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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
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
25, 1999 as reported on the NASDAQ National Market System, was approximately
$536,137,000. 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 25, 1999, Registrant had outstanding 82,358,255 shares of
Common Stock.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for the
fiscal year ended December 31, 1998 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 27, 1999 is incorporated by reference in Part III of this Form 10-K to the
extent stated herein.
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PART I
ITEM 1. BUSINESS
THE COMPANY
Sybase, Inc. ("Sybase" or the "Company"), one of the largest global
independent software companies in the world, helps businesses gain competitive
advantage by enabling them to manage and deliver applications, content and data
anywhere they are needed. The Company's software products and professional
consulting services provide a comprehensive platform for delivery of integrated
solutions for enterprise data management, mobile and embedded computing, data
warehousing, and Internet computing environments that businesses need to be
successful. Sybase's software products consist of leading high-performance
enterprise, mobile and embedded database products; middleware products that
provide interoperability, connectivity and data movement; application
development tools and application servers that enable the development and
deployment of applications in Web and other computing environments; and business
intelligence products that enable the design and implementation of data
warehouses and data marts. The Company offers a broad range of consulting,
education and technical support services to provide customers with complete
solutions for building on-line, enterprise-wide applications. Unless otherwise
specified, the terms "Sybase" or the "Company" include Sybase and all of its
direct and indirect consolidated subsidiaries.
The following are trademarks of Sybase, Inc. used in this Form 10-K:
Sybase, SQL Anywhere, Adaptive Component Architecture, Adaptive Server, SQL
Remote, Replication Server, Enterprise Connect, OmniConnect, DirectConnect,
Jaguar CTS, jConnect, PowerJ, Open Client, Open Server, Powersoft, PowerBuilder,
PowerDesigner, PowerDynamo, ProcessAnalyst, DataArchitect, AppModeler, Warehouse
Architect, MetaWorks, SQL Anywhere, Ultralite, Warehouse Studio and Viewer are
trademarks of Sybase, Inc. This Form 10-K also includes additional trademarks of
other companies.
MARKET OVERVIEW
Sybase's advanced software product architecture allows users to build
and deploy applications that can be distributed across heterogeneous networked
computing environments. The Company's relational database management systems
(RDBMS), data access and data movement software and application development
tools have historically been used primarily to address customers' enterprise
data management needs for high performance, on-line transaction processing
(OLTP) systems, such as securities brokerage systems, and other mission-critical
applications which need to process and store a large numbers of transactions,
and for data warehouse and data mart applications, which are designed to access
and analyze corporate data (either routinely or on an ad-hoc basis) to enable an
enterprise to rapidly obtain answers to specific queries about its business and
customers. Sybase customers relying on the Company's enterprise data management
products include leading companies in banking, brokerage, insurance,
telecommunications and healthcare.
The Company's strategy is to leverage its existing strengths in
enterprise data management and enterprise application development to focus on
delivering market-leading computing solutions in three growing markets: mobile
and embedded computing, business intelligence and Internet applications.
MOBILE AND EMBEDDED COMPUTING
Businesses are turning to mobile and embedded computing to capture
and distribute up-to-date information, such as pricing, products, and order
status, from and to remote users' equipment, in order to gain the flexibility to
transact business anywhere and to enable sales forces and branch offices to keep
in touch with corporate data resources while remaining close to their customers.
Mobile computing consists of end-to-end solutions that deliver enterprise
information and applications to any location where business transactions occur,
whether it be at a self-service kiosk, a remote branch office or the laptop
computer of
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a salesperson in the field. Embedded solutions include both database
applications that run on laptops, handheld machines, and palm sized devices as
well as databases that are literally embedded into hardware devices such as
parking meters, gas pumps, and intelligent appliances. Embedding database
technology in next-generation devices will provide a convenient and
cost-effective way to capture and access critical information. These solutions
require a fully functional database and synchronization technology, with
increased flexibility to customize the database to meet unique requirements. The
Company believes its high-performance, scalable technology in products such as
Adaptive Server Anywhere, the industry's leading small-footprint mobile
database, position the Company at the forefront of this market.
INTERNET APPLICATIONS
By using the Internet as a platform for business computing,
businesses are attempting to differentiate themselves from their competitors and
gain competitive advantage. Computing over the Internet's World Wide Web has
created a tremendous opportunity for companies to give their customers, vendors
and partners better access to information systems and to strategic data. It also
allows companies to advertise and sell products in a vast, global marketplace.
Through its combination of industry-leading application development tools,
application servers, industry specific applications servers, high-performance
database servers, and extensive middleware, Sybase enables companies to design,
develop and deploy enterprise dynamic Internet applications that can integrate
their various legacy and mainframe-based data sources.
BUSINESS INTELLIGENCE
The global business environment currently is characterized by rapid
and dynamic changes, frequent mergers and consolidations, global competition,
and encroachment from other business sectors. Amid this environment, the ability
of a company to analyze its business to understand the impact of business
decisions on customer behavior, sales revenue, market competition, financial
costs and operational effectiveness is becoming an important factor in a
company's ability to effectively compete and succeed. Companies are increasingly
seeking new ways to discover business opportunities by better understanding
customer needs, analyzing profitable market segments, providing the specific
products their customers are demanding and measuring how well their
organizations are executing. To obtain these types of business intelligence,
companies are building data warehouse and data mart systems, which are
specifically designed to receive, store and analyze large amounts of corporate
data. Sybase offers an integrated platform to enable businesses to design,
integrate, manage, visualize, and administer enterprise data warehouses and data
marts.
PRODUCTS AND PLATFORMS
Sybase provides a comprehensive technology platform for enterprise
computing known as the Adaptive Component Architecture(TM) which supports the
use of industry-standard components; rapid application development; delivery of
data in the right form, to the right place, at the right time; and minimized
complexity for end-users and developers. This architecture is based on open
component logic, comprehensive development tools, and optimized data stores. Its
multi-tiered framework is designed to manage and deploy components across the
distributed heterogeneous computing environment.
Sybase products are available for a wide variety of hardware
platforms from various hardware manufacturers including, but not limited to,
Digital Equipment Corporation, Hewlett-Packard, IBM and Sun Microsystems. The
Company also provides connectivity to other hardware platforms with large
installed bases. Sybase products are available for various UNIX environments,
Windows, Windows NT and other software operating systems.
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ENTERPRISE DATABASE MANAGEMENT PRODUCTS
Sybase's enterprise 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. The Adaptive Server database product family is unique in delivering
optimized database performance for different application environments and in
providing common management, administration, access and other services across
the entire database family. The end result is a product family providing high
performance for today's transaction processing requirements with the flexibility
to accommodate future enterprise computing needs. The Adaptive Server product
family includes: Adaptive Server Enterprise, Adaptive Server Anywhere (for
mobile and embedded computing), Adaptive Server IQ (for business intelligence
applications).
Adaptive Server Enterprise is the latest version of the Company's
flagship client/server RDBMS product designed specifically for on-line mission
critical applications, and is a key element of the Company's Adaptive Component
Architecture. 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. Adaptive Server Enterprise is designed to provide
organizations with predictable high performance in unpredictable mixed workload
on-line transaction processing and data warehouse environments. Product features
include Logical Memory Manager and Logical Process Manager for application and
user-specific dedicated resources; scalability for very large databases through
parallel operation for maximum utilization of system resources; common services
for management and administration, data access/movement, security and Web
access, and security features for Internet transactions and multi-tier
applications. In 1998, Adaptive Server 11.9 with row-level locking capabilities
became available. These capabilities provide Sybase customers with significantly
improved performance and scalability when running numerous leading commercial
application solutions, such as those of PeopleSoft, Inc. and Baan Company.
Adaptive Server Anywhere and Adaptive Server IQ are discussed below within the
Mobile and Embedded Computing and Business Intelligence Product sections.
DATA ACCESS AND DATA MOVEMENT PRODUCTS
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 and operated or
managed by different departments or groups. Sybase's 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 applications and to
facilitate mass deployment. Recognizing the importance of access to data in a
multi-platform environment, Sybase offers a market-leading suite of data access
and data movement products to manage the flow of data required in most of the
applications being developed today. These products include: Replication Server
(R), OmniConnect(TM), DirectConnect(TM), Enterprise Connect(TM), Mainframe
Connect(TM) and Open Server(TM).
Replication Server(R) synchronizes replicated copies of data on
heterogeneous platforms through a client/server network, and is designed to
allow data sharing among operational and decision support systems without
affecting data integrity and consistency or business performance. Frequently,
each piece of data in an organization has a primary site that is the actual
source of the data and is the location where the data is updated or revised.
Using Replication Server, 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. Replication Server will then deliver such 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 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, Replication Server reduces the impact on the primary
data manager while providing near real-time data replication. In 1998,
Replication Server 11.5, the latest
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version of this product, became available. This new version provides several new
features, including significantly enhanced management capabilities.
OmniConnect(TM) is a data integration server that enables users and
developers to employ a single language to access multiple disparate data sources
as through they were a single database. While SQL is the industry standard
language for RDBMS products, manufacturers employ different dialects of SQL.
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 separate access languages 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 RDBMSs accessed, users do not need to know where each type of data resides
within each database or which server controls a database.
DirectConnect(TM) is a single-source data access server which
provides users with complete read/write access to heterogeneous data sources. It
simplifies access to enterprise data wherever it resides and enables greater
flexibility in managing distributed heterogeneous environments. The product is
optimized for both OLTP and decision support and offers enhanced remote systems
management and monitoring; greater client and middleware configuration
flexibility; increased support for multi-tier application development;
integration of specialized services such as e-mail or additional data sources;
and utilization of Open Client(TM) and Open Server(TM) enhancements such as
directory and security services. DirectConnect works in conjunction with
OmniConnect. 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 family for enterprise data access, data movement, data transparency,
heterogeneous replication, and data warehousing.
Enterprise Connect(TM) is a new integrated product set that became
available in 1998. It is designed to provide distributed transactional
replication and location-transparent, application-independent data access among
heterogeneous data sources to enable customers to build corporate-wide
information systems. This new offering integrates Sybase connectivity and data
access technologies, including Replication Server, DirectConnect and
OmniConnect, to enable the organizations to integrate over 25 different types of
data using one easy-to-install, easy-to-maintain solution.
Mainframe Connect(TM), enables users to get high-performance access
to mainframe data and on-line production applications in CICS, IMS/TM, MVS, and
DB2/MVS environments. This product is designed for organizations with
environments requiring connectivity between client/server databases and
mainframe data.
Open Server(TM) products provide a server-side 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.
MOBILE AND EMBEDDED COMPUTING PRODUCTS
Sybase is a leader in providing small footprint database technology
to specifically address the mobile and embedded computing market. The Company's
principal mobile and embedded computing products are described below:
SQL Anywhere Studio(TM) is the Company's integrated product set that
enables the design and delivery of corporate information to workgroup, mobile
and embedded database systems. SQL Anywhere Studio which became available in
1998, combines Adaptive Server(R) Anywhere 6.0, the industry-leading mobile
database; bi-directional, message-based replication with SQL Remote(TM); and
tools for development, design and administration.
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Adaptive Server Anywhere is a small footprint, self-tuning,
fully-functional RDBMS engine designed for applications operating in embedded or
mobile computing environments, such as hand-held PCs. Important requirements in
this market include a database solution that can be transparently deployed and
easily managed with a low cost of ownership. From mobile computing to
large-scale high-performance applications, the compatibility and
interoperability of Adaptive Server Anywhere with Adaptive Server Enterprise
provides an end-to-end data management platform. Key to the product's success is
SQL Remote(TM) which makes two-way synchronization possible for occasionally
connected users. Telecommuters, remote office locations or traveling
professionals can both download and upload mission critical information ensuring
that up-to-date information is always available both at their fingertips, and at
the head office. Data can be synchronized among multiple hand-held PCs, desktop
PCs and enterprise servers using standard communication and wireless products.
This technology allows users to achieve the benefits of a true mobile computing
solution.
Adaptive Server Anywhere for Windows CE builds on Sybase's proven
technology for small footprint databases. This product is designed for the
Microsoft Windows CE operating system that is used in many handheld PCs and
became generally available in 1998.
In 1998 Sybase announced the beta test availability of its new
Ultralite(TM) deployment option for SQL Anywhere Studio, an application
optimized, ultra-small relational database. The Ultralite technology is designed
to allow developers to customize the capabilities of the database to match the
requirements of an application. This customized database can have a memory
fingerprint as small as 50K. In addition, the product's synchronization
technology will enable users to synchronize data directly to any enterprise
database, including Sybase, Oracle and Microsoft. Ultralite's capabilities will
enable the delivery of corporate information to a new class of lightweight
mobile business tools and devices.
INTERNET APPLICATION DEPLOYMENT AND APPLICATION DEVELOPMENT PRODUCTS
The increasingly widespread use of the Internet has created the
opportunity for companies to engage in electronic commerce and to expand their
methods of interacting with their customers. The Company's application
deployment and development products provide customers with a complete
environment to design, develop and deploy component-based business applications
in Web-based and non-Web-based distributed environments. These products enable
customers to develop new applications for the Internet using Java and HTML
languages, to continue the use of existing investments in applications and data
developed for traditional client/server environments, and to extend the use of
these client/server applications into the new Web environment.
The need to provide business applications over the Web, rather than
simply displaying static data, has resulted in the emergence of a new multiple
tier computing architecture and a new category of products, generally called,
application servers. Traditional client/server applications are generally
unsuitable for direct access over the Web, because of a variety of factors
including, the limitations of Web browsers and the need for a significant part
of the application to be delivered to and run on the user's computer.
Application servers enable Web-based users to launch applications and receive
data from an application server using a standard Web browser. The application
server in turn accesses data from one or more databases, applies the
application's business logic and returns the results over the Internet to the
user. The emergence of this "middle tier" has also increased the need for
applications to be developed based on components that can be more easily
deployed and used in a multiple tier architecture. Sybase's application servers
and development tools have been specifically designed to enable customers to
build component-based applications and to deploy those business applications in
a multiple tier environment. Sybase has also developed technology that enables
client/server applications to be Web-enabled.
Sybase's application deployment products, include Enterprise
Application Server(TM) and Financial Server(TM), and its development tools
include PowerBuilder(R), PowerJ(TM) and PowerDesigner(TM). In 1998, Enterprise
Application Studio(TM) 2.0 became generally available. This integrated product
set, which includes PowerBuilder, PowerJ and a developer edition of Enterprise
Application Server, enables customers to obtain together a complete toolset for
building enterprise applications.
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PowerBuilder(R) is the Company's principal application development
tool for building enterprise business applications for client/server, multi-tier
and Internet architectures. 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 of the operating system or complicated
programming. PowerBuilder Enterprise 6.5 became generally available in August
1998 and features new capabilities for creating Web applications and managing
Web sites and key advancements in distributed development capabilities for
creating multi-tier applications.
PowerJ(TM) is the Company's enterprise-class tool specifically
designed for enabling Java language developers to build and deploy distributed
Web applications. PowerJ provides support for JavaBeans on both the client and
middle tiers, robust database access and the ability to build and deploy
multi-tier applications. PowerJ also features seamless integration with
Enterprise Application Server for building real-world business applications on
the Web. In 1998, the latest version of this product, PowerJ 2.5, became
generally available.
PowerDesigner(TM) is an integrated design toolset for building highly
optimized and functional databases, data warehouses and data-aware components
and is comprised of six modules targeted at business and systems analysts, data
modelers, database administrators and application developers: ProcessAnalyst(TM)
for identifying and capturing data flow within a business; DataArchitect(TM) for
bi-level conceptual and physical database design and construction; Warehouse
Architect(TM) for data warehouse design and construction; AppModeler(TM) for
physical data modeling and data-aware component generation, MetaWorks(TM) for
model management and team design; and Viewer(TM) for read-only access to model
information. PowerDesigner 6.1, the newest version of the product set, became
generally available in 1998.
Enterprise Application Server(TM) is Sybase's new scalable deployment
environment that enables customers to support applications ranging from simple
Web data publishing to fully integrated, component-based information systems.
This application server, which became generally available in 1998, includes a
component transaction server (Jaguar CTS(TM)) and a dynamic page engine
(PowerDynamo(TM)) to address the customer need for an enterprise-class platform
that delivers both Web OLTP and dynamic data publishing. Enterprise Application
Server supports multiple industry-standard component models, such as ActiveX,
CORBA, COM, and JavaBeans.
In late 1998, Sybase announced the beta test availability of a number
of new application deployment and development products, including PowerBuilder
7.0 and PowerJ 3.0, which include numerous new and enhanced features to further
ease testing and debugging and the development and deployment of components to
application servers; Enterprise Application Server 3.0; and Financial
Server(TM), an application server specifically designed for the financial
services industry.
BUSINESS INTELLIGENCE PRODUCTS
Companies are increasingly building data warehouses and data marts to
discover business opportunities and compete more effectively by analyzing and
using their corporate data to better understand customer needs, evaluate
profitable market segments, provide the specific products their customers are
demanding and measure performance. Large-scale data warehouse development
projects typically cost several million dollars and require many months and
often years, in development time. To be effective, a data warehouse must be able
to receive the correct data from a variety of sources, and frequently in a
variety of formats, to manage the voluminous and disparate data, and to quickly
and efficiently analyze the data based on numerous and frequently changing
business queries. To provide rapid responses to data warehouse queries and to
speed warehouse deployment and to ease management, Sybase delivers a database
management system specifically designed for warehousing and a full suite of
warehouse design tools and central meta data management facilities. In addition,
Sybase's middleware products provide organizations with the data movement,
connectivity and interoperability capabilities to effectively leverage and
integrate information from diverse data sources, and to distribute data
throughout the enterprise and beyond. Sybase's principal business intelligence
products include Adaptive Server IQ and Warehouse Studio(TM).
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Adaptive Server IQ is an optional extension to Adaptive Server Enterprise
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. Adaptive Server IQ utilizes
an innovative 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. Adaptive Server IQ works with standard commercial hardware and
imported database information from a wide variety of data sources, and supports
a wide range of standard Sybase tools and on-line analytical processing and
voice recognition products from companies such as WhiteLight Systems, Business
Objects, Cognos and Prodea.
Warehouse Studio(TM), is a new integrated product set for delivering
powerful enterprise or departmental data warehouse driven business solutions.
Warehouse Studio became generally available in 1998 and includes Adaptive Server
Enterprise, Adaptive Server IQ, and a set of design, transformation, meta data
management and administration capabilities optimized to meet customers' data
warehousing needs. In early 1998, Sybase acquired Intellidex Systems, Inc., a
developer of a sophisticated meta data management technology that has been
incorporated into Warehouse Studio. Warehouse Studio is designed to enable
organizations to deploy business solutions faster and at a lower cost, while
providing the flexibility and scalability to accommodate global, enterprise
requirements.
Sybase believes that data warehousing and business intelligence
market will rapidly evolve toward largely prepackaged applications which will
further reduce the expense, design and development time, and risk of
implementing data warehouse applications. Sybase has announced its development
of several industry specific vertical warehousing applications which are
currently scheduled to become available in 1999. These applications which
include industry specific data models for various applications will be offered
with Warehouse Studio to enable a new generation of business intelligence
applications.
SERVICES
Technical Support and Maintenance Services. Sybase worldwide Customer
Service and Support organizations provide support for the entire family of
Sybase products. A comprehensive portfolio of support programs let customers
choose the level of support their business requires, from personalized support
for mission critical projects to minimum assistance designed to get development
underway. Support is provided by a worldwide organization with major support
centers located in North America, Europe, and Asia Pacific. Operating as a
virtual team, support resources are coordinated to provide services 24 hours a
day, seven days a week in all time zones around the world. Sybase also offers a
wide variety of methods to obtain support, including electronic support services
that allow customers to search vast sources of problem-solving technical
information, connect with other users, log support cases and download software
fixes. Access to the technical information sources and newsgroups on Sybase's
support web site is provided free to all customers.
Sybase Professional Services. The Company provides comprehensive
consulting and integration services for its customers worldwide through the
Sybase Professional Services organization. These service offerings assist
customers on an enterprise-wide basis with migration, design and development,
implementation, performance improvement, knowledge transfer and IT architecture
projects, particularly in the areas of on-line transaction processing, data
warehousing, Internet computing and occasionally connected computing. Services
include architecture and resource planning, custom application design and
development, performance and migration services, system administration and
extensive SQL and Sybase product training.
Training and Education Services. The Company provides a broad
education curriculum for its customers allowing them to increase their
proficiency in Sybase products. The Company offers basic
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and advanced classes from education centers in the United States, Australia,
Belgium, Brazil, Canada, China, France, Germany, Hong Kong, Italy, Japan, Korea,
Malaysia, Netherlands, New Zealand, Singapore, Spain, Switzerland, Taiwan and
the United Kingdom. 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.
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, systems integrators, original equipment manufacturers,
international distributors and other resellers. In general, enterprise database
products, middleware and services are primarily marketed through the direct
sales organization. Application development tools products and mobile and
embedded computing products are marketed primarily through a combination of
indirect channels and direct sales. Business Intelligence products have
primarily been sold through the direct sales organization and system
integrators. In 1998 and 1999, the Company made significant changes in its sales
model and sales compensation programs, in connection with the Company's
reorganization into four operating divisions. Although such changes are intended
to enhance overall revenues, such changes could, in the short-term, 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 -
Future Operating Results; Stock Price Volatility".
Approximately 42 percent, 37 percent and 39 percent of the Company's
total revenues for the years ended December 31, 1998, 1997 and 1996,
respectively, were from international operations. As of December 31, 1998, the
Company's subsidiaries licensed and supported the Company's products in
Argentina, Australia, Belgium, Brazil, China, France, Germany, Hong Kong,
Indonesia, Italy, Japan, South Korea, Malaysia, New Zealand, The Netherlands,
Norway, Singapore, Spain, Sweden, Switzerland, Taiwan, and the United Kingdom.
In 1998, the Company closed or began the process of closing its subsidiaries in
Chile, Mexico, Peru, Thailand and Venezuela. The Company also licenses its
products through distributors in Europe, Asia, Africa and Latin America. In the
future, the Company could experience fluctuations in international revenues and
such fluctuations 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. Among the Company's
primary market segments are financial services, insurance, telecommunications,
healthcare, defense and government agencies. No customer accounted for more than
10% of revenues during any of the years ended December 31, 1998, 1997 and 1996.
The Company's products and services are offered in a wide variety of
configurations depending on each 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 nonexclusive,
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 Studio
database products, application development products, and 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.
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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 1998, 1997 and 1996, product
development and engineering expenses were $148.6 million, $138.6 million and
$164.7 million, representing 17%, 15% and 16% 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,
business intelligence and Internet applications products. Sybase intends to
continue to invest heavily in research and product development.
The Company's future results will depend in part on its ability to
enhance 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
gaining market acceptance for such new or enhanced products.
The Company has experienced delays in introducing some new products
in the past. 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, or the Company's failure to accurately anticipate customer demand or
to 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 could 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. New or
enhanced products, many of which have been announced and many of which are
continually introduced by existing or future competitors in the software
industry, could increase the competition faced by the Company's products from
time to time and result in greater price pressure on certain of the Company's
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. For example, changes to the
Company's pricing and licensing structure in the first quarter of 1996 increased
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prices for certain products, and reduced prices for others. The Company will
introduce price and licensing changes from time to time in the future. If such
changes or changes in the Company's products, or existing or future competition
were to result in significant revenue declines, the Company's business and
financial results could be adversely affected.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company relies on a combination of trade secret, copyright, patent
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 March 1, 1999, the Company had thirty two issued patents,
expiring between 2113 and 2116, 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 March 24, 1999, the Company and its subsidiaries had 4,196
employees, excluding temporary personnel and consultants. In 1998 and early
1999, there were a number of changes in the Company's executive management team.
For example, in the fall of 1998, the Company completed an executive management
transition pursuant to which John Chen replaced Mitchell Kertzman as the
Company's Chief Executive Officer and Chairman of the Board and in early 1999,
Pieter Van der Vorst became the Company's Chief Financial Officer. Moreover, in
connection with the Company's reorganization into four operating divisions and
the appointment of one general manager for each division, a number of executives
changed responsibilities at the end of 1998. Further changes in management, the
reduction in the overall number of Sybase employees made during 1998, and the
Company's financial and stock price performance relative to companies with which
Sybase competes for employees, could affect the amount of employee turnover. The
Company has experienced in recent quarters a high rate of employee turnover. The
failure to effectively recruit, train, and retain qualified personnel or high
rates of employee turnover, particularly among consulting, engineering or sales
staff, could adversely affect the Company's product development efforts, sales
of products and services and other aspects of the Company's operations and
results.
ITEM 2. PROPERTIES
The Company is headquartered in Emeryville, California, where it
leases administrative, sales and marketing and product development facilities in
seven locations consisting of an aggregate of approximately 446,000 square feet.
The Company's leases with respect to its Emeryville headquarters facilities
expire as follows: approximately 129,700 square feet in 2001, 95,900 square feet
in 2,002 and 220,370 square feet in 2003. 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
one property formerly owned by the Company and one
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leased property included in Sybase's headquarters facilities. The cost of
monitoring and treating these sites is less than $40,000 per year. As of
December 31, 1998, the Company maintained an engineering center in Milpitas,
California where it leased approximately 20,749 square feet of office space
through 2003. The Company also maintains engineering centers in Boulder,
Colorado, which is principally focused on the Company's middleware products; in
Concord, Massachusetts, and Paris, France which are principally focused on the
Company's internet applications products, development tools and business
intelligence products; in Waterloo, Canada which is primarily focused on mobile
and embedded computing products and in Singapore which is primarily focused on
product localization and development relating to the Company's Asian markets.
As of December 31, 1998, the Company's field operations, professional
service organizations and subsidiaries occupied leased facilities in
approximately 96 locations in the United States, Australia, Belgium, Brazil,
Canada, China, Czech Republic, France, Germany, Hong Kong, Italy, Japan, Korea,
The Netherlands, New Zealand, Philippines, Singapore, Spain, Sweden,
Switzerland, Taiwan, Argentina and the United Kingdom aggregating approximately
1.8 million square feet. In addition, the Company owns a building in Concord,
Massachusetts encompassing approximately 44,600 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 announcements on January 2, 1998 and January
21, 1998 regarding its preliminary results of operations for the quarter and
year ended December 31, 1997, several class action lawsuits were filed against
the Company and certain of its officers and directors in the United States
District Court, Northern District of California ("Northern California District
Court"). The complaints are similar and allege violations of federal and state
securities laws and request unspecified monetary damages. A consolidated,
amended class action Complaint was served on June 11, 1998 and named Sybase KK,
the Company's Japanese subsidiary, and the Company's former country manager of
Japan, as additional defendants. Pretrial discovery has not yet begun.
On January 27, 1998, a purported shareholder derivative action was
filed in the Superior Court of the State of California, County of Alameda
("Alameda County Superior Court"). The complaint alleges that certain of the
Company's present and former officers and/or directors breached fiduciary duties
owed to the Company in connection with the underlying circumstances alleged in
the securities class action complaints described above. Two similar derivative
actions were also filed in Alameda County Superior Court, and the three
derivative actions have now been consolidated. Pretrial discovery has begun in
those actions. On April 15, 1998, a derivative complaint was filed in Northern
California District Court. A second similar derivative complaint was also filed
in the same court. These two complaints have been consolidated, and pretrial
discovery has not begun. In addition, a similar complaint has been filed in the
Chancery Court in Delaware. Pretrial discovery has not begun in that case.
Sybase is a nominal defendant in these actions and no damages are sought from
it.
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 Northern California District Court. The complaints are similar and allege
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. Pretrial discovery has been
completed.
Management believes that the claims alleged against it in all of the
actions described above are without merit, and the Company 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 these matters could materially affect the Company's
future results of operations or cash flows in a particular period.
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The Company is also a party to various legal disputes and proceedings
arising from the ordinary course of business. In the opinion of management,
resolution of these matters is not expected to have a material adverse effect on
the consolidated 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, 1998.
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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 29, 1999, are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
John S. Chen......................................... 43 Chairman of the Board, Chief Executive Officer,
President and Director
Robert S. Epstein.................................... 46 Executive Vice President and Director
Richard N. LaBarbera ................................ 50 Senior Vice President and General Manager,
Enterprise Solutions Division
Eric L. Miles........................................ 52 Senior Vice President and General Manager,
Business Intelligence Division
Raj Nathan........................................... 45 Senior Vice President and General Manager,
Internet Applications Division
Terry Stepien ....................................... 40 Senior Vice President and General Manager,
Mobile and Embedded Computing Division
Pieter A. Van der Vorst.............................. 44 Vice President and Chief Financial Officer
Mitchell L. Gaynor .................................. 39 Vice President, General Counsel and Secretary
Martin J. Healy ..................................... 36 Vice President and Corporate Controller
Nita White-Ivy....................................... 52 Vice President, Worldwide Human Resources
</TABLE>
Mr. Chen is the Chief Executive Officer, President and Chairman of the
Board. He has served as Chief Executive Officer and Chairman of the Board since
November 1998 and as President and a director since August 1997. Mr. Chen served
as co-Chief Executive Officer between February 1998 and November 1998 and as
Chief Operating Officer between August 1997 and February 1998. Before joining
Sybase, Mr. Chen served between March 1995 and July 1997 as the President of the
Open Enterprise Computing Division of Siemens Nixdorf, a computer and
electronics company, and as Chief Executive Officer and Chairman of the Siemens
Pyramid subsidiary of Siemens Nixdorf. Before its acquisition by Siemens Nixdorf
in March 1995, Mr. Chen served in various executive capacities with Pyramid
Technology Corporation, a computer company, where he became Chief Operating
Officer in October 1992 and President in June 1993. Mr. Chen is a director of
Beyond.com Corporation.
Dr. Epstein is a founder of the Company and has served as Executive Vice
President and as a director since November 1984. From November 1996 to August
1998, Dr. Epstein also served as Chief Information Officer of the Company. He
currently is the Chairman of the Board of Colorado Microdisplay, a
privately-held company, where he has been a director since August 1996.
Mr. LaBarbera has served as Senior Vice President and General Manager,
Enterprise Solutions Division since December 1998. Between June 1998 and
December 1998, Mr. LaBarbera was Senior Vice President, Services. Mr. LaBarbera
joined Sybase in December 1997 and served as Vice President, Customer Service
and Support through June 1998. Prior to joining Sybase, he was Vice President
and
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General Manager of Customer Services at Siemens Pyramid between November
1995 and December 1997. Mr. LaBarbera previously served as Vice President and
General Manager at Octel Communications between 1993 and November 1995.
Mr. Miles has served as Senior Vice President and General Manager,
Business Intelligence Division since December 1998. Between December 1997 when
he joined Sybase and December 1998, he was Senior Vice President, Product
Operations. From November 1995 until he joined Sybase, Mr. Miles served as Vice
President, Product Development at Informix Corporation, a database software
company. Prior to that, he served as Vice President, Applications Development at
Ross Systems from September 1994 through November 1995. From January through
September 1994, Mr. Miles was President of the Ingres business unit of Ask
Corporation, a software company.
Dr. Nathan has served as Senior Vice President and General Manager,
Internet Applications Division since December 1998. Dr. Nathan joined Sybase in
November 1997. Between November 1997 and December 1998, he served as Senior Vice
President, Corporate Program Office. From May through November 1997, he served
as President and CEO of Siemens Pyramid, and held a number of executive
positions with Siemens Pyramid prior to that.
Mr. Stepien has served as Senior Vice President and General Manager,
Mobile and Embedded Computing Division since March 1999. Between September 1998
and March 1, 1999 he was Vice President and General Manager, Mobile and Embedded
Computing Division. Between September 1996 and September 1998, he served as Vice
President, Marketing for Database Products. Mr. Stepien was Vice President,
Marketing for Workplace Database Products from February 1995 to September 1996.
Between March 1992 and February 1995, Mr. Stepien was Director of Marketing for
Watcom Corporation, a provider of application development tools and database
software that became a subsidiary of Sybase in February 1995.
Mr. Van der Vorst became Vice President and Chief Financial Officer
in January 1999. Between November 1997 and January 1999, he served as Corporate
Controller. Prior to that, he served as Sybase's Vice President, Tax and
Corporate Accounting beginning in April 1997. From the time he joined Sybase in
December 1991 through April 1997, Mr. Van der Vorst held various other
positions, including Director of Tax and Assistant Controller. Prior to joining
Sybase, Mr. Van der Vorst held positions with Cetus Corporation, a biotechnology
company, Spectra Physics, Inc., a laser manufacturing company, Levi Strauss &
Company, a clothing company, and Price Waterhouse, an accounting firm.
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.
Mr. Healy has served as Vice President and Corporate Controller since
January 1999. Between January 1997 and January 1999, he served as Vice
President, Intercontinental Operations. Mr. Healy was Director of Finance, Asia
from January 1994 to December 1997, and prior to that held various positions
within the Company's finance organization. Before Joining Sybase in 1989, Mr.
Healy was Financial Reporting Manager at WordStar International and prior to
that was an auditor with Arthur Andersen and Company.
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<PAGE> 17
Ms. White-Ivy became Vice President, Worldwide Human Resources in
March 1998. Between January 1998 and March 1998, she was a human resources
consultant to Sybase. Prior to joining Sybase, she was with Siemens Pyramid,
serving as Vice President of Worldwide Human Resources from February 1994 to
October 1997 and as Senior Director of Human Resources from December 1992 to
February 1994. Previously, Ms. White-Ivy served in various human resources
management capacities with Burroughs/Unisys, Spectra Physics and Silicon
Graphics.
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 1997:
Quarter ended March 31, 1997 $20.00 $13.25
Quarter ended June 30, 1997 $16.88 $12.50
Quarter ended September 30, 1997 $20.75 $12.50
Quarter ended December 31, 1997 $23.50 $12.00
High Low
---- ---
Fiscal 1998:
Quarter ended March 31, 1998 $10.69 $7.00
Quarter ended June 30, 1998 $10.38 $6.50
Quarter ended September 30, 1998 $10.06 $5.84
Quarter ended December 31, 1998 $ 8.03 $4.53
</TABLE>
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 25, 1999 was $6.625. The number of
stockholders of record of the Company's Common Stock as of March 25, 1999 was
2,066.
On February 28, 1996, the Company issued 733,178 shares of Common
Stock pursuant to Section 4(2) of the Securities Act of 1933, as amended, (the
"Act") and Regulation D promulgated thereunder in exchange for all of the
outstanding common stock of Visual Components, Inc., a privately-held, software
company. On February 21, 1997, the Company issued 750,000 shares of Common
Stock pursuant to Section 4(2) of the Act to two individuals in exchange for
all of the outstanding common stock of Purchase Net, Inc., a privately-held
developer of application development software. The resale of the Sybase Common
Stock issued in connection with these two merger transactions was registered
under the Act.
FUTURE OPERATING RESULTS; STOCK PRICE VOLATILITY
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 significant risks, including but not limited to the specific risks identified
below. The results of operations for the three months ended December 31, 1998
and for the year ended December 31, 1998 are not necessarily indicative of
results for the year ending December 31, 1999 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.
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<PAGE> 18
The timing and amount of the Company's revenues from license fees 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 fees 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. The Company currently anticipates this seasonal pattern continuing in
1999, with lower total revenues in the first quarter of 1999 than in the fourth
quarter of 1998. 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 such 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 operating results for
that period would be adversely affected and could result in an operating loss,
as occurred in the first quarter of 1998. Failure to achieve revenues, earnings,
and other operating and financial results as forecast or anticipated by
brokerage firms and industry analysts have previously resulted in, and in the
future could result in, an immediate and substantial adverse effect on the
market price of the Company's stock. The Company may not achieve, in the future,
the relatively high rates of growth experienced by the Company in and prior to
1994 or the rates of growth projected for the software markets in which Sybase
competes.
The Company recently realigned its sales force, product teams and
professional services capabilities into four new divisions, each one focused
upon one of four key markets: Enterprise Solutions, Mobile and Embedded
Computing, Internet Applications and Business Intelligence. This reorganization
took effect in January 1999. Although such changes are intended to enhance
overall revenues and profitability, they could, in the short-term, materially
and adversely affect the sales process, revenues and results of operations. In
1998 and early 1999, there were a number of changes in the Company's executive
management. In the fall of 1998, the Company completed an executive management
transition pursuant to which John Chen replaced Mitchell Kertzman as the
Company's Chief Executive Officer and Chairman of the Board. In early 1999,
Pieter Van der Vorst became the Company's Chief Financial Officer. The Company's
divisional reorganization also resulted in the appointment of one general
manager for each division, and a number of other executive reassignments at the
end of 1998 and beginning of 1999. The Company will 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 the
Company's results of operations.
The market for the Company's stock is highly volatile. The trading
price of the Company's common stock fluctuated widely in 1995, 1996, 1997 and
1998 and may continue to fluctuate in the future 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 revenues 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 could also affect the Company's stock prices. 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. For example, due to a variety of
factors, the Company's stock price declined significantly during the first
quarter of 1996 and the first quarter of 1998. 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.
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<PAGE> 19
An increased portion of the Company's revenues in recent quarters has
been derived from its international operations. In 1998, revenues from its
international operations represented a record 42 percent of the Company's total
revenues. During 1998, the Company closed subsidiaries in Mexico and Thailand
and began the process of closing its subsidiaries in Chile, Peru and Venezuela.
In addition, there have been several management and organizational changes
within the international operations. For example, during 1998 and in early 1999,
the country managers in Australia, Switzerland and Japan and the European
General Manager resigned or were replaced. 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 or closure of international
organizations. 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, the introduction of the Euro currency unit,
political instability in emerging markets, and difficulties in staffing and
managing foreign operations, as well as other risks associated with
international activities. For example, the economic unrest and currency
devaluations in Asia in late 1997 adversely affected collection of receivables,
particularly dollar denominated receivables and the recognition of revenue in
the fourth quarter of 1997 and during 1998.
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, Microsoft Corporation, Informix 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. In
addition, many of these competitors offer additional categories of products,
such as applications or operating systems, that the Company does not and which
may provide those companies with a competitive advantage in various
circumstances. New or enhanced products, many of which have been announced and
many of which are continually introduced by existing or future competitors in
the software industry, could increase the competition faced by the Company's
products from time to time and result in greater price pressure on certain of
the Company's products, especially to the extent that market acceptance for
personal computer-oriented and Windows NT technologies increases at the expense
of UNIX-based systems. 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.
The Company's future results of operations will depend in part on its
ability to enhance 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
gaining market acceptance for such new or enhanced products. During 1998, the
Company achieved a number of milestones, including the shipment to several
application partners of Adaptive Server(R) Enterprise with row-level locking
capabilities. In October 1998, the Company also announced the general
availability of Adaptive Server(R) Anywhere for Windows CE. The Company has been
in the process of combining a number of its products into integrated product
sets such as Enterprise Application Studio(TM), which includes Jaguar CTS(TM)
and PowerDynamo(TM); and SQL Anywhere(TM) Studio, which includes Adaptive
Server(R) Anywhere, InfoMaker(R) and jConnect(TM) for JBDC(TM). Creation of such
integrated product sets is intended to enhance the ability of the Company's
partners and direct sales force to market and sell more complete solutions to
customers in a single package. While such integration is intended to improve
productivity, revenues and profitability, the elimination of the availability of
individual products subsumed within integrated product sets could have an
adverse effect on license fees and service revenues, particularly if such
product sets are not well received in the marketplace.
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<PAGE> 20
Sybase's results of operations 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 (RDBMSs). 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 are not interoperable with Sybase RDBMSs,
and others may never be available on Sybase's RDBMSs. 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 the development, quality, and support of products for non-Sybase
RDBMSs will diminish over time, the Company's business, results of operations,
and financial condition could be materially and adversely affected. The
Company's products are used by many customers to build and deploy their own
custom applications. Increased reliance on prepackaged applications and
diversion of internal information technology budgets to rectify Year 2000
compliance issues has and may in the future continue to have the effect of
reducing the internal development of custom applications overall. Such a
reduction has and may in the future continue to have a material and adverse
impact on the market for the Company's products and the Company's business,
results of operations and financial condition. Furthermore, many products
licensed by the Company contain components developed by third parties. If the
Company's products or such third party products are not Year 2000 compliant, or
cannot be determined to be compliant, market acceptance of the Company's
products could be 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 that could affect customer perception. In
addition, customer perception of Sybase and its products could be adversely
affected by financial results, particularly revenues and profitability, reported
for the 1998 fiscal year or future periods, by reductions in the applicable
market share of the Company's products and by related press reports.
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 1998 and early 1999, there were a number of changes in the Company's
executive management team. For example, in the fall of 1998, the Company
completed an executive management transition pursuant to which John Chen
replaced Mitchell Kertzman as the Company's Chief Executive Officer and Chairman
of the Board and in early 1999, Pieter Van der Vorst became the Company's Chief
Financial Officer. Moreover, in connection with the Company's reorganization
into four operating divisions and the appointment of one general manager for
each division, a number of executives changed responsibilities at the end of
1998 and in early 1999. Further changes in management, the reduction in the
overall number of Sybase employees made during 1998, and the Company's financial
and stock price performance relative to companies with which Sybase competes for
employees, could affect the amount of employee turnover. The Company has
experienced in recent quarters a high rate of employee turnover. The failure to
effectively recruit, train, and retain qualified personnel or high rates of
employee turnover, particularly among consulting, engineering or sales staff,
could adversely affect the Company's product development efforts, sales of
products and services and other aspects of the Company's operations and results.
Sybase currently ships most of its products in North America from its
Emeryville, California and Massachusetts distribution facilities. 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 more of
18
<PAGE> 21
these facilities (or a disruption of business operations generally) 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 and, therefore, on the overall results of operations for such quarter.
The Company has acquired a number of companies in the past. During
1998, the Company acquired Intellidex Systems, L.L.C., a provider of meta data
management technology for deploying and managing data warehouse environments,
and in 1999, Data Warehouse Network Limited, a provider of industry specific
data warehouse solutions. The Company will likely 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 1998, the Company incurred restructuring charges of $74.2
million. The Company does not currently anticipate that it will incur additional
restructuring charges in 1999. However, as this is a forward-looking statement,
future actual results may differ based on the actual results of operations
experienced in 1999 and the various factors described above that affect future
results.
Effective January 1, 1998, the Company adopted the American Institute
of Certified Public Accountants Statement of Position No. 97-2, "Software
Revenue Recognition" (SOP 97-2), which supercedes SOP 91-1 and which prohibits
the restatement of prior financial statements. SOP 97-2 addresses software
revenue recognition matters primarily from a conceptual level and detailed
implementation guidelines have not been issued. In March 1998, the American
Institute of Certified Public Accountants issued Statement of Position No. 98-4,
"Deferral of the Effective Date of a Provision of SOP 97-2, Software Revenue
Recognition", which defers for one year the application of certain provisions of
SOP 97-2. These provisions limit what is considered vendor-specific objective
evidence of the fair value of the various elements in a multiple-element
arrangement. All other provisions of SOP 97-2 remain in effect. These and future
changes to, and interpretations of, accounting standards and rules could
adversely affect the amount and timing of recognition of revenue.
YEAR 2000
The Company is aware of and is addressing the issues associated with
the programming code in existing computer systems as the year 2000 approaches.
The "Year 2000" issue is pervasive and complex, as many computer systems will be
affected in some way by the rollover of the two-digit year value to 00. Systems
that do not properly recognize such information could generate erroneous data or
cause a system to fail. The "Year 2000" issue creates potential risk for the
Company from unforeseen problems in its own computer systems, from third parties
with whom the Company deals on financial transactions worldwide and in its own
software products licensed to customers. Failures of the Company's and/or third
parties' computer systems could have a material impact on the Company's ability
to conduct its business. Not all products previously licensed by the Company
meet current standards for Year 2000 compliance, and many of these products are
still in use by customers. Complex software products, such as the type licensed
by the Company and its competitors, generally are not completely free from
"bugs" and other defects. The existence of such "bugs" may give rise to legal
claims against the Company, notwithstanding standard provisions in the Company's
license agreements with its customers disclaiming express and implied warranties
against such errors. Such legal claims or claims that products previously
licensed by the Company are not Year 2000 compliant could have a materially
adverse impact on the Company's business and results of operations.
19
<PAGE> 22
As of March 1999, the Company completed its assessment of all of its
critical worldwide infrastructure systems (e.g., computer and telephone systems)
and business systems (e.g., revenue, sales and marketing and finance functions)
and also completed much of the remedial work necessary to make these systems
Year 2000 compliant. The outstanding list of such nonconforming applications and
systems is small and the Company believes it has identified upgrade or
replacement solutions to make all of these systems Year 2000 compliant. Most
outstanding items are scheduled for installation of certified upgrades from
suppliers which have been received or are expected to be received by May 1999,
and the Company expects to effect all solutions by July 1999. The Company
believes that the risk of Year 2000 problems in the Company's internal
applications has been low because the Company's systems are generally run using
its own technology and its partners' products, and relatively little development
work other than assessment and testing has been required to insure Year 2000
compliance. Notwithstanding the foregoing, there is no guarantee that the
systems of other companies on which the Company's systems rely will be timely
converted and that they will not have an adverse effect on the Company's
systems. The Company does not believe that the cost of such actions will have a
material adverse effect on the Company's results of operations or financial
condition. There are no assurances, however, that there will not be a delay in,
or increased cost associated with, the implementation of such changes, and the
Company's inability to implement such changes could have an adverse effect on
future results of operations. Factors that could cause unusual costs and delays
include the availability and cost of personnel trained in this area, and the
ability to locate and correct all relevant computer codes and other
uncertainties.
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 1998 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 1998 Annual Report to
Stockholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion about the Company's risk management
activities includes "forward-looking statements" that involve risks and
uncertainties. Actual results could differ materially from those projected in
the forward-looking statements for the reasons described under the caption
"Future Operating Results; Stock Price Volatility".
As a global concern, the Company faces exposure to adverse movements
in foreign currency exchange rates. These exposures may change over time as
business practices evolve and could have a material adverse impact on the
Company's financial position and results of operations. Historically, the
Company's primary exposures have related to nondollar-denominated sales and
expenses in Europe, Asia Pacific, including Japan, Australia, and Latin America.
For example, throughout 1997, the U.S. dollar strengthened against the major
European and Intercontinental currencies, which resulted in lower revenues and
expenses recorded for these regions when translated into U.S. dollars. In order
to reduce the effect of foreign currency fluctuations, the Company hedges its
exposure on certain transactional balances that are denominated in foreign
currencies through the use of foreign currency forward exchange contracts. For
the most part, these exposures consist of intercompany accounts receivable owed
to the Company as a result of local sales of software licenses by the Company's
international subsidiaries. The majority of these exposures are denominated in
European and Asia Pacific currencies, primarily the Dutch guilder and the Hong
Kong dollar. These forward exchange contracts are recorded at fair value and are
short-term in nature (primarily thirty days or less). At December 31, 1998, the
Company had forward exchange contracts
20
<PAGE> 23
to exchange various foreign currencies for U.S. dollar and Dutch guilders in the
amounts of $15,039,000 and $5,018,000, respectively, and to exchange U.S.
dollars, Dutch guilders and Hong Kong dollars into various foreign currencies in
the amounts of $17,624,000, $45,870,000 and $2,590,000, respectively. The
success of this activity depends upon the estimation of future transactions
denominated in various currencies. To the extent that these estimates are
overstated or understated during periods of currency volatility, the Company
could experience unanticipated currency gains or losses.
The Company maintains an investment portfolio holding of various
issuers, types and maturities. These securities are generally classified as
available for sale, and consequently, are recorded on the balance sheet at fair
value with unrealized gains or losses reported as a separate component of
stockholders' equity, net of tax, if material. Unrealized gains and losses at
December 31, 1998 and 1997 were not material. The Company's investments consist
primarily of short-term money market instruments. Of the Company's cash
equivalents and cash investments balance of $124,943,000 at December 31, 1998,
approximately 80 percent has maturity dates of less than 90 days, and 19 percent
of this balance has maturities of 90 days to one year. The Company does not
believe its exposure to interest rate risk is material given the short-term
nature of its investment portfolio.
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 1998 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 27, 1999 (the
"Proxy Statement"), to be filed with the Commission within 120 days after the
end of the Registrant's fiscal year ended December 31, 1998. 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 "Section 16(a) Beneficial
Ownership Reporting Compliance" 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.
21
<PAGE> 24
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.
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 1998 Annual Report to Stockholders:
<TABLE>
<CAPTION>
Pages Located
in 1998 Annual
Report to
Stockholders
------------
<S> <C>
Report of Independent Auditors 20
Consolidated Balance Sheets as of December 31, 1998 and 1997 21
Consolidated Statements of Operations for the Three Years Ended December 31, 1998 22
Consolidated Statements of Stockholders' Equity for the Three Years Ended December 31, 1998 23
Consolidated Statements of Cash Flows for the Three Years Ended December 31, 1998 24
Notes to Consolidated Financial Statements 25 - 41
</TABLE>
2. Financial Statement Schedules. The following financial statement
schedules of Sybase, Inc. for the years ended December 31, 1998, 1997 and 1996
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 26
</TABLE>
22
<PAGE> 25
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. Exhibits Required by Item 601 of Regulation S-K. The management
contracts and compensatory plans required to be filed as part of, or
incorporated by reference into, this Report are: (i) 1988 Stock Option Plan, as
amended, Exhibit 10.1, (ii) 1991 Employee Stock Purchase Plan, as amended, and
1991 Foreign Subsidiary Employee Stock Purchase Plan, as amended, Exhibit 10.2,
(iii) Sybase Key Management Incentive Program, Exhibit 10.3, (iv) Sybase, Inc.
401(K) Plan, as amended, Exhibit 10.4, (v) 1992 Director Stock Option Plan, as
amended, Exhibit 10.5, (vi) Executive Deferred Compensation Plan, Exhibit 10.6,
(vii) 1996 Stock Plan, as amended, and form of Stock Option Agreement, Exhibit
10.7, (viii) Retirement Agreement and General Release dated as of November 5,
1998 between Mitchell Kertzman and the Sybase, Inc., Exhibit 10.12, (ix) Loan
and Security Agreement dated as of January 7, 1998 between Sybase, Inc. and
Mitchell E. Kertzman, Exhibit 10.13, (x) Agreement of Employment Terms dated as
of August 1, 1996 between Sybase, Inc. and Jack Acosta, Exhibit 10.14, (xi) Form
of Statement of Employment Terms, Exhibit 10.20, (xii) Form of Amendment to Form
of Statement of Employment Terms, Exhibit 10.21, (xiii) Retirement Agreement and
General Release between Sybase, Inc. and Michael Forster dated as of March 11,
1998, Exhibit 10.22, (xiv) Employment Agreement between Sybase, Inc. and John S.
Chen dated as of July 11, 1997, Exhibit 10.23, (xv) Promissory Note of Eric
Miles in favor of Sybase, Inc. dated as of January 2, 1998, Exhibit 10.26, (xvi)
Promissory Note of Richard LaBarbera in favor of Sybase, Inc. dated as of
December 17, 1997, Exhibit 10.27, (xvii) Offer Letter dated February 12, 1998
between Michael Gardner and Sybase, Inc., Exhibit 10.9.
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 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)
10.1(6) 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 Sybase Key Management Incentive Program
10.4(1) Sybase, Inc. 401(k) Plan, as amended
10.5 1992 Director Stock Option Plan, as amended
10.6 Executive Deferred Compensation Plan, as amended
10.7 1996 Stock Plan, as amended, and form of Stock Option
Agreement
10.8(1) Standard Office Lease dated April 17, 1989 between
Registrant and P.O. Partners
</TABLE>
23
<PAGE> 26
<TABLE>
<S> <C>
10.9 Offer Letter dated February 12, 1998 between Michael
Gardner and Sybase, Inc.
10.10 Form of Indemnification Agreement
10.11(3) Lease dated October 1, 1992 between JS-Bay Center
Associates and the Registrant
10.12 Retirement Agreement and General Release dated November 5,
1998 between Mitchell Kertzman and the Registrant
10.13(6) Loan and Security Agreement dated as of January 7, 1998
between Sybase, Inc. and Mitchell E. Kertzman
10.14(6) Agreement of Employment Terms dated as of August 1, 1996
between Sybase, Inc. and Jack Acosta
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(7) Form of Statement of Employment Terms
10.21 Form of Amendment No. 1 to Form of Statement of Employment
Terms
10.22(6) Retirement Agreement and General Release between Sybase,
Inc. and Michael Forster dated as of March 11, 1998
10.23(8) Employment Agreement between Sybase, Inc. and John S. Chen
dated as of July 11, 1997
10.24(6) Office Lease dated March 17, 1998, Building A - Bay Center
between Sybase, Inc. and JS Bay Center Associates
10.25(6) Office Lease dated March 17, 1998, Building C - Bay Center
between Sybase, Inc. and JS Bay Center Associates
10.26(6) Promissory Note of Eric Miles in favor of Sybase, Inc.
dated as of January 2, 1998
10.27 Promissory Note of Richard LaBarbera in favor of Sybase,
Inc. dated as of December 17, 1997
</TABLE>
24
<PAGE> 27
<TABLE>
<S> <C>
13.1 (2) Proxy for 1998 Annual Meeting of Stockholders
13.2 Pages 6 - 43 of the Registrant's Annual Report to
Stockholders for the fiscal year ended December 31, 1998
(except for the portions of the 1998 Annual Report to the
Stockholders expressly incorporated by reference in the
Report on Form 10-K, the 1998 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
27 Financial Data Schedules
</TABLE>
(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) 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.
(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, 1997.
(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) Incorporated by reference to exhibits filed in response to Item 6(a),
"Exhibits and Reports on Form 8K" of the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997.
(b) Reports on Form 8-K. The Company filed no Reports on Form 8-K
during the quarter ended December 31, 1998.
25
<PAGE> 28
II Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
--------------------
SYBASE, INC.
COL. A COL. B COL. C COL. D COL. E
- ---------------------------------------------------------------------------------------------------------------------------
ADDITIONS
----------------------------
Balance at Charged to Charged to Balance at
Beginning Costs Other End of
DESCRIPTION of Period and Expenses Accounts Deletions Period
- ---------------------------------------- ------------ ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1998:
Deduced from asset accounts:
Allowance for doubtful accounts $30,673,000 $ 2,020,000 $12,191,000A $13,114,000B $31,770,000
Year ended December 31, 1997:
Deducted from asset accounts:
Allowance for doubtful accounts $28,242,000 $ 1,484,000 $45,582,000A $44,635,000B $30,673,000
Year ended December 31, 1996:
Deducted from asset accounts:
Allowance for doubtful accounts $19,304,000 $11,713,000 $34,505,000A $37,280,000B $28,242,000
</TABLE>
A Charged against revenue
B Uncollectible accounts written off and recoveries
The required information regarding the valuation allowance for deferred tax
assets is included in Note 7 to the Financial Statements.
26
<PAGE> 29
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/ JOHN S. CHEN
March 26, 1999 -------------------------------------
John S. Chen
Chairman of the Board, 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/ JOHN S. CHEN Chairman of the Board, President, March 26, 1999
- ----------------------------------------------- Chief Executive Officer (Principal
(John S. Chen) Executive Officer) and Director
/s/PIETER VAN DER VORST Vice President and March 26, 1999
- ----------------------------------------------- Chief Financial Officer (Principal
(Pieter Van Der Vorst) Financial Officer)
/s/ ROBERT S. EPSTEIN Executive Vice President March 26, 1999
- ----------------------------------------------- and Director
(Robert S. Epstein)
/s/ MARTIN J. HEALY Vice President and Corporate March 26, 1999
- ----------------------------------------------- Controller (Principal Accounting
(Martin J. Healy) Officer)
/s/ RICHARD C. ALBERDING Director March 26, 1999
- -----------------------------------------------
(Richard C. Alberding)
/s/ L. WILLIAM KRAUSE Director March 26, 1999
- -----------------------------------------------
(L. William Krause)
/s/ ALAN B. SALISBURY Director March 26, 1999
- -----------------------------------------------
(Alan B. Salisbury)
/s/ ROBERT P. WAYMAN Director March 26, 1999
- -----------------------------------------------
(Robert P. Wayman)
/s/ JEFFREY T. WEBBER Director March 26, 1999
- -----------------------------------------------
(Jeffrey T. Webber)
</TABLE>
27
<PAGE> 30
<TABLE>
<CAPTION>
EXHIBIT INDEX
<S> <C>
3.1(4) Restated Certificate of Incorporation of Registrant, as
amended
3.2 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)
10.1(6) 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 Sybase Key Management Incentive Program
10.4(1) Sybase, Inc. 401(k) Plan, as amended
10.5 1992 Director Stock Option Plan, as amended
10.6 Executive Deferred Compensation Plan, as amended
10.7 1996 Stock Plan, as amended, and form of Stock Option
Agreement
10.8(1) Standard Office Lease dated April 17, 1989 between
Registrant and P.O. Partners
10.9 Offer Letter dated February 12, 1998 between Michael
Gardner and Sybase, Inc.
10.10 Form of Indemnification Agreement
10.11(3) Lease dated October 1, 1992 between JS-Bay Center
Associates and the Registrant
10.12 Retirement Agreement and General Release dated November 5,
1998 between Mitchell Kertzman and the Registrant
10.13(6) Loan and Security Agreement dated as of January 7, 1998
between Sybase, Inc. and Mitchell E. Kertzman
10.14(6) Agreement of Employment Terms dated as of August 1, 1996
between Sybase, Inc. and Jack Acosta
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
</TABLE>
28
<PAGE> 31
<TABLE>
<S> <C>
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(7) Form of Statement of Employment Terms
10.21 Form of Amendment No. 1 to Form of Statement of Employment
Terms
10.22(6) Retirement Agreement and General Release between Sybase,
Inc. and Michael Forster dated as of March 11, 1998
10.23(8) Employment Agreement between Sybase, Inc. and John S. Chen
dated as of July 11, 1997
10.24(6) Office Lease dated March 17, 1998, Building A - Bay Center
between Sybase, Inc. and JS Bay Center Associates
10.25(6) Office Lease dated March 17, 1998, Building C - Bay Center
between Sybase, Inc. and JS Bay Center Associates
10.26(6) Promissory Note of Eric Miles in favor of Sybase, Inc.
dated as of January 2, 1998
10.27 Promissory Note of Richard LaBarbera in favor of Sybase,
Inc. dated as of December 17, 1997
13.1(2) Proxy for 1998 Annual Meeting of Stockholders
13.2 Pages 6 - 43 of the Registrant's Annual Report to
Stockholders for the fiscal year ended December 31, 1998
(except for the portions of the 1998 Annual Report to the
Stockholders expressly incorporated by reference in the
Report on Form 10-K, the 1998 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
27 Financial Data Schedules
</TABLE>
(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) 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.
(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.
29
<PAGE> 32
(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, 1997.
(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) Incorporated by reference to exhibits filed in response to Item 6(a),
"Exhibits and Reports on Form 8K" of the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997.
30
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
SYBASE, INC.
(as amended February 3, 1999)
<PAGE> 2
<TABLE>
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TABLE OF CONTENTS
Page
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<S> <C>
ARTICLE I - CORPORATE OFFICES................................................................1
1.1 REGISTERED OFFICE.......................................................1
1.2 OTHER OFFICES...........................................................1
ARTICLE II - MEETINGS OF STOCKHOLDERS........................................................1
2.1 PLACE OF MEETINGS.......................................................1
2.2 ANNUAL MEETING..........................................................1
2.3 SPECIAL MEETINGS........................................................1
2.4 NOTICE OF STOCKHOLDERS' MEETINGS........................................2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS.........2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE............................3
2.7 QUORUM..................................................................3
2.8 ADJOURNED MEETING; NOTICE...............................................4
2.9 VOTING..................................................................4
2.10 WAIVER OF NOTICE........................................................5
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING ................5
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS ............5
2.13 PROXIES.................................................................6
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE...................................6
2.15 CONDUCT OF BUSINESS.....................................................6
ARTICLE III - DIRECTORS......................................................................7
3.1 POWERS..................................................................7
3.2 NUMBER OF DIRECTORS.....................................................7
3.3 ELECTION QUALIFICATION AND TERM OF OFFICE OF DIRECTORS..................7
3.4 RESIGNATION AND VACANCIES...............................................7
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE................................8
3.6 FIRST MEETINGS..........................................................8
3.7 REGULAR MEETINGS........................................................9
3.8 SPECIAL MEETINGS; NOTICE................................................9
3.9 QUORUM..................................................................9
3.10 WAIVER OF NOTICE........................................................9
3.11 ADJOURNED MEETING; NOTICE..............................................10
3.12 CONDUCT OF BUSINESS ...................................................10
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<TABLE>
<S> <C>
3.13 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.................................................10
3.14 FEES AND COMPENSATION OF DIRECTORS................................................................10
3.15 APPROVAL OF LOANS TO OFFICERS.....................................................................10
3.16 REMOVAL OF DIRECTORS..............................................................................11
ARTICLE IV - COMMITTEES................................................................................................11
4.1 COMMITTEES OF DIRECTORS...........................................................................11
4.2 COMMITTEE MINUTES.................................................................................12
4.3 MEETINGS AND ACTION OF COMMITTEES.................................................................12
ARTICLE V OFFICERS....................................................................................................12
5.1 OFFICERS..........................................................................................12
5.2 ELECTION OF OFFICERS..............................................................................12
5.3 REMOVAL AND RESIGNATION OF OFFICERS...............................................................13
5.4 CHAIRMAN OF THE BOARD.............................................................................13
5.5 PRESIDENT.........................................................................................13
5.6 VICE PRESIDENTS...................................................................................13
5.7 SECRETARY.........................................................................................14
5.8 TREASURER.........................................................................................14
5.9 ASSISTANT SECRETARY...............................................................................15
5.10 ASSISTANT TREASURER...............................................................................15
5.11 AUTHORITY AND DUTIES OF OFFICERS..................................................................15
ARTICLE VI - INDEMNITY.................................................................................................15
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS.........................................................15
6.2 INDEMNIFICATION OF OTHERS.........................................................................16
6.3 INSURANCE.........................................................................................16
ARTICLE VII - RECORDS AND REPORTS......................................................................................16
7.1 MAINTENANCE AND INSPECTION OF RECORDS.............................................................16
7.2 INSPECTION BY DIRECTORS...........................................................................17
7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS....................................................17
ARTICLE VIII - GENERAL MATTERS.........................................................................................17
8.1 STOCK CERTIFICATES; PARTLY PAID SHARES............................................................17
8.2 LOST CERTIFICATES.................................................................................18
8.3 CONSTRUCTION; DEFINITIONS.........................................................................18
8.4 DIVIDENDS.........................................................................................18
8.5 FISCAL YEAR.......................................................................................18
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<PAGE> 4
<TABLE>
<S> <C>
8.6 SEAL..............................................................................................18
8.7 TRANSFER OF STOCK.................................................................................19
8.8 STOCK TRANSFER AGREEMENTS.........................................................................19
8.9 REGISTERED .......................................................................................19
ARTICLE IX - AMENDMENTS................................................................................................19
ARTICLE X - DISSOLUTION................................................................................................20
ARTICLE XI - CUSTODIAN.................................................................................................21
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES.......................................................21
11.2 DUTIES OF CUSTODIAN...............................................................................22
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<PAGE> 5
BYLAWS
OF
SYBASE, INC.
(as amended February 3, 1999)
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation in the State of Delaware
shall be in the City of Wilmington, County of New Castle, State of Delaware. The
name of the registered agent of the corporation at such location is Corporation
Trust Company.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at the principal executive
offices of the corporation, or at any other place, within or outside the State
of Delaware, designated by the board of directors. In the absence of any such
designation, stockholders' meetings shall be held at the principal executive
offices of the corporation.
2.2 ANNUAL MEETING
An annual meeting of stockholders shall be held for the election of
directors at such date, time and place, either within or without the State of
Delaware, as may be designated by resolution of the board of directors from time
to time. Any other proper business may be transacted at the annual meeting.
2.3 SPECIAL MEETINGS
<PAGE> 6
A special meeting of the stockholders may be called at any time by
the board of directors, or by the chairman of the board, by the president or by
the chief executive officer, or by one or more stockholders holding shares in
the aggregate entitled to cast not less than ten percent of the votes at that
meeting.
If a special meeting is called by any person or persons other than
the board of directors, the request shall be in writing, specifying the time of
such meeting and the general nature of the business proposed to be transacted,
and shall be delivered personally or sent by registered mail or by telegraphic
or other facsimile transmission to the chairman of the board, the president,
chief executive officer, or the secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
officer receiving the request shall cause notice to be promptly given to the
stockholders entitled to vote, in accordance with the provisions of Sections 2.4
and 2.5, that a meeting will be held at the time requested by the person or
persons who called the meeting, not less than thirty-five (35) nor more than
sixty (60) days after the receipt of the request. If the notice is not given
within twenty (20) days after the receipt of the request, the person or persons
requesting the meeting may give the notice. Nothing contained in this paragraph
of this Section 2.3 shall be construed as limiting, fixing, or affecting the
time when a meeting of stockholders called by action of the board of directors
may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and
shall be sent or otherwise given in accordance with Section 2.6 of these bylaws
not less than ten (10) nor more than sixty (60) days before the date of the
meeting to each stockholder entitled to vote at such meeting. The notice shall
specify the place, date, and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
To be properly brought before an annual meeting or special meeting,
nominations for the election of director or other business must be (a) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the board of directors, (b) otherwise properly brought before the
meeting by or at the direction of the board of directors, or (c) otherwise
properly brought before the meeting by a stockholder. For such nominations or
other business to be considered properly brought before the meeting by a
stockholder such stockholder must have given timely notice and in proper form of
his intent to bring such business before such meeting. To be timely, such
stockholder's notice must be delivered to or mailed and received by the
secretary of the corporation not less than ninety (90) days prior to the
meeting; provided, however, that in the event that less than one-hundred (100)
days notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so received
not later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. To be in proper form, a stockholder's notice
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<PAGE> 7
to the secretary shall set forth:
(i) the name and address of the stockholder who intends to
make the nominations or propose the business and, as the
case may be, the name and address of the person or persons
to be nominated or the nature of the business to be
proposed;
(ii) a representation that the stockholder is a holder of
record of stock of the corporation entitled to vote at such
meeting and, if applicable, intends to appear in person or
by proxy at the meeting to nominate the person or persons
specified in the notice or introduce the business specified
in the notice;
(iii) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be
made by the stockholder;
(iv) such other information regarding each nominee or each
matter of business to be proposed by such stockholder as
would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange
Commission had the nominee been nominated, or intended to
be nominated, or the matter been proposed, or intended to
be proposed by the board of directors; and
(v) if applicable, the consent of each nominee to serve as
director of the corporation if so elected.
The chairman of the meeting may refuse to acknowledge the nomination
of any person or the proposal of any business not made in compliance with the
foregoing procedure.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given
when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.7 QUORUM
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the
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<PAGE> 8
stockholders for the transaction of business except as otherwise provided by
statute or by the certificate of incorporation. If, however, such quorum is not
present or represented at any meeting of the stockholders, then either (i) the
chairman of the meeting or (ii) the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present or represented. At such adjourned meeting at
which a quorum is present or represented, any business may be transacted that
might have been transacted at the meeting as originally noticed.
When a quorum is present or represented at any meeting, the vote of
the holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which, by express provisions of the statutes or
of the certificate of incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of the question.
2.8 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these
bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders
shall be determined in accordance with the provisions of Section 2.12 and
Section 2.14 of these bylaws, subject to the provisions of Sections 217 and 218
of the General Corporation Law of Delaware (relating to voting rights of
fiduciaries, pledgors and joint owners of stock and to voting trusts and other
voting agreements).
Except as may otherwise be provided in the certificate of
incorporation or the last paragraph of this Section 2.9, each stockholder shall
be entitled to one vote for each share of capital stock held by such
stockholder.
At a stockholders' meeting at which directors are to be elected, or
at elections held under special circumstances, a stockholder shall be entitled
to cumulate votes (i.e., cast for any candidate a number of votes greater than
the number of votes which such stockholder normally is entitled to cast). Each
holder of stock of any class or series who elects to cumulate votes shall be
entitled to as many votes as equals the number of votes which (absent this
provision as to cumulative voting) he would be entitled to cast for the election
of directors with respect to his shares of stock multiplied by the number of
directors to be elected by him, and he may cast all of such votes for a single
director or may distribute them among the number to be voted for, or for any two
or more of them, as he may see fit, so long as the name of the candidate for
director shall have been placed in nomination prior to
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<PAGE> 9
the voting and the stockholder, or any other holder of the same class or series
of stock, has given notice at the meeting prior to the voting of the intention
to cumulate votes; provided that, except as may otherwise be provided in the
certificate of incorporation, effective upon such time as (i) shares of the
capital stock of the corporation are designated as qualified for trading as
National Market System securities on the National Association of Securities
Dealers, Inc. Automated Quotation System (or any successor national market
system) and (ii) the corporation has at least 800 holders of shares of its
capital stock, the cumulative voting rights set forth in this Section 2.9 shall
terminate.
2.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Effective upon the closing of the corporation's initial public
offering of securities pursuant to a registration statement filed under the
Securities Act of 1933, as amended, the stockholders of the corporation may not
take action by written consent without a meeting but must take any such actions
at a duly called annual or special meeting.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof or entitled to express consent or dissent to corporate action in writing
without a meeting (if otherwise permitted by these bylaws and the corporation's
certificate of incorporation), or entitled to receive payment of any dividend or
other distribution or allotment of any rights or entitled to exercise any rights
in respect of any change, conversion or exchange of stock or for the purpose of
any other lawful action, the board of directors may fix, in advance, a record
date, which shall be not more than sixty (60) nor less than ten (10) days before
the date of such meeting, nor more than sixty (60) days prior to any other
action.
If the board of directors does not so fix a record date, the fixing
of such record date shall be governed by the provisions of Section 213 of the
General Corporation Law of Delaware.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
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<PAGE> 10
2.13 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or
entitled to express consent or dissent to corporate action in writing without a
meeting (if otherwise permitted by these bylaws and the corporation's
certificate of incorporation) may authorize another person or persons to act for
him by a written proxy, signed by the stockholder and filed with the secretary
of the corporation, but no such proxy shall be voted or acted upon after three
(3) years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(c) of the General Corporation Law of Delaware.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of the corporation
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list of stockholders or
the books of the corporation, or to vote in person or by proxy at any meeting of
stockholders and of the number of shares held by each such stockholder.
2.15 CONDUCT OF BUSINESS
Meetings of stockholders shall be presided over by the chairman of
the board, if any, or in his absence by the president, or in his absence by a
vice president, or in the absence of the foregoing persons by a chairman
designated by the board of directors, or in the absence of such designation by a
chairman chosen at the meeting. The secretary shall act as secretary of the
meeting, but in his absence the chairman of the meeting may appoint any person
to act as secretary of the meeting. The chairman of any meeting of stockholders
shall determine the order of business and the procedures at the meeting,
including such matters as the regulation of the manner of voting and conduct of
business.
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ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware
and any limitations in the certificate of incorporation or these bylaws relating
to action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the board of
directors.
3.2 NUMBER OF DIRECTORS
The number of directors of the corporation is fixed at seven (7), of
which two shall be designated as Class I directors, two shall be designated as
Class II directors and three shall be designated as Class III directors. No
reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
3.3 ELECTION QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Each director shall hold office until his successor is elected and
qualified or until his earlier resignation or removal. Directors need not be
stockholders unless so required by the certificate of incorporation or these
bylaws.
Election of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the
corporation. Stockholders may remove directors with or without cause. Any
vacancy occurring in the board of directors with or without cause may be filled
by a majority of the remaining members of the board of directors, although such
majority is less than a quorum, or by a plurality of the votes cast at a meeting
of stockholders, and each director so elected shall hold office until the
expiration of the term of office of the director whom he has replaced.
Unless otherwise provided in the certificate of incorporation or
these bylaws:
(i) Vacancies and newly created directorships resulting
from any increase in the authorized number of directors
elected by all of the stockholders having the right to vote
as a single class may be filled by a majority of the
directors then in office, although less than a quorum, or
by a sole remaining director.
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<PAGE> 12
(ii) Whenever the holders of any class or classes of stock
or series thereof are entitled to elect one or more
directors by the provisions of the certificate of
incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority
of the directors elected by such class or classes or series
thereof then in office, or by a sole remaining director so
elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder may apply to the Court of Chancery for a decree summarily
ordering an election as provided in Section 211 of the General Corporation Law
of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or
these bylaws, members of the board of directors, or any committee designated by
the board of directors, may participate in a meeting of the board of directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be
held at such time and place as shall be fixed by the vote of the stockholders at
the annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
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<PAGE> 13
3.7 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice
at such time and at such place, within or without the State of Delaware, as
shall from time to time be determined by the board.
3.8 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors may be held at such time
and at such place, within or without the State of Delaware, whenever called by
the chairman of the board, by the president, by the secretary or by any two
directors.
When given by the chairman of the board, the president or the
secretary, notice of the time and place of special meeting shall be delivered
personally or by telephone or facsimile to each director at least 24 hours in
advance of the date and time of the special meeting.
When given by any two directors, notice of the time and place of the
special meeting shall be delivered personally or by telephone or facsimile to
each director or sent by first-class mail to them, charges prepaid addressed to
each director at that director's address as it is shown on the records of the
Corporation. Such notice shall be given at least four days before the time of
the holding of the meeting. If the notice is mailed, it shall be deposited in
the United States mail at least six days before the time of the holding of the
meeting. If the notice is delivered personally or by telephone, facsimile or by
telegram, it shall be delivered personally or by telephone, facsimile or to the
telegraph company at least four days before the time of the holding of the
meeting.
Any oral notice (when given by either the chairman, the president,
the secretary or any two directors) given either personally or by telephone may
be communicated either to the director or to a person at the office of the
director whom the person giving the notice has reason to believe will promptly
communicate it to the director. No notice need specify the place for the meeting
if the meeting is to be held at the principal executive office of the
Corporation.
3.9 QUORUM
At all meetings of the board of directors, a majority of the number
of authorized directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the board of directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation.
3.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these bylaws, a written waiver thereof, signed by
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<PAGE> 14
the person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the directors, or members of a committee of
directors, need be specified in any written waiver of notice unless so required
by the certificate of incorporation or these bylaws.
3.11 ADJOURNED MEETING; NOTICE
If a quorum is not present at any meeting of the board of directors,
then the directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum is
present.
3.12 CONDUCT OF BUSINESS
Meetings of the board of directors shall be presided over by the
chairman of the board, if any, or in his absence by the president, or in their
absence by a chairman chosen at the meeting. The secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting. The chairman of any
meeting shall determine the order of business and the procedures at the meeting.
3.13 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or
these bylaws, any action required or permitted to be taken at any meeting of the
board of directors, or of any committee thereof, may be taken without a meeting
if all members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
3.14 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or
these bylaws, the board of directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be paid a fixed sum
for attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
3.15 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee
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<PAGE> 15
who is a director of the corporation or its subsidiary, whenever, in the
judgment of the directors, such loan, guaranty or assistance may reasonably be
expected to benefit the corporation. The loan, guaranty or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the board of directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.16 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that, so long as stockholders of the corporation are entitled to cumulative
voting, if less than the entire board is to be removed, no director may be
removed without cause if the votes cast against his or her removal would be
sufficient to elect him or her if then cumulatively voted at an election of the
entire Board of Directors.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist of
one or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
board of directors or in the bylaws of the corporation, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers that may require it; but no
such committee shall have the power or authority to (i) amend the certificate of
incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets of
the corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation), (ii) adopt an
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agreement of merger or consolidation under Sections 251 or 252 of the General
Corporation Law of Delaware, (iii) recommend to the stockholders the sale, lease
or exchange of all or substantially all of the corporation's property and assets
(iv) recommend to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or (v) amend the bylaws of the corporation; and,
unless the board resolution establishing the committee, the bylaws or the
certificate of incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend, to authorize the issuance of
stock, or to adopt a certificate of ownership and merger pursuant to Section 253
of the General Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report
the same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings and meetings by telephone), Section 3.7 (regular
meetings), Section 3.8 (special meetings and notice), Section 3.9 (quorum),
Section 3.10 (waiver of notice), Section 3.11 (adjournment and notice of
adjournment), Section 3.12 (conduct of business) and Section 3.13 (action
without a meeting), with such changes in the context of those bylaws as are
necessary to substitute the committee and its members for the board of directors
and its members; provided, however, that the time of regular meetings of
committees may also be called by resolution of the board of directors and that
notice of special meetings of committees shall also be given to all alternate
members, who shall have the right to attend all meetings of the committee. The
board of directors may adopt rules for the government of any committee not
inconsistent with the provisions of these bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, one or more
vice presidents, a secretary, and a treasurer. The corporation may also have, at
the discretion of the board of directors, a chairman of the board, one or more
assistant vice presidents, assistant secretaries, assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.2 of these bylaws. Any number of offices may be held by the same
person.
5.2 ELECTION OF OFFICERS
Except as otherwise provided in this Section 5.2, the officers of the
corporation shall be chosen by the board of directors, subject to the rights, if
any, of an officer under any contract of
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employment. The board of directors may appoint, or empower the president to
appoint (whether or not such officer is described in this Article V), such
officers and agents of the business as the corporation may require, each of whom
shall hold office for such period, have such authority, and perform such duties
as are provided in these bylaws or as the board of directors may from time to
time determine. Any vacancy occurring in any office of the corporation shall be
filled by the board of directors or may be filled by the president (if the
president appointed such officer).
5.3 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors or, in the case of an officer appointed by
the president, by the president.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.4 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.5 of these bylaws.
5.5 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the
board of directors to the chairman of the board, if there be such an officer,
the president, unless otherwise determined by the board of directors, shall be
the chief executive officer of the corporation and shall, subject to the control
of the board of directors, have general supervision, direction, and control of
the business and the officers of the corporation. He shall preside at all
meetings of the shareholders and, in the absence or nonexistence of a chairman
of the board, at all meetings of the board of directors. He shall have the
general powers and duties of management usually vested in the office of
president of a corporation and shall have such other powers and duties as may be
prescribed by the board of directors or these bylaws.
5.6 VICE PRESIDENTS
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In the absence or disability of the president, the vice presidents,
if any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
the duties of the president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors, these bylaws,
the president or the chairman of the board.
5.7 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and shareholders. The minutes shall show the
time and place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
shareholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names of
all shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all
meetings of the shareholders and of the board of directors required to be given
by law or by these bylaws. He shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these bylaws.
5.8 TREASURER
The treasurer shall keep and maintain, or cause to be kept and
maintained, adequate and correct books and records of accounts of the properties
and business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings
and shares. The books of account shall at all reasonable times be open to
inspection by any director.
The treasurer shall deposit all money and other valuables in the name
and to the credit of the corporation with such depositaries as may be designated
by the board of directors. He shall disburse the funds of the corporation as may
be ordered by the board of directors, shall render to the president and
directors, whenever they request it, an account of all of his transactions as
treasurer and of the financial condition of the corporation, and shall have such
other powers and perform such other duties as may be prescribed by the board of
directors or these bylaws.
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5.9 ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.10 ASSISTANT TREASURER
The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the treasurer or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the treasurer
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.11 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of
the corporation shall respectively have such authority and perform such duties
in the management of the business of the corporation as may be designated from
time to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware, indemnify each of its
directors and officers against expenses (including attorneys' fees), judgments,
fines, settlements, and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such person
is or was an agent of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation includes any person (i) who is or was
a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, including, without
limitation, any direct or indirect subsidiary of the corporation, or (iii) who
was a director or officer of a corporation which was a predecessor corporation
of the corporation or of another enterprise at the request of such predecessor
corporation.
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6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the manner
permitted by the General Corporation Law of Delaware, to indemnify each of its
employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (i) who is or was an employee or
agent of the corporation, (ii) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including, without limitation, any direct or
indirect subsidiary of the corporation, or (iii) who was an employee or agent of
a corporation which was a predecessor corporation of the corporation or of
another enterprise at the request of such predecessor corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of Delaware.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent
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to so act on behalf of the stockholder. The demand under oath shall be directed
to the corporation at its registered office in Delaware or at its principal
place of business.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the
treasurer, the secretary or assistant secretary of this corporation, or any
other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and, upon request,
every holder of uncertificated shares, shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the board of directors, or the president or vice-president, and by the treasurer
or an assistant treasurer, or the secretary or an assistant secretary of such
corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
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The corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, or upon the books and records of the
corporation in the case of uncertificated partly paid shares, the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated. Upon the declaration of any dividend on fully paid shares, the
corporation shall declare a dividend upon partly paid shares of the same class,
but only upon the basis of the percentage of the consideration actually paid
thereon.
8.2 LOST CERTIFICATES
Except as provided in this Section 8.2, no new certificates for
shares shall be issued to replace a previously issued certificate unless the
latter is surrendered to the corporation and cancelled at the same time. The
corporation may issue a new certificate of stock or uncertificated shares in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the corporation may require the owner of the lost,
stolen or destroyed certificate, or his legal representative, to give the
corporation a bond sufficient to indemnity it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
8.3 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules
of construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
8.4 DIVIDENDS
The directors of the corporation, subject to any restrictions
contained in the certificate of incorporation, may declare and pay dividends
upon the shares of its capital stock pursuant to the General Corporation Law of
Delaware. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the
funds of the corporation available for dividends a reserve or reserves for any
proper purpose and may abolish any such reserve.
8.5 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of
the board of directors and may be changed by the board of directors.
8.6 SEAL
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The corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
8.7 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.
8.8 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
8.9 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of
a person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted,
amended or repealed by the stockholders entitled to vote; provided, however,
that the corporation may, in its certificate of incorporation, confer the power
to adopt, amend or repeal bylaws upon the directors. The fact that such power
has been so conferred upon the directors shall not divest the stockholders of
the power, nor limit their power to adopt, amend or repeal bylaws.
Notwithstanding any other provision of these bylaws or any provision
of law which might otherwise permit a lesser vote or no vote, but in addition to
any affirmative vote of the holders of the capital stock required by law or by
these bylaws, the affirmative vote of at least two-thirds (2/3) of the combined
voting power of all of the then-outstanding shares of the corporation entitled
to vote shall be required to alter, amend or repeal Article II, Section 2.9 or
Section 2.11 of these bylaws or this Article IX or any provision thereof, or to
add or amend any other bylaw in order to change or
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nullify the effect of such provisions, unless such amendment shall be approved
by a majority of the directors of the corporation not affiliated or associated
with any person or entity holding (or which has announced an intent to obtain)
26% or more of the voting power of the corporation's outstanding capital stock.
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the board of
directors of the corporation that the corporation should be dissolved, the
board, after the adoption of a resolution to that effect by a majority of the
whole board at any meeting called for that purpose, shall cause notice to be
mailed to each stockholder entitled to vote thereon of the adoption of the
resolution and of a meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the corporation shall be dissolved.
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may
appoint one or more persons to be custodians and, if the corporation is
insolvent, to be receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect
successors to directors whose terms have expired or would
have expired upon qualification of their successors; or
(ii) the business of the corporation is suffering or is
threatened with irreparable injury because the directors
are so divided respecting the management of the affairs of
the corporation that the required vote for action by the
board of directors cannot be obtained and the stockholders
are unable to terminate this division; or
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(iii) the corporation has abandoned its business and has
failed within a reasonable time to take steps to dissolve,
liquidate or distribute its assets.
11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver
appointed under Section 291 of the General Corporation Law of Delaware, but the
authority of the custodian shall be to continue the business of the corporation
and not to liquidate its affairs and distribute its assets, except when the
Court of Chancery otherwise orders and except in cases arising under Sections
226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware.
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EXHIBIT 10.2
SYBASE, INC.
1991 AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN
(As amended on March 26, 1999)
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 9,800,000
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 9,800,000 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 on the first Enrollment Date on or following
commencement of his or her employment
<PAGE> 2
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 categorized after August 31,
1999 as temporary employees or 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 whose option expires and who has not withdrawn
from the Plan will automatically be re-
<PAGE> 3
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, cash recognition awards, commissions,
overtime pay, shift premiums, and elective
<PAGE> 4
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 (except that with respect to shares which are
sold on a Purchase Date that were added by an amendment of the Plan between the
Enrollment Date for the option applicable to such Purchase Date and that
Purchase Date, it shall be the fair market value of the Common Stock on the date
the Stockholders approved such amendment); 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
<PAGE> 5
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 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
<PAGE> 6
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 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
<PAGE> 7
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. 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
<PAGE> 8
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 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, January 24, 1995, January 21,
1997 and March 13, 1998 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, May 23, 1995, May 20, 1997 and May 27, 1998, respectively. The
Plan also was amended by the Board of Directors on March 26, 1999.
SYBASE, INC.
By: MITCHELL L. GAYNOR
---------------------------------
Its: Vice President, General
Counsel and Secretary
Date: March 26, 1999
<PAGE> 9
SYBASE, INC.
1991 AMENDED AND RESTATED
FOREIGN SUBSIDIARY EMPLOYEE STOCK PURCHASE PLAN
(As Amended March 26, 1999)
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 9,800,000
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
9,800,000 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 categorized after August 31,
1999 as temporary employees or 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
<PAGE> 11
Participating Subsidiary or 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 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
<PAGE> 12
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 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.
<PAGE> 13
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 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 (except that with respect to shares which are
sold on a Purchase Date that were added by an amendment of the Plan between the
Enrollment Date for the option applicable to such Purchase Date and that
Purchase Date, it shall be the fair market value of the Common Stock on the date
the Stockholders approved such amendment); 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
<PAGE> 14
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 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
<PAGE> 15
(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.
(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,
<PAGE> 16
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 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.
<PAGE> 17
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.
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, January 24, 1995, January 21,
1997 and March 13, 1998 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, May 23, 1995, May 20, 1997 and May 27, 1998, respectively.
The Plan also was amended by the Board of Directors on March 26, 1999.
SYBASE, INC.
By: MITCHELL L. GAYNOR
---------------------------------
Its: Vice President, General
Counsel and Secretary
Date: March 26, 1999
<PAGE> 1
Exhibit 10.3
June 5, 1998
(Employee Name & Address)
Dear ________________,
Congratulations! You have been selected to participate in the new Sybase Key
Management Incentive Program.
Before I go into the details of the program, let me take a moment to share my
thoughts with you and reflect on where we have been as a company since I came to
Sybase last August. As you know, I have been working diligently with senior
management to reinvent our company. Experience tells us that better results are
coming; however, the journey into the reinvention process is obviously a long
and difficult one. We have indeed had our ups and downs in the past quarters.
These results cost us employee morale and turnover. Despite these challenges and
the many more ahead of us, I am encouraged and confident about our company's
future because of our excellent technology and the devotion, loyalty and
dedication of key team members like you. I have no doubt that with our
concentrated efforts and dedication to the cause, Sybase will forge through the
challenges and difficulties to emerge as a successful leading company. I am,
therefore, counting on your continuing contributions, patience and dedication
and those of other key management teams to get us to our much deserved goal.
The new Sybase Key Management Incentive Program has been creatively designed to
recognize and reward your role and those of other key management contributors to
the reinvention of Sybase. It is my desire and hope that through this program,
key players like you can be recognized for your devotion and loyalty to the
company despite the company's current financial constraints. The deferred
compensation aspect of this program permits all of us to strike a balance
between financially rewarding key team members while remaining responsible and
fair to our shareholders. Below are the highlights of the program. A plan
description and statement containing program details and contribution on your
behalf will be mailed to you separately.
- - Sybase will contribute a special bonus equal to ____% of your current base
pay. This bonus will be credited to a special account established under our
new deferred compensation plan.
- - The following vesting schedule applies to the contributions: (1) on March
31, 1999, 60% of the bonus will vest; and (2) the balance of 40% will vest
on March 31, 2000.
- - You may elect to receive distributions of vested amounts while still
employed. Certain restrictions or "early withdrawal penalties" based on US
Internal Revenue Service (IRS) regulations will apply.
- - Immediate and full vesting of all contributions will apply in certain
circumstances such as change-of-control and involuntary terminations, e.g.,
reduction-in-force (RIF) where termination of employment is not "for
cause."
I thank you for your continued commitment to Sybase's reinvention and success. I
look forward to working with you and the other dedicated key members of the
management team and seeing the fruits of all our efforts which we all deserve.
Sincerely,
John S. Chen
President and Chief Executive Officer
<PAGE> 1
Exhibit 10.5
SYBASE, INC.
1992 DIRECTOR OPTION PLAN
(as amended February 3, 1999)
1. Purposes of the Plan. The purposes of this 1992 Director Option Plan
are to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.
All options granted hereunder shall be "non-statutory stock
options."
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" means the Common Stock of the Company.
(d) "Company" means Sybase, Inc., a Delaware corporation.
(e) "Continuous Status as a Director" means the absence of any
interruption or termination of service as a Director.
(f) "Director" means a member of the Board.
(g) "Employee" means any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(i) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or
exchange (or the exchange with the greatest volume of trading in Common Stock)
on the date of grant, as reported in the Wall Street Journal or such other
source as the Board deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System
(but not on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the bid and
asked prices for the
-1-
<PAGE> 2
Common Stock on the last market trading day prior to the day of determination,
as reported in The Wall Street Journal or such other source as the Board deems
reliable, or;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board.
(j) "Option" means a stock option granted pursuant to the Plan.
(k) "Optioned Stock" means the Common Stock subject to an
Option.
(l) "Optionee" means an Outside Director who receives an Option.
(m) "Outside Director" means a Director who is not an Employee.
(n) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(o) "Plan" means this 1992 Director Option Plan.
(p) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(q) "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Internal Revenue Code
of 1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 10 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 700,000 Shares (the "Pool") of Common Stock. The Shares may be
authorized but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares which are
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan.
4. Administration of and Grants of Options under the Plan.
(a) Administrator. Except as otherwise required herein, the Plan
shall be administered by the Board.
(b) Procedure for Grants. The provisions set forth in this
Section 4(b) shall not be amended more than once every six months, other than to
comport with changes in the Code, the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder. All grants of Options to Outside
Directors under this Plan shall be automatic and non-discretionary and shall be
made strictly in accordance with the following provisions:
(i) No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number of Shares
to be covered by Options granted to Outside Directors, the exercise price
thereof or the timing of the grant of such Options.
(ii) Each new Outside Director who first becomes a
Director after March 26, 1996 (excluding each Outside Director who, at the time
he or she first becomes a Director, holds unvested options to purchase Shares or
securities convertible into or exchangeable for Shares as a result of such
Outside Director's service as a director of an affiliate of the Corporation),
shall be automatically granted an Option to purchase 20,000 Shares upon the date
on which such person first becomes a Director, whether
-2-
<PAGE> 3
through the election by the stockholders of the Company or appointment by the
Board to fill a vacancy. In addition, on the first trading day of February in
each calendar year beginning with 2000, each Outside Director serving on that
date as an Outside Director who has served as an Outside Director for at least
five months shall be automatically granted an Option to purchase 16,000 Shares.
(iii) The terms of each Option granted hereunder shall
be as follows:
(A) the term of the Option shall be ten (10)
years.
(B) except as set forth in Section 8 hereof, the
Option shall be exercisable only while the Outside Director remains a Director.
(C) the Option shall become exercisable in
installments cumulatively with respect to 1/48th of the Optioned Stock one month
after the date of grant and as to an additional
1/48th of the Optioned Stock each month thereafter, so that one hundred percent
(100%) of the Optioned Stock shall be exercisable four years after the date of
grant; provided, however, that in no event shall any Option be exercisable prior
to obtaining stockholder approval of the Plan.
(iv) In the event that any Option granted under the Plan
would cause the number of Shares subject to outstanding Options plus the number
of Shares previously purchased under Options to exceed the Pool, then the
remaining Shares available for Option grant shall be granted under Options to
the Outside Directors on a pro rata basis. No further grants shall be made until
such time, if any, as additional Shares become available for grant under the
Plan through an increase in the number of Shares which may be issued under the
Plan or through cancellation or expiration of Options previously granted
hereunder.
(c) Powers of the Board. Subject to the provisions and
restrictions of the Plan, the Board shall have the authority, in its discretion:
(i) to determine, upon review of relevant information and in accordance with
Section 2(i) of the Plan, the Fair Market Value of the Common Stock; (ii) to
interpret the Plan; (iii) to prescribe, amend and rescind rules and regulations
relating to the Plan; (iv) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option previously
granted hereunder; and (v) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(d) Effect of Board's Decision. All decisions, determinations
and interpretations of the Board shall be final.
5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) hereof. An Outside Director who has been granted an Option may, if
he or she is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions.
The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate his or her directorship at any time.
6. Term of 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 16 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 11 of the Plan.
-3-
<PAGE> 4
7. Exercise Price and Consideration.
(a) Exercise Price. The per Share exercise price for Optioned
Stock shall be 100% of the Fair Market Value per Share on the date of grant of
the Option.
(b) Form of Consideration. The consideration to be paid for the
Shares to be issued upon exercise of an Option, including the method of payment,
shall be determined by the Board and may consist entirely of (i) cash, (ii)
check, (iii) promissory note, (iv) 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, (v) delivery of a properly executed
exercise notice together with such other documentation as the Company 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, (vi) any combination of the foregoing methods of payment, or
(vii) such other consideration and method of payment for the issuance of Shares
to the extent permitted under applicable law.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4(b) hereof; provided, however, that no Options shall be exercisable until
stockholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7(b) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. A share certificate for the number of Shares so acquired shall be issued
to the Optionee as soon as practicable after exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to me date the stock certificate is issued, except as provided in
Section 10 of the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be 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) Rule 16b-3. Options granted to Outside Directors must comply
with the applicable provisions of Rule 16b-3 promulgated under the Exchange Act
or any successor thereto 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.
(c) Termination of Continuous Status as a Director. In the event
of an Optionee's Continuous Status as a Director terminates (other than upon the
Optionee's death or total and permanent disability (as defined in Section
22(e)(3) of the Code)), the Optionee may exercise his or her Option, but only
within twelve (12) months from the date of such termination, and only to the
extent that the Optionee was
-4-
<PAGE> 5
entitled to exercise it as the date of such termination (but in no event later
than the expiration of its ten (10) year term). To the extent that the Optionee
was not entitled to exercise an Option at the date of such termination, and to
the extent that the Optionee does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall
terminate.
(d) Disability of Optionee. In the event Optionee's Continuous
Status as a Director terminates as a result of total and permanent disability
(as defined in Section 22(e)(3) of the Code), the Optionee may exercise his or
her Option, but only within twelve (12) months from the date of such
termination, and 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
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option at the date of termination, or if he or she does not exercise
such Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
(e) Death of Optionee. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it at the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option at the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option 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.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger,
Asset Sale or Change of Control.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of Shares covered by each
outstanding Option and the number of Shares which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares 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 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 subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it will terminate immediately prior to the
consummation of such proposed action; provided, however, that the Company shall
give each Optionee notice of such dissolution or liquidation at least thirty
(30) days prior to the consummation of such dissolution or liquidation and, upon
receipt of such notice, all options shall become fully exercisable.
(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, outstanding Options may be assumed or equivalent options
may be substituted by the successor corporation or a Parent or Subsidiary
-5-
<PAGE> 6
thereof (the "Successor Corporation"). If an Option is assumed or substituted
for, the Option or equivalent option shall continue to be exercisable as
provided in Sections 4 and 8 hereof for so long as the Optionee serves as a
Director or as a director of the Successor Corporation. Following such
assumption or substitution, if the Optionee's status as a Director or as a
director of the Successor Corporation, as applicable, is terminated other than
upon a voluntary resignation by the Optionee, the Option or option shall become
fully exercisable, including as to Shares for which it would not otherwise be
exercisable. Thereafter, the Option or equivalent option shall remain
exercisable in accordance with Sections 8(c) through (e) above.
If the Successor Corporation does not assume and outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of not less than forty-five (45) days
from the date of such notice, and upon the expiration of such period the Option
shall terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
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 Board may,
with the consent of the Successor Corporation, provide for the consideration to
be received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, 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.
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. Except as set forth in Section 4
or as further limited by the Rule 16b-3 provisions relating to formula award
plans, the Board may at any time amend, alter, suspend, or discontinue the Plan,
but no amendment, alteration, suspension, or discontinuation shall be made which
would impair the rights of any Optionee under any grant theretofore made,
without his or her consent. In addition, to the extent necessary and desirable
to comply with Rule 16b-3 promulgated under the Exchange Act (or any other
applicable law or regulation), the Company shall obtain shareholder approval of
any Plan amendment in such a manner and to such a degree as is required.
(b) Effect of Amendment, Etc. Any such amendment, alteration,
suspension or discontinuation of the Plan shall not affect Options already
granted and such Options shall remain in full force and effect as if this Plan
has not been amended, altered, suspended or discontinued.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto 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, state securities 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.
-6-
<PAGE> 7
As a condition to the exercise of an Option, the Company may
require the person exercising such Option 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 by any of
the aforementioned relevant provisions of law.
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.
14. 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.
15. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company at or prior to the first annual
meeting of shareholders held subsequent to the first granting of an Option
hereunder. Such shareholder approval shall be obtained in the degree and manner
required under applicable state and federal law.
-7-
<PAGE> 1
EXHIBIT 10.6
SYBASE, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
Amended and Restated Effective as of May 1, 1998
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
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<S> <C>
ARTICLE 1 INTRODUCTION....................................................................................1
1.1 Establishment of Plan................................................................................1
1.2 Purpose of Plan......................................................................................1
ARTICLE 2 DEFINITIONS.....................................................................................1
2.1 Definitions..........................................................................................1
2.2 Beneficiary..........................................................................................1
2.3 Board................................................................................................1
2.4 Change of Control....................................................................................1
2.5 Code.................................................................................................2
2.6 Committee............................................................................................2
2.7 Disability...........................................................................................2
2.8 Eligible Employee....................................................................................2
2.9 Employee Contribution Account........................................................................3
2.10 Employer.............................................................................................3
2.11 Employer Contribution Account........................................................................3
2.12 ERISA................................................................................................3
2.13 Hardship.............................................................................................3
2.14 Insolvent............................................................................................3
2.15 Investment Funds or Funds............................................................................3
2.16 Participant..........................................................................................3
2.17 Plan.................................................................................................3
2.18 Plan Compensation....................................................................................3
2.19 Plan Year............................................................................................4
2.20 Retirement...........................................................................................4
2.21 Subsidiary...........................................................................................4
2.22 Sybase...............................................................................................4
2.23 Valuation Date.......................................................................................4
ARTICLE 3 EMPLOYEE ELECTIVE CONTRIBUTIONS.................................................................4
3.1 Participation........................................................................................4
3.2 Election Procedures..................................................................................5
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3.3 Timing of Elections..................................................................................5
3.4 Irrevocable Elections................................................................................6
ARTICLE 4 DISCRETIONARY EMPLOYER CONTRIBUTIONS............................................................6
4.1 Participation........................................................................................6
4.2 Vesting..............................................................................................6
4.3 Change of Control....................................................................................6
ARTICLE 5 PARTICIPANT ACCOUNT BALANCES....................................................................7
5.1 Establishment of Accounts............................................................................7
5.2 Bookkeeping Accounts.................................................................................7
5.3 Crediting Employee Elective Contributions............................................................7
5.4 Crediting Discretionary Employer Contributions.......................................................7
5.5 Crediting Investment Results.........................................................................7
ARTICLE 6 DISTRIBUTION OF ACCOUNTS........................................................................8
6.1 Distribution in the Event of Hardship................................................................8
6.2 Distribution upon Retirement.........................................................................8
6.3 Distribution upon Termination of Employment..........................................................9
6.4 Distribution upon Death..............................................................................9
6.5 In-Service Distributions............................................................................10
ARTICLE 7 PLAN ADMINISTRATION............................................................................10
7.1 Committee...........................................................................................10
7.2 Amendment or Termination............................................................................10
7.3 Administration of the Plan..........................................................................11
7.4 Claims Procedure....................................................................................11
ARTICLE 8 MISCELLANEOUS..................................................................................11
8.1 Beneficiary Designation.............................................................................11
8.2 No Funding..........................................................................................12
8.3 Unsecured Interest..................................................................................12
8.4 Nonalienation.......................................................................................12
8.5 Right to Withhold...................................................................................12
8.6 Limitation of Rights................................................................................12
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8.7 Non-U.S. Participants...............................................................................13
8.8 Governing Law.......................................................................................13
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SYBASE, INC. EXECUTIVE DEFERRED COMPENSATION PLAN
ARTICLE 1
INTRODUCTION
1.1 ESTABLISHMENT OF PLAN. Sybase, Inc. established the Sybase, Inc.
Executive Deferred Compensation Plan (the "Plan") effective as of January 1,
1994. Sybase amended and restated the Plan effective as of January 1, 1995 and
again effective as of January 1, 1997. Sybase hereby amends and restates this
Plan effective as of May 1, 1998.
1.2 PURPOSE OF PLAN. Sybase has established this Plan to provide select
executives with the opportunity to defer the receipt of compensation. Sybase
intends to maintain the Plan primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees,
within the meaning of ERISA Sections 201(2), 301(a)(3), and 401(a)(1). The Plan
shall be interpreted in a manner that comports with these intentions.
ARTICLE 2
DEFINITIONS
2.1 DEFINITIONS are contained in this article and throughout other sections
of the Plan. The location of a definition is for convenience only and should not
be given any significance. A word or term defined in this article (or in any
other article) will have the same meaning throughout the Plan unless the context
clearly requires a different meaning.
2.2 BENEFICIARY means the individual(s) or entity designated by a
Participant to receive any benefit payable upon the death of a Participant.
A Beneficiary designation must be signed by the Participant and delivered
to the Committee on such form as specified by the Committee. In the absence of a
valid or effective Beneficiary designation, the Beneficiary shall be the
Participant's surviving spouse, or if there is no surviving spouse, the
Participant's estate.
2.3 BOARD means the Board of Directors of Sybase, Inc.
2.4 CHANGE OF CONTROL means the occurrence of any of the following events:
(a) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Act") is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of Sybase representing fifty percent (50%) or more of
the total voting power represented by Sybase's then outstanding voting
securities whether by tender offer, or otherwise; or
<PAGE> 6
(b) A change in the composition of the Board, as a result of which
fewer than a majority of the directors are Incumbent Directors. "Incumbent
Directors" shall mean directors who either (i) are directors of Sybase as of the
date immediately preceding the date of change, or (ii) are elected, or nominated
for election, to the Board with the affirmative votes of at least a majority of
the Incumbent Directors at the time of such election or nomination (but shall
not include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to
Sybase); or
(c) (i) The consummation of a merger or consolidation of Sybase with
any other corporation, other than a merger or consolidation which would result
in the voting securities of Sybase outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of Sybase or such
surviving entity outstanding immediately after such merger or consolidation,
(ii) the liquidation of Sybase, or (iii) the sale or disposition by Sybase of
all or substantially all of Sybase's assets.
2.5 CODE means the Internal Revenue Code of 1986, as amended from time to
time.
2.6 COMMITTEE means the committee appointed by Sybase to administer the
Plan in accordance with Article 7.
2.7 DISABILITY means any physical or mental condition arising from an
illness, pregnancy or injury which renders a Participant incapable of performing
the material duties of his or her regular occupation or any reasonably related
occupation, as defined in the Sybase, Inc. Long Term Disability Insurance Plan.
A Participant will not be considered to have sustained a Disability if he or she
is performing work of any kind for remuneration or profit for Sybase or any
Subsidiary, unless such work is done with the prior approval of the Committee.
2.8 ELIGIBLE EMPLOYEE means a regular employee of an Employer identified by
the Committee, who is eligible to defer compensation under Article 3 of the Plan
for a Plan Year, or a regular employee of an Employer identified by the
Committee, who is eligible for a discretionary employer contribution under
Article 4 of the Plan. The group of Eligible Employees for any Plan Year will be
limited to, and may be more restrictive than, the group of employees who are
members of a select group of management or highly compensated employees (within
the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1)). An employee's
eligibility to participate in the Plan for a Plan Year does not guarantee
continued eligibility to participate in any future Plan Year. In the event that
an Eligible Employee transfers employment from one Employer to another, his or
her ability to continue to defer Plan Compensation under Article 3 or to be
eligible for a discretionary employer contribution under Article 4 shall be
governed by such rules and procedures as established by the Committee in its
sole discretion.
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2.9 EMPLOYEE CONTRIBUTION ACCOUNT means a bookkeeping account established
for and maintained on behalf of a Participant to which the Participant's
employee elective contributions under Article 3, and any earnings thereon, are
credited.
2.10 EMPLOYER means Sybase or any Subsidiary.
2.11 EMPLOYER CONTRIBUTION ACCOUNT means a bookkeeping account established
for and maintained on behalf of a Participant to which discretionary employer
contributions made under Article 4, and any earnings thereon, are credited.
2.12 ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
2.13 HARDSHIP means an unforeseeable and unanticipated emergency which is
caused by an event beyond the control of the Participant or Beneficiary, and
which would result in severe financial hardship to the Participant or
Beneficiary if a revocation of a deferral election, or a distribution (as the
case may be), were not permitted. Hardship conditions will be evaluated in
accordance with the terms of Code Section 1.457-2(h)(4). The Committee shall
have the sole discretion to determine whether a Hardship condition exists.
2.14 INSOLVENT means (a) the inability to pay debts as they become due, or
(b) being subject to a pending proceeding as a debtor under the U.S. Bankruptcy
Code.
2.15 INVESTMENT FUNDS OR FUNDS mean the investment funds designated by the
Committee as the basis for determining the hypothetical investment return to be
credited in accordance with Article 5.5 to employee election contributions made
under Article 3 and vested discretionary employer contributions made under
Article 4. Initially, the Investment Funds shall mirror the available investment
funds under the Sybase, Inc. 401(k) Plan. Thereafter, the Committee may change
the Investment Funds at such times as it deems appropriate.
2.16 PARTICIPANT means a current or former Eligible Employee who has been
designated by the Committee as eligible to participate in the Plan and who has
an Employee Contribution Account balance or Employer Contribution Account
balance.
2.17 PLAN means the Sybase, Inc. Executive Deferred Compensation Plan, as
set forth in this document, and as amended from time to time.
2.18 PLAN COMPENSATION means a Participant's base salary, incentive bonuses
(including any extraordinary lump sum payments) and commission payments for a
Plan Year, and excludes any other form of compensation, including without
limitation: extraordinary payments, such as payroll advances, the proceeds from
the exercise of stock options or stock appreciation rights, severance payments
following a formal termination of employment, moving expenses, car or other
special allowances, or other amounts included in an Eligible Employee's taxable
income that are not compensation for services. A Participant's Plan Compensation
shall be determined
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before taking into account any reduction in taxable income by salary deferral
contribution under Code Sections 125 or 401(k), or under this Plan.
Tier A elections apply to the base salary portion of Plan Compensation,
including base salary continuation payments made while an employee is absent
from work. Tier B elections apply to the incentive bonus and commission portions
of Plan Compensation.
2.19 PLAN YEAR means the calendar year.
2.20 RETIREMENT means termination of employment with Sybase and all other
Employers on or after age 50 or as a result of Disability.
2.21 SUBSIDIARY means any corporation (other than Sybase) in which Sybase
or a Subsidiary owns directly or indirectly fifty percent (50%) or more of the
total combined voting power of all classes of stock.
2.22 SYBASE means Sybase, Inc., a Delaware corporation, or its successor.
2.23 VALUATION DATE means the date on which the Investment Funds are valued
and the Employee Contribution Account and/or Employer Contribution Account of
each Participant (or the Participant's Beneficiary) are adjusted. The Committee
shall determine the Valuation Date and such date shall be at least once every
calendar year.
ARTICLE 3
EMPLOYEE ELECTIVE CONTRIBUTIONS
3.1 PARTICIPATION. An Eligible Employee may elect to defer the receipt of a
portion of his or her Plan Compensation by completing a deferred compensation
agreement on such form and in such manner as prescribed by the Committee. An
Eligible Employee may elect to defer Plan Compensation in accordance with this
Section 3.1 under one or both of two tiers, as follows:
(a) TIER A. An Eligible Employee may elect to defer a percentage of
his or her base salary so that, when added to the Eligible Employee's 401(k)
Election under the Sybase, Inc. 401(k) Plan, the total percentage of base salary
deferred under both plans does not exceed 75 percent. The deferral election made
under this Subsection 3.1(a) must be made in whole percentages. Under a Tier A
election, an Eligible Employee's election to defer under this Plan automatically
begins when an Eligible Employee reaches the Code Section 402(g) limit (as
periodically indexed for inflation), or is otherwise limited because of the Code
limitations from making pre-tax salary deferrals under the Sybase, Inc. 401(k)
Plan.
(b) TIER B. In addition to, or in lieu of, a Tier A election, an
Eligible Employee may also elect to defer the receipt of all, or any whole
percentage or dollar amount, of any incentive bonus or commission payment for
the Plan Year, including a percentage above a threshold amount (e.g., 25% of
bonus in excess of $10,000).
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<PAGE> 9
An Eligible Employee's election to defer Plan Compensation under an
available Tier is unrelated to, and shall not be affected by, any election to
defer Plan Compensation under another available Tier.
To the extent that an Eligible Employee elected to defer amounts under
Tiers 1, 2 or 3 under the Plan in effect prior to May 1,1998, such elections
shall continue in effect. Tier 1 and Tier 2 amounts shall be credited as Tier A
amounts. Tier 3 amounts shall be credited as Tier B amounts. For administrative
convenience only, the Committee may provide reports to Eligible Employees
reflecting balances under such old Tier names for past contributions.
3.2 ELECTION PROCEDURES. An Eligible Employee who elects to defer Plan
Compensation in accordance with Section 3.1 must do so in accordance with such
procedures as shall be established by the Committee including, where permitted
by applicable law, election by telephonic or other non-written means. Each such
election must specify the form and timing of distribution of such amounts in the
future and such other matters as are specified by the Committee.
3.3 TIMING OF ELECTIONS. In order to be effective, an election to defer
Plan Compensation must be made before the Eligible Employee has earned the right
to receive the Plan Compensation, as indicated below.
(a) TIER A ELECTIONS. Tier A elections must be made before the start
of the Plan Year in which the Eligible Employee earns the base salary which he
is electing to defer. At the discretion of the Committee, Tier A elections may
be made by newly-hired Eligible Employees for the Plan Year in which they
commence employment, provided such elections are made within 30 days of their
date of hire.
(b) TIER B ELECTIONS. Tier B elections must be made before the start
of the Plan Year in which the incentive bonus and commission payment(s) are
earned by the Eligible Employee. At the discretion of the Committee, Tier B
elections for a Plan Year may be made during the Plan Year to which the bonus
and/or commissions relate (rather than before the beginning of the Plan Year),
provided that any elections made after the beginning of the Plan Year shall
apply only to bonuses and commissions: (1) not yet payable, (2) for which it is
not possible to determine whether any payment will be made or the amount of
payment, and (3) for which the Participant has not yet had the opportunity to
make a deferral election.
(c) EVERGREEN PROVISION. Unless otherwise required by applicable law,
an Eligible Employee's election under Tier A or Tier B shall remain in effect
from year-to-year unless; (i) the Eligible Employee elects to change his or her
election during the annual enrollment period, or (ii) the Eligible Employee
elects during the annual enrollment period to terminate his or her participation
in the Plan during a future annual enrollment period.
The Committee may specify such deadlines and advance notice
requirements as it deems necessary to administer the Plan in accordance with
this section.
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<PAGE> 10
3.4 IRREVOCABLE ELECTIONS. Except as otherwise provided herein, an Eligible
Employee's election under Section 3.1 is irrevocable and cannot be amended.
Notwithstanding the foregoing, a Participant may request to revoke an
election under Section 3.1 in the event of a Hardship in accordance with Section
6.1.
ARTICLE 4
DISCRETIONARY EMPLOYER CONTRIBUTIONS
4.1 PARTICIPATION. An Employer may designate, in its sole discretion,
certain Eligible Employees to be eligible for a discretionary employer
contribution if certain target goals are met in such amount as shall be
determined by, and to be payable by, the Employer in accordance with the terms
of this Plan. The identity of the Eligible Employees, the amount of the
discretionary employer contribution and the target goals that must be reached in
order to earn that discretionary employer contribution (subject to any further
vesting period, as set forth in Section 4.2) shall be established by the
Employer in its sole discretion and communicated to each such Eligible Employee
prior to the time period during which the Eligible Employee will perform the
services towards the attainment of the target goals. In the event that an
Eligible Employee commences employment during a Plan Year for which a
discretionary employer contribution has already been announced and for which
target goals have already been set, the Employer may in its sole discretion
permit such Eligible Employee to be eligible for a pro rata portion of such
contribution otherwise payable for that Plan Year.
4.2 VESTING. Provided that the target goals have been met, as determined by
the Committee in its sole discretion, each discretionary employer contribution,
and any earnings thereon (as described in Section 5.5(b)), shall be subject to a
further vesting schedule as determined by the Committee, in its sole discretion.
In the event that the Eligible Employee voluntarily terminates employment with
Sybase and all other Employers or is terminated from Sybase and all other
Employers for cause (as defined in Section 6.3 below), he or she shall forfeit
his or her right to receive any unvested portion of such contributions, and any
earnings thereon. Notwithstanding the foregoing, in the event of a Change of
Control (as defined in Section 2.4) or an Eligible Employee's involuntary
termination of employment other than for cause (e.g., reduction in force, death,
Disability, etc.), the Eligible Employee shall become immediately 100% vested in
his or her discretionary employer contributions for which the target goals have
been met as of that date and any earnings thereon.
4.3 CHANGE OF CONTROL. If an Eligible Employee's target goal for a
discretionary employer contribution is based solely or in part upon his or her
remaining in employment until a future date, then upon a Change of Control
occurring prior to that future date, the Eligible Employee shall be deemed to
have met his or her target goal.
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<PAGE> 11
ARTICLE 5
PARTICIPANT ACCOUNT BALANCES
5.1 ESTABLISHMENT OF ACCOUNTS. The Committee shall establish and maintain
an Employee Contribution Account on behalf of each Eligible Employee who elects
under Article 3 to defer the receipt of a portion of his or her other Plan
Compensation, and an Employer Contribution Account for each Participant who is
entitled to a discretionary employer contribution under Article 4. Contributions
and earnings shall be credited to such accounts in accordance with the
provisions of this article.
5.2 BOOKKEEPING ACCOUNTS. Employee Contribution Accounts and Employer
Contribution Accounts shall be established primarily for bookkeeping purposes
and shall not restrict the operation of the Plan or require separate earmarked
assets for any account. The establishment of an Employee Contribution Account or
Employer Contribution Account shall not give any Participant the right to
receive any particular asset of Sybase or an Employer.
5.3 CREDITING EMPLOYEE ELECTIVE CONTRIBUTIONS. The Committee shall credit
to a Participant's Employee Contribution Account the amount of any Plan
Compensation elected to be deferred by the Participant in accordance with
Section 3.1 as of the last day of the quarter in which Plan Compensation would
otherwise have been paid absent such an election.
5.4 CREDITING DISCRETIONARY EMPLOYER CONTRIBUTIONS. The Committee shall
credit to an Eligible Employee's Employer Contribution Account the amount of any
discretionary employer contribution as of the last day of the quarter in which
the target goals for such contribution have been met by the Eligible Employee,
as determined by the Committee in its sole discretion.
5.5 CREDITING INVESTMENT RESULTS.
(a) Each Participant generally may direct the manner in which his or
her Employee Contribution Account shall be deemed invested in and among the
Investment Funds; provided, however, that each investment election made by a
Participant shall, notwithstanding anything to the contrary in the Plan, be
strictly subject to the consent of the Committee which, in its sole discretion,
may elect to honor the Participant's request or may elect to disregard the
Participant's hypothetical investment request and have the Employee Contribution
Account deemed invested in another manner. Such deemed investment election shall
be made in accordance with such procedures as the Committee shall establish. The
investment authority shall remain at all times with the Committee. The selection
of Investment Funds by a Participant shall be for the sole purpose of
determining the rate of return to be credited to his or her Employee
Contribution Account and shall not be treated or interpreted in any manner
whatsoever as a requirement or direction to actually invest assets in any
Investment Fund or any other investment media. Each Participant's Employee
Contribution Account shall be credited on each Valuation Date with his or her
allocable share of
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<PAGE> 12
investment gains or losses of each Investment Fund in which the account is
hypothetically invested. The Committee shall adopt a protocol for allocating the
deemed investment gains and losses similar to that used in the Sybase, Inc.
401(k) Plan.
(b) As an Eligible Employee's discretionary employer contributions
vest, the Participant generally may direct the manner in which his or her vested
discretionary employer contributions shall be deemed invested in and among the
Investment Funds; provided, however, that each investment election made by a
Participant shall, notwithstanding anything to the contrary in the Plan, be
strictly subject to the consent of the Committee which, in its sole discretion,
may elect to honor the Participant's request or may elect to disregard the
Participant's hypothetical investment request and have the discretionary
employer contributions deemed invested in another manner. Such deemed investment
election shall be made in accordance with such procedures as the Committee shall
establish. The investment authority shall remain at all times with the
Committee. The selection of Investment Funds by a Participant shall be for the
sole purpose of determining the rate of return to be credited to his or her
Employer Contribution Account and shall not be treated or interpreted in any
manner whatsoever as a requirement or direction to actually invest assets in any
Investment Fund or any other investment media. Each Participant's Employer
Contribution Account shall thereafter be credited on each Valuation Date with
his or her allocable share of investment gains or losses of each Investment Fund
in which the account is hypothetically invested. The Committee shall adopt a
protocol for allocating investment gains and losses. Such protocol shall
initially be similar to that used in the Sybase, Inc. 401(k) Plan.
(c) The credited investment return may reflect the actual performance
of the Investment Funds or may be calculated based on their respective rates of
return, as determined by the Committee in its sole discretion.
ARTICLE 6
DISTRIBUTION OF ACCOUNTS
6.1 DISTRIBUTION IN THE EVENT OF HARDSHIP. Notwithstanding Section 3.4, the
Committee may distribute all or a portion of: (a) the Participant's Employee
Contribution Account, and (b) the vested portion of the Participant's Employer
Contribution Account, in a lump sum in the event of the Participant's Hardship.
The amount of any Hardship distribution shall not exceed the amount required to
meet the Hardship, including any taxes or penalties due on the distribution. A
Participant or Beneficiary who desires a Hardship distribution must submit a
request for a Hardship to the Committee on such form and in such manner as the
Committee prescribes and must certify as to the existence of a financial need.
The Committee shall have sole discretion to determine whether a Hardship exists
and whether to approve the request for a distribution and may in its sole
discretion determine that Disability and death constitute a Hardship.
6.2 DISTRIBUTION UPON RETIREMENT. In the event of the Participant's
Retirement, the Participant's Employee Contribution Account and the vested
portion of
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the Participant's Employer Contribution Account shall be distributed
in the manner elected by the Participant at the commencement of his or her
participation in the Plan as soon as administratively practicable.
The amount to be distributed upon Retirement shall be paid in a lump
sum unless the Participant has previously elected to receive the distribution in
substantially equal annual installment payments calculated in such method as the
Committee prescribes over a period not to exceed fifteen (15) years.
Notwithstanding anything to the contrary, in the event that the amount to be
distributed to a Participant or a Beneficiary is $10,000 or less, the Committee
in its sole discretion may distribute it in the form of a lump sum. In addition,
a Participant may elect to receive his or her Retirement distribution part in a
lump sum and part in installments. An election to receive installment payments
must be made no later than 13 months prior to the month in which the
Participant's Retirement occurs and cannot subsequently be revoked or amended by
the Participant, except in the event of a Hardship .
6.3 DISTRIBUTION UPON TERMINATION OF EMPLOYMENT. Except as set forth in
Section 6.1, the Participant's Employee Contribution Account and the vested
portion of the Participant's Employer Contribution Account shall be paid in a
lump sum as soon as administratively practicable, and any election previously
made by the Participant to receive installment payments upon Retirement shall be
considered null and void; provided, however, that a previous election to receive
installment payments made by the Participant shall be honored in the event the
Participant is involuntary terminated for reasons other than for cause. For
purposes of this Section 6.3, "cause" shall include, without limitation: (i)
unethical, immoral, indecent, or illegal conduct; (ii) deliberate destruction of
the Employer's or other employee's property; (iii) deliberate work stoppage or
slowdown; (iv) violation of the Employee Nondisclosure and Assignment of
Inventions Agreement; (v) theft, misappropriation or unauthorized personal use
of property of the Employer or others; (vi) falsification of facts or Employer
records; (vii) sexual harassment, physical fighting, or other abusive conduct;
(viii) refusal to follow legitimate direction from a manager or deliberately
undermining a manager's authority; (ix) bringing weapons, illegal substances, or
other contraband onto the Employer's property or being in possession, or in the
case of illegal substances, under the influence, of same; (x) any action which
seriously impacts the Employer's business or image in a negative way, or is
considered a significant conflict of interest; or (xi) any conduct that poses a
serious threat to the health or safety of oneself or others.
6.4 DISTRIBUTION UPON DEATH. In the event of the death of a Participant
prior to the distribution of his or her account balances under the Plan, the
Participant's Beneficiary shall receive the Participant's Employee Contribution
Account and the vested portion of the Participant's Employer Contribution
Account balances in a lump sum as soon as administratively practicable. Any
previous election made by the Participant to receive installment payments shall
be considered null and void.
If a Participant dies after installment payments have begun, the
Participant's Beneficiary shall continue to receive the Participant's remaining
account balances in accordance with the installment payment scheduled elected by
the Participant.
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<PAGE> 14
Notwithstanding the foregoing, the Committee may accelerate payment of such
account balances to pay the Beneficiary in the event of a Hardship.
6.5 IN-SERVICE DISTRIBUTIONS.
(a) SPECIFIED IN-SERVICE DISTRIBUTION. Notwithstanding any other
provision of this Plan to the contrary, a Participant may elect at the time he
or she commences participation in the Plan to receive on a specified future date
or dates an in-service distribution of a specified percentage (up to 100
percent) or a specified amount of the Plan Compensation he or she is electing to
defer pursuant to Section 3. Such election must be made at the same time the
Participant is electing to defer his or her Plan Compensation under Section 3.
The election shall be made on such form and in accordance with such procedures
as the Committee shall specify. In no event may such specified future date be
less than 13 months from the date the Plan Compensation to be distributed would
have been paid to the Participant but for his or her deferral election under
Section 3.1. A Participant shall be limited to a maximum of two (2), outstanding
in-service distribution elections in effect at any given time. In addition, such
distribution elections shall be limited so that in the aggregate they provide
for no more than two (2) distributions (that is, checks written) per calendar
year.
(b) DISTRIBUTION WITH 10% FORFEITURE. Notwithstanding any other
provision of this Plan to the contrary, a Participant may elect, at any time
prior to termination of his or her employment with Sybase and all other
Employers, to receive a lump sum distribution with respect to all or a portion
of (i) the entire amount credited to his or her Employee Contribution Account;
plus (ii) the vested portion of his or her Employer Contribution Account. The
election shall be made on such form and in accordance with such procedures as
the Committee shall specify. Ninety percent of the amount so elected shall be
distributed to the Participant (subject to applicable withholding as provided in
Section 8.5) as soon as administratively feasible after the date of the
Participant's election under this section 6.5(b) and the remaining 10% of the
amount so elected shall be permanently and irrevocably forfeited. Such
Participant shall not be eligible to make any deferral elections under Section
3.1 of the Plan for a period of one year after such distribution. A Participant
shall be permitted a maximum of two distributions under this Section 6.5(b) per
calendar year.
ARTICLE 7
PLAN ADMINISTRATION
7.1 COMMITTEE. This Plan shall be administered by a committee (the
"Committee") of three or more members, appointed by Sybase. The Committee
members shall be appointed by and serve at the pleasure of the Board.
7.2 AMENDMENT OR TERMINATION. The Board may amend all or any provision of
this Plan, and may terminate the Plan in its entirety, at any time and for any
reason. No amendment or termination of the Plan shall adversely affect any
Participant's Employee Contribution Account balance or Employer Contribution
Account balance as
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of the effective date of such amendment or termination, without the
Participant's or Beneficiary's consent.
7.3 ADMINISTRATION OF THE PLAN. The Committee shall have the sole authority
to control and manage the operation and administration of the Plan, to have all
powers, authority and discretion necessary or appropriate to carry out the Plan
provisions and to interpret and apply the terms of the Plan to particular cases
or circumstances. All decisions, determinations and interpretations of the
Committee shall be binding on all interested parties.
Committee members who are Participants shall abstain from voting on
any Plan matters that relate primarily to themselves or that would cause them to
be in constructive receipt of amounts credited to their Employee Contribution
Accounts and/or Employer Contribution Accounts. The Committee may delegate in
writing any or all of its responsibilities under the Plan as it sees fit.
7.4 CLAIMS PROCEDURE. If a request for benefits by a Participant or
Beneficiary is wholly or partially denied, the Committee will provide such
claimant written notice setting forth the denial. A review procedure is
available upon written request by the claimant to the Committee within 90 days
after the date of the Committee's written notice of the denial of the claim, and
includes the right to examine pertinent documents and submit issues and comments
in writing to the Committee. The decision on review will be made within 90 days
after receipt of the request for review, unless circumstances warrant an
extension of time not to exceed an additional 90 days, and shall be in writing.
If a decision on review is not made within such period, the Participant's claim
shall be deemed denied.
ARTICLE 8
MISCELLANEOUS
8.1 BENEFICIARY DESIGNATION.
(a) Each Participant shall have the right, at any time, to designate
any person, persons or entity as his or her Beneficiary or Beneficiaries to whom
payment under the Plan shall be paid in the event of his or her death by
designating a Beneficiary in accordance with such procedures as shall be
established by the Committee. Such payment shall be in accordance with Article
6.
(b) If a Participant's Plan Compensation is community property, any
designation other than such Participant's spouse made by a Participant then
married shall not be valid or effective to the extent any Beneficiary (or
combination thereof) is to receive more than fifty percent (50%) of such
Participant's aggregate benefits payable hereunder unless the Participant's
spouse shall, in writing, approve such designation. Any Beneficiary designation
may be changed by a Participant by filing such change on a form prescribed by
the Committee. The filing of a new Beneficiary designation will cancel all
Beneficiary designations previously filed for such Plan Year, subject to any
necessary spousal consent.
-11-
<PAGE> 16
(c) If a Participant fails to designate a Beneficiary as provided
above, or if his or her Beneficiary designation is revoked by operation of law
or otherwise, without execution of a new designation, or if all designated
Beneficiaries predecease the Participant or die prior to distribution of the
Participant's benefits, then the Participant's Beneficiary shall be deemed to be
his or her estate. 8.2 NO FUNDING. The obligations of Sybase or an Employer to
pay benefits under the Plan constitute an unfunded, unsecured promise to pay and
Participants and Beneficiaries shall have no rights against Sybase or any
Employer with respect to the payment of any portion of the Participant's
Employee Contribution Account or Employer Contribution Account, except as
general unsecured creditors of Sybase and all Employers.
8.2 NO FUNDING. The obligations of Sybase or an Employer to pay benefits
under the Plan constitute an unfunded, unsecured promise to pay and Participants
and Beneficiaries shall have no rights against Sybase or any Employer with
respect to the payment of any portion of the Participant's Employee
Contribution Account or Employer Contribution Account, except as general
unsecured creditors of Sybase and all Employers.
8.3 UNSECURED INTEREST. Sybase may establish one or more grantor trusts,
with such trustee(s) as the Committee may approve, for the purpose of providing
for the payment of deferred amounts. Any such trust created by Sybase will
conform to the terms of the model trust approved by the Internal Revenue Service
pursuant to Revenue Procedure 92-64, or any amendment thereof or successor
procedure thereto. Such trust or trusts may be irrevocable, but the assets
thereof shall be subject to the claims of Sybase's general creditors. To the
extent any deferred amounts under the Plan are actually paid from any such
trust, Sybase shall have no further obligation with respect thereto, but to the
extent not so paid, such deferred amounts shall remain the obligation of, and
shall be paid by, Sybase.
8.4 NONALIENATION. No assignment, pledge or other anticipation of benefits
from the Plan will be permitted or recognized by the Employers or the Committee.
Moreover, benefits from the Plan shall not be subject to attachment, garnishment
or other legal process for debts or liabilities of any Participant or
Beneficiary, to the extent permitted by law. This prohibition on assignment or
alienation shall apply to any judgment, decree or order (including approval of a
property settlement agreement) which relates to the provision of child support,
alimony or property rights to a present or former spouse, child or other
dependent of a Participant pursuant to a State domestic relations or community
property law, unless the judgment, decree or order is determined by the
Committee to be a qualified domestic relations order within the meaning of
Section 414(p) of the Code.
8.5 RIGHT TO WITHHOLD. To the extent required by law in effect at the time
a distribution is made from the Plan, the Employer or its agents shall have the
right to withhold or deduct from any distributions or payments any taxes
required to be withheld by federal, state or local governments.
8.6 LIMITATION OF RIGHTS. Nothing in this Plan shall be construed to give a
Participant the right to continue in the employ of Sybase or any Employer at any
particular position or to interfere with the right of Sybase or any Employer to
discharge, lay off or discipline a Participant at any time, or give Sybase or
any Employer the right to require any Participant to remain in its employ or to
interfere with the Participant's right to terminate his or her employment.
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<PAGE> 17
The ability of a Participant to defer Plan Compensation for a given
Plan Year under this Plan shall not in any way ensure participation in any
subsequent Plan Year.
8.7 NON-U.S. PARTICIPANTS. With respect to any Subsidiary which employs
Participants who reside outside the United States, and notwithstanding anything
herein to the contrary, the Committee may in its sole discretion amend the terms
of the Plan in order to conform such terms with the requirements of local law or
to meet the objectives of the Plan, and may, where appropriate, establish one or
more sub-plans to reflect such amended provisions.
8.8 GOVERNING LAW. The provisions of this Plan shall be construed, enforced
and administered in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, by its duly authorized officer, Sybase, Inc. has
executed this Plan on the date indicated below.
SYBASE, INC.
Date: May 1, 1998 By: /s/ MITCHELL L. GAYNOR
------------------------------
Its: Vice President and General Counsel
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<PAGE> 1
Exhibit 10.7
SYBASE, INC.
1996 STOCK PLAN
(as amended March 26, 1999)
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.
(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.
<PAGE> 2
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.
(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.
<PAGE> 3
(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.
(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.
<PAGE> 4
(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 9,727,000. 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.
(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
<PAGE> 5
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;
(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;
<PAGE> 6
(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.
(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.
<PAGE> 7
(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.
(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;
<PAGE> 8
(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 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.
<PAGE> 9
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.
(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
<PAGE> 10
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.
(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
<PAGE> 11
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 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
<PAGE> 12
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 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.
<PAGE> 13
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.
(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.
<PAGE> 14
(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
Option Number:
Plan: 96
ID:
Effective ___________ ("Date of Grant"), you have been granted a(n) [Incentive
Stock Option][Non-qualified Stock Option] to buy _____________ shares of Sybase,
Inc. (the "Company") Common Stock at $_________ per share.
Shares in each period will become fully vested on the dates shown:
Shares: Vest Type: Full Vest: Expiration:
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.
<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.
In lieu of receiving the written notice of exercise referred
to above, the Company may dispense with receipt of such notice and instead act
and rely upon, and accept as evidence of Optionee's exercise of this option,
reports, confirmations or instructions received from a Designated Broker in a
form acceptable to the Administrator. A "Designated Broker" is a broker (i) that
the Optionee has authorized in writing to act upon Optionee's instructions
regarding the exercise of Optionee's stock options and/or sale of Company Common
Stock and (ii) that the Company's Employee Shareholder Services organization has
designated as an authorized broker.
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:
<PAGE> 17
(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 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.
<PAGE> 18
(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
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.
<PAGE> 19
(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 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 10.9
February 12, 1998
Michael S. Gardner
1485 Fairway Drive
Los Altos, CA 94024
Dear Michael:
I am very pleased to offer you the position of Senior Vice President, Worldwide
Sales Operations as a member of the Executive Leadership Team for Sybase,
reporting to me. The anticipated start date is February 17, 1998.
Financial Terms and Conditions:
- - Base salary of $325,000.00 annually.
Your compensation is governed by the Compensation Committee of the Board
of Directors, and will be reviewed on an annual basis or upon change in
job responsibilities. Sybase currently conducts annual salary reviews on a
specified ("focal") date, usually during its second quarter. Your first
focal review date is currently scheduled for May 1999.
- - Target Incentive Bonus of $43,750 quarterly.
Bonuses are paid quarterly and will be based on agreed upon corporate and
individual targets. If start date is on or before March 1, 1998, there
will be a guarantee of a prorated Q1 '98 and Q2 '98 bonus.
- - An incentive stock option. A recommendation will be made for you to be
awarded an option to purchase 250,000 shares of Sybase common stock.
Vesting terminates upon any termination of employment. The number of
shares awarded is also subject to the approval of the Sybase Board of
Directors. The stock option price will be the closing price as quoted on
NASDAQ on the date we receive signed acceptance.
- - The option with respect to 6/48 of the shares will vest after the first
six (6) months and the option with respect to 1/48 of the shares will vest
each month for the following forty-two (42) months. Sybase has the right
to cancel any unvested portion of your shares if your employment with the
company is ended for any reason before four (4) years.
- - Sybase will provide a fixed expense reimbursement of $500.00 per month for
expenses associated with and incurred for transportation and commutation
associated with your employment.
The above referenced compensation terms will be incorporated into an employment
agreement. This employment agreement will also provide, subject to certain terms
and conditions, for the payment to you of six month's base salary plus variable
target and full personal and family benefits if you employment is terminated for
any reasons other than cause.
We make this offer of employment contingent upon references, and the successful
clearance of a background check.
The enclosed Non-Disclosure Agreement must be signed by all Sybase employees as
a condition of employment and section 1 of the enclosed I-9 Form must be
completed. The enclosed Personal Data Sheet and W-4 need to be completed to
ensure that you receive pay and other important services and benefits in a
timely manner. In addition, if you believe you are exempt from FICA withholding,
because for example you are in F-1 or J-1 immigration status, please send
evidence of such exemptions along with the enclosed documents. PLEASE SIGNIFY
ACCEPTANCE OF THIS OFFER BY SIGNING ONE COPY OF THE OFFER LETTER, INDICATING
YOUR STARTING DATE, AND RETURNING IT WITH THE ENCLOSED DOCUMENTS BY FEBRUARY 17,
1998, TO JANET MAHONEY IN HUMAN RESOURCES.
<PAGE> 2
Michael S. Gardner
February 12, 1998
Page 2
In addition to the enclosed forms, your attendance at the New Hire Orientation
on the first Monday of your employment will introduce you to Sybase and provide
valuable information regarding its history, mission and culture. The enclosed
"Welcome to Sybase" sheet has the specific details about your Orientation
schedule. During your first day Orientation you will sign up for your Benefits
package. This package will include a minimum of three (3) weeks of paid vacation
per year until eligible for greater than three (3) weeks. This is effective for
calendar year 1998.
The law requires that we make this offer of employment contingent upon your
being able to produce proof that you have the legal right to work in the United
States. Because satisfactory evidence of such proof must be presented in order
for you to start employment at Sybase, please bring your choice of required I.D.
and/or work eligibility documents (as stated on the enclosed I-9 form) with you
on your first day to the New Hire Orientation. (If you do not attend the New
Hire Orientation on your first day, please meet with an HR representative within
24 hours of your start date.)
This offer is valid through February 20, 1998.
We expect that you will play an important role in our success and we are eager
for you to join us. Please call me if you have any questions about these
documents or any other aspect of this offer.
Sincerely,
/S/ JOHN S. CHEN
John S. Chen
JC/ls
Enclosures
I will start work at Sybase on 2/17/98. I certify that as of this date I will
not be employed by, on the payroll of or otherwise compensated by any other
company, and that I have not received any consideration or promise of
consideration from any other company based on my acceptance of employment with
Sybase. I can produce satisfactory proof on my start date that I have the legal
right to work in the United States.
I understand and agree that if I am hired by Sybase, I will be free to resign my
employment at any time with or without cause and that Sybase may also terminate
my employment at any time with it or without cause. I understand that although
Sybase has personnel policies relating to other terms and conditions of my
employment, and that these policies and conditions, may be changed from time to
time by Sybase at its discretion, the voluntary "at will" nature of my
employment may not be changed.
This offer states the entire agreement and understanding between Sybase and me
with regard to its offer of employment, and supersedes any other negotiations,
agreements, understandings, and representations, whether written or oral.
Signed: /S/ Michael S. Gardner
---------------------------------
Date: 2/23/98 Print Name: Michael S. Gardner
---------------- ---------------------------------------
<PAGE> 1
Exhibit 10.10
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of the ____
day of ______________________, 1999 by and between Sybase, Inc., a Delaware
corporation (the "Company"), and ________________________ ("Indemnitee").
WHEREAS, the Company and Indemnitee recognize the increasing
difficulty in obtaining directors' and officers' liability insurance, the
significant increases in the cost of such insurance and the general reductions
in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to expensive litigation risks at the same time as the availability and coverage
of liability insurance has been severely limited;
WHEREAS, Indemnitee does not regard the current protection available
as adequate under the present circumstances, and Indemnitee and other officers
and directors of the Company and/or its affiliates may not be willing to
continue to serve as officers and directors without additional protection; and
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve as officers and
directors of the Company and/or its affiliates and to indemnify its officers and
directors so as to provide them with the maximum protection permitted by law.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
(a) Third Party Proceedings. The Company shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be made a party
to any threatened, pending or completed action or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company or any of its subsidiaries, by reason of any action or inaction on the
part of Indemnitee while an officer or director or by reason of the fact that
Indemnitee is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement (if such settlement is approved
in advance by the Company, which approval shall not be unreasonably withheld)
actually and reasonably incurred by Indemnitee in connection with such action or
proceeding if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in the best interests of the Company, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
Indemnitee's conduct was unlawful. The termination of any action or proceeding
by judgment, order, settlement, conviction, or upon a plea
1
<PAGE> 2
of nolo contendere or its equivalent, shall not, of itself, create a presumption
that (i) Indemnitee did not act in good faith and in a manner which Indemnitee
reasonably believed to be in the best interests of the Company, or (ii) with
respect to any criminal action or proceeding, Indemnitee had reasonable cause to
believe that Indemnitee's conduct was unlawful.
(b) Proceedings By or in the Right of the Company. The
Company shall indemnify Indemnitee if Indemnitee was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
proceeding by or in the right of the Company, or any subsidiary of the Company
or any of its subsidiaries, to procure a judgment in its favor by reason of the
fact that Indemnitee is or was a director, officer, employee or agent of the
Company, or any subsidiary of the Company or any of its subsidiaries, by reason
of any action or inaction on the part of Indemnitee while an officer or director
or by reason of the fact that Indemnitee is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) and, to the fullest extent permitted by law, amounts
paid in settlement, in each case to the extent actually and reasonably incurred
by Indemnitee in connection with the defense or settlement of such action or
proceeding if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in the best interests of the Company and its
shareholders, except that no indemnification shall be made in respect of any
claim, issue or matter as to which Indemnitee shall have been adjudged to be
liable to the Company in the performance of Indemnitee's duty to the Company and
its shareholders unless and only to the extent that the court in which such
action or proceeding is or was pending shall determine upon application that, in
view of all the circumstances of the case, Indemnitee is fairly and reasonably
entitled to indemnity for expenses and then only to the extent that the court
shall determine.
2. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) Advancement of Expenses. The Company shall advance all
expenses incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil or criminal action or proceeding referenced in
Section 1(a) or (b) hereof (but not amounts actually paid in settlement of any
such action or proceeding). Indemnitee hereby undertakes to repay such amounts
advanced only if, and to the extent that, it shall ultimately be determined that
Indemnitee is not entitled to be indemnified by the Company as authorized
hereby. The advances to be made hereunder shall be paid by the Company to
Indemnitee within twenty (20) days following delivery of a written request
therefor by Indemnitee to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as
a condition precedent to his right to be indemnified under this Agreement, give
the Company notice in writing as soon as practicable of any claim made against
Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the General Counsel of the
Company at the address shown on the signature page of this Agreement (or such
other address as the Company shall designate in writing to Indemnitee). Notice
shall be deemed received three business days after the date postmarked if sent
by domestic certified or registered mail, properly addressed; otherwise notice
shall be deemed received when such notice shall
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<PAGE> 3
actually be received by the Company. In addition, Indemnitee shall give the
Company such information and cooperation as it may reasonably require and as
shall be within Indemnitee's power.
(c) Procedure. Any indemnification provided for in Section
1 shall be made no later than forty-five (45) days after receipt of the written
request of Indemnitee. If a claim under this Agreement, under any statute, or
under any provision of the Company's Articles of Incorporation or By-laws
providing for indemnification, is not paid in full by the Company within
fortyfive (45) days after a written request for payment thereof has first been
received by the Company, Indemnitee may, but need not, at any time thereafter
bring an action against the Company to recover the unpaid amount of the claim
and, subject to Section 12 of this Agreement, Indemnitee shall also be entitled
to be paid for the expenses (including attorneys' fees) of bringing such action.
It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in connection with any action or
proceeding in advance of its final disposition) that Indemnitee has not met the
standards of conduct which make it permissible under applicable law for the
Company to indemnify Indemnitee for the amount claimed, but the burden of
proving such defense shall be on the Company, and Indemnitee shall be entitled
to receive interim payments of expenses pursuant to Subsection 2(a) unless and
until such defense may be finally adjudicated by court order or judgment from
which no further right of appeal exists. It is the parties' intention that if
the Company contests Indemnitee's right to indemnification, the question of
Indemnitee's right to indemnification shall be for the court to decide, and
neither the failure of the Company (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its shareholders) to have made a determination that indemnification of
Indemnitee is proper in the circumstances because Indemnitee has met the
applicable standard of conduct required by applicable law, nor an actual
determination by the Company (including its Board of Directors, any committee or
subgroup of the Board of Directors, independent legal counsel, or its
shareholders) that Indemnitee has not met such applicable standard of conduct,
shall create a presumption that Indemnitee has or has not met the applicable
standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of
a notice of a claim pursuant to Section 2(b) hereof, the Company has director
and officer liability insurance in effect, the Company shall give prompt notice
of the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall
be obligated under Section 2(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, which approval
shall not be unreasonably withheld, upon the delivery to Indemnitee of written
notice of its election so to do. After delivery of such notice, approval of such
counsel by Indemnitee and the retention of such counsel by the Company, the
Company will not be liable to Indemnitee under this Agreement for any fees of
counsel subsequently incurred by Indemnitee
-3-
<PAGE> 4
with respect to the same proceeding, provided that (i) Indemnitee shall have the
right to employ his counsel in any such proceeding at Indemnitee's expense; and
(ii) if (A) the employment of counsel by Indemnitee has been previously
authorized by the Company, (B) Indemnitee shall have reasonably concluded that
there may be a conflict of interest between the Company and Indemnitee in the
conduct of any such defense or (C) the Company shall not, in fact, have employed
counsel to assume the defense of such proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
3. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) Scope. Notwithstanding any other provision of this
Agreement, the Company hereby agrees to indemnify the Indemnitee to the fullest
extent permitted by law, notwithstanding that such indemnification is not
specifically authorized by the other provisions of this Agreement, the Company's
Articles of Incorporation, the Company's By-laws or by statute. In the event of
any change, after the date of this Agreement, in any applicable law, statute or
rule which expands the right of a Delaware corporation to indemnify a member of
its board of directors or an officer, such changes shall be, ipso facto, within
the purview of Indemnitee's rights and Company's obligations, under this
Agreement. In the event of any change in any applicable law, statute or rule
which narrows the right of a Delaware corporation to indemnify a member of its
Board of Directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties' rights and obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this
Agreement shall not be deemed exclusive of any rights to which Indemnitee may be
entitled under the Company's Articles of Incorporation, its By-laws, any
agreement, any vote of shareholders or disinterested directors, the Delaware
General Corporation Law, or otherwise, both as to action in Indemnitee's
official capacity and as to action in another capacity while holding such
office. The indemnification provided under this Agreement shall continue as to
Indemnitee for any action taken or not taken while serving in an indemnified
capacity even though he may have ceased to serve in such capacity at the time of
any action or other covered proceeding.
4. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him in the investigation, defense, appeal or settlement of any civil
or criminal action or proceeding, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such expenses, judgments, fines or penalties to which Indemnitee is entitled.
5. MUTUAL ACKNOWLEDGEMENT. Both the Company and Indemnitee
acknowledge that in certain instances, Federal law or applicable public policy
may prohibit the Company from indemnifying its directors and officers under this
Agreement or otherwise. Indemnitee understands and acknowledges that the Company
has undertaken or may be required in the future to undertake with the Securities
and Exchange Commission to submit the question of
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<PAGE> 5
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
6. DIRECTORS' AND OFFICERS' LIABILITY INSURANCE. The Company shall,
from time to time, make the good faith determination whether or not it is
practicable for the Company to obtain and maintain a policy or policies of
insurance with reputable insurance companies providing the officers and
directors of the Company with coverage for losses from wrongful acts, or to
ensure the Company's performance of its indemnification obligations under this
Agreement. Among other considerations, the Company will weigh the costs of
obtaining such insurance coverage against the protection afforded by such
coverage. In all policies of directors' and officers' liability insurance,
Indemnitee shall be named as an insured in such a manner as to provide
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, if Indemnitee is not an officer or
director but is a key employee. Notwithstanding the foregoing, the Company shall
have no obligation to obtain or maintain such insurance if the Company
determines in good faith that such insurance is not reasonably available, if the
premium costs for such insurance are disproportionate to the amount of coverage
provided, if the coverage provided by such insurance is limited by exclusions so
as to provide an insufficient benefit, or if Indemnitee is covered by similar
insurance maintained by a subsidiary or parent of the Company.
7. SEVERABILITY. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 7. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
8. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Excluded Acts. To indemnify Indemnitee for any acts or
omissions or transactions from which a director may not be relieved of liability
under the Delaware General Corporation Law.
(b) Claims Initiated by Indemnitee. To indemnify or
advance expenses to Indemnitee with respect to proceedings or claims initiated
or brought voluntarily by Indemnitee and not by way of defense, except with
respect to proceedings brought to establish or enforce a right to
indemnification under this Agreement or any other statute or law or otherwise as
required under Section 317 of the Delaware General Corporation Law, but such
indemnification or
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<PAGE> 6
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors has approved the initiation or bringing of such suit; or
(c) Lack of Good Faith. To indemnify Indemnitee for any
expenses incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or
(d) Insured Claims. To indemnify Indemnitee for expenses
or liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
directors' and officers' liability insurance maintained by the Company; or
(e) Claims Under Section 16(b). To indemnify Indemnitee
for expenses and the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
9. EFFECTIVENESS OF AGREEMENT. To the extent that the indemnification
permitted under the terms of certain provisions of this Agreement exceeds the
scope of the indemnification provided for in the Delaware General Corporation
Law, such provisions shall not be effective unless and until the Company's
Articles of Incorporation authorize such additional rights of indemnification.
In all other respects, the balance of this Agreement shall be effective as of
the date set forth on the first page and may apply to acts or omissions of
Indemnitee which occurred prior to such date if Indemnitee was an officer,
director, employee or other agent of the Company, or was serving at the request
of the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, at the time such act or
omission occurred.
10. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to the
"Company" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents, so that if Indemnitee is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, Indemnitee
shall stand in the same position under the provisions of this Agreement with
respect to the resulting or surviving corporation as Indemnitee would have with
respect to such constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on
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<PAGE> 7
Indemnitee with respect to an employee benefit plan; and references to "serving
at the request of the Company" shall include any service as a director, officer,
employee or agent of the Company which imposes duties on, or involves services
by, such director, officer, employee or agent with respect to an employee
benefit plan, its participants, or beneficiaries.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
13. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action) unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
14. NOTICE. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee, on the date of such
receipt, or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked. Addresses for
notice to either party are as shown on the signature page of this Agreement, or
as subsequently modified by written notice.
15. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of California
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of California.
16. CHOICE OF LAW. This Agreement shall be governed by and its
provisions construed in accordance with the laws of the State of Delaware as
applied to contracts between California residents entered into and to be
performed entirely within California.
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
SYBASE, INC.
By:
-------------------------------------------
Mitchell L. Gaynor
Title: Vice President and General Counsel
--------------------------------------
Address: 6475 Christie Avenue
--------------------------------------
Emeryville, CA 94608
--------------------------------------
AGREED TO AND ACCEPTED:
INDEMNITEE:
- -------------------------------
(Name)
- -------------------------------
(signature)
- -------------------------------
- -------------------------------
(address)
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<PAGE> 1
Exhibit 10.12
RETIREMENT AGREEMENT AND GENERAL RELEASE
1. This Retirement Agreement and General Release ("Agreement") is entered into
by and between Sybase, Inc., a Delaware corporation with its principal
headquarters in Emeryville, California, on behalf of itself and each of its
subsidiaries ("Sybase" or the "Company"), and Mitchell Kertzman ("Employee") for
the purpose of amicably concluding their employment relationship. By entering
into this Agreement neither party admits any deficiency, wrongdoing or
liability, expressly or by implication.
2. Employee and Sybase hereby agree as follows:
(a) Employee's last regular working day at Sybase will be November 13, 1998 (the
"Termination Date"). Employee hereby resigns as Chairman of the Board, Director
and all other offices with Sybase and its subsidiaries as of November 2, 1998.
Through the Termination Date, Employee will continue to be actively employed by
Sybase, and will be expected to be available during normal working hours and as
otherwise reasonably necessary to assist the Company in the transition of his
current work responsibilities to one or more successors. Employee further agrees
that that certain Statement of Employment Terms, as amended, entered into
between Sybase and Employee is hereby terminated. Except as expressly set forth
below, all payments and benefits which Employee is or would be entitled to
receive under this Agreement (other than amounts then accrued and owing) shall
cease as of the Termination Date, subject to COBRA conversion rights.
(b) Employee shall receive on the Termination Date a final paycheck which will
include payment for Employee's current base salary for the period November 1,
1998 through the Termination Date, payment for all of Employee's unused vacation
accrued through the Termination Date, and a refund of any unused Employee Stock
Purchase Plan (ESPP) contributions, if any.
(c) Subject to the terms and conditions contained herein, Employee shall receive
additional payments as follows:
(i) Within seven days of the date of this Agreement, Employee shall be
entitled to receive a lump sum payment equal to $91,666.67.
(ii) On January 2, 1999, Employee shall be entitled to receive a lump sum
payment equal to $183,333.33.
(iii) On December 31, 1999, Employee shall be entitled to receive a lump
sum payment equal to $91,666.67.
(d) Subject to the terms of this Agreement and notwithstanding employee's
termination of employment and the terms of the Employee's currently outstanding
stock options ("Outstanding Options"): (i) vesting of shares under the
Outstanding Options shall be immediately accelerated with respect to that number
of shares that would have vested between the Termination Date and December 31,
1998 had the Employee continued as an employee through December 31, 1998 and
there shall be no vesting after the
<PAGE> 2
Termination Date (thus, the total number of shares vested on the Termination
Date will be equal to the number of shares that would have vested through
December 31, 1998 if Employee's employment would not have terminated), and (ii)
the Outstanding Options shall remain exercisable (to the extent vested in
accordance with the preceding clause) until December 31, 1999. The exercise
restriction applicable to options repriced pursuant to the June 24, 1998
repricing program shall cease to be applicable on January 1, 1999.
(e) Unless otherwise indicated, all required and authorized payroll deductions
shall be withheld from all amounts to be paid to Employee under this Agreement.
No unearned bonuses or other incentive compensation will be due Employee. All
unreimbursed travel and business expenses to which Employee is entitled to
reimbursement as of the Termination Date will be promptly paid to Employee after
submission of expense reports in accordance with standard Sybase policy.
(f) Sybase hereby transfers to Employee all of its right, title and interest in
and to the three (3) desktop computers and one laptop computers (collectively,
"Computer Equipment"), one (1) palm pilot, and one (1) cellular phone, all of
which were originally issued to Employee for Sybase business use, and which
Employee represents are currently in his possession. Such Computer Equipment is
transferred to Employee "as is, with all faults", and no express or implied
warranties of any kind (including any warranties of merchantability or fitness
for a particular purpose) are made with respect to such Computer Equipment.
Sybase has been providing communication lines to Employee's homes and shall
continue to provide them through December 31, 1998. Except as provided in the
preceding sentence, Employee shall be solely responsible for the repair and
maintenance and all other expenses associated with such items, as well as for
payment of any and all subscription or service charges incurred by Employee in
the use of such items. Sybase shall have the right to download all Company
information stored on the Computer Equipment. Employee hereby agrees to make the
Computer Equipment available to Sybase's Corporate Information Systems
department for such purpose upon request, and agrees not to delete or copy any
such information from the Computer Equipment prior to that time. Employee agrees
and acknowledges that all such Company information stored on the Computer
Equipment is Confidential Information subject to the Employee Nondisclosure and
Assignment of Inventions Agreement previously executed by Employee, a copy of
which is attached hereto as Exhibit A ("Nondisclosure Agreement").
(g) Through December 31, 1998, Sybase shall maintain for Employee's use
employee's email account and voice mailbox. Employee shall direct all Sybase
business matters received in his email and voicemail to appropriate Sybase
employees. Employee agrees that use of such voicemail and email (as well as any
other Sybase computer systems) is subject to the Nondisclosure Agreement. If
requested, Employee agrees to create a voicemail greeting acceptable to Sybase
regarding business matters.
3. Except as may be expressly provided in Section 2 above, Employee will be
entitled to participate through the Termination Date in all employee benefit
programs and policies generally available to Sybase employees and in which
Employee is eligible to
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<PAGE> 3
participate, including stock option vesting, health insurance, and participation
in the Employee Stock Purchase Plan and Sybase's 401(k) plan (if applicable),
subject to Employee's continued regular designated payroll deductions for such
items. Employee may elect optional health insurance continuation under COBRA
following the Termination Date, as well as optional continuation of certain
other insurance benefits, all at Employee's expense. Procedures for electing to
continue such benefits will be provided to Employee under separate cover by the
Human Resources Department.
4. Employee acknowledges that such payments and benefits exceed any amount to
which Employee would be entitled under Sybase's other policies, procedures and
benefit programs. In consideration for entering into this Agreement and for the
payments described herein, Employee personally and for Employee's heirs, legal
representatives, estates and successors in interest hereby releases and forever
discharges Sybase and its officers, directors, employees, affiliates, successors
and assigns (collectively, "Released Parties") from any and all claims, demands,
obligations and causes of action of any and every kind, known or unknown, which
Employee may have as of the date and time of signing this Agreement, which arise
out of Employee's employment by Sybase or the termination of that employment,
including without limitation all wrongful discharge actions; all actions arising
under the Americans with Disabilities Act, Age Discrimination in Employment Act
(if applicable), Title VII of the Civil Rights Act of 1991, California Fair
Employment and Housing Act, or any other federal or state statute which may be
held applicable; all actions for breach of contract or the covenant of good
faith and fair dealing; all tort claims; and any and all claims for
compensation, wages, bonuses, severance pay, commissions, vacation pay, or
reimbursement for expenses, attorneys' fees and costs, except for claims for
workers' compensation insurance benefits. Notwithstanding the foregoing, nothing
in this Agreement shall be construed as a waiver or release by Employee of his
right to enforce the provisions of this Agreement.
THIS MEANS THAT BY SIGNING THIS AGREEMENT, EMPLOYEE WILL HAVE WAIVED ANY RIGHT
TO BRING A LAWSUIT AGAINST ANY OF THE RELEASED PARTIES BASED ON ANY ACTIONS
TAKEN BY ANY OF THEM UP TO THE DATE AND TIME OF SIGNING THIS AGREEMENT AND THAT
EMPLOYEE WILL HAVE RELEASED EACH OF THE RELEASED PARTIES FROM ANY AND ALL CLAIMS
OF ANY NATURE RELATING TO EMPLOYEE'S EMPLOYMENT, ARISING UP TO THE DATE AND TIME
OF SIGNING THIS AGREEMENT.
5. Section 1542 of the California Civil Code may apply to this Agreement.
Section 1542 provides as follows: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR. Having been apprised of Section 1542, Employee
voluntarily elects to waive the rights described therein, and elects to assume
all risks for claims that now exist in Employee's favor, known or unknown,
arising from the subject matter of this Agreement up to the date and time of
signing of this Agreement.
3
<PAGE> 4
6. At no time after the execution of this Agreement will Employee file or
maintain, or cause or knowingly permit the filing or maintenance in any state or
federal court, or before any local, state or federal administrative agency, or
any tribunal, any charge, claim or action of any kind, nature or character
arising out of the matters released in Section 4 above, except for an action to
enforce the provisions of this Agreement. Employee also agrees not to initiate,
assist, support, join, participate in, encourage, or actively cooperate in the
pursuit of any employment-related legal claims against Sybase or its employees
or agents, whether the claims are brought on Employee's own behalf or on behalf
of any other person or entity. Nothing in this Section 6 will preclude Employee
from testifying truthfully in any legal proceeding pursuant to subpoena or other
legal process.
7. Employee understands and acknowledges Employee's continuing obligations
toward Sybase under the Employee Nondisclosure and Assignment of Inventions
Agreement (or any similar predecessor agreement) previously executed by
Employee, a copy of which is attached hereto as Exhibit A ("Nondisclosure
Agreement"). Employee further agrees that any and all information obtained by or
disclosed to Employee at any time during Employee's employment with Sybase which
is not generally known outside of Sybase on an unrestricted basis, including but
not limited to information concerning Sybase's customers, prospects, discounts,
unreleased products, methods of operation, processes, practices, programs and
procedures, are confidential and proprietary to Sybase and subject to protection
under the Nondisclosure Agreement and under applicable law. Further, Employee
agrees, to the extent Employee has not already so agreed in the Nondisclosure
Agreement, that for the period through December 31, 1999, Employee will not
directly or indirectly, either for Employee or for any other person or business
entity: (a) solicit or encourage any employee of the Company (whether through
recruiting, interviewing or any other means) to either: (i) terminate his
employment with the Company, or (ii) accept employment with any subsequent
employer with whom Employee is affiliated or associated in any way; (b) divert
or take away (or attempt to divert or take away) any of the Company's customers
or clients to Oracle Corporation or any other third party, except that this
provision shall not prohibit Employee from attempting to sell or license Network
Computer, Inc. ("NCI") products or services (but excluding any Oracle products);
(c) become an officer or director of Oracle Corporation or Informix Corporation
(nothing in the foregoing shall preclude Employee from becoming an officer and
director of NCI); and (d) disparage the Company, its products or its employees.
During the period through December 31, 1999, Employee also agrees to reasonably
cooperate with and assist Sybase in matters relating to, or arising in
connection with, (i) any pending or threatened litigation involving Sybase,
including securities litigation and (ii) upon the reasonable requests of Sybase,
discussions and telephonic calls with customers, analysts and press regarding
his transition from Sybase. EMPLOYEE EXPRESSLY ACKNOWLEDGES THAT THE COMPANY IS
PREPARED TO VIGOROUSLY ENFORCE THESE PROMISES, AND THAT VIOLATION OF THIS
PROVISION COULD RESULT IN THE ASSESSMENT OF DAMAGES AND OTHER LEGAL REMEDIES
AGAINST EMPLOYEE AND ANY OF EMPLOYEE'S SUBSEQUENT EMPLOYERS. ANY MATERIAL BREACH
BY EMPLOYEE OF THIS AGREEMENT SHALL RESULT IN THE IMMEDIATE RELEASE OF THE
COMPANY FROM ANY OBLIGATIONS IT MAY HAVE TO PROVIDE PAYMENTS OR BENEFITS UNDER
THIS AGREEMENT (EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW), INCLUDING BUT NOT
LIMITED TO, THE
4
<PAGE> 5
CONTINUATION OF OPTION VESTING AND EXERCISABILITY BEYOND THE PERIODS ORIGINALLY
SPECIFIED IN THE OPTIONS.
8. In the event Employee fails to return Company property in accordance with the
terms of the Nondisclosure Agreement, the Company shall have the right to offset
against payments or benefits owing to Employee hereunder the replacement value
of any and all such unreturned property.
9. As further mutual consideration for this Agreement, the parties agree that
each party shall bear the cost of, and shall be responsible for, its own
attorneys' and accountants' fees and costs, if any, in connection with the
negotiation and execution of this Agreement.
10. Employee further agrees that the terms and conditions of this Agreement are
strictly confidential and shall not be disclosed, discussed with or revealed to
any other persons, whether within or outside Sybase, except professional
advisors with whom Employee may consult regarding this Agreement and the
Employee's spouse, if any, unless disclosure is compelled by subpoena or other
legal process. ANY BREACH BY EMPLOYEE OF THIS PROVISION SHALL IMMEDIATELY
RELEASE THE COMPANY FROM ANY OBLIGATIONS IT MAY HAVE TO PROVIDE FURTHER PAYMENTS
OR BENEFITS UNDER THIS AGREEMENT, EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW.
11. If any prospective employer of Employee makes a request to Sybase for a
reference concerning Employee, Sybase will respond to the request by providing
only the dates of Employee's employment and the position(s) held.
12. This Agreement shall be governed by and construed in accordance with
California law.
13. The parties agree that any dispute of any kind whatsoever arising from the
subject matter of this Agreement, including claims regarding this Agreement
(other than claims for workers' compensation benefits and claims relating to
matters otherwise covered by the Severance Pay Plan), shall be resolved under
the following procedures:
A. The party claiming to be aggrieved shall furnish to the other party, within
fifteen (15) days of the disputed action, a written statement of the grievance
identifying any witnesses or documents that support the grievance and the relief
requested or proposed. Employee is required to furnish the written statement of
grievance to Sybase's Vice President and General Counsel, 6425 Christie Ave.,
Emeryville, California 94608.
B. If the grievance is denied, the parties agree that the dispute shall be
resolved by final and binding arbitration. A single arbitrator shall be mutually
selected by the parties. If no agreement on the selection is reached within
fifteen (15) days, then a neutral arbitrator shall be selected under the
Expedited Labor Arbitration Rules of the American Arbitration Association,
except that the arbitrator shall be selected by alternately striking names from
the panel of five (5) neutral labor or employment arbitrators designated by the
American Arbitration Association. The arbitrator shall have the authority to
grant the requested relief if authorized by law; provided, however,
5
<PAGE> 6
that nothing herein shall limit the right of Sybase to obtain injunctive relief
to prevent a violation of the Nondisclosure Agreement.
C. Arbitration shall be the exclusive and final remedy for any dispute between
the parties, and the parties agree that no dispute shall be submitted to
arbitration where the party claiming to be aggrieved has not complied with the
preliminary steps provided for above.
14. This Agreement constitutes the entire understanding of the parties and
cancels and supersedes any prior or contemporaneous written or oral agreements
or understandings between them with respect to the subject matter hereof.
Employee warrants that he: (a) has read and fully understands this Agreement;
(b) has had the opportunity to consult with legal counsel of his own choosing
and have the terms of this Agreement fully explained; (iii) is not executing
this Agreement in reliance on any promises, representations or inducements other
than those contained herein; and (iv) is executing this Agreement voluntarily,
free of any duress or coercion.
15. "Employee hereby acknowledges that the terms and conditions contained in
this Agreement were offered as of November 2, 1998, and that Employee has up to
twenty-one (21) days from that date (i.e., through November 23, 1998) in which
to accept such terms and conditions in writing. If Employee does not accept such
terms and conditions by such date, then this offer shall expire at that time.
Employee is advised to consult an attorney about this Agreement. To effectively
accept this Agreement, Employee must date, sign and return two originals of this
Agreement to Sybase's Vice President and General Counsel ("General Counsel"),
6425 Christie Avenue, Emeryville, California 94608. Following the date of such
acceptance, Employee shall have seven (7) days in which to revoke such
acceptance. To revoke, Employee must send to the General Counsel a written
statement of revocation. If Employee does not revoke, the eighth (8th) day after
Employee's acceptance shall be the "effective date" of this Agreement. EMPLOYEE
SHALL NOT BE ENTITLED TO ANY BENEFITS UNDER THIS AGREEMENT UNLESS AND UNTIL THE
AGREEMENT REVOCATION PERIOD HAS EXPIRED."
Dated: November 5, 1998 SYBASE, INC.
By /s/ MITCHELL L. GAYNOR
------------------------------------
Its Vice President and General Counsel
I understand that this document is of serious legal consequence and that I
should consult with someone whose opinion I trust before signing it. By my
signature, I agree to the terms set forth above.
Dated: November 17, 1998 /s/ MITCHELL E. KERTZMAN
--------------------------
Mitchell E. Kertzman
Exhibit A - Nondisclosure Agreement
6
<PAGE> 1
EXHIBIT 10.21
FORM OF AGREEMENT ENTERED INTO BETWEEN SYBASE AND EACH OF MITCHELL KERTZMAN,
JOHN CHEN, JACK ACOSTA AND MITCHELL GAYNOR
AMENDMENT NO. 1 TO STATEMENT OF EMPLOYMENT TERMS
This Amendment No. 1 ("Amendment") to the Statement of Employment
Terms dated ______________________________ (the "Statement") is effective as of
July 7, 1998 (the "Amendment Date") by and between _________________________
(the "Employee") and Sybase, Inc., a Delaware corporation (the "Company").
R E C I T A L S
A. The Board previously determined that it is in the best interests
of the Company and its stockholders to assure that the Company will have the
continued dedication and objectivity of the Employee, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company.
B. In that regard, the Board previously directed the Company to enter
into the Statement with Employee to provide the Employee with certain severance
and other benefits in connection with an "Involuntary Termination" following a
Change of Control which provide the Employee with enhanced financial security
and provide sufficient incentive and encouragement to the Employee to remain
with the Company prior to, during and following a Change of Control.
C. The Statement provided that the significant reduction of the
Employee's duties constituted an Involuntary Termination.
D. The Board believes that any ambiguity over the possible
interpretation of the definition of "Involuntary Termination" or the
determination of the occurrence of a "significant reduction of the Employee's
duties" reduces the effectiveness of the Statement and the achievement of its
objectives.
E. The Board has determined that it is in the best interests of the
Company and its stockholders to amend the Statement to provide for the payment
of benefits upon a Change of Control, regardless of whether there is a
termination of Employee's employment.
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Employee by the Company, the
parties agree as follows:
1.1. Amendment of Section 2. Section 2 of the Statement is amended to
read in its entirety as follows:
"1. Change of Control Benefits.
-1-
<PAGE> 2
(a) Upon the occurrence of a Change of Control, and
regardless of whether Employee has been terminated, the Employee
shall be entitled to receive pay in an amount equal to the sum of (A)
twice the Employee's annual base salary at the time of the Change of
Control, plus (B) one times the average of (x) the annual cash bonus,
if any, received or deferred by the Employee in respect of the most
recently completed fiscal year (or, if such bonus, if any, has been
earned but not yet received or deferred, the annual cash bonus, if
any, to be received or deferred with respect to such fiscal year),
and (y) the annualized annual cash bonus that Employee is then
eligible to receive for the Company's fiscal year in effect on the
date of the Change of Control (which shall be calculated by
annualizing the objective performance milestones based on the
completed fiscal quarters in such fiscal year, and by assuming 100%
"on target" satisfaction of any subjective performance milestones);
provided, however, that if such Change in Control occurs prior to the
completion of the first fiscal quarter, then, subject to the minimum
payment obligation set forth below, Employee shall receive pay in the
amount described in subsection (A) above plus one times the average
of the annual cash bonuses, if any, received or deferred by the
employee in respect of the two most recently completed fiscal years
(or, if such bonus, if any, has been earned but not yet received or
deferred with respect to the most recently completed fiscal year, the
average of the prior fiscal year's annual cash bonus and the annual
cash bonus, if any, to be received or deferred with respect to the
most recently completed fiscal year); provided further, however, that
in any event, the amount relating to the annual cash bonus shall not
be less than 50% of the Employee's target annual incentive
compensation at the time of the Change of Control. If Employee did
not receive an annual cash bonus in respect of any fiscal year or
years required to be averaged for purposes of computing amounts due
pursuant to the preceding sentence by virtue of not being employed
with the Company or by virtue of not yet being eligible to receive an
annual cash bonus due to his or her prior position with the Company,
then Employee's annual cash bonus for such fiscal year or years shall
be deemed to be an amount equal to the annualized annual cash bonus
that Employee is then eligible to receive for the Company's fiscal
year in effect on the date of the Change of Control (which shall be
calculated by annualizing the objective performance milestones based
on any completed fiscal quarters (following Employee's employment
with the Company) in such fiscal year, and by assuming 100% "on
target" satisfaction of any subjective performance milestones or, if
no such fiscal quarters have been completed, then such bonus shall be
equal to Employee's target incentive compensation at the time of the
Change of Control). Any payments to which the Employee is entitled
pursuant to this section shall be paid in a lump sum within thirty
(30) days of the Change of Control unless (A) the preceding sentence
applies to Employee, and (B) the Change of Control is prior to the
completion of the first fiscal quarter, in which event such payment
shall be paid in a lump sum within thirty (30) days of the completion
of such fiscal quarter. In addition, if within the eighteen (18)
month period following any Change of Control the Employee's
employment terminates for any reason other than Cause, the Company
shall be obligated for the twenty -four (24) month period following
the date of termination to continue to make available to the Employee
and to pay for all health, dental, vision, life, dependent life,
long-term disability, accidental death and dismemberment and other
similar insurance plans existing on the date of termination, or to
provide comparable coverage. The
-2-
<PAGE> 3
Company shall "gross-up" Employee for any income required to be
imputed by virtue of providing the benefits set forth in the
preceding sentence, such that the net economic result to the Employee
will be as if such benefits were provided on a tax-free basis. In
addition, subject to Section 8 below, any outstanding stock option or
restricted stock held by the Employee under the Company's stock
option plans and under the stock option plans of corporations that
have merged with or into the Company shall automatically have its
vesting accelerated (including, for restricted stock, accelerated
lapse of a right of repurchase by the Company) as to 50% of the
unvested portion of such option or restricted stock on the date of
the Change of Control, in addition to any portion of the option or
restricted stock vested prior to the date of the Change of Control
after taking into account any acceleration of vesting provided in the
option agreement or restricted stock agreement between the Company
and the Employee pertaining to such outstanding stock option or
restricted stock.
(a) Termination Apart from Change of Control. Aside from
the amounts specified above payable in the event of a Change of
Control, if the Employee's employment is terminated for any reason,
then the Employee shall be entitled to receive severance and any
other benefits only as may then be established under the Company's
existing written severance and benefit plans and written policies and
written agreements at the time of such termination."
1.2 Other Amendments. Sections 3(b) and 7(c) of the Agreement are
hereby deleted and shall be of no further force and effect. In the first
sentence of Section 7(b) of the Agreement the words "within eighteen (18) months
following a Change of Control" are hereby deleted. In Section 8 of the Agreement
the words "Section 2(a)(i)" are hereby amended to read as "Section 2(a)" and the
words "one year of the date of the Agreement" are amended to read as "one year
of the original date of the Agreement".
1.3 Amendment. Except as expressly amended herein, all terms and
conditions of the Statement remain unchanged and in full force and effect.
1.4 Counterparts. This Amendment may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Amendment,
in the case of the Company by its duly authorized officer, as of the Amendment
Date.
SYBASE, INC.
____________________ By
(EMPLOYEE NAME) ------------------------------
Mitchell L. Gaynor
Vice President and General Counsel
-3-
<PAGE> 1
Exhibit 10.27
PROMISSORY NOTE
Date: December 17, 1997 Principal Amount: U.S. $200,000.00
FOR VALUE RECEIVED, receipt of which is hereby acknowledged, Richard N.
LaBarbera, an individual who resides at 1619 Orvieto Court, Pleasanton,
California 94566, in the County of Contra Costa (the "Maker"), promises to pay
Sybase, Inc., a corporation incorporated in the State of Delaware, (the
"Holder"), with its principal offices located at 6475 Christie Ave., Emeryville,
CA 94608, the principal sum of $200,000.00, with interest as specified herein.
The principal and accrued interest shall be due and payable on March 1, 2001,
except as provided otherwise below. The principal amount of this Note shall bear
interest at the rate of six percent (6%) per annum.
This Note is made by the Maker who is a full time management employee of the
Holder.
If the Maker remains as an employee of the Holder for a period of three years
from the date of the Note, the Holder shall forgive the payment of interest and
the Note shall be interest free. If the Maker resigns from the employment of the
Holder for any reason or is terminated for cause by the Holder within a period
of three years from the date of the Note, the principal and accrued interest of
the Note shall become immediately due and payable to the Holder. In such an
event, the Maker represents and agrees that the Holder will be entitled to
deduct from any final pay, bonus, commission or other compensation (the "Final
Pay") which is at the time of the termination of employment earned but not yet
paid the portion of the principal and interest due on the Note up to the amount
of the Final Pay. If prior to the third anniversary of this Note the Holder is
laid-off, reduced in force, or his position within Sybase, Inc. is eliminated
and he is not offered a comparable position by the Holder, the Note will be
interest free.
Should (i) default be made in the payment of principal or interest or (ii) Maker
apply for or consent to the appointment of any receiver, trustee or similar
officer for it or for all or any substantial part of its property or institute
any bankruptcy, insolvency, or similar proceeding relating to it under the laws
of any jurisdiction, or any such proceeding be instituted against Maker and is
not dismissed within 60 days the Holder may, at its election, declare the entire
principal and accrued interest balance hereof immediately due and payable.
The Maker agrees that this Note is collectible and enforceable under the laws of
the State of California and may be collected and enforced in any court of
competent jurisdiction in the United States.
The Maker hereby waives grace, demand, presentment, demand for presentment,
formal notice of nonpayment, notice of protest, and protest of the Note, notice
of dishonor or default, notice of intent to accelerate, notice of acceleration,
diligence in collecting and bringing of suit, trial by jury, and the right to
interpose any defense, set-off, or counterclaim to this Note
No extension of time for payment or a part of any amount owing hereon nor any
delay or omission on the part of the Holder hereof in exercising any right
hereunder at any time shall operate as a waiver of the right of the Holder to
enforce the terms of this Note or under any other document or instrument
executed or delivered in connection with this Note.
In the event of any action to collect or enforce this Note, the prevailing party
shall be entitled to an award from the losing party of reasonable attorney's
fees in addition to the other proper costs of action.
This Note and all covenants, promises and agreements contained herein shall be
binding upon the Maker and his successors, representatives, and assigns, and
shall inure to the benefit of the Holder and its successors and assigns.
Notwithstanding any other provisions of this Note or any document or instrument
executed or delivered in connection with this Note, interest, fees and the like
shall not exceed the maximum rate permitted by applicable law.
This Note shall constitute the complete and exclusive agreement of Maker and
Holder with respect to the payment of the amounts owing hereunder and supersedes
all prior oral or written understandings. No term or provision of
1
<PAGE> 2
this Note may be amended, waived, discharged or terminated except by a written
instrument signed by Maker and the Holder.
This Note shall be governed by, and construed in accordance with, the laws of
the state of California, and in the event of a dispute involving this Note, the
Maker and the Holder irrevocably agree that venue for such dispute shall lie in
any court in the State of California that the Holder has to take legal action to
enforce this Note or to remedy a default of this Note and Maker hereby accepts
the nonexclusive jurisdiction of any such court and waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action.
Payment shall be made to: Treasurer
Sybase, Inc.
6475 Christie Ave.
Emeryville, CA 94608
IN WITNESS WHEREOF, the Maker has executed this Note.
Date: December 17, 1997 /s/ RICHARD N. LABARBERA
------------------------
Richard N. LaBarbera
2
<PAGE> 1
SELECTED FINANCIAL DATA
CONSOLIDATED STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
(In thousands, except per share data) 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
License fees $ 421,454 $ 471,036 $ 605,491 $ 615,642 $ 588,973
- ----------------------------------------------------------------------------------------------------------------------------
Services 446,015 432,901 406,054 340,944 236,420
- ----------------------------------------------------------------------------------------------------------------------------
Total revenues 867,469 903,937 1,011,545 956,586 825,393
- ----------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of license fees 37,573 31,356 29,859 29,736 33,446
- ----------------------------------------------------------------------------------------------------------------------------
Cost of services 235,574 248,625 246,273 205,019 140,274
- ----------------------------------------------------------------------------------------------------------------------------
Sales and marketing 392,979 469,161 523,159 481,404 350,239
- ----------------------------------------------------------------------------------------------------------------------------
Product development and engineering 148,583 138,590 164,676 151,902 114,008
- ----------------------------------------------------------------------------------------------------------------------------
General and administrative 65,406 62,607 72,561 67,888 52,844
- ----------------------------------------------------------------------------------------------------------------------------
Cost of restructuring 74,167 -- 49,232 -- --
- ----------------------------------------------------------------------------------------------------------------------------
Cost of merger -- -- -- 24,017 --
- ----------------------------------------------------------------------------------------------------------------------------
Purchase of in-process technology -- -- -- 19,965 --
- ----------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 954,282 950,339 1,085,760 979,931 690,811
- ----------------------------------------------------------------------------------------------------------------------------
Operating income (loss) (86,813) (46,402) (74,215) (23,345) 134,582
- ----------------------------------------------------------------------------------------------------------------------------
Interest income and expense, net 7,748 5,646 7,507 8,603 5,694
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (79,065) (40,756) (66,708) (14,742) 140,276
- ----------------------------------------------------------------------------------------------------------------------------
Provision for income taxes 14,063 14,668 12,298 4,760 53,223
- ----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (93,128) $ (55,424) $ (79,006) $ (19,502) $ 87,053
============================================================================================================================
Basic net income (loss) per share $ (1.15) $ (0.70) $ (1.05) $ (0.27) $ 1.29
- ----------------------------------------------------------------------------------------------------------------------------
Shares used in computing basic
net income (loss) per share 80,893 78,794 75,160 71,292 67,458
- ----------------------------------------------------------------------------------------------------------------------------
Diluted net income (loss) per share $ (1.15) $ (0.70) $ (1.05) $ (0.27) $ 1.18
- ----------------------------------------------------------------------------------------------------------------------------
Shares used in computing diluted
net income (loss) per share 80,893 78,794 75,160 71,292 73,523
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
CONSOLIDATED BALANCE SHEET DATA
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents and
cash investments $249,613 $246,137 $174,522 $223,721 $256,001
- ----------------------------------------------------------------------------------------
Working capital 84,179 67,510 93,056 140,306 200,767
- ----------------------------------------------------------------------------------------
Total assets 696,604 781,625 751,891 766,292 671,440
- ----------------------------------------------------------------------------------------
Long-term obligations 2,011 1,959 2,871 5,452 7,543
- ----------------------------------------------------------------------------------------
Stockholders' equity 301,072 371,515 396,808 439,649 407,615
</TABLE>
Historical financial results of operations of Sybase prior to February 1995
contained in this annual report have been restated to include the results of
operations of Powersoft Corporation.
6
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company completed 1998 with revenues of $867 million, down from $904
million in 1997. The decline in revenues was primarily attributable to lower
revenues generated in North America. The Company believes the impact of
companies continuing to reallocate available technology resources toward Year
2000 compliance solutions was a factor which contributed to the decline in
revenues.
The year was also one of significant change for the Company as it implemented
a restructuring program aimed at reducing costs, restoring profitability to
operating results and realigning its sales force, product teams and
professional service capabilities into four new divisions for 1999, each
focused upon one of four key markets: Enterprise Solutions, Mobile and
Embedded Computing, Internet Applications and Business Intelligence. The
restructuring program resulted in total charges to operations of $74 million
and the termination of 1,097 employees.
Despite the many challenges during 1998, the Company generated cash in each
of the last three quarters in 1998 and closed the year with having achieved
three consecutive quarters of operating profitability before restructuring
charges and with year-over-year revenue growth for the fourth quarter of
1998.
As of December 31, 1998, the Company had $250 million in cash, cash
equivalents and cash investments and stockholders' equity of $301 million.
Days sales outstanding in accounts receivable was 77 days as of December 31,
1998.
The Company continues to supply and support an extensive customer base in
many industries and across many global markets. In particular, the Company
counts as its customers 68 of the top 100 global banks, 20 of the leading
life insurance companies, 125 of the top global telecommunications companies,
and more than 350 major healthcare organizations worldwide.
With the creation of the new global organizational structure and the creation
of the four new divisions, the Company believes it is in a strong position to
extend beyond its traditional enterprise software offerings, aggressively
pursue new market-driven opportunities, and quickly deliver to customers
industry specific computing solutions. Significant new product announcements
in 1998 included: Enterprise Data Studio(TM); Enterprise Application
Studio(TM) 3.0; Enterprise Application Server 3.0; Adaptive Server Anywhere
for the Microsoft Windows CE operating system; SQL Anywhere(TM) Studio and
its UltraLite deployment technology for the Palm Computing platform; and the
Sybase Financial Server.
Overall, the Company is optimistic about the future. The Company's strong
customer base, realigned market-focused divisional structure and sound
financial base will be key to achieving its long-term goals of profitability
and sustained revenue growth.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Revenues
(Dollars in millions) 1998 Change 1997 Change 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
License fees $ 421.5 (11%) $ 471.0 (22%) $ 605.5
- --------------------------------------------------------------------------------------------
Percentage of total revenues 49% 52% 60%
- --------------------------------------------------------------------------------------------
Services $ 446.0 3% $ 432.9 7% $ 406.0
- --------------------------------------------------------------------------------------------
Percentage of total revenues 51% 48% 40%
- --------------------------------------------------------------------------------------------
Total revenues $ 867.5 (4%) $ 903.9 (11%) $1,011.5
- --------------------------------------------------------------------------------------------
</TABLE>
Total revenues for 1998 decreased 4 percent to $867.5 million compared to
$903.9 million recorded in 1997, compared to a decrease of 11 percent in 1997
over the $1,011.5 million achieved in 1996. The factors described above
contributed to the decline in total revenues in 1998 from 1997. The decline
in 1997 from 1996 was largely attributable to two major factors: First,
revenue growth in North America slowed partially,
7
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
the Company believes, due to companies reallocating technological resources
toward "Year 2000" compliance solutions and away from building strategic
enterprise applications and second, because of the uncertain economic
conditions in the Asia Pacific region, the Company took a more conservative
approach with respect to its business practices in the region. Consequently,
while the Company continued to win substantial new business in the region,
the economic conditions and the changes in the Company's business practices
resulted in a decrease in revenues recognized for the year.
License fees revenues decreased 11 percent to $421.5 million in 1998, down
from $471.0 million recorded in 1997 and decreased 22 percent in 1997 from
$605.5 million recorded in 1996. The decline in license fee revenues in 1998
was the result of the factors described above.
Services revenues grew 3 percent to $446.0 million in 1998, up from $432.9
million and $406.0 million in 1997 and 1996, respectively. Services revenues
consist primarily of consulting, education and other services related to the
development and deployment of applications using the Company's software
products and product support and maintenance fees. Services revenues as a
percentage of total revenues increased to 51 percent in 1998 from 48 percent
in 1997 and 40 percent in 1996. The increase in services revenues in absolute
dollars 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.
GEOGRAPHICAL REVENUES
<TABLE>
<CAPTION>
(Dollars in millions) 1998 Change 1997 Change 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
North America $ 503.3 (12%) $ 571.5 (7%) $ 615.7
- -----------------------------------------------------------------------------------------------
Percentage of total revenues 58% 63% 61%
- -----------------------------------------------------------------------------------------------
International:
- -----------------------------------------------------------------------------------------------
Europe $ 253.2 9% $ 232.6 (3%) $ 238.8
- -----------------------------------------------------------------------------------------------
Percentage of total revenues 29% 26% 23%
- -----------------------------------------------------------------------------------------------
Intercontinental $ 111.0 11% $ 99.8 (36%) $ 157.0
- -----------------------------------------------------------------------------------------------
Percentage of total revenues 13% 11% 16%
- -----------------------------------------------------------------------------------------------
Total International $ 364.2 10% $ 332.4 (16%) $ 395.8
- -----------------------------------------------------------------------------------------------
Percentage of total revenues 42% 37% 39%
- -----------------------------------------------------------------------------------------------
Total revenues $ 867.5 (4%) $ 903.9 (11%) $ 1,011.5
===============================================================================================
</TABLE>
North American revenues (United States, Canada and Mexico) declined 12
percent in 1998 to $503.3 million from $571.5 million in 1997 and decreased 7
percent in 1997 from $615.7 million in 1996. International revenues increased
10 percent in 1998 to $364.2 million from $332.4 million in 1997. European
revenues were up 9 percent in 1998 from both increased license fees revenues
and services revenues. Intercontinental revenues (principally Japan, Asia
Pacific and South America) increased 11 percent in 1998 due to higher
services revenues in Asia Pacific and South America. International revenues
comprised 42 percent of total revenues in 1998, up from 37 percent in 1997
and 39 percent in 1996. International revenues decreased 16 percent to $332.4
million in 1997 from $395.8 million in 1996. This decrease was primarily due
to economic conditions in the Asia Pacific region and the factors discussed
above.
In Europe and the Intercontinental Region, most revenues and expenses are
denominated in local currencies. The effect of foreign currency exchange rate
changes on revenues was not material in 1998 and 1996. However, throughout
1997, the U.S. dollar strengthened against the major European and
Intercontinental currencies, which resulted in lower revenues and expenses
recorded for these regions when translated into
8
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
U.S. dollars compared with 1996. Although the Company takes into account
changes in exchange rates over time in its pricing strategy, the Company's
business and results of operations could be materially and adversely affected
by fluctuations in foreign currency exchange rates. Changes in foreign
currency exchange rates, the strength of local economies, and the general
volatility of software markets may result in a higher or lower proportion of
international revenues as a percentage of total revenues in the future.
COSTS AND EXPENSES
<TABLE>
<CAPTION>
(Dollars in millions) 1998 Change 1997 Change 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cost of license fees $ 37.6 20% $31.4 5% $ 29.9
- ------------------------------------------------------------------------------------------------------------------
Percentage of license fees revenues 9% 7% 5%
- ------------------------------------------------------------------------------------------------------------------
Cost of services $ 235.6 (5%) $248.6 1% $ 246.3
- ------------------------------------------------------------------------------------------------------------------
Percentage of services revenues 53% 57% 61%
- ------------------------------------------------------------------------------------------------------------------
Sales and marketing $ 393.0 (16%) $469.2 (10%) $ 523.2
- ------------------------------------------------------------------------------------------------------------------
Percentage of total revenues 45% 52% 52%
- ------------------------------------------------------------------------------------------------------------------
Product development and engineering $ 148.6 7% $138.6 (16%) $ 164.7
- ------------------------------------------------------------------------------------------------------------------
Percentage of total revenues 17% 15% 16%
- ------------------------------------------------------------------------------------------------------------------
General and administrative $ 65.4 4% $62.6 (14%) $ 72.6
- ------------------------------------------------------------------------------------------------------------------
Percentage of total revenues 8% 7% 7%
- ------------------------------------------------------------------------------------------------------------------
Cost of restructuring $ 74.2 * $ -- * $ 49.2
- ------------------------------------------------------------------------------------------------------------------
Percentage of total revenues 9% -- 5%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not meaningful
COST OF LICENSE FEES
Cost of license fees consists primarily of product costs (media and
documentation), amortization of purchased software and capitalized software
development costs and third-party royalty costs. These costs increased to
$37.6 million in 1998 up from $31.4 million in 1997, and $29.9 million in
1996 as a result of higher amortization of capitalized software. These costs
were 9 percent of license fees revenues in 1998, 7 percent in 1997 and 5
percent in 1996. Amortization of capitalized software costs included in cost
of license fees was $19.5 million in 1998, $9.7 million in 1997, and $7.4
million in 1996. The increase in the amortization of capitalized software
related to the release of Adaptive Server Enterprise 11.9, featuring
row-level locking, in the second quarter of 1998 and the release of Adaptive
Server Enterprise 11.5, PowerBuilder 6.0 and PowerStudio(TM) during the
second half of 1997.
COST OF SERVICES
Cost of services consists primarily of maintenance, consulting and education
expenses and, to a lesser degree, services-related product costs (media and
documentation). These costs decreased as a percentage of services revenues to
53 percent in 1998 compared to 57 percent and 61 percent in 1997 and 1996,
respectively. The slight decrease in absolute dollars and as a percentage of
services revenues in 1998 over 1997 is primarily due to the restructuring
efforts initiated in the first quarter of 1998.
SALES AND MARKETING
Sales and marketing expenses decreased 16 percent in absolute dollars to
$393.0 million in 1998 from $469.2 million in 1997. These costs decreased as
a percentage of total revenues to 45 percent in 1998 compared to 52 percent
in 1997. In 1997, sales and marketing expenses decreased 10 percent in
absolute dollars compared to 1996 from $523.2 million while remaining
consistent as a percentage of total revenues
9
<PAGE> 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
at 52 percent. The decrease in sales and marketing expenses in 1998 as a
percentage of revenues was primarily the result of the Company's
restructuring program in 1998. The decrease in sales and marketing expenses,
in absolute dollars, in 1997 compared to 1996 was the result of efforts to
minimize growth in sales and marketing expenses and an improvement in the
productivity of the resources already in place.
PRODUCT DEVELOPMENT AND ENGINEERING
Product development and engineering expenses (net of capitalized software
development costs) increased as a percentage of total revenues in 1998 to 17
percent from 15 percent in 1997. In 1997, these costs decreased to 15 percent
from 16 percent in 1996. The increase in 1998 is partially due to the
acquisition in February 1998 of Intellidex Systems, L.L.C. (Intellidex), a
provider of data management technology for deploying and managing data
warehouse environments. The product development and engineering costs
incurred by Intellidex since the date of acquisition have been included in
the results of operations of the Company. The decrease for 1997 is in part
the result of lower than anticipated license fees revenues and the Company's
emphasis on managing its expense base relative to expected 1997 license fees
revenues. In absolute dollars, product development and engineering expenses
for 1998 increased 7 percent to $148.6 million from $138.6 million in 1997.
The increased expenses were largely attributable to the increased Intellidex
expenses referred to above and lower capitalized software development costs
in 1998 compared to 1997. Much of the reduction in expenses between 1997 and
1996 resulted from discontinuation of certain product lines in 1996. These
product lines included interactive television, wireless messaging and
multimedia authoring tools. The Company capitalized approximately $10.8
million of software development costs in 1998 compared to $21.7 million in
1997 and $13.8 million in 1996. In 1998, capitalized software costs included
$3.7 million purchased in connection with its Intellidex acquisition along
with costs incurred for the development of Adaptive Server Enterprise 11.9
and enhancements to Replication Server(R) and Jaguar CTS(TM) products. During
1997, the Company released Adaptive Server Enterprise 11.5 and PowerBuilder
6.0. Product development and engineering costs incurred in connection with
these releases during the period between the achievement of technological
feasibility and release have been capitalized. The Company believes that
product development and engineering expenditures are essential to technology
and product leadership and 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 8 percent of total revenues
in 1998 and 7 percent in both 1997 and 1996. These expenses increased to
$65.4 million in 1998 from $62.6 million in 1997. The absolute dollar
decrease to $62.6 million in 1997 from $72.6 million in 1996 resulted
primarily from the Company's emphasis on managing general and administrative
costs and improving productivity.
COST OF RESTRUCTURING
The Company incurred restructuring charges in the amounts of $74.2 million
and $49.2 million in 1998 and 1996, respectively. Major elements of the
restructuring in 1998 included terminating certain product lines, terminating
employees and vacating certain facilities. The charge included $27.5 million
for severance and related items, $16.7 million for facilities consolidation,
$22.8 million for disposition expenses and write-off of capitalized software
development costs related to discontinued products, and $7.2 million for
other restructuring related items. See Note Twelve of the Notes to
Consolidated Financial Statements for a more complete analysis of the 1998
restructuring charge.
In 1996, the Company recorded a charge to operations of $49.2 million for the
costs of a restructuring. The charge included $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.
10
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
OPERATING LOSS
<TABLE>
<CAPTION>
(Dollars in millions) 1998 Change 1997 Change 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating loss $ (86.8) * $ (46.4) * $ (74.2)
- -------------------------------------------------------------------------------------------------------
Percentage of total revenues 10% 5% 7%
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Not meaningful
The operating loss in 1998 was $86.8 million, as compared to an operating
loss of $46.4 million in 1997. The operating loss in 1998 includes a
restructuring charge of $74.2 million. The operating loss of $46.4 million in
1997 includes charges of $68.5 million related to the reversal of revenues
recorded during 1997 in the Company's Japanese subsidiary which were not in
conformity with U.S. generally accepted accounting principles and the
Company's policies. The charges of $68.5 million include $43.0 million
related to the restatement of revenues for the nine months ended September
30, 1997 and $25.5 million related to the adoption of more conservative
revenue recognition practices for the Japanese subsidiary under which revenue
is not recognized until cash is received from the customer. The operating
loss in 1996 of $74.2 million includes a restructuring charge of $49.2
million.
INTEREST INCOME AND INTEREST EXPENSE AND OTHER, NET
<TABLE>
<CAPTION>
(Dollars in millions) 1998 Change 1997 Change 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $10.1 10% $ 9.2 0% $ 9.2
- ------------------------------------------------------------------------------------
Percentage of total revenues 1% 1% 0.9%
- ------------------------------------------------------------------------------------
Interest expense and other, net $ (2.3) (34%) $(3.5) 106% $(1.7)
- ------------------------------------------------------------------------------------
Percentage of total revenues 0.3% 0.4% 0.2%
- ------------------------------------------------------------------------------------
</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 transactions and the
related hedging activities and the cost of hedging foreign currency
exposures.
PROVISION FOR INCOME TAXES
<TABLE>
<CAPTION>
(Dollars in millions) 1998 Change 1997 Change 1996
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Provision for income taxes $14.1 (4%) $14.7 20% $12.3
- -----------------------------------------------------------------------------------
</TABLE>
The Company recorded a $14.1 million provision for income taxes in 1998, down
slightly from $14.7 million in 1997 and up from $12.3 million in 1996. The
tax provision for all years is primarily the result of earnings generated
from operations and withholding taxes on revenue in certain international
jurisdictions. The Company has a net deferred tax asset of $41.1 million at
December 31, 1998. The deferred tax asset includes a valuation allowance of
$43.3 million. As of December 31, 1998, the Company has federal net operating
loss carryforwards of $25.0 million, research and development tax credits of
$11.8 million and foreign tax credits of $9.4 million. The net operating loss
carryforwards expire in years from 2003 through 2018, the research and
development tax credits expire in years from 2005 through 2011, and the
foreign tax credits expire from 2000 through 2001. 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 and any such adjustments could have a material adverse impact on
the Company's effective tax rate and results of operations in future periods.
11
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
NET LOSS PER SHARE
<TABLE>
<CAPTION>
(Dollars in millions) 1998 Change 1997 Change 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net loss $ (93.1) 68% $ (55.4) (30%) $ (79.0)
- ----------------------------------------------------------------------------------------------------------
Percentage of total revenues (11%) 6% 8%
- ----------------------------------------------------------------------------------------------------------
Basic and diluted net loss per share $ (1 15) 64% $ (0.70) 33% $ (1.05)
- ----------------------------------------------------------------------------------------------------------
Shares used in computing basic and diluted
net loss per share 80.9 3% 78.8 5% 75.2
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The Company incurred a net loss in 1998 of $93.1 million compared to net
losses of $55.4 million and $79.0 million in 1997 and 1996, respectively. The
basic and diluted net loss per share was $1.15 in 1998, $0.70 in 1997 and
$1.05 in 1996. Shares used in the per share computations increased 3 percent
in 1998 and 5 percent in 1997, primarily due to the exercise of employee
stock options and the sale of shares under the Company's employee stock
purchase plans.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
(Dollars in millions) 1998 Change 1997 Change 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Working capital $ 84.2 25% $ 67.5 (28%) $ 93.1
- -----------------------------------------------------------------------------------------------------------------------
Cash, cash equivalents and cash investments $ 249.6 1% $ 246.1 41% $ 174.5
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 88.5 19% $ 74.2 274% $ 19.8
- -----------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities $ 20.8 (81%) $ 109.6 45% $ 75.4
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities $ (30.2) (141%) $ 73.7 116% $ 34.1
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Net cash provided by operating activities was $88.5 million in 1998 compared
to $74.2 million in 1997 and $19.8 million in 1996. Net cash provided by
operating activities during 1998 reflects a net loss of $93.1 million
compared to $55.4 million in 1997 and $79.0 million in 1996. Depreciation and
amortization, which are included in the net losses, but do not require the
use of cash, amounted to $107.8 million in 1998 compared to $104.7 million in
1997 and $97.8 million in 1996. The increase in depreciation and amortization
in 1998 resulted principally from the increase in amortization of capitalized
software development costs and the increase in 1997 reflects a larger base of
depreciable long-term assets compared to 1996. The Company incurred a
non-cash restructuring charge to operations in the amount of $23.6 million in
1998 and $17.6 million in 1996. Additionally, net cash provided by operating
activities reflects a decrease in accounts receivable of $6.6 million in 1998
compared to a decrease of $25.9 million in 1997 and increase of $49.0 million
in 1996.
Net cash used for investing activities decreased to $20.8 million in 1998
compared to $109.6 million in 1997 and $75.4 million in 1996. Investing
activities included capital expenditures of $38.9 million in 1998 compared to
$36.4 million in 1997 and $82.3 million in 1996. The decrease in 1997
reflects a reduction in capital expenditures required to support the
Company's employee base around the world as well as in systems and
infrastructure investments. Additionally, in 1998, investing activities
included a cash use of $6.6 million (net of cash acquired) for business
combinations, whereas in 1997 and 1996 these activities resulted in a net
cash outflow of $4.5 million and net cash inflow of $0.2 million,
respectively. During 1998, there was a net decrease in cash investments in
the amount of $32.3 million compared to a net increase of $39.5 million in
1997 and net decrease of $25.1 million in 1996.
Net cash used for financing activities for 1998 was $30.2 million. In 1997
and 1996, net cash provided by financing activities was $73.7 million and
$34.1 million, respectively. Net cash used for financing activities in 1998
was due to the repayment by the Company of amounts received from Japanese
financial institutions in prior years for financing transactions related to
revenues in the Company's Japanese subsidiary. This was partially offset by
the issuance of common stock associated with the exercise of stock options.
12
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
The Company engages in business operations around the world and is therefore
exposed to foreign currency fluctuations. As of December 31, 1998, the
Company had identifiable assets totaling $169.7 million associated with its
European operations and $76.7 million associated with its Intercontinental
operations. The Company experiences foreign exchange transaction exposures
from certain balances denominated in different currencies. The Company hedges
certain of these short-term exposures under a plan approved by the Board of
Directors (see Note One 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 related foreign currency
translation gains and losses are reflected in accumulated foreign translation
adjustments in stockholders' equity.
Cash, cash equivalents and cash investments totaled $249.6 million at
December 31, 1998 compared to $246.1 million at December 31, 1997 and $174.5
million at December 31, 1996.
On February 18, 1998, the Board of Directors authorized the repurchase of up
to $25.0 million of the Company's outstanding common stock. Subject to price
and market conditions, such purchases may be made from time to time in open
market transactions using available cash balances. During 1998, the Company
repurchased 600,000 shares of common stock for $3.3 million under this
program.
In 1998, the Board of Directors approved a stock option repricing program
pursuant to which employees of the Company could elect to exchange or amend
their then outstanding employee stock options for new employee stock options
to acquire common stock at an exercise price equal to the fair market value
at July 2, 1998 ($6.875 per share), with exercisability generally prohibited
until April 5, 1999, except in the event of a change in control or
involuntary termination other than for cause. Options to acquire a total of
11,426,021 shares of common stock at exercise prices ranging from $8.00 to
$45.69 per share were exchanged or amended under the program.
The Company believes that it has the financial resources needed to meet its
presently anticipated business requirements, including capital expenditures
and strategic operating programs, for the foreseeable future.
NEW ACCOUNTING PRONOUNCEMENTS
In 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income,"
("Statement 130") which requires that all items that are required to be
recognized under accounting standards as components of comprehensive income
(revenues, expenses, gains and losses) be reported in the financial
statements. The Company adopted Statement 130 effective January 1, 1998.
In 1997, the FASB issued Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information,"
("Statement 131") which establishes standards for the way public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports issued to stockholders.
In addition, it establishes standards for related disclosures about products
and services, geographic areas and major customers. The Company has adopted
Statement 131 effective for the year ended December 31, 1998.
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities"
("Statement 133"). The Company is required to adopt this statement for the
year ending December 31, 2000. Statement 133 establishes methods of
accounting for derivative financial instruments and hedging activities
related to those instruments as well as other hedging activities. The Company
has not determined the effect, if any, that adoption will have on its
financial position or results of operations.
The Company adopted Statement of Position 97-2, "Software Revenue
Recognition," ("SOP 97-2") and Statement of Position 98-4, "Deferral of the
Effective Date of a Provision of SOP 97-2, Software Revenue
13
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
Recognition," ("SOP 98-4") as of January 1, 1998. SOP97-2 and SOP98-4 provide
guidance for recognizing revenue on software transactions and supercede
Statement of Position 91-1, "Software Revenue Recognition" ("SOP 91-1"). The
adoption of SOP 97-2 and SOP98-4 did not have a material impact on the
Company's financial results. However, full implementation guidelines for
these standards have not been issued. Once available, the current revenue
recognition accounting practices may need to change and such changes could
affect the Company's future revenues and results of operations.
In December 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-9, "Modification of SOP97-2,
Software Revenue Recognition, with Respect to Certain Transactions" ("SOP
98-9"). SOP98-9 amends SOP98-4 to extend the deferral of the application of
certain passages of SOP 97-2 provided by SOP98-4 through fiscal years
beginning on or before March 15, 1999. All other provisions of SOP98-9 are
effective for transactions entered into in fiscal years beginning after March
15, 1999. The Company has not yet determined the effect of the final adoption
of SOP 98-9 on its future revenues and results of operations.
FINANCIAL RISK MANAGEMENT
The following discussion about the Company's risk management activities
includes "forward-looking statements" that involve risks and uncertainties.
Actual results could differ materially from those projected in the
forward-looking statements for the reasons described under the caption
"Future Operating Results."
As a global concern, the Company faces exposure to adverse movements in
foreign currency exchange rates. These exposures may change over time as
business practices evolve and could have a material adverse impact on the
Company's financial position and results of operations. Historically, the
Company's primary exposures have related to nondollar-denominated sales and
expenses in Europe, Asia Pacific, including Japan and Australia, and Latin
America. For example, throughout 1997, the U.S. dollar strengthened against
the major European and Intercontinental currencies, which resulted in lower
revenues and expenses recorded for these regions when translated into U.S.
dollars. In order to reduce the effect of foreign currency fluctuations, the
Company hedges its exposure on certain transactional balances that are
denominated in foreign currencies through the use of foreign currency forward
exchange contracts. For the most part, these exposures consist of
intercompany accounts receivable owed to the Company as a result of local
sales of software licenses by the Company's international subsidiaries. The
majority of these exposures are denominated in European and Asia Pacific
currencies, primarily the Dutch guilder and the Hong Kong dollar. These
forward exchange contracts are recorded at fair value and are short-term in
nature (primarily 30 days or less). At December 31, 1998, the Company had
forward exchange contracts to exchange various foreign currencies for U.S.
dollars and Dutch guilders in the amounts of $15,039,000 and $5,018,000,
respectively, and to exchange U.S. dollars, Dutch guilders and Hong Kong
dollars into various foreign currencies in the amounts of $17,624,000,
$45,870,000 and $2,590,000, respectively. The success of this activity
depends upon the estimation of future transactions denominated in various
currencies. To the extent these estimates are overstated or understated
during periods of currency volatility, the Company could experience
unanticipated currency gains or losses.
The Company maintains an investment portfolio holding of various issuers,
types and maturities. These securities are generally classified as available
for sale, and consequently, are recorded on the balance sheet at fair value
with unrealized gains or losses reported as a separate component of
stockholders' equity, net of tax, if material. Unrealized gains and losses at
December 31, 1998 and 1997 were not material. The Company's investments
consist primarily of short-term money market instruments. Of the Company's
cash equivalents and cash investments balance of $124,943,000 at December 31,
1998, approximately 80 percent has maturity dates of less than 90 days, and
19 percent of this balance has maturities of 90 days to one year. The Company
does not believe its exposure to interest rate risk is material given the
short-term nature of its investment portfolio.
14
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
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
significant risks, including but not limited to the specific risks identified
below. The results of operations for the three months ended December 31, 1998
and for the year ended December 31, 1998 are not necessarily indicative of
results for the year ending December 31, 1999 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 revenues from license fees 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
experienced a seasonal pattern of license fees 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. The Company currently anticipates this seasonal pattern continuing
in 1999, with lower total revenues in the first quarter of 1999 than in the
fourth quarter of 1998. 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 such 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 operating results for that period would be adversely affected
and could result in an operating loss, as occurred in the first quarter of
1998. Failure to achieve revenues, earnings and other operating and financial
results as forecast or anticipated by brokerage firms and industry analysts
has previously resulted in, and in the future could result in, an immediate
and substantial adverse effect on the market price of the Company's stock.
The Company may not achieve, in the future, the relatively high rates of
growth experienced by the Company in and prior to 1994 or the rates of growth
projected for the software markets in which the Company competes.
The Company has recently realigned its sales force, product teams and
professional services capabilities into four new divisions, each focused upon
one of four key markets: Enterprise Solutions, Mobile and Embedded Computing,
Internet Applications and Business Intelligence. This reorganization took
effect in January, 1999. Although such changes are intended to enhance
overall revenues and profitability, they could, in the short-term, materially
and adversely affect the sales process, revenues and results of operations.
In 1998 and early 1999, there were a number of changes in the Company's
executive management. In the fall of 1998, the Company completed an executive
management transition pursuant to which John Chen replaced Mitchell Kertzman
as the Company's Chief Executive Officer and Chairman of the Board. In early
1999, Pieter Van der Vorst became the Company's Chief Financial Officer. The
Company's divisional reorganization also resulted in the appointment of one
general manager for each division, and a number of other executive
reassignments at the end of 1998 and beginning of 1999. The Company will 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 the Company's results of operations.
The market for the Company's stock is highly volatile. The trading price of
the Company's common stock fluctuated widely from 1995 through 1998 and may
continue to fluctuate in the future 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
15
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
Company's or its competitors' products and services, changes in product mix,
changes in the Company's revenues 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 could also affect the
Company's stock prices. 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. For example, due to a variety of factors, the
Company's stock price declined significantly during the first quarter of 1996
and the first quarter of 1998. 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. In 1998, revenues from its
international operations represented a record 42 percent of the Company's
total revenues. During 1998, the Company closed subsidiaries in Mexico and
Thailand and substantially completed the process of closing its subsidiaries
in Chile, Peru and Venezuela. In addition, there have been several management
and organizational changes within the international operations. For example,
during 1998 and in early 1999, the country managers in Australia, Switzerland
and Japan and the European General Manager resigned or were replaced.
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 or closure of international organizations. 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,
the introduction of the Euro currency unit, political instability in emerging
markets, and difficulties in staffing and managing foreign operations, as
well as other risks associated with international activities. For example,
the economic unrest and currency devaluations in Asia in late 1997 adversely
affected collection of receivables, particularly dollar denominated
receivables and the recognition of revenue in the fourth quarter of 1997 and
during 1998.
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, Microsoft Corporation, Informix 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. In addition, many of these competitors offer additional
categories of products, such as applications or operating systems, that the
Company does not and which may provide those companies with a competitive
advantage in various circumstances. New or enhanced products, many of which
have been announced and many of which are continually introduced by existing
or future competitors in the software industry, could increase the
competition faced by the Company's products from time to time and result in
greater price pressure on certain of the Company's products, especially to
the extent that market acceptance for personal computer-oriented and Windows
NT technologies increases at the expense of UNIX-based systems. 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.
The Company's future operating results will depend in part on its ability to
enhance 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. The Company's future operating 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 gaining market acceptance for such new or
enhanced products. During 1998,
16
<PAGE> 12
the Company achieved a number of milestones, including the shipment to
several application partners of Adaptive Server Enterprise with row-level
locking capabilities. In October 1998, the Company also announced the general
availability of Adaptive Server Anywhere for Windows CE. The Company has been
in the process of combining a number of its products into integrated product
sets such as Enterprise Application Studio, which includes Jaguar CTS and
PowerDynamo(TM), and SQL Anywhere Studio, which includes Adaptive Server
Anywhere, InfoMaker(R) and jConnect(TM) for JDBC. Creation of such integrated
product sets is intended to enhance the ability of the Company's partners and
direct sales force to market and sell more complete solutions to customers in
a single package. While such integration is intended to improve productivity,
revenues and profitability, the elimination of the availability of individual
products subsumed within integrated product sets could have an adverse effect
on license fees and services revenues, particularly if such product sets are
not well received in the marketplace.
The Company's future operating 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 (RDBMSs).
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 the Company's products. Certain leading applications are not
interoperable with Sybase's RDBMSs, and others may never be available on
Sybase's RDBMSs. 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
the development, quality, and support of products for non-Sybase RDBMSs will
diminish over time, the Company's business, results of operations, and
financial condition could be materially and adversely affected. The Company's
products are used by many customers to build and deploy their own custom
applications. Increased reliance on prepackaged applications and diversion of
internal information technology budgets to rectify Year 2000 compliance
issues has and may in the future continue to have the effect of reducing the
internal development of custom applications overall. Such a reduction has and
may in the future continue to have a material and adverse impact on the
market for the Company's products and the Company's business, results of
operations and financial condition.
Furthermore, many products licensed by the Company
contain components developed by third parties. If the Company's products or
such third party products are not Year 2000 compliant, or cannot be
determined to be compliant, market acceptance of the Company's products could
be 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 that could affect customer perception. In
addition, customer perception of Sybase and its products could be adversely
affected by financial results, particularly revenues and profitability,
reported for 1998 or future periods, by reductions in the applicable market
share of the Company's products and by related press reports.
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, the Company believes, has increased substantially in
recent years. In 1998 and early 1999, there were a number of changes in the
Company's executive management team. For example, in the fall of 1998, the
Company completed an executive management transition pursuant to which John
Chen replaced Mitchell Kertzman as the Company's Chief Executive Officer and
Chairman of the Board and in early 1999, Pieter Van der Vorst became the
Company's Chief Financial Officer. Moreover, in connection with
17
<PAGE> 13
the Company's reorganization into four operating divisions and the
appointment of one general manager for each division, a number of executives
changed responsibilities at the end of 1998 and in early 1999. Further
changes in management, the reduction in the overall number of Sybase
employees made during 1998, and the Company's financial and stock price
performance relative to companies with which Sybase competes for employees
could affect the level of employee turnover. The Company has experienced in
recent quarters a high rate of employee turnover. The failure to effectively
recruit, train, and retain qualified personnel or high rates of employee
turnover, particularly among consulting, engineering or sales staff, could
adversely affect the Company's product development efforts, sales of products
and services and other aspects of the Company's operations and results.
The Company currently ships most of its products in North America from its
Emeryville, California and Massachusetts distribution facilities. 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
more of these facilities (or a disruption of business operations generally)
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 and, therefore, on the overall results of
operations for such quarter.
The Company has acquired a number of companies in the past. During 1998, the
Company acquired Intellidex Systems, L.L.C., a provider of meta data
management technology for deploying and managing data warehouse environments,
and in 1999, Data Warehouse Network Limited, a provider of industry-specific
data warehouse solutions. The Company will likely 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 1998, the Company incurred restructuring charges of $74.2 million. The
Company does not currently anticipate that it will incur additional
restructuring charges in 1999. However, as this is a forward-looking
statement, future actual results may differ based on the actual results of
operations experienced in 1999 and the various factors described above that
affect future results.
The Company adopted Statement of Position 97-2, "Software Revenue
Recognition," ("SOP 97-2") and Statement of Position 98-4, "Deferral of the
Effective Date of a Provision of SOP 97-2, Software Revenue Recognition,"
("SOP 98-4") as of January 1, 1998. SOP97-2 and SOP98-4 provide guidance for
recognizing revenue on software transactions and supercede Statement of
Position 91-1, "Software Revenue Recognition" ("SOP 91-1"). The adoption of
SOP 97-2 and SOP98-4 did not have a material impact on the Company's
financial results. However, full implementation guidelines for these
standards have not been issued. Once available, the current revenue
recognition accounting practices may need to change and such changes could
affect the Company's future revenues and results of operations.
In December 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-9, "Modification of SOP97-2,
Software Revenue Recognition, with Respect to Certain Transactions" ("SOP
98-9"). SOP98-9 amends SOP98-4 to extend the deferral of the application of
certain passages of SOP 97-2 provided by SOP98-4 through fiscal years
beginning on or before March 15, 1999. All other provisions of SOP98-9 are
effective for transactions entered into in fiscal years beginning after March
15, 1999. The Company has not yet determined the effect of the final adoption
of SOP 98-9 on its future revenues and results of operation. These and future
changes to, and interpretations of, accounting standards and rules could
adversely affect the amount and timing of recognition of revenue.
18
<PAGE> 14
YEAR 2000
The Company is aware of and is addressing the issues associated with the
programming code in existing computer systems as the year 2000 approaches.
The "Year 2000" issue is pervasive and complex, as many computer systems will
be affected in some way by the rollover of the two-digit year value to 00.
Systems that do not properly recognize such information could generate
erroneous data or cause a system to fail. The "Year 2000" issue creates
potential risk for the Company from unforeseen problems in its own computer
systems, from third parties with whom the Company deals on financial
transactions worldwide and in its own software products licensed to
customers. Failures of the Company's and/or third parties' computer systems
could have a material impact on the Company's ability to conduct its
business. Not all products previously licensed by the Company meet current
standards for Year 2000 compliance, and many of these products are still in
use by customers. Complex software products, such as the type licensed by the
Company and its competitors, generally are not completely free from "bugs"
and other defects. The existence of such "bugs" may give rise to legal claims
against the Company, notwithstanding standard provisions in the Company's
license agreements with its customers disclaiming express and implied
warranties against such errors. Such legal claims or claims that products
previously licensed by the Company are not Year 2000 compliant could have a
materially adverse impact on the Company's business and results of
operations.
As of February 1999, the Company completed its assessment of all of its
critical worldwide infrastructure systems (e.g., computer and telephone
systems) and business systems (e.g., revenue, sales and marketing and finance
functions) and also completed much of the remedial work necessary to make
these systems Year 2000 compliant. The outstanding list of such nonconforming
applications and systems is small and the Company believes it has identified
upgrade or replacement solutions to make all of these systems Year 2000
compliant. Most outstanding items are scheduled for installation of certified
upgrades from suppliers which have been received or are expected to be
received by May 1999, and the Company expects to effect all solutions by July
1999. The Company believes that the risk of Year 2000 problems in the
Company's internal applications has been low because the Company's systems
are generally run using its own technology and its partners' products, and
relatively little development work other than assessment and testing has been
required to insure Year 2000 compliance. Notwithstanding the foregoing, there
is no guarantee that the systems of other companies on which the Company's
systems rely will be timely converted and that they will not have an adverse
effect on the Company's systems. As such, the Company is in the process of
developing a contingency plan in the event its internal systems are not
converted on a timely basis. The Company does not believe that the impact of
such actions will have a material adverse effect on the Company's results of
operations or financial condition. There are no assurances, however, that
there will not be a delay in, or increased cost associated with, the
implementation of such changes, and the Company's inability to implement such
changes could have an adverse effect on future results of operations. Factors
that could cause unusual costs and delays include the availability and cost
of personnel trained in this area, and the ability to locate and correct all
relevant computer codes and other uncertainties.
EURO CURRENCY
On January 1, 1999, eleven of the fifteen member countries of the European
Union established fixed conversion rates between their existing currencies
and the Euro. The participating countries adopted the Euro as their common
legal currency on that date. The transition period will last through January
1, 2002. The Company is assessing the potential impact which may result from
the Euro conversion. The Company does not expect the introduction and the use
of the Euro to materially affect its foreign exchange activities, to affect
its use of derivatives and other financial instruments, or result in any
material costs to the Company. The Company will continue to assess the impact
of the introduction of the Euro currency over the transition period as well
as the period subsequent to the transition.
19
<PAGE> 15
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, 1998 and 1997 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and 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, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Sybase,
Inc. at December 31, 1998 and 1997, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Walnut Creek, California
January 21, 1999
20
<PAGE> 16
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
(In thousands, except share and per share data) 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 224,665 $ 188,876
- ----------------------------------------------------------------------------------------------------------
Short-term cash investments 23,967 47,127
- ----------------------------------------------------------------------------------------------------------
Total cash, cash equivalents and short-term cash
investments 248,632 236,003
- ----------------------------------------------------------------------------------------------------------
Accounts receivable, less allowance for doubtful accounts of
$31,770 (1997 - $30,673) 199,303 204,411
- ----------------------------------------------------------------------------------------------------------
Deferred income taxes 20,903 16,973
- ----------------------------------------------------------------------------------------------------------
Other current assets 8,862 18,274
- ----------------------------------------------------------------------------------------------------------
Total current assets 477,700 475,661
- ----------------------------------------------------------------------------------------------------------
Long-term cash investments 981 10,134
- ----------------------------------------------------------------------------------------------------------
Property, equipment and improvements, net 101,433 149,661
- ----------------------------------------------------------------------------------------------------------
Deferred income taxes 20,152 24,077
- ----------------------------------------------------------------------------------------------------------
Capitalized software, net 35,773 44,208
- ----------------------------------------------------------------------------------------------------------
Other assets 60,565 77,884
- ----------------------------------------------------------------------------------------------------------
Total assets $ 696,604 $ 781,625
==========================================================================================================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 12,747 $ 19,521
- ----------------------------------------------------------------------------------------------------------
Accrued compensation and related expenses 49,061 43,974
- ----------------------------------------------------------------------------------------------------------
Accrued income taxes 26,736 31,800
- ----------------------------------------------------------------------------------------------------------
Other accrued liabilities 112,856 95,476
- ----------------------------------------------------------------------------------------------------------
Deferred revenue 190,631 170,473
- ----------------------------------------------------------------------------------------------------------
Other current liabilities 1,490 46,907
- ----------------------------------------------------------------------------------------------------------
Total current liabilities 393,521 408,151
- ----------------------------------------------------------------------------------------------------------
Other liabilities 2,011 1,959
- ----------------------------------------------------------------------------------------------------------
Commitments and contingent liabilities
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;
81,769,334 shares issued and 81,169,334 outstanding (1997 - 79,998,287
shares issued and outstanding) 82 80
- ----------------------------------------------------------------------------------------------------------
Additional paid-in capital 416,501 397,925
- ----------------------------------------------------------------------------------------------------------
Accumulated deficit (102,471) (9,343)
- ----------------------------------------------------------------------------------------------------------
Accumulated other comprehensive loss (9,702) (17,147)
- ----------------------------------------------------------------------------------------------------------
Cost of 600,000 shares of treasury stock (3,338) --
- ----------------------------------------------------------------------------------------------------------
Total stockholders' equity 301,072 371,515
- ----------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 696,604 $ 781,625
==========================================================================================================
</TABLE>
See accompanying notes.
21
<PAGE> 17
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended December 31,
(In thousands, except per share data) 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
License fees $ 421,454 $ 471,036 $ 605,491
- --------------------------------------------------------------------------------------------------------------
Services 446,015 432,901 406,054
- --------------------------------------------------------------------------------------------------------------
Total revenues 867,469 903,937 1,011,545
- --------------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of license fees 37,573 31,356 29,859
- --------------------------------------------------------------------------------------------------------------
Cost of services 235,574 248,625 246,273
- --------------------------------------------------------------------------------------------------------------
Sales and marketing 392,979 469,161 523,159
- --------------------------------------------------------------------------------------------------------------
Product development and engineering 148,583 138,590 164,676
- --------------------------------------------------------------------------------------------------------------
General and administrative 65,406 62,607 72,561
- --------------------------------------------------------------------------------------------------------------
Cost of restructuring 74,167 -- 49,232
- --------------------------------------------------------------------------------------------------------------
Total costs and expenses 954,282 950,339 1,085,760
- --------------------------------------------------------------------------------------------------------------
Operating loss (86,813) (46,402) (74,215)
- --------------------------------------------------------------------------------------------------------------
Interest income 10,077 9,184 9,243
- --------------------------------------------------------------------------------------------------------------
Interest expense and other, net (2,329) (3,538) (1,736)
- --------------------------------------------------------------------------------------------------------------
Loss before income taxes (79,065) (40,756) (66,708)
- --------------------------------------------------------------------------------------------------------------
Provision for income taxes 14,063 14,668 12,298
- --------------------------------------------------------------------------------------------------------------
Net loss $ (93,128) $ (55,424) $ (79,006)
==============================================================================================================
Basic and diluted net loss per share $ (1.15) $ (0.70) $ (1.05)
==============================================================================================================
Shares used in computing basic and diluted net loss per share 80,893 78,794 75,160
==============================================================================================================
</TABLE>
See accompanying notes.
22
<PAGE> 18
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three years ended December 31, 1998
<TABLE>
<CAPTION>
Retained Accumulated
Common stock Additional earnings other com-
-------------------- paid-in (Accumulated prehensive Treasury
(In thousands) Shares Amount capital deficit) loss stock Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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
- ------------------------------------------------------------------------------------------------------------------------------------
Subtotal 76,609 77 359,161 125,087 (3,742) -- 480,583
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss -- -- -- (79,006) -- -- (79,006)
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign currency translation
adjustments -- -- -- -- (4,769) -- (4,769)
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive loss (83,775)
- ------------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1996 76,609 $ 77 $ 359,161 $ 46,081 $ (8,511) -- $ 396,808
- ------------------------------------------------------------------------------------------------------------------------------------
Common stock issued in
connection with business
combinations 750 1 11,999 -- -- -- 12,000
- ------------------------------------------------------------------------------------------------------------------------------------
Common stock issued under
stock option and stock
purchase plans 2,639 2 26,765 -- -- -- 26,767
- ------------------------------------------------------------------------------------------------------------------------------------
Subtotal 79,998 80 397,925 46,081 (8,511) -- 435,575
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss -- -- -- (55,424) -- -- (55,424)
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign currency translation
adjustments -- -- -- -- (8,636) -- (8,636)
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive loss (64,060)
- ------------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1997 79,998 $ 80 $ 397,925 $ (9,343) $(17,147) -- $ 371,515
- ------------------------------------------------------------------------------------------------------------------------------------
Common stock issued under
stock option and stock
purchase plans 1,771 2 13,201 -- -- -- 13,203
- ------------------------------------------------------------------------------------------------------------------------------------
Purchase of treasury stock (600) -- -- -- -- (3,338) (3,338)
- ------------------------------------------------------------------------------------------------------------------------------------
Tax benefit of exercise of
stock options -- -- 5,375 -- -- -- 5,375
- ------------------------------------------------------------------------------------------------------------------------------------
Subtotal 81,169 82 416,501 (9,343) (17,147) (3,338) 386,755
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss -- -- -- (93,128) -- -- (93,128)
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign currency translation
adjustments -- -- -- -- 7,445 -- 7,445
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive loss (85,683)
- ------------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1998 81,169 $ 82 $ 416,501 $(102,471) $ (9,702) $ (3,338) $ 301,072
====================================================================================================================================
</TABLE>
See accompanying notes.
23
<PAGE> 19
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
(In thousands) 1998 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and cash equivalents, beginning of year $ 188,876 $ 156,796 $ 180,877
- ---------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss (93,128) (55,424) (79,006)
- ---------------------------------------------------------------------------------------------------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 107,798 104,739 97,835
- ---------------------------------------------------------------------------------------------------
Write-off of assets in restructuring 23,560 -- 17,600
- ---------------------------------------------------------------------------------------------------
Loss on disposal of assets 3,036 -- --
- ---------------------------------------------------------------------------------------------------
Deferred income taxes (5) 85 (100)
- ---------------------------------------------------------------------------------------------------
Changes in assets and liabilities:
Accounts receivable 6,610 25,876 (49,034)
- ---------------------------------------------------------------------------------------------------
Other current assets 9,274 (589) 1,378
- ---------------------------------------------------------------------------------------------------
Accounts payable (6,774) (2,042) (15,551)
- ---------------------------------------------------------------------------------------------------
Accrued compensation and related expenses 5,087 (3,855) 5,422
- ---------------------------------------------------------------------------------------------------
Accrued income taxes (5,064) 4,848 (1,421)
- ---------------------------------------------------------------------------------------------------
Other accrued liabilities 17,262 1,152 17,358
- ---------------------------------------------------------------------------------------------------
Deferred revenue 20,158 2,521 28,218
- ---------------------------------------------------------------------------------------------------
Other 668 (3,130) (2,871)
- ---------------------------------------------------------------------------------------------------
Net cash provided by operating activities 88,482 74,181 19,828
- ---------------------------------------------------------------------------------------------------
Cash used for investing activities:
Purchases of available-for-sale cash investments (42,588) (76,652) (59,883)
- ---------------------------------------------------------------------------------------------------
Maturity of available-for-sale cash investments 44,755 20,385 67,751
- ---------------------------------------------------------------------------------------------------
Sale of available-for-sale cash investments 30,146 16,732 17,250
- ---------------------------------------------------------------------------------------------------
Business combinations, net of cash acquired (6,550) (4,533) 201
- ---------------------------------------------------------------------------------------------------
Purchase of property, equipment and improvements (38,910) (36,362) (82,258)
- ---------------------------------------------------------------------------------------------------
Proceeds from sale of property, equipment
and improvements 7,274 -- --
- ---------------------------------------------------------------------------------------------------
Capitalized software development costs (10,819) (21,658) (13,838)
- ---------------------------------------------------------------------------------------------------
Increase in other assets (4,150) (7,516) (4,627)
- ---------------------------------------------------------------------------------------------------
Net cash used for investing activities (20,842) (109,604) (75,404)
- ---------------------------------------------------------------------------------------------------
Cash provided by (used for) financing activities:
Increase (decrease) in other current liabilities (45,474) 46,907 --
- ---------------------------------------------------------------------------------------------------
Net proceeds from issuance of common stock 13,203 26,767 34,131
- ---------------------------------------------------------------------------------------------------
Tax benefit of exercise of stock options 5,375 -- --
- ---------------------------------------------------------------------------------------------------
Purchase of treasury stock (3,338) -- --
- ---------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing
activities (30,234) 73,674 34,131
- ---------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (1,617) (6,171) (2,636)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 35,789 32,080 (24,081)
- ---------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year 224,665 188,876 156,796
- ---------------------------------------------------------------------------------------------------
Cash investments, end of year 24,948 57,261 17,726
- ---------------------------------------------------------------------------------------------------
Total cash, cash equivalents and cash
investments, end of year $ 249,613 $ 246,137 $ 174,522
===================================================================================================
Supplemental disclosures:
Acquisition of Purchase Net, Inc. in
exchange for common stock $ -- $ 12,000 $ --
===================================================================================================
Facility acquired and sold under sale and
leaseback arrangement $ 13,016 $ -- $ --
===================================================================================================
Interest paid $ 489 $ 1,168 $ 399
===================================================================================================
Income taxes paid $ 19,584 $ 15,987 $ 12,842
===================================================================================================
</TABLE>
See accompanying notes.
24
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE ONE:
Summary of Significant Accounting Policies,
THE COMPANY
Sybase, Inc. ("Sybase" or "the Company"), one of the largest global
independent software companies, helps businesses integrate, manage and
deliver applications, content and data anywhere they are needed. Sybase's
software products, combined with its professional services and partner
technologies, provide a comprehensive platform for delivering the integrated
solutions businesses need to be successful. Leveraging its existing strengths
in enterprise data management and enterprise application development, Sybase
is focused on delivering end-to-end solutions for mobile and embedded
computing, data warehousing and Web computing environments.
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.
In January 1998, the Company discovered that certain accounting practices in
its Japanese subsidiary were not in accordance with U.S. generally accepted
accounting principles and the Company's policies. As a result of these
irregularities, the Company restated its revenues and results of operations
for the quarters ended September 30, 1997, June 30, 1997 and March 31, 1997.
The restatement resulted in a decrease in previously reported revenues for
those quarters totaling approximately $43.0 million. Other current
liabilities in the consolidated balance sheet at December 31, 1997 represent
amounts accrued related to actual and potential liabilities to Japanese
financial institutions resulting from these irregularities.
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 were 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 other comprehensive loss" account
included in stockholders' equity. Foreign currency transaction gains and
losses, which historically have not been material, are included in interest
expense and other, net in the consolidated statements of operations.
In order to reduce the effect of foreign currency fluctuations on its results
of operations, the Company hedges its exposure on certain transactional
balances that are denominated in foreign currencies through the use of
foreign currency forward exchange contracts. For the most part, these
exposures consist of intercompany accounts receivable owed to the Company as
a result of local sales of software licenses by the Company's international
subsidiaries. The majority of these exposures are denominated in European and
Asia Pacific currencies, primarily the Dutch guilder and the Hong Kong
dollar. These forward exchange contracts are recorded at fair value and the
resulting gains or losses, as well as the associated premiums or discounts,
are recorded in interest expense and other, net in the consolidated
statements of operations and are offset by corresponding gains and losses
from foreign exchange contracts on hedged balances.
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.
25
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
NOTE ONE:
Summary of Significant Accounting Policies, Continued
CAPITALIZED SOFTWARE
The Company capitalizes software development costs incurred subsequent to the
internal 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
$77,134,000, $69,421,000 and $51,831,000 at December 31, 1998, 1997 and 1996,
respectively, and related accumulated amortization was $41,361,000,
$25,213,000 and $31,857,000, respectively. Software amortization charges
included in cost of license fees were $19,531,000, $9,683,000 and $7,364,000,
for 1998, 1997 and 1996, respectively.
INTANGIBLE ASSETS
Intangible assets, which have generally resulted from business combinations
accounted for as purchases (Note Ten), are recorded at amortized cost and are
included in other assets. 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 adoption of this
statement did not have a material effect on the Company's consolidated
financial statements.
REVENUE RECOGNITION
The Company licenses software under noncancellable license agreements.
License fee revenues are 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. If the fee is not
fixed or determinable, revenue is recognized as payments become due from the
customer. Sublicense fees are recognized as reported to the Company by its
licensees. License fees 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. If collectibility is not
considered probable, revenue is recognized when the fee is collected.
Maintenance and support revenues are recognized ratably over the term of the
related agreements, which in most cases is one year. Revenues from consulting
services under time and materials contracts and for training are recognized
as services are performed. Revenues from other contract services are
generally recognized under the percentage-of-completion method.
The Company adopted Statement of Position 97-2, "Software Revenue
Recognition," ("SOP 97-2") and Statement of Position 98-4, "Deferral of the
Effective Date of a Provision of SOP 97-2, Software Revenue Recognition,"
("SOP 98-4") as of January 1, 1998. SOP97-2 and SOP98-4 provide guidance for
recognizing revenue on software transactions and supercede Statement of
Position 91-1, "Software Revenue Recognition" ("SOP 91-1"). The adoption of
SOP 97-2 and SOP98-4 did not have a material impact on the Company's
financial results. However, full implementation guidelines for these
standards have not been issued. Once available, the current revenue
recognition accounting practices may need to change and such changes could
affect the Company's future revenues and results of operations.
26
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
In December 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-9, "Modification of SOP97-2,
Software Revenue Recognition, with Respect to Certain Transactions" ("SOP
98-9"). SOP98-9 amends SOP98-4 to extend the deferral of the application of
certain passages of SOP 97-2 provided by SOP98-4 through fiscal years
beginning on or before March 15, 1999. All other provisions of SOP98-9 are
effective for transactions entered into in fiscal years beginning after March
15, 1999. The Company has not yet determined the effect of the final adoption
of SOP 98-9 on its future revenues and results of operations.
PRODUCT DEVELOPMENT
Revenues recognized under vendor and end-user funding arrangements amounted
to $121,000 and $984,000 for 1998 and 1996, respectively. There were no such
revenues recognized in 1997. 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 $158,694,000,
$157,900,000 and $177,613,000 for 1998, 1997 and 1996, respectively.
TRANSFER OF FINANCIAL ASSETS
The Company finances certain software license and service agreements with
customers through the sale, assignment and transfer of the future payments
under those agreements to financing institutions, principally on a
non-recourse basis. The Company records such transfers as sales of the
related accounts receivable when it is considered to have surrendered control
of such receivables under the provisions of Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" ("Statement 125"). The Company
adopted Statement 125 effective January 1, 1997. The adoption of this
statement did not have a material effect on the Company's consolidated
financial statements.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," ("Statement 123") 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
stock at the date of the grant over the amount an employee must pay to
acquire the stock.
NET INCOME (LOSS) PER SHARE
Shares used in computing basic and diluted net income (loss) per share are
based on the weighted average shares outstanding in each period, excluding
treasury stock. Basic net income (loss) per share excludes any dilutive
effects of stock options. Diluted net income (loss) per share includes the
dilutive effect of the assumed exercise of stock options using the treasury
stock method. However, the effect of outstanding stock options has been
excluded from the calculation of diluted net loss per share as their
inclusion would be antidilutive. Accordingly, the calculation of diluted net
loss per share does not include the common stock equivalent effect (using the
treasury stock method) of 12,037,963, 10,685,969 and 12,762,192 shares of
common stock which may be issued under outstanding stock options at
December 31, 1998, 1997 and 1996, respectively.
27
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE ONE:
Summary of Significant Accounting Policies, Continued
COMPREHENSIVE INCOME
In 1997, the FASB issued Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," ("Statement 130") which requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income (revenues, expenses, gains and losses) be
reported in the financial statements. The Company's components of
comprehensive loss consist of net loss and foreign currency translation
adjustments. The Company adopted Statement 130 effective January 1, 1998.
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE
In 1997, the FASB issued Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information,"
("Statement 131") which establishes standards for the way public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports issued to stockholders.
In addition, it establishes standards for related disclosures about products
and services, geographic areas and major customers. The Company adopted
Statement 131 effective for the year ended December 31, 1998.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities"
("Statement 133"). The Company is required to adopt this statement for the
year ending December 31, 2000. Statement 133 establishes methods of
accounting for derivative financial instruments and hedging activities
related to those instruments as well as other hedging activities. The Company
has not determined the effect, if any, that adoption will have on its
financial position or results of operations.
NOTE TWO: Financial Instruments
CASH, CASH EQUIVALENTS AND CASH INVESTMENTS
Cash equivalents are highly liquid investments with insignificant interest
rate risk and original maturities of three months or less. Cash investments
have original maturities of 90 days to two years. Cash equivalents and cash
investments consist principally of short-term money market instruments and
are stated at amounts which approximate fair value, based on quoted market
prices.
In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities,"
("Statement 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, 1998 and 1997, the
Company has classified all of its debt and equity securities as
available-for-sale pursuant to Statement 115. The available-for-sale
securities are recorded as follows at December 31 (in thousands):
<TABLE>
<CAPTION>
1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Cash equivalents $ 99,995 $ 99,982
- ----------------------------------------------------------------------------------------
Short-term cash investments (maturities of one year or less) 23,967 47,127
- ----------------------------------------------------------------------------------------
Cash investments (maturities of one to two years) 981 10,134
- ----------------------------------------------------------------------------------------
$124,943 $157,243
========================================================================================
</TABLE>
Unrealized gains and losses at December 31, 1998 and 1997 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.
28
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
FOREIGN CURRENCY FORWARD EXCHANGE CONTRACTS
At December 31, 1998, 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 $15,039,000
and $5,018,000 respectively, and to exchange U.S. dollars, Dutch guilders and
Hong Kong dollars into various foreign currencies in the amounts of
$17,624,000, $45,870,000 and $2,590,000, respectively. At December 31, 1997,
the Company had outstanding forward exchange contracts, all having maturities
of approximately 30 days, to exchange various foreign currencies for U.S.
dollars, Dutch guilders and Hong Kong dollars in the amounts of $28,933,000,
$40,355,000 and $6,634,000, respectively, and to exchange U.S. dollars and
Dutch guilders into various foreign currencies in the amounts of $22,822,000
and $8,152,000, respectively. Neither the cost nor the fair value of these
foreign currency forward exchange contracts was material at December 31, 1998
or 1997. 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
1998 1997 useful lives
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Real property $ 4,467 $ 8,203 20-25 years
- -----------------------------------------------------------------------------------------------
Computer equipment and software 241,134 279,377 3 years
- -----------------------------------------------------------------------------------------------
Furniture and fixtures 76,676 81,113 5 years
- -----------------------------------------------------------------------------------------------
Leasehold improvements 44,075 47,027 lease term
- -----------------------------------------------------------------------------------------------
366,352 415,720
- -----------------------------------------------------------------------------------------------
Less accumulated depreciation (264,919) (266,059)
- -----------------------------------------------------------------------------------------------
Property, equipment and improvements, net $ 101,433 $149,661
===============================================================================================
</TABLE>
Depreciation expense amounted to $71,030,000, $81,542,000 and $76,919,000 in
1998, 1997 and 1996, respectively.
The components of other assets are as follows at December 31 (in thousands):
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Intangible assets, less accumulated amortization of $57,065 (1997 - $43,488) $39,314 $53,849
- ------------------------------------------------------------------------------------------------------
Deposits 5,548 6,044
- ------------------------------------------------------------------------------------------------------
Other 15,703 17,991
- ------------------------------------------------------------------------------------------------------
$60,565 $77,884
======================================================================================================
</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 2010, 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, 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.
In September 1998, the Company terminated a five-year lease for its research
and development facility in Boulder, Colorado by exercising the option to
purchase the property for $13,016,000. As a result, the Company satisfied its
obligation to the lessor resulting in the release of $13,276,000 in
restricted cash deposits.
29
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE FIVE:
Lease Obligations and Other Liabilities and Commitments, Continued
Notes to Consolidated Financial Statements, Continued The Company
subsequently entered into a sale-leaseback agreement for the facility, which
resulted in an immaterial gain. Under the terms of the leaseback agreement,
the Company entered into a twelve-year operating lease.
Future minimum lease payments under noncancellable operating leases,
including the Boulder facility, having initial terms in excess of one year as
of December 31, 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
1999 $ 44,875
- --------------------------------------------------------------------------------
2000 34,810
- --------------------------------------------------------------------------------
2001 25,307
- --------------------------------------------------------------------------------
2002 18,040
- --------------------------------------------------------------------------------
2003 10,394
- --------------------------------------------------------------------------------
Thereafter 16,979
- --------------------------------------------------------------------------------
Total minimum lease payments $150,405
================================================================================
</TABLE>
Facility rent expense amounted to approximately $52,608,000, $42,322,000 and
$47,389,000 in 1998, 1997 and 1996, respectively.
At December 31, 1998, the Company had outstanding letters of credit in the
amount of $1,526,000.
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 1988 Stock
Option Plan must be at least equal to the fair market value of the shares at
the date of the grant. Options granted prior to January 1, 1997 generally
expire over terms not exceeding ten years from the grant date, one month
after termination of employment, and six months after death or permanent
disability of the optionee. Options granted subsequent to January 1, 1997
generally expire over terms not exceeding ten years from the grant date,
three months after termination of employment, two years after death, and one
year after permanent disability of the optionee. Options, in all of these
cases, are exercisable only 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.
30
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Pursuant to the 1996 Stock Plan, an aggregate of 7,927,000 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. The exercise price
of all nonstatutory stock options granted under the 1996 Plan must be at
least 85 percent of the fair market value of the common stock on the date
granted. 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 after permanent disability, or at the end of the option's
term in the case of retirement. Options are exercisable only 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.
Price data and activity for the Company's option plans, including options
assumed by the Company in mergers with Powersoft and other companies
(adjusted for the merger exchange ratio) are summarized as follows:
<TABLE>
<CAPTION>
Outstanding options Weighted average
Number of shares Exercise price per share
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Balance at December 31, 1995 11,929,044 $ 22.30
- ---------------------------------------------------------------------------------------
Assumed in merger 135,496 5.07
- ---------------------------------------------------------------------------------------
Granted 11,412,135 19.19
- ---------------------------------------------------------------------------------------
Exercised (1,911,037) 7.27
- ---------------------------------------------------------------------------------------
Cancelled (8,803,446) 27.10
- ---------------------------------------------------------------------------------------
Balance at December 31, 1996 12,762,192 $ 18.27
- ---------------------------------------------------------------------------------------
Granted 4,090,400 14.87
- ---------------------------------------------------------------------------------------
Exercised (1,402,285) 7.43
- ---------------------------------------------------------------------------------------
Cancelled (4,764,338) 21.14
- ---------------------------------------------------------------------------------------
Balance at December 31, 1997 10,685,969 $ 17.11
- ---------------------------------------------------------------------------------------
Granted 17,920,121 7.38
- ---------------------------------------------------------------------------------------
Exercised (128,078) 4.08
- ---------------------------------------------------------------------------------------
Cancelled (16,440,049) 13.60
- ---------------------------------------------------------------------------------------
Balance at December 31, 1998 12,037,963 $ 7.56
=======================================================================================
</TABLE>
At December 31, 1998, options to purchase 1,086,726 shares were exercisable
at prices ranging from $4.38 to $49.38. Shares available for option grants
totaled 6,369,200 at December 31, 1998.
In June 1998, the Board of Directors approved a stock option repricing
program pursuant to which all employees of the Company could elect to
exchange or amend their then outstanding employee stock options for new
employee stock options having an exercise price of $6.88 per share (equal to
the then fair market value), with exercisability generally prohibited until
April 5, 1999. A total of 11,426,021 options with exercise prices ranging
from $8.00 to $45.69 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.
31
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE SIX:
Stockholders' Equity, Continued
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.
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
currently provide for six month exercise periods. The shares can be purchased
at the lower of 85 percent of the fair market value of the common stock on
the first day of each six month exercise period or at the last day of each
six 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.
As of December 31, 1998, an aggregate of 7,500,000 shares of common stock had
been issued or reserved for issuance under the Plans, of which 802,267 shares
remained available for issuance. Employees purchased 1,642,993 shares in
1998, 1,236,696 shares in 1997 and 1,082,620 shares in 1996.
PRO FORMA DISCLOSURES OF THE EFFECT OF STOCK-BASED COMPENSATION PLANS
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees and Related Interpretations," in accounting for grants to employees
under its stock-based compensation plans, described above. As a result, no
compensation cost has been recognized for grants to employees under its fixed
stock option plans or its employee stock purchase plans. 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 plans based on the fair value at
the grant dates for awards under those plans, consistent with the method
encouraged by Statement 123, the Company's net loss and net loss per share
would have been increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1998 1997 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net loss (in thousands) As reported $ (93,128) $(55,424) $ (79,006)
- ---------------------------------------------------------------------------------------
Pro forma $(139,541) $(63,797) $(115,399)
Basic and diluted net
loss per share As reported $ (1.15) $ (0.70) $ (1.05)
- ---------------------------------------------------------------------------------------
Pro forma $ (1.73) $ (0.81) $ (1.54)
- ---------------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
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 assumptions:
<TABLE>
<CAPTION>
Stock option plans Purchase plans
-------------------------- --------------------------
1998 1997 1996 1998 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Expected volatility 68.36% 54.90% 51.50% 68.36% 54.90% 51.50%
- -------------------------------------------------------------------------------------------
Risk-free interest rates 5.15% 6.50% 6.00% 5.00% 5.60% 5.20%
- -------------------------------------------------------------------------------------------
Expected lives (years) 3.50 4.25 3.24 .50 .50 .50
- -------------------------------------------------------------------------------------------
Expected dividend yield -- -- -- -- -- --
- -------------------------------------------------------------------------------------------
</TABLE>
The weighted-average grant-date fair value of options granted in 1998, 1997
and 1996 was $3.84, $7.52 and $6.22 per share, respectively.
The following table summarizes information about fixed stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
------------------------- -------------------
Weighted
average Weighted Weighted
remaining average average
contractual exercise exercise
Ranges of exercisable prices Shares life price Shares price
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 4.38 to $ 6.81 1,389,834 9.70 $ 5.31 23,131 $ 5.89
$ 6.88 to $ 6.88 9,887,409 7.46 $ 6.88 598,393 $ 6.88
$ 7.75 to $43.38 720,720 7.29 $ 19.12 427,202 $23.62
$ 46.13 to $49.38 40,000 5.26 $ 46.78 38,000 $46.64
- ---------------------------------------------------------------------------------------------------
$ 4.38 to $49.38 12,037,963 7.70 $ 7.56 1,086,726 $14.83
===================================================================================================
</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>
1998 1997 1996
- ---------------------------------------------------------------
<S> <C> <C> <C>
United States $(46,786) $(30,899) $(80,347)
- ---------------------------------------------------------------
Foreign (32,279) (9,857) 13,639
- ---------------------------------------------------------------
Total $(79,065) $(40,756) $(66,708)
================================================================
</TABLE>
33
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The provisions (credits) for income taxes consist of the following (in
thousands):
<TABLE>
<CAPTION>
1998 1997 1996
- ---------------------------------------------------------------
<S> <C> <C> <C>
Federal
Current $ (900) $ (4,496) $ --
- ---------------------------------------------------------------
Deferred -- -- --
- ---------------------------------------------------------------
(900) (4,496) --
- ---------------------------------------------------------------
State
Current 375 750 560
- ---------------------------------------------------------------
Deferred -- -- (100)
- ---------------------------------------------------------------
375 750 460
- ---------------------------------------------------------------
Foreign
Current 14,593 18,329 11,838
- ---------------------------------------------------------------
Deferred (5) 85 --
- ---------------------------------------------------------------
14,588 18,414 11,838
- ---------------------------------------------------------------
Total $ 14,063 $ 14,668 $ 12,298
===============================================================
</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>
1998 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax (credit) at U.S. statutory rate $(27,673) $(14,265) $(23,348)
- -------------------------------------------------------------------------------------------
State tax, net of federal benefit, before
valuation allowance (1,408) (401) (3,232)
- -------------------------------------------------------------------------------------------
Effect of foreign operations 27,618 21,035 9,714
- -------------------------------------------------------------------------------------------
Amortization of intangible assets 2,398 2,435 1,537
- -------------------------------------------------------------------------------------------
Tax-exempt interest -- -- (57)
- -------------------------------------------------------------------------------------------
Effect of valuation allowance 13,699 3,272 24,376
- -------------------------------------------------------------------------------------------
Other (571) 2,592 3,308
- -------------------------------------------------------------------------------------------
Total $ 14,063 $ 14,668 $ 12,298
===========================================================================================
</TABLE>
34
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
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>
1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C>
Depreciation $ 16,898 $ 11,531
- ------------------------------------------------------------------------------
Deferred revenue 9,032 10,903
- ------------------------------------------------------------------------------
Accrued expenses 18,679 9,288
- ------------------------------------------------------------------------------
Allowance for doubtful accounts 10,548 7,163
- ------------------------------------------------------------------------------
Purchased software 373 2,641
- ------------------------------------------------------------------------------
Net operating loss carryovers and tax credits
carryforwards 40,366 41,403
- ------------------------------------------------------------------------------
Other assets 12,005 8,382
- ------------------------------------------------------------------------------
Gross deferred tax asset 107,901 91,311
- ------------------------------------------------------------------------------
Unremitted foreign earnings (5,095) (5,095)
- ------------------------------------------------------------------------------
Capitalized R&D expenses (18,105) (11,487)
- ------------------------------------------------------------------------------
Other liabilities (322) (266)
- ------------------------------------------------------------------------------
Gross deferred tax liabilities (23,522) (16,848)
- ------------------------------------------------------------------------------
Total before valuation allowance 84,379 74,463
- ------------------------------------------------------------------------------
Valuation allowance (43,324) (33,413)
- ------------------------------------------------------------------------------
Net deferred tax assets $ 41,055 $ 41,050
==============================================================================
Recorded as:
Current deferred tax assets $ 20,903 $ 16,973
- ------------------------------------------------------------------------------
Noncurrent deferred tax assets 20,152 24,077
- ------------------------------------------------------------------------------
$ 41,055 $ 41,050
==============================================================================
</TABLE>
The valuation allowance increased by $9,911,000 in 1998, including reductions
of deferred tax assets and the related valuation allowance previously
recorded ($4,274,000), additions to the valuation allowance for deferred tax
assets arising from tax benefits associated with stock option plans
($486,000) and additions included in the provision for income taxes
($13,699,000). The valuation allowance decreased by $3,268,000 in 1997,
including reductions of deferred tax assets and the related valuation
allowance previously recorded ($9,189,000), additions to the valuation
allowance for deferred tax assets arising from tax benefits associated with
stock option plans ($2,649,000) and additions included in the provision for
income taxes ($3,272,000). Deferred tax assets relating to carryforwards as
of December 31, 1998 include approximately $6,740,000 associated with stock
option activity for which any subsequently recognized tax benefits will be
credited directly to stockholders' equity. As of December 31, 1998, the
Company had federal net operating loss carryovers of $24,990,000 expiring in
years from 2003 through 2018, research and development tax credits of
$11,799,000 which expire in years from 2005 through 2011 and foreign tax
credits of $9,425,000 expiring from 2000 through 2001.
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 $16,654,000 at
December 31, 1998) since the Company plans to
permanently reinvest all such earnings.
35
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
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 1998, 1997 or 1996.
NOTE NINE:
Segment and Geographical Information
The Company has adopted Statement 131 effective December 31, 1998. The new
rules established revised standards for public companies relating to the
reporting of financial information about operating segments.
SEGMENT INFORMATION
The Company has identified two reportable operating segments based upon the
provisions of Statement 131, licence fees and services. License fees are
derived from sales of the Company's software products. Services include
consulting, education and support.
The Company's Chief Operating Decision Maker ("CODM"), who is the President
and Chief Executive Officer, evaluates performance based on a measure of
segment gross profit or loss. The accounting policies of the reportable
segments are the same as those described in the summary of significant
accounting policies. The Company's CODM does not view the segment results
below gross profit (loss), therefore, operating costs and expenses, interest
income, interest expense and other, net and the provision for income taxes
are not broken out by segment. The Company does not account for or report to
the CODMits assets or capital expenditures by segments.
Based upon the above, the Company's statements of operations disclose the
available financial information of its reportable segments in accordance with
Statement 131 for the years ended December 31, 1998, 1997 and 1996,
respectively.
In 1999, the Company launched four separate business divisions, which are
expected to maintain their own operating results accountability. Therefore,
future reportable operating segments may change.
GEOGRAPHICAL INFORMATION
The Company markets its products and services internationally through both
foreign subsidiaries and distributors located in the Americas, Europe, Asia,
Australia and Africa. Other includes operations in Asia, Australia, New
Zealand, Latin America, Canada and Mexico.
The following table presents a summary of operating information and certain
year-end balance sheet information by geographic region in accordance with
Statement 131's enterprise-wide disclosure requirements (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
External customers:
United States $475,949 $537,485 $ 580,536
- --------------------------------------------------------------------------
Europe 253,162 232,561 238,810
- --------------------------------------------------------------------------
Other 138,358 133,891 192,199
- --------------------------------------------------------------------------
Total $867,469 $903,937 $1,011,545
==========================================================================
Long lived assets, net:
United States $150,120 $210,232 $ 222,944
- --------------------------------------------------------------------------
Europe 10,908 18,735 18,006
- --------------------------------------------------------------------------
Other 15,492 17,843 21,464
- --------------------------------------------------------------------------
Total $176,520 $246,810 $ 262,414
==========================================================================
</TABLE>
36
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE TEN:
Business Combinations
On February 2, 1998, the Company acquired Intellidex Systems, L.L.C.,
(Intellidex) a provider of data management technology for deploying and
managing data warehouse environments. Under terms of the acquisition
agreement, the Company paid $5,000,000 in cash for certain assets and assumed
certain liabilities of Intellidex. The Company has allocated $3,737,000 to
purchased software and $1,241,000 was allocated to goodwill related to this
transaction. In addition, pursuant to the terms of the agreement, the Company
is obligated to make contingent payments based on certain agreed upon
performance criteria. The maximum additional amount payable over an aggregate
three-year period is equal to $10,000,000. The transaction was accounted for
as a purchase. The results of operations of Intellidex are not material in
relation to those of the Company and have been included in the consolidated
results of operations for periods subsequent to the acquisition date.
On February 21, 1997 the Company acquired Purchase Net, Inc., a developer of
application development software. The Company issued 750,000 shares of its
common stock with a fair market value of approximately $12,000,000 for all
the outstanding shares of common stock of Purchase Net, Inc. The transaction
was accounted for as a purchase. The total purchase cost was $12,763,000,
including direct cost and expenses related to the acquisition, of which
$12,693,000 was allocated to purchased software and included in capitalized
software in the consolidated balance sheet. The results of operations of
Purchase Net, Inc., which are not material in relation to those of the
Company, have been included in the consolidated results of operations for
periods subsequent to the acquisition date.
In February 1996, the Company acquired Visual Components, Inc. ("Visual"), a
developer and marketer of components for software developers. The Company
issued 733,178 shares of its common stock for all the outstanding shares of
common stock of Visual and assumed outstanding options to acquire 135,496
shares of the Company's common stock based on the merger exchange ratio. The
transaction was accounted for as a pooling of interests. The operating
results of Visual prior to the combination were not material in relation to
those of the Company. Therefore, prior period financial information of the
Company was not restated.
In addition to the transactions discussed above, in 1997, the Company
acquired several distributors of its products in various countries in
transactions accounted for as purchases. The Company paid cash for the
businesses totaling $4,290,000. Amounts recorded as intangible assets from
these transactions were $8,272,000. These intangible assets are being
amortized over periods of five to seven years, which amounts were recorded as
additional intangible assets. There were no such purchases in 1998 and 1996.
The Company paid approximately $1,550,000 and $2,827,000 in 1998 and 1997,
respectively, and recorded an additional $2,110,000 to accrued liabilities in
1998, related to earn-out provisions for transactions consummated in the
current and prior years. The results of operations of these entities prior to
the acquisitions were not material in relation to those of the Company.
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 ELEVEN:
Litigation
Following the Company's announcements on January 2, 1998 and January 21, 1998
regarding its preliminary results of operations for the quarter and year
ended December 31, 1997, several class action lawsuits were filed against the
Company and certain of its officers and directors in the United States
District Court, Northern District of California ("Northern California
District Court"). The complaints are similar and allege violations of federal
and state securities laws and request unspecified monetary damages. A
consolidated, amended class action complaint was served on June 11, 1998 and
named Sybase KK, the Company's Japanese subsidiary, and the Company's former
Japan country manager, as additional defendants.
Pretrial discovery has not yet begun.
On January 27, 1998, a purported shareholder derivative action was filed in
the Superior Court of the State of California, County of Alameda ("Alameda
County Superior Court"). The complaint alleges that certain of the Company's
present and former officers and/or directors breached fiduciary duties owed
to the Company in connection with the underlying circumstances alleged in the
securities class action
37
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE ELEVEN:
Litigation, Continued
complaints described above. Two similar derivative actions were also filed in
Alameda County Superior Court, and the three derivative actions have now been
consolidated. Pretrial discovery has begun in those actions. On April 15,
1998, a derivative complaint was filed in the Northern California District
Court. A second similar derivative complaint was also filed in the same
court. These two complaints have been consolidated, and pretrial discovery
has not begun. In addition, a similar complaint has been filed in the
Chancery Court in Delaware. Pretrial discovery has not begun in that case.
Sybase is a nominal defendant in these actions and no damages are sought from
it.
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 Northern California District Court. The complaints are similar and allege
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. Pretrial
discovery has been completed.
Management believes that the claims alleged against it in all of the actions
described above are without merit and the Company 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 these matters could materially affect the Company's
future 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. In the opinion of management,
resolution of these matters is not expected to have a material adverse effect
on the consolidated 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 TWELVE:
Restructuring Costs
In February 1998, the Company announced and began to implement a
restructuring plan aimed at reducing costs, restoring profitability to
operations and focusing the Company's products around its core businesses.
This restructuring activity consisted primarily of terminating 1,097
employees company-wide, 953 of which were terminated by December 31, 1998,
terminating certain product lines, vacating certain facilities and cancelling
real estate leases as a result of the employee terminations. Through December
31, 1998, these actions resulted in aggregate charges of $74,167,000, of
which $23,289,000 was paid during 1998.
The following table summarizes the 1998 restructuring activity (in
thousands):
<TABLE>
<CAPTION>
Total Amount Accrued
restructuring paid or liabilities at
charges written off December 31,1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Severance and related charges $27,473 $14,990 $12,483
- ---------------------------------------------------------------------------------------------------
Lease cancellations and commitments 16,736 7,198 9,538
- ---------------------------------------------------------------------------------------------------
Write-off on disposal of assets and other 29,958 24,661 5,297
- ---------------------------------------------------------------------------------------------------
$74,167 $46,849 $27,318
===================================================================================================
</TABLE>
38
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The Company expects that the remaining $27,318,000 accrued liability balance
at December 31, 1998 will be expended over the next twelve months.
In July 1996, the Company announced and implemented a restructuring plan
aimed at reducing costs 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 of $49,200,000, including
approximately $17,000,000 for 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 in 1997 and $17,600,000 consisted of write-offs of property,
equipment and improvements, capitalized software development costs and other
assets.
39
<PAGE> 35
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended (in thousands,
except per share and stock price data) March 31, June 30, September 30, December 31,
1998 1998 1998 1998 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
License fees $ 96,004 $105,920 $ 98,759 $ 120,771 $ 421,454
- -----------------------------------------------------------------------------------------------------------------------------
Services 110,813 111,950 111,498 111,754 446,015
- -----------------------------------------------------------------------------------------------------------------------------
Total revenues 206,817 217,870 210,257 232,525 867,469
- -----------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of license fees 10,098 8,934 8,921 9,620 37,573
- -----------------------------------------------------------------------------------------------------------------------------
Cost of services 62,782 56,064 57,807 58,921 235,574
- -----------------------------------------------------------------------------------------------------------------------------
Sales and marketing 108,434 103,412 87,684 93,449 392,979
- -----------------------------------------------------------------------------------------------------------------------------
Product development and engineering 37,133 33,260 36,865 41,325 148,583
- -----------------------------------------------------------------------------------------------------------------------------
General and administrative 16,425 14,588 15,016 19,377 65,406
- -----------------------------------------------------------------------------------------------------------------------------
Cost of restructuring 51,694 -- -- 22,473 74,167
- -----------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 286,566 216,258 206,293 245,165 954,282
- -----------------------------------------------------------------------------------------------------------------------------
Operating income (loss) (79,749) 1,612 3,964 (12,640) (86,813)
- -----------------------------------------------------------------------------------------------------------------------------
Interest income and expense, net 2,075 2,338 1,743 1,592 7,748
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (77,674) 3,950 5,707 (11,048) (79,065)
- -----------------------------------------------------------------------------------------------------------------------------
Provision for income taxes 3,520 3,500 3,500 3,543 14,063
- -----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (81,194) $ 450 $ 2,207 $ (14,591) $ (93,128)
=============================================================================================================================
Basic net income (loss) per share $ (1.01) $ 0.01 $ 0.03 $ (0.18) $ (1.15)
- -----------------------------------------------------------------------------------------------------------------------------
Diluted net income (loss) per share $ (1.01) $ 0.01 $ 0.03 $ (0.18) $ (1.15)
- -----------------------------------------------------------------------------------------------------------------------------
Stock prices:
High $ 10.69 $ 10.38 $ 10.06 $ 8.03 $ 10.69
- -----------------------------------------------------------------------------------------------------------------------------
Low $ 7.00 $ 6.50 $ 5.84 $ 4.53 $ 4.53
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE> 36
<TABLE>
<CAPTION>
Three months ended (in thousands, March 31, June 30, September 30, December 31,
except per share and stock price data) 1997 1997 1997 1997 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
License fees $ 127,392 $ 110,591 $ 122,550 $ 110,503 $ 471,036
- ---------------------------------------------------------------------------------------------------------------------------------
Services 104,809 104,890 110,473 112,729 432,901
- ---------------------------------------------------------------------------------------------------------------------------------
Total revenues 232,201 215,481 233,023 223,232 903,937
- ---------------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of license fees 8,058 6,148 6,563 10,587 31,356
- ---------------------------------------------------------------------------------------------------------------------------------
Cost of services 61,878 61,673 63,435 61,639 248,625
- ---------------------------------------------------------------------------------------------------------------------------------
Sales and marketing 114,597 116,674 118,015 119,875 469,161
- ---------------------------------------------------------------------------------------------------------------------------------
Product development and engineering 35,300 33,707 33,871 35,712 138,590
- ---------------------------------------------------------------------------------------------------------------------------------
General and administrative 17,363 14,443 15,410 15,391 62,607
- ---------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 237,196 232,645 237,294 243,204 950,339
- ---------------------------------------------------------------------------------------------------------------------------------
Operating loss (4,995) (17,164) (4,271) (19,972) (46,402)
- ---------------------------------------------------------------------------------------------------------------------------------
Interest income and expense, net 1,006 1,729 1,516 1,395 5,646
- ---------------------------------------------------------------------------------------------------------------------------------
Loss before income taxes (3,989) (15,435) (2,755) (18,577) (40,756)
- ---------------------------------------------------------------------------------------------------------------------------------
Provision for income taxes 2,171 2,357 3,195 6,945 14,668
- ---------------------------------------------------------------------------------------------------------------------------------
Net loss $ (6,160) $ (17,792) $ (5,950) $ (25,522) $ (55,424)
=================================================================================================================================
Basic and diluted net loss per share $ (0.08) $ (0.23) $ (0.08) $ (0.32) $ (0.70)
- ---------------------------------------------------------------------------------------------------------------------------------
Stock prices:
High $ 20.00 $ 16.88 $ 20.75 $ 23.50 $ 23.50
- ---------------------------------------------------------------------------------------------------------------------------------
Low $ 13.25 $ 12.50 $ 12.50 $ 12.00 $ 12.00
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE> 37
CORPORATE INFORMATION
BOARD OF DIRECTORS
John S. Chen
Chairman of the Board,
President, and
Chief Executive Officer
Director since 1997
Robert S. Epstein
Executive Vice President
Director since 1984
Richard C. Alberding(1)
Retired, Executive Vice President
Hewlett-Packard Company
Director since 1993
L. William Krause(1)
President
LWK Ventures
Director since 1995
Alan B. Salisbury(2)
President
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
John S. Chen
Chairman of the Board,
President, Chief Executive
Officer, and Director
Robert S. Epstein
Executive Vice President
and Director
Richard N. LaBarbera
Senior Vice President
and General Manager,
Enterprise Solutions Division
Eric L. Miles
Senior Vice President
and General Manager,
Business Intelligence Division
Raj Nathan
Senior Vice President
and General Manager,
Internet Applications Division
Terry Stepien
Senior Vice President and
General Manager,
Mobile and Embedded Computing Division
Pieter Van der Vorst
Vice President and
Chief Financial Officer
Mitchell L. Gaynor
Vice President,
General Counsel,
and Secretary
Martin J. Healy
Vice President and
Corporate Controller
Nita C. White-Ivy
Vice President,
Worldwide Human
Resources
42
<PAGE> 38
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, 1999, with the
Securities and Exchange Commission and are available without charge on
request. Please direct your request to any of the following:
By written request:
Sybase, Inc.
Investor Relations Department
6475 Christie Avenue
Emeryville, California 94608 U.S.A.
By telephone:
+1 510 922 3437
Via the World Wide Web:
www.sybase.com
Registrar and Transfer Agent
Equiserve
Shareholder Services
Mail Stop: 45-01-23
P.O. Box 644
Boston, Massachusetts 02102 U.S.A.
+1 781 575 3120
www.equiserve.com
Annual Meeting
The annual meeting of stockholders will be held at 10:00 a.m. on May 27,
1999, at the Company's offices at 1650 65th Street, Emeryville, California.
Stock Information
As of December 31, 1998, the Company had 1,973 (est.) 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
Walnut Creek, California
43
<PAGE> 39
GLOBAL CORPORATE CONTACTS
Sybase, Inc.
Worldwide Headquarters
6475 Christie Avenue
Emeryville, California
94608 U.S.A.
+800 8 SYBASE
+1 510 922 3500
Fax: +1 510 922 3210
World Wide Web:
www.sybase.com
Sybase Europe
Sybase Court
Crown Lane
Maidenhead, Berkshire SL6 1XW
United Kingdom
+44 1 628 597100
Fax: +44 1 628 597000
Sybase Professional Services
77 South Bedford Street
Burlington, Massachusetts
01803 U.S.A.
+1 781 238 6100
Fax: +1 781 564 7000
Canada
+1 905 273 8500
Fax: +1 905 273 8550
Europe
Belgium
+32 2 716 8311
Fax: +32 2 725 6550
Czech Republic
+420 2 2431 0808
Fax: +420 2 2431 5024
France
+33 1 41 90 41 90
Fax: +33 1 41 90 42 00
Germany
+49 211 59760
Fax: +49 211 59761 11
Italy
+390 2 483 241
Fax: +390 2 483 00660
The Netherlands
+31 34 658 2999
Fax: +31 34 655 2884
Norway
+47 2310 5500
Fax: +47 2310 5501
Spain
+349 1 302 0900
Fax: +349 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
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
+91 22 641 1349
Fax: +91 22 645 1800
Indonesia
+62 21 526 6520
Fax: +62 21 526 6523
Japan
+81 3 5210 6000
Fax: +81 3 5210 6300
South Korea
+82 2 3451 5200
Fax: +82 2 3451 5299
Malaysia
+60 3242 4218
Fax: +60 3243 4318
New Zealand
+64 4473 3661
Fax: +64 4499 9068
Philippines
+632 754 4100
Fax: +632 754 4141
Singapore
+65 338 0018
Fax: +65 338 8112
Taiwan
+886 2 2514 8282
Fax: +886 2 2545 6909
For other Asia Pacific inquiries:
+852 2506 6000
Fax: +852 2506 6050
Latin America
Argentina
+54 11 4 313 4488
Fax: +54 11 4 315 8834
Brazil
+55 11214 4044
Fax: +55 11214 0820
For other Latin America inquiries:
+1 305 223 6410
(Miami office)
Copyright (C) 1999 Sybase, Inc. All rights reserved. Unpublished rights
reserved under U.S. copyright laws. Sybase, the Sybase logo, Information
Anywhere, Enterprise Application Server, Sybase Financial Server, Adaptive
Server, UltraLite, PowerBuilder, PowerJ, EnterpriseConnect, Warehouse Studio,
Enterprise Data Studio, Enterprise Application Studio, SQL Anywhere,
PowerStudio, Replication Server, Jaguar CTS, PowerDynamo, InfoMaker,
jConnect, and Powersoft are trademarks or registered trademarks of Sybase,
Inc. Java and JDBC are trademarks of Sun Microsystems, Inc. All other
trademarks are property of their respective owners. (R) indicates
registration in the United States. Specifications are subject to change
without notice. Printed in the U.S.A. CM No. 1999-0020 L00912
44
<PAGE> 1
EXHIBIT 21
<TABLE>
<CAPTION>
COMPANY NAME JURISDICTION OF INCORPORATION
<S> <C>
Data Warehouse Network Ireland
Oasis Group ltd. United Kingdom
Powersoft K.K. Japan
Sybase Argentina, S.A. Republica Argentina
Sybase Australia Pty Limited New South Wales, Australia
Sybase Canada Limited Canada
Sybase Central and Eastern Europe s.r.o. Czech Republic
Sybase China Limited Hong Kong
Sybase do Brasil Software Limitada Brazil
Sybase Eastern Europe B.V. The Netherlands
Sybase Europe B.V. The Netherlands
Sybase Financial Services, Inc. Delaware
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 Holdings Corporation Delaware
Sybase International Limited United Kingdom
Sybase Italia S.r.l. Italy
Sybase KK Japan
Sybase Korea, Ltd. South Korea
Sybase Luxembourg Luxembourg
Sybase MEC, Inc. Delaware
Sybase N.V./S.A. Belgium
Sybase (N.Z.) Limited New Zealand
Sybase Nederland B.V. The Netherlands
Sybase Norge AS Norway
Sybase Philippines, Inc. Philippines
Sybase (Schweiz) AG Switzerland
Sybase (Singapore) Pte Ltd. Singapore
Sybase Software (China) Co., Ltd. The People's Republic of China
Sybase Software (Malaysia) Sdn Bhd Malaysia
Sybase Sverige AB Sweden
Sybase Taiwan Co., Ltd. Republic of China
Sybase UK Limited United Kingdom
Tecnologia Cliente/Servidor Informatica Limitada Brazil
WATCOM Europe Limited United Kingdom
</TABLE>
<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 21, 1999, included in the 1998
Annual Report to Stockholders 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 consolidated 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-8) and related Prospectuses 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
Powersoft Corporation 1984 Incentive Stock Option Plan, the Powersoft
Corporation 1994 Amended and Restated Incentive and Non-Qualified Stock Option
Plan, the Letter Agreement between Powersoft Corporation and William P. Miller
dated April 5, 1991, the Complex Architectures, Inc. Stock Option Plan and the
Letter Agreement dated February 25, 1994 between Complex Architectures, Inc. and
Frank A. Sola, and the Expressway Technologies 1987 Stock Option Plan, of our
reports dated January 21, 1999, 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, 1998.
/s/ ERNST & YOUNG LLP
Walnut Creek, California
March 25, 1999
<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, 1998 FOR THE
YEAR THEN ENDED.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 224,665
<SECURITIES> 24,948
<RECEIVABLES> 231,073
<ALLOWANCES> 31,770
<INVENTORY> 0
<CURRENT-ASSETS> 477,700
<PP&E> 366,352
<DEPRECIATION> (264,919)
<TOTAL-ASSETS> 696,604
<CURRENT-LIABILITIES> 393,521
<BONDS> 0
0
0
<COMMON> 82
<OTHER-SE> 300,990
<TOTAL-LIABILITY-AND-EQUITY> 696,604
<SALES> 421,454
<TOTAL-REVENUES> 867,469
<CGS> 37,573
<TOTAL-COSTS> 666,126
<OTHER-EXPENSES> 288,156
<LOSS-PROVISION> 2,019
<INTEREST-EXPENSE> 489
<INCOME-PRETAX> (79,065)
<INCOME-TAX> 14,063
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (93,128)
<EPS-PRIMARY> (1.15)<F1>
<EPS-DILUTED> (1.15)
<FN>
<F1>REFLECTS BASIC EPS ACCORDING TO SFAS 128, EARNINGS PER SHARE
</FN>
</TABLE>
