
available to the Company's own internal support personnel.
Licensees generally are required to purchase an initial one-year
maintenance contract, which consists of technical support and product updates.
However, first year support and maintenance for certain workgroup and Powersoft
branded products is optional. The annual fees for technical support vary
depending upon the support options selected, including the SupportPlus level
alternative and the number of customer employees authorized to obtain telephone
support. After the first year, licensees have the option of renewing their
maintenance contract for an annual fee.
TRAINING AND EDUCATION SERVICES. The Company provides a broad education
curriculum for its customers. The Company offers basic and advanced classes from
education centers in the United States, Australia, Belgium, Brazil, Canada,
China, France, Germany, Hong Kong, Italy, Japan, Korea, Malaysia, Mexico,
Netherlands, New Zealand, Singapore, Spain, Switzerland, Taiwan and the United
Kingdom, for the purpose of increasing the customer's proficiency with Sybase's
products. On-site and specially tailored customer classes are also available. A
number of the Company's distributors also provide training. In addition to
classroom training, Sybase also offers a number of videotape training materials
for self-paced training. Training is also available through authorized third
party providers.
Sybase believes that customer training is as integral a component of
its products as the software and documentation. In 1994, Sybase introduced
SKILS(TM) to provide interactive multimedia training for users of Sybase
products. SKILS enables individuals and teams to train, answer technical
questions and create their own reference notes.
SALES, MARKETING AND CUSTOMERS
The Company markets its products both through a direct sales
organization and through indirect sales channels comprised of commercial
application partners ("CAPs"), systems integrators ("SIs") and international
distributors. In general, enterprise database products, middleware and services
are primarily marketed through the direct sales organization; and tools products
and PC-oriented databases are marketed primarily through a combination of
indirect channels and direct sales. The Company's goal is to increase the
portion of its revenues that are generated through CAPs and SIs. In this regard
the Company implemented in late 1995 and 1996 a variety of changes to the sales
organization, including a new sales model, changes to sales compensation
programs and an increased focus on sales through indirect channels. Although
such changes are intended to enhance overall revenues, such changes could, in
the
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short-run, materially and adversely affect the sales process and revenues. See
"Part II, Item 5 -- Market For The Registrant's Common Stock And Related
Stockholder Matters --Stock Price Volatility; Future Operating Results."
Approximately 32%, 38% and 39% of the Company's total revenues for the
years ended December 31, 1994, 1995 and 1996, respectively, were from
international operations. In 1995, Sybase expanded its direct presence in
international markets through the acquisition of its distributors in Sweden and
the Czech Republic (which also markets into Slovakia, and the establishment of
new subsidiaries in Taiwan, Malaysia and Singapore. The Company's subsidiaries
currently license and support the Company's products in Australia, Belgium,
Brazil, Czech Republic, China, France, Germany, Hong Kong, Italy, Japan, Korea,
Malaysia, Mexico, New Zealand, The Netherlands, Singapore, Spain, Sweden,
Switzerland, Taiwan and the United Kingdom. In 1996, the Company established a
subsidiary in the Philippines and a liaison office in India. The Company also
licenses its products through distributors in Europe, Asia and Latin America. In
the future the Company could experience fluctuations in international revenues
and such fluctuations, if any, could adversely affect the Company's financial
results. For a discussion of certain risks associated with international
operations, see "Part II, Item 5 -- Market For The Registrant's Common Stock And
Related Stockholder Matters -- Future Operating Results; Stock Price
Volatility."
The Company's customers are primarily Fortune 1000 companies in North
America, or their equivalents in other geographic regions. The Company's primary
market segments are financial services, manufacturing, telecommunications,
defense and government agencies. Emerging segments include healthcare and
pharmaceutical, insurance, media and publishing, retail, transportation and
utilities. No customer accounted for more than 10% of revenues during any of the
years ended December 31, 1996, 1995 and 1994.
The Company's products and services are offered in a wide variety of
configurations depending on the customer's requirements and hardware
environment. As is customary in the software industry, in order to protect its
intellectual property rights, the Company does not sell or transfer title to its
software products to customers. Customers generally purchase non-exclusive,
nontransferable perpetual licenses in exchange for a fee that varies depending
on the mix of products and services, the number and type of users, the number of
servers, and the type of operating system. License fees range from several
hundred dollars for single user desktop tools or databases to several million
dollars for enterprise solutions that can support hundreds or thousands of users
throughout an organization. Under the Company's current standard forms of
end-user license agreement, customers license software either for use on a
single machine or by a single user or for use in a networked environment by a
specified number of users and/or machines. The Company's SQL Anywhere and
PC-oriented databases, the Company's tool products, as well as products licensed
through the telemarketing sales organization, are typically licensed under
"break the seal" licenses. These licenses may not be enforceable in a number of
jurisdictions.
As is common in its industry, the Company's backlog is typically small
and not a meaningful indicator of future revenues.
PRODUCT DEVELOPMENT
Since inception, the Company has made substantial investments in
research and product development. The Company believes that timely development
of new products and enhancements to its existing products is essential to
maintain a strong position in its market. During 1996, 1995 and 1994, product
development and engineering expenses were $164.7 million, $151.9 million and
$114.0 million, representing 16%, 16% and 14% of total revenues, respectively.
Sybase currently is developing new products as well as enhancements to existing
products in each of its major product categories of database, middleware and
tools and Internet products. Sybase intends to continue to invest heavily in
research and product development. The Company has announced the development and
anticipated availability dates of several products, including an enhanced
version of SQL Server, a RAD Java development tool for building and deploying
Java applets and applications, and a high-end scalable OLTP Internet application
server.
The Company has from time-to-time received vendor funding for porting
its products to additional platforms and to extend its product offerings. The
Company generally retains technology ownership and rights to market developed
products to other customers, in some cases subject to the payment of royalties
to the funding party. In addition, the Company has entered into agreements with
certain end-user customers which have resulted in jointly funded product
development.
The market for the Company's products and services is characterized by
dynamic customer demands, rapid technological change and frequent new product
introductions. The Company's future results will depend in part on its ability
to enhance its existing products and to introduce new products, on a timely and
cost-effective basis, that meet dynamic customer requirements. Customer
requirements for products can rapidly change as a result of innovations or
changes within the computer hardware and software industries. For example, the
widespread use of the Internet is rapidly giving rise to new customer
requirements as well as new methods and practices of selling, marketing and
distributing products and services. Sybase's future results will depend in part
on its success in developing new products, making generally available products
that have been previously announced, enhancing its existing products and
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adapting its existing products to changing customer requirements and,
ultimately, on the market acceptance received by such new or enhanced products.
The Company has experienced delays in introducing some new products in the past.
For example, the commercial shipment of Sybase IQ which became commercially
available in February 1996 was previously planned for the second half of 1995.
Unanticipated delays in product availability schedules could result from various
factors including development or testing difficulties, feature changes, software
errors, shortages in appropriately skilled software engineers and project
management problems. Delays in the scheduled availability of these or other
products, a lack of or decrease in market acceptance of new or enhanced
products, particularly SQL Server 11 which became commercially available in
December 1995 and PowerBuilder 5.0 which became commercially available in June
1996, or the Company's failure to accurately anticipate customer demand or meet
customer performance requirements or to anticipate competitive products and
developments could have a material adverse effect on the Company's business and
financial results. New products or new versions of existing products may,
despite testing, contain undetected errors or bugs that will delay the
introduction or adversely affect commercial acceptance of such products or give
rise to warranty or other customer claims, which could, in turn, adversely
affect the Company's financial results.
COMPETITION
The market for the Company's software products and services is
extremely competitive and characterized by dynamic customer demands, rapid
technological and marketplace changes, and frequent product enhancements and new
product introductions. The Company competes with a number of companies,
including Oracle Corporation, Informix Corporation, Microsoft Corporation, IBM
Corporation and Computer Associates, Inc. Many of the Company's competitors and
potential competitors have significantly greater financial, technical, sales and
marketing resources and a larger installed base than the Company. Each of
Informix, IBM, Microsoft and Oracle has announced the development of enhanced
versions of their principal database products that are intended to improve the
performance or expand the capabilities of their existing products. New or
enhanced products introduced by existing or future competitors could increase
the competition faced by the Company's products and result in greater price
pressure on certain of the Company's database products, especially to the extent
that market acceptance for personal computer oriented technologies increases. A
failure by the Company to compete successfully with its existing competitors or
with new competitors could have a material adverse effect on the Company's
business and results of operations and on the market price of the Company's
Common Stock.
Existing and future competition or changes by the Company in its product
offerings or product pricing structure could result in an immediate reduction in
the prices of the Company's products. The Company introduced changes in its
pricing and licensing structure in the first quarter of 1996 that increased the
prices for certain products or configurations, and reduced the prices for other
products and configurations. The Company will introduce price and licensing
changes from time to time in the future. If recently implemented or future
changes in the Company's products, pricing structure or existing or future
competition, for example from Microsoft, were to result in significant revenue
declines, the Company's business and financial results would be adversely
affected.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company relies on a combination of trade secret, copyright and
trademark laws and contractual provisions to protect its proprietary rights in
its software products. These protections may not be adequate in certain
circumstances. As of February 1997, the Company had seven issued patents,
expiring between 2113 and 2114, covering various aspects of software technology.
Competitors may independently develop technologies that are substantially
equivalent or superior to the Company's technology. In addition, copyright and
trade secret protection for the Company's products may be unavailable or
unreliable in certain foreign countries. As the number of software products in
the industry and the number of software patents increase, the Company believes
that software developers may become increasingly subject to infringement claims.
Third parties have in the past asserted, and may in the future assert, that
their patents or other proprietary rights are violated by products offered by
the Company. Any such claims, with or without merit, can be time consuming and
expensive to defend or settle, and could have an adverse effect on the Company's
business and results of operations. While the Company believes that its products
do not infringe other parties' patents and proprietary rights, it cannot be
certain that its products are not doing so. Infringement of valid third party
patents and proprietary rights could have an adverse effect on the Company's
business and results of operations. With respect to an increasing number of
products, the Company relies on "break the seal" licenses not signed by the
licensee to protect its proprietary rights. "Break the seal" licenses may be
unenforceable under the laws of certain jurisdictions.
EMPLOYEES
As of December 31, 1996, the Company and its subsidiaries had 5,484
employees, excluding temporary personnel and consultants. The Company's ability
to achieve its future revenues and earnings will depend in part on the ability
of its officers and key personnel to manage growth, costs and expenses
successfully through the implementation of appropriate management systems and
controls. Failure to effectively implement or maintain such systems and controls
could adversely affect the Company's
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business and results of operations. The success of the Company also depends in
part on its ability to attract and retain qualified technical, managerial, sales
and marketing personnel. The competition for such personnel is intense in the
software industry, and Sybase believes, has increased substantially in recent
years. There have been several changes in 1996 and 1997 to the Company's
executive management team. Changes in management, the Company's recent financial
performance and a reduction in the overall number of Sybase employees made in
the third quarter of 1996 could cause an increase in the amount of employee
turnover. The failure to effectively recruit, train and retain qualified
personnel or high rates of employee turnover, particularly among engineering or
sales staff, could adversely affect the Company's product development efforts,
product sales and other aspects of the Company's operations and results. During
1996, the software industry generally, and Sybase specifically, experienced
higher than historical rates of employee turnover.
ITEM 2. PROPERTIES
The Company is headquartered in Emeryville, California, where it owns
or leases administrative, sales and marketing and product development facilities
in eight locations consisting of an aggregate of approximately 664,300 square
feet. Sybase owns property comprising approximately 63,000 square feet of its
headquarters facilities. The Company's leases with respect to its Emeryville
headquarters facilities expire as follows: approximately 257,517 square feet in
1997, 192,549 square feet in 1998, 129,700 square feet in 2001 and 80,671 square
feet in 2,002. The Company has renewal options, generally at the fair market
value, under each of these headquarters leases. The area of Emeryville in which
the Company's headquarters facilities are located includes significant amounts
of landfill and was historically used for industrial and light industrial uses.
Underground fuel storage tanks and soil contaminated from leaked fuel were
removed, prior to Sybase's occupancy, from the owned property and one leased
property included in Sybase's headquarters facilities. The cost of monitoring
and treating these sites is less than $100,000 per year. In addition, the
Company maintains an engineering center in Mountain View, California where it
leases approximately 61,000 square feet of office space. The leases for the
Mountain View facilities expire December 31, 1998, unless renewed by the
Company. The Company also maintains an engineering centers in Boulder, Colorado
and in Concord, Massachusetts that are focused, respectively, on the development
of the Company's middleware products and tool products.
The Company's field operations, professional service organizations and
subsidiaries occupy leased facilities in approximately 120 locations in the
United States, Australia, Belgium, Brazil, Canada, China, Czech Republic,
France, Germany, Hong Kong, Italy, Japan, Korea, Mexico, The Netherlands, New
Zealand, Philippines, Russia, Singapore, Spain, Sweden, Switzerland, Taiwan and
the United Kingdom aggregating approximately 1.9 million square feet. In
addition, the Company owns a building in Concord, Massachusetts encompassing
approximately 55,500 square feet and a building encompassing 10,500 square feet
located in Maidenhead, England. The Company is in the process of leasing
additional premises in various locations.
ITEM 3. LEGAL PROCEEDINGS
Following the Company's announcement on April 3, 1995 of its
preliminary results for the first fiscal quarter ended March 31, 1995, several
class action lawsuits were filed against the Company and certain of its officers
in the U.S. District Court, Northern District of California. The complaints are
similar to one another and allege violations of federal and state securities
laws and request unspecified monetary damages. These actions have been
consolidated, a consolidated amended class action complaint was served on August
7, 1995, and the parties are in pretrial discovery. Management believes that the
claims contained in the consolidated amended complaint are without merit and
intends to defend against the claims vigorously. In the opinion of management,
resolution of this litigation is not expected to have a material adverse effect
on the financial position of the Company. However, depending on the amount and
timing, an unfavorable resolution of this matter could materially affect the
Company's future results of operations or cash flows in a particular period. The
Company is also a party to various legal disputes and proceedings arising from
the ordinary course of business activities. In the opinion of management,
resolution of these matters is not expected to have a material adverse effect on
the financial position of the Company. However, depending on the amount and
timing, an unfavorable resolution of some or all of these matters could
materially affect the Company's future results of operations or cash flows in a
particular period.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a stockholder vote in the quarter ended
December 31, 1996.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company who are elected by and serve in
such capacities at the discretion of the Board of Directors, and their ages, as
of March 24, 1997 are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Mark B. Hoffman .... 50 Chairman of the Board
Mitchell E. Kertzman 48 President, Chief Executive Officer and Director
Robert S. Epstein .. 44 Executive Vice President, Chief Information Officer
and Director
David A. Litwack ... 50 Executive Vice President, Products
Jack L. Acosta ..... 49 Senior Vice President and Chief Financial Officer
Michael W. Bealmear 49 Senior Vice President, Worldwide Services
Michael H. Forster 54 Senior Vice President, Worldwide Field Operations
L. Mindi Butterfield 35 Vice President, Marketing
Mitchell L. Gaynor . 37 Vice President, General Counsel and Secretary
Janet H. Mahoney ... 47 Vice President, Worldwide Human Resources
Peter F. Pervere ... 49 Vice President and Corporate Controller
</TABLE>
Mr. Hoffman is a founder of the Company and has served as Chairman of
the Board and a director since the Company's inception in November 1984. Mr.
Hoffman also served as Chief Executive Officer and President of the Company from
its inception to July 1996. Mr. Hoffman has been Chief Executive Officer of
Commerce One, Inc., a developer of electronic commerce technology, since
September 1996.
Mr. Kertzman has served as President and Chief Executive Officer since
July 1996, and as a director since February 1995. Between February 1995 and July
1996, he served as an Executive Vice President. In February 1995, Sybase merged
with Powersoft Corporation ("Powersoft"), a leading provider of application
development tools. Mr. Kertzman served as Chief Executive Officer and a director
of Powersoft since he founded it in 1974. He also served as President of
Powersoft from 1974 to 1992. Mr. Kertzman is also a director of Shiva
Corporation and C-Net, Inc.
Dr. Epstein is a founder of the Company and has served as Executive
Vice President and as a director since November 1984. Since November 1996, Dr.
Epstein has also served as Chief Information Officer of the Company. Dr. Epstein
is a director of First Virtual Holding, Inc.
Mr. Litwack has served as Executive Vice President, Products since
August 1996. Prior to that, beginning in October 1995, he served as a Senior
Vice President, and also served as President of Powersoft beginning in 1992. He
has been a director of Powersoft since 1993. Between 1988 and 1992, he served as
Powersoft's Vice President of Product Development. Prior to joining Powersoft,
Mr. Litwack was the Executive Vice President of Product Development for Cullinet
Software, Inc., a database management software company. Mr. Litwack is a
director of Atria Software.
Mr. Acosta has served as Senior Vice President and Chief Financial
Officer since July 1996. Prior to that, beginning in March 1995, he served as
Vice President of Products Group Operations. From December 1994 though February
1995, Mr. Acosta served first as Vice President of SCG Business Operations, then
as Vice President of Products Business Operations. From March 1993 through
December 1994, Mr. Acosta was President and Chief Operating Officer of Tanon
Manufacturing, Inc., an electronics manufacturing company. From October 1984 to
February 1993, he was employed by
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Ungermann-Bass, Inc., a computer networking company. During that period, he held
various titles, including Executive Vice President, Corporate Operations, and
Chief Financial Officer.
Mr. Bealmear has served as Senior Vice President, Worldwide Services
since October 1995. Between November 1994 and October 1995, he was Vice
President, Worldwide Consulting. Between September 1992 and November 1994, he
served as Managing Director of Northeast Region, Worldwide Financial Services
and Public Safety Practices of SHL Systemhouse, a system integrator. Between
September 1991 and September 1992 he served as managing Partner at Bear Creek
Partners, a technology management investment company. Between October 1990 and
September 1991, he was Senior Operating Officer of Salomon Brothers, an
investment banking and brokerage firm.
Mr. Forster has served as Senior Vice President, Worldwide Field
Operations since April 1996. Prior to that, from October 1995, he served as a
Senior Vice President and as President of the EnterpriseConnect division.
Between April 1994 and October 1995, he was Vice President of the
EnterpriseConnect division. From March 1993 to December 31, 1995, Mr. Forster
served as President of Micro Decisionware, Inc. ("MDI"), a connectivity software
developer acquired by Sybase in April 1994. Prior to joining MDI in 1993, he
served as President and General Manager of the International Business Unit of
Computervision, Inc., a developer of CAD/CAM technology between January 1990 and
December 1992.
Ms. Butterfield has served as Vice President, Marketing since February
1997. Prior to that, beginning in January 1996, she served as Vice President of
Workplace Marketing. From September 1992 to January 1996, Ms. Butterfield served
as Director of Marketing Communications for the Powersoft division. From March
1991 until she joined Powersoft, Ms. Butterfield was a sales representative for
Bachman Information Systems, Inc. , an application development company.
Mr. Gaynor has served as Vice President, General Counsel and Secretary
since January 1997. Prior to that, beginning in May 1996, he served as Vice
President and Associate General Counsel. Between February 1993 and May 1996, Mr.
Gaynor served first as Corporate Counsel, then as Senior Corporate Counsel.
Before joining Sybase, Mr. Gaynor was an attorney with the law firm of Brobeck,
Phleger & Harrison.
Ms. Mahoney has served as Vice President, Worldwide Human Resources
since January 1997. From July 1996 until January 1997, she was Vice President of
Human Resources for the SITE Enterprise group of Charles Schwab & Co., Inc., a
brokerage firm. Between February 1995 and July 1996, Ms. Mahoney served first as
Sybase's Human Resources Director, Marketing, then as Human Resources Director,
Worldwide Sales. From April 1991 until she joined Sybase, Ms. Mahoney was a
Human Resources Consultant for Apple Computer, Inc.
Mr. Pervere has served as Corporate Controller since October 1987 and
as a Vice President since February 1992. Prior to that, Mr. Pervere was employed
by the accounting firm, Ernst & Young LLP as a Certified Public Accountant in
the audit department, initially as a staff member and most recently as an audit
manager.
PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
Sybase, Inc. Common Stock, par value $.001, is traded on the NASDAQ
National Market System under the symbol "SYBS." The price per share reflected in
the table below represents the range of low and high closing sale prices for the
Company's Common Stock as reported in the NASDAQ National Market System for the
quarters indicated.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
Fiscal 1995:
Quarter ended March 31, 1995 $54.50 $40.00
Quarter ended June 30, 1995 $39.13 $20.13
Quarter ended September 30, 1995 $36.50 $28.75
Quarter ended December 31, 1995 $39.25 $30.75
Fiscal 1996:
Quarter ended March 31, 1996 $37.13 $22.25
Quarter ended June 30, 1996 $27.38 $21.50
Quarter ended September 30, 1996 $20.00 $14.38
Quarter ended December 31, 1996 $20.50 $13.88
</TABLE>
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The Company has never paid cash dividends on its capital stock. The
Company currently intends to retain any earnings for use in its business and
does not anticipate paying any cash dividends in the foreseeable future.
The closing sale price of the Company's Common Stock as reported in the
NASDAQ National Market System on March 24, 1997 was $13.50. The number of
stockholders of record of the Company's Common Stock as of March 24, 1997 was
2,257.
FUTURE OPERATING RESULTS; STOCK PRICE VOLATILITY
The Company's future operating results may vary substantially from
period to period. The timing and amount of the Company's license fee revenues
are subject to a number of factors that make estimation of revenues and
operating results prior to the end of a quarter extremely uncertain. The Company
has operated historically with little or no backlog and, as a result, license
fees in any quarter are dependent on orders booked and shipped in that quarter.
Sybase has experienced a seasonal pattern of license fee decline between the
fourth quarter and the succeeding first quarter contributing to lower total
revenues and operating earnings in the first quarter compared to the prior
fourth quarter. Sybase currently anticipates that revenues and earnings in the
first quarter of 1997 will be lower than in the fourth quarter of 1996. In
addition, the timing of closing of large license agreements increases the risk
of quarter-to-quarter fluctuations and the uncertainty of estimating quarterly
operating results. The Company has experienced a pattern of recording 50 percent
to 70 percent of its quarterly revenues in the third month of the quarter, with
a concentration of such revenues in the last week or two weeks of that third
month. The Company's operating expenses are based on projected annual and
quarterly revenue levels and are incurred approximately ratably throughout each
quarter. As a result, if projected revenues are not realized in the expected
period, the Company's operating results for that period would be adversely
affected and could result in an operating loss, as occurred in the first and
second quarters of 1996. Failure to achieve revenue, earnings, and other
operating and financial results as forecast or anticipated by brokerage firm and
industry analysts has in the past resulted, and could in the future result, in
an immediate and adverse effect on the market price of the Company's common
stock. The Company's rate of year-over-year growth slowed significantly in the
preceding six quarters compared to the year earlier periods. The Company may not
achieve in the future the relatively high rates of growth experienced by the
Company in 1991 through 1994 or the rates of growth projected for the software
markets in which Sybase competes.
The market for the Company's stock is highly volatile. The trading
price of the Company's common stock fluctuated widely in 1995 and 1996 and may
in the future continue to be subject to wide fluctuations in response to
quarterly variations in operating and financial results, announcements of
technological innovations, new products, or customer contracts won by the
Company or its competitors, changes in prices of the Company's or its
competitors' products and services, changes in product mix, changes in the
Company's revenue and revenue growth rates for the Company as a whole or for
individual geographic areas, business units, products or product categories, as
well as other events or factors. Statements or changes in opinions, ratings or
earnings estimates made by brokerage firms and industry analysts relating to the
market in which the Company does business, the Company's competitors, or the
Company or its products specifically, have resulted, and could in the future
result, in an immediate and adverse effect on the market price of the Company's
Common Stock. In particular, due to a variety of factors, the Company's stock
price declined significantly during the third quarter of 1994, the second
quarter of 1995 and the first quarter of 1996. In addition, the stock market has
from time to time experienced extreme price and volume fluctuations that have
particularly affected the market price for many high-technology companies and
which often have been unrelated to the operating performance of these companies.
An increased portion of the Company's revenues in recent quarters has
been derived from its international operations. Several of the Company's
international subsidiaries have been only recently acquired or formed. In
addition there have been several management and organizational changes within
the international operations. International revenues, in absolute dollars and as
a percentage of total revenues, may fluctuate in part due to the rapid growth
and, in some cases, the relative immaturity of international organizations. If
international revenues decrease, and sales from North American operations are
insufficient to compensate for such decrease, the Company's total revenues will
decrease, thereby adversely affecting net income. The Company's operations and
financial results could be significantly affected by factors associated with
international operations such as changes in foreign currency exchange rates and
uncertainties relative to regional economic circumstances, political instability
in emerging markets and difficulties in staffing and managing foreign
operations, as well as by other risks associated with international activities.
The market for the Company's software products and services is
extremely competitive. For a discussion of certain risks associated with
competition, see "Item 1, Business -- Competition." Existing and future
competition or changes by the Company in its product offerings or product
pricing structure could result in an immediate reduction in the prices of the
Company's products. The Company introduced changes in its pricing and licensing
structure in the first quarter of 1996 that increased the prices for certain
products or configurations, and reduced the prices for other products and
configurations. The Company will introduce price and licensing changes from time
to time in the future. If recently implemented or future changes in the
Company's products, pricing structure or existing or future competition, for
example from
14
<PAGE> 16
Microsoft, were to result in significant revenue declines, the Company's
business and financial results would be adversely affected.
The Company's future results will depend in part on its ability to
enhance its existing products and to introduce new products, on a timely and
cost-effective basis, that meet dynamic customer requirements. See "Item 1
Business -- Product Development."
Sybase's results will also depend increasingly on the ability of its
products to interoperate and perform well with existing and future leading,
industry-standard application software products intended to be used in
connection with relational database management systems. Failure to meet existing
or future interoperability and performance requirements of certain independent
vendors marketing such applications in a timely manner has in the past and could
in the future adversely affect the market for Sybase's products. Certain leading
applications will not be interoperable with Sybase RDBMSs until certain features
are added to the Company's RDBMS and others may never be available on Sybase's
RDBMS. In addition, the Company's application development tools, database design
tools and certain middleware products are designed for use with RDBMSs offered
by the Company's competitors. Vendors of non-Sybase RDBMSs and related products
may become less willing in the future to provide the Company with access to
products, technical information and marketing and sales support. If existing and
potential customers of the Company who use non-Sybase RDBMSs refrain from
purchasing such products due to concerns that over time the development,
quality, and support of products for non-Sybase RDBMSs will diminish, the
Company's business, results of operations and financial condition could be
materially and adversely affected.
Commercial acceptance of the Company's products and services could be
adversely affected by critical or negative statements or reports by brokerage
firms, industry and financial analysts, and industry periodicals concerning the
Company, its products, business, or competitors, or by the advertising or
marketing efforts of competitors or other factors that could affect customer
perception, such as the criticism of the scalability of the Company's SQL Server
10 database product experienced in 1995. In addition, customer perception of
Sybase and its products could be adversely affected by financial results
reported for the 1995 fiscal year and the first nine months of 1996 and 1996
fiscal years and by press reports related thereto.
The success of the Company also depends in part on its ability to
attract and retain qualified technical, managerial, sales and marketing
personnel. The competition for such personnel is intense in the software
industry. The failure to effectively recruit, train and retain such personnel or
high rates of employee turn-over, particularly among engineering or sales staff,
could adversely affect the Company's product development efforts, product sales
and other aspects of the Company's operations and results. See "Item 1, Business
- -- Employees."
Sybase currently enters most of its North American customer orders in
its Burlington, Massachusetts operations center and ships all of its products in
North America (other than its Powersoft products) from its Emeryville,
California distribution facility. Because of the pattern of recording a high
percentage of quarterly revenues within the last week or two weeks of each
quarter, the closure or inoperability of one or both of these facilities during
such weeks due to natural calamity or due to a systems or power failure could
have a material adverse effect on the Company's ability to record revenues for
such quarter.
In 1994 and 1995 the Company acquired Powersoft and several other
companies. In February 1996, the Company merged with Visual Components, Inc. In
February 1997, the Company acquired Purchase Net Inc. The Company will acquire
other distributors, companies, products, or technologies in the future. The
achievement of the desired benefits of these and future acquisitions will depend
in part upon whether the integration of the acquired businesses is achieved in
an efficient and effective manner. The successful combination of businesses will
require, among other things, integration of the companies' related product
offerings and coordination of their sales, marketing and research and
development efforts. The difficulties of such coordination may be increased by
the geographic distance between separate organizations. The Company may be
unable to integrate effectively these or future acquired businesses, and may not
obtain the anticipated or desired benefits of such acquisitions. Such
acquisitions may result in costs or liabilities that could adversely effect the
Company's results of operations and financial condition. In addition,
acquisitions or changes in business or market conditions may cause the Company
to revise its plans, which could result in unplanned expenses or a loss of
anticipated benefits from past investments.
A substantial portion of the Company's revenues from the licensing of
application development tools and middleware for use with RDBMSs offered by the
Company's competitors. There can also be no assurance that existing and
potential customers who use non-Sybase RDBMSs will not refrain from purchasing
the Company's products due to concerns that the development, quality and support
of such products for non-Sybase RDBMSs will diminish. Vendors of non-Sybase
RDBMSs and related products may become less willing than they have previously
been to provide the Company with access to products, technical information, and
marketing and sales support. These factors could impair Powersoft's ability to
continue to develop and support advanced application development tools for use
with non-Sybase RDBMSs and could result in reduced revenues from the licensing
of such products.
15
<PAGE> 17
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated by reference to
the section entitled "Selected Financial Data" of the Registrant's 1996 Annual
Report to Stockholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this Item is incorporated by reference to
the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of the Registrant's 1996 Annual Report to
Stockholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated by reference to
the Consolidated Financial Statements, related notes thereto and Report of
Independent Auditors which appear in the Registrant's 1996 Annual Report to
Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The information required by this item with respect to identification of
directors is incorporated by reference to the information contained in the
section captioned "Election of Directors" in the Registrant's definitive Proxy
Statement for the Annual Meeting of Stockholders to be held May 20, 1997 (the
"Proxy Statement"), to be filed with the Commission within 120 days after the
end of the Registrant's fiscal year ended December 31, 1996. For information
with respect to the executive officers of the Registrant, see "Executive
Officers of the Registrant" at the end of Part I of this Report on Form 10-K.
The information required by this item with respect to the information
required under Item 405 of Regulation S-K is incorporated by reference to the
information contained in the section captioned "Compliance With Section 16(a) of
the Exchange Act" in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to
the information contained in the section captioned "Executive Compensation" in
the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to
the information contained in the section captioned "Share Ownership by Principal
Stockholders and Management" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to
the information contained in the section captioned "Employment Agreements and
Certain Transactions" in the Proxy Statement.
16
<PAGE> 18
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report on Form
10-K:
1. Financial Statements. The following Consolidated Financial
Statements of Sybase, Inc. and Report of Independent Auditors are incorporated
by reference to the Registrant's 1996 Annual Report to Stockholders:
<TABLE>
<CAPTION>
Pages Located
in 1996 Annual
Report to
Stockholders
------------
<S> <C>
Report of Independent Auditors 27
Consolidated Balance Sheets as of December 31, 1996 and 1995 28
Consolidated Statements of Income for the Three Years Ended
December 31, 1996 29
Consolidated Statement of Stockholders' Equity for the Three
Years Ended December 31, 1996 30
Consolidated Statements of Cash Flows for the Three Years
Ended December 31, 1996 31
Notes to Consolidated Financial Statements 32-45
</TABLE>
2. Financial Statement Schedules. The following financial statement
schedules of Sybase, Inc. for the years ended December 31, 1996, 1995 and 1994
are filed as part of this Report on Form 10-K and should be read in conjunction
with the Consolidated Financial Statements, and related notes thereto, of
Sybase, Inc.
<TABLE>
<CAPTION>
Form
10-K
Schedule Page
-------- ----
<S> <C>
II Valuation and Qualifying Accounts 20
Report Of Independent Accountants 21
</TABLE>
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set forth
herein is included in the Consolidated Financial Statements or notes thereto.
3. Executive Compensation Plans and Exhibits. The management
contracts and compensatory plans required to be filed as part of, or
incorporated by reference into, this Report are: (i) 1991 Employee Stock
Purchase Plan, as amended, Exhibit 10.2, (ii) 1993 Sybase Executive Incentive
Plan, Exhibit 10.3, (iii) Sybase, Inc. 401(K) Plan, as amended, Exhibit 10.4,
(iv) 1992 Director Stock Option Plan, as amended, Exhibit 10.5, (v)1988 Stock
Option Plan, as amended, Exhibit 10.1, (vi) Executive Deferred Compensation
Plan, Exhibit 10.6, (vii) 1996 Stock Plan and form of Stock Option Agreement,
Exhibit 10.20, (viii) Form of Statement of Employment Terms, Exhibit 10.21, (ix)
Employment Agreement dated as of November 11, 1994 among Sybase, Powersoft
Corporation and Mitchell E. Kertzman, Exhibit 10.13, (x) Employment Agreement
dated as of November 11, 1994 among Sybase, Powersoft Corporation and David
Litwack, Exhibit 10.14, (xi) Employment Agreement between Sybase, Inc. and
Michael Forster dated as of April 1, 1996, Exhibit 10.22.
The following Exhibits are filed as part of, or incorporated by
reference into, this Report on Form 10-K:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
3.1 (4) Restated Certificate of Incorporation of Registrant, as
amended.
3.2 (6) Bylaws of Registrant, as amended.
4.1 Preferred Share Rights Agreement dated as of March 24,
1992 between Registrant and The First National Bank of
Boston, as amended, (incorporated herein by reference to
Exhibit 4.2 of the Registrant's Registration Statement
on Form S-8 (file no. 33-81692) filed July 18,1994).
</TABLE>
17
<PAGE> 19
10.1 (7) 1988 Stock Option Plan and Forms of Incentive Stock Option
Agreements and Nonstatutory Stock Option Agreements, as amended.
10.2 1991 Employee Stock Purchase Plan and 1991 Foreign Subsidiary
Employee Stock Purchase Plan, as amended.
10.3 (6) Sybase Executive Incentive Plan.
10.4 (1) Sybase, Inc. 401(k) Plan, as amended.
10.5 (7) 1992 Director Stock Option Plan, as amended.
10.6 (6) Executive Deferred Compensation Plan
10.7 (1) Standard Office Lease dated March 10, 1988 between Registrant and
Bay Center Associates.
10.8 (1) Standard Office Lease dated April 17, 1989 between Registrant and
P.O. Partners
10.9 (1) Standard Office Lease dated April 21, 1989 between Registrant and
Christie Avenue Partners.
10.10 (1) Form of Indemnification Agreement.
10.11 (3) Second Amendment dated as of November 24, 1992 to Standard Office
Lease dated April 21, 1989 between the Registrant and Christie
Avenue Partners.
10.12 (3) Lease dated October 1, 1992 between JS-Bay Center Associates and
the Registrant.
10.13 (6) Employment Agreement dated as of November 11, 1994 among Sybase,
Powersoft Corporation and Mitchell E. Kertzman.
10.14 (6) Employment Agreement dated as of November 11, 1994 among Sybase,
Powersoft Corporation and David Litwack.
10.15 (5) Powersoft Corporation 1984 Incentive Stock Option Plan, as
amended.
10.16 (5) Powersoft Corporation Form of Incentive Option Granted under the
1984 Incentive Stock Option Plan
10.17 (5) Powersoft Corporation 1994 Amended and Restated Incentive and
Non-Qualified Stock Option Plan
10.18 (5) Powersoft Corporation Forms of Incentive and Non-Qualified Stock
Option Granted under the 1994 Amended and Restated Incentive and
Non-Qualified Stock Option Plan
10.19 (5) Powersoft Corporation 1994 Amended and Restated Employee Stock
Purchase Plan
10.20 1996 Stock Plan, as amended, and form of Stock Option Agreement
10.21 (7) Form of Statement of Employment Terms
10.22 Employment Agreement between Sybase, Inc. and Michael Forster
dated as of April 1, 1996.
11.1 Computation of Earnings per share.
13.1 (8) Proxy for 1997 Annual Meeting of Stockholders.
13.2 Pages 15 - 48 of the Registrant's Annual Report to Stockholders
for the fiscal year ended December 31, 1996 (except for the
portions of the 1996 Annual Report to the Stockholders expressly
incorporated by reference in the Report on Form 10-K, the 1996
Annual Report to Stockholders is furnished for the information of
the Securities and Exchange Commission and is not to be deemed
"filed").
18
<PAGE> 20
21 Subsidiaries of Registrant.
23.1 Consent of Independent Auditors.
23.2 Consent of Independent Accountants
27 Financial Data Schedule
(1) Incorporated by reference to exhibits filed in response to Item 16(a),
"Exhibits," of the Company's Registration Statement on Form S-1 (File No.
33-41549) declared effective on August 13, 1991.
(2) Incorporated by reference to exhibits filed in response to Item 16(a),
"Exhibits," of the Company's Annual Report on Form 10-K for the year ended
December 31, 1991.
(3) Incorporated by reference to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1992, filed on March 29, 1993.
(4) Incorporated by reference to Amendment No. 1 to the Company's Registration
Statement on Form S-4 filed March 8, 1994 (File No. 33-75462).
(5) Incorporated by reference to the Registrant's Registration Statement on Form
S-8 (file no. 33-89334) filed on February 10, 1995.
(6) Incorporated by reference to exhibits filed in response to Item 16(a),
"Exhibits," of the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
(7) Incorporated by reference to exhibits filed in response to Item 16(a),
"Exhibits," of the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
(8) To be filed with Securities and Exchange Commission not later than 120 days
after the end of the period covered by this Report on Form 10-K.
(b) Reports on Form 8-K. The Company filed no Reports on Form 8-K
during the quarter ended December 31, 1996.
19
<PAGE> 21
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
--------------------
SYBASE, INC.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
DESCRIPTION Balance at -----------------------------------
Beginning Charged to Costs Charged to Other Deletions Balance at End
of Period and Expenses Accounts of Period
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Deducted from asset accounts:
Allowance for doubtful accounts $19,304,000 $11,713,000 $34,505,000 A $37,280,000 B $28,242,000
Allowance for amortization of intangible
assets 21,969,000 6,996,000 28,965,000
----------- ----------- ------------- ------------- -----------
Totals $41,273,000 $18,709,000 $34,505,000 $37,280,000 $57,207,000
=========== =========== ============= ============= ===========
Year ended December 31, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts $15,903,000 $ 867,000 $27,802,000 A $25,268,000 B $19,304,000
Allowance for amortization of intangible
assets 12,996,000 8,973,000 21,969,000
----------- ----------- ------------- ------------- -----------
Totals $28,899,000 $ 9,840,000 $27,802,000 $25,268,000 $41,273,000
=========== =========== ============= ============= ===========
Year ended December 31, 1994:
Deducted from asset accounts:
Allowance for doubtful accounts $11,481,000 $ 1,486,000 $15,679,000 A $12,743,000 B $15,903,000
Allowance for amortization of intangible
assets 7,806,000 5,190,000 12,996,000
----------- ----------- ------------- ------------- -----------
Totals $19,287,000 $ 6,676,000 $15,679,000 $12,743,000 $28,899,000
=========== =========== ============= ============= ===========
</TABLE>
- ----------
A Charged against revenue
B Uncollectable accounts written off and recoveries
20
<PAGE> 22
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Powersoft Corporation:
We have audited the accompanying consolidated balance sheets of
Powersoft Corporation as of December 31, 1994 and 1993 and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for each of the three years in the period ended December 31, 1994. The
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. In February 1994, the Company acquired WATCOM Corporation in a
transaction accounted for under the pooling of interests method (see Note K). We
did not audit the financial statements of WATCOM Corporation whose financial
statements represent 20% of consolidated revenues for the year ended December
31, 1992. These statements were examined by another auditor whose report thereon
has been furnished to us, and our opinion expressed herein, insofar as it
relates to the amounts included for WATCOM Corporation is based solely upon the
report of another auditor.
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 significant 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, based on our audits and the report of another auditor,
the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Powersoft Corporation as of
December 31, 1994 and 1993 and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for each of the three
years in the period ended December 31, 1994 in conformity with generally
accepted accounting principles.
In connection with our audit of the consolidated financial statements
referred to above, we have also audited the related financial statement
schedule. In our opinion, this financial statement schedule when considered in
relation to the basic financial statements taken as a whole presents fairly, in
all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 14, 1995
21
<PAGE> 23
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 on Form 10-K to
be signed on its behalf of the undersigned, thereunto duly authorized. SYBASE,
INC.
By: /s/ MITCHELL E. KERTZMAN
---------------------------------------------
March 24, 1997 Mitchell E. Kertzman
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report on 10-K has been signed by the following persons in the capacities
and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ MITCHELL E. KERTZMAN President, Chief Executive March 24, 1997
- ---------------------------- Officer (Principal Executive
(Mitchell E. Kertzman) Officer) and Director
/s/ ROBERT S. EPSTEIN Executive Vice President March 24, 1997
- ---------------------------- and Director
(Robert S. Epstein)
/s/ JACK L. ACOSTA Senior Vice President and March 24, 1997
- ---------------------------- Chief Financial Officer (Principal
(Jack L. Acosta) Financial Officer)
/s/ PETER F. PERVERE Vice President and Corporate March 24, 1997
- ---------------------------- Controller (Principal Accounting
(Peter F. Pervere) Officer)
/s/ MARK B. HOFFMAN Chairman of the Board March 24, 1997
- ----------------------------
(Mark B. Hoffman)
/s/ RICHARD C. ALBERDING Director March 24, 1997
- ----------------------------
(Richard C. Alberding)
/s/ L. WILLIAM KRAUSE Director March 24, 1997
- ----------------------------
(L. William Krause)
/s/ DAVID E. LIDDLE Director March 24, 1997
- ----------------------------
(David E. Liddle)
/s/ ALAN B. SALISBURY Director March 24, 1997
- ----------------------------
(Alan B. Salisbury)
/s/ ROBERT P. WAYMAN Director March 24, 1997
- ----------------------------
(Robert P. Wayman)
/s/ JEFFREY T. WEBBER Director March 24, 1997
- ----------------------------
(Jeffrey T. Webber)
</TABLE>
22
<PAGE> 24
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3.1 (4) Restated Certificate of Incorporation of Registrant, as
amended.
3.2 (6) Bylaws of Registrant, as amended.
4.1 Preferred Share Rights Agreement dated as of March 24, 1992
between Registrant and The First National Bank of Boston, as
amended, (incorporated herein by reference to Exhibit 4.2 of
the Registrant's Registration Statement on Form S-8 (file no.
33-81692) filed on July 18, 1994).
10.1 (7) 1988 Stock Option Plan and Forms of Incentive Stock Option
Agreements and Nonstatutory Stock Option Agreements, as
amended.
10.2 1991 Employee Stock Purchase Plan and 1991 Foreign Subsidiary
Employee Stock Purchase Plan, as amended.
10.3 (6) Sybase Executive Incentive Plan.
10.4 (1) Sybase, Inc. 401(k) Plan, as amended.
10.5 (7) 1992 Director Stock Option Plan, as amended.
10.6 (6) Executive Deferred Compensation Plan
10.7 (1) Standard Office Lease dated March 10, 1988 between Registrant
and Bay Center Associates.
10.8 (1) Standard Office Lease dated April 17, 1989 between Registrant
and P.O. Partners
10.9 (1) Standard Office Lease dated April 21, 1989 between Registrant
and Christie Avenue Partners.
10.10 (1) Form of Indemnification Agreement.
10.11 (3) Second Amendment dated as of November 24, 1992 to Standard
Office Lease dated April 21, 1989 between the Registrant and
Christie Avenue Partners.
10.12 (3) Lease dated October 1, 1992 between JS-Bay Center Associates
and the Registrant.
10.13 (6) Employment Agreement dated as of November 11, 1994 among
Sybase, Powersoft Corporation and Mitchell E. Kertzman.
10.14 (6) Employment Agreement dated as of November 11, 1994 among
Sybase, Powersoft Corporation and David Litwack.
10.15 (5) Powersoft Corporation 1984 Incentive Stock Option Plan, as
amended.
10.16 (5) Powersoft Corporation Form of Incentive Option Granted
under the 1984 Incentive Stock Option Plan
10.17 (5) Powersoft Corporation 1994 Amended and Restated Incentive and
Non-Qualified Stock Option Plan
10.18 (5) Powersoft Corporation Forms of Incentive and Non-Qualified
Stock Option Granted under the 1994 Amended and Restated
Incentive and Non-Qualified Stock Option Plan
10.19 (5) Powersoft Corporation 1994 Amended and Restated Employee
Stock Purchase Plan
10.20 1996 Stock Plan, as amended, and form of Stock Option
Agreement
10.21 (7) Form of Statement of Employment Terms
23
<PAGE> 25
10.22 Employment Agreement between Sybase, Inc. and Michael Forster
dated as of April 1, 1996.
11.1 Computation of Earnings per share.
13.1 (8) Proxy for 1997 Annual Meeting of Stockholders.
13.2 Pages 15 - 48 Registrant's Annual Report to Stockholders for
the fiscal year ended December 31, 1996 (except for the
portions of the 1996 Annual Report to the Stockholders
expressly incorporated by reference in the Report on Form
10-K, the 1996 Annual Report to Stockholders is furnished for
the information of the Securities and Exchange Commission and
is not to be deemed "filed").
21 Subsidiaries of Registrant.
23.1 Consent of Independent Auditors.
23.2 Consent of Independent Accountants
27 Financial Data Schedule
(1) Incorporated by reference to exhibits filed in response to Item 16(a),
"Exhibits," of the Company's Registration Statement on Form S-1 (File No.
33-41549) declared effective on August 13, 1991.
(2) Incorporated by reference to exhibits filed in response to Item 16(a),
"Exhibits," of the Company's Annual Report on Form 10-K for the year ended
December 31, 1991.
(3) Incorporated by reference to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1992, filed on March 29, 1993.
(4) Incorporated by reference to Amendment No. 1 to the Company's Registration
Statement on Form S-4 filed March 8, 1994 (File No. 33-75462).
(5) Incorporated by reference to the Registrant's Registration Statement on Form
S-8 (file no. 33-89334) filed on February 10, 1995.
(6) Incorporated by reference to exhibits filed in response to Item 16(a),
"Exhibits," of the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
(7) Incorporated by reference to exhibits filed in response to Item 16(a),
"Exhibits," of the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
(8) To be filed with Securities and Exchange Commission not later than 120 days
after the end of the period covered by this Report on Form 10-K.
24
<PAGE> 1
EXHIBIT 10.2
SYBASE, INC.
1991 AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN
(As amended on January 21, 1997)
1. Purpose
This Amended and Restated Sybase, Inc. 1991 Employee Stock
Purchase Plan (the "Plan") is designed to encourage and assist employees of
Sybase, Inc. ("Sybase") and participating subsidiaries (together, the "Company")
to acquire an equity interest in the Company through the purchase of shares of
Sybase common stock (the "Common Stock").
2. Administration
The Plan shall be administered by the Board of Directors of
Sybase (or a committee of "disinterested" directors no fewer in number than
required by Rule 16b-3 of the Securities and Exchange Commission ("Rule 16b-3")
as in effect with respect to the Company from time to time, which in either case
is referred to as the "Board") in accordance with Rule 16b-3. The Board may from
time to time select a committee or persons (the "Administrator"), to be
responsible for any matters for which a "disinterested administrator" is not
required by Rule 16-b. Subject to the express provisions of the Plan, to the
overall supervision of the Board, and to the limitations of Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"), the Administrator may
administer and interpret the Plan in any manner it believes to be desirable, and
any such interpretation shall be conclusive and binding on the Company and all
participants.
3. Number of Shares
(a) The Company has reserved for sale under the Plan 6,000,000
shares of Common Stock (after giving effect to the November 1993 2-for-1 stock
split) less any shares sold under the Sybase 1991 Amended and Restated Foreign
Subsidiary Employee Stock Purchase Plan. Shares sold under the Plan may be newly
issued shares or shares reacquired in private transactions or open market
purchases, but all shares sold under the Plan, regardless of source, shall be
counted against the 6,000,000 share limitation.
(b) In the event of any reorganization, recapitalization,
stock split, reverse stock split, stock dividend, combination of shares, merger,
consolidation, offering of rights, or other similar change in the capital
structure of the Company, the Board may make such adjustment, if any, as it
deems appropriate in the number, kind, and purchase price of the shares
available for purchase under the Plan and in the maximum number of shares
subject to any option under the Plan.
4. Eligibility Requirements
(a) Each employee of the Company, except those described in
the next paragraph, shall become eligible to participate in the Plan in
accordance with Section 5
<PAGE> 2
on the first Enrollment Date on or following commencement of his or her
employment by the Company or following such period of employment as is
designated by the Board from time to time. Participation in the Plan is entirely
voluntary.
(b) The following employees are not eligible to participate in
the Plan:
(i) employees who would, immediately upon enrollment in
the Plan, own directly or indirectly, or hold options or rights to acquire stock
possessing, five percent or more of the total combined voting power or value of
all classes of stock of Sybase or any subsidiary of Sybase;
(ii) employees who are customarily employed by the Company
less than 20 hours per week or less than five months in any calendar year; and
(iii) employees who are prohibited by the laws of the
nation of their residence or employment from participating in the Plan.
Employees who are also directors or officers of the Company may participate only
in accordance with Rule 16b-3 of the Securities and Exchange Commission.
(c) "Employee" shall mean any individual who is an employee of
the Company or a Participating Subsidiary within the meaning of Section 3401(c)
of the Code and the Treasury Regulations thereunder. "Subsidiary" shall mean any
corporation described in Section 425(e) or (f) of the Code. "Participating
Subsidiary" shall mean a subsidiary which has been designated by the
Administrator as covered by the Plan.
5. Enrollment
Any eligible employee may enroll or re-enroll in the Plan each
year as of the first trading day of (i) the month immediately following the
closing of the Company's initial public offering of shares of its Common Stock
on a Registration Statement on Form S-1 (except that if such closing occurs
during the last month of a fiscal quarter (e.g. September), then the first
Enrollment Date will be the first trading day of the second month of the quarter
immediately following the closing (e.g. November)), (ii) the sixth month
following such month, and (iii) each yearly anniversary of such months (e.g. any
March and September or May and November), or such other days as may be
established by the Board from time to time (the "Enrollment Dates"). In order to
enroll, an eligible employee must complete, sign, and submit to the Company an
enrollment form. Any enrollment form received by the Company by the 15th day of
the month preceding an Enrollment Date (or by the Enrollment Date in the case of
employees hired after such 15th day), or such other date established by the
Administrator from time to time, will be effective on that Enrollment Date. For
purposes of the Plan, a "trading day" is any day on which regular trading occurs
on any established stock exchange or market system on which the Common Stock is
traded.
6. Grant of Option on Enrollment
(a) Enrollment or re-enrollment by a participant in the Plan
on an Enrollment Date will constitute the grant by the Company to the
participant of an option to purchase shares of Common Stock from the Company
under the Plan. Any participant
<PAGE> 3
whose option expires and who has not withdrawn from the Plan will automatically
be re-enrolled in the Plan and granted a new option on the Enrollment Date
immediately following the date on which the option expires.
(b) Except as provided in Section 9, each option granted under
the Plan shall have the following terms:
(i) each option granted under the Plan will have a term of
not more than 24 months or such shorter option period as may be established by
the Board from time to time; notwithstanding the foregoing, however, whether or
not all shares have been purchased thereunder, the option will expire on the
earlier to occur of (A) the completion of the purchase of shares on the last
Purchase Date occurring within 24 months after the Enrollment Date for such
option, or such shorter option period as may be established by the Board before
an Enrollment Date for all options to be granted on such date or (B) the date on
which the employee's participation in the Plan terminates for any reason;
(ii) payment for shares purchased under the option will be
made only through payroll withholding in accordance with Section 7;
(iii) purchase of shares upon exercise of the option will
be effected only on the Purchase Dates established in accordance with Section 8;
(iv) the price per share under the option will be
determined as provided in Section 8;
(v) the number of shares available for purchase under the
option will, unless otherwise established by the Board before an Enrollment Date
for all options to be granted on such date, be determined by dividing $25,000 by
the fair market value of a share of Common Stock on the Enrollment Date and by
multiplying the result by the number of calendar years included in whole or in
part in the period from grant to expiration of the option;
(vi) the option (taken together with all other options
then outstanding under this and all other similar stock purchase plans of Sybase
and any subsidiary of Sybase, collectively "Options") will in no event give the
participant the right to purchase shares at a rate per calendar year which
accrues in excess of $25,000 of fair market value of such shares, less the fair
market value of any shares accrued and already purchased during such year under
Options which have expired or terminated, determined at the applicable
Enrollment Dates; and
(vii) the option will in all respects be subject to the
terms and conditions of the Plan, as interpreted by the Administrator from time
to time.
7. Payroll and Tax Withholding; Use by Company
(a) Each participant shall elect to have amounts withheld from
his or her compensation paid by the Company during the option period, at a rate
equal to any whole percentage up to a maximum of 10 percent, or such lesser
percentage as the Board may establish from time to time before an Enrollment
Date. Compensation includes regular salary payments, annual and quarterly
performance bonuses, hire-on bonuses,
<PAGE> 4
cash recognition awards, commissions, overtime pay, shift premiums, and elective
contributions by the participant to qualified employee benefit plans, but
excludes all other payments including, without limitation, long-term disability
or workers compensation payments, car allowances, employee referral bonuses,
relocation payments, expense reimbursements (including but not limited to
travel, entertainment, and moving expenses), salary gross-up payments, and
non-cash recognition awards. The participant shall designate a rate of
withholding in his or her enrollment form and may elect to increase or decrease
the rate of contribution effective as of any Enrollment Date, by delivery to the
Company, not later than 15 days before such Enrollment Date, of a written notice
indicating the revised withholding rate.
(b) Payroll withholdings shall be credited to an account
maintained for purposes of the Plan on behalf of each participant, as soon as
administratively feasible after the withholding occurs. The Company shall be
entitled to use the withholdings for any corporate purpose, shall have no
obligation to pay interest on withholdings to any participant, and shall not be
obligated to segregate withholdings.
(c) Upon disposition of shares acquired by exercise of an
option, the participant shall pay, or make provision adequate to the Company for
payment of, all federal, state, and other tax (and similar) withholdings that
the Company determines, in its discretion, are required due to the disposition,
including any such withholding that the Company determines in its discretion is
necessary to allow the Company to claim tax deductions or other benefits in
connection with the disposition. A participant shall make such similar
provisions for payments that the Company determines, in its discretion, are
required due to the exercise of an option, including such provisions as are
necessary to allow the Company to claim tax deductions or other benefits in
connection with the exercise of the option.
8. Purchase of Shares
(a) On the last trading day of each month immediately
preceding a month containing an Enrollment Date, or on such other days as may be
established by the Board from time to time, prior to an Enrollment Date for all
options to be granted on an Enrollment Date (each a "Purchase Date"), the
Company shall apply the funds then credited to each participant's payroll
withholdings account to the purchase of whole shares of Common Stock. The cost
to the participant for the shares purchased under any option shall be not less
than 85 percent of the lower of:
(i) the fair market value of the Common Stock on the
Enrollment Date for such option; or
(ii) the fair market value of the Common Stock on that
Purchase Date.
The "fair market value" of the Common Stock on a date shall be the closing price
of the Common Stock on such date on any established stock exchange or market
system if the Common Stock is traded on such an exchange or market system (and
the largest such exchange or market system if the Common Stock is traded on more
than one), if the Common Stock is not so traded then the mean between the bid
and asked prices for Common Stock on such date as quoted on NASDAQ or reported
in The Wall Street
<PAGE> 5
Journal or similar publication if such prices are so quoted or reported, or the
fair market value on such date as determined by the Administrator if shares of
Common Stock are not so traded, quoted, or reported.
(b) Any funds in an amount less than the cost of one share of
Common Stock left in a participant's payroll withholdings account on a Purchase
Date shall be carried forward in such account for application on the next
Purchase Date, and any additional amount shall be distributed to the
participant.
(c) If at any Purchase Date, the shares available under the
Plan are less than the number all participants would otherwise be entitled to
purchase on such date, purchases shall be reduced proportionately to eliminate
the deficit. Any funds that cannot be applied to the purchase of shares due to
such a reduction shall be refunded to participants as soon as administratively
feasible.
9. Grant of Additional Options
In addition to the options which may be granted under Section
6 of this Plan, the Board, in its sole discretion, may grant, to each employee
satisfying the eligibility requirements of Section 4, additional options, for a
term not to exceed 27 months and for an identical number of shares. The options
granted hereunder shall be subject to the limitations of Section 6(b)(v) and
6(b)(vi); provided, however, that immediately before the grant of such
additional options, the limitations imposed thereby upon each recipient's
Options subject to payroll withholdings shall be adjusted to the minimum extent
necessary to permit the grant. The option price shall not be less than 85% of
the lower of (i) the fair market value of the stock on the grant date for such
option, or (ii) the fair market value on the date of exercise. The option will
be subject to such additional terms and conditions, not inconsistent with the
terms of the Plan as interpreted by the Administrator, as may be established
from time to time by the Board.
10. Withdrawal from the Plan
A participant may withdraw from the Plan in full (but not in
part) at any time, effective after written notice thereof is received by the
Company. All funds credited to a participant's payroll withholdings account
shall be distributed to him or her without interest within 60 days after notice
of withdrawal is received by the Company. Any eligible employee who has
withdrawn from the Plan may enroll in the Plan again on any subsequent
Enrollment Date in accordance with the provisions of Section 5.
11. Termination of Employment
Participation in the Plan terminates immediately when a
participant ceases to be employed by the Company for any reason whatsoever
(including death or disability) or otherwise becomes ineligible to participate
in the Plan. As soon as administratively feasible after termination, the Company
shall pay to the participant or his or her beneficiary or legal representative,
all amounts credited to the participant's payroll withholdings account;
provided, however, that if a participant ceases to be employed by the Company
because of the commencement of employment with a Subsidiary of the Company that
is not a Participating Subsidiary, funds then credited to such participant's
payroll withholdings account shall be applied to the purchase of whole
<PAGE> 6
shares of Common Stock at the next Purchase Date and any funds remaining after
such purchase shall be paid to the participant.
12. Designation of Beneficiary
(a) Each participant may designate one or more beneficiaries
in the event of death and may, in his or her sole discretion, change such
designation at any time. Any such designation shall be effective upon receipt in
written form by the Company and shall control over any disposition by will or
otherwise.
(b) As soon as administratively feasible after the death of a
participant, amounts credited to his or her account shall be paid in cash to the
designated beneficiaries or, in the absence of a designation, to the executor,
administrator, or other legal representative of the participant's estate. Such
payment shall relieve the Company of further liability with respect to the Plan
on account of the deceased participant. If more than one beneficiary is
designated, each beneficiary shall receive an equal portion of the account
unless the participant has given express contrary written instructions.
13. Assignment
(a) The rights of a participant under the Plan shall not be
assignable by such participant, by operation of law or otherwise. No participant
may create a lien on any funds, securities, rights, or other property held by
the Company for the account of the participant under the Plan, except to the
extent that there has been a designation of beneficiaries in accordance with the
Plan, and except to the extent permitted by the laws of descent and distribution
if beneficiaries have not been designated.
(b) A participant's right to purchase shares under the Plan
shall be exercisable only during the participant's lifetime and only by him or
her, except that a participant may direct the Company in the enrollment form to
issue share certificates to the participant and his or her spouse in community
property, to the participant jointly with one or more other persons with right
of survivorship, or to certain forms of trusts approved by the Administrator.
14. Administrative Assistance
If the Administrator in its discretion so elects, it may
retain a brokerage firm, bank or other financial institution to assist in the
purchase of shares, delivery of reports, or other administrative aspects of the
Plan. If the Administrator so elects, each participant shall (unless prohibited
by the laws of the nation of his or her employment or residence) be deemed upon
enrollment in the Plan to have authorized the establishment of an account on his
or her behalf at such institution. Shares purchased by a participant under the
Plan shall be held in the account in the name in which the share certificate
would otherwise be issued pursuant to Section 13(b).
15. Costs
All costs and expenses incurred in administering the Plan
shall be paid by the Company, except that any stamp duties or transfer taxes
applicable to participation in the Plan may be charged to the account of such
participant by the Company. Any
<PAGE> 7
brokerage fees for the purchase of shares by a participant shall be paid by the
Company, but brokerage fees for the resale of shares by a participant shall be
borne by the participant.
16. Equal Rights and Privileges
All eligible employees shall have equal rights and privileges
with respect to the Plan so that the Plan qualifies as an "employee stock
purchase plan" within the meaning of Section 423 of the Code and the related
Treasury Regulations. Any provision of the Plan which is inconsistent with
Section 423 of the Code shall without further act or amendment by the Company or
the Board be reformed to comply with the requirements of Section 423. This
Section 16 shall take precedence over all other provisions of the Plan.
17. Applicable Law
The Plan shall be governed by the substantive laws (excluding
the conflict of laws rules) of the State of California.
18. Modification and Termination
(a) The Board may amend, alter, or terminate the Plan at any
time, including amendments to outstanding options. No amendment shall be
effective unless within 12 months after it is adopted by the Board, it is
approved by the holders of a majority of the votes cast at a duly held
shareholders' meeting at which a quorum of the voting power of the Company is
represented in person or by proxy, if such amendment would:
(i) increase the number of shares reserved for purchase
under the Plan; or
(ii) require shareholder approval in order to comply with
SEC Rule 16b-3.
(b) In the event the Plan is terminated, the Board may elect
to terminate all outstanding options either immediately or upon completion of
the purchase of shares on the next Purchase Date, or may elect to permit options
to expire in accordance with their terms (and participation to continue through
such expiration dates). If the options are terminated prior to expiration, all
funds contributed to the Plan that have not been used to purchase shares shall
be returned to the participants as soon as administratively feasible.
(c) In the event of the sale of all or substantially all of
the assets of Sybase or the Company, or the merger of Sybase or the Company with
or into another corporation, or the dissolution or liquidation of Sybase, a
Purchase Date shall occur on the trading day immediately preceding the date of
such event, unless otherwise provided by the Board in its sole discretion,
including provision for the assumption or substitution of each option under the
Plan by the successor or surviving corporation, or a parent or subsidiary
thereof.
19. Rights as an Employee
<PAGE> 8
Nothing in the Plan shall be construed to give any person the
right to remain in the employ of the Company or to affect the Company's right to
terminate the employment of any person at any time with or without cause.
20. Rights as a Shareholder; Delivery of Certificates
Unless otherwise determined by the Board, certificates
evidencing shares purchased on any Purchase Date shall be delivered to
participants as soon as administratively feasible. Participants shall be treated
as the owners of their shares effective as of the Purchase Date.
21. Board and Shareholder Approval
The Plan was approved by the Board of Directors on April 30,
1991, and by the holders of a majority of the votes cast at a duly held
shareholders' meeting on June 13, 1991, at which a quorum of the voting power of
the Company was represented in person or by proxy. As amended and restated to
adopt amendments not requiring shareholder approval, the Plan was approved by
the Board of Directors on July 30, 1991. The Plan was amended by the Board of
Directors on January 28, 1993, January 27, 1994 and January 24, 1995 and such
amendments were approved by the holders of a majority of the votes cast at a
duly held shareholders' meeting on May 18, 1993, May 24, 1994 and May 23, 1995,
respectively. The Plan also was amended by the Board of Directors on January 21,
1997.
SYBASE, INC.
By: MITCHELL L. GAYNOR
---------------------------
Its: Vice President, General
Counsel and Secretary
Date: March 24, 1997
<PAGE> 9
SYBASE, INC.
1991 AMENDED AND RESTATED
FOREIGN SUBSIDIARY EMPLOYEE STOCK PURCHASE PLAN
(As Amended January 21, 1997)
1. Purpose
This Amended and Restated Sybase, Inc. 1991 Foreign Subsidiary
Employee Stock Purchase Plan (the "Plan") is designed to encourage and assist
employees of designated subsidiaries of Sybase, Inc. ("Sybase" or the "Company")
to acquire an equity interest in the Company through the purchase of shares of
Sybase common stock (the "Common Stock").
2. Administration
The Plan shall be administered by the Board of Directors of
Sybase or a committee (the "Committee") selected from time to time by the Board.
Subject to the express provisions of the Plan and to the overall supervision of
the Board, the Committee may administer and interpret the Plan in any manner it
believes to be desirable, and any such interpretation shall be conclusive and
binding on the Company and all participants. If and to the extent that Rule
16b-3 of the Securities and Exchange Commission ("Rule 16b-3") becomes
applicable to the Plan, the Board and the Committee shall use their best efforts
to cause the Plan to be administered in accordance therewith.
3. Number of Shares
(a) The Company has reserved for sale under the Plan 6,000,000
shares of Common Stock (after giving effect to the November 1993 2-for-1 stock
split) less any shares sold under the Sybase 1991 Amended and Restated Employee
Stock Purchase Plan. Shares sold under the Plan may be newly issued shares or
shares reacquired in private transactions or open market purchases, but all
shares sold under the Plan, regardless of source, shall be counted against the
6,000,000 share limitation.
(b) In the event of any reorganization, recapitalization,
stock split, reverse stock split, stock dividend, combination of shares, merger,
consolidation, offering of rights, or other similar change in the capital
structure of the Company, the Committee may make such adjustment, if any, as it
deems appropriate in the number, kind, and purchase price of the shares
available for purchase under the Plan and in the maximum number of shares
subject to any option under the Plan.
4. Designation of Subsidiaries; Employee Eligibility Requirements
(a) The Board may at any time designate one or more
Subsidiaries as participating in the Plan. The names of all Participating
Subsidiaries shall be shown on Exhibit A to the Plan, which shall be amended
from time to time to reflect additions and deletions of Participating
Subsidiaries; failure to show a Participating Subsidiary on Exhibit A shall not,
however, prevent otherwise eligible employees of that Subsidiary from
participating in the Plan. No Subsidiary participating in the Company's 1991
Employee Stock Purchase Plan may be designated for participating in the Plan.
<PAGE> 10
(b) Each employee of a Participating Subsidiary, except those
described in the next paragraph, shall become eligible to participate in the
Plan in accordance with Section 5 on the first Enrollment Date on or following
commencement of his or her employment by the Participating Subsidiary or
following such period of employment as is designated by the Board from time to
time. Participating in the Plan is entirely voluntary.
(c) Except to the extent otherwise determined by the Board or
provided by the Plan, the following employees are not eligible to participate in
the Plan:
(i) employees who would, immediately upon enrollment
in the Plan, own directly or indirectly, or hold options or rights to acquire
stock possessing, five percent or more of the total combined voting power or
value of all classes of stock of Sybase or any subsidiary of Sybase;
(ii) employees who are customarily employed by the
Participating Subsidiary less than 20 hours per week or less than five months in
any calendar year; and
(iii) employees who are prohibited by the laws of the
nation of their residence or employment from participating in the Plan.
Employees who are also directors or officers of the Company may participate only
in accordance with Rule 16b-3 of the Securities and Exchange Commission.
(d) "Employee" shall mean any individual who is an employee of
a Participating Subsidiary within the meaning of Section 3401(c) of the Internal
Revenue Code of 1986, as amended (the "Code") and the Treasury Regulations
thereunder. "Subsidiary" shall mean any corporation described in Section 425(e)
or (f) of the Code. "Participating Subsidiary" shall mean a subsidiary which has
been designated by the Committee as covered by the Plan.
5. Enrollment
Any eligible employee may enroll or re-enroll in the Plan each
year as of the first trading day of (i) the month immediately following the
closing of the Company's initial public offering of shares of its Common Stock
on a Registration Statement on Form S-1 (except that if such closing occurs
during the last month of a fiscal quarter (e.g., September), then the first
Enrollment Date will be the first trading day of the second month of the quarter
immediately following the closing (e.g., November)), (ii) the sixth month
following such month, and (iii) each yearly anniversary of such months (e.g.,
any March and September or May and November), or such other days as may be
established by the Board from time to time (the "Enrollment Dates"). In
addition, for purposes of participating in the Plan by an eligible employee
following termination of such employee's participation in the Sybase 1991
Amended and Restated Employee Stock Purchase Plan (the "U.S. Plan") a deemed
Enrollment Date may be designated corresponding to the employee's most recent
Enrollment Date under the U.S. Plan. In order to enroll, an eligible employee
must complete, sign, and submit to the Company or the Participating Subsidiary
an enrollment form. Any enrollment form received by the Participating Subsidiary
or the Company by the 15th day of the month preceding an
<PAGE> 11
Enrollment Date (or by the Enrollment Date in the case of employees hired after
such 15th day), or such other date established by the Committee from time to
time, will be effective on that Enrollment Date. For purposes of the Plan, a
"trading day" is any day on which regular trading occurs on any established
stock exchange or market system on which the Common Stock is traded.
6. Grant of Option on Enrollment
(a) Enrollment or re-enrollment by a participant in the Plan
on an Enrollment Date will constitute the grant by the Company to the
participant of an option to purchase shares of Common Stock from the Company
under the Plan. Any participant whose option expires and who has not withdrawn
from the Plan will automatically be re-enrolled in the Plan and granted a new
option on the Enrollment Date immediately following the date on which the option
expires.
(b) Except as provided in Section 9 or Section 11, each option
granted under the Plan shall have the following terms unless otherwise
determined by the Board:
(i) each option granted under the Plan will have a
term of not more than 24 months or such shorter option period as may be
established by the Board from time to time; notwithstanding the foregoing,
however, whether or not all shares have been purchased thereunder, the option
will expire on the earlier to occur of (A) the completion of the purchase of
shares on the last Purchase Date occurring within 24 months after the Enrollment
Date for such option, or such shorter option period as may be established by the
Board before an Enrollment Date for all options to be granted on such date or
(B) the date on which the employee's participation in the Plan terminates for
any reason;
(ii) payment for shares purchased under the option
will be made only through payroll withholding in accordance with Section 7;
(iii) purchase of shares upon exercise of the option
will be effected only on the Purchase Dates established in accordance with
Section 8;
(iv) the price per share under the option will be
determined as provided in Section 8;
(v) the number of shares available for purchase under
an option will, unless otherwise established by the Board before an enrollment
Date for all options to be granted on such date, be determined by dividing
$25,000 by the fair market value of a share of Common Stock on the Enrollment
Date and by multiplying the result by the number of calendar years included in
whole or in part in the period from grant to expiration of the option;
(vi) the option (taken together with all other
options then outstanding under this and all other similar stock purchase plans
of Sybase and any subsidiary of Sybase, collectively "Options") will in no event
give the participant the right to purchase shares at a rate per calendar year
which accrues in excess of $25,000 of
<PAGE> 12
fair market value of such shares, less the fair market value of any shares
accrued and already purchased during such year under Options which have expired
or terminated, determined at the applicable Enrollment Dates; and
(vii) the option will in all respects be subject to
the terms and conditions of the Plan, as interpreted by the Committee from time
to time.
7. Payroll and Tax Withholding; Use by Participating Subsidiary and the
Company
(a) Each participant shall elect to have amounts withheld from
his or her compensation and paid to the Company during the option period, at a
rate equal to any whole percentage up to a maximum of 10 percent, or such lesser
percentage as the Board may establish from time to time before an Enrollment
Date. Compensation includes regular salary payments, annual and quarterly
performance bonuses, hire-on bonuses, cash recognition awards, commissions,
overtime pay, shift premiums, and elective contributions by the participant to
qualified employee benefit plans, but excludes all other payments including,
without limitation, long-term disability or workers compensation payments, car
allowances, employee referral bonuses, relocation payments, expense
reimbursements (including but not limited to travel, entertainment, and moving
expenses), salary gross-up payments, and non-cash recognition awards. The
participant shall designate a rate of withholding in his or her enrollment form
and may elect to increase or decrease the rate of contribution effective as of
any Enrollment Date, by delivery to the Participating Subsidiary, not later than
15 days before such Enrollment Date, of a written notice indicating the revised
withholding rate.
(b) Payroll withholdings shall be credited to an account
maintained for purposes of the Plan on behalf of each participant in local
currency, as soon as administratively feasible after the withholding occurs. The
Participating Subsidiary and the Company shall be entitled to use the
withholdings for any corporate purpose, shall have no obligation to pay interest
on withholdings to any participant, and shall not be obligated to segregate
withholdings.
(c) Upon disposition of shares acquired by exercise of an
option, the participant shall pay, or make provision adequate to the Company and
the Participating Subsidiary for payment of, all federal, state, and other tax
(and similar) withholdings that the Company or the Participating Subsidiary
determines, in its discretion, are required due to the disposition, including
any such withholding that the Company or the Participating Subsidiary
determines, in its discretion, is necessary to allow the Company or the
Participating Subsidiary to claim tax deductions or other benefits in connection
with the disposition. A participant shall make such similar provisions for
payment that the Company or the Participating Subsidiary determines, in its
discretion, are required due to the exercise of an option, including such
provisions as are necessary to allow the Company or the Participating Subsidiary
to claim tax deductions or other benefits in connection with the exercise of the
option.
8. Purchase of Shares
<PAGE> 13
(a) On the last trading day of each month immediately
preceding a month containing an Enrollment Date, or on such other days as may be
established by the Board from time to time, prior to an Enrollment Date for all
options to be granted on an Enrollment Date (each a "Purchase Date"), the
Company shall convert each participant's account balance, including amounts
carried forward pursuant to Section 8(b) below, to U.S. Dollars determined as of
such Purchase Date (or applying such formula as may be established by the
Administrator) and shall apply the funds then credited to each participant's
payroll withholdings account to the purchase of whole shares of Common Stock.
The cost to the participant for the shares purchased under any option shall be
not less than 85 percent of the lower of:
(i) the fair market value of the Common Stock on the
Enrollment Date for such option; or
(ii) the fair market value of the Common Stock on
that Purchase Date.
The "fair market value" of the Common Stock on a date shall be the closing price
of the Common Stock on such date on any established stock exchange or market
system if the Common Stock is traded on such an exchange or market system (and
the largest such exchange or market system if the Common Stock is traded on more
than one), if the Common Stock is not so traded then the mean between the bid
and asked prices for Common Stock on such date as quoted on NASDAQ or reported
in The Wall Street Journal or similar publication if such prices are so quoted
or reported, or the fair market value on such date as determined by the
Committee if shares of Common Stock are not so traded, quoted, or reported.
(b) Any funds in an amount less than the cost of one share of
Common Stock left in a participant's payroll withholdings account on a Purchase
Date shall be carried forward in such account for application on the next
Purchase Date, and any additional amount shall be distributed to the
participant.
(c) If at any Purchase Date, the shares available under the
Plan are less than the number all participants would otherwise be entitled to
purchase on such date, purchases shall be reduced proportionately to eliminate
the deficit. Any funds that cannot be applied to the purchase of shares due to
such a reduction shall be refunded to participants as soon as administratively
feasible.
9. Grant of Additional Options
In addition to the options which may be granted under Section
6 of this Plan, the Committee, in its sole discretion, may grant, to each
employee of a Participating Subsidiary satisfying the eligibility requirements
of Section 4, additional options, for a term not to exceed 27 months and for an
identical number of shares. The options granted hereunder shall be subject to
the limitations of Section 6(b)(v) and 6(b)(vi); provided, however, that
immediately before the grant of such additional options, the limitations imposed
thereby upon each recipient's Options subject to payroll withholdings shall be
adjusted to the minimum extent necessary to permit the grant. The option price
shall not be less than 85% of the lower of (i) the fair market value of the
<PAGE> 14
stock on the grant date for such option, or (ii) the fair market value on the
date of exercise. The option will be subject to such additional terms and
conditions, not inconsistent with the terms of the Plan as interpreted by the
Committee, as may be established from time to time by the Board.
10. Withdrawal from the Plan
A participant may withdraw from the Plan in full (but not in
part) at any time, effective after written notice thereof is received by the
Company. All funds credited to a participant's payroll withholdings account
shall be distributed to him or her without interest within 60 days after notice
of withdrawal is received by the Company. Any eligible employee who has
withdrawn from the Plan may enroll in the Plan again on any subsequent
Enrollment Date in accordance with the provisions of Section 5.
11. Termination of Employment
(a) Except as provided in Section 11(b) below, participation
in the Plan terminates immediately when a participant ceases to be employed by a
Participating Subsidiary for any reason whatsoever (including death or
disability) or otherwise becomes ineligible to participate in the Plan. Transfer
of a participant's employment from one Participating Subsidiary to another
without material interruption shall not be deemed a termination of employment
for purposes of this Section 11. As soon as administratively feasible after
termination, the Company shall pay to the participant or his or her beneficiary
or legal representative, all amounts credited to the participant's payroll
withholdings account.
(b) Following transfer of a participant's employment without
material interruption from a Participating Subsidiary to the Company or any
subsidiary of the Company other than a participating Subsidiary, any outstanding
option granted to such participant under the Plan shall not terminate until the
occurrence of the earliest of: (i) the last Purchase Date included in the term
of such option; (ii) enrollment of the participant in the U.S. Plan; or (iii)
any event or change of condition or status (other than the transfer described in
this Section 11(b)) that would have caused the option to terminate if the
transfer of employment described in this Section 11(b) had not occurred. While
an option remains outstanding pursuant to this Section 11(b), the Company or
other subsidiary to which the participant is transferred shall, in accordance
with Section 7, effect payroll withholdings under the option and shall remit
them to the Company or the Participating Subsidiary that employed the
participant at the time of the transfer; such withholdings shall be credited to
the Participant's payroll withholdings account at the time withheld by the
Company or other subsidiary and in the currency of the Company or subsidiary by
which the participant is employed at the time of the withholdings.
12. Designation of Beneficiary
(a) Each participant may designate one or more beneficiaries
in the event of death and may, in his or her sole discretion, change such
designation at any time. Any such designation shall be effective upon receipt in
written form by the Company or the Participating Subsidiary and shall control
over any disposition by will or otherwise.
<PAGE> 15
(b) As soon as administratively feasible after the death of a
participant, amounts credited to his or her account shall be paid in cash to the
designated beneficiaries or, in the absence of a designation, to the executor,
administrator, or other legal representative of the participant's estate. Such
payment shall relieve the Participating Subsidiary of further liability with
respect to the Plan on account of the deceased participant. If more than one
beneficiary is designated, each beneficiary shall receive an equal portion of
the account unless the participant has given express contrary written
instructions.
13. Assignment
(a) The rights of a participant under the Plan shall not be
assignable by such participant, by operation of law or otherwise. No participant
may create a lien on any funds, securities, rights, or other property held by
the Company or the Participating Subsidiary for the account of the participant
under the Plan, except to the extent that there has been a designation of
beneficiaries in accordance with the Plan, and except to the extent permitted by
the laws of descent and distribution if beneficiaries have not been designated.
(b) A participant's right to purchase shares under the Plan
shall be exercisable only during the participant's lifetime and only by him or
her, except that a participant may direct the Company in the enrollment form to
issue share certificates to the participant and his or her spouse in community
property, to the participant jointly with one or more other persons with right
of survivorship, or to certain forms of trusts approved by the Committee.
14. Administrative Assistance
If the Committee in its discretion so elects, it may retain a
brokerage firm, bank, or other financial institution to assist in the purchase
of shares, delivery of reports, or other administrative aspects of the Plan. If
the Committee so elects, each participant shall (unless prohibited by the laws
of the nation of his or her employment or residence) be deemed upon enrollment
in the Plan to have authorized the establishment of an account on his or her
behalf at such institution. Shares purchased by a participant under the Plan
shall be held in the account in the name in which the share certificate would
otherwise be issued pursuant to Section 13(b).
15. Costs
All costs and expenses incurred in administering the Plan
shall be paid by the Company, except that any stamp duties or transfer taxes
applicable to participation in the Plan may be charged to the account of such
participant by the Company. Any brokerage fees for the purchase of shares by a
participant shall be paid by the Company, but brokerage fees for the resale of
shares by a participant shall be borne by the participant.
16. Equivalent Rights and Privileges
It is intended that all eligible employees shall have
substantially equivalent rights and privileges with respect to the Plan;
notwithstanding any other
<PAGE> 16
provision of the Plan, however, the Committee may make such changes in the terms
of eligibility and participation from Subsidiary to Subsidiary that it
determines, in its discretion, to be necessary or desirable to reflect or comply
with local laws or conditions.
17. Applicable Law
The Plan shall be governed by the substantive laws (excluding the
conflict of laws rules) of the State of California.
18. Modification and Termination
(a) The Board may amend, alter, or terminate the Plan at any
time, including amendments to outstanding options. To the extent required for
the Plan to comply with Rule 16b-3 or applicable tax laws or regulations, no
amendment shall be effective unless within 12 months after it is adopted by the
Board, it is approved by the holders of a majority of the votes cast at a duly
held shareholders' meeting at which a quorum of the voting power of the Company
is represented in person or by proxy, if such amendment would:
(i) increase the number of shares reserved for
purchase under the Plan;
(ii) increase the benefits accruing to participants
under the Plan; or
(iii) modify the requirements as to eligibility for
participation in the Plan.
(b) In the event the Plan is terminated, the Board may elect
to terminate all outstanding options either immediately or upon completion of
the purchase of shares on the next Purchase Date, or may elect to permit options
to expire in accordance with their terms (and participation to continue through
such expiration dates). If the options are terminated prior to expiration, all
funds contributed to the Plan that have not been used to purchase shares shall
be returned to the participants as soon as administratively feasible.
(c) In the event of the sale of all or substantially all of
the assets of Sybase or a Participating Subsidiary, or the merger of Sybase or a
Participating Subsidiary with or into another corporation, or the dissolution or
liquidation of Sybase, a Purchase Date shall occur on the trading day
immediately preceding the date of such event, unless otherwise provided by the
Board in its sole discretion, including provision for the assumption or
substitution of each option under the Plan by the successor or surviving
corporation, or a parent or subsidiary thereof.
19. Rights as an Employee
Nothing in the Plan shall be construed to give any person the
right to remain in the employ of the Participating Subsidiary or to affect the
Participating Subsidiary's right to terminate the employment of any person at
any time with or without cause.
<PAGE> 17
20. Rights as a Shareholder; Delivery of Certificates
Unless otherwise determined by the Board, certificates
evidencing shares purchased on any Purchase Date shall be delivered to
participants as soon as administratively feasible. Participants shall be treated
as the owners of their shares effective as of the Purchase Date.
21. Board and Shareholder Approval
The Plan was approved by the Board of Directors on April 30,
1991, and by the holders of a majority of the votes cast at a duly held
shareholders' meeting on June 13, 1991, at which a quorum of the voting power of
the Company was represented in person or by proxy. As amended and restated to
adopt amendments not requiring shareholder approval, the Plan was approved by
the Board of Directors on July 30, 1991. The Plan was amended by the Board of
Directors on January 28, 1993, January 27, 1994 and January 24, 1995 and such
amendments were approved by the holders of a majority of the votes cast at a
duly held shareholders' meeting on May 18, 1993, May 24, 1994 and May 23, 1995,
respectively. The Plan also was amended by the Board of Directors on January 21,
1997.
SYBASE, INC.
By: MITCHELL L. GAYNOR
-----------------------
Its: Vice President, General
Counsel and Secretary
Date: March 24, 1997
<PAGE> 1
Exhibit 10.20
SYBASE, INC.
1996 STOCK PLAN
(as amended January 21, 1997)
1. Purposes of the Plan. The purposes of this Stock Plan are:
- to attract and retain the best available personnel for
positions of substantial responsibility,
- to provide additional incentive to Employees and
Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to
the administration of stock option, restricted stock and incentive stock plans
under state corporate and securities laws and the Code.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a Committee appointed by the Board in
accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means Sybase, Inc.
(h) "Consultant" means any person, including an advisor, engaged
by the Company or a Parent or Subsidiary to render services and who is
compensated for such services. The term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
<PAGE> 2
(i) "Continuous Status as an Employee or Consultant" means that
the employment or consulting relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor. A
leave of absence approved by the Company shall include sick leave, military
leave, or any other personal leave approved by an authorized representative of
the Company. For purposes of Incentive Stock Options, no such leave may exceed
ninety (90) days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract. If reemployment upon expiration of a leave of
absence approved by the Company is not so guaranteed, on the one hundred
eighty-first (181st) day of such leave any Incentive Stock Option held by the
Optionee shall cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonstatutory Stock Option.
(j) "Director" means a member of the Board.
(k) "Disability" means total and permanent disability as defined
in Section 22(e)(3) of the Code.
(l) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value" means, as of any date, the value of
Common Stock determined as the closing sales price for such Common Stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the date of determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable.
(o) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(p) "Misconduct" means the Optionee or purchaser, as applicable,
(i) is convicted of a felony involving dishonesty or moral turpitude, (ii)
committed an act of dishonesty intended to result in substantial personal
enrichment, (iii) engaged in actions intended to cause significant injury to the
Company (including derogatory statements regarding the Company, but excluding
statements made in connection with any legal action filed against the Company),
or (iv) breached the non-disclosure, non-compete or non-solicit provisions of
any agreement between the Optionee and the Company.
(q) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
<PAGE> 3
(r) "Notice of Grant" means a written or electronic notice
evidencing certain terms and conditions of an individual Option or Right grant.
The Notice of Grant is part of the Option Agreement.
(s) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(t) "Option" means a stock option granted pursuant to the Plan.
(u) "Option Agreement" means an agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
The Option Agreement is subject to the terms and conditions of the Plan.
(v) "Optioned Stock" means the Common Stock subject to an Option
or Right.
(w) "Optionee" means an Employee or Consultant who holds an
outstanding Option or Right.
(x) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(y) "Plan" means this 1996 Stock Plan.
(z) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 below.
(aa) "Restricted Stock Purchase Agreement" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(bb) "Retirement" means the termination of employment pursuant to
the Company's retirement policies for an Employee who has attained the age of
fifty-five (55) and whose Continuous Status as an Employee was not interrupted
during the previous five (5) years.
(cc) "Right" means a Stock Purchase Right granted pursuant to the
Plan.
(dd) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(ee) "Section 16(b)" means Section 16(b) of the Securities
Exchange Act of 1934, as amended.
(ff) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 14 of the Plan.
<PAGE> 4
(gg) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(hh) "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 14 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 5,427,000. The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option or Right expires or becomes unexercisable without
having been exercised in full, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated); provided, however, that Shares that have actually been issued
under the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are repurchased by the
Company at their original purchase price, and the original purchaser of such
Shares did not receive any benefits of ownership of such Shares, such Shares
shall become available for future grant under the Plan. For purposes of the
preceding sentence, voting rights shall not be considered a benefit of Share
ownership.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. If permitted by Rule
16b-3, the Plan may be administered by different bodies with respect to
Directors, Officers who are not Directors, and Employees who are neither
Directors nor Officers.
(ii) Administration With Respect to Directors and
Officers Subject to Section 16(b). With respect to Options or Rights grants made
to Employees who are also Officers or Directors subject to Section 16(b) of the
Exchange Act, the Plan shall be administered by (A) the Board, if the Board may
administer the Plan in a manner complying with the rules under Rule 16b-3
relating to the disinterested administration of employee benefit plans under
which Section 16(b) exempt discretionary grants and awards of equity securities
are to be made, or (B) a committee designated by the Board to administer the
Plan, which committee shall be constituted to comply with the rules under Rule
16b-3 relating to the disinterested administration of employee benefit plans
under which Section 16(b) exempt discretionary grants and awards of equity
securities are to be made. Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee and appoint
additional members, remove members (with or without cause) and substitute new
members, fill vacancies (however caused), and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the rules under Rule 16b-3 relating to the disinterested
administration of employee benefit plans under which Section 16(b) exempt
discretionary grants and awards of equity securities are to be made.
<PAGE> 5
(iii) Administration With Respect to Other Persons. With
respect to Options or Rights grants made to Employees or Consultants who are
neither Directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a committee designated by the Board, which committee shall
be constituted to satisfy Applicable Laws. Once appointed, such Committee shall
serve in its designated capacity until otherwise directed by the Board. The
Board may increase the size of the Committee and appoint additional members,
remove members (with or without cause) and substitute new members, fill
vacancies (however caused), and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by
Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(n) of the Plan;
(ii) to select the Consultants and Employees to whom
Options and Rights may be granted hereunder;
(iii) to determine whether and to what extent Options and
Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to
be covered by each Option and Right granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder. Such
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options or Rights may be exercised (which may be based on
performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or Right or
the shares of Common Stock relating thereto, based in each case on such factors
as the Administrator, in its sole discretion, shall determine;
(vii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(viii) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
<PAGE> 6
(ix) to modify or amend each Option or Right (subject to
Section 16(c) of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Options;
(x) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Right
previously granted by the Administrator;
(xi) to determine the terms and restrictions applicable
to Options and Rights and any Restricted Stock;
(xii) to determine whether and under what circumstances
an Option may be settled in cash under Section 10(f) instead of Common Stock;
(xiii) to determine whether, to what extent and under
what circumstances Common Stock and other amounts payable with respect to an
award under this Plan shall be deferred either automatically or at the election
of the participant (including providing for and determining the amount (if any)
of any deemed earnings on any deferred amount during any deferral period); and
(xiv) to make all other determinations deemed necessary
or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Rights.
5. Eligibility. Nonstatutory Stock Options and Rights may be granted to
Employees and Consultants. Incentive Stock Options may be granted only to
Employees. If otherwise eligible, an Employee or Consultant who has been granted
an Option or Right may be granted additional Options or Rights.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Right shall confer upon an
Optionee any right with respect to continuing the Optionee's employment or
consulting relationship with the Company, nor shall they interfere in any way
with the Optionee's right or the Company's right to terminate such employment or
consulting relationship at any time, with or without cause.
<PAGE> 7
(c) The following limitations shall apply to grants of Options to
Employees:
(i) No Employee shall be granted, in any fiscal year of
the Company, Options to purchase more than 500,000 Shares.
(ii) In connection with his or her initial employment, an
Employee may be granted Options to purchase up to an additional 500,000 Shares
which shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 14.
7. Term of Plan. Subject to Section 20 of the Plan, the Plan shall
become effective upon the earlier to occur of its adoption by the Board or its
approval by the stockholders of the Company as described in Section 20 of the
Plan. It shall continue in effect for a term of ten (10) years unless terminated
earlier under Section 16 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Notice
of Grant and shall be ten (10) years from the date of grant or such shorter term
as may be provided in the Notice of Grant.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares
to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option, the per
Share exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator, but in no case
shall the per Share exercise price be less than 85% of the Fair Market Value per
Share on the date of grant; provided, however, that for any calendar year, the
aggregate number of Shares subject to Nonstatutory Stock Options granted during
such calendar year with a per Share exercise price less than the Fair Market
Value per Share on the date of grant shall not exceed five percent (5%) of the
number of Shares subject to Options granted in the preceding calendar year.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised. In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period or the
attainment of certain performance goals determined by the Administrator.
<PAGE> 8
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (B) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised;
(iv) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price;
(v) a reduction in the amount of any Company liability to
the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vi) any combination of the foregoing methods of payment;
or
(vi) such other consideration and method of payment for
the issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the stock certificate evidencing such Shares is issued (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall
<PAGE> 9
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. The Company shall issue (or cause to be issued) such stock certificate
promptly after the Option is exercised. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 14 of the Plan.
Exercising an Option in any manner shall decrease the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Employment or Consulting Relationship. Upon
termination of an Optionee's Continuous Status as an Employee or Consultant,
other than as provided for in Sections 10(c), 10(d) and 10(e), the Optionee may
exercise his or her Option, but only within such period of time as is specified
in the Notice of Grant, and only to the extent that the Optionee was entitled to
exercise it at the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Notice of Grant). In
the absence of a specified time in the Notice of Grant, the Option shall remain
exercisable for three (3) months following the Optionee's termination. If, on
the date of termination, the Optionee is not entitled to exercise the Optionee's
entire Option, the Shares covered by the unexercisable portion of the Option
shall revert to the Plan. If, after termination, the Optionee does not exercise
his or her Option within the time specified by the Administrator, the Option
shall terminate, and the Shares covered by such Option shall revert to the Plan.
(i) Notwithstanding the above, in the event an Optionee's
Continuous Status as an Employee or Consultant terminates and the Optionee
performs an act of Misconduct, all unexercised Options held by such Optionee
shall expire five (5) business days following written notice from the Company to
the Optionee.
(ii) Notwithstanding the above, in the event of an
Optionee's change in status from Consultant to Employee or Employee to
Consultant, an Optionee's Continuous Status as an Employee or Consultant shall
not automatically terminate solely as a result of such change in status.
However, in the event of an Optionee's change of status from Employee to
Consultant, an Incentive Stock Option held by the Optionee shall cease to be
treated as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option three (3) months and one (1) day following such change
of status.
(c) Disability of Optionee. In the event that an Optionee's
Continuous Status as an Employee or Consultant terminates as a result of the
Optionee's Disability, the Optionee may exercise his or her Option at any time
within twelve (12) months from the date of such termination, but only to the
extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant). If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
<PAGE> 10
(d) Death of Optionee. In the event of the death of an Optionee,
the Option may be exercised at any time within twenty-four (24) months following
the date of death (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent that the Optionee was entitled to exercise the Option at
the date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan. If, after death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Retirement. In the event that an Optionee's Continuous Status
as an Employee terminates as a result of the Optionee's Retirement, the Optionee
may exercise his or her Option at any time subject to the limitations in the
Plan and the Notice of Grant, but only to the extent that the Optionee was
entitled to exercise the Option at the time of such termination, unless
otherwise expressly provided in a written agreement between the Optionee and the
Company. However, any Incentive Stock Options not exercised within three (3)
months of the termination of the Optionee's Continuous Status as an Employee
shall be treated for tax purposes as Nonstatutory Stock Options three (3) months
and one (1) day following such Retirement.
(f) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
(g) Rule 16b-3. Options granted to individuals subject to Section
16 of the Exchange Act ("Insiders") must comply with the applicable provisions
of Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption from Section 16
of the Exchange Act with respect to Plan transactions.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing or electronically, by means of a Notice of Grant,
of the terms, conditions and restrictions related to the offer, including the
number of Shares that the offeree shall be entitled to purchase, the price to be
paid, and the time within which the offeree must accept such offer, which shall
in no event exceed six (6) months from the date upon which the Administrator
made the determination to grant the Stock Purchase Right. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator. The Administrator may grant a Stock Purchase
Right at a price equal to or in excess of the par value of the Shares; provided,
however, for any calendar year, the aggregate number of shares subject to grants
of Stock Purchase Rights granted during such calendar year with a per Share
exercise price less than the Fair Market Value per Share on the date of grant
shall not exceed ten percent (10%) of the number of Shares subject to Options
granted in the preceding calendar year.
<PAGE> 11
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment or in the event of the purchaser's Misconduct with
the Company for any reason (including death or Disability). The purchase price
for Shares repurchased pursuant to the Restricted Stock purchase agreement shall
be the original price paid by the purchaser and may be paid by cancellation of
any indebtedness of the purchaser to the Company. The repurchase option shall
lapse at a rate determined by the Administrator.
(c) Rule 16b-3. Stock Purchase Rights granted to Insiders, and
Shares purchased by Insiders in connection with Stock Purchase Rights, shall be
subject to any restrictions applicable thereto in compliance with Rule 16b-3. An
Insider may only purchase Shares pursuant to the grant of a Stock Purchase
Right, and may only sell Shares purchased pursuant to the grant of a Stock
Purchase Right, during such time or times as are permitted by Rule 16b-3.
(d) Other Provisions. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.
(e) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 14
of the Plan.
12. Withholding Taxes. In accordance with any applicable administrative
guidelines it establishes, the Administrator may allow a purchaser to pay the
amount of taxes required by law to be withheld as a result of a purchase of
Shares or a lapse of restrictions in connection with Shares purchased pursuant
to an Option or Right, by withholding from any payment of Common Stock due as a
result of such purchase or lapse of restrictions, or by permitting the purchaser
to deliver to the Company, Shares having a Fair Market Value, as determined by
the Administrator, equal to the amount of such required withholding taxes.
13. Non-Transferability of Options and Rights. Unless otherwise
specified by the Administrator in the Notice of Grant, an Option or Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee.
14. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Right, and the number of shares of Common Stock
which have been authorized for issuance under the
<PAGE> 12
Plan but as to which no Options or Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Right,
as well as the price per share of Common Stock covered by each such outstanding
Option or Right, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of issued shares
of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option or Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option or Right until ten (10) days prior
to such transaction as to all of the Optioned Stock covered thereby, including
Shares as to which the Option or Right would not otherwise be exercisable. In
addition, the Administrator may provide that any Company repurchase rights
applicable to any Shares purchased upon exercise of an Option or Right shall
lapse as to all such Shares, provided the proposed dissolution or liquidation
takes place at the time and in the manner contemplated. To the extent it has not
been previously exercised, an Option or Right will terminate immediately prior
to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Right shall be assumed or an
equivalent option or right substituted by the successor corporation or a Parent
or Subsidiary of the successor corporation (the "Successor Corporation"), unless
the Successor Corporation refuses to assume or substitute for the Option or
Right, in which case the Optionee shall have the right to exercise the Option or
Right as to all of the Optioned Stock, including Shares as to which it would not
otherwise be exercisable. If an Option or Right is exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Right shall be fully exercisable for a period of not less than
forty-five (45) days from the date of such notice, and the Option or Right shall
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option or Right shall be considered assumed if, following the
merger or sale of assets, the option or right confers the right to purchase or
receive, for each Share of Optioned Stock subject to the Option or Right
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets was not solely common stock of the Successor Corporation, the
Administrator may, with the consent of the Successor Corporation, provide for
the consideration to be received upon the exercise
<PAGE> 13
of the Option or Right, for each Share of Optioned Stock subject to the Option
or Right, to be solely common stock of the Successor Corporation equal in fair
market value to the per share consideration received by holders of Common Stock
in the merger or sale of assets.
15. Date of Grant. The date of grant of an Option or Right shall be, for
all purposes, the date on which the Administrator makes the determination
granting such Option or Right, or such other later date as is determined by the
Administrator. Notice of the determination shall be provided to each Optionee
within a reasonable time after the date of such grant.
16. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Rule 16b-3 or with Section 422 of the Code (or any successor rule or
statute or other applicable law, rule or regulation, including the requirements
of any exchange or quotation system on which the Common Stock is listed or
quoted). Such shareholder approval, if required, shall be obtained in such a
manner and to such a degree as is required by the applicable law, rule or
regulation.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
17. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option or Right unless the exercise of such Option or Right and
the issuance and delivery of such Shares shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder,
Applicable Laws, and the requirements of any stock exchange or quotation system
upon which the Shares may then be listed or quoted, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of
an Option or Right, the Company may require the person exercising such Option or
Right to represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required.
18. Liability of Company.
<PAGE> 14
(a) Inability to Obtain Authority. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock
covered by an Option or Right exceeds, as of the date of grant, the number of
Shares which may be issued under the Plan without additional shareholder
approval, such Option or Right shall be void with respect to such excess
Optioned Stock, unless shareholder approval of an amendment sufficiently
increasing the number of Shares subject to the Plan is timely obtained in
accordance with Section 16(b) of the Plan.
19. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
20. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the manner and to the degree required under applicable federal and state law.
<PAGE> 15
NOTICE OF GRANT OF STOCK OPTIONS SYBASE, INC. STOCK PLAN DEPT.
AND GRANT AGREEMENT ID: 94-2951005
6475 CHRISTIE AVE. , 4th Fl
EMERYVILLE, CA 94608
(510) 922-4566 FAX# 922-5502
NAME
ADDRESS
ID:
You have been granted options to buy Sybase, Inc. Common Stock as follows:
Stock Option Grant Number _________________________
Date of Grant _________________________
Stock Option Plan _________________________
Option Price per Share $_________________________
Total Number of Shares Granted _________________________
Total Price of Shares Granted $_________________________
This Option is granted subject to the terms of and conditions of the 1996 Stock
Plan, as amended ("Plan"), and this Option Agreement. The "Exercise Price" is
equal to the Option Price per Share set forth above. Vesting Commencement Date
is the Date of Grant [Hire]. This Option expires ten years following the Date of
Grant. The Option may be exercised only with respect to shares that have vested
in accordance with the following vesting schedule: 1/8 of the total number of
shares granted shall vest six months after the Vesting Commencement Date, and
1/48 of the total number of shares shall vest for each month which has expired
thereafter. By accepting this Option, Optionee agrees that the vesting of the
shares hereunder is earned only by continuing employment at the will of the
Company (and not through the act of being hired, being granted this Option, or
by purchasing shares hereunder) and that all decisions or interpretations of the
Administrator with respect to questions arising under the Plan or Option are
binding, conclusive and final on Optionee. A copy of the Plan and Prospectus
relating thereto are available through electronic means. DO NOT RETURN. KEEP
THIS FOR YOUR RECORDS
SYBASE, INC. Date:
By ____________________________
<PAGE> 16
II. AGREEMENT
1. Grant of Option. The Plan Administrator of the Company hereby
grants to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference. Subject to
Section 16(c) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock
Option ("ISO"), this Option is intended to qualify as an Incentive Stock Option
under Section 422 of the Code. However, if this Option is intended to be an
Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code
Section 422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
(a) Right to Exercise. This Option is exercisable during
its term in accordance with the Vesting Schedule set out in the Notice of Grant
and the applicable provisions of the Plan and this Option Agreement. In the
event of Optionee's death, Disability or other termination of Optionee's
employment or consulting relationship, the exercisability of the Option is
governed by the applicable provisions of the Plan and this Option Agreement.
This Option may not be exercised for a fraction of a
Share.
(b) Method of Exercise. This Option is exercisable by
delivery of an exercise notice, in the form attached as Exhibit A (the "Exercise
Notice"), which shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised (the "Exercised
Shares"), and such other representations and agreements as may be required by
the Company pursuant to the provisions of the Plan. The Exercise Notice shall be
signed by the Optionee and shall be delivered in person or by certified mail to
the Secretary of the Company. The Exercise Notice shall be accompanied by
payment of the aggregate Exercise Price as to all Exercised Shares. This Option
shall be deemed to be exercised upon receipt by the Company of such fully
executed Exercise Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of
this Option unless such issuance and exercise complies with all relevant
provisions of law and the requirements of any stock exchange or quotation
service upon which the Shares are then listed. Assuming such compliance, for
income tax purposes the Exercised Shares shall be considered transferred to the
Optionee on the date the Option is exercised with respect to such Exercised
Shares.
3. Method of Payment. Payment of the aggregate Exercise Price
shall be by any of the following, or a combination thereof, at the election of
the Optionee:
(a) cash; or
(b) check; or
(c) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of
<PAGE> 17
the Option and delivery to the Company of the sale or loan proceeds required to
pay the exercise price; or
(d) surrender of other Shares which (i) in the case of
Shares acquired upon exercise of an option, have been owned by the Optionee for
more than six (6) months on the date of surrender, AND (ii) have a Fair Market
Value on the date of surrender equal to the aggregate Exercise Price of the
Exercised Shares.
4. Non-Transferability of Option. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by the
Optionee. The terms of the Plan and this Option Agreement shall be binding upon
the executors, administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the
term set out in the Notice of Grant, and may be exercised during such term only
in accordance with the Plan and the terms of this Option Agreement.
6. Restrictions on Exercise. As a condition to the exercise of
this Option, the Company may require Optionee to make any representation or
warranty to the Company as may be required by any applicable law or regulation.
7. Termination of Employment or Consulting Relationship.
(a) General. Upon termination of an Optionee's Continuous
Status as an Employee or Consultant, other than as provided for in Sections
7(b), 7(c), 7(d) and 7(e) the Optionee may exercise his or her Option within
three (3) months after the date of such termination, but only to the extent that
the Optionee was entitled to exercise it at the date of termination (and in no
event later than the expiration of the term of such Option as set forth in the
Notice of Grant). If, after termination, the Optionee does not exercise his or
her Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(b) Misconduct. In the event an Optionee's Continuous
Status as an Employee or Consultant terminates and the Optionee performs an act
of Misconduct, all unexercised Options held by such Optionee shall expire five
(5) business days following written notice from the Company to the Optionee.
(c) Disability of Optionee. In the event that an
Optionee's Continuous Status as an Employee or Consultant terminates as a result
of the Optionee's Disability, the Optionee may exercise his or her Option at any
time within twelve (12) months from the date of such termination, but only to
the extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant). If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an
Optionee, the Option may be exercised at any time within twenty-four (24) months
following the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Notice of Grant), but the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
of inheritance, but only to the extent that the Optionee was entitled to
exercise the Option at the date of death. If, at the time of death, the Optionee
was not entitled to exercise his or her entire Option, the Shares covered by the
<PAGE> 18
unexercisable portion of the Option shall immediately revert to the Plan. If,
after death, the Optionee's estate or a person who acquired the right to
exercise the Option by bequest or inheritance does not exercise the Option
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(e) Retirement. In the event that an Optionee's
Continuous Status as an Employee terminates as a result of the Optionee's
Retirement, the Optionee may exercise his or her Option at any time subject to
the limitations in the Plan and the Notice of Grant, but only to the extent that
the Optionee was entitled to exercise the Option at the time of such
termination, unless otherwise expressly provided in a written agreement between
the Optionee and the Company. However, any Incentive Stock Options not exercised
within three (3) months of the termination of the Optionee's Continuous Status
as an Employee shall be treated for tax purposes as Nonstatutory Stock Options
three (3) months and one (1) day following such Retirement.
8. Tax Consequences. Some of the federal and state tax
consequences relating to this Option, as of the date of this Option, are set
forth below. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND
REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercising the Option.
(i) Nonstatutory Stock Option. The Optionee may
incur regular federal income tax and state income tax liability upon exercise of
a NSO. The Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Exercised Shares on the date of exercise over their
aggregate Exercise Price. If the Optionee is an Employee or a former Employee,
the Company will be required to withhold from his or her compensation or collect
from Optionee and pay to the applicable taxing authorities an amount in cash
equal to a percentage of this compensation income at the time of exercise, and
may refuse to honor the exercise and refuse to deliver Shares if such
withholding amounts are not delivered at the time of exercise.
(ii) Incentive Stock Option. If this Option
qualifies as an ISO, the Optionee will have no regular federal income tax or
state income tax liability upon its exercise, although the excess, if any, of
the Fair Market Value of the Exercised Shares on the date of exercise over their
aggregate Exercise Price will be treated as an adjustment to alternative minimum
taxable income for federal tax purposes and may subject the Optionee to
alternative minimum tax in the year of exercise. In the event that the Optionee
undergoes a change of status from Employee to Consultant, any Incentive Stock
Option of the Optionee that remains unexercised shall cease to qualify as an
Incentive Stock Option and will be treated for tax purposes as a Nonstatutory
Stock Option three (3) months and one (1) day following such change of status.
(b) Disposition of Shares.
(i) NSO. If the Optionee holds NSO Shares for
at least one year, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for
at least one year after exercise and two years after the grant date, any gain or
loss realized on disposition of the Shares will be treated as long-term capital
gain or loss for federal income tax purposes. If the Optionee disposes of ISO
Shares within one year after exercise or two years after the grant date, any
gain realized on such disposition
<PAGE> 19
will be treated as compensation income (taxable at ordinary income rates) to the
extent of the excess, if any, of the lesser of (A) the difference between the
Fair Market Value of the Shares acquired on the date of exercise and the
aggregate Exercise Price, or (B) the difference between the amount realized on
the sale of such Shares and the aggregate Exercise Price.
(c) Notice of Disqualifying Disposition of ISO Shares. If
the Optionee sells or otherwise disposes of any of the Shares acquired pursuant
to an ISO on or before the later of (i) two years after the grant date, or (ii)
one year after the exercise date, the Optionee shall immediately notify the
Company in writing of such disposition. The Optionee agrees that he or she may
be subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
9. Entire Agreement; Governing Law. The Plan is incorporated
herein by reference. The Plan and this Option Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede
in their entirety all prior undertakings and agreements of the Company and
Optionee with respect to the subject matter hereof, and may not be modified
adversely to the Optionee's interest except by means of a writing signed by the
Company and Optionee. This agreement is governed by California law except for
that body of law pertaining to conflict of laws.
10. NO GUARANTEE OF EMPLOYMENT. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT THE WILL OF THE
COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR
PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS
AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET
FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD,
OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT
TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTING RELATIONSHIP AT ANY TIME, WITH
OR WITHOUT CAUSE.
This Option is granted under and governed by the terms and conditions of the
Plan and this Option Agreement. Optionee has reviewed the Plan and this Option
Agreement in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Option Agreement and fully understands all
provisions of the Plan and Option Agreement. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions relating to the Plan and Option Agreement.
Optionee further agrees to notify the Company upon any change in the residence
address indicated on the attached Notice of Grant.
<PAGE> 1
EXHIBIT 10.22
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is dated as of April 1, 1996 by and
between Sybase, Inc., a Delaware corporation ("Sybase" or "the Company") and
MICHAEL H. FORSTER ("Employee").
A. Employee was hired by Sybase as of March 3, 1993 pursuant to the terms of an
Employment Agreement between Sybase and Employee dated January 21, 1994 ("Prior
Employment Agreement").
B. Sybase and Employee now desire to amend and restate the terms of the Prior
Employment Agreement on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, the parties hereby amend and restate in their entirety the terms
and conditions of the Prior Employment Agreement as follows:
1. Terms of Employment.
(a) Term. The term of Employee's employment shall be from April 1, 1996 through
December 31, 1997 ("Term"), unless expressly extended in a written document
signed by both parties, or sooner terminated for Cause as set forth in Section 7
below.
(b) Duties. Employee shall hold the title of Senior Vice President, Worldwide
Field Sales Operations and shall perform such functions and duties in such
capacity as designated by the Company's Executive Vice President Sales and
Marketing or in his absence by the Chief Executive Officer or his designee (the
"Company's Senior Executive Officer"). Employee shall be a regular full-time
employee and shall carry out his duties and responsibilities in a diligent,
competent and professional manner, all in accordance with the terms of this
Agreement.
2. Compensation.
(a) Employee shall be entitled to receive the following compensation:
(i) Base Salary. Employee's annual base salary shall be $370,000
($15,416.67 payable on a semi-monthly basis). Such initial base salary shall be
subject to review and adjustment in accordance with the Company's compensation
policies then in effect. Employee will receive this base salary amount
throughout the Term unless sooner terminated for "Cause" as defined in Section 7
below.
(ii) Incentive Compensation. Employee shall be eligible to receive
$200,000 in annual target incentive compensation based on achievement of
performance objectives to be mutually established by Employee and the Company's
Senior Executive Officer within 60 days of the execution of this Agreement.
(iii) Continued Vesting of Existing Stock Options. During the Term of
this Agreement, all stock options previously granted to Employee shall continue
to vest in accordance with the terms and conditions of the option agreements
under which such options were granted.
(iv) Initial Performance-Based Stock Option Grant. Employee shall be
granted an
<PAGE> 2
Incentive Stock Option (or Non-Qualified Stock Option, to the extent
required by law) to purchase One Hundred Thousand (100,000) shares of the
Company's Common Stock, pursuant to the Sybase, Inc. 1988 Stock Option Plan, as
amended from time to time. The exercise price shall be the closing price as
quoted on NASDAQ on the date the option is granted. The option described in this
subsection (a)(iv) will vest as set forth below; provided, however, that any
portion of the option which does not vest as scheduled due to the non-occurrence
of the relevant performance objective shall nevertheless vest in full on the
sixth (6th) anniversary of this Agreement, provided Employee is then an employee
in good standing of Sybase or any of its subsidiaries.
(A) The option with respect to Twenty-Five Thousand (25,000)
shares will vest on December 31, 1996 provided Employee is then an
employee in good standing of Sybase or any of its subsidiaries and the
Company has hired a replacement for Employee who is fully qualified to
perform the then-current job duties of the senior executive for ICD and
to achieve other business goals of this executive as specified by the
Company's President Enterprise Business Group.
(B) The option with respect to Twenty-Five Thousand (25,000)
shares will vest on December 31, 1996 provided Employee is then an
employee in good standing of Sybase or any of its subsidiaries and the
Objectives to be mutually determined within 60 days of the execution of
this Agreement by Employee and the Company's Senior Executive Officer
have been met or exceeded.
(C) The option with respect to Twenty-Five Thousand (25,000)
shares will vest on December 31, 1997, provided Employee is then an
employee in good standing of Sybase or any of its subsidiaries and: (i)
the option has vested as provided in subsection (a)(iv)(A); and (ii)
Employee has, on or before that date and in the Senior Executive
Officer's opinion, sufficiently trained and fully integrated Employee's
replacement as the senior executive for ICD into his or her position.
(D) The option with respect to Twenty-Five Thousand (25,000)
shares will vest on December 31, 1997 provided Employee is then an
employee in good standing of Sybase or any of its subsidiaries and the
objectives to be mutually determined within 60 days of the execution of
this Agreement by Employee and the Company's Senior Executive Officer
have been met or exceeded.
(v) Additional Performance-Based Stock Option Grant The Company's Chief
Executive Officer will recommend to the Compensation Committee of the Company's
Board of Directors that on or before [April 30, 1997], Employee be granted an
additional Incentive Stock Option (or Non-Qualified Stock Option, to the extent
required by law) to purchase Forty Thousand (40,000) shares of the Company's
Common Stock. The exercise price will be the closing price as quoted on NASDAQ
on the date the option is granted. The option described in this subsection
(a)(v) will vest as set forth below; provided, however, that any portion of the
option which does not vest as scheduled due to the non-occurrence of the
relevant performance objective shall nevertheless vest in full on the sixth
(6th) anniversary of this Agreement, provided Employee is then an employee in
good standing of Sybase or any of its subsidiaries.
(A) The option with respect to Ten Thousand (10,000) shares
will vest on December 31, 1997 provided Employee is then an employee in
good standing of Sybase or any of its subsidiaries and the Company has
hired a replacement for
<PAGE> 3
Employee who is fully qualified to perform the then-current job duties
of senior executive for worldwide field sales operations and to achieve
other business goals established for this executive as specified by the
Company's Senior Executive Officer.
(B) The option with respect to Ten Thousand (10,000) shares
will vest on December 31, 1997 provided Employee is then an employee in
good standing of Sybase or any of its subsidiaries and provided the
objectives to be mutually determined within 60 days of the execution of
this Agreement by Employee and the Company's Senior Executive Officer
have been met or exceeded.]
(C) The option with respect to Ten Thousand (10,000) shares
will vest on December 31, 1998, provided Employee is then an employee
in good standing of Sybase or any of its subsidiaries (or an
independent contractor for Sybase or any of its subsidiaries, whose
engagement commenced immediately following his employment with the
Company and in respect of which Sybase elects to expressly agree that
during such engagement vesting of this option, which may as a result of
the change in Employee's status convert to a nonqualified stock option,
would continue) and provided: (i) the option has vested as provided in
subsection (a)(v)(A); and (ii) Employee has, on or before that date and
in the opinion of the Company's Senior Executive Officer, sufficiently
trained and fully integrated Employee's replacement as senior executive
for worldwide field sales operations.
(D) The option with respect to Ten Thousand (10,000) shares
will vest on December 31, 1998 provided Employee is then an employee in
good standing of Sybase or any of its subsidiaries (or an independent
contractor for Sybase or any of its subsidiaries, whose engagement
commenced immediately following his employment with the Company and in
respect of which Sybase elects to expressly agree that during such
engagement vesting of this option, which may as a result of the change
in Employee's status convert to a nonqualified stock option, would
continue) and the objectives to be mutually determined within 60 days
of the execution of this Agreement by Employee and the Company's Senior
Executive Officer have been met or exceeded.
(b) Lump Sum Bonus. Employee will receive a special lump sum incentive bonus in
the amount of $166,657, net of all required tax withholdings, which bonus shall
constitute "Plan Compensation" as defined in the Sybase, Inc. Executive Deferred
Compensation Plan. This payment will be made within 30 days of the execution of
this Agreement.
(c) Withholding Deductions. Unless otherwise specified herein, the Company shall
make such deductions, withholdings and other payments from all sums payable
pursuant to this Agreement which Employee requests, or which are required by law
for taxes and other charges.
(d) Benefit Plans. During the entire Term, and unless otherwise expressly
provided by this Agreement, Employee will be eligible to participate in and
receive benefits under the Company's employee benefit plans and policies in
effect from time to time, subject to the terms, conditions and eligibility
requirements of the particular plans. Such plans may include stock benefit
plans, paid vacation, health care, life insurance, accidental death and
disability, short- and long-term disability, and/or savings plans provided by,
through, or on behalf of the Company to its employees in the United States. The
Company may change, amend, modify
<PAGE> 4
or terminate any benefit plan from time to time without prior notice to
Employee.
3. Employee will receive the following relocation assistance in accordance where
applicable with the Company's relocation policy:
- payment or reimbursement of all reasonable costs associated with the
sale of Employee's residence in Boulder Colorado.
- payment or reimbursement of all reasonable expenses associated with
moving and temporary storage of Employee's household goods from
Colorado to California or another domestic location designated by
Employee.
- payment or reimbursement of reasonable rental costs associated with
suitable accommodations in the San Francisco Bay Area during the Term
ending December 31, 1997, or ending at the conclusion of any extension
of the Term but no later than December 31, 1998, in the event Sybase
elects to extend the Term and Employee and the Company's Senior
Executive Officer, in his or her discretion, mutually agree to extend
such rental cost benefit through such date.
4. Extension of Time to Repay Outstanding Loans. Employee hereby agrees and
acknowledges that as of the date of this Agreement, he is the obligor on two (2)
outstanding loans payable to Sybase. Such loans are evidenced by secured
promissory notes in the remaining principal amounts of Four Hundred Seventy-Five
Thousand Five Hundred Dollars ($475,500) (the "Stock Purchase Note"), and One
Hundred Fifty-Seven Thousand Dollars ($157,000) (the "Residence Note"),
respectively. Copies of such promissory notes are attached hereto as Exhibits A
and B (the "Notes"). Employee further agrees and acknowledges that all
outstanding principal and accrued interest on the Notes was due and payable in
full as of December 31, 1995. In consideration for the promises set forth in
this Agreement, and subject to the terms of Section 4, Sybase hereby agrees to
modify the Residence Note so as to extend the date on which the entire principal
amount shall be due until July 31, 1996, provided that notwithstanding any other
provision of such Residence Note, Employee will pay Sybase, Inc. interest on the
outstanding principal amount of $157,000 from September 1, 1995, until all
amounts owing under such Note are paid in full, at the rate per annum specified
in Section 3(a) of the Residence Note. Sybase further agrees modify the payment
date provided in Section 1(a) of the Stock Purchase Note, as previously amended,
such that the payment due date shall be December 31, 1997 ("Loan Due Date"),
subject to all remaining provisions of the Stock Purchase Note. Except to the
extent expressly modified by this Agreement, all provisions of the Notes shall
remain in full force and effect. Employee and Sybase agree to execute and
deliver to each other any and all documents which are necessary to reflect the
modifications to the Notes as set forth in this Agreement or necessary with
respect to the perfection of Sybase's security interest in the shares pledged to
secure payment of Employee's obligations under the Stock Purchase Note.
5. Nondisclosure Agreement. Employee agrees and acknowledges that he shall
continue to be bound by the terms and conditions of the Employee Nondisclosure
and Assignment of Inventions Agreement which he executed as a condition of
employment with Sybase ("Nondisclosure Agreement").
6. Covenant Not to Compete. For so long as Employee remains employed by the
Company, Employee shall not, directly or indirectly, either as an officer,
employee, director, proprietor, partner, consultant or otherwise, participate or
engage in any business which is competitive in any manner whatsoever with the
business of the Company or any of its subsidiaries.
<PAGE> 5
7. Termination. Notwithstanding the provisions of Section 1(a), this Agreement
may be terminated by the Company for Cause at any time prior to expiration of
the Term. "Cause" shall mean any of the following:
(a) Employee dies during the Term;
(b) Employee conducts himself in an unprofessional, unethical, immoral or
fraudulent manner, or Employee's conduct discredits the Company or is
detrimental to the Company's business or reputation;
(c) Employee breaches in any material respect any term of this Agreement or the
Nondisclosure Agreement;
(d) Employee fails or refuses to comply with the reasonable policies, standards
or practices of the Company which may be established from time to time; or
(e) Employee commences employment with another employer while he is an employee
of the Company.
8. Compensation Upon Termination or Resignation.
(a) Upon termination for Cause, as set forth above, or upon Employee's voluntary
resignation prior to expiration of the Term, the Company shall pay to Employee
(or to his estate in the event of death) all compensation earned by the Employee
prior to the effective date of termination but not yet paid to him by the
Company, and Employee shall not be entitled to any further compensation from the
Company. Employee's rights under the Company's benefit plans shall be determined
under the provisions of those plans.
(b) If the Company elects to terminate this Agreement during the Term for any
reason other than Cause, the Company shall pay to Employee the compensation
described in subsection 2 (a)(i) above for the remainder of the Term, or for a
period of 12 months from the date of notice of termination, whichever is longer
and additionally shall give Employee three (3) months' advance notice of such
termination.
(c) If the Company elects at the conclusion of the Term not to extend the Term
beyond December 31, 1997, then provided there has been no earlier termination
for Cause, Employee shall receive severance compensation in the amount of 12
months' base salary at the then current base rate. Such amount will be paid as a
lump sum within 60 days following December 31, 1997.
(d) If the Company or its successor elects to terminate Employee's employment as
senior vice president worldwide field sales operations following an acquisition
or merger of the Company involving a change of control and such termination
occurs on or before December 31, 1996, the option vesting described in Section 2
(a)(iv)(A) and (B) shall be accelerated so as to occur automatically on the date
of such termination, without regard to the satisfaction of the conditions to
vesting that would otherwise apply.
9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
<PAGE> 6
10. Binding Upon Successors. This Agreement shall inure to the benefit of
Employee's heirs and Sybase's successors and assigns and be binding upon and
enforceable against any successor to Sybase.
11. Entire Agreement. This Agreement sets forth the entire agreement and
understanding of the parties with respect to the subject matter hereof, and
supersedes any other written or oral negotiations, agreements (including without
limitation the Prior Employment Agreement), understandings, representations or
practices. Any waiver, modification, extension of the Term or other amendment of
this Agreement shall be effective only if in writing and signed by the parties
hereto. Notwithstanding the foregoing, the Prior Employment Agreement shall
remain in full force and effect with respect to Employee's rights and
obligations prior to April 1, 1996.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.
SYBASE, INC. EMPLOYEE:
By: _____________________ __________________________
MARK B. HOFFMAN MICHAEL H. FORSTER
Chief Executive Officer
<PAGE> 1
Exhibit 11.1
SYBASE, INC.
SUPPLEMENTAL COMPUTATIONS OF EARNINGS PER SHARE
(In thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1996 1995 1994
------- -------- -------
<S> <C> <C> <C>
Actual weighted average shares
outstanding for the period:
Common stock 75,160 71,292 50,036
Dilutive employee stock options
and warrants (1) - - 4,386
Weighted average shares and
common stock equivalents of
Powersoft Corporation (2) - - 19,250
------- -------- -------
Total common and common
equivalent shares 75,160 71,292 73,672
======= ======== =======
Net income (loss) (79,006) ($19,502) $87,053
======= ======== =======
Net income (loss) per share ($1.05) ($0.27) $1.18
======= ======== =======
</TABLE>
(1) Computed using the treasury stock method. Not included if anti-dilutive.
(2) On an as-converted basis using merger conversion ratio of 1.6 shares of
Sybase, Inc. common stock and equivalents for each share of Powersoft
Corporation common stock and equivalents.
<PAGE> 1
Exhibit 13.2
15 Sybase, Inc. SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
Consolidated Statement of Operations Data
<TABLE>
<CAPTION>
For the years ended December 31,
- ----------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
License fees $ 605,491 $ 615,642 $588,973 $349,131 $213,949
Services 406,054 340,944 236,420 134,919 76,959
- ----------------------------------------------------------------------------------------------------------------
Total revenues 1,011,545 956,586 825,393 484,050 290,908
- ----------------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of license fees 29,859 29,736 33,446 17,658 13,365
Cost of services 246,273 205,019 140,274 69,402 35,601
Sales and marketing 523,159 481,404 350,239 210,478 129,536
Product development and engineering 164,676 151,902 114,008 71,911 46,313
General and administrative 72,561 67,888 52,844 36,675 24,723
Cost of merger -- 24,017 -- -- 2,243
Purchase of in-process technology -- 19,965 -- -- --
Cost of restructuring 49,232 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
Total costs and expenses 1,085,760 979,931 690,811 406,124 251,781
- ----------------------------------------------------------------------------------------------------------------
Operating income (loss) (74,215) (23,345) 134,582 77,926 39,127
- ----------------------------------------------------------------------------------------------------------------
Interest income and expense, net 7,507 8,603 5,694 3,728 2,965
- ----------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (66,708) (14,742) 140,276 81,654 42,092
Provision for income taxes 12,298 4,760 53,223 31,056 16,245
- ----------------------------------------------------------------------------------------------------------------
Net income (loss) $ (79,006) $ (19,502) $ 87,053 $ 50,598 $ 25,847
================================================================================================================
Net income (loss) per share $ (1.05) $ (0.27) $ 1.18 $ 0.73 $ 0.40
================================================================================================================
Shares used in per share computation 75,160 71,292 73,672 69,739 64,529
</TABLE>
Consolidated Balance Sheet Data
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents, and
short-term cash investments $174,522 $223,721 $256,001 $181,385 $ 80,718
Working capital 93,056 140,306 200,767 170,199 90,075
Total assets 751,891 766,292 671,440 400,621 226,269
Long-term obligations 2,871 5,452 7,543 5,927 15,965
Stockholders' equity 396,808 439,649 407,615 243,953 119,211
</TABLE>
Historical financial results of operations of Sybase contained in this annual
report have been restated to include the results of operations of Powersoft
Corporation.
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION Sybase, Inc. 16
- --------------------------------------------------------------------------------
AND RESULTS OF OPERATIONS
OVERVIEW
- --------------------------------------------------------------------------------
Sybase completed 1996 with record revenues of over $1 billion. The year
was marked by change and, as a result, we believe we exited 1996 better
positioned to succeed in 1997.
There were two distinct halves in 1996. In the first half, the company
suffered losses. Revenues were less than anticipated and expenses were
built around a higher revenue expectation, resulting in losses over the
first six months of the year. In July, the Company restructured its
operations to eliminate non-core products and streamline its
infrastructure. The goal for this restructuring was to focus the Company's
business and reduce its expense base. This effort was successful and the
Company generated operating income, before a $49.2 million restructuring
charge, in the last half of the year.
In 1996, license revenues made up 60% of total revenues and services
accounted for the remaining 40%. The Company made good progress late in
1996 in improving its software license database sales, rebounding from a
weak first half of the year. All key database categories - SQL Server,
Sybase IQ, and SQL Anywhere - showed sequential growth from the third to
the fourth quarter of the year. For all of 1996, database and middleware
revenues made up approximately 70% of the Company's total license
revenues.
Tools showed annual license growth in 1996 and Sybase's merger with
Powersoft in 1995 has proved to be an important combination for customers,
bolstering our product lines. PowerBuilder 5.0, released in mid-1996, was
recognized by the industry as an important upgrade to the development
tool. PowerBuilder and other tools now account for approximately 30% of
the Company's license revenues.
A key goal for 1997 will be to continue expanding tools, middleware, and
database license revenue growth, leveraging the strength of each product
category and capitalizing on each category's leadership capabilities.
Sybase's services business, which includes consulting, education, and
support, has grown to be a more significant part of the company. In an
effort to promote complete solutions for our customers, services
increasingly have become a critical element in our customer relationships.
While the Company has focused efforts toward increasing software license
revenue, services will continue to be an important element of our
business.
Sybase has a good opportunity to continue its progress which began in late
1996. The software industry remains healthy, and new opportunities in
Internet and data warehousing and mobile applications continue to fuel
growth. We believe Sybase is well positioned to benefit from many of the
market trends underlying this anticipated growth, including the continuing
shift to distributed, networked computing; high demand for commercial
applications built on relational database management systems (RDBMSs); the
growing demand for data warehousing and decision support systems;
increasing importance of the mobile database market segment; and emerging
technologies such as the Internet and intranet, objects, and abstract
data.
We anticipate that the competitive environment in which Sybase operates
will remain intense. While much progress has been made in improving
Sybase's product and market competitiveness, crisp execution of sales,
marketing, and product development is vital to realizing the Company's
financial goals. Sybase will continue to focus on revenue growth,
sustained technological leadership, improved processes, and disciplined
allocation of resources.
Overall, we believe we made progress in the latter half of 1996 to
successfully position the Company for 1997. Along with strong technology,
Sybase has a sound financial base, with $175 million in cash, cash
equivalents, and short-term cash investments, and essentially no debt.
From this strong base, successful execution in sales, marketing, and
development is critical as we move forward.
<PAGE> 3
17 Sybase, Inc. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- --------------------------------------------------------------------------------
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenues
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
(Dollars in millions) 1996 Change 1995 Change 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
License fees $ 605.5 (2%) $615.6 5% $589.0
Percentage of total revenues 60% 64% 71%
Services $ 406.0 19% $341.0 44% $236.4
Percentage of total revenues 40% 36% 29%
Total revenues $1,011.5 6% $956.6 16% $825.4
</TABLE>
Total revenues for 1996 increased 6 percent to $1.0 billion compared to
$956.6 million and $825.4 million achieved in 1995 and 1994, respectively.
The revenue growth was the result of increased revenues from the Company's
maintenance, consulting, and other services. The impact of price changes
on the increase in revenues during 1996 was not significant.
License fees decreased 2 percent to $605.5 million in 1996 from $615.6
million recorded in 1995, and increased 5% in 1995 over the $589.0 million
recorded in 1994. The Company attributes the decline in license revenue in
1996 to several factors, including but not limited to: a) weaker database
revenues resulting from lost market momentum after the release of SQL
Server 10, b) customer confidence issues resulting from financial
performance in 1995 and 1996, and c) diffused marketing messages regarding
the Company's products and strategies, poorly differentiating Sybase in
the marketplace.
License revenue growth is vital to the Company's success. Product
development efforts in 1997, expanding on the Company's strong
technological base and integrated with a clearly articulated and
comprehensive strategy, along with improved sales and marketing execution,
are all tailored to create growth in the Company's software license
business.
Services revenues grew 19 percent to $406.0 million in 1996, from $341.0
million recorded in 1995 and increased 44% in 1995 from $236.4 million
recorded in 1994. Services revenues consist primarily of support and
maintenance service fees and consulting, education, and other services
related to the deployment of applications using the Company's software
products. Services revenues as a percentage of total revenues increased to
40 percent in 1996 from 36 percent in 1995 and 29 percent in 1994,
reflecting relatively higher growth in services revenues as compared with
license revenue growth.
The increase in services revenues resulted, in part, from the increase in
support and maintenance service fees related to the Company's growing
installed base, both in terms of directly supported sites as well as
additional users and the renewal of maintenance contracts. The increase in
services revenues also resulted from increased demand for the Company's
consulting and other services. The Company expects services revenues to
continue to increase modestly in absolute dollars in 1997, due partially
to an expanding installed base of customers. However, as this is a
forward-looking statement, future actual results may differ materially
based on future product licenses and the factors described in "Future
Operating Results."
- --------------------------------------------------------------------------------
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION Sybase, Inc. 18
- --------------------------------------------------------------------------------
AND RESULTS OF OPERATIONS
Geographical Revenues
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
(Dollars in millions) 1996 Change 1995 Change 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
North American $ 615.7 5% $588.8 4% $564.8
Percentage of total revenues 61% 62% 68%
International:
European $ 238.8 0% $239.8 23% $194.8
Percentage of total revenues 23% 25% 24%
Intercontinental $ 157.0 23% $127.9 94% $ 65.8
Percentage of total revenues 16% 13% 8%
- ----------------------------------------------------------------------------------------------------------------------------------
Total International $ 395.8 8% $367.8 41% $260.6
Percentage of total revenues 39% 38% 32%
- ----------------------------------------------------------------------------------------------------------------------------------
Total revenues $1,011.5 6% $956.6 16% $825.4
</TABLE>
North American revenues (United States, Canada, and Mexico) grew 5 percent
in 1996 to $615.7 million. International revenues increased 8 percent in
1996 to $395.8 million from $367.8 million in 1995, with European revenues
essentially flat and Intercontinental revenues (principally Japan, Asia,
Australia, and Latin America) increasing 23 percent.
International revenues comprised 39 percent of total revenues in 1996, up
from 38 percent in 1995 and 32 percent in 1994. The stronger international
revenue growth rate in 1996 compared to the North American growth rate
reflects expansion of the Company's direct selling organization in
existing and new international markets, combined with lower than expected
North American revenues. The effect of foreign currency exchange rate
changes on revenues was not material in 1996, 1995, or 1994. Although the
Company takes into account changes in exchange rates over time in its
pricing and strategy, the Company's business and results of operations
could be materially and adversely affected by fluctuations in foreign
currency exchange rates. See "Future Operating Results."
Cost and Expenses
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
(Dollars in millions) 1996 Change 1995 Change 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cost of license fees $ 29.9 0% $ 29.7 (11%) $ 33.4
Percentage of license fees 5% 5% 6%
Cost of services $246.3 20% $205.0 46% $140.3
Percentage of services revenues 61% 60% 59%
Sales and marketing $523.2 9% $481.4 37% $350.2
Percentage of total revenues 52% 50% 42%
Product development and engineering $164.7 8% $151.9 33% $114.0
Percentage of total revenues 16% 16% 14%
General and administrative $ 72.6 7% $ 67.9 28% $ 52.8
Percentage of total revenues 7% 7% 6%
Cost of merger and purchase of in-process technology $ -- * $ 44.0 * $ --
Percentage of total revenues -- 5% --
Cost of restructuring $ 49.2 * $ -- * $ --
Percentage of total revenues 5% -- --
</TABLE>
*Not meaningful
<PAGE> 5
19 Sybase, Inc. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- --------------------------------------------------------------------------------
AND RESULTS OF OPERATIONS
Cost of license fees. Cost of license fees, consisting primarily of
product costs (media and documentation), amortization of capitalized
software development costs, and third-party royalty costs, increased in
absolute dollar amount in 1996 to $29.9 million, up from $29.7 million in
1995 but represented a decrease from $33.4 million in 1994. Such costs
were 5 percent of license fees in both 1996 and 1995 and 6 percent in
1994. Amortization of capitalized software costs included in cost of
license fees was $7.4 million in 1996, $5.3 million in 1995, and $4.4
million in 1994. Also included in the cost of license fees in 1996, 1995,
and 1994 is the amortization of capitalized technology costs associated
with the acquisition of Micro Decisionware, Inc. in the amounts of
approximately $1.6 million, $1.6 million, and $1.2 million, respectively.
Cost of services. Cost of services, consisting primarily of maintenance,
consulting, and education expenses and, to a lesser degree,
services-related product costs (media and documentation), increased
slightly as a percentage of services revenues to 61 percent in 1996 from
60 percent in 1995, and up from 59 percent in 1994. The increase in
absolute dollars in 1996 and 1995 reflects the expansion of the customer
support and the professional services organizations, made in order to
better support the growth in customer sites, to gain a more geographically
diverse customer base and to better enable customers to develop and deploy
the Company's software products.
Sales and marketing. Sales and marketing expenses increased in absolute
dollars in all three periods while increasing as a percentage of total
revenues to 52 percent in 1996, from 50 percent in 1995 and 42 percent in
1994. The increase in sales and marketing expenses as a percentage of
total revenues in 1996 compared to 1995 is primarily the result of lower
than expected license revenues and, to a lesser extent, lower than
expected services revenues realized in 1996 due to the factors discussed
above. In 1996, Sybase increased investments in sales, marketing, and
advertising to support planned revenue expansion in all geographic regions
and increased sales through indirect channels. During 1997, Sybase intends
to minimize growth in sales and marketing in absolute dollars and improve
the productivity of the resources already in place.
Product development and engineering. Product development and engineering
expenses (net of capitalized software development costs) remained
consistent as a percentage of total revenues in 1996 and 1995 at 16
percent, up from 14 percent in 1994. This increase is primarily the result
of lower than anticipated license revenues in 1996 and 1995. In absolute
dollars, product development and engineering expenses in 1996 increased 8
percent over 1995, following 33 percent growth in 1995 over 1994. The
increase in 1996 was the result of several major product development
programs. Significant expenditures in 1996 were made to develop the System
11 suite of products, including enhancements to SQL Server, SQL Anywhere,
and Replication Server products and certain other existing database
products; the Company's middleware products; and application development
tools, including PowerBuilder 5.0 and Optima++. The Company capitalized
approximately $13.8 million, $13.4 million, and $6.8 million, representing
8, 9, and 6 percent of gross product development and engineering
expenditures for 1996, 1995, and 1994, respectively. The increase in
capitalization of product development and engineering expenditures for
1996 and 1995 over 1994 reflects major development programs such as SQL
Server 11, Sybase IQ, and PowerBuilder 5.0. The Company believes that
product development and engineering expenditures are essential to
maintaining its position as a technology and product leader. The Company
expects product development and engineering expenditures to continue to be
significant, both in absolute dollars and as a percentage of total
revenues.
General and administrative. General and administrative expenses
represented 7 percent of revenues in 1996 and 1995, up slightly from 6
percent in 1994, while increasing in absolute dollars in all three years.
The increase in general and administrative expenses as a percentage of
total revenues in 1996 and 1995 is primarily the result of lower than
anticipated license revenues. The absolute dollar increases in general and
administrative expenses resulted primarily from increased staffing and
increased investments in systems infrastructure necessary to support the
Company's planned growth.
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION Sybase, Inc. 20
- --------------------------------------------------------------------------------
AND RESULTS OF OPERATIONS
Cost of merger and purchase of in-process technology. In 1995, the Company
charged to operations estimated one-time costs related to the merger with
Powersoft Corporation of approximately $24.0 million, a substantial
portion of which are nondeductible for income tax purposes. These costs
consisted primarily of investment banking and professional fees and other
direct costs associated with the merger. In 1995, the Company also charged
to operations one-time costs of approximately $20.0 million related to
in-process technology acquired in the acquisition of SDP, S.A.
Cost of restructuring. In 1996, the Company charged to operations
approximately $49.2 million to cover the costs of a restructuring. The
Company's goal in the restructuring was to reduce ongoing expenses and
focus its operations. The charge included approximately $17.0 million for
severance and related items, $15.7 million for facilities consolidation,
$13.9 million for disposition expenses and write-off of capitalized
software development costs related to discontinued products, and $2.6
million for other restructuring related items.
Operating Income (Loss)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
(Dollars in millions) 1996 Change 1995 Change 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating income (loss) $(74.2) 218% $(23.3) (117%) $134.6
Percentage of total revenues 7% 2% 16%
</TABLE>
The 1996 operating loss of $74.2 million represents 7 percent of total
revenue and includes the non-recurring charge of $49.2 million for
restructuring. This compares with $23.3 million of operating losses and
$134.6 million of operating income in 1995 and 1994, respectively. The
1995 operating loss includes non-recurring charges totaling $44.0 million
related to the cost of merger and the purchase of in-process technology.
The substantial decrease in operating income and margins results from the
operating factors described above.
Interest Income and Interest Expense and Other (Net)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
(Dollars in millions) 1996 Change 1995 Change 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $9.2 3% $8.9 40% $6.4
Percentage of total revenues 0.9% 0.9% 0.8%
Interest expense and other, net $1.7 421% $0.3 (53%) $0.7
Percentage of total revenues 0.2% 0.0% 0.1%
</TABLE>
Interest income consists primarily of interest earned on investments.
Interest expense and other (net) includes interest expense from capital
lease obligations incurred in prior years, bank fees and expenses, net
gains and losses resulting from the Company's foreign currency exposures,
and hedging activities and the related cost of foreign exchange hedging.
The decrease in net interest income in absolute dollars in 1996 is largely
due to lower average invested cash balances in 1996 than in 1995. Net
foreign exchange gains and losses resulting from the Company's hedging
activities were immaterial for all periods covered.
Provision for Income Taxes
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
(Dollars in millions) 1996 Change 1995 Change 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Provision for income taxes $12.3 158% $4.8 (91%) $53.2
</TABLE>
The Company recorded a $12.3 million provision for income taxes in 1996,
up from $4.8 million and $53.2 million recorded in 1995 and 1994,
respectively. The 1996 tax provision is primarily a result of earnings
generated from operations in certain international jurisdictions and
withholding taxes on revenues. As of December 31, 1996, the
<PAGE> 7
21 Sybase, Inc. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- --------------------------------------------------------------------------------
AND RESULTS OF OPERATIONS
Company has U.S. federal net operating loss carryforwards of
approximately $98,000,000 and tax credit carryforwards of approximately
$6,700,000 which expire in various years through 2011. Realization of
the Company's net deferred tax assets, which total $41.1 million at
December 31, 1996, is dependent upon the Company generating sufficient
taxable income in future years in appropriate tax jurisdictions to
obtain benefit from the reversal of temporary differences and from tax
credit carryforwards. The amount of deferred tax assets considered
realizable is subject to adjustment in future periods if estimates of
future taxable income are reduced and any such adjustments could have
an impact on the Company's effective tax rate in future periods.
Net Income (Loss) and Net Income (Loss) per Share
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
(Dollars in millions except net income (loss) per share) 1996 Change 1995 Change 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income (loss) $(79.0) 305% $(19.5) (122%) $87.1
Percentage of total revenues 8% 2% 11%
Net income (loss) per share $(1.05) 289% $(0.27) (123%) $1.18
Shares used in per share computation 75.2 5% 71.3 (3%) 73.7
</TABLE>
The Company incurred a net loss in 1996 of $79.0 million, including
one-time restructuring charges, compared to a net loss of $19.5 million in
1995 and net income of $87.1 million in 1994. The net loss per share was
$1.05 in 1996, compared to a net loss per share of $0.27 in 1995 and net
income per share of $1.18 in 1994. Shares used in the per share
computation increased 5 percent in 1996 from 1995.
Liquidity and Capital Resources
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
(Dollars in millions) 1996 Change 1995 Change 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Working capital $ 93.1 (34%) $140.3 (30%) $200.8
Cash, cash equivalents, and short-term cash investments $174.5 (22%) $223.7 (13%) $256.0
Net cash provided by operating activities $ 19.8 (75%) $ 78.4 (43%) $136.3
Net cash used for investing activities $ 75.4 (24%) $ 99.1 (26%) $134.1
Net cash provided by financing activities $ 34.1 (29%) $ 47.9 (12%) $ 54.5
</TABLE>
Net cash provided by operating activities was $19.8 million in 1996
compared to $78.4 million in 1995 and $136.3 million in 1994. Net cash
provided by operating activities during 1996 reflects a net loss of $79.0
million compared to a loss of $19.5 million in the prior year. Partially
offsetting the use of cash from this increased loss are depreciation and
amortization totaling $97.8 million and a write-off of assets from
restructuring totaling $17.6 million in 1996 compared to $75.2 million and
$0 in 1995 and $43.9 million and $0 in 1994. The increase in depreciation
and amortization over these periods reflects a larger base of depreciable
long-term assets. Additionally, decreased net cash provided by operating
activities reflects an increase in accounts receivable of $49.0 million in
1996 compared to increases of $9.9 million in 1995 and $65.0 million in
1994. Accounts payable balances fell $15.6 million in 1996, compared to
increases of $6.0 million in 1995 and $11.6 million in 1994.
Net cash used for investing activities decreased to $75.4 million in 1996
compared to $99.1 million in 1995 and $134.1 million in 1994. Investing
activities included capital expenditures of $82.3 million in 1996 compared
to $121.1 million in 1995 and $96.1 million in 1994, which reflects slower
expansion of expenditures required to support the Company's employee base
around the world as well as systems and infrastructure investments.
Additionally, in 1995 investing activities included a cash use of $37.3
million (net of cash acquired) for business combinations, whereas in 1996
these activities resulted in a net cash inflow of $0.2 million. In 1994,
$2.9 million was used for business combinations. During 1996 there was a
net decrease of cash investments in the amount of $25.1 million compared
to a $61.0 million net decrease in 1995 and a $15.9 million net increase
in 1994.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION Sybase, Inc. 22
- --------------------------------------------------------------------------------
AND RESULTS OF OPERATIONS
Net cash provided by financing activities for 1996 was $34.1 million
compared to $47.9 million in 1995 and $54.5 million in 1994. Net cash
provided by financing activities declined due to the reduction of the tax
benefit available to the Company associated with the exercise of stock
options.
The Company engages in business operations around the world and is
therefore exposed to foreign currency fluctuations. As of December 31,
1996, the Company had identifiable assets totaling $136.4 million
associated with its European operations and $100.9 million associated with
its Intercontinental operations. The Company experiences foreign exchange
transaction exposures from short-term intercompany payables and
receivables denominated in different currencies. The Company hedges
certain of these short-term exposures under a plan approved by the Sybase
Board of Directors (see Note Two of Notes to Consolidated Financial
Statements). The Company also experiences foreign exchange translation
exposure on its net assets denominated in different currencies. As certain
of these net assets are considered by Sybase, the U.S. parent company, to
be a permanent investment in the respective subsidiaries, the foreign
currency translation gains and losses are reflected in stockholders'
equity accumulated foreign currency translation adjustments.
Cash, cash equivalents, and short-term cash investments totaled $174.5
million at December 31, 1996, compared to $223.7 million at December 31,
1995 and $256.0 million at December 31, 1994.
The Company believes that it has the financial resources needed to meet
its presently anticipated business requirements, including capital
expenditure and strategic operating programs, for the foreseeable future.
Future Operating Results
- --------------------------------------------------------------------------------
The Company's future operating results may vary substantially from period
to period. The price of the Company's common stock will fluctuate in the
future, and an investment in the Company's common stock is subject to a
variety of risks, including but not limited to the specific risks
identified below. The results of operations for the quarter and year ended
December 31, 1996 are not necessarily indicative of results for the fiscal
year ending December 31, 1997 or any other future period. Expectations,
forecasts, and projections by the Company or others are by nature
forward-looking statements, and future results cannot be guaranteed.
Forward-looking statements that were true at the time made may ultimately
prove to be incorrect or false. Inevitably, some investors in the
Company's securities will experience gains while others will experience
losses depending on the prices at which they purchase and sell securities.
Prospective and existing investors are strongly urged to carefully
consider the various cautionary statements and risks set forth in this
report.
The timing and amount of the Company's license fee revenues are subject to
a number of factors that make estimation of revenues and operating results
prior to the end of a quarter extremely uncertain. Sybase has experienced
a seasonal pattern of license fee decline between the fourth quarter and
the succeeding first quarter contributing to lower total revenues and
operating earnings in the first quarter compared to the prior fourth
quarter. Sybase currently anticipates that revenues and earnings in the
first quarter of 1997 will be lower than in the fourth quarter of 1996.
The Company has operated historically with little or no backlog and, as a
result, license fees in any quarter are dependent on orders booked and
shipped in that quarter. In addition, the timing of closing of large
license agreements increases the risk of quarter-to-quarter fluctuations
and the uncertainty of estimating quarterly operating results. The Company
has experienced a pattern of recording 50 percent to 70 percent of its
quarterly revenues in the third month of the quarter, with a concentration
of such revenues in the last two weeks of that third month. The Company's
operating expenses are based on projected annual and quarterly revenue
levels and are incurred approximately ratably throughout each quarter.
Because the Company's operating expenses are relatively fixed in the short
term, if projected revenues are not realized in the expected period, the
Company's
<PAGE> 9
23 Sybase, Inc. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- --------------------------------------------------------------------------------
AND RESULTS OF OPERATIONS
operating results for that period would be adversely affected and could
result in an operating loss, as occurred in the first and second
quarters of 1996. Failure to achieve revenue, earnings, and other
operating and financial results as forecast or anticipated by brokerage
firm and industry analysts could result in an immediate and adverse
effect on the market price of the Company's stock. The Company's rate
of year-over-year growth slowed significantly in each of the past seven
quarters compared to the year earlier periods. The Company may not
achieve, in the future, the relatively high rates of growth experienced
by the Company in 1991 through 1994 or the rates of growth projected
for the software markets in which Sybase competes.
Commencing in late 1995 and continuing throughout 1996, the Company
implemented a variety of changes to the sales organization, including a
new sales model, changes to sales compensation programs, and an
increased focus on sales through indirect channels. Although such
changes are intended to enhance overall revenues, such changes could,
in the short-run, materially and adversely affect the sales process and
revenues. For example, the Company believes that these changes may have
contributed in part to the lower than expected revenues in the first
two quarters of 1996. In the second quarter of 1996, the Company
announced several other management and organizational changes,
including changes in the senior management of the sales and marketing
organizations. In the third quarter of 1996, Mitchell Kertzman
succeeded Mark Hoffman as the Company's President and Chief Executive
Officer, with Mr. Hoffman continuing as the Company's Chairman of the
Board. Also in the third quarter of 1996, Jack Acosta became the
Company's Chief Financial Officer and David Litwack became Executive
Vice President of Products. The Company may make other management and
organization changes in the future. Organizational and management
changes are intended to enhance productivity and competitiveness.
However, such changes may not produce the desired results and could
materially adversely affect productivity, expenses, and revenues.
The market for the Company's stock is highly volatile. The trading
price of the Company's common stock fluctuated widely in 1995 and 1996
and may in the future continue to be subject to wide fluctuations in
response to quarterly variations in operating and financial results,
announcements of technological innovations, new products, or customer
contracts won by the Company or its competitors, changes in prices of
the Company's or its competitors' products and services, changes in
product mix, changes in the Company's revenue and revenue growth rates
for the Company as a whole or for individual geographic areas, business
units, products or product categories, as well as other events or
factors. Statements or changes in opinions, ratings, or earnings
estimates made by brokerage firms and industry analysts relating to the
market in which the Company does business, the Company's competitors,
or the Company or its products specifically, have resulted, and could
in the future result, in an immediate and adverse effect on the market
price of the Company's common stock. In particular, due to a variety of
factors, the Company's stock price declined significantly during the
third quarter of 1994, the second quarter of 1995, and the first
quarter of 1996. In addition, the stock market has from time to time
experienced extreme price and volume fluctuations that have
particularly affected the market price for many high-technology
companies and which often have been unrelated to the operating
performance of these companies.
An increased portion of the Company's revenues in recent quarters has
been derived from its international operations. Several of the
Company's international subsidiaries have been only recently acquired
or formed. In addition there have been several management and
organizational changes within the international operations.
International revenues, in absolute dollars and as a percentage of
total revenues, may fluctuate in part due to the growth and, in some
cases, the relative immaturity of international organizations. The
Company's operations and financial results could be significantly
affected by factors associated with international operations such as
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION Sybase, Inc. 24
- --------------------------------------------------------------------------------
AND RESULTS OF OPERATIONS
changes in foreign currency exchange rates and uncertainties relative
to regional economic circumstances, political instability in emerging
markets, and difficulties in staffing and managing foreign operations,
as well as by other risks associated with international activities.
The market for the Company's software products and services is
extremely competitive and characterized by dynamic customer demands,
rapid technological and marketplace changes, and frequent product
enhancements and new product introductions. The Company competes with a
number of companies, including Oracle Corporation, Informix
Corporation, Microsoft Corporation, IBM Corporation, and Computer
Associates, Inc. Many of the Company's competitors and potential
competitors have significantly greater financial, technical, sales, and
marketing resources, and a larger installed base than the Company. Each
of Informix, IBM, Microsoft, and Oracle has announced the development
of enhanced versions of their principal database products that are
intended to improve the performance or expand the capabilities of their
existing products. New or enhanced products introduced by existing or
future competitors could increase the competition faced by the
Company's products and result in greater price pressure on certain of
the Company's database products, especially to the extent that market
acceptance for personal computer oriented technologies increases. A
failure by the Company to compete successfully with its existing
competitors or with new competitors could have a material adverse
effect on the Company's business and results of operations and on the
market price of the Company's common stock.
Existing and future competition or changes by the Company in its
product offerings or product pricing structure could result in an
immediate reduction in the prices of the Company's products. The
Company introduced changes in its pricing and licensing structure in
the first quarter of 1996 that increased the prices for certain
products or configurations and reduced the prices for other products
and configurations. The Company will introduce price and licensing
changes from time to time in the future. If recently implemented or
future changes in the Company's products, pricing structure, or
existing or future competition, for example from Microsoft, were to
result in significant revenue declines, the Company's business and
financial results would be adversely affected.
The Company's future results will depend in part on its ability to
enhance its existing products and to introduce new products, on a
timely and cost-effective basis, that meet dynamic customer
requirements. Customer requirements for products can rapidly change as
a result of innovations or changes within the computer hardware and
software industries. For example, the widespread use of the Internet is
rapidly giving rise to new customer requirements as well as new methods
and practices of selling, marketing, and distributing products and
services. Sybase's future results will depend in part on its success in
developing new products, making generally available products that have
been previously announced, enhancing its existing products and adapting
its existing products to changing customer requirements, and ultimately
on the market acceptance received by such new or enhanced products. The
Company has announced the development and anticipated availability
dates of several products -- for example, a rapid application
development tool for Java; the Company currently plans to commence
commercial shipment of this product in 1997. The Company has
experienced delays in introducing some new products in the past. For
example, the commercial shipment of Sybase IQ, which became
commercially available in February 1996, was previously planned for the
second half of 1995. Unanticipated delays in product availability
schedules could result from various factors including development or
testing difficulties, feature changes, software errors, shortages in
appropriately skilled software engineers, and project management
problems. Delays in the scheduled availability of these or other
products, a lack of or decrease in market acceptance of new or enhanced
products, particularly SQL Server 11 which became commercially
available in December 1995 and PowerBuilder 5.0 which became
commercially available in June 1996, or the Company's failure to
accurately anticipate customer demand or meet customer performance
requirements or to anticipate competitive products and developments
could have a material adverse effect on the Company's business and
financial results. New products or new versions of existing products
<PAGE> 11
25 Sybase, Inc. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- --------------------------------------------------------------------------------
AND RESULTS OF OPERATIONS
may, despite testing, contain undetected errors or bugs that will delay
the introduction or adversely affect commercial acceptance of such
products or give rise to warranty or other customer claims, which
could, in turn, adversely affect the Company's financial results.
Sybase's results will also depend increasingly on the ability of its
products to interoperate and perform well with existing and future
leading, industry-standard application software products intended to be
used in connection with relational database management systems. Failure
to meet existing or future interoperability and performance
requirements of certain independent vendors marketing such applications
in a timely manner has in the past and could in the future adversely
affect the market for Sybase's products. Certain leading applications
will not be interoperable with Sybase relational database management
systems ("RDBMSs") until certain features are added to the Company's
RDBMS and others may never be available on Sybase's RDBMS. In addition,
the Company's application development tools, database design tools, and
certain connectivity products are designed for use with RDBMSs offered
by the Company's competitors. Vendors of non-Sybase RDBMSs and related
products may become less willing in the future to provide the Company
with access to products, technical information, and marketing and sales
support. If existing and potential customers of the Company who use
non-Sybase RDBMSs refrain from purchasing such products due to concerns
that over time the development, quality, and support of products for
non-Sybase RDBMSs will diminish, the Company's business, results of
operations, and financial condition could be materially and adversely
affected.
Commercial acceptance of the Company's products and services could be
adversely affected by critical or negative statements or reports by
brokerage firms, industry and financial analysts, and industry
periodicals concerning the Company and its products, business, or
competitors, or by the advertising or marketing efforts of competitors
or other factors that could affect customer perception, such as the
criticism of the scalability of the Company's SQL Server 10 database
product experienced in 1995. In addition, customer perception of Sybase
and its products could be adversely affected by financial results,
particularly revenues and profitability, reported for the 1996 fiscal
year or other future periods, by the market share of the Company's
products and by press reports related thereto.
As the number of software products in the industry and the number of
software patents increase, the Company believes that software
developers may become increasingly subject to infringement claims.
Third parties have in the past asserted and may in the future assert
that their patents or other proprietary rights are violated by products
offered or in development by the Company. Any such claims, with or
without merit, can be time consuming and expensive to defend or settle,
and could have an adverse effect on the Company's business and results
of operations.
The Company's ability to achieve its future revenues and earnings will
depend in part on the ability of its officers and key personnel to
manage growth, costs, and expenses successfully through the
implementation of appropriate management systems and controls. Failure
to effectively implement or maintain such systems and controls could
adversely affect the Company's business and results of operations. The
success of the Company also depends in part on its ability to attract
and retain qualified technical, managerial, sales, and marketing
personnel. The competition for such personnel is intense in the
software industry and, Sybase believes, has increased substantially in
recent years. In particular, there have been several changes in 1996
and 1997 to the Company's executive management team. Changes in
management, the Company's recent financial performance, and a reduction
in the overall number of Sybase employees made in the third quarter of
1996 could cause an increase in the amount of employee turnover. The
failure to effectively recruit, train, and retain qualified personnel
or high rates of employee turnover, particularly among engineering or
sales staff, could adversely affect the Company's product development
efforts, product sales, and other aspects of the Company's operations
and results. During 1996, the software industry generally, and Sybase
specifically, experienced higher than historical rates of employee
turnover.
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION Sybase, Inc. 26
- --------------------------------------------------------------------------------
AND RESULTS OF OPERATIONS
Sybase currently enters most of its North American customer orders in its
Burlington, Massachusetts, operations center and ships all of its products
in North America (other than its Powersoft products) from its Emeryville,
California, distribution facility. Because of the pattern of recording a
high percentage of quarterly revenues within the last week or two weeks of
the quarter, the closure or inoperability of one or both of these
facilities during such weeks due to natural calamity or due to a systems
or power failure could have a material adverse effect on the Company's
ability to record revenues for such quarter.
In 1994 and 1995 the Company acquired Powersoft and several other
companies. In February 1996, the Company acquired Visual Components, Inc.
The Company will acquire other distributors, companies, products, or
technologies in the future. The achievement of the desired benefits of
these and future acquisitions will depend in part upon whether the
integration of the acquired businesses is achieved in an efficient and
effective manner. The successful combination of businesses will require,
among other things, integration of the companies' related product
offerings and coordination of their sales, marketing, and research and
development efforts. The difficulties of such coordination may be
increased by the geographic distance between separate organizations. The
Company may be unable to integrate effectively these or future acquired
businesses and may not obtain the anticipated or desired benefits of such
acquisitions. Such acquisitions may result in costs, liabilities, or
additional expenses that could adversely affect the Company's results of
operations and financial condition. In addition, acquisitions or changes
in business or market conditions may cause the Company to revise its
plans, which could result in unplanned expenses or a loss of anticipated
benefits from past investments.
During the third quarter of 1996 the Company incurred a restructuring
charge of approximately $49.2 million. The Company will continue to
evaluate its business, products, and results of operations, and
accordingly the Company may incur restructuring charges sometime in the
future.
<PAGE> 13
27 Sybase, Inc. REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Directors and Stockholders
Sybase, Inc.
We have audited the accompanying consolidated balance sheets of Sybase,
Inc. as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of
the three years in the period ended December 31, 1996. 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. In February 1995, the Company merged with Powersoft
Corporation in a transaction which was accounted for as a pooling of
interests. We did not audit the financial statements of Powersoft
Corporation for the year ended December 31, 1994, which statements reflect
revenues constituting 16% of the consolidated financial statement total
for the year ended December 31, 1994. Those statements were audited by
other auditors whose report has been furnished to us, and our opinion,
insofar as it relates to data included for Powersoft Corporation, is based
solely on the report of the other auditors.
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 significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
and the report of other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Sybase, Inc. at
December 31, 1996 and 1995, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
San Francisco, California
January 23, 1997, except for Note Fourteen,
as to which the date is February 21, 1997
<PAGE> 14
CONSOLIDATED BALANCE SHEETS Sybase, Inc. 28
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
- ----------------------------------------------------------------------------------------------------------------------
(In thousands, except share data) 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 156,796 $ 180,877
Short-term cash investments 17,726 42,844
- ----------------------------------------------------------------------------------------------------------------------
Total cash, cash equivalents and short-term cash investments 174,522 223,721
Accounts receivable, less allowance for doubtful accounts of $28,242 (1995 - $19,304) 239,466 193,924
Deferred income taxes 13,729 24,947
Other current assets 17,551 18,905
- ----------------------------------------------------------------------------------------------------------------------
Total current assets 445,268 461,497
Property, equipment and improvements, net 191,328 194,916
Deferred income taxes 27,406 16,088
Capitalized software, net 19,974 17,227
Other assets 67,915 76,564
- ----------------------------------------------------------------------------------------------------------------------
Total assets $ 751,891 $ 766,292
======================================================================================================================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 21,563 $ 36,939
Accrued compensation and related expenses 47,829 42,400
Accrued income taxes 26,952 28,373
Other accrued liabilities 89,386 75,215
Deferred revenue 166,482 138,264
- ----------------------------------------------------------------------------------------------------------------------
Total current liabilities 352,212 321,191
Other liabilities 2,871 5,452
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value, 8,000,000 shares authorized;
none issued or outstanding -- --
Common stock, $0.001 par value; 200,000,000 shares authorized;
76,608,794 shares issued and outstanding (1995 - 72,645,734) 77 72
Additional paid-in capital 359,161 315,064
Retained earnings 46,081 128,255
Accumulated translation adjustments (8,511) (3,742)
- ----------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 396,808 439,649
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 751,891 $ 766,292
======================================================================================================================
</TABLE>
See accompanying notes.
<PAGE> 15
29 Sybase, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the years ended December 31,
- ------------------------------------------------------------------------------------------
(In thousands, except per share data) 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
License fees $ 605,491 $ 615,642 $ 588,973
Services 406,054 340,944 236,420
- ------------------------------------------------------------------------------------------
Total revenues 1,011,545 956,586 825,393
Costs and expenses:
Cost of license fees 29,859 29,736 33,446
Cost of services 246,273 205,019 140,274
Sales and marketing 523,159 481,404 350,239
Product development and engineering 164,676 151,902 114,008
General and administrative 72,561 67,888 52,844
Cost of restructuring 49,232 -- --
Cost of merger -- 24,017 --
Purchase of in-process technology -- 19,965 --
- ------------------------------------------------------------------------------------------
Total costs and expenses 1,085,760 979,931 690,811
- ------------------------------------------------------------------------------------------
Operating income (loss) (74,215) (23,345) 134,582
Interest income 9,243 8,936 6,404
Interest expense and other, net (1,736) (333) (710)
- ------------------------------------------------------------------------------------------
Income (loss) before income taxes (66,708) (14,742) 140,276
Provision for income taxes 12,298 4,760 53,223
- ------------------------------------------------------------------------------------------
Net income (loss) $ (79,006) $ (19,502) $ 87,053
- ------------------------------------------------------------------------------------------
Net income (loss) per share $ (1.05) $ (0.27) $ 1.18
- ------------------------------------------------------------------------------------------
Shares used in calculation of per share amounts 75,160 71,292 73,672
- ------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
<PAGE> 16
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Sybase, Inc. 30
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three years ended December 31, 1996
- ---------------------------------------------------------------------------------------------------------------------------
Common stock Additional Accumulated
--------------- paid-in Retained translation
(In thousands) Shares Amount capital earnings adjustments Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1993 64,797 $65 $177,538 $ 68,739 $(2,389) $ 243,953
Common stock issued in connection with
business combinations 1,656 2 27,039 (4,692) -- 22,349
Common stock issued under stock option and
stock purchase plans 2,906 2 28,686 -- -- 28,688
Tax benefit of exercise of stock options -- -- 25,895 -- -- 25,895
Foreign currency translation adjustments -- -- -- -- (323) (323)
Net income -- -- -- 87,053 -- 87,053
- ---------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1994 69,359 69 259,158 151,100 (2,712) 407,615
Common stock issued in connection with
business combinations 497 -- 8,051 (3,343) -- 4,708
Common stock issued under stock option and
stock purchase plans 2,790 3 34,497 -- -- 34,500
Tax benefit of exercise of stock options -- -- 13,358 -- -- 13,358
Foreign currency translation adjustments -- -- -- -- (1,030) (1,030)
Net loss -- -- -- (19,502) -- (19,502)
- ---------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1995 72,646 72 315,064 128,255 (3,742) 439,649
Common stock issued in connection with
business combinations 971 1 9,970 (3,168) -- 6,803
Common stock issued under stock option and
stock purchase plans 2,992 4 34,127 -- -- 34,131
Foreign currency translation adjustments -- -- -- -- (4,769) (4,769)
Net loss -- -- -- (79,006) -- (79,006)
- ---------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1996 76,609 $77 $359,161 $ 46,081 $(8,511) $ 396,808
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
<PAGE> 17
31 Sybase, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the years ended December 31,
- ------------------------------------------------------------------------------------------------------------------------
(In thousands) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and cash equivalents, beginning of year $ 180,877 $ 152,211 $ 93,617
Cash flows from operating activities:
Net income (loss) (79,006) (19,502) 87,053
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 97,835 75,178 43,865
Write-off of assets in restructuring 17,600 -- --
Deferred income taxes (100) (21,710) (6,617)
Changes in assets and liabilities:
Accounts receivable (49,034) (9,926) (65,030)
Other current assets 1,378 1,413 (9,453)
Accounts payable (15,551) 6,044 11,589
Accrued compensation and related expenses 5,422 5,164 11,680
Other accrued liabilities 17,358 13,744 4,862
Deferred revenue 28,218 37,450 39,090
Accrued income taxes (1,421) (5,454) 22,035
Other (2,871) (4,005) (2,748)
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 19,828 78,396 136,326
Cash flows used for investing activities:
Purchases of available-for-sale cash investments (59,883) (143,101) (158,218)
Maturities of available-for-sale cash investments 67,751 73,924 47,883
Sales of available-for-sale cash investments 17,250 130,184 94,455
Business combinations, net of cash acquired 201 (37,342) (2,890)
Purchase of property, equipment and improvements (82,258) (121,094) (96,102)
Capitalized software development costs (13,838) (13,376) (6,837)
Decrease (increase) in other assets (4,627) 11,734 (12,394)
- ------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (75,404) (99,071) (134,103)
Cash flows provided by financing activities:
Net proceeds from issuance of common stock 34,131 34,500 28,646
- ------------------------------------------------------------------------------------------------------------------------
Tax benefit of exercise of stock options -- 13,358 25,895
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 34,131 47,858 54,541
Effect of exchange rate changes on cash (2,636) 1,483 1,830
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (24,081) 28,666 58,594
Cash and cash equivalents, end of year 156,796 180,877 152,211
Short-term cash investments, end of year 17,726 42,844 103,790
- ------------------------------------------------------------------------------------------------------------------------
Total cash, cash equivalents and short-term cash investments, end of year $ 174,522 $ 223,721 $ 256,001
- ------------------------------------------------------------------------------------------------------------------------
Supplemental disclosures:
Interest paid $ 399 $ 410 $ 523
- ------------------------------------------------------------------------------------------------------------------------
Income taxes paid $ 12,842 $ 18,546 $ 15,445
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Sybase, Inc. 32
- --------------------------------------------------------------------------------
NOTE ONE: Summary of Significant Accounting Policies
- --------------------------------------------------------------------------------
The Company Sybase, Inc. ("Sybase" or "the Company") develops, markets,
and supports software products and services for client/server, Internet
and intranet transaction processing, and data mart and data warehousing
applications. Sybase's products include databases, middleware, and
application development tools and are marketed under the brand names of
Sybase and Powersoft. The Company also offers consulting and customer
support and technical services; demand for such services is predominantly
dependent upon the base of customers with installed license products.
Basis of Presentation The consolidated financial statements include the
accounts of Sybase and its subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation.
The Company translates the accounts of its foreign subsidiaries using the
local foreign currency as the functional currency. For foreign
subsidiaries in countries with highly inflationary economies the accounts
are translated as if the U.S. dollar was the functional currency. The
assets and liabilities of foreign subsidiaries are translated into U.S.
dollars using current exchange rates, and gains and losses from this
translation process are credited or charged to the "accumulated
translation adjustments" account included in stockholders' equity. Foreign
currency transaction gains and losses, which have not been material, are
included in interest expense and other in the consolidated statements of
operations.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Property, Equipment and Improvements Property, equipment and improvements
are stated at cost. Depreciation and amortization are computed using the
straight-line method over the shorter of the estimated useful life of the
asset or the lease term.
Capitalized Software The Company capitalizes software development costs
incurred subsequent to the release of the product for acceptance testing.
Upon the general release of the product to customers, development costs
for that product are amortized over periods not exceeding three years,
based on the estimated economic life of the product. Capitalized software
costs amounted to $51,831,000, $37,911,000, and $26,984,000 at December
31, 1996, 1995, and 1994, respectively, and related accumulated
amortization was $31,857,000, $20,684,000, and $15,419,000, respectively.
Software amortization charges included in cost of license fees were
$7,364,000, $5,265,000, and $4,433,000, for 1996, 1995, and 1994,
respectively.
Intangible Assets Intangible assets, which have generally resulted from
business combinations accounted for as purchases (Note Eleven), are
recorded at the lower of amortized cost or fair value. Amortization is
computed using the straight-line method over periods of three to eight
years. Management periodically reviews the carrying amounts of the
Company's intangible assets for indications of impairment.
Long-Lived Assets Effective January 1, 1996 the Company adopted Financial
Accounting Standards Board (FASB) Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of," which requires impairment losses
to be recorded on long-lived assets used in operations, such as property,
equipment and improvements, and intangible assets, when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amount of the assets.
The Company adopted Statement 121 in 1996. The adoption of this statement
did not have a material effect on the Company's financial statements.
<PAGE> 19
33 Sybase, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Revenue Recognition Sybase licenses software to end users under
noncancellable license agreements. License fee revenue is recognized when
a noncancellable license agreement is in force, the product has been
shipped, the license fee is fixed or determinable, and collectibility is
reasonably assured. Sublicense fees are recognized as reported to the
Company by its licensees. License fee revenue for certain application
development and data access tools is recognized upon direct shipment to
the end user or through an initial reseller channel to the end user.
Maintenance and support revenues are recognized ratably over the term of
the related agreements, which in most cases is one year. Revenue from
consulting services under time and materials contracts and for training is
recognized as services are performed. Revenue from other contract services
is generally recognized under the percentage-of-completion method.
The Company licenses its products primarily to companies and governmental
agencies in the Americas, Europe, Asia, and Australia. The Company
performs ongoing credit evaluations of these customers and generally does
not require collateral. An allowance for doubtful accounts is maintained
to provide for estimated uncollectible receivables. Actual uncollectible
amounts could differ from such estimates.
Transfer of Financial Assets The FASB issued Statement No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," which requires an entity to recognize the
financial and servicing assets it controls and the liabilities it has
incurred and to derecognize financial assets when control has been
surrendered in accordance with the criteria provided in the Statement. The
Company will apply the new rules prospectively to transactions beginning
in the first quarter of 1997. Based on current circumstances, the Company
believes the application of the new rules will not have a material impact
on the financial statements.
Product Development Revenues recognized under vendor and end-user funding
arrangements amounted to $984,000, $2,237,000, and $9,064,000 for 1996,
1995, and 1994, respectively. Company-funded product development,
calculated as total product development expenses including amounts
capitalized for financial reporting purposes, less revenues recognized
under the vendor and end-user funding arrangements discussed above,
amounted to $177,613,000, $162,278,000, and $111,788,000 for 1996, 1995,
and 1994, respectively.
Stock-Based Compensation Statement of Financial Accounting Standards No.
123 (SFAS 123), "Accounting for Stock-Based Compensation," encourages but
does not require companies to record compensation cost for stock-based
employee compensation plans at fair value. The Company has chosen to
continue to account for stock-based employee compensation using the
intrinsic value method prescribed in Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
Interpretations. Accordingly, compensation cost for stock options granted
to employees is measured as the excess, if any, of the quoted market price
of the Company's stock at the date of the grant over the amount an
employee must pay to acquire the stock.
Net Income (Loss) per Share Net income (loss) per share is computed using
the weighted average number of shares of outstanding common stock and
dilutive common stock equivalents from the assumed exercise of stock
options (using the treasury stock method). Outstanding common stock and
common stock equivalents of Powersoft have been converted to equivalent
Sybase shares for periods prior to the merger of the companies (Note Ten).
NOTE TWO: Financial Instruments
- --------------------------------------------------------------------------------
Cash and Cash Equivalents Cash equivalents are highly liquid investments
with insignificant interest rate risk and original maturities of three
months or less and are stated at amounts which approximate fair value,
based on quoted market prices. Cash equivalents consist principally of
taxable, short-term money market instruments.
Short-Term Cash Investments Cash investments consist principally of
taxable, short-term money market instruments with maturities of one year
or less and are stated at amounts which approximate fair value, based on
quoted market prices.
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Sybase, Inc. 34
- --------------------------------------------------------------------------------
In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" (SFAS
115), management determines the appropriate classification of debt and
equity securities at the time of purchase and re-evaluates such
designation as of each balance sheet date. At December 31, 1996, the
Company has classified all of its debt and equity securities as
available-for-sale pursuant to SFAS 115. The available-for-sale securities
are recorded as follows at December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $71,023 $ 71,613
Short-term cash investments (maturities of one year or less) 17,726 42,844
- ------------------------------------------------------------------------------------
$88,749 $114,457
====================================================================================
</TABLE>
Unrealized gains and losses at December 31, 1996 and 1995 and realized
gains and losses for the years then ended were not material. Accordingly,
the Company has not made a provision for such amounts in its consolidated
balance sheets. The cost of securities sold is based on the specific
identification method.
Foreign Currency Forward Exchange Contracts In order to reduce the
effect of foreign currency fluctuations on its results of operations, the
Company hedges its exposure on certain intercompany and customer
receivables that are denominated in foreign currencies through the use of
foreign currency forward exchange contracts. Realized gains and losses
from these hedges are recorded as interest expense and other and are
offset by corresponding foreign currency gains and losses on hedged
transactions.
At December 31, 1996 and 1995, the Company had outstanding forward
exchange contracts, all having maturities of approximately 30 days, to
exchange various foreign currencies for U.S. dollars and Dutch guilders in
the amounts of $55,511,000 and $21,819,000, respectively, and at December
31, 1996 and 1995, to exchange U.S. dollars and Dutch guilders into
various foreign currencies in the amount of $20,027,000 and $5,771,000,
respectively. Neither the carrying amount nor the fair value of these
foreign currency forward exchange contracts was material at December 31,
1996 or 1995. One major U.S. multinational bank is counterparty to
substantially all of these contracts.
NOTE THREE: Property, Equipment, and Improvements
- --------------------------------------------------------------------------------
The components of property, equipment, and improvements are as follows at
December 31 (in thousands):
<TABLE>
<CAPTION>
Estimated
1996 1995 useful lives
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Real property $ 9,899 $ 9,899 20-25 years
Computer equipment and software 263,694 203,406 3 years
Furniture and fixtures 84,404 73,767 5 years
Leasehold improvements 46,865 48,089 lease term
- --------------------------------------------------------------------------------
404,862 335,161
Less accumulated depreciation (213,534) (140,245)
- --------------------------------------------------------------------------------
Net property, equipment, and improvements $191,328 $194,916
================================================================================
</TABLE>
Depreciation expense amounted to $76,919,000, $57,941,000, and $28,454,000
in 1996, 1995, and 1994, respectively.
<PAGE> 21
35 Sybase, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE FOUR: Other Assets
The components of other assets are as follows at December 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Intangible assets, less accumulated amortization of $28,965 (1995 - $21,969) $51,408 $62,974
Deposits 8,130 4,173
Other 8,377 9,417
- --------------------------------------------------------------------------------------------------------
$67,915 $76,564
========================================================================================================
</TABLE>
NOTE FIVE: Lease Obligations and Other Liabilities and Commitments
- --------------------------------------------------------------------------------
The Company leases certain office facilities and certain furniture and
equipment under operating leases expiring through 2004, which generally
require Sybase to pay operating costs, including property taxes,
insurance, and maintenance. These facility leases generally contain
renewal options and provisions adjusting the lease payments based upon
changes in the consumer price index and increases in real estate taxes and
operating expenses or in fixed increments. Rent expense is reflected on a
straight-line basis over the term of the lease. Capital lease obligations
incurred for equipment acquisitions have not been material.
Future minimum lease payments under noncancellable operating leases having
initial terms in excess of one year as of December 31, 1996 are as follows
(in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
1997 $ 44,555
1998 32,613
1999 22,960
2000 15,994
2001 12,187
Thereafter 5,907
- --------------------------------------------------------------------------------
Total minimum lease payments $134,216
================================================================================
</TABLE>
During 1995, the Company entered into a five-year lease of a new research
and development facility in Boulder, Colorado. The lessor has committed to
fund up to a maximum of $13,750,000 for construction of the facility.
Payments under this lease will commence during 1997 and are based on LIBOR
rates applied to amounts funded. The Company has an option to renew the
lease for up to two five-year extensions, subject to certain conditions.
If at the end of the lease term the Company does not purchase the
property, the Company would guarantee a residual value to the lessor equal
to a specified percentage of the lessor's cost of the facility. Under this
lease, the Company is required to maintain compliance with certain
financial covenants.
Facility rent expense amounted to approximately $47,389,000, $42,347,000,
and $28,929,000 in 1996, 1995, and 1994, respectively.
At December 31, 1996, other liabilities included accrued rent expense
under the Company's facilities leases ($1,463,000), noncurrent liabilities
related to business combinations ($980,000), and other obligations
($428,000).
At December 31, 1996, the Company had outstanding letters of credit in the
amount of $2,664,000. The Company has also guaranteed the indebtedness of
an unaffiliated company to a maximum of $6,600,000.
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Sybase, Inc. 36
- --------------------------------------------------------------------------------
NOTE SIX: Stockholders' Equity
Preferred Stock Rights Under the Company's stockholder rights plan,
each stockholder receives one right to purchase one one-thousandth of a
share of Series A Participating Preferred Stock (a "Right") for each share
of common stock owned by the stockholder. Holders of the Rights are
entitled to purchase for $250.00 one one-thousandth of one share of the
Company's Series A Participating Preferred Stock in certain limited
circumstances involving acquisitions of, or offers for 15 percent or more
of, the Company's common stock. After any such acquisition is completed,
each Right entitles its holder to purchase for $250.00 an amount of common
stock of the Company, or in certain circumstances securities of the
acquirer, having a then current market value of two times the exercise
price of the Right. In connection with the stockholder rights plan, the
Company has designated 200,000 shares of its 8,000,000 shares of
authorized but unissued Preferred Stock as "Series A Participating
Preferred Stock." Each one one-thousandth of each share of Series A
Participating Preferred Stock will generally be afforded economic rights
similar to one share of the Company's common stock. The Rights are
redeemable for a specified period at a price of $.01 per Right and expire
in March 2002.
Stock Option Plans Pursuant to the terms of the Company's 1988 Stock
Option Plan, an aggregate of 17,930,480 shares of common stock has been
issued or reserved for issuance upon the exercise of options granted to
qualified employees and consultants of the Company. The Board of
Directors, directly or through committees, administers the Plan and
establishes the terms of option grants. The exercise price per share of
all incentive stock options granted under the Plan must be at least equal
to the fair market value of the shares at the date of the grant. Options
generally expire over terms not exceeding ten years from the grant date,
one month after termination of employment, or six months after death or
permanent disability of the optionee and are exercisable to the extent
vested. Vesting generally occurs at the rate of 12.5 percent after 6
months and the balance in equal installments over the following 42 months.
The 1996 Stock Option Plan was approved by the Company's stockholders in
May 1996. An aggregate of 2,977,000 shares of common stock are reserved
for issuance upon the exercise of options granted to qualified employees
and consultants of the Company. The Board of Directors, directly or
through committees, administers the Plan and establishes the terms of
option grants. The exercise price per share of all incentive stock options
granted under the Plan must be at least equal to the fair market value of
the shares at the date of the grant. The exercise price of all
nonstatutory stock options granted under the 1996 Stock Option Plan must
be at least 85% of the fair market value of the Common Stock on the date
of grant. With respect to any participant who owns stock possessing more
than 10% of the voting power of all classes of the Company's outstanding
capital stock, the exercise price of any incentive stock option must be
equal to at least 110% of the fair market value on the grant date. Options
generally expire over terms not exceeding ten years from the grant date,
three months after termination of employment, two years after death, one
year in the case of permanent disability, or the balance of the option's
term in the case of an employee's retirement. Options are exercisable to
the extent vested. Vesting generally occurs at the rate of 12.5 percent
after 6 months and the balance in equal installments over the following 42
months.
An aggregate of 700,000 shares of common stock has been issued or reserved
for issuance under the 1992 Director Stock Option Plan. All grants of
options under the Plan are automatic and nondiscretionary and may be
granted only to nonemployee directors. The exercise price of all options
granted under the Plan must be the fair market value of the shares at the
date of grant. Options expire in ten years from the date of grant and vest
ratably over four years from the grant date.
<PAGE> 23
37 Sybase, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Price data and activity for the Company's option plans, including options
assumed by Sybase in mergers with Powersoft and other companies (adjusted
for the merger exchange ratio) are summarized as follows:
<TABLE>
<CAPTION>
Outstanding options Outstanding options Weighted average
Number of shares Price range price per share
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1993 10,645,935 $ .01-41.00 --
Assumed in mergers 145,492 2.63-45.69 --
Granted 3,192,652 35.75-52.88 --
Exercised (2,235,038) .01-46.13 --
Cancelled (508,528) .23-52.88 --
- ----------------------------------------------------------------------------------------------
Balance at December 31, 1994 11,240,513 $ .06-52.88 --
- ----------------------------------------------------------------------------------------------
Assumed in merger 33,345 $ .74-21.76 $13.92
Granted 8,098,360 .75-51.75 29.98
Exercised (2,081,293) .06-47.38 6.70
Cancelled (5,361,881) .23-52.88 39.06
- ----------------------------------------------------------------------------------------------
Balance at December 31, 1995 11,929,044 $ .13-52.88 22.30
- ----------------------------------------------------------------------------------------------
Assumed in merger 135,496 $ 2.57-13.37 5.07
Granted 11,412,135 14.50-35.00 19.19
Exercised (1,911,037) .13-31.50 7.27
Cancelled (8,803,446) .38-52.88 27.10
- ----------------------------------------------------------------------------------------------
Balance at December 31, 1996 12,762,192 $ .23-49.38 $18.27
==============================================================================================
</TABLE>
At December 31, 1996, options to purchase 2,840,122 shares were
exercisable at prices ranging from $0.23 to $49.38. Shares available for
grant totaled 2,732,344 at December 31, 1996.
In September 1996, the Board of Directors approved a stock option
repricing program pursuant to which all employees of the Company
(excluding certain executive officers) could elect to exchange or amend
their then outstanding employee stock options for new employee stock
options having an exercise price of $19.25 per share (equal to the then
fair market value), with exercisability generally prohibited until July
21, 1997. A total of 5,259,938 options with exercise prices ranging from
$20.50 to $47.75 per share were exchanged or amended under the program.
The exchange of such options is presented in the preceding table as
cancellations and subsequent grants.
In June 1995, the Board of Directors approved a stock option repricing
program pursuant to which employees of the Company (excluding certain
executive officers) could elect to exchange or amend their then
outstanding employee stock options for new employee stock options having
an exercise price of $26.88 per share (equal to the then fair market
value), with exercisability generally prohibited until January 30, 1996. A
total of 4,298,471 options with exercise prices ranging from $27.38 to
$52.88 per share were exchanged or amended under the program. The exchange
of such options is presented in the preceding table as cancellations and
subsequent grants.
The income tax benefits that accrue to the Company from exercises of
nonqualified stock options and disqualifying dispositions of incentive
stock options are recorded as additional paid-in capital.
Employee Stock Purchase Plans The Company has an Employee Stock Purchase
Plan and a Foreign Subsidiary Employee Stock Purchase Plan (collectively
the "Plans"), which allow eligible employees to purchase common stock
through payroll deductions. The Plans consist of consecutive 24-month
offering periods composed of four
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Sybase, Inc. 38
- --------------------------------------------------------------------------------
6-month exercise periods. The shares can be purchased at the lower of
85 percent of the fair market value of the common stock at the date of
commencement of this two-year offering period or at the last day of
each 6-month exercise period. Purchases are limited to 10 percent of an
employee's eligible compensation, subject to an annual maximum as
defined in the Plans.
In connection with the merger of Sybase and Powersoft described in Note
Ten, all rights to purchase shares of Powersoft capital stock under the
Powersoft Corporation Employee Stock Purchase Plan in the offering
period ending on June 30, 1995 were converted into rights to purchase
Sybase common stock (adjusted for the merger exchange ratio).
The Company's stockholders authorized the issuance of up to 4,700,000
shares of common stock under the Plans, of which 883,956 shares were
available for issuance as of December 31, 1996. Employees purchased
1,080,620 shares in 1996, 708,785 shares in 1995, and 669,603 shares in
1994, including equivalent shares purchased under Powersoft employee
stock purchase plans.
Pro Forma Disclosures of the Effect of Stock-Based Compensation Plans
The Company applies APB Opinion No. 25 and related Interpretations in
accounting for grants to employees under its stock-based compensation
plans, described above. Accordingly, no compensation cost has been
recognized for grants to employees under its fixed stock option plans
or its employee stock purchase plan. Compensation cost for the
estimated fair value of grants to nonemployee consultants of
stock-based compensation has not been material. Had compensation cost
been charged to expense for grants to employees under the Company's
fixed stock option plans and its employee stock purchase plan based on
the fair value at the grant dates for awards under those plans,
consistent with the method encouraged by SFAS 123, the Company's net
loss and net loss per share would have been increased to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net loss (in thousands) As reported $ (79,006) $(19,502)
Pro forma $(115,399) $(36,512)
Net loss per share As reported $ (1.05) $ (0.27)
Pro forma $ (1.54) $ (0.51)
================================================================================
</TABLE>
Because SFAS 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effects will not be fully reflected
until 1998. The fair value of each option grant is estimated on the
date of the grant using the Black-Scholes option-pricing model with the
following weighted-average assumption:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Expected volatility 51.5% 52.0%
Risk-free interest rate 5.6% 5.7%
Expected lives (years)* 2.9 3.1
Expected dividend yield -- --
================================================================================
</TABLE>
*The expected life of the Sybase options granted during 1996 and 1995 under the
1988 and 1996 Stock Option Plans is estimated to be 4.25 years. This is offset
by lower weighted-average expected lives attributed to the 1996 and 1995
repricings, the Employee Stock Purchase Plan, and certain provisions of the 1996
Stock Option Plan.
The weighted-average grant-date fair value of options granted during
1996 and 1995 was $6.22 and $9.55, respectively.
<PAGE> 25
39 Sybase, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following table summarizes information about fixed stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ----------------------------------------------------------------------------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Number Life Exercise Number Exercise
Ranges of Exercisable Prices Outstanding (in years) Price Exercisable Price
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 0.23 to $ 8.63 910,577 1.7 $ 1.96 881,335 $ 1.92
$ 9.00 to $13.88 597,291 5.0 $13.15 581,087 $13.21
$14.13 to $18.38 3,891,795 9.4 $16.03 152,272 $15.79
$19.25 to $21.56 5,548,546 8.0 $19.30 138,828 $20.66
$22.07 to $32.25 1,304,629 7.5 $26.94 802,969 $27.14
$33.88 to $49.38 509,354 7.7 $37.21 283,631 $37.50
- ----------------------------------------------------------------------------------------------------
12,762,192 2,840,122
====================================================================================================
</TABLE>
NOTE SEVEN: Income Taxes
- --------------------------------------------------------------------------------
The Company accounts for income taxes under the liability method. Under
this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and income tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that
will be in effect when the differences are expected to reverse.
The following is a geographical breakdown of consolidated income (loss)
before income taxes (including intercompany royalties and expenses) by
income tax jurisdiction (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $(80,347) $(14,993) $119,999
Foreign 13,639 251 20,277
- --------------------------------------------------------------------------------
Total $(66,708) $(14,742) $140,276
================================================================================
</TABLE>
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Sybase, Inc. 40
- --------------------------------------------------------------------------------
The provisions for income taxes consist of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
- -----------------------------------------------------------
<S> <C> <C> <C>
Federal
Current $ -- $ 10,118 $ 38,375
Deferred -- (17,422) (5,989)
- -----------------------------------------------------------
-- (7,304) 32,386
State
Current 560 3,340 12,555
Deferred (100) (3,229) (716)
- -----------------------------------------------------------
460 111 11,839
Foreign
Current 11,838 13,012 9,118
Deferred -- (1,059) (120)
- -----------------------------------------------------------
11,838 11,953 8,998
- -----------------------------------------------------------
Total $ 12,298 $ 4,760 $ 53,223
===========================================================
</TABLE>
The provision for income taxes differs from the amount computed by
applying the statutory federal income tax rate to income before income
taxes. The sources and tax effects of the differences are as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax (credit) at U.S. statutory rate $(23,348) $(5,160) $ 49,096
State tax (credit), net of federal benefit (3,232) 72 7,706
Effect of foreign operations 9,714 5,469 (5,019)
Tax-exempt interest (57) (1,919) (1,939)
Nondeductible merger costs -- 4,415 480
Research and development tax credits -- (1,000) (1,700)
Increase in valuation allowance 24,376 -- --
Other 4,845 2,883 4,599
- -------------------------------------------------------------------------------------
Total $ 12,298 $ 4,760 $ 53,223
=====================================================================================
</TABLE>
<PAGE> 27
41 Sybase, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Deferred income taxes result principally from temporary differences
between years in the recognition of certain revenue and expense items for
financial and tax reporting purposes. Significant components of the
Company's net deferred tax assets were as follows at December 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Depreciation $ 3,303 $ 4,174
Deferred revenue 8,336 8,981
Accrued expenses 10,490 8,279
Allowance for doubtful accounts 6,882 8,124
Purchased software 5,439 8,178
Net operating loss carryovers and tax credit carryforwards 46,635 3,124
Other assets (liabilities) (3,269) 3,299
- ---------------------------------------------------------------------------------------
Total before valuation allowance 77,816 44,159
Valuation allowance (36,681) (3,124)
- ---------------------------------------------------------------------------------------
Net deferred tax assets $ 41,135 $ 41,035
=======================================================================================
Recorded as:
Current deferred tax assets $ 13,729 $ 24,947
Noncurrent deferred tax assets (liabilities) 27,406 16,088
- ---------------------------------------------------------------------------------------
$ 41,135 $ 41,035
=======================================================================================
</TABLE>
The valuation allowance increased by $33,557,000 in 1996 and includes
$9,181,000 related to deferred tax assets arising from tax benefits
associated with stock option plans. Any reduction in the valuation
allowance resulting from realization of such tax benefits will be credited
directly to stockholders' equity. As of December 31, 1996, the Company has
U.S. federal net operating loss carryforwards of approximately $98,000,000
and tax credit carryforwards of approximately $6,700,000 which expire in
various years through 2011.
Realization of the Company's net deferred tax assets is dependent upon the
Company generating sufficient taxable income in future years in
appropriate tax jurisdictions to obtain benefit from the reversal of
temporary differences and from tax credit carryforwards. The amount of
deferred tax assets considered realizable is subject to adjustment in
future periods if estimates of future taxable income are reduced.
No provision has been made for federal income taxes on unremitted
earnings of certain of the Company's foreign subsidiaries (approximately
$15,400,000 at December 31, 1996) since the Company plans to permanently
reinvest all such earnings.
NOTE EIGHT: Retirement Plan
- --------------------------------------------------------------------------------
The Company has a retirement plan under Section 401(k) of the Internal
Revenue Code. Discretionary Company contributions are based on achieving
certain operating profit goals. There were no discretionary Company
contributions in 1996 or 1995. In 1994 the discretionary Company
contribution was $2,300,000.
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Sybase, Inc. 42
- --------------------------------------------------------------------------------
NOTE NINE: Segment and Geographical Information
- --------------------------------------------------------------------------------
The Company operates in one industry segment (the development and
marketing of computer software and related services) and markets its
products and services internationally through both foreign subsidiaries
and distributors located in the Americas, Europe, Asia, and Australia.
Interarea revenues, which are eliminated in the consolidated financial
statements, represent royalties from license and service fees generated by
the foreign operations. Intercontinental includes operations in Asia,
Australia, and Latin America.
The following table presents a summary of operating information and
certain year-end balance sheet information by geographic region (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Unaffiliated customers:
United States, Canada, and Mexico $ 615,663 $ 588,827 $564,772
Europe 238,810 239,842 194,807
Intercontinental 157,072 127,917 65,814
- --------------------------------------------------------------------------------------------------------
Total $ 1,011,545 $ 956,586 $825,393
========================================================================================================
Interarea $ 58,014 $ 52,891 $ 41,044
Operating income (loss):
United States, Canada, and Mexico $ (154,116) $ (75,677) $116,731
Europe 36,241 22,673 17,851
Intercontinental 43,660 29,659 --
- --------------------------------------------------------------------------------------------------------
Total $ (74,215) $ (23,345) $134,582
========================================================================================================
Cash, cash equivalents, and short-term cash investments:
United States, Canada, and Mexico $ 110,955 $ 166,292 $213,259
Europe 42,378 36,638 37,676
Intercontinental 21,189 20,791 5,066
- --------------------------------------------------------------------------------------------------------
Total $ 174,522 $ 223,721 $256,001
========================================================================================================
Accounts receivable, net:
United States, Canada, and Mexico $ 121,710 $ 105,541 $116,734
Europe 69,438 60,147 51,037
Intercontinental 48,318 28,236 15,919
- --------------------------------------------------------------------------------------------------------
Total $ 239,466 $ 193,924 $183,690
========================================================================================================
Identifiable assets:
United States, Canada, and Mexico $ 514,569 $ 563,135 $514,729
Europe 136,405 126,927 116,085
Intercontinental 100,917 76,230 40,626
- --------------------------------------------------------------------------------------------------------
Total $ 751,891 $ 766,292 $671,440
========================================================================================================
</TABLE>
<PAGE> 29
43 Sybase, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE TEN: Merger with Powersoft Corporation
On February 13, 1995, Sybase, through a wholly owned subsidiary, merged
with Powersoft, a U.S.-based company that provides a family of scalable
client/server application development and data access tools. Sybase issued
17,801,092 shares of its common stock for all of the outstanding common
stock of Powersoft (based on a merger exchange ratio of 1.6 shares of
Sybase common stock for each share of Powersoft common stock) and assumed
all outstanding obligations for the issuance of up to 2,840,155 additional
shares of Sybase common stock based on the merger exchange ratio. The
merger was accounted for as a pooling of interests and the historical
consolidated financial statements of Sybase for prior periods have been
restated to include the financial position, results of operations, and
cash flows of Powersoft. Components of the consolidated results of
operations of Sybase and Powersoft for 1994 are as follows:
<TABLE>
<CAPTION>
(in thousands)
- --------------------------------------------------------------------------------
<S> <C>
Revenues:
Sybase $693,806
Powersoft 131,587
- --------------------------------------------------------------------------------
Total $825,393
================================================================================
Net income:
Sybase $ 75,207
Powersoft 11,846
- --------------------------------------------------------------------------------
Total $ 87,053
================================================================================
</TABLE>
Revenue and net income of Powersoft for the period from January 1 through
February 13, 1995 were approximately $14,660,000 and $790,000,
respectively.
Costs of the merger were charged to operations in 1995. The consolidated
results of operations for 1994 include certain immaterial adjustments to
conform the accounting policies of Powersoft to those followed by Sybase.
Intercompany transactions between Powersoft and Sybase were not material.
NOTE ELEVEN: Business Combinations
- --------------------------------------------------------------------------------
On February 28, 1996 Sybase acquired Visual Components, Inc., a developer
and marketer of components for software developers. Sybase issued 733,178
shares of its common stock for all the outstanding shares of common stock
of Visual Components, Inc. and assumed outstanding options to acquire
135,496 shares of Sybase common stock based on the merger exchange ratio.
The transaction has been accounted for as a pooling of interests. The
operating results of Visual Components, Inc. prior to the combination were
not material in relation to those of Sybase. Therefore, prior period
financial information of Sybase has not been restated.
In May 1995, Sybase, through a wholly owned subsidiary, acquired SDP, S.A.
("SDP") a French company that develops and markets database modeling and
design tools. Under the terms of the acquisition agreement, Sybase paid
$32,500,000 in cash to the stockholders of SDP (approximately $26,500,000
upon consummation of the acquisition and approximately $6,000,000 in
decreasing annual installments through 1998, subject to satisfaction of
certain conditions) for all of the outstanding shares of the company.
Approximately $12,000,000 of the purchase price was allocated to
intangible assets, which are being amortized over periods of three to
seven years, and approximately
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Sybase, Inc. 44
- --------------------------------------------------------------------------------
$20,000,000 was allocated to in-process technology and charged to
operations in 1995. Sybase has accounted for the acquisition as a
purchase. The historical results of operations of SDP, which have not
been material in relation to those of Sybase, are included in the
consolidated results of operations for periods subsequent to the
acquisition date. In 1996, pursuant to the terms of the acquisition
agreement, Sybase made a payment of $1,850,000.
In April 1994, Sybase acquired all the stock and options of Micro
Decisionware, Inc. ("MDI"), a U.S.-based company that provides
multiplatform database interoperability solutions. Sybase issued
475,500 shares of its common stock and assumed outstanding options to
acquire 66,380 common shares. As a condition of the merger, Sybase
entered into a consulting agreement and covenant not to compete with
the majority stockholder of MDI. Pursuant to such agreement, Sybase is
obligated to pay a fee in cash and common stock of up to approximately
$11,900,000 based on the financial performance of MDI and certain
Sybase products through December 31, 1995. Common stock and cash
totaling $5,000,000 was paid in 1995. In 1996, 238,182 shares of Sybase
common stock was issued at a value of approximately $5,700,000. In
connection with this acquisition, Sybase has recorded intangible assets
of approximately $29,000,000, which are being amortized over periods of
seven and eight years. The transaction was accounted for as a purchase.
The results of operations of MDI, which have not been material in
relation to those of Sybase, are included in the consolidated results
of operations for periods subsequent to the acquisition date.
In addition to the transactions discussed above, in 1995 and 1994,
Sybase and Powersoft acquired several technology companies and
distributors of their products in transactions which were accounted for
as poolings of interests. In connection with these transactions, Sybase
issued 279,045 and 2,957,212 shares of its common stock (including
equivalent Sybase shares issued by Powersoft in such transactions)
during 1995 and 1994, respectively. Also in 1995 and 1994 Sybase and
Powersoft acquired several distributors of their products in various
countries in transactions accounted for as purchases. Sybase and
Powersoft paid cash for the businesses totaling $8,270,000 and
$7,574,000 in 1995 and 1994, respectively, and issued 40,880 shares of
Sybase common stock in 1995. Amounts recorded as intangible assets from
these transactions were $14,036,000 and $10,773,000 in 1995 and 1994,
respectively. These intangible assets are being amortized over periods
of five to seven years. During 1996, Sybase paid approximately
$1,600,000 related to earn-out provisions for transactions consummated
in prior years. At December 31, 1996, an additional $5,150,000 may be
payable by Sybase contingent upon achievement of certain financial
objectives by these businesses. The results of operations of these
entities prior to the acquisitions were not material in relation to
those of Sybase. Results of operations of these entities have been
included in the consolidated results of operations for the periods
subsequent to the respective acquisition dates.
NOTE TWELVE: Litigation
- --------------------------------------------------------------------------------
Following the Company's announcement on April 3, 1995, of its
preliminary results of operations for the quarter ended March 31, 1995,
several class action lawsuits were filed against the Company and
certain of its officers in the U.S. District Court, Northern District
of California. The complaints were similar and alleged violations of
federal and state securities laws and request unspecified monetary
damages. These actions have been consolidated, and a consolidated
amended class action complaint was served on August 7, 1995, and the
parties are in pretrial discovery. Management believes that the claims
contained in the consolidated amended complaint are without merit and
intends to defend against the claims vigorously. In the opinion of
management, resolution of this litigation is not expected to have a
material adverse effect on the financial position of the Company.
However, depending on the amount and timing, an unfavorable resolution
of this matter could materially affect the Company's future results of
operations or cash flows in a particular period. The Company is also a
party to various legal disputes and proceedings arising from the
ordinary course of business activities. In the opinion of management,
<PAGE> 31
45 Sybase, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
resolution of these matters is not expected to have a material adverse
effect on the financial position of the Company. However, depending on
the amount and timing, an unfavorable resolution of some or all of
these matters could materially affect the Company's future results of
operations or cash flows in a particular period.
NOTE THIRTEEN: Restructuring
In July 1996, the Company announced and began to implement a
restructuring plan aimed at reducing costs, restoring profitability to
the Company's operations, and focusing the Company's products around
its core businesses. The Company's restructuring actions consisted
primarily of terminating certain product lines, terminating employees
and vacating certain facilities, and cancelling real estate leases as a
result of these employee terminations. These actions resulted in a
charge to operations of approximately $49,200,000, including
approximately $17,000,000 for employee severance and related items,
$15,700,000 for vacating facilities and cancelling real estate leases,
$13,900,000 for expenses related to discontinued products, and
$2,600,000 for other restructuring related items. Of this amount
$22,300,000 was paid in 1996, $9,300,000 was included in other accrued
liabilities at December 31, 1996 and $17,600,000 consisted of
write-offs of property, equipment and improvements, capitalized
software development costs, and other assets. The Company expects that
the majority of the remaining $9,300,000 accrued liability balance at
December 31, 1996 will be expended in 1997.
NOTE FOURTEEN: Subsequent Events
On February 21, 1997 Sybase acquired Purchase Net, Inc., a developer of
application development software. Sybase issued 750,000 shares of its
common stock for all the outstanding shares of common stock of Purchase
Net, Inc. The transaction will be accounted for as a purchase. The
results of operations of Purchase Net, Inc., which have not been
material in relation to those of Sybase, will be included in the
consolidated results of operations for periods subsequent to the
acquisition date.
<PAGE> 32
QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Sybase, Inc. 46
- --------------------------------------------------------------------------------
The tables below and to the right present unaudited quarterly and annual
financial information and stock price data for 1996 and 1995.
<TABLE>
<CAPTION>
Three months ended (In thousands, March 31, June 30, September 30, December 31,
except per share and stock price data) 1996 1996 1996 1996 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
License fees $ 147,945 $ 150,454 $ 147,219 $159,873 $ 605,491
Services 95,719 99,433 102,994 107,908 406,054
-------------------------------------------------------------------------
Total revenues 243,664 249,887 250,213 267,781 1,011,545
-------------------------------------------------------------------------
Costs and expenses:
Cost of license fees 7,117 7,585 6,963 8,194 29,859
Cost of services 56,139 62,846 62,906 64,382 246,273
Sales and marketing 130,293 137,197 123,373 132,296 523,159
Product development and
engineering 43,091 46,085 39,217 36,283 164,676
General and administrative 18,726 19,735 17,163 16,937 72,561
Cost of restructuring -- -- 49,232 -- 49,232
-------------------------------------------------------------------------
Total costs and expenses 255,366 273,448 298,854 258,092 1,085,760
-------------------------------------------------------------------------
Operating income (loss) (11,702) (23,561) (48,641) 9,689 (74,215)
Interest income and expense, net 2,494 2,197 1,112 1,704 7,507
-------------------------------------------------------------------------
Income (loss) before income taxes (9,208) (21,364) (47,529) 11,393 (66,708)
Provision (benefit) for income taxes (2,302) 3,200 5,100 6,300 12,298
-------------------------------------------------------------------------
Net income (loss) $ (6,906) $ (24,564) $ (52,629) $ 5,093 $ (79,006)
-------------------------------------------------------------------------
Net income (loss) per share $ (0.09) $ (0.33) $ (0.69) $ 0.07 $ (1.05)
-------------------------------------------------------------------------
Stock prices:
High $ 37.13 $ 27.38 $ 20.00 $ 20.50 $ 37.13
Low $ 22.25 $ 21.50 $ 14.38 $ 13.88 $ 13.88
</TABLE>
<PAGE> 33
47 Sybase, Inc. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended (In thousands, March 31, June 30, September 30, December 31,
except per share and stock price data) 1995 1995 1995 1995 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
License fees $ 136,325 $ 154,206 $ 145,963 $179,148 $ 615,642
Services 79,927 85,804 87,111 88,102 340,944
-----------------------------------------------------------------------
Total revenues 216,252 240,010 233,074 267,250 956,586
-----------------------------------------------------------------------
Costs and expenses:
Cost of license fees 7,222 7,562 6,446 8,506 29,736
Cost of services 46,158 50,204 53,707 54,950 205,019
Sales and marketing 108,731 120,748 118,170 133,755 481,404
Product development and
engineering 35,366 36,842 38,412 41,282 151,902
General and administrative 15,762 16,233 17,173 18,720 67,888
Cost of merger (credit) 24,997 -- (980) -- 24,017
Purchase of in-process
technology -- 19,965 -- -- 19,965
-----------------------------------------------------------------------
Total costs and expenses 238,236 251,554 232,928 257,213 979,931
-----------------------------------------------------------------------
Operating income (loss) (21,984) (11,544) 146 10,037 (23,345)
Interest income and expense, net 2,422 2,374 1,921 1,886 8,603
-----------------------------------------------------------------------
Income (loss) before income taxes (19,562) (9,170) 2,067 11,923 (14,742)
Provision (benefit) for income taxes (2,126) -- 925 5,961 4,760
-----------------------------------------------------------------------
Net income (loss) $ (17,436) $ (9,170) $ 1,142 $ 5,962 $ (19,502)
-----------------------------------------------------------------------
Net income (loss) per share $ (0.25) $ (0.13) $ 0.02 $ 0.08 $ (0.27)
-----------------------------------------------------------------------
Stock prices:
High $ 54.50 $ 39.13 $ 36.50 $ 39.25 $ 54.50
Low $ 40.00 $ 20.13 $ 28.75 $ 30.75 $ 20.13
</TABLE>
<PAGE> 34
CORPORATE AND INVESTOR INFORMATION Sybase, Inc. 48
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS
- ------------------
Mark B. Hoffman
Chairman of the Board,
Sybase, Inc.
Chief Executive Officer,
DistriVision Development Corporation
Director since 1984
Mitchell E. Kertzman
Chief Executive Officer and President
Director since 1995
Robert S. Epstein
Executive Vice President and Chief Information Officer
Director since 1984
Richard C. Alberding(1)
Retired, Executive Vice President,
Hewlett-Packard Company
Director since 1993
L. William Krause(1)
President and Chief Executive Officer,
Storm Technology, Inc.
Director since 1995
David E. Liddle, Ph.D.(1)
President and Chief Executive Officer,
Interval Research Corporation
Director since 1984
Alan B. Salisbury(2)
President and General Manager,
Learning Tree International USA, Inc.
Director since 1993
Robert P. Wayman(2)
Executive Vice President,
Finance and Administration, and
Chief Financial Officer,
Hewlett-Packard Company
Director since 1995
Jeffrey T. Webber(2)
President,
R.B. Webber & Company, Inc.
Director since 1993
(1) Member of Compensation Committee
(2) Member of Audit Committee
CORPORATE OFFICERS
- ------------------
Mark B. Hoffman
Chairman of the Board
Mitchell E. Kertzman
Chief Executive Officer and President
Robert S. Epstein
Executive Vice President and
Chief Information Officer
David A. Litwack
Executive Vice President, Products
Jack L. Acosta
Senior Vice President
and Chief Financial Officer
Michael W. Bealmear
Senior Vice President,
Worldwide Services
Michael H. Forster
Senior Vice President,
Worldwide Field Operations
Mindi Butterfield
Vice President, Marketing
Mitchell L. Gaynor
Vice President,
General Counsel, and Secretary
Janet H. Mahoney
Vice President,
Worldwide Human Resources
Peter F. Pervere
Vice President and
Corporate Controller
STOCKHOLDER INFORMATION
- -----------------------
A copy of the Company's Annual Report, Form 10-K, and other financial documents
will be on file as of March 31, 1997, with the Securities and Exchange
Commission and are available on request. Please direct your request to any of
the following:
By written request:
Sybase, Inc.
Investor Relations Department
6475 Christie Avenue
Emeryville, California USA 94608
By telephone:
+1 510 922 5399
Via the World Wide Web:
www.sybase.com
Registrar and Transfer Agent
Boston Equiserve LP
Shareholder Services
Mail Stop: 45-01-23
P.O. Box 644
Boston, Massachusetts USA 02102
+1 617 575 3120
www.equiserve.com
Annual Meeting
The annual meeting of stockholders
will be held at 10:00 a.m. on
May 20, 1997, at the Company's
offices at 6603 Bay Street,
Emeryville, California.
Stock Information
As of December 31, 1996, the Company had 2,291 stockholders of record. The
Company has never paid cash dividends.
Stock Listing
Sybase, Inc., is traded on the NASDAQ/
National Market System, NASDAQ
Symbol: SYBS
Independent Auditors
Ernst & Young LLP
San Francisco, California
<PAGE> 35
GLOBAL CORPORATE CONTACTS
- --------------------------------------------------------------------------------
SYBASE, INC.
Corporate Headquarters
6475 Christie Avenue
Emeryville, California
USA 94608
800 8 SYBASE
+1 510 922 3500
Fax: +1 510 922 3210
World Wide Web:
www.sybase.com
European Headquarters
Planetenbaan 25
3606 AK Maarssen
The Netherlands
+31 34658 2999
Fax: +31 34655 2884
Sybase Professional Services
77 South Bedford Street
Burlington, Massachusetts
USA 01803
+1 617 564 6100
Fax: +1 617 564 7000
EUROPE
Belgium
+32 2 716 8311
Fax: +32 2 725 6550
Czech Republic
+42 2 243 10808
Fax: +42 2 243 15024
France
+33 14190 4190
Fax: +33 14190 4200
Germany
+49 211 59760
Fax: +49 211 5976111
Italy
+39 2 483241
Fax: +39 2 4830 0660
The Netherlands
+31 34658 2999
Fax: +31 34655 2884
Spain
+34 1 302 0900
Fax: +34 1 302 8937
Sweden
+46 8 587 11000
Fax: +46 8 750 5420
Switzerland
+41 1 308 63 63
Fax: +41 1 308 63 99
United Kingdom
+44 1628 597100
Fax: +44 1628 597000
Distribution in:
Austria
Commonwealth of
Independent States
Cyprus
Denmark
Egypt
Finland
Greece
Hungary
Ireland
Israel
Kuwait
Morocco
Norway
Portugal
Saudi Arabia
South Africa
Tunisia
Turkey
United Arab Emirates
Canada
+1 905 273 8500
Fax: +1 905 273 8550
ASIA PACIFIC
Australia
+612 9936 8800
Fax: +612 9936 8822
China
+8610 6856 8488
Fax: +8610 6856 8489
Hong Kong
+852 2506 6000
Fax: +852 2506 6050
India
+9180 226 2233
Fax: +9180 226 7676
Indonesia
+6221 526 6520
Fax: +6221 526 6523
Japan
+813 5210 6000
Fax: +813 5210 6300
Korea
+822 3451 5200
Fax: +822 3451 5299
Malaysia
+60 3242 4218
Fax: +60 3243 4318
New Zealand
+64 4473 3661
Fax: +64 4499 9068
Philippines
+632 754 4000
Fax: +632 754 4141
Singapore
+65 330 4118
Fax: +65 338 8112
Taiwan
+886 2 715 6000
Fax: +886 2 545 6909
Distribution in:
India
Thailand
For other Asia Pacific inquiries:
+852 2506 6000
Fax: +852 2506 6050
LATIN AMERICA
Brazil
+55 11214 4044
Fax: +55 11214 0820
Mexico
+52 5282 8000
Fax: +52 5282 8045
Distribution in:
Argentina
Chile
Colombia
Costa Rica
Ecuador
El Salvador
Guatemala
Panama
Peru
Puerto Rico
Venezuela
For other Latin America
inquiries:
+1 305 267 9344
Fax: +1 305 267 9973
Design:Jacobs Fulton Design Group, Palo Alto, CA
Photography:Louis Fabian Bachrach
Printing:George Rice & Sons
(C) Copyright 1997 Sybase, Inc. All rights reserved. Sybase, the Sybase logo,
Open Solutions, Powersoft, SQL Anywhere, NetImpact, WarehouseNOW, Sybase IQ,
OmniCONNECT, PowerBuilder, System 11, SQL Server, Sybase MPP, S-Designor,
Optima++, Visual Components, Open Client/Server, Replication Server, Bit-Wise,
web.sql, and DataWindow are trademarks of Sybase, Inc. or its subsidiaries. (R)
indicates registration in the United States of America. Other company and
product names may be trademarks of the companies with which they are associated.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
SUBSIDIARY NAME JURISDICTION OF INCORPORATION
Henco Software FSC, Ltd Virgin Islands
OASIS Group Ltd. United Kingdon
P.T. Sybase Informatindo Indonesia Indonesia
Powersoft Holding France SARL France
Powersoft K.K. Japan
SDP S.N.C. France
Sybase Australia Pty Limited New South Wales, Australia
Sybase Canada Limited Canada
Sybase China Limited Hong Kong
Sybase de Mexico, S.A. de C.V. Mexico
Sybase Do Brasil Software Ltda. Brazil
Sybase Eastern Europe B.V. The Netherlands
Sybase Europe B.V. The Netherlands
Sybase Foreign Sales Corporation Virgin Islands
Sybase France S.a.r.l. France
Sybase GmbH Germany
Sybase Hong Kong Limited Hong Kong
Sybase Iberia S.A. Spain
Sybase International Limited United Kingdom
Sybase Italia S.r.l. Italy
Sybase KK Japan
Sybase Korea, Ltd. South Korea
Sybase Nederland B.V. The Netherlands
Sybase N.V./S.A. Belgium
Sybase (N.Z.) Limited New Zealand
Sybase Philippines, Inc. Philippines
Sybase (Schweiz) AG Switzerland
Sybase (Singapore) Pte Ltd. Singapore
Sybase Software (Beijing) Co., Ltd. People's Republic of China
Sybase Software (Malaysia) Sdn Bhd Malaysia
Sybase Solutions s.r.o. Czech Republic
Sybase Sverige AB Sweden
Sybase Taiwan Co., Ltd. Republic of China
Sybase (Thailand) Limited Thailand
Sybase UK Limited United Kingdom
Tecnologia Cliente/Servidor Informatica S.A. Brazil
WATCOM Europe Limited United Kingdom
Organization & System Innovations, Inc. Delaware
Powersoft Corporation Massachusetts
Sybase Financial Services, Inc. Delaware
Sybase India, Ltd. Delaware
Sybase International Holdings Corporation Delaware
Visual Components, Inc. Kansas
WATCOM, Inc. Massachusetts
1 of 1
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report
(Form 10-K) of Sybase, Inc. of our report dated January 23, 1997, except for
Note Fourteen, as to which the date is February 21, 1997, included in the 1996
Annual Report to Shareholders of Sybase, Inc.
Our audits also included the financial statement schedule of Sybase,
Inc. listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration
Statements (Forms S-3) pertaining to the resale of Sybase Inc. Common Stock by
certain former stockholders of Purchase Net Inc., Visual Components, Inc.,
Complex Architectures, Inc. and Expressway Technologies Corporation and related
Prospectuses, and in the Registration Statement (Form S-3) pertaining to the
issuance of Sybase, Inc. Common Stock in connection with the payment of fees to
Safeguard Scientifics, Inc., and in the Registration Statements (Forms S-8)
pertaining to the 1996 Stock Plan, the 1988 Stock Option Plan, the 1992 Director
Stock Option Plan, the 1991 Employee Stock Purchase Plan, the 1991 Foreign
Subsidiary Employee Stock Purchase Plan, the Gain Technology, Inc. 1990 Stock
Option Plan and Employee Stock Purchase Agreement, the Powersoft Corporation
1984 Incentive Stock Option Plan, the Powersoft Corporation 1994 Amended and
Restated Employee Incentive and Non-Qualified Stock Option Plan, the Letter
Agreement Between Powersoft Corporation and William P. Miller Dated April 5,
1991 and the Powersoft Corporation 1994 Amended and Restated Employee Stock
Purchase Plan, the Complex Architectures, Inc. Stock Option Plan and the Letter
Agreement dated February 25, 1994 between Complex Architectures, Inc. and Frank
A. Sola, the Expressway Technologies 1987 Stock Option Plan, the Micro
Decisionware, Inc. Stock Option Plan, and the Visual Tools, Inc. 1993 Stock
Option Plan and related Prospectuses, of our reports dated January 23, 1997,
except for Note Fourteen, as to which the date is February 21, 1997, with
respect to the consolidated financial statements and schedule of Sybase, Inc.
included and incorporated by reference in its Annual Report (Form 10-K) for the
year ended December 31, 1996.
ERNST & YOUNG
San Francisco, California
March 26, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Sybase, Inc. (Forms S-3) pertaining to the resale of Sybase, Inc.
Common Stock by certain former stockholders of Purchase Net Inc., Visual
Components, Inc., Complex Architectures, Inc. and Expressway Technologies
Corporation and related Prospectuses, and by certain stockholders and former
stockholders of Sybase, Inc., in the Registration Statement (Form S-3)
pertaining to the issuance of Sybase, Inc. Common Stock in connection with the
payment of fees to Safeguard Scientifics, Inc., and in the Registration
Statements (Form S-8) pertaining to the 1996 Stock Plan, the 1988 Stock Option
Plan, the 1992 Director Stock Option Plan, the 1991 Employee Stock Purchase
Plan, the 1991 Foreign Employee Subsidiary Stock Purchase Plan, the Gain
Technology, Inc. 1990 Stock Option Plan and Employee Stock Purchase Agreement,
the Powersoft Corporation 1984 Incentive Stock Option Plan, the Powersoft
Corporation 1994 Amended and Restated Employee Incentive and Non-Qualified Stock
Option Plan, the Letter Agreement Between Powersoft Corporation and William P.
Miller Dated April 5, 1991 and the Powersoft Corporation 1994 Amended and
Restated Employee Stock Purchase Plan, the Complex Architectures, Inc. Stock
Option Plan and the Letter Agreement dated February 25, 1994 between Complex
Architectures, Inc. and Frank A. Sola, the Expressway Technologies 1987 Stock
Plan, the Micro Decisionware, Inc. Stock Option Plan, and the Visual Tools, Inc.
1993 Stock Option Plan and related Prospectuses, of our report dated February
14, 1995, on our audits of the consolidated financial statements and financial
statement schedule of Powersoft Corporation as of December 30, 1994 and 1993 and
for the three years in the period ended December 31, 1994, which report is
included in the Form 10-K of Sybase, Inc.
COOPERS & LYBRAND
Boston, Massachusetts
March 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF SYBASE, INC. AS OF DECEMBER 31, 1996 AND
FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 156,796
<SECURITIES> 17,726
<RECEIVABLES> 267,708
<ALLOWANCES> 28,242
<INVENTORY> 0
<CURRENT-ASSETS> 445,268
<PP&E> 404,862
<DEPRECIATION> 213,534
<TOTAL-ASSETS> 751,891
<CURRENT-LIABILITIES> 352,212
<BONDS> 0
0
0
<COMMON> 77
<OTHER-SE> 359,161
<TOTAL-LIABILITY-AND-EQUITY> 751,891
<SALES> 605,491
<TOTAL-REVENUES> 1,011,545
<CGS> 29,859
<TOTAL-COSTS> 799,291
<OTHER-EXPENSES> 286,469
<LOSS-PROVISION> 11,713
<INTEREST-EXPENSE> 399
<INCOME-PRETAX> (66,708)
<INCOME-TAX> 12,298
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (79,006)
<EPS-PRIMARY> (1.05)
<EPS-DILUTED> (1.05)
</TABLE>
