<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT
(Mark one)
[x] Annual report pursuant to section 13 or 15(d) of the securities
exchange act of 1934 [fee required] for the fiscal year ended April
30, 1996 or
[ ] Transition report pursuant to section 13 or 15(d) of the securities
exchange act of 1934 [no fee required]for the transition period from
________ to ________
Commission file number 0-27874
ANSOFT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 72-1001909
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification no.)
Four Station Square, Suite 660
Pittsburgh, Pennsylvania 15219-1119
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (412) 261-3200
Securities registered pursuant to Section 12(b) of the act: None
Securities registered pursuant to Section 12(g) of the act: Common stock, par
value $.01 per share
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. [ ]
As of July 19, 1996, the aggregate market value of voting common stock held by
non-affiliates of the registrant, based upon the last reported sale price for
the registrant's Common Stock on the Nasdaq National Market on such date, as
reported in The Wall Street Journal, was $17,767,884.38.
The number of shares of the registrant's Common Stock outstanding as of the
close of business on July 19, 1996 was 7,641,059.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the definitive Proxy Statement of Ansoft Corporation (the
"Company") to be furnished in connection with the solicitation of proxies by
the Company's Board of Directors for use at the 1996 Annual Meeting of
Stockholders (the "Proxy Statement") are incorporated by reference into Part
III of this Annual Report on Form 10-K to the extent provided herein. Except as
specifically incorporated by reference herein, the Proxy Statement is not to be
deemed filed as part of this Annual Report on Form 10-K.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM OF FORM 10-K PAGE
- ----------------- ----
<S> <C> <C>
Part I
1. Business 1
2. Properties 8
3. Legal Proceedings 8
4. Submission of Matters to a Vote of Security Holders 8
4.(a) Executive Officers of the Registrant 8
Part II
5. Market for Registrant's Common Stock, Preferred Stock and
Warrants, and Related Security Holder Matters 10
6. Selected Financial Data 10
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
8. Financial Statements and Supplementary Data 18
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures 31
Part III
Part III information will appear in Item 4(a) of Part I of Form 10-K
and in the Registrant's Proxy Statement in connection with its Annual Meeting of
Stockholders. Such Proxy Statement will be filed with the Securities and
Exchange Commission and such information is incorporated herein by this
reference as of the date of such filing.
Part IV
14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 32
Signatures 35
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS
Ansoft Corporation ("Ansoft" or the "Company") develops, markets and
supports electronic design automation ("EDA") software, based upon
electromagnetic principles, for the design of electronic, communications and
electromechanical components and systems. The Company believes that its
proprietary products enable design engineers to develop smaller systems with
higher performance and greater yields than can be developed with traditional
EDA tools, and result in reduced time-to-market, lower risk of failure and
elimination of costly and time-consuming product redesign. The Company's
products are used by design engineers in the communications, semiconductor,
automotive, computer, defense/aerospace and consumer electronics industries.
Ansoft's customers include GM, Motorola, Raytheon, TRW, Mitsubishi, Texas
Instruments, Hitachi, Lucky-Goldstar, AT&T and Sun Microsystems.
The Company's products are generally marketed under the Maxwell(R) name.
The Company's electromechanical EM software analyzes the electrical performance
of product designs to increase yields and is applied in the design of sensors,
solenoids, motors and transformers for the automotive and consumer electronics
industries. The Company's signal integrity SI software analyzes the degradation
in signal integrity that results from the higher clock speeds and smaller
physical dimensions of micron and deep-submicron integrated circuits and
computer interconnects for the computer and semiconductor industries. In
addition, the Company's SI software analyzes electromagnetic radiation from
electronic systems, including radio frequency integrated circuits, antenna and
radar systems, and is used in the communications, aerospace and defense
industries.
Unless otherwise stated, the information contained in this Annual Report on
Form 10-K is as of April 30, 1996. This Form 10-K, including Management's
Discussion and Analysis of Financial Condition and Results of Operations,
contains certain statements of a forward looking nature relating to future
events or the future financial performance of the Company which are forward
looking statements under Section 21E of the Securities Exchange Act of 1934.
Persons reading this Form 10-K are cautioned that such statements are only
predictions and that actual events or results may differ materially. In
evaluating such statements, readers should specifically consider the various
factors identified in this Form 10-K, which could cause actual events or
results to differ materially from those indicated by such forward looking
statements.
Industry Overview
Since the early 1970s, design engineers have used EDA software to assist
in electronic design and development. EDA software automates the previously
manual, time-consuming, error-prone design process, resulting in dramatic
increases in productivity and efficiency. As design and manufacturing
technology has focused on increased performance, miniaturization and yield, the
applications for EDA software have expanded from computers to communication,
semiconductor, automotive, defense/aerospace and consumer electronic products.
The need to model accurately the electromagnetic interaction in
electronic, communications and electromechanical components and systems is
increasingly important as the marketplace demands higher levels of system
performance, miniaturization and yield. The Company believes that traditional
EDA tools, which are not based on electromagnetic principles and can therefore
only approximate electromagnetic interaction, cannot model such systems with
the requisite degree of accuracy.
Ansoft addresses the limitations of traditional EDA software by providing
design engineers with easy-to-use tools to model accurately electromagnetic
interaction. While Ansoft products may be used as an independent design
platform, they are also designed to
1
<PAGE> 4
be compatible with complementary EDA tools and to be easily integrated into the
customer's total design environment.
Ansoft Strategy
Ansoft's objective is to become a leading, worldwide supplier of EDA
software. Using its proprietary technology as a primary competitive advantage,
the Company pursues its objectives through the following strategies:
Leverage Technology Leadership. Leveraging a focused team of research and
development engineers and the Company's achievements in electromagnetics, the
Company continually seeks to design and develop new technologies, products and
interfaces. Examples of the Company's new technologies include automatic and
adaptive convergence to solutions, asymptotic waveform evaluation ("AWE") for
spectral domain solutions, transfinite elements, Basis Evaluation State-Space
Techniques and fast multipole acceleration algorithms.
Capitalize on Growing Need for Electromagnetics Analysis. Ansoft seeks to
capitalize on the increased need in the marketplace for the accurate modeling
of electromagnetic interaction. The Company uses a direct sales force, regional
engineering services and worldwide marketing to achieve product awareness, name
recognition and market penetration in domestic and international markets. To
supplement its direct sales force, the Company uses international distributors,
provides localized customer support and training for its international
customers, targets international publications, trade journals and trade shows
and offers product seminars.
Integrate with Multiple Design Environments. To broaden its installed base
and penetrate its customers' installed base, the Company designs its software
products to be integrated into customers' design environments and to be
compatible with other vendors' tools, enabling customers to select an optimal
design flow for their needs. Ansoft participates in industry standardization
efforts and supports a wide range of Unix-based workstations and Intel-based
personal computers running Microsoft Windows to enable easy adoption of its
products into its customers' computing environment.
Expand Broad Range of Product Applications. The Company offers products
which address a wide range of design problems including electromechanical
performance and yield issues in the automotive and consumer electronics
industries, IC Packaging and Signal Integrity issues in the semiconductor and
computer industries and electromagnetic interference issues in the
communications and defense/aerospace industries. The Company seeks to develop
new applications and product enhancements which address additional design
issues, as well as new interfaces for its existing products.
Focus on Customer Service. The Company focuses on providing worldwide
customer service to achieve a high degree of customer satisfaction, and
provides a wide range of support services on both a pre-sale and post-sale
basis to maximize the success of its tools in the customer's design
environment. The Company offers on-site and in-house training programs, on-line
and telephone support for design engineers and annual maintenance contracts.
2
<PAGE> 5
Products
Ansoft solutions are offered in both electromechanical ("EM") and signal
integrity ("SI") products. The Company's EM software products enable designers
of electromechanical components and systems to optimize the electrical
performance of their designs while increasing yields. The Company's SI software
products have two markets: High Speed and High Frequency. The Company's SI
(High Speed) software enables designers to design computer interconnects, IC
Packaging structures and electronic systems by accurately capturing the
degradation in signal quality due to higher clock speeds and smaller physical
dimensions. The Company's SI (High Frequency) software enables designers to
design radio frequency integrated circuits ("RF ICs"), antenna and radar
systems and microwave components by accurately solving the effects of
electromagnetic radiation from electronic systems. Ansoft products are
available on Unix workstations from International Business Machines
Corporation, HP, Sun Microsystems, Inc., Silicon Graphics, Inc. and Digital
Electronics Inc. and Intel-based PCs running Microsoft Windows/Windows NT(R).
Ansoft EM Software
Maxwell 2D Field Simulator: This product performs electromagnetic field
simulation at the product design stage from physical design information.
Electromagnetic field simulation provides designers with critical device
parameters such as forces, torques, saturation effects, inductance, capacitance
and power losses. The parametrics capability of this two-dimensional field
simulator allows the user easily to perform "what-if" analysis by automatically
varying physical dimensions, material properties and excitation levels. The
U.S. list price of this product ranges from $2,900 to $12,900.
Maxwell 3D Field Simulator: This product provides similar electromagnetic
field simulation of devices as the Maxwell 2D Field Simulator for devices that
require three-dimensional analysis. The software leads the designer in a top
down fashion from a three-dimensional solid modeler to viewing electromagnetic
field patterns throughout the device. By evaluating field solutions and device
characteristics, the designer is able to determine where material substitutions
and geometry changes can be made to reduce production costs while increasing
device performance. The U.S. list price of this product ranges from $14,900 to
$34,900 (includes Maxwell 2D Field Simulator).
EMSS: This product allows devices designed at the component level in
Ansoft Field Simulators to be simulated on a larger system level by coupling
the electromagnetic behavior of the device with electrical and mechanical drive
and load components, and permits the critical evaluation of both transient and
steady state system level behavior. This integrated solution is used to study
issues such as the effects of non-linear magnetic components on system level
behavior, source and load transients, induced voltages and currents, as well as
position and velocity of moving parts. The U.S. list price of this product
ranges from $19,900 to $44,900.
3
<PAGE> 6
Ansoft SI Software (High Speed)
Maxwell Extractor: This product extracts physical interconnects on ICs and
printed circuit boards ("PCBs") and creates device models in HSPICE (Meta
Software), PSpice (MicroSim), or DF/SigNoise (Cadence) formats. The models
accurately capture the degradation in signal quality due to higher clock speeds
and smaller physical dimensions. The U.S. list price of this product is
$19,900.
Maxwell Spicelink: This product creates physical models of IC Packaging
structures in industry standard JEDEC format and creates SPICE models for these
devices. The package includes a schematic capture and circuit simulation tool
which allows system designers to study the effect of connectors, cables and
packages on system performance. The U.S. list price of this product is $34,900.
Maxwell Eminence: This product addresses issues of electromagnetic
radiation from electronic systems and provides solutions to both high speed and
high frequency problems. The U.S. list price of this product is $49,900. There
are two key applications for this product:
- FCC guidelines in the US, European emissions rules and EMC guidelines in
Japan regulate the level of electromagnetic radiation allowable from
computers, personal communications systems and other consumer electronic
products. This product allows system designers to model critical path
PCB emissions, evaluate component level EMI and study shielding
effectiveness, thus enabling them to design proactively for EMC
compliance (High Speed).
- Designers of wireless communication systems use this product to design
RF components and sub-systems and to evaluate the interaction between
the digital and RF portions of telecommunication systems. Engineers in
the military/aerospace industry utilize this product for designing
antenna and radar systems (High Frequency).
ParICs Modeler. This product automatically generates physical designs of
IC Packaging structures in industry standard JEDEC formats. This product is
available stand-alone for IC CAD engineers, or as an option to Extractor or
Spicelink for signal integrity engineers. The U.S. list price for this product
is $4,900.
Ansoft SI Software (High Frequency)
Maxwell Strata. This product will enable the design of highly dense RF
ICs, monolithic microwave integrated circuits ("MMICs") and planar antennas for
customers in the telecommunications and defense electronics market. The U.S.
list prices for this product, which is expected to be available in calendar
1996, are expected to be $29,900 stand-alone and $19,900 if purchased with
another Ansoft product.
Ansoft HFSS. The Company supplies HP with HFSS, which Hewlett-Packard
Corporation ("HP") sells exclusively worldwide for the design of RF and
microwave systems. HFSS is used by microwave component designers to develop
MMICs, which are used in defense and aerospace applications. This product was
first shipped in fiscal 1990. The HP Agreement expires in January 1997 and will
not be renewed. HP has the right to sell the HFSS product through January 1998.
Since January 1994, the Company has directly marketed its
4
<PAGE> 7
Maxwell(R) Eminence product, which expands on the functionality of HFSS, to
target the commercial wireless communications market and the military/aerospace
industry through its worldwide direct sales force and its international
distributors.
Sales and Marketing
Ansoft markets its products worldwide through its direct sales force and
its distributors. The Company supports its customers with skilled engineers and
technically proficient sales representatives. The Company hires application
engineers with significant industry experience in order to analyze the needs of
its customers and to gain technical insight into the development of future
products and enhancements to existing products. The Company believes that
customer referrals account for a significant percentage of the Company's new
product sales. The Company generates name recognition and sales through
advertising in trade publications and on the World Wide Web. In addition, the
Company participates in industry trade shows and organizes seminars to promote
and expand the adoption of its products.
Direct. In North America, the Company maintains sales and support offices
in Pittsburgh and San Jose, additional sales personnel in Los Angeles, Boston,
Orlando, Dallas and Detroit, and a telemarketing sales group operating from its
Pittsburgh headquarters. As of April 30, 1996, the Company had a domestic
direct sales force of 14 representatives, supported by 21 employees in
application engineering, marketing and sales administration.
In August 1995, the Company established a sales office in Asia for the
sale of its EM software. As of April 30, 1996, this office consists of four
employees in Japan and one in Singapore . In January 1996, the Company added a
sales representative in England in order to localize its direct sales effort in
Europe and has engaged a local technical consulting firm to assist with
benchmark and technology support.
Distributors and HP. In 1989, Ansoft entered into an exclusive distribution
agreement with HP (the "HP Agreement") for worldwide distribution of its HFSS
product. The HP Agreement will expire in January 1997, and the agreement will
not be renewed. HP has the right to sell the HFSS product through January 1998.
Since January 1994, the Company has directly marketed its Maxwell(R) Eminence
product, which expands on the functionality of HFSS, to target the commercial
wireless communications market and the military/aerospace industry through its
worldwide direct sales force and its international distributors. During fiscal
1996, 1995 and 1994, revenue from HP accounted for approximately 13%, 18%, and
16%, respectively, of the Company's total revenue. The Company expects that HP
will account for a lower percentage of its total revenues in the next twelve
months.
With respect to international licensing, the Company has entered into a
distribution agreement with Innotech Corporation, which is an exclusive
agreement for sales of its SI software in Japan, and agreements with other
distributors in Europe, Korea, Singapore, China and Taiwan. The Company
supports its distributors and their customers with technical, sales and
management personnel.
5
<PAGE> 8
Customers
The Company has significant breadth in its installed base with over 500
customers in the communications, semiconductor, automotive, computer,
defense/aerospace and consumer electronics industries. No single customer in
the Company's installed base accounted for more than 10% of total revenue
within any of the past three fiscal years. Representative customers by industry
include:
Communications: Motorola, Inc.; Hughes Electronics Company; Rockwell
International Corporation; Alcatel Network Systems,
Inc.; AT&T Corporation; Northern Telecom Inc.
Semiconductor: Motorola, Inc.; Texas Instruments Incorporated; Samsung
Electronics, Inc.; Lucky-Goldstar Group; Intel
Corporation; LAM Research Corporation; Analog Devices,
Inc.; Harris Corp.; Illinois Superconductor
Corporation; Integrated Device Technology Inc.
Automotive: General Motors Corporation; BMW Ltd.; Hyundai
Corporation; Robert Bosch Corp.
Computer: Sun Microsystems, Inc.; International Business Machines
Corporation; AMP Incorporated; Fujitsu, Ltd.; ITT
Cannon; NEC Corporation; Owl Displays Inc.; Teradyne,
Inc.
Defense/Aerospace: Raytheon Company Inc.; TRW, Inc.; Allied Signal
Corporation; Lockheed Martin Corporation; Sandia
Aerospace National Laboratories; Anaren Microwave Inc.;
United States Corporation; Loral Corporation; United
States Army/Redstone; Aerospatiale Inc.
Consumer
Electronics: Hitachi Ltd.; Mitsubishi Corp.; Sharp Electronics
Corporation; Sony Corporation; Dynamics Research
Corporation; China National Electric
Customer Service and Support
Ansoft provides customer support services on both a pre-sale and post-sale
basis. Pre-sale support involves the Company's application engineers working
with the direct sales force to provide on-site support during critical stages
of the user's benchmark, evaluation and implementation processes. Post-sale
support is provided pursuant to renewable annual maintenance contracts.
Post-sale services include on-line and telephone support for design engineers
and on-site and in-house training on all products. Customers with maintenance
agreements receive all product enhancement releases without additional charge.
Product upgrades that add significant new functionality are provided to
customers for an additional fee.
The Company offers a variety of training programs for customers ranging
from introductory level courses to advanced training.
6
<PAGE> 9
Product Development
The Company continually seeks to design and develop new technologies,
products and interfaces. This effort includes releasing improved versions of
its products on a regular basis and developing new products. The Company
assigns an interdisciplinary team of personnel from research and development,
software development, documentation, quality assurance, customer support and
marketing to each product development project. Ansoft develops cooperative
relationships with major customers with respect to beta-testing its new
products or enhancements and implementing suggestions for new product features.
The Company also maintains cooperative relationships with the major hardware
vendors on which the Company's products operate. The Company believes that its
team approach and cooperative relationships allow it to design products that
respond on a timely basis to emerging trends in computing, graphics and
networking technologies.
During fiscal 1996, 1995 and 1994 research and development expenses were
$1.8 million, $1.5 million and $1.3 million, respectively. As of April 30,
1996, the Company's product development group consisted of 28 employees. The
Company anticipates that it will continue to commit substantial resources to
product development for the foreseeable future.
Competition
The EDA software industry is highly competitive and is characterized by
continuing advances in products and technologies. In general, competition in
the traditional EDA industry comes from major EDA vendors, some of which have a
longer operating history, significantly greater financial, technical and
marketing resources, greater name recognition and a larger installed customer
base than the Company. These companies also have established relationships with
current and potential customers of the Company. The Company competes directly
with certain major EDA vendors and privately-held companies which provide
products based on electromagnetic principles derived from Maxwell's Equations.
There can be no assurance that the major EDA vendors and other EDA companies
will not expand and develop new products in the electromagnetics-based EDA
market. The Company also competes, on a limited basis, with the internal
development groups of its existing and potential customers, many of whom design
and develop customized design tools for their particular needs. If the Company
is unable to compete successfully against current and future competitors, the
Company's business, operating results and financial condition will be
materially adversely affected.
Ansoft believes that its current products compete effectively on the basis
of product functionality, solution speed and accuracy, reliability, price, ease
of use and technical support for applications which require accurate modeling
of electromagnetic interaction. However, there is no assurance that the Company
will not face competitive technologies that could hinder its future growth.
Proprietary Rights
The Company is heavily dependent on its proprietary software technology.
The Company relies on a combination of non-competition and confidentiality
agreements with its employees, license agreements, copyrights, trademarks and
trade secret laws to establish and protect proprietary rights to its
technology. The Company does not hold any
7
<PAGE> 10
patents. All Ansoft software is shipped with a security lock which limits
software access to authorized users. In addition, the Company does not license
or release its source code. Effective copyright and trade secret protection of
the Company's proprietary technology may be unavailable or limited in certain
foreign countries.
Maxwell(R) and ParICs(R) are registered trademarks in the United States of
Ansoft Corporation.
Employees
As of April 30, 1996, the Company had a total of 69 employees, including
28 in research and development, 35 in sales, marketing, and customer support
services and six in administration. None of the Company's employees is
represented by a collective bargaining agreement, nor has the Company
experienced any work stoppage. The Company considers its relations with its
employees to be good.
ITEM 2. PROPERTIES
The Company occupies approximately 10,000 square feet of space at its
headquarters in Pittsburgh, Pennsylvania under a lease expiring in 1999. The
current annual base rent is approximately $140,400. The Company also maintains
sales and support offices in California and Japan. The Company's current
aggregate annual rental expenses for these additional facilities is
approximately $42,000. Ansoft believes that its existing facilities are
adequate for its current needs and that suitable additional space will be
available when needed.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any litigation and is not aware of any
threatened litigation, unasserted claims or assessments that could have a
material adverse effect on the Company's business, operating results or
financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 4(A). EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning each of the
executive officers of the Company:
<TABLE>
<CAPTION>
Name Age Title
<S> <C> <C>
Zoltan J. Cendes, Ph.D ........ 50 Chief Research Scientist
Nicholas Csendes .............. 52 President and Chief Executive Officer
Thomas A.N. Miller ............ 48 Chief Financial Officer
Padmanabhan Premkumar ......... 33 Vice President-Marketing
</TABLE>
8
<PAGE> 11
Dr. Zoltan Cendes is a founder of Ansoft and has served as Chairman of the
Board of Directors of the Company and its chief research scientist, since its
formation in 1984. Since 1982, Dr. Cendes has been a university professor in
electrical and computer engineering at Carnegie Mellon University. Dr. Cendes
has lectured throughout North America, Europe and Asia on the topic of
electromagnetics and finite element analysis and has published over 100
publications on these topics. Dr. Cendes directs the research efforts of
Ansoft.
Nicholas Csendes is a founder of Ansoft and has served as President, Chief
Executive Officer and Secretary since 1992 and a director since 1984. From 1989
to 1994, Mr. Csendes was an officer, director and controlling stockholder of
Southwest Gas Systems, Inc. ("Southwest Gas"), a privately-held natural gas
company which was sold to Ensearch Corporation in 1994. Mr. Csendes was a
founder and major stockholder of IT Network, Inc. ("ITN"), the predecessor
company to Source Media, Inc. ("Source Media"), a publicly-held interactive
information service company. Mr. Csendes was a director of ITN from 1988 to
1994. From 1991 to 1993, Mr. Csendes was a director of Cableshares, Inc., a
publicly-held interactive software development company. Since 1985, Mr. Csendes
has been an officer, director and controlling stockholder of American Banner
Resources, Inc. ("ABR"), a privately-held holding company with various
interests in real estate and public and private securities.
Thomas A.N. Miller is a founder of Ansoft and has served as a director
since 1984 and as Chief Financial Officer since 1994. From 1989 to 1994, Mr.
Miller was an officer, director and controlling stockholder of Southwest Gas.
Mr. Miller was a founder of ITN and served as Chairman of the Board of ITN from
its inception in 1988 to 1994, and served as Chief Executive Officer of ITN
from its inception to December 1992. Since 1981, Mr. Miller has been President,
director and controlling stockholder of ABR and its predecessor companies.
Padmanabhan Premkumar joined Ansoft in 1989. From 1991 to 1994, Mr.
Premkumar was in charge of Ansoft's software development programs as Vice
President of Development. Since 1995, Mr. Premkumar has been Vice
President-Marketing, responsible for product planning, marketing and
commercialization of existing software product enhancements and the commercial
development of new products. Prior to joining Ansoft, Mr. Premkumar was a
research associate in the Robotics Laboratory at the University of Toledo.
Officers are appointed by the Board of Directors and serve at the
discretion of the Board. Dr. Zoltan J. Cendes and Mr. Nicholas Csendes are
brothers. There are no other family relationships between any of the directors
or executive officers of the Company.
9
<PAGE> 12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Common Stock of the Company has been listed on the Nasdaq National
Market under the symbol "ANST" since its initial public offering which was
declared effective on April 3, 1996. Prior to that date, there was no
established public trading market for the Company's Common Stock. The following
table sets forth the range of high and low sale prices of the Common Stock as
reported on the Nasdaq National Market for the fiscal year ended April 30,
1996.
<TABLE>
<CAPTION>
Fiscal 1996: HIGH LOW
---- ---
<S> <C> <C>
Fourth Quarter
(April 3, 1996 to April 30, 1996) $9.50 $7.125
</TABLE>
The Company has not paid cash dividends on its Common Stock since its
inception. The Company currently intends to retain earnings for development of
its business and, therefore, does not anticipate paying any cash dividends in
the foreseeable future.
The approximate number of shareholders of record at July 18, 1996 was 118.
As of July 18, two record holders were registered clearing agencies holding
common stock on behalf of participants of such clearing agencies.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the Company's Financial Statements and the Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein. The statement of operations data for each of the
years in the three-year period ended April 30, 1996 and the balance sheet data
as of April 30, 1996 and 1995 are derived from financial statements of the
Company which have been audited by KPMG Peat Marwick LLP, independent certified
public accountants, and are included elsewhere in this Report. The statement of
operations data for the year ended April 30, 1993 and the balance sheet data as
of April 30, 1994 are derived from financial statements of the Company which
have been audited by KPMG Peat Marwick LLP, independent certified public
accountants. The statement of operations data for the year ended April 30, 1992
and the balance sheet data at April 30, 1993 and 1992 are derived from unaudited
financial statements.
10
<PAGE> 13
<TABLE>
<CAPTION>
Year Ended April 30, (In thousands, except per share data)
-----------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Statement of Operations Data
Revenues:
License ......................... $7,995 $5,921 $ 4,944 $ 3,350 $ 2,567
Service and other ............... 700 233 177 121 --
------ ------ ------- ------- -------
Total revenue ..................... 8,695 6,154 5,121 3,471 2,567
------ ------ ------- ------- -------
Costs and expenses:
Sales and marketing ............. 5,007 3,935 2,734 1,699 1,135
Research and development ........ 1,766 1,462 1,296 1,450 1,488
General and administrative ...... 1,269 1,046 1,137 1,096 860
Write-off of capitalized software -- -- -- -- 1,230
------ ------ ------- ------- -------
Total costs and expenses ...... 8,042 6,443 5,167 4,245 4,713
------ ------ ------- ------- -------
Income (loss) from operations ..... 653 (289) (46) (774) (2,146)
Interest income (expense) ......... 35 (16) (94) (193) (133)
------ ------ ------- ------- -------
Income (loss) before income taxes . 688 (305) (140) (967) (2,279)
Income tax benefit ................ 612 -- -- -- --
------ ------ ------- ------- -------
Net income (loss) ................. $1,300 $ (305) $ (140) $ (967) $(2,279)
====== ====== ======= ======= =======
Net income (loss) per share ....... $ 0.19 $(0.06) $ (0.06) $ (0.40) $ (1.00)
====== ====== ======= ======= =======
Weighted average shares outstanding 6,873 5,528 2,394 2,394 2,286
====== ====== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Year Ended April 30, (In thousands, except per share data)
---------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance Sheet Data
Cash and cash equivalents .......... $10,728 $ 116 $ 43 $ 10 $ 59
Working capital (deficit) .......... 12,204 593 259 (748) (570)
Total assets ....................... 15,391 1,792 1,417 950 681
Total stockholders' equity (deficit) $14,291 $1,161 $(3,435) $(3,295) $(2,418)
</TABLE>
11
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
The Company develops, markets and supports EDA software, based upon
electromagnetic principles, for the design of electronic, communications and
electromechanical components and systems. The Company was incorporated in 1984
and commenced commercial shipments of its first software product, focused on
the electronic component industry, in 1987. The Company subsequently offered
solutions in both electromechanical ("EM") and signal integrity ("SI")
products. The SI products are targeted at two markets: High Speed and High
Frequency. The importance of any individual product has diminished as the
Company has introduced new products.
Revenue consists primarily of fees for licenses of the Company's software
products and fees for customer service and support. Revenue from the sale of
software licenses is recognized upon shipment of the products and fulfillment
of acceptance terms, if any. No significant obligations, including the
performance of services essential to the functionality of the software, remain
unfulfilled at the time revenue is recognized on software licenses, and with
respect to any remaining insignificant obligations, either the related revenue
is unbundled and deferred, based on the estimated fair value of related
services, or the related estimated costs are accrued. When the Company receives
advance payment for software products, such payments are recorded as deferred
revenue and recognized as revenue when products are shipped and other
obligations, if any, have been satisfied. Other revenue from customer training,
support and other services is recognized as the service is performed.
Costs directly attributable to the cost of license and service revenue are
not material in any reported period. Accordingly, the Company has not
separately disclosed these costs.
In the fourth quarter of fiscal 1996, the Company recorded a net income
tax benefit of $612,000, or $0.09 per share, resulting primarily from the
partial recognition of previously unrecorded deferred tax assets in accordance
with the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes.". The Company's
deferred tax asset of $700,000 as of April 30, 1996, consists primarily of net
operating loss carryforwards for federal income tax purposes, which are
available to offset future taxable income, and expire in increments beginning
in April 2001, through April 2010.
12
<PAGE> 15
Results of Operations
The following table sets forth the percentage of total revenue of each
item in the Company's statements of operations:
<TABLE>
<CAPTION>
Year Ended April 30, --------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues:
License .................................... 92% 96% 97%
Service and other .......................... 8 4 3
--- ---- ----
Total revenue ............................ 100 100 100
--- ---- ----
Costs and expenses:
Sales and marketing ........................ 58 64 54
Research and development ................... 20 24 25
General and administrative ................. 15 17 22
--- ---- ----
Total costs and expenses ................. 93 105 101
--- ---- ----
Income (loss) from operations ................ 7 (5) (1)
Interest income (expense) .................... -- -- (2)
--- ---- ----
Income (loss) before income taxes ............ 7 (5) (3)
Income taxes ................................. 8 -- --
--- ---- ----
Net income (loss) ............................ 15% (5)% (3)%
=== ==== ====
</TABLE>
Year Ended April 30, 1996 compared with Year Ended April 30, 1995
Revenue. The Company's license revenue increased by 35% to $8.0 million
for the year ended April 30, 1996, as compared with $5.9 million in the
previous year. The increase in revenue is primarily attributable to the
increase in the number of licenses sold. Service and other revenue increased by
200% to $700,000 for the year ended April 30, 1996, as compared with $233,000
in the previous year. The increase in service and maintenance revenue was
primarily attributable to purchased annual maintenance agreements and reflects
the continued growth of the installed base of customers and increased focus on
marketing annual maintenance agreements.
International revenue accounted for 33% and 31% of the Company's total
revenue in fiscal 1996 and 1995, respectively. The Company expects that
international revenues will account for an increasing portion of its revenues
in the future.
13
<PAGE> 16
Revenue from the HP agreement accounted for 13% and 18% of total revenue in
fiscal 1996 and 1995, respectively. The HP Agreement will expire in January
1997, and will not be renewed. HP has the right to sell the HFSS product through
January 1998. The Company expects that HP will account for a lower percentage of
its total revenues in the next twelve months. Since January 1994, the Company
has directly marketed its Maxwell(R) Eminence product, which expands on the
functionality of HFSS, to target the commercial wireless communications and
defense/aerospace markets through its worldwide direct sales force and its
international distributors.
Sales and Marketing. Sales and marketing expenses consist of salaries,
commissions paid to internal sales and marketing personnel and international
distributors, promotional costs and related operating expenses. Sales and
marketing expenses increased by 27% to $5.0 million in fiscal 1996, as compared
to $3.9 million in fiscal 1995. Sales and marketing expenses increased
primarily due to the expansion of the Company's sales and marketing
organization and, to a lesser extent, participation in domestic and
international conferences and trade shows. Sales and marketing expenses
represented 58% and 64% of total revenue in fiscal 1996 and fiscal 1995,
respectively. The decrease as a percentage of revenue is due to certain of the
expenses being of a fixed nature which have not increased proportionately with
the increase in revenue. The Company expects to increase sales and marketing
expenditures both domestically and internationally as part of its continuing
effort to expand its markets, introduce new products, build marketing staff and
programs and expand its international presence.
Research and Development Expenses. Research and development expenses
include all costs associated with the development of new products and
enhancements to existing products. Research and development expenses increased
21% to $1.8 million in fiscal 1996, as compared to $1.5 million in fiscal 1995.
The increase is due to increased costs associated with continuing product
development and enhancement of existing products. Research and development
expenses represented 20% and 24% of total revenue in fiscal 1996 and 1995,
respectively. The decrease as a percentage of revenue is due to certain of the
expenses being of a fixed nature which have not increased proportionately with
the increase in revenue. The Company anticipates that it will continue to
devote substantial resources to product research and development.
General and Administrative Expenses. General and administrative expenses
increased 21% to $1.3 million in fiscal 1996, as compared to $1.0 million in
fiscal 1995. The increase is due to additional costs required to support the
increase in operations, including the hiring of additional administrative
personnel, along with other general cost increases. General and administrative
expenses represented 15% and 17% of total revenue in fiscal 1996 and 1995,
respectively. The Company expects general and administrative expenses to
continue to increase.
Year Ended April 30, 1995 compared with Year Ended April 30, 1994
Revenue. The Company's license revenue increased by 20% to $5.9 million in
fiscal 1995, as compared to $4.9 million in fiscal 1994. The growth in license
revenue was attributable to an increase in the number of licenses sold. Service
and other revenue increased by 32% to $233,000 in fiscal 1995, as compared to
$177,000 in fiscal
14
<PAGE> 17
1994. The increases in service revenue were primarily attributable to purchased
annual maintenance agreements in connection with the continued growth of the
installed base of customers licensing the Company's products.
International revenue accounted for 31% and 28% and of the Company's total
revenue in fiscal 1995 and 1994, respectively. HP revenue accounted for 18% and
16% of total revenue in fiscal 1995 and 1994, respectively.
Sales and Marketing. Sales and marketing expenses increased by 44% to $3.9
million in fiscal 1995, as compared to $2.7 million in fiscal 1994. The
increases were primarily due to the expansion of the Company's sales and
marketing organization and, to a lesser extent, participation in domestic and
international conferences and trade shows. Sales and marketing expenses
represented 64% and 54% of total revenue in fiscal 1995 and 1994, respectively.
Research and Development Expenses. Research and development expenses
increased 13% to $1.5 million in fiscal 1995, as compared to $1.3 million in
fiscal 1994. The increase in fiscal 1995 was due to increased costs associated
with the development of new products and enhancement of existing products.
Research and development expenses represented 24% and 25% of total revenue in
fiscal 1995 and 1994, respectively.
General and Administrative Expenses. General and administrative expenses
were approximately $1.1 million in each of fiscal 1995 and 1994. General and
administrative expenses as a percentage of revenue has decreased in fiscal 1995
as revenue has increased.
Interest Expense. Interest expense decreased by 84% to $15,444 in fiscal
1995, as compared to $94,593 in fiscal 1994. Interest expense in fiscal 1994
includes interest on stockholder advances totaling $67,000. The decrease in
fiscal 1995 is primarily attributable to the issuance of Common Stock of the
Company in consideration for stockholder advances in fiscal 1995.
Quarterly Results of Operations
The following table presents unaudited quarterly results in dollar amounts
for each quarter of fiscal 1996 and fiscal 1995. The information has been
prepared on a basis consistent with the Company's annual financial statements
and, in the opinion of management, contains all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the
information for such periods. The Company's quarterly results have been in the
past, and may be in the future, subject to fluctuations due to increased
competition, the timing of new product announcements, changes in pricing
policies by the Company or its competitors, market acceptance of new and
enhanced versions of the Company's products and the size and timing of
significant licenses. The Company believes that results of operations for the
interim periods are not necessarily indicative of the results to be expected
for any future period.
15
<PAGE> 18
<TABLE>
<CAPTION>
Quarter Ended (In thousands, except per share data)
-----------------------------------------------------------------------------------
April Jan. Oct. July April Jan. Oct. July
30, 31, 31, 31, 30, 31, 31, 31,
1996 1996 1995 1995 1995 1995 1994 1994
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data
Revenues:
License ...................... $2,359 $2,066 $1,790 $1,780 $1,816 $1,276 $1,345 $1,484
Service and other ............ 323 157 131 89 58 57 89 28
------ ------ ------ ------ ------ ------ ------ ------
Total revenue .............. 2,682 2,223 1,921 1,869 1,874 1,333 1,434 1,512
------ ------ ------ ------ ------ ------ ------ ------
Costs and expenses:
Sales and marketing .......... 1,582 1,249 1,067 1,110 1,017 898 976 1,046
Research and development ..... 508 415 440 403 407 368 362 323
General and administrative ... 347 370 289 263 261 261 247 277
------ ------ ------ ------ ------ ------ ------ ------
Total costs and expenses ... 2,437 2,034 1,796 1,776 1,685 1,527 1,585 1,646
Income (loss) before taxes ... 245 189 125 93 189 (194) (151) (134)
Interest income (expense) ...... 41 (2) (2) (2) (2) (4) (4) (5)
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before taxes ... 286 187 123 91 187 (198) (155) (139)
Income taxes(1) ................ 612 -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Net income (loss) ............ $ 898 $ 187 $ 123 $ 91 $ 187 $ (198) $ (155) $ (139)
====== ====== ====== ====== ====== ====== ====== ======
Net income (loss) per share $ 0.12 $ 0.03 $ 0.02 $ 0.01 $ 0.03 $(0.03) $(0.03) $(0.03)
====== ====== ====== ====== ====== ====== ====== ======
Weighted average shares
outstanding .................. 7,302 6,832 6,861 6,893 6,893 6,438 5,638 4,306
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
(1) In the fourth quarter of fiscal 1996, the Company recorded a net income
tax benefit of $612,000 resulting primarily from the partial recognition
of previously unrecorded deferred tax assets.
Liquidity and Capital Resources
Net cash provided by financing activities includes proceeds from the
issuance of Common Stock and stockholder advances totaling $11.4 million,
$714,000, and $594,000, in fiscal 1996, 1995 and 1994, respectively. Other
financing activities have principally been borrowing and repayment of debt.
As of April 30, 1996, the Company had $10.7 million in cash and cash
equivalents. Net cash provided by operating activities was $717,000 in fiscal
1996. Net cash used in operating activities was $340,000, and $126,000 in
fiscal 1995 and 1994, respectively.
Capital expenditures, consisting primarily of purchases of computer
equipment, were $400,000, $277,000 and $246,000 in fiscal 1996, 1995 and 1994,
respectively. The Company expects that purchases of computer equipment will
increase as the Company's employee base grows.
16
<PAGE> 19
As of April 30, 1996, the Company has working capital of $12.2 million.
The company believes that the net proceeds from its initial public offering,
together with available funds and cash flows expected to be generated by
operations, will be sufficient to meet its anticipated cash needs for working
capital and capital expenditures for at least the next twelve months.
Thereafter, if cash generated from operations is insufficient to satisfy the
Company's liquidity requirements, the Company may seek additional funds through
equity or debt financing. There can be no assurance that additional financing
will be available or that, if available, such financing will be on terms
favorable to the Company.
Effects of Inflation
To date, inflation has not had a material impact on the Company's
financial results.
Recent Accounting Pronouncements:
In March 1995, the Financial Accounting Standards Board released Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No.
121"). SFAS No. 121 established guidelines for recognition of impairment
losses related to long-lived assets and certain intangibles and related
goodwill for both assets to be held and used as well as assets to be disposed
of. The Company believes that the impact of the adoption of SFAS No. 121 will
not have a material impact on its financial statements.
In addition, the Financial Accounting Standards Board released Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123") in October 1995. SFAS No. 123 outlines
preferable accounting treatment and reporting guidelines for employee stock
compensations plans. The Company intends to adopt SFAS No. 123 through
disclosure only effective May 1, 1996.
17
<PAGE> 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Ansoft Corporation:
We have audited the accompanying balance sheets of Ansoft Corporation as
of April 30, 1996 and 1995 and the related statements of operations,
stockholders' equity (deficit) and cash flows for each of the years in the
three-year period ended April 30, 1996. Our audit also included the financial
statement schedule for the year ended April 30, 1996, listed at Item 14(a).
These financial statements and schedule 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 financial statements referred to above present fairly,
in all material respects, the financial position of Ansoft Corporation as of
April 30, 1996 and 1995, and the results of its operations and its cash flows
for each of the years in the three-year period ended April 30, 1996 in
conformity with generally accepted accounting principles. Also in our opinion,
the related financial statement schedule, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects, the information set forth
therein.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
May 29, 1996
18
<PAGE> 21
Balance Sheet
<TABLE>
<CAPTION>
------------------------
April 30, (In thousands except per share data) 1996 1995
---------- ----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents........................ $10,728 $ 116
Accounts receivable, less allowance for doubtful
accounts of $125 and $90, respectively........ 1,666 1,100
Marketable Securities held to maturity........... 119 --
Deferred Taxes................................... 700 --
Prepaid expenses and other assets................ 91 8
------- -------
Total current assets............................... 13,304 1,224
Plant and equipment, net .......................... 724 521
Marketable Securities held to maturity............. 1,340 --
Other asset........................................ 13 13
Intangible asset, less accumulated amortization of
$110 and $86 respectively ....................... 10 34
------- -------
Total assets....................................... $15,391 $ 1,792
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Note payable to bank ............................ $ -- $ 75
Accounts payable................................. 345 215
Accrued expenses................................. 131 97
Accrued wages.................................... 209 95
Deferred revenue................................. 415 149
------- -------
Total current liabilities.......................... 1,100 631
Total liabilities.................................. 1,100 631
------- -------
Stockholders' equity:
Preferred stock, par value $.01 per share;
1,000 shares authorized, no shares
outstanding................................... -- --
Common stock, par value $.01 per share;
10,000 authorized shares; issued and
outstanding 7,636 and 6,093
shares, respectively.......................... 76 61
Additional paid-in capital....................... 17,204 5,831
Receivable from stockholders..................... -- (442)
Accumulated deficit.............................. (2,989) (4,289)
------- -------
Total stockholders' equity ........................ 14,291 1,161
------- -------
Total liabilities and stockholders'
equity .......................................... $15,391 $ 1,792
======= =======
</TABLE>
See accompanying notes to financial statements.
19
<PAGE> 22
Statements of Operations
<TABLE>
<CAPTION>
Years Ended April 30, (In thousands, except per share data)
-----------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Revenues:
License ....................................... $ 7,995 $ 5,921 $ 4,944
Service and other ............................. 700 233 177
------- ------- -------
Total revenue ................................... 8,695 6,154 5,121
Costs and expenses:
Sales and marketing ........................... 5,007 3,935 2,734
Research and development ...................... 1,766 1,462 1,296
General and administrative .................... 1,269 1,046 1,137
------- ------- -------
Total costs and expenses ........................ 8,042 6,443 5,167
------- ------- -------
Income (loss) from operations ................... 653 (289) (46)
Interest income ................................. 41 -- --
Interest expense ................................ (6) (16) (94)
------- ------- -------
Income (loss) before income taxes ............... 688 (305) (140)
Income taxes .................................... 612 -- --
------- ------- -------
Net income (loss) ............................... $ 1,300 $ (305) $ (140)
======= ======= =======
Net income (loss) per share ..................... $ 0.19 $ (0.06) $ (0.06)
======= ======= =======
Weighted average shares outstanding ............. 6,873 5,528 2,394
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
20
<PAGE> 23
Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Common Stock Receivable Additional
------------------ From Paid-in Accumulated
(In thousands) Shares Amount Stockholders Capital Deficit Total
-------- ------- ------------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, April 30, 1993...... 1,680 $ 17 $ -- $ 532 $ (3,844) $(3,295)
Net loss..................... -- -- -- -- (140) (140)
----- ------ ----- ------- -------- -------
Balance, April 30, 1994...... 1,680 $ 17 $ -- $ 532 $ (3,984) $(3,435)
Net loss..................... -- -- -- 33 (305) (272)
Issuance of common stock..... 4,413 44 (442) 5,266 -- 4,868
----- ------ ----- ------- -------- -------
Balance, April 30, 1995...... 6,093 $ 61 $(442) $ 5,831 $ (4,289) $ 1,161
Net income................... -- -- -- -- 1,300 1,300
Issuance of common stock..... 1,543 15 -- 11,373 -- 11,388
Payments from Stockholders... -- -- 442 -- -- 442
----- ------ ----- ------- -------- -------
Balance, April 30, 1996...... 7,636 $ 76 $ -- $17,204 $ (2,989) $14,291
===== ====== ===== ======= ======== =======
</TABLE>
See accompanying notes to financial statements.
21
<PAGE> 24
Statements of Cash Flows
<TABLE>
<CAPTION>
-------------------------------
Year Ended April 30, (In thousands) 1996 1995 1994
------- ----- -----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).......................... $ 1,300 $(304) $(140)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation......................... 197 145 126
Amortization......................... 24 24 24
Non-cash compensation................ -- 32 --
Deferred taxes....................... (700) -- --
Changes in assets and liabilities:
Accounts receivable............... (566) (194) (353)
Prepaid expenses and other
assets.......................... (83) -- (2)
Other long-term assets............ -- -- 16
Accounts payable.................. 130 (65) 87
Accrued wages and expenses........ 148 (23) 125
Deferred revenue.................. 266 45 (9)
------- ----- -----
Net cash provided by (used
in) operating activities 716 (340) (126)
------- ----- -----
Cash flows from investing activities:
Purchases of plant and equipment......... (400) (277) (245)
Purchases of marketable securities
held to maturity....................... (1,459) -- --
------- ----- -----
Net cash used in investing activities...... (1,859) (277) (245)
------- ----- -----
Cash flows from financing activities:
Repayment of borrowings.................. (75) (24) (189)
Proceeds from the issuance of common
stock, net............................. 11,388 14 --
Proceeds from related party
stockholders, net...................... 442 700 593
------- ----- -----
Net cash provided by financing activities 11,755 690 404
------- ----- -----
Net increase in cash and cash
equivalents.............................. 10,612 73 33
Cash and cash equivalents at beginning
of period................................ 116 43 10
------- ----- -----
Cash and cash equivalents at end of
period................................... $10,728 $ 116 $ 43
======= ===== =====
Supplemental disclosures of cash flow
information:
Cash paid for interest................... $ 6 $ 15 $ 28
Cash paid for income taxes............... $ 72 $ 2 $ 3
</TABLE>
See accompanying notes to financial statements.
22
<PAGE> 25
Notes to Financial Statements
(1) Nature of Business and Summary of Significant Accounting Policies
Nature of Business and Basis of Presentation
Ansoft Corporation (Ansoft) develops, markets and supports electronic
design automation software, based upon electromagnetic principles, for the
design of electronic, communications and electromechanical components and
systems.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses and disclosure of contingent assets and liabilities. The estimates
and assumptions used in the accompanying financial statements are based on
management's evaluation of the relevant facts and circumstances as of the date
of the financial statements. Actual results may differ from those estimates.
Cash Equivalents
Cash equivalents include only highly liquid debt instruments purchased
with original maturity dates of three months or less.
Marketable Securities
In fiscal 1995, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" on a prospective basis. Marketable Securities portfolio
consists of corporate bonds and agency issues and are classified as of April
30, 1996, as held to maturity. Marketable securities held to maturity are
recorded at amortized cost. A decline in the fair value of any marketable
security below cost, that is deemed other than temporary, is charged to
earnings resulting in a new cost basis for the security. Costs of investments
sold are determined on the basis of specific identification.
Plant and Equipment
Plant and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation for financial reporting purposes is computed using
the straight-line method based upon the estimated useful lives of the assets
which range from three to seven years. Assets acquired under capital leases and
leasehold improvements are amortized over their useful life or the lease term,
as appropriate.
Revenue Recognition
The Company recognizes revenue in accordance with the provisions of
American Institute of Certified Public Accountants Statement of Position No.
91-1, Software Revenue Recognition.
Revenue consists primarily of fees for licenses of the Company's software
products and fees for customer service and support. Revenue from the sale of
software licenses is recognized upon shipment of the products and fulfillment
of acceptance terms, if any. No significant obligations, including the
23
<PAGE> 26
performance of services essential to the functionality of the software, remain
unfulfilled at the time revenue is recognized on software licenses, and with
respect to any remaining insignificant obligations, either the related revenue
is unbundled and deferred, based on the estimated fair value of related
services, or the related estimated costs are accrued. When the Company receives
advance payment for software products, such payments are recorded as deferred
revenue and recognized as revenue when products are shipped and other
obligations, if any, have been satisfied. Other revenue from customer training,
support and other services is recognized as the service is performed.
The Company uses distributors for the majority of its international sales.
Revenue generated through distributors is generally recorded at the gross sales
price paid by the customer. Commissions withheld by distributors are recorded
as sales and marketing expense. License revenue also includes royalties earned
on sales of certain products under terms of an agreement with Hewlett-Packard
Corporation (see also note 8). Royalty revenue is recognized upon shipment of
product as reported to the Company by Hewlett-Packard. All obligations of the
Company are satisfied upon shipment of product by Hewlett-Packard.
Costs directly attributable to the cost of license and service revenue are
not material in any reported period. Accordingly, the Company has not
separately disclosed these costs.
Software Development Costs
Under Statement of Financial Accounting Standards (SFAS) No. 86, software
development costs are capitalized beginning when a product's technological
feasibility has been established and ending when a product is available for
general release to customers. Technological feasibility is deemed to have been
established upon completion of a detail program design or, in its absence,
completion of a working model. Generally, the establishment of technological
feasibility of the Company's products and general release have coincided. As a
result, the Company has not capitalized any software development costs because
any costs meeting the requirements of SFAS No. 86 have not been significant.
Intangible Asset
In 1992, the Company acquired the rights to a software product marketed as
the ParICs Modeler. This asset is carried at cost less accumulated amortization
calculated using the straight-line method and a useful life of five years.
Income Taxes
Income taxes are provided for under the provisions of SFAS No. 109,
"Accounting for Income Taxes," for all periods presented. Under the asset and
liability method of SFAS No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
Under SFAS No. 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Valuation allowances are established when necessary to reduce
deferred tax assets to the amounts expected to be realized.
24
<PAGE> 27
Net Income (Loss) Per Share
Net income (loss) per share is computed using the weighted average number
of common and common equivalent shares outstanding during the period. Common
equivalent shares are not included in the per share calculations where their
inclusion would be antidilutive, except that in accordance with certain SEC
Staff Accounting Bulletins, common and common equivalent shares issued during
the 12 months preceding the initial filing of the Registration Statement for
the Company's initial public offering have been included in the calculation
using the treasury stock method as if they were outstanding for all periods
presented.
(2) Plant and Equipment
Plant and equipment consist of the following:
<TABLE>
<CAPTION>
-------------------
April 30, (In thousands) 1996 1995
-------- -------
<S> <C> <C>
Computer equipment....................................... $ 1,404 $1,036
Furniture and fixtures................................... 262 230
Leasehold improvements................................... 2 2
------- ------
1,668 1,268
Less allowances for depreciation and amortization... 944 747
------- ------
724 521
======= ======
</TABLE>
(3) Marketable Securities
Information about marketable investment securities at April 30, 1996, is
as follows:
<TABLE>
<CAPTION>
(In thousands) Amortized Unrealized Unrealized Market
cost gains losses value
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
Marketable Securities $ 1,459 9 -- $ 1,468
======= ===== ===== =======
</TABLE>
The carrying values of debt securities as of April 30, 1996, by
contractual maturity is shown below:
<TABLE>
<CAPTION>
(In thousands)
-------
<S> <C>
Due in one year or less.................................... $ 119
Due in one to five years................................... 914
Due in five to ten years................................... 426
-------
$ 1,459
=======
</TABLE>
25
<PAGE> 28
(4) Borrowings
In November 1991, the Company terminated its line of credit agreement with
a bank and converted the outstanding balance, $150,000, to a secured note
payable. The bank had the right to demand payment in full in accordance with
the original line of credit agreement. Principal and interest were payable in
84 monthly installments which began December 1, 1991. The note provided for the
payment of interest at the prime rate of interest plus 1%. The interest rate
was 9.75% and 7.75% as of April 30, 1995 and 1994, respectively. The note was
repaid in full in February 1996.
In 1992, the Company purchased the assets of ParICs, Inc. for $120,000.
Payment was in the form of a $120,000 note, payable in monthly installments
over a five-year period commencing August 1992. The note was paid in full in
1994.
On March 19, 1993, the Company borrowed $150,000 from a former stockholder
evidenced by a note payable at 8% interest. The note was paid in full in 1994.
(5) Leases
The Company leases its facilities under operating lease agreements which
expire in 1999. Rental expense incurred by the Company under operating lease
agreements totaled $187,063, $154,088 and $120,300 for the years ended April
30, 1996, 1995 and 1994, respectively. The future minimum lease payments for
such operating leases as of April 30, 1996, are:
<TABLE>
<CAPTION>
Year ending April 30, (In thousands)
- ----------------------
<S> <C>
1997........................................................ $ 148
1998........................................................ 140
1999........................................................ 105
Thereafter.................................................. --
-----
$ 393
=====
</TABLE>
(6) Stockholders' Equity (Deficit) and Advances
In May and December 1994, the Company issued 1,397,600 shares and 400,000
shares, respectively, to a corporation whose sole stockholders had been
directors and executive officers of the Company since the formation of the
Company, for settlement of prior advances totaling $2,072,000. In May 1994, the
Company issued 614,524 shares to three directors and executive officers of the
Company at that time for settlement of prior advances totaling $670,129. In
September 1994, the Company issued 1,332,000 shares to nine persons (including
three directors and executive officers of the Company at that time) for
settlement of prior advances totaling $1,412,659. In December 1994, the Company
issued 400,000 shares to two of the directors and executive officers of the
Company at that time for settlement of advances in fiscal 1995 totaling
$500,000. The exchange rates for such advances were fixed at the time of the
initial advances, at the estimated fair market value of the Common Stock on the
date of such advance. Interest expense in 1994 includes interest on stockholder
advances totaling $66,740.
26
<PAGE> 29
In April 1996, the Company closed its initial public offering of common
stock at $8.50 per share. The net proceeds of the offering were $11.3 million,
after deducting applicable costs and expenses.
(7) Common Stock Options
The Company's 1988 Stock Option Plan (1988 Plan) authorizes the issuance
of 850,000 shares of common stock for the grant of incentive or nonstatutory
stock options to employees and directors. Under the terms of the 1988 Plan,
options to purchase Common Stock are granted at no less than the stock's
estimated fair market value at the date of the grant and may be exercised
during specified future periods as determined by the Board of Directors. The
1988 Plan provides that the options shall expire no more than ten years after
the date of the grant.
In March 1995, the Board of Directors approved a 1995 Stock Option Plan
(1995 Plan) that authorized the issuance of up to 350,000 shares of Common
Stock for the grant of incentive or nonstatutory stock options to employees and
directors. In January 1996, the Board of Directors approved an additional
300,000 shares of common stock for grant. Under the terms of the 1995 Plan,
options to purchase Common Stock are granted at no less than the stock's
estimated fair market value at the date of the grant and may be exercised
during specified future periods as determined by the Board of Directors. The
1995 Plan provides that the options shall expire no more than ten years after
the date of the grant. Under the 1995 Plan, the Board approved the granting of
incentive stock options to employees who elected to exercise up to 50% of their
currently outstanding incentive stock options under the 1988 Plan. In addition,
employees were given the right to require the Company to buy back any stock
purchased under this offer at the exercise price plus 10% per share from March
15, 1996 until March 15, 1997. American Banner Resources, Inc., a company
wholly owned by two directors of the Company, has agreed to purchase the stock
repurchased by the Company under this program at a price equal to the price
paid by the Company. Employees were also offered the ability to finance the
stock purchased from the exercise of their 1988 Plan options through the
origination of two-year, 8% loans from American Banner Resources, Inc. In
connection with this transaction, the Company recorded a charge to fiscal 1995
operations of $32,558 representing compensation equal to the 10% per share
premium on the 1988 options which were exercised pursuant to the 1995 Plan.
Shares under outstanding options under the 1988 Plan and the 1995 Plan are as
follows:
Shares under Outstanding Options
<TABLE>
<CAPTION>
-------------------------
Shares Price
-------- -----------
<S> <C> <C>
Outstanding, April 30, 1993 513,132 $0.32-$1.75
Granted................................ 320,017 $1.75
Canceled............................... (45,000) $1.75
-------- -----------
Outstanding, April 30, 1994 788,149 $0.32-$1.75
Granted................................ 341,508 $1.75-$2.00
Exercised.............................. (217,967) $0.32-$1.75
Canceled............................... (149,473) $1.75
-------- -----------
</TABLE>
27
<PAGE> 30
<TABLE>
<S> <C> <C>
Outstanding, April 30, 1995 762,217 $1.00-$2.00
Granted................................ 174,000 $1.75-$2.00
Exercised.............................. (42,868) $0.32-$1.75
Canceled............................... (58,132) $1.75
-------- -----------
Outstanding, April 30, 1996 835,217 $1.00-$2.00
======== ===========
</TABLE>
Options to purchase 504,411 shares of Common Stock were exercisable at
April 30, 1996 and options to purchase 403,948 shares of Common Stock were
available for future grant at April 30, 1996.
In addition to the options described above, the Chairman of the Board of
Directors received an option to purchase 200,000 shares of Common Stock at an
exercise price of $5.00 per share in April 1995. At that time, such exercise
price was considered to be above the estimated fair market value. As of April
30, 1996, all such options were still outstanding and unexercised. The options
expire ten years after the date of the grant.
(8) Export Sales, Major Customers and Credit Risk
Export sales, principally to Asia, accounted for 33%, 31% and 28% of total
revenues in 1996, 1995 and 1994, respectively. Included in export sales to Asia
were sales to Japan, which accounted for approximately 13%, 14% and 10% of
total revenue in fiscal 1996, 1995 and 1994, respectively. No other foreign
country accounted for more than 10% of total revenue during these periods.
Revenue from one distributor accounted for approximately $684,000,
$489,000 and of total revenue in fiscal 1995 and 1994, respectively. As of
April 30, 1995, accounts receivable from this distributor was $60,467.
In 1989, the Company entered into an exclusive distribution agreement with
Hewlett-Packard (the "HP agreement") for worldwide distribution of its HFSS
product. Revenue from HP accounted for approximately $1,129,000, $1,078,000 and
$821,000 of total revenue in fiscal 1996, 1995 and 1994, respectively. The HP
agreement expires in January 1997, and will not be renewed. HP has the right to
sell the HFSS product until January 1998. In the opinion of management, the
expiration of the distribution agreement will not have a material adverse
effect on the Company's financial position or results of operations.
The Company markets its software products to customers throughout the
world directly and through distributors and generally does not require
collateral. However, letters of credit are obtained from certain international
customers prior to shipment. The Company performs ongoing credit evaluations of
its customers and maintains an allowance for potential credit losses. The
Company believes that it has adequately provided for credit losses.
28
<PAGE> 31
(9) Income Taxes
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
---------------------------
April 30, (In thousands) 1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Current:
Federal ................................ $ 14 -- --
Foreign ................................ 72 -- --
State .................................. 2 -- --
----- ----- -----
Total ................................ 88 -- --
Deferred:
Federal ................................ (638) -- --
State .................................. (62) -- --
----- ----- -----
Total ................................ (700) -- --
----- ----- -----
Total provision for income taxes ......... $ 612 $ -- $ --
===== ===== =====
</TABLE>
The Company's actual income tax expense (benefit) differs from the
expected income tax expense (benefit) computed by applying the statutory
federal income tax rate to income before income taxes as a result of the
following:
<TABLE>
<CAPTION>
--------------------------
April 30, (In thousands) 1996 1995 1994
----- ----- ----
<S> <C> <C> <C>
Income tax expense (benefit) at statutory
rate ........................................ $ 234 $(104) $(48)
State income tax, net of federal offset ........ 41 (18) (15)
Expiration of State net operating losses ....... 91 -- --
Change in valuation allowance .................. (992) 114 61
Other, net ..................................... 14 8 2
----- ----- ----
Actual income tax expense (benefit) ............ $(612) $ -- $ --
===== ===== ====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
--------------------
April 30, (In thousands) 1996 1995
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward .................... $ 1,245 $ 1,610
Allowance for doubtful accounts .................... 51 32
Alternative Minimum Tax credit carryforward ........ 14 --
Foreign Tax Credit carryforward .................... 72 --
Other .............................................. -- 14
------- -------
Total gross deferred tax assets ...................... 1,382 1,656
</TABLE>
29
<PAGE> 32
<TABLE>
<S> <C> <C>
Less valuation allowance ............................. 599 1,591
------- -------
Net deferred tax assets .............................. 783 65
======= =======
Deferred tax liabilities:
Property, plant and equipment ...................... (83) (65)
------- -------
Total gross deferred tax liability ................... (83) (65)
------- -------
Net deferred taxes ................................... $ 700 $ --
======= =======
</TABLE>
The Company has established a valuation allowance against its net deferred
tax assets due to the uncertainty surrounding the realization of such assets
pursuant to SFAS No. 109. The decrease in the valuation allowance during the
fourth quarter of the year ended April 30, 1996 was due to management's
determination that some portion of the deferred tax assets would more likely
than not be realized in the future. This determination was due in part to the
successful completion of the Company's IPO, which is expected to generate
future taxable investment income on the IPO proceeds. The ultimate realization
of the remaining deferred tax assets is dependent upon the generation of future
taxable income beyond that which is deemed more likely than not at this time.
Management evaluates on a quarterly basis the recoverability of the deferred
tax assets and the level of the valuation allowance. Due to the uncertainty of
the future financial results of the company, a valuation allowance is
maintained for the remaining deferred tax assets. At such time as it is
determined that it is more likely than not that deferred tax assets are
realizable, the valuation allowance will be reduced.
As of April 30, 1996, the Company had net operating loss carryforwards for
federal income tax purposes of $3,327,161 which are available to offset future
federal taxable income, if any, and expire in relatively equal increments,
beginning April 30, 2001 through April 30, 2010.
(10) Related Party Transactions
Certain of the Company's principal stockholders are also members of the
Board of Directors and executive management.
In 1992, the Company entered into an agreement with a distributor under
which distribution rights in Japan were granted for certain Company products.
In addition, the distributor purchased 120,000 shares of the Company's Common
Stock at a price of $2.50 per share. Sales through the distributor were
approximately $684,000 and $489,000 in 1995 and 1994, respectively. These
transactions were on terms no less favorable to the Company than could be
obtained from unrelated third parties. In fiscal 1995, the Company terminated
the distribution agreement. In the opinion of management, the termination of
the distribution agreement will not have a material adverse effect on the
Company's financial position or results of operations.
(11) Employee Benefit Plan
The Company has a 401(k) savings and retirement plan which covers its
full-time employees who have attained the age of 21 and have completed six
months of service. Eligible employees make voluntary contributions to the plan
up to 15% of their annual compensation. The Company is not required to
contribute, nor has it contributed, to the 401(k) Plan.
30
<PAGE> 33
(12) Commitments and Contingencies
The Company is not a party to any litigation and is not aware of any
threatened litigation, unasserted claims or assessments that could have a
material adverse effect on the Company's business, operating results or
financial condition.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
31
<PAGE> 34
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) DOCUMENTS FILED AS PART OF THIS REPORT:
1. FINANCIAL STATEMENTS. The following consolidated financial statements
of the Company are filed as part of this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Report of KPMG Peat Marwick LLP 18
Balance Sheet as of April 30, 1996 and 1995 19
Statement of Operations for the years ended April 30, 1996, 1995 and 1994 20
Statement of Stockholders' Equity (Deficit) for the years ended April 30, 1996,
1995 and 1994 21
Statement of Cash Flows for the years ended April 30, 1996, 1995 and 1994 22
Notes to Financial Statements 23
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts and Reserves 34
</TABLE>
Financial statement schedules not listed above have been omitted because they
are inapplicable, are not required under applicable provisions of Regulation
S-X, or the information that would otherwise be included in such schedules is
contained in the registrant's financial statements or accompanying notes.
2. EXHIBITS. The Exhibits listed below are filed or incorporated by
reference as part of this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
3.1 Articles of Incorporation of the Company (incorporated by
reference from Registration Statement No. 333-1398).
3.2 Bylaws of the Company (incorporated by reference from
Registration Statement No. 333-1398).
*10.1 1988 Stock Option Plan (incorporated by reference from
Registration Statement No. 333-1398).
*10.2 1995 Stock Option Plan (incorporated by reference from
Registration Statement No. 333-1398).
*10.3 Zoltan Cendes Stock Option Plan, dated April 30, 1995
(incorporated by reference from Registration Statement
No. 333-1398).
</TABLE>
32
<PAGE> 35
<TABLE>
<S> <C>
10.4 Office Lease Agreement between Commerce Court Associates and
the Company dated June 7, 1989.
10.5 Amendment No. 1 to Office Lease Agreement between Commerce Court
Associates and the Company dated March 17, 1994 (incorporated by
reference from Registration Statement No. 333-1398).
10.6 Software Distribution Agreement, by and between the Company and
Hewlett-Packard Company, dated January 1, 1994 (incorporated by
reference from Registration Statement No. 333-1398).
10.7 First Amendment to Software Distribution Agreement, by and
between the Company and Hewlett-Packard Company, dated May 9, 1995
(incorporated by reference from Registration Statement No. 333-1398).
10.8 Second Amendment to Software Distribution Agreement, by and between
the Company and Hewlett-Packard Company, dated September 7, 1995
(incorporated by reference from Registration Statement No. 333-1398).
10.9 Underwriting Agreement dated April 3, 1996 by and between Registrant
and Janney Montgomery Scott Inc. and Pennsylvania Merchant Group Ltd.,
as representatives for the Underwriters identified therein (filed herewith).
11.1 Calculation of Earnings Per Share (filed herewith).
27.1 Financial Data Schedule (filed herewith).
</TABLE>
- ----------------
* Denotes management contracts and compensatory plans and arrangements required
to be identified by Item 14(a)(3).
(b) REPORTS ON FORM 8-K:
No Reports on Form 8-K were filed by the Company during the last
quarter of fiscal year 1996.
(c) The Company hereby files as exhibits to this Form 10-K the exhibits set
forth in Item 14(a)(2) hereof which are not incorporated by reference.
(d) The Company hereby files as financial statement schedules to this Form
10-K the financial statement schedules set forth in Item 14(a)(2) hereof.
33
<PAGE> 36
ITEM 14 (A).
Schedule II-Valuation and Qualifying Accounts
(In thousands)
<TABLE>
<CAPTION>
Balance as of Additions Balance as of
the Beginning Charged to Costs the End of
of the Period and Expenses Deductions the Period
------------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Year ended April 30, 1996
Allowance for doubtful
accounts ............... 70 55 -- 125
Year ended April 30, 1995
Allowance for doubtful
accounts ............... 60 10 -- 70
Year ended April 30, 1994
Allowance for doubtful
accounts ............... 35 25 -- 60
</TABLE>
34
<PAGE> 37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date July 23, 1996 ANSOFT CORPORATION.
By: /s/ NICHOLAS CSENDES
-------------------------------------
Nicholas Csendes
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on July 23, 1996.
<TABLE>
<CAPTION>
Signature Title
<S> <C>
(1) Principal Executive, Financial
Accounting Officers
/s/ NICHOLAS CSENDES, President, Chief Executive Officer and Director
- -----------------------------
Nicholas Csendes
/s/ ZOLTAN J. CENDES, PH.D. Chairman of the Board and Director
- -----------------------------
Zoltan J. Cendes, Ph.D.
/s/ THOMAS A.N. MILLER Chief Financial Officer and Director
- -----------------------------
Thomas A.N. Miller
/s/ JACOB K. WHITE, PH.D. Director
- -----------------------------
Jacob K. White, Ph.D.
/s/ JOHN N. WHELIHAN Director
- -----------------------------
John N. Whelihan
</TABLE>
35
<PAGE> 1
EXHIBIT 10.9
1,725,000 Shares
ANSOFT CORPORATION
Common Stock
UNDERWRITING AGREEMENT
Philadelphia, Pennsylvania
April 3, 1996
JANNEY MONTGOMERY SCOTT INC.
PENNSYLVANIA MERCHANT GROUP LTD
As Representatives of the Several
Underwriters Named in SCHEDULE I
Hereto
c/o Janney Montgomery Scott Inc.
1801 Market Street
Philadelphia, Pennsylvania 19103
Dear Ladies and Gentlemen:
Ansoft Corporation, a Delaware corporation (the "Company"), proposes to
sell to Janney Montgomery Scott Inc. and Pennsylvania Merchant Group Ltd (the
"Representatives") and the several other underwriters named in SCHEDULE I hereto
(collectively with the Representatives, the "Underwriters") 1,500,000 shares of
the Company's common stock ("Common Shares"). The shares of the Company's common
stock to be sold to the Underwriters by the Company are hereinafter referred to
as the "Firm Shares." The respective amounts of the Firm Shares to be so
purchased by the several Underwriters are set forth opposite their names in
Schedule I hereto. The Firm Shares shall be offered to the public at an initial
public offering price of $8.50 per Firm Share (the "Offering Price").
In addition, in order to cover over-allotments in the sale of the Firm
Shares, the Underwriters may purchase for the Underwriters' own accounts,
ratably in proportion to the amounts set forth opposite their respective names
in SCHEDULE I hereto, up to 225,000 additional Common Shares from the Company
(such additional Common Shares are referred to herein as the "Optional Shares").
If any Optional Shares are purchased, the Optional Shares shall be purchased for
offering to the public at the Offering Price and in accordance with the terms
and
<PAGE> 2
conditions set forth herein. The Firm Shares and the Optional Shares are
referred to collectively herein as the "Shares."
The Company, intending to be legally bound, hereby confirms its agreement
with the Underwriters as follows:
1. REPRESENTATIONS AND WARRANTIES.
(a) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the several Underwriters that:
(i) the Company has prepared, in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations (the "Regulations"), of the Securities and Exchange
Commission (the "SEC",) under the Act in effect until applicable times, and has
filed with the SEC a registration statement on Form S-1 (File No. 333-1398) and
one or more amendments thereto for the purpose of registering the Shares under
the Act. Copies of such registration statement and any amendments thereto, and
all forms of the related prospectus contained therein, have been delivered to
the Representatives. Any preliminary prospectus included in such registration
statement or filed with the SEC pursuant to Rule 424(a) of the Regulations is
hereinafter called a "Preliminary Prospectus." The various parts of such
registration statement, including all exhibits thereto and the information (if
any) contained in the form of final prospectus filed with the SEC pursuant to
Rule 424(b) of the Regulations in accordance with Section 5(a) of this Agreement
and deemed by virtue of Rule 424 of the Regulations to be part of the
registration statement at the time it was declared effective, each as amended at
the time the registration statement became 'effective, are hereinafter
collectively called the "Registration Statement." The final prospectus in the
form included in the Registration Statement or first filed with the SEC pursuant
to Rule 424(b) of the Regulations and any amendments or supplements thereto is
hereinafter called the "Prospectus";
(1)
(ii) the Registration Statement has become effective under the
Act and the SEC has not issued any stop order suspending the effectiveness of
the Registration Statement or preventing or suspending the use of the
Preliminary Prospectus, nor has the SEC instituted or threatened to institute
proceedings with respect to such an order. No stop order suspending the sale of
the Shares in any jurisdiction designated by the Representatives as provided for
in Section 5(f) hereof has been issued, and no proceedings for that purpose have
been instituted or threatened. The Company has complied in all material respects
with all requests of the SEC, or requests of which the Company has been advised
of any state securities commission in a state designated by the Representatives
as provided for in Section 5(f) hereof, for additional information to be
included in the Registration Statement, any Preliminary Prospectus or the
Prospectus unless such request has been waived. Each Preliminary Prospectus
conformed to all the requirements of the Act and the Regulations as of its date
in all material respects and did not as of its date contain any untrue statement
of material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except the foregoing shall not
-2-
<PAGE> 3
apply to statements in or omissions from any Preliminary Prospectus in reliance
upon and in conformity with information supplied to the Company in writing by
or on behalf of any Underwriter through the Representatives expressly for use
therein. The Registration Statement, on the date on which it is declared
effective by the SEC (the "Effective Date") and when any post-effective
amendment thereof shall become effective, and the Prospectus, at the time it is
filed with the SEC pursuant to Rule 424(b) and on the Closing Date (as defined
in Section 3 hereof) and any Option Closing Date (as defined in Section 4(b)
hereof), will conform in all material respects to all the requirements of the
Act and the Regulations, and will not, on any of such dates, include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading,
except that this representation and warranty does not apply to statements in or
omissions from the Registration Statement or the Prospectus made in reliance
upon and in conformity with information furnished to the Company in writing by
or on behalf of any Underwriter through the Representatives expressly for use
therein;
(iii) the Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with all
necessary corporate power and authority, and all required licenses, permits,
clearances, certifications, registrations, approvals, consents and franchises
(including, without limitation, authorizations under all relevant insurance laws
and regulations), to own or lease and operate its properties and to conduct its
business as described in the Prospectus, and to execute, deliver and perform
this Agreement;
(iv) this Agreement has been duly authorized, executed and
delivered by the Company and constitutes its legal, valid and binding
obligation, enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by equitable principles or by the
application of bankruptcy, insolvency or other similar laws relating to or
affecting creditor's rights generally, and except as rights to indemnity and
contribution hereunder may be limited by applicable securities laws;
(v) the execution, delivery and performance of this Agreement by
the Company does not and will not, with or without the giving of notice or the
lapse of time, or both, (a) conflict with any term or provision of the Company's
Certificate of Incorporation or Bylaws; (b) result in a breach of, constitute a
default under, result in the termination or modification of, result in the
creation or imposition of any lien, security interest, charge or encumbrance
upon any of the assets of the Company, or require any payment by the Company or
impose any liability on the Company pursuant to, any contract, indenture,
mortgage, deed of trust, commitment or other agreement or instrument to which
the Company is a party or by which any of the Company's assets are bound or
affected; (c) assuming compliance with Blue Sky laws and regulations applicable
to the offer and sale of the Shares, violate any law, rule, regulation,
judgment, order or decree of any government or governmental agency,
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any of the Company's properties or business; or (d) result in a
breach, termination or lapse of the Company's corporate power and authority to
own or lease and operate its assets and properties and conduct its business as
described in the Prospectus;
-3-
<PAGE> 4
(vi) at the date or dates indicated in the Prospectus, the
Company had the duly authorized and outstanding capital stock set forth in the
Prospectus. On the Effective Date, the Closing Date and any Option Closing Date,
there will be no options or warrants for the purchase of, other outstanding
rights to purchase, agreements or obligations to issue or agreements or other
rights to convert or exchange any obligation or security into, capital stock of
the Company or securities convertible into or exchangeable for capital stock of
the Company, except as described in the Prospectus;
(vii) the authorized capital stock of the Company conforms in
all respects with the description thereof in the Prospectus;
(viii) the currently outstanding shares of the Company's capital
stock have been duly authorized and are validly issued, fully paid and
non-assessable; and none of such outstanding shares of the Company's capital
stock has been issued in violation of any preemptive rights of any security
holder of the Company. The holders of the outstanding shares of the Company's
capital stock are not subject to personal liability solely by reason of being
such holders. The offers and sales of the outstanding shares of the Company's
capital stock, whether described in the Registration Statement or otherwise,
were made in conformity with applicable federal and state securities laws;
(ix) when the Shares have been duly delivered against payment
therefor as contemplated by this Agreement, the Shares will be validly issued,
fully paid and non-assessable, and the holders thereof will not be subject to
personal liability solely by reason of being such holders. The certificates
representing the Shares are in proper legal form under, and conform in all
respects to the requirements of, the Delaware General Corporation Law, as
amended. Neither the filing of the Registration Statement nor the offering or
sale of Shares as contemplated by this Agreement gives any security holder of
the Company any rights for or relating to the registration of any Common Shares
or any other capital stock of the Company, except such as have been satisfied or
waived;
(x) no consent, approval, authorization, order, registration,
license or permit of, or filing or registration with, any court, government,
governmental agency, instrumentality or other regulatory body or official is
required for the valid and legal execution, delivery and performance by the
Company of this Agreement and the consummation of the transactions contemplated
hereby and described in the Prospectus, except such as may be required for the
registration of the Shares under the Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and for compliance with the applicable
state securities or Blue Sky laws;
(xi) the Common Shares (including the Shares) have been approved
for inclusion, subject only to official notice of issuance, in the Nasdaq Stock
Market's National Market;
(xii) the statements in the Registration Statement and
Prospectus, insofar as they are descriptions of or references to contracts,
agreements or other documents, are accurate in all material respects and present
or summarize fairly, in all material
-4-
<PAGE> 5
respects, the information required to be disclosed under the Act and/or the
Regulations, and there are no contracts, agreements or other documents required
to be described or referred to in the Registration Statement or Prospectus or to
be filed as exhibits to the Registration Statement under the Act or the
Regulations that have not been so described, referred to or filed, as required;
(xiii) the financial statements of the Company (including the
notes thereto) filed as part of any Preliminary Prospectus, the Prospectus and
the Registration Statement present fairly, in all material respects, the
financial position of the Company as of the respective dates thereof, and the
results of operations, cash flows and stockholders, equity of the Company for
the periods indicated therein, all in conformity with generally accepted
accounting principles. The supporting notes and schedules included in the
Registration Statement fairly state in all material respects the information
required to be stated therein in relation to the financial statements taken as a
whole. The financial information included in the Prospectus under the caption
"Prospectus Summary" and "Selected Financial Data" presents fairly the
information shown therein and has been compiled on a basis consistent with that
of the financial statements included in the Registration Statement;
(xiv) since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as otherwise
expressly stated therein, there has not been (a) any material adverse change
(including, whether or not insured against, any material loss or damage to any
material assets), or development involving a prospective material adverse
change, in the general affairs, properties, assets, management, condition
(financial or otherwise), results of operations, shareholders' equity, business
or prospects of the Company, (b) any material adverse change, loss, reduction,
termination or non-renewal of any contract to which the Company is a party,
including, without limitation, with respect to the exclusive distribution
agreement between Hewlett-Packard Corporation and the Company (the "HP
Contract"), (c) any transaction entered into by the Company not in the ordinary
course of its business that is material to the Company, (d) any dividend or
distribution of any kind declared, paid or made by the Company on its capital
stock, (e) any liabilities or obligations, direct or indirect, incurred by the
Company that are material to the Company, (f) any change in the capitalization
or stock ownership of the Company or (g) any change in the indebtedness of the
Company that is material to the Company. The Company has no contingent
liabilities or obligations that are material to the Company and that are not
disclosed in the Prospectus;
(xv) the Company has not distributed and will not distribute any
offering material in connection with the offering and sale of the Shares other
than the Registration Statement, a Preliminary Prospectus, the Prospectus and
other material, if any, permitted by the Act and the Regulations. Neither the
Company nor any of its officers, directors or affiliates has taken nor shall the
Company take any action designed to, or that might be reasonably expected to
cause or result in, stabilization or manipulation of the price of the Shares;
(xvi) the Company has filed with the appropriate federal, state
and local governmental agencies, and all foreign countries and political
subdivisions thereof, all tax returns that are required to be filed or has duly
obtained extensions of time for the filing
-5-
<PAGE> 6
thereof and has paid all taxes shown on such returns or otherwise due and all
material assessments received by it to the extent that the same have become
due. The Company has not executed or filed with any taxing authority, foreign
or domestic, any agreement extending the period for assessment or collection of
any income or other tax and is not a party to any pending action or proceeding
by any foreign or domestic governmental agencies for the assessment or
collection of taxes, and no claims for assessment or collection of taxes have
been asserted against the Company that might materially adversely affect the
general affairs, assets, properties, condition (financial or otherwise),
results of operations, shareholders, equity, business or prospects of the
Company;
(xvii) to the knowledge of the Company, KPMG Peat Marwick LLP,
which has given its reports on certain financial statements included as part of
the Registration Statement, is a firm of independent certified public
accountants as required by the Act and the Regulations;
(xviii) the Company is not in violation of or in default under
any of the terms or provisions of (a) its Certificate of Incorporation or Bylaws
or similar governing instruments, or (b) any indenture, mortgage, deed of trust,
contract, commitment or other agreement or instrument to which it is a party or
by which it or any of its properties is bound or affected, (c) any law, rule,
regulation, judgment, order or decree of any government or governmental agency,
instrumentality or court, domestic or foreign, having jurisdiction over it or
any of its properties or business, or (d) any license, permit, certification,
registration, approval, consent or franchise referred to in Section l(a)(iii)
hereof;
(xix) there are no claims, actions, suits, protests,
proceedings, arbitrations, investigations or inquiries pending before, or
threatened or contemplated by, any governmental agency, instrumentality, court
or tribunal, domestic or foreign, or before any private arbitration tribunal,
that could reasonably be expected to affect the validity of any of the
outstanding Common Shares, or that, if determined adversely to the Company,
would, in any case or in the aggregate, result in any material adverse change in
the general affairs, properties, condition (financial or otherwise), results of
operations, shareholders' equity, business or prospects of the Company; nor, to
the Company's knowledge, is there any reasonable basis for any such claim,
action, suit, protest, proceeding, arbitration, investigation or inquiry. There
are no outstanding orders, judgments or decrees of any court, governmental
agency, instrumentality or other tribunal, enjoining the Company from, or
requiring the Company to take or refrain from taking, any action, or to which
the Company, its properties, assets or business are bound or subject;
(xx) the Company owns, or possesses adequate rights to use, all
patents, patent applications, trademarks, trade names, service marks, licenses,
inventions, copyrights, computer software, algorithms, know-how, trade secrets,
confidential or proprietary information, processes, procedures and formulations
and other intellectual property necessary for, used in or proposed to be used in
the conduct of its business as described in the Prospectus (collectively, the
"Intellectual Property"). The Company has not infringed and is not infringing,
and has not received any notice of conflict with, the asserted rights of others
with respect to the
-6-
<PAGE> 7
Intellectual Property, and the Company knows of no reasonable basis for any
such infringement or conflict;
(xxi) the Company has good and marketable title to all property
described in the Prospectus as being owned by it, free and clear of all liens,
security interests, charges or encumbrances, except such as are described or
referred to in the Prospectus or such as do not materially affect the value of
such property and do not interfere in any material respect with the use made, or
proposed to be made, of such property by the Company. The Company has adequately
insured its property against loss or damage by fire or other casualty and
maintains, in amounts reasonably believed by it to be adequate, insurance
against such other risks as it deems appropriate. All real and personal property
leased by the Company, as described or referred to in the Prospectus, is held by
the Company under valid leases. The executive offices and facilities of the
Company (the "Premises"), and all operations conducted thereon, are now and,
since the Company began to use such Premises, always have been and, to the
knowledge of the Company, prior to when the Company began to use such Premises,
always had been, in compliance with all U.S., Japanese and United Kingdom laws
concerning or relating to industrial hygiene and the protection of health and
the environment, including all federal, state and local statutes, ordinances,
regulations and rules (collectively, "the Governmental Laws"), except to the
extent that any failure to be in such compliance would not materially adversely
affect the general affairs, properties, condition (financial or otherwise),
results of operations, shareholders, equity, business or prospects of the
Company. There are no conditions on, about, beneath or arising from the Premises
that might give rise to liability, the imposition of a statutory lien or require
a "Response," "Removal" or "Remedial Action," as defined herein, under any of
the Governmental Laws, and that would materially adversely affect the general
affairs, properties, condition (financial or otherwise), results of operations,
shareholders, equity, business or prospects of the Company. The Company has not
received notice, and the Company does not have knowledge, of any claim, demand,
investigation, regulatory action, suit or other action instituted or threatened
against the Company or any portion of the Premises relating to any of the
Governmental Laws. The Company has not received any notice of material
violation, citation, complaint, order, directive, request for information or
response thereto, notice letter, demand letter or compliance schedule to or from
any governmental or regulatory agency arising out of or in connection with
"hazardous substances" (as defined by applicable environmental laws) on, about,
beneath, arising from or generated at the Premises. As used in this subsection,
the terms "Response," "Removal" and "Remedial Action" shall have the respective
meanings assigned to such terms under Sections 101(23)-101(25) of the
Comprehensive Environmental Response, Compensation and Liability Act, as amended
by the Superfund Amendments and Reauthorization Act, 42 U.S.C.
9601(23)-9601(25);
(xxii) the Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that: (a) transactions are
executed in accordance with management's general or specific authorization; (b)
transactions are recorded as necessary in order to permit preparation of
financial statements in accordance with generally accepted accounting principles
and statutory accounting practices and to maintain accountability for assets;
(c) access to assets is permitted only in accordance with management's general
or
-7-
<PAGE> 8
specific authorization; and (d) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences;
(xxiii) each contract or other instrument (however characterized
or described) to which the Company is a party or by which any of its properties
or business is bound or affected and which is material to the conduct of the
Company's business as described in the Prospectus has been duly and validly
executed by the Company and, to the knowledge of the Company, by the other
parties thereto. Each such contract or other instrument (including, without
limitation, the HP Contract) is in full force and effect and is enforceable
against the parties thereto in accordance with its terms, and the Company is
not, and to the knowledge of the Company, no other party is, in default
thereunder, nor do the purchases made by third parties thereunder violate any
law, regulation, directive or policy of the United States Government or any
department, agency, or subdivision thereof, and no event has occurred that, with
the lapse of time or the giving of notice, or both, would constitute a default
under any such contract or other instrument. All necessary consents under such
contracts or other instruments to disclosure in the Prospectus with respect
thereto have been obtained;
(xxiv) except for such plans that are expressly disclosed in the
Prospectus, the Company does not have any employee benefit plan, profit sharing
plan, employee pension benefit plan or employee welfare benefit plan or deferred
compensation arrangements ("Plans") that are subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended, or the rules and
regulations thereunder ("ERISA"). All Plans that are subject to ERISA are in
compliance with ERISA, in all material respects, and, to the extent required by
the Internal Revenue Code of 1986, as amended (the "Code"), in compliance with
the Code in all material respects. The Company has not had any employee pension
benefit plan that is subject to Part 3 of Subtitle B of Title I of ERISA or any
defined benefit plan or multi-employer plan. The Company has not maintained
retired life and retired health insurance plans that are employee welfare
benefit plans providing for continuing benefit or coverage for any employee or
any beneficiary of any employee after such employee's termination of employment,
except as required by Section 4980B of the Code. No fiduciary or other party in
interest with respect to any of the Plans has caused any of such Plans to engage
in a prohibited transaction as defined in Section 406 of ERISA. As used in this
subsection, the terms "defined benefit plan," "employee benefit plan," "employee
pension benefit plan," "employee welfare benefit plan," "fiduciary" and
"multi-employer plan" shall have the respective meanings assigned to such terms
in Section 3 of ERISA;
(xxv) no labor dispute exists with the Company's employees, and
no such labor dispute is threatened. The Company has no knowledge of any
existing or threatened labor disturbance by the employees of any of its
principal suppliers, contractors or customers that would materially adversely
affect the general affairs, properties, condition (financial or otherwise),
results of operations, shareholders, equity, business or prospects of the
Company;
(xxvi) the Company has not incurred any liability for any
finder's fees or similar payments in connection with the transactions
contemplated herein;
-8-
<PAGE> 9
(xxvii) the Company currently intends to conduct its affairs in
such a manner as to ensure that it will not be an "investment company" within
the meaning of the Investment Company Act of 1940, as amended (the "1940 Act"),
and the rules and regulations thereunder;
(xxviii) no statement, representation, warranty or covenant made
by the Company in this Agreement or in any certificate or document required by
this Agreement to be delivered to the Representatives is, was when made, or as
of the Closing Date or any Option Closing Date will be, inaccurate, untrue or
incorrect in any material respect. No transaction has occurred or is proposed
between or among the Company and any of its officers, directors or shareholders
or any affiliate of any such officer, director or shareholder that is required
to be described in and is not described in the Registration Statement and the
Prospectus;
(xxix) none of the Company or any officer, director, employee,
agent or other person acting on behalf of the Company, has, directly or
indirectly, given or agreed to give any money, property or similar benefit or
consideration to any customer or supplier (including any employee or agent of
any customer or supplier) or official or employee of any agency or
instrumentality of any government (foreign or domestic) or political party or
candidate for office (foreign or domestic) or any other person who was, is or in
the future may be in a position to affect the general affairs, properties,
condition (financial or otherwise), results of operations, shareholders, equity,
business or prospects of the Company or any actual or proposed business
transaction of the Company that (a) could subject the Company to any liability
(including, but not limited to the payment of monetary damages) or penalty in
any civil, criminal or governmental action or proceeding which would have a
material adverse effect on the general affairs, properties, condition (financial
or otherwise), results of operations, shareholders' equity, business or
prospects of the Company or (b) violates any law, rule or regulation to which
the Company is subject, which violation if proven would have a material and
adverse effect on the general affairs, properties, condition (financial or
otherwise), results of operations, shareholders, equity, business or prospects
of the Company;
(xxx) the Company has not declared, paid or accrued any
dividends or distributions to shareholders since its incorporation, and will not
hereafter declare, pay or accrue any such dividends or distributions prior to
the Closing Date or the Option Closing Date;
(xxxi) except as described on SCHEDULE II attached hereto, none
of the shareholders of the Company is affiliated with any member of the National
Association of Securities Dealers, Inc. (the "NASD");
(xxxii) none of the Company, its employees nor its directors
have ever been and are not now A party to, and none of them is bound by, any
agreement pursuant to which royalties, honoraria or fees are payable by the
Company to others by reason of the ownership or use of any intellectual
property;
(xxxiii) the Company does not own any stock or other equity
interest in, or control, directly or indirectly, any corporation, partnership or
other entity;
-9-
<PAGE> 10
(xxxiv) all outstanding options to purchase shares of the
Company's common stock were granted at an exercise price that was equal to or
greater than the fair market value of the Company's common stock at the time of
such grant; and
(xxxv) the Put Funding Agreement between American Banner
Resources, Inc. ("ABR") and the Company dated April 30, 1995, concerning the
agreement by ABR to purchase from the Company such number of shares of the
Company's common stock as are subject to certain put rights in a series of
Company Stock Option Agreements dated March 15, 1995, is in full force and
effect and is enforceable against ABR in accordance with its terms, and the
Company has no reason to believe that ABR is or will be in the future unable to
perform its obligations thereunder.
Any certificate signed by any officer of the Company in such capacity and
delivered to the Representatives or to counsel for the Underwriters pursuant to
this Agreement shall be deemed a representation and warranty by the Company to
the several Underwriters as to the matters covered thereby.
2. PURCHASE AND SALE OF FIRM SHARES. On the basis of the representations,
warranties, covenants and agreements contained herein, but subject to the terms
and conditions set forth herein, the Company shall sell to the several
Underwriters at the Offering Price, less the Underwriting Discounts and
commissions in the amount of $.60 per Share, the respective amounts of the Firm
Shares set forth opposite their names on SCHEDULE I hereto, and the
Underwriters, severally and not jointly, shall purchase from the Company on a
firm commitment basis, at the Offering Price, less the Underwriting Discounts
and Commissions in the amount of $.60 per Share, the respective amounts of the
Firm Shares set forth opposite their names on SCHEDULE I hereto. In making this
Agreement, each Underwriter is contracting severally, and not jointly, and
except as provided in Sections 4 and 11 hereof, the agreement of each
Underwriter is to purchase only that number of shares specified with respect to
that Underwriter in SCHEDULE I hereto. The Underwriters shall offer the Shares
to the public as set forth in the Prospectus.
3. PAYMENT AND DELIVERY. Payment for the Firm Shares shall be made by
certified or official bank check payable to the order of the Company with
respect to the Firm Shares sold by it in New York Clearing House funds at the
offices of Janney Montgomery Scott Inc., 1801 Market Street, Philadelphia, or
such other place as shall be agreed upon by the Company and the Representatives,
or in immediately available funds wired to such accounts as the Company may
specify (with all costs and expenses incurred by the Underwriters in connection
with such settlement in immediately available funds, including, but not limited
to, interest or cost of funds and expenses, to be borne by the Company), against
delivery of the Firm Shares to the Representatives at the offices of Janney
Montgomery Scott Inc., 1801 Market Street, Philadelphia, Pennsylvania for the
respective accounts of the Underwriters. Such payment and delivery will be made
at 10:00 AM., Philadelphia, Pennsylvania time, on the third business day after
the date of this Agreement or at such other time and date not later than three
business days thereafter as the Representatives and the Company shall agree
upon. Such time and date are referred to herein as the "Closing Date." The
certificates representing the Firm Shares to be sold and delivered will be in
such denominations and registered in such names as
-10-
<PAGE> 11
the Representatives request not less than two full business days prior to the
Closing Date, and will be made available to the Representatives for inspection,
checking and packaging at the New York correspondent office of the Company's
transfer agent not less than one full business day prior to the Closing Date.
4. OPTION TO PURCHASE OPTIONAL SHARES.
(a) For the purposes of covering any overallotments in connection
with the distribution and sale of the Firm Shares as contemplated by the
Prospectus. subject to the terms and conditions herein set forth, the several
Underwriters are hereby granted an option by the Company to purchase all or any
part of the Optional Shares (the "Over-allotment Option"). The purchase price to
be paid for the Optional Shares shall be the Offering Price less the
Underwriting Discounts and Commissions shown on the cover page of the
Prospectus. The Overallotment Option granted hereby may be exercised by the
Representatives on behalf of the several Underwriters as to all or any part of
the Optional Shares at any time and from time to time within 30 days after the
date of the Prospectus. No Underwriter shall be under any obligation to purchase
any Optional Shares prior to an exercise of the Over-allotment Option.
(b) The Over-allotment Option granted hereby may be exercised by the
Representatives on behalf of the several Underwriters by giving notice to the
Company by a letter sent by registered or certified mail, postage prepaid,
telex, telegraph, telegram or facsimile (such notice to be effective when
received), addressed as provided in Section 13 hereof, setting forth the number
of Optional Shares to be purchased, the date and time for delivery of and
payment for the Optional Shares and stating that the Optional Shares referred to
therein are to be used for the purpose of covering over-allotments in connection
with the distribution and sale of the Firm Shares. If such notice is given prior
to the Closing Date, the date set forth therein for such delivery and payment
shall be the Closing Date. If such notice is given on or after the Closing Date,
the date set forth therein for such delivery and payment shall be a date
selected by the Representatives that is not more than three full business days
after the exercise of the Over-allotment Option. The date and time set forth in
such a notice is referred to herein as an "Option Closing Date," and a closing
held pursuant to such a notice is referred to herein as an "Option Closing."
Upon each exercise of the Over-allotment Option, and on the basis of the
representations, warranties, covenants and agreements herein contained, and
subject to the terms and conditions herein set forth, the several Underwriters
shall become severally, but not jointly, obligated to purchase from the Company
the number of Optional Shares specified in each notice of exercise of the
Overallotment Option.
(c) The number of Optional Shares to be sold to each Underwriter
pursuant to each exercise of the Over-allotment option shall be the number set
forth opposite their names on SCHEDULE I hereto. Notwithstanding the foregoing,
the number of Optional Shares purchased and sold pursuant to each exercise of
the over-allotment option shall be subject to such adjustment as the
Representatives may approve to eliminate fractional shares and subject to the
provisions for the allocation of Optional Shares purchased for the purpose of
covering over-allotments set forth in the agreement entered into by and among
the Underwriters in connection herewith (the "Agreement Among Underwriters").
-11-
<PAGE> 12
(d) Payment for the Optional Shares shall be made to the Company
by certified or official bank check payable to the order of the Company in New
York Clearing House funds, at the offices of Janney Montgomery Scott Inc., 1801
Market Street, Philadelphia, Pennsylvania, or such other place as shall be
agreed upon by the Company and the Representatives, or in immediately available
funds wired to such account as the Company may specify (with all costs and
expenses incurred by the underwriters in connection with such settlement in
immediately available funds, including, but not limited to, interest or cost of
funds and expenses, to be borne by the Company), against delivery of the
Optional Shares to the Representatives at the offices of Janney Montgomery Scott
Inc., 1801 Market Street, Philadelphia, Pennsylvania, for the respective
accounts of the Underwriters. The certificates representing the Optional Shares
to be issued and delivered will be in such denominations and registered in such
names as the Representatives request not less than two full business days prior
to the Option Closing Date, and will be made available to the Representatives
for inspection, checking and packaging at the New York correspondent office of
the Company's transfer agent not less than one full business day prior to the
Option Closing Date.
5. CERTAIN COVENANTS AND AGREEMENTS OF THE COMPANY. The Company covenants
and agrees with the several Underwriters as follows:
(a) if Rule 430A of the Regulations is employed, the Company will
timely file the Prospectus pursuant to and in compliance with Rule 424(b) of the
Regulations and will advise the Representatives of the time and manner of such
filing;
(b) the Company will not file or publish any amendment or supplement
to the Registration Statement, Preliminary Prospectus or Prospectus at any time
before the completion of the distribution of the Shares by the Underwriters that
is not (i) in compliance with the Regulations and (ii) approved by the
Representatives (such approval not to be unreasonably withheld or delayed);
(c) the Company will advise the Representatives immediately, and
confirm such advice in writing, (i) when any post-effective amendment to the
Registration Statement is filed with the SEC, (ii) of the receipt of any
comments from the SEC concerning the Registration Statement, (iii) when any
posteffective amendment to the Registration Statement becomes effective, or when
any supplement to the Prospectus or any amended Prospectus has been filed, (iv)
of any request of the SEC for amendment or supplementation of the Registration
Statement or Prospectus or for additional information, (v) during the period
when the Prospectus is required to be delivered under the Act and Regulations,
of the happening of any event as a result of which the Registration Statement or
the Prospectus would include an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein not misleading,
(vi) during the period noted in (v) above, of the need to amend the Registration
Statement or supplement the Prospectus to comply with the Act, (vii) of the
issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus, and (viii) of the suspension of the
qualification of any of the Shares for offering or sale in any jurisdiction in
which the Underwriters intend to make such offers or sales, or of the initiation
or threatening of
-12-
<PAGE> 13
any proceedings for any of such purposes known to the Company. The Company will
use its best efforts to prevent the issuance of any such stop order or of any
order preventing or suspending such use and, if any such order is issued, to
obtain as soon as possible the lifting thereof;
(d) the Company has delivered to the Representatives, without charge,
copies of each Preliminary Prospectus. The Company will deliver to the
Representatives, without charge, from time to time during the period when
delivery of the Prospectus is required under the Act, such number of copies of
the Prospectus (as supplemented or amended) as the Representatives may
reasonably request. The Company hereby consents to the use of such copies of the
Preliminary Prospectus and the Prospectus for purposes permitted by the Act, the
Regulations and the securities or Blue Sky laws of the states in which the
Shares are offered by the several Underwriters and by all dealers to whom Shares
may be sold, both in connection with the offering and sale of the Shares and for
such period of time thereafter as the Prospectus is required by the Act to be
delivered in connection with sales by any Underwriter or dealer. The Company has
furnished or will furnish to the Representatives three original signed copies of
the Registration Statement as originally filed and of all amendments and
supplements thereto, whether filed before or after the Effective Date, three
copies of all exhibits filed therewith and three signed copies of all consents
and certificates of experts, and will deliver to the Representatives such number
of conformed copies of the Registration Statement, including financial
statements and exhibits, and all amendments thereto, as the Representatives may
reasonably request;
(e) the Company will comply with the Act, the Regulations, the
Exchange Act and the rules and regulations thereunder so as to permit the
continuance of sales of and dealings in the Shares for as long as may be
necessary to complete the distribution of the Shares as contemplated hereby;
(f) the Company will furnish such information as may be required and
otherwise cooperate in the registration or qualification of the Shares, or
exemption therefrom, for offering and sale by the several Underwriters and by
dealers under the securities or Blue Sky laws of such jurisdictions in which the
Representatives determine to offer the Shares, after consultation with the
Company, and will file such consents to service of process or other documents
necessary or appropriate in order to effect such registration or qualification;
provided, however, that no such qualification shall be required in any
jurisdiction where, solely as a result thereof, the Company would be subject to
taxation or qualification as a foreign corporation doing business in such
jurisdiction where it is not now so qualified or to take any action which would
subject it to service of process in suits, other than those arising out of the
offering or sale of the Shares, in any jurisdiction where it is not now so
subject. The Company will, from time to time, prepare and file such statements
and reports as are or may be required to continue such qualification in effect
for so long a period as is required under the laws of such jurisdictions for
such offering and sale;
(g) subject to subsection 5(b) hereof, in case of any event, at any
time within the period during which, in the opinion of counsel for the
Underwriters, a prospectus is
-13-
<PAGE> 14
required to be delivered under the Act and Regulations, as a result of which any
Preliminary Prospectus or the Prospectus, as then amended or supplemented, would
contain an untrue statement of a material fact, or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, or, if it is necessary
at any time to amend any Preliminary Prospectus or the Prospectus to comply with
the Act and Regulations or any applicable securities or Blue Sky laws, the
Company promptly will prepare and file with the SEC, and any applicable state
securities commission, an amendment, supplement or document that will correct
such statement or omission or effect such compliance and will furnish to the
several Underwriters such number of copies of such amendments), supplements) or
documents) (in the form and substance satisfactory to the Representatives and
counsel for the Underwriters) as the Representatives may reasonably request. For
purposes of this subsection (g), the Company will provide such information to
the Representatives, the Underwriters' counsel and counsel to the Company as
shall be necessary to enable such persons to consult with the Company with
respect to the need to amend or supplement the Registration Statement,
Preliminary Prospectus or Prospectus or file any document, and shall furnish to
the Representatives and the Underwriters' counsel such further information as
each may from time to time reasonably request;
(h) the Company will make generally available to its security holders
not later than 45 days after the end of the period covered thereby, an earnings
statement of the Company (which need not be audited unless required by the Act
or the Regulations) that shall comply with Section 11(a) of the Act and cover a
period of at least 12 consecutive months beginning not later than the first day
of the Company's fiscal quarter next following the Effective Date;
(i) for a period of five years following the Effective Date, the
Company will furnish to the Representatives copies of all materials furnished by
the Company to its shareholders and all public reports and all reports and
financial statements furnished by the Company to the SEC pursuant to the
Exchange Act or any rule or regulation of the SEC thereunder;
(j) during the course of the distribution of the Shares, the Company
will not take, directly or indirectly, any action designed to or that could
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Common Shares;
(k) the Company has caused each person listed on SCHEDULE III hereto
to execute an agreement (a "Lock-up Agreement"), which Lock-up Agreement shall
be in form and substance satisfactory to the Representatives and the
Underwriters' counsel providing that (i) such person irrevocably agrees that
without the prior written consent of the Representatives, he or she will not, at
any time from the Effective Date through the 180th day after the Effective Date,
directly or indirectly offer to sell, sell, contract to sell or otherwise
transfer or dispose of, any Common Shares, any options or warrants to purchase
Common Shares or any securities convertible into or exchangeable for Common
Shares owned by such person or with respect to which such person has the power
of disposition now or at any time during such 180-day period (otherwise than in
private transactions to the undersigned's spouse, children, descendants, parents
-14-
<PAGE> 15
or grandparents or to a trust for the benefit of one or more of such persons,
provided that each transferee and other person acquiring an interest in any
Common Shares during such 180-day period agrees in writing to be bound by the
provisions of such Lock-Up Agreement) and (ii) that without the prior written
consent of the Representatives, such person will not exercise any demand,
mandatory, piggyback, optional or any other registration rights, if any such
rights exist, for a period of 180 days from the Effective Date with respect to
Common Shares. The Company has delivered such agreements to the Representatives
prior to the date of this Agreement. Appropriate stop transfer instructions will
be issued by the Company to the transfer agent for the Common Shares;
(l) the Company will not engage in any transaction with affiliates
(as defined in the Regulations) without the prior approval of a majority of the
members of its Board of Directors who do not have an interest in such
transaction other than in their capacity as directors of the Company;
(m) except pursuant to outstanding options or rights to purchase
common stock of the Company or pursuant to the 1988 and 1995 Employee Stock
Option Plans, as described in the Prospectus, for a period of 180 days after the
Effective Date, the Company will not, without the prior written consent of the
Representatives, offer, sell, contract to sell or otherwise dispose of any
Common Shares or any securities convertible into or exercisable for any Common
Shares or grant options to purchase any Common Shares; and
(n) the Company will use all reasonable efforts to maintain the
qualification or listing of the Common Shares (including, without limitation,
the Shares) on the Nasdaq Stock Market's National Market.
6. PAYMENT OF FEES AND EXPENSES.
(a) Whether or not the transactions contemplated by this Agreement
are consummated and regardless of the reason this Agreement is terminated, the
Company will pay or cause to be paid, and bear or cause to be borne, all costs
and expenses incident to the performance of the obligations of the Company under
this Agreement, including: (i) the fees and expenses of the accountants and
counsel for the Company incurred in the preparation of the Registration
Statement and any post-effective amendments thereto (including financial
statements and exhibits), Preliminary Prospectuses and the Prospectus and any
amendments or supplements thereto; (ii) printing and mailing expenses associated
with the Registration Statement and any post-effective amendments thereto,
Preliminary Prospectus, the Prospectus, this Agreement, the Agreement Among
Underwriters, the Underwriters' Questionnaire submitted to each of the
Underwriters by Janney Montgomery Scott Inc. in connection herewith, the power
of attorney executed by each of the Underwriters in favor of Janney Montgomery
Scott Inc. in connection herewith, the Selected Dealer Agreement and related
documents and the preliminary Blue Sky memorandum relating to the offering
prepared by Pepper, Hamilton & Scheetz, counsel to the Underwriters
(collectively with any supplement thereto, the "Preliminary Blue Sky
Memorandum"); (iii) the costs (other than fees and expenses of the
Underwriters' counsel except in connection with Blue Sky and NASD filings or
exemptions as provided herein) incident to the
-15-
<PAGE> 16
authentication, issuance, sale and delivery of the Shares to the Underwriters;
(iv) the fees, expenses and all other costs of qualifying the Shares for sale
under the securities or Blue Sky laws of those states in which the Shares are to
be offered or sold, including, without limitation, the reasonable fees (not in
excess of $20,000) and expenses of Underwriters, counsel and such local counsel
as may have been reasonably required and retained for such purpose; (v) the
fees, expenses and other costs of, or incident to, securing any review or
approvals by or from the NASD, including the reasonable fees and expenses of the
Underwriters' counsel; (vi) the filing fees of the SEC; (vii) the cost of
furnishing to the Underwriters copies of the Registration Statement, Preliminary
Prospectuses and Prospectuses as herein provided; (viii) the Company's travel
expenses in connection with meetings with the brokerage community and
institutional investors; (ix) the costs and expenses associated with settlement
in same day funds (including, but not limited to, interest or cost of funds
expenses), if desired by the Company; (x) any fees or costs payable to the
Nasdaq Stock Market as a result of the offering; (xi) the cost of printing
certificates for the Shares; (xii) the cost and charges of any transfer agent;
(xiii) the costs (not in excess of $15,000) of advertising the offering,
including, without limitation, with respect to the placement of "tombstone"
advertisements in publications selected by the Representatives; and (xiv) all
other costs and expenses reasonably incident to the performance of the Company's
obligations hereunder that are not otherwise specifically provided for in this
Section 6(a); provided, however, that, except as specifically set forth in
Section 6(c) hereof, (A) the Underwriters shall be responsible for their
out-of-pocket expenses, including those associated with meetings with the
brokerage community and institutional investors, other than the Company's travel
expenses, and the fees and expenses of their counsel for other than Blue Sky and
NASD filings or exemptions.
(b) The Company shall pay as due any state registration,
qualification and filing fees and any accountable out-of-pocket disbursements in
connection with such registration, qualification or filing in the states in
which the Representatives determine to offer or sell the Shares.
(c) In order to reimburse the Representatives for costs and expenses
associated with the offering of the Shares, on the Closing Date, the Company
will pay to the Representatives, in their individual capacities, a
non-accountable expense allowance in the aggregate amount of $100,000; provided,
however, that if the sale of the Firm Shares is not completed pursuant to this
Agreement, the Representatives shall be entitled to reimbursement only for their
accountable out-of-pocket expenses, including, without limitation, the
reasonable fees and expenses of Underwriters' counsel, in an amount not to
exceed, in the aggregate, $100,000.
(d) If on or before April 30, 1996, the offering of the Shares
contemplated hereby is canceled because of the sale, acquisition, merger,
business combination or other material event affecting the ownership of all or
substantially all of the Company's assets or outstanding securities (each, a
"Transaction"), then, with respect to any such Transaction, the Company shall
engage the Representatives as financial advisors and investment bankers pursuant
to an agreement containing customary terms and provisions reasonably
satisfactory to the Company and the Representatives. The Representatives shall
perform customary investment
-16-
<PAGE> 17
banking and financial advisory services for the Company in analyzing,
structuring, negotiating, and effecting such Transaction and, in consideration
therefor, in addition to its expense obligations contained in this Section 6.
the Company shall pay to the Representatives a fee, in cash, of an amount equal
to one and one-half percent of all consideration (cash, securities, promises of
performance, assumption, payment or forgiveness of debt, or otherwise) paid with
respect to the assets or stock of the Company pursuant to such Transaction;
provided, however, that the amount of such advisory fee payable by the Company
shall be reduced on a dollar for dollar basis by the amount (if any) paid by the
Company to the Representatives pursuant to Section 6(c) hereof.
7. CONDITIONS OF UNDERWRITERS, OBLIGATIONS. The obligation of each
Underwriter to purchase and pay for the Firm Shares that it has agreed to
purchase hereunder on the Closing Date, and to purchase and pay for any Optional
Shares as to which it exercises its right to purchase under Section 4 on an
option Closing Date, is subject at the date hereof, the Closing Date and any
Option Closing Date to the continuing accuracy and fulfillment of the
representations and warranties of the Company, to the performance by the Company
of its covenants and obligations hereunder, and to the following additional
conditions:
(a) if required by the Regulations, the Prospectus shall have been
filed with the SEC pursuant to Rule 424(b) of the Regulations within the
applicable time period prescribed for such filing by the Regulations; on or
prior to the Closing Date or any Option Closing Date, as the case may be, no
stop order or other order preventing or suspending the effectiveness of the
Registration Statement or the sale of any of the Shares shall have been issued
under the Act or any state securities law and no proceedings for that purpose
shall have been initiated or shall be pending or, to the Representatives'
knowledge or the knowledge of the Company, shall be contemplated by the SEC or
by any authority in any jurisdiction designated by the Representatives pursuant
to Section 5(f) hereof; and any request on the part of the SEC for additional
information shall have been complied with to the reasonable satisfaction of
counsel for the Underwriters;
(b) all corporate proceedings and other matters incident to the
authorization, form and validity of this Agreement, the Shares and the form of
the Registration Statement and the Prospectus, and all other legal matters
relating to this Agreement and the transactions contemplated hereby, shall be
satisfactory in all material respects to counsel to the Underwriters; the
Company shall have furnished to such counsel all documents and information that
they may reasonably request to enable them to pass upon such matters; and the
Representatives shall have received from the Underwriters' counsel, Pepper,
Hamilton & Scheetz, an opinion, dated as of the Closing Date and any Option
Closing Date, as the case may be, and addressed to the Representatives
individually and as the Representatives of the several Underwriters, which
opinion shall be satisfactory in all respects to the Representatives;
(c) the NASD shall have indicated that it has no objection to the
underwriting arrangements pertaining to the sale of any of the Shares;
-17-
<PAGE> 18
(d) the Representatives shall have received a copy of an executed
Lock-up Agreement from each person listed on SCHEDULE III hereto;
(e) the Representatives shall have received at or prior to the
Closing Date from the Underwriters' counsel a memorandum or summary, in form and
substance satisfactory to the Representatives, with respect to the qualification
for offering and sale by the Underwriters of the Shares under the securities or
Blue Sky laws of such jurisdictions designated by the Representatives pursuant
to Section 5(f) hereof;
(f) on the Closing Date and any Option Closing Date, there shall have
been delivered to the Representatives signed opinions of Buchanan Ingersoll
Professional Corporation, counsel for the Company, dated as of each such date
and addressed to the Representatives individually and as the Representatives of
the several Underwriters to the effect set forth in EXHIBIT A hereto,
respectively, or as is otherwise reasonably satisfactory to the Representatives;
(g) at the Closing Date and any Option Closing Date: (i) the
Registration Statement and any post-effective amendment thereto and the
Prospectus and any amendments or supplements thereto shall contain all
statements that are required to be stated therein in accordance with the Act and
the Regulations and in all material respects shall conform to the requirements
of the Act and the Regulations, and neither the Registration Statement nor any
post-effective amendment thereto nor the Prospectus and any amendments or
supplements thereto shall contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading; (ii) since the respective dates as
of which information is given in the Registration Statement and any
post-effective amendment thereto and the Prospectus and any amendments or
supplements thereto, there shall have been no material adverse change in the
properties, condition (financial or otherwise), results of operations,
shareholders, equity, business or management of the Company, from that set forth
therein, whether or not arising in the ordinary course of business, other than
as expressly referred to in the Registration Statement or Prospectus; (iii)
since the respective dates as of which information is given in the Registration
Statement and the Prospectus or any amendment or supplement thereto, there shall
have been no event or transaction, contract or agreement entered into by the
Company, other than in the ordinary course of business and as set forth in the
Registration Statement or Prospectus, that has not been, but would be required
to be, set forth in the Registration Statement or Prospectus; (iv) since the
respective dates as of which information is given in the Registration Statement
and any posteffective amendment thereto and the Prospectus and any amendments or
supplements thereto, there shall have been no material adverse change, loss,
reduction, termination or non-renewal of any contract to which the Company is a
party, and (v) no action, suit or proceeding at law or in equity shall be
pending or threatened against the Company that would be required to be set forth
in the Prospectus, other than as set forth therein, and no proceedings shall be
pending or threatened against or directly affecting the Company before or by any
federal, state or other commission, board or administrative agency wherein an
unfavorable decision, ruling or finding would materially adversely affect the
properties, condition (financial or otherwise), results of operations,
-18-
<PAGE> 19
shareholders, equity, or business of the Company other than as expressly set
forth in the Prospectus;
(h) the Representatives shall have received at the Closing Date and
any Option Closing Date certificates of the Chief Executive Officer and the
Chief Financial Officer of the Company dated as of the date of the Closing Date
or Option Closing Date, as the case may be, and addressed to the
Representatives, individually and as the Representatives of the several
Underwriters, to the effect that (i) the signers of the certificate have read
this Agreement and the representations and warranties of the Company in this
Agreement are true and correct in all material respects, as if made at and as of
the Closing Date or the Option Closing Date, as the case may be, and the Company
has complied in all material respects with all the agreements, fulfilled in all
material respects all the covenants and satisfied all the conditions on its part
to be performed, fulfilled or satisfied at or prior to the Closing Date or the
Option Closing Date, as the case may be, and (ii) the signers of the certificate
have examined the Registration Statement and the Prospectus and any amendments
or supplements thereto and that the conditions set forth in Section 7(g) of this
Agreement have been satisfied;
(i) at the time this Agreement is executed and at the Closing Date
and any Option Closing Date the Representatives shall have received a letter
addressed to the Representatives individually and as the Representatives of the
several Underwriters, and in form and substance satisfactory to the
Representatives in all respects (including the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) from KPMG Peat
Marwick LLP dated as of the date of this Agreement, the Closing Date or the
Option Closing Date, as the case may be:
(i) confirming that they are independent certified public
accountants within the meaning of the Act and the Regulations and stating that
the section of the Registration Statement under the caption "Experts" is correct
insofar as it relates to them;
(ii) stating that, in their opinion, the financial statements,
schedules and notes of the Company audited by them and included in the
Registration Statement comply in form in all material respects with the
applicable accounting requirements of the Act and the Regulations;
(iii) stating that, on the basis of specified procedures, which
included the procedures specified by the American Institute of Certified Public
Accountants for a review of interim financial information, as described in AICPA
Statement on Auditing Standards SAS No. 71, INTERIM FINANCIAL INFORMATION (with
respect to the latest unaudited quarterly financial statements of the Company
included in the Registration Statement), a reading of the latest available
unaudited monthly interim financial statements of the Company (with an
indication of the date of the latest available unaudited monthly interim
financial statements), a reading of the minutes of the meetings of the
shareholders and the Board of Directors of the Company, and audit and
compensation committees of such Board, if any, and inquiries to certain officers
and other employees of the Company responsible for operational, financial and
accounting matters and other specified procedures and inquiries, nothing has
come to their
-19-
<PAGE> 20
attention that caused them to believe that (A) the unaudited financial
statements of the Company included in the Registration Statement, (1) do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Regulations, or (2) any material modifications
should be made to such unaudited financial statements for them to be in
conformity with generally accepted accounting principles; or (B) at the date of
the latest available unaudited interim financial statements of the Company and a
specified date not more than five business days prior to the date of such
letter, there was any change in the capital stock or debt of the Company or any
decrease in net current assets, total assets or shareholders' equity of the
Company as compared with the amounts shown in the January 31, 1996 unaudited
balance sheet of the Company included in the Registration Statement, or that for
the periods from February 1, 1996 to the date of the latest available unaudited
monthly financial statements of the Company and to a specified date not more
than five days prior to the date of the letter, there were any decreases, as
compared to the corresponding periods in the prior year, in license revenues,
service and other revenues or total or per share amounts of net income, except
in all instances for changes, decreases or increases which the Registration
Statement discloses have occurred or may occur and except for such other
changes, decreases or increases which the Representatives shall in their sole
discretion accept;
(iv) stating that they have compared specific dollar amounts,
numbers of shares and other numerical data and financial information set forth
in the Registration Statement that have been specified by the Representatives
prior to the date of this Agreement, to the extent that such information is
derived from the accounting records subject to the internal control structure,
policies and procedures of the Company's accounting system, or has been
otherwise derived in a manner permitted by AICPA Statement on Auditing Standards
No. 72 (which procedures do not constitute an audit in accordance with generally
accepted auditing standards) set forth in the letter, and found them to be in
agreement;
(j) there shall have been duly tendered to the Representatives for
the respective accounts of the Underwriters certificates representing all of the
Shares to be purchased by the Underwriters on the Closing Date or any Option
Closing Date, as the case may be;
(k) at the Closing Date and any Option Closing Date, the
Representatives shall have been furnished such additional documents, information
and certificates as they shall have reasonably requested;
(l) the issuance and sale of the Shares shall be legally permitted
under applicable Blue Sky or state securities laws so long as such sales are
made in accordance with the Preliminary Blue Sky Memorandum;
(m) an independent, unaffiliated individual meeting the Nasdaq Stock
Market's National market listing requirements shall have been nominated and
elected to the Board of Directors of the Company and shall have agreed to serve
in such capacity; and
(n) all corporate and other proceedings and other matters incident to
the authorization, form and validity of this Agreement and the form of the
Registration Statement and Prospectus and all other legal matters related to
this Agreement and the transactions
-20-
<PAGE> 21
contemplated hereby, shall be satisfactory in all respects to counsel to the
Underwriters. The Company shall have furnished to such counsel all documents
and information that they shall have reasonably requested to enable them to
pass upon such matters.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to the Representatives and Underwriters' counsel. The Company shall
furnish the Representatives with such conformed copies of such opinions,
certificates, letters and other documents as they shall reasonably request. If
any condition to the Underwriters' obligations hereunder to be fulfilled prior
to or at the Closing Date or any Option Closing Date, as the case may be, is not
fulfilled, the Representatives may on behalf of the several Underwriters,
terminate this Agreement with respect to the Closing Date or such Option Closing
Date, as applicable, or, if it so elects, waive any such conditions which have
not been fulfilled or extend the time for their fulfillment. Any such
termination shall be without liability of the Underwriters to the Company.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company shall indemnify and hold harmless each Underwriter,
and each person, if any, who controls each Underwriter within the meaning of the
Act, against any and all loss, liability, claim, damage and expense whatsoever,
including, but not limited to, any and all reasonable expenses whatsoever
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever or in connection with any
investigation or inquiry of, or action or proceeding that may be brought
against, the respective indemnified parties, arising out of or based upon any
breach of its representations and warranties made in this Agreement and any
untrue statements or alleged untrue statements of a material fact contained in
any Preliminary Prospectus, the Registration Statement or the Prospectus, any
application or other document (in this Section 8 collectively called
"application") executed by the Company and based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
qualify all or any part of the Shares under the securities laws thereof or filed
with the SEC or the NASD, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the foregoing indemnity:
(i) shall not apply in respect of any statement or omission made
in reliance upon and in conformity with written information furnished to the
Company by any Underwriter or through the Representatives expressly for use in
any Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment or supplement thereto, or in any application or in any communication
to the SEC, as the case may be; and
(ii) with respect to any Preliminary Prospectus, shall not inure
to the benefit of any Underwriter from whom the person asserting any such
losses, claims, damages, liabilities or expenses purchased the Shares if, at or
prior to the written confirmation of the sale of such Shares, a copy of an
amended Preliminary Prospectus or the Prospectus (or the Prospectus as amended
or supplemented) was delivered to such Underwriter but was not sent or delivered
to such person and the untrue statement or omission of a material fact contained
in such
-21-
<PAGE> 22
Preliminary Prospectus was corrected in the amended Preliminary Prospectus or
Prospectus (or the Prospectus as amended or supplemented).
This indemnity agreement will be in addition to any liability the Company may
otherwise have.
(b) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless the Company, each of the directors of the Company, each of the
officers of the Company who shall have signed the Registration Statement and
each other person, if any, who controls the Company within the meaning of the
Act to the same extent as the foregoing indemnities from the Company to the
several Underwriters, but only with respect to any loss, liability, claim,
damage or expense resulting from statements or omissions, or alleged statements
or omissions, if any, made in any Preliminary Prospectus, Registration Statement
or Prospectus or any amendment or supplement thereof or any application in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter or through the Representatives with respect to any
Underwriter by or on behalf of such Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereof or any application, as the case may be. This
indemnity agreement will be in addition to any liability which such Underwriter
may otherwise have.
(c) If any action, inquiry, investigation or proceeding is brought
against any person in respect of which indemnity may be sought pursuant to any
of the two preceding paragraphs, such person (hereinafter called the
"indemnified party") shall, promptly after notification of, or receipt of
service of process for, such action, inquiry, investigation or proceeding,
notify in writing the party or parties against whom indemnification is to be
sought (hereinafter called the "indemnifying party") of the institution of such
action, inquiry, investigation or proceeding and the indemnifying party, upon
the request of the indemnified party, shall assume the defense of such action,
inquiry, investigation or proceeding, including the employment of counsel
(reasonably satisfactory to such indemnified party) and payment of expenses. No
indemnification provided for in this Section 8 shall be available to any
indemnified party who shall fail to give such notice if the indemnifying party
does not have knowledge of such action, inquiry, investigation or proceeding, to
the extent, that such indemnifying party has been materially prejudiced by the
failure to give such notice, but the omission to so notify the indemnifying
party shall not relieve the indemnifying party otherwise than under this Section
8. Such indemnified party or controlling person shall have the right to employ
its or their own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless the employment
of such counsel shall have been authorized in writing by the indemnifying party
in connection with the defense of such action. If such indemnified party or
parties shall have been advised by counsel that there is a conflict between the
positions of the indemnifying party or parties and of the indemnified party or
parties or that there are legal defenses available to such indemnified party or
parties different from or in addition to those available to the indemnifying
party or parties, the indemnified party or parties shall be entitled to select
counsel (such counsel, "Separate Counsel") to conduct the defense to the extent
determined by such counsel to be necessary to protect the interests of the
indemnified party or parties and the reasonable fees and expenses of such
Separate Counsel shall be borne by the indemnifying party; provided, however,
that if the indemnified parties engage
-22-
<PAGE> 23
more than one Separate Counsel, then the indemnifying party's liability with
respect to such Separate Counsel shall be limited, in the aggregate, to an
amount equal to the highest amount of reasonable fees and expenses charged or
incurred by a single Separate Counsel, which amount shall be divided among the
indemnified parties on a pro rata basis in accordance with the relative amounts
of reasonable fees and expenses of their respective Separate Counsel. Expenses
covered by the indemnification in this Section 8 shall be paid by the
indemnifying party as they are incurred by the indemnified party. Anything in
this Section 8 to the contrary notwithstanding, the indemnifying party shall
not be liable for any settlement of any such claim effected without its written
consent.
(d) If the indemnification provided for in this Section 8 is
unavailable to, or insufficient to hold harmless an indemnified party under
Sections 8(a) or (b) hereof in respect of any losses, liabilities, claims,
damages or expenses (or actions, inquiries, investigations or proceedings in
respect thereof) referred to therein, except by reason of the provisos set forth
in Section 8(a) hereof or the failure to give notice as required in Section 8(c)
hereof (provided that the indemnifying party does not have knowledge of the
action, inquiry, investigation or proceeding and to the extent such party has
been materially prejudiced by the failure to give such notice), then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, liabilities, claims, damages or
expenses (or actions, inquiries, investigations or proceedings in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the other from
the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, liabilities, claims or reasonable expenses (or
actions, inquiries, investigations or proceedings in respect thereof), as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bears to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the Underwriters on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to above in this Section 8(d). The amount
paid or payable by an indemnified party as a result of the losses, liabilities,
claims, damages or reasonable expenses (or actions, inquiries, investigations or
proceedings in respect
-23-
<PAGE> 24
thereof) referred to above in this Section 8(d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8(d), (i) the provisions of the
Agreement Among Underwriters shall govern contribution among Underwriters, (ii)
no Underwriter (except as provided in the Agreement Among Underwriters) shall
be required to contribute any amount in excess of the underwriting discounts
and commissions applicable to the Shares purchased by such Underwriter, and
(iii) no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this Section 8(d) to contribute are several in proportion to
their individual underwriting obligations and not joint.
9. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Date and any Option Closing Date; and such
representations, warranties and agreements of the Underwriters and the Company,
including, without limitation, the indemnity and contribution agreements
contained in Section 8 hereof and the agreements contained in Sections 6, 9, 10
and 13 hereof, shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any Underwriter or any controlling
person, and shall survive delivery of the Shares and termination of this
Agreement, whether before or after the Closing Date or any Option Closing Date.
10. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION HEREOF.
(a) This Agreement shall become effective at 10:00 a.m.,
Philadelphia, Pennsylvania time, on the first business day following the
Effective Date or at the time of the public offering by the Underwriters of the
Shares, whichever is earlier, except that the provisions of Sections 6, 8, 9, 10
and 13 hereof shall be effective upon execution hereof. The time of the public
offering, for the purpose of this Section 10, shall mean the time when any of
the Shares are first released by the Underwriters for offering by dealers. The
Representatives may prevent the provisions of this Agreement (other than those
contained in Sections 6, 8, 9, 10 and 13) hereof from becoming effective without
liability of any party to any other party, except as noted below, by giving the
notice indicated in Section 10(c) hereof before the time the other provisions of
this Agreement become effective.
(b) The Representatives shall have the right to terminate this
Agreement at any time prior to the Closing Date as provided in Sections 7 and 11
hereof or if any of the following have occurred:
(i) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, any material adverse change or
any development involving a prospective material adverse change in or affecting
the condition, financial or otherwise, of the Company, or the earnings, business
affairs, management or business prospects of the Company, whether or not arising
in the ordinary course of business,
-24-
<PAGE> 25
that would, in the Representatives' reasonable judgment, make the offering or
delivery of the Shares impracticable;
(ii) any outbreak of hostilities or other national or
international calamity or crisis or change in economic, political or financial
market conditions if the effect on the financial markets of the United States of
such outbreak, calamity, crisis or change is material and adverse and would, in
the Representatives, reasonable judgment, make the offering or delivery of the
Shares impracticable;
(iii) suspension of trading generally in securities on the New
York Stock Exchange, the American Stock Exchange, the Nasdaq Stock Market or the
over-the-counter market or limitation on prices (other than limitations on hours
or numbers of days of trading) for securities or the promulgation of any federal
or state statute, regulation, rule or order of any court or other governmental
authority that in the Representatives, reasonable opinion materially and
adversely affects trading on such exchange or the over-the-counter market;
(iv) declaration of a banking moratorium by either federal or
Pennsylvania or Delaware state authorities;
(v) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs that in the
Representatives' reasonable opinion has a material adverse effect on the
securities markets in the United States; or
(vi) trading in any securities of the Company shall have been
suspended or halted by the Nasdaq Stock Market or the SEC.
(c) If the Representatives elect to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this Section
10, the Representatives shall notify the Company thereof promptly by telephone,
telex, telegraph, telegram or facsimile, confirmed by letter.
11. DEFAULT BY AN UNDERWRITER.
(a) If any Underwriter or Underwriters shall default in its or their
obligation to purchase Firm Shares or Optional Shares hereunder, and if the Firm
Shares or Optional Shares with respect to which such default relates do not
exceed the aggregate of 10% of the number of Firm Shares or Optional Shares, as
the case may be, that all Underwriters have agreed to purchase hereunder, then
such Firm Shares or Optional Shares to which the default relates shall be
purchased severally by the non-defaulting Underwriters in proportion to their
respective commitments hereunder.
(b) If such default relates to more than 10% of the Firm Shares or
Optional Shares, as the case may be, the Representatives may in their discretion
arrange for another party or parties (including a non-defaulting Underwriter) to
purchase such Firm Shares or Optional Shares to which such default relates, on
the terms contained herein. In the event that the Representatives do not arrange
for the purchase of the Firm Shares or Optional Shares to
-25-
<PAGE> 26
which a default relates as provided in this Section 11, this Agreement may be
terminated by the Representatives or by the Company without liability on the
part of the several Underwriters (except as provided in Section 8 hereof) or
the Company (except as provided in Sections 6 and 8 hereof), but nothing herein
shall relieve a defaulting Underwriter of its liability, if any, to the other
several Underwriters and to the Company for damages occasioned by its default
hereunder.
(c) If the Firm Shares or Optional Shares to which the default
relates are to be purchased by the nondefaulting Underwriters, or are to be
purchased by another party or parties as aforesaid, the Representatives or the
Company shall have the right to postpone the Closing Date or any Option Closing
Date, as the case may be, for a reasonable period but not in any event exceeding
seven days, in order to effect whatever changes may thereby be made necessary in
the Registration Statement or the Prospectus or in any other documents and
arrangements, and the Company agrees to file promptly any amendment to the
Registration Statement or supplement to the Prospectus that in the opinion of
counsel for the Underwriters may thereby be made necessary. The terms
"Underwriters" and "Underwriter" as used in this Agreement shall include any
party substituted under this Section 11 with like effect as if it had originally
been a party to this Agreement with respect to such Firm Shares and/or Optional
Shares.
12. INFORMATION FURNISHED BY UNDERWRITERS. The statement set forth on the
inside cover page regarding stabilization and under the caption "Underwriting"
(except for the third to last and last paragraphs thereunder) in any Preliminary
Prospectus and the Prospectus constitute the only written information furnished
by or on behalf of any Underwriter referred to in Sections 1(a)(ii) and 8
hereof.
13. NOTICE. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to any Underwriter,
shall be mailed, delivered, telexed, telegrammed, telegraphed or telecopied and
confirmed to such Underwriter, c/o Janney Montgomery Scott Inc., 1801 Market
Street, Philadelphia, Pennsylvania 19103, Attention: Mr. William L.
Rulon-Miller, with a copy to Pepper, Hamilton & Scheetz, 3000 Two Logan Square,
Philadelphia, Pennsylvania 19103, Attention: Barry M. Abelson, Esquire; if sent
to the Company shall be mailed, delivered, telexed, telegrammed, telegraphed or
telecopied and confirmed to Ansoft Corporation, Four Station Square, Suite 660,
Pittsburgh, Pennsylvania 15219, Attention: Nicholas Csendes, with a copy to
Buchanan Ingersoll, Professional Corporation, One Oxford Centre, 301 Grant
Street, 20th Floor, Pittsburgh, Pennsylvania 15219, Attention: Ronald Schuler.
14. PARTIES. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the several Underwriters, the Company, and the
controlling persons, directors and officers thereof, and their respective
successors, assigns, heirs and legal representatives, and no other person shall
have or be construed to have any legal or equitable right, remedy or claim under
or in respect of or by virtue of this Agreement or any provision herein
contained. The terms "successors" and "assigns" shall not include any purchaser
of the Shares merely because of such purchase.
-26-
<PAGE> 27
In all dealings with the Company under this Agreement, the Representatives
shall act on behalf of each of the several Underwriters, and the Company shall
be entitled to act and rely upon any statement, request, notice or agreement
made or given by the Representatives jointly or by Janney Montgomery Scott Inc.
on behalf of the Representatives.
15. DEFINITION OF BUSINESS DAY. For purposes of this Agreement, "business
day" means any day on which the Nasdaq Stock market is opened for trading.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and all such counterparts will constitute one and the same
instrument.
CONSTRUCTION. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania applicable to
agreements made and performed entirely within such Commonwealth.
If the foregoing correctly sets forth your understanding of our agreement,
please sign and return to the Company the enclosed duplicate hereof, whereupon
it will become a binding agreement in accordance with its terms.
Very truly yours,
ANSOFT CORPORATION
By:
---------------------------
Nicholas Csendes
President
The foregoing Agreement is hereby confirmed
and accepted as of the date first
above written.
JANNEY MONTGOMERY SCOTT INC.
PENNSYLVANIA MERCHANT GROUP Ltd
As Representatives of the Several Underwriters
named in Schedule I hereto
By: JANNEY MONTGOMERY SCOTT INC.
By:
--------------------------------
Authorized Representative
-27-
<PAGE> 28
SCHEDULE I
SCHEDULE OF UNDERWRITERS
------------------------
<TABLE>
<CAPTION>
Number of Firm Number of
Shares to be Optional Shares
UNDERWRITER Purchased to be Purchased
- ----------- --------------- ---------------
<S> <C> <C>
Janney Montgomery Scott, Inc. 445,000 66,750
Pennsylvania Merchant Group Ltd 445,000 66,750
Adams, Harkness & Hill, Inc. 25,000 3,750
Advest, Inc. 25,000 3,750
Dain Bosworth Incorporated 25,000 3,750
First Albany Corporation 25,000 3,750
First of Michigan Corporation 25,000 3,750
Furman Selz LLC 25,000 3,750
Legg Mason Wood Walker Incorporated 25,000 3,750
Morgan Keegan & Company, Inc. 25,000 3,750
Needham & Company, Inc. 25,000 3,750
Parker/Hunter Incorporated 25,000 3,750
Piper Jaffray Inc. 25,000 3,750
Principal Financial Securities, Inc. 25,000 3,750
Rauscher Pierce Refsnes, Inc. 25,000 3,750
Raymond James & Associates, Inc. 25,000 3,750
The Robinson-Humphrey Company, Inc. 25,000 3,750
Rodman & Renshaw, Inc. 25,000 3,750
SoundView Financial Group, Inc. 25,000 3,750
Stephens, Inc. 25,000 3,750
Tucker Anthony Incorporated 25,000 3,750
Unterberg Harris 25,000 3,750
Wessels, Arnold & Henderson, L.L.C. 25,000 3,750
Wheat, First Securities, Inc. 25,000 3,750
Dominick & Dominick, Incorporated 10,000 1,500
Ferris, Baker Watts, Inc. 10,000 1,500
C. L. King & Associates, Inc. 10,000 1,500
Mesirow Financial, Inc. 10,000 1,500
Scott & Stringfellow, Inc. 10,000 1,500
Van Kasper & Co. 10,000 1,500
--------- -------
Total 1,500,000 225,000
</TABLE>
<PAGE> 29
SCHEDULE II
SHAREHOLDER NASD AFFILIATIONS
-----------------------------
None
<PAGE> 30
SCHEDULE III
List of Persons Who Are to Deliver Lock-Up
AGREEMENTS CALLED FOR UNDER SECTIONS 5(K) AND 7(D)
--------------------------------------------------
All holders of Common Stock of the Company, except Keith
Franz, Brittany Brown, Harsha Bhat and Nancy Ott, and all
holders of options exercisable for Common Stock of the
Company, except Dan Lukitsch, Henri Marunis, Dave Olson and
Rajen Gupta.
<PAGE> 31
EXHIBIT A
Matters to be Covered in the Opinion of
Buchanan Ingersoll, Professional Corporation
Counsel for the Company
(1) The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation with full
corporate power and authority to conduct all of the activities conducted by it,
own or lease all of the assets owned or leased by it, and conduct its business
all as described in the Registration Statement and the Prospectus; and is duly
licensed or qualified to do business and is in good standing as a foreign
corporation in all jurisdictions in which the nature of the activities conducted
by it and/or the character of the assets owned and leased by it makes such
qualification or license necessary.
(2) No authorization, registration, approval, consent or license of any
governmental or regulatory body, except as may be required under the Act or the
blue sky laws of the various jurisdictions, is required in connection with the
(A) authorization, issuance, transfer, sale or delivery of the Shares to be sold
by the Company; (B) execution, delivery and performance of this Agreement by the
Company or (C) taking of any action contemplated herein or in the Registration
Statement or the Prospectus, or if so required, all such authorizations,
approvals, consents and licenses, specifying the same, have been obtained and
are in full force and effect and have been disclosed to the Representatives.
(3) The Company has the authorized and outstanding capital stock, stock
options and other derivative securities as set forth in the Registration
Statement and the Prospectus. The outstanding shares of the Common Stock have
been, and all of the Shares will be, upon sale or issuance and payment therefor,
duly authorized, validly issued, fully paid and nonassessable, are not subject
to preemptive rights and have not been issued in violation of any statutory
preemptive rights or similar contractual rights. The holders of shares of the
Common Stock are not and will not be subject to personal liability solely by
reason of being such holders. The issuance and sale of the Shares by the Company
has been duly and validly authorized. The Common Stock has been duly authorized
for quotation or listing on the Nasdaq Stock Market's National Market. All
issuances and repurchases of securities by the Company were exempt from, or
complied in all respects with, the provisions of all applicable federal and
state securities and state corporate laws.
(4) To the knowledge of such counsel, no holder of any securities of the
Company has the right to require registration of shares of the Common Stock or
other securities of the Company. The description of the Common Stock and the
Shares contained in the Registration Statement and the Prospectus conforms to
the rights set forth in the instruments defining the same and is in conformity
with the requirements of the Act and the Regulations.
(5) The Company is not an "investment company" as defined in Section 3(a)
of the Investment Company Act and, if the Company conducts its business as set
forth in the
A-1
<PAGE> 32
Registration Statement and the Prospectus, will not become an "investment
company" and will not be required to register under the Investment Company Act;
the Company has not, prior to the date of the Prospectus, been required to make
any filings pursuant to the Exchange Act.
(6) The Company has full power and authority to enter into this Agreement,
and this Agreement has been duly authorized, executed and delivered by the
Company and constitutes a valid and binding obligation of the Company
enforceable in accordance with its terms, except insofar as rights to indemnity
or contribution may be limited by applicable law or equitable principles, and
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, arrangement or similar laws affecting creditors,
rights generally or by general equitable principles.
(7) Nothing has come to such counsels attention to give such counsel
reason to believe that any of the representations and warranties of the Company
contained in this Agreement or in any certificate or document contemplated under
this Agreement to be delivered is not true or correct or that any of the
covenants and agreements contained in this Agreement or in any such certificate
or document to be performed on the part of the Company or any of the respective
conditions contained in this Agreement or in any such certificate or document,
or set forth in the Registration Statement or the Prospectus, to be fulfilled or
complied with by the Company has not been or will not be duly and timely
performed, fulfilled or complied with in any material respect.
(8) The Registration Statement and the Prospectus, and each amendment
thereof or supplement thereto, comply as to form and substance with, and are
responsive in all material respects to, the requirements of the Act and the
Rules and Regulations (except that no opinion need be expressed as to matters
concerning financial statements and other financial data and related notes,
schedules and financial or statistical data contained in the Registration
Statement or the Prospectus).
(9) Such counsel has participated in the preparation of the Registration
Statement and the Prospectus and nothing has come to the attention of such
counsel to lead them to believe that, both as of the Effective Date and as of
the Closing Date and any Option Closing Date, either the Registration Statement
or the Prospectus, or any amendment or supplement thereto, contained or contains
any untrue statement of a material fact or omitted or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading (except
that no opinion need be expressed as to matters concerning financial statements
and other financial data and related notes, schedules and financial or
statistical data contained in the Registration Statement or the Prospectus).
(10) Such counsel has read all contracts specifically enumerated in the
Registration Statement and the Prospectus, and such contracts are fairly
summarized or described therein, conform in all material respects to the
descriptions thereof contained therein, and are filed as exhibits thereto, if
required, and to the knowledge of such counsel, there are no contracts
A-2
<PAGE> 33
or documents required to be so summarized or disclosed or so filed which have
not been so summarized or disclosed or so filed.
(11) The Registration Statement has become effective under the Act, and
(A) no stop order suspending the effectiveness of the Registration Statement has
been issued and (B) to the best of such counsel's knowledge, no proceedings for
that purpose have been instituted or are threatened, pending or contemplated.
The opinion delivered at the Closing Date shall state that all filings required
by Rule 424 and Rule 430A of the Rules and Regulations have been made, to the
extent that such rules are utilized.
(12) The execution and delivery of this Agreement by the Company, the
consummation by the Company of the transactions herein contemplated and the
compliance with the terms of this Agreement do not and will not conflict with or
result in a breach of any of the terms or provisions of or violate or constitute
a default under (a) the Certificate of Incorporation or Bylaws of the Company,
(b) any indenture, mortgage or other agreement or instrument known to such
counsel to which the Company is a party or by which the Company or any material
portion of its properties is bound, (c) any existing statute, rule or
regulation, or (d) any judgment, order or decree of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any material portion of its properties.
(13) The real properties described in the Registration Statement and the
Prospectus as being leased by the Company are held by the Company under valid,
subsisting and enforceable leases.
(14) To the knowledge of such counsel, there are no legal proceedings
pending or threatened against the Company which are required to be disclosed in
the Registration Statement.
(15) The Company does not own any interest in any corporation,
partnership, joint venture, trust or other business entity.
In rendering such opinions, counsel for the Company may set forth that as
to certain matters of fact, such counsel is relying on one or more certificates
of public officials, governmental agencies or officers of the Company. To the
extent any statement in such opinions is qualified as being "to the knowledge of
such counsel" or words to similar effect, such statement shall be deemed to
indicate that during the course of such counsels representation of the Company,
no information that would give counsel current actual knowledge of the
inaccuracy of such statement has come to the attention of those lawyers in the
firm who have rendered legal services to the Company in connection with the
preparation of the Registration Statement and the Prospectus. In addition, as to
matters of law, counsel for the Company may rely as to matters involving the
application of laws other than the laws of the United States, the laws of
Pennsylvania, the laws of Delaware and jurisdictions in which they are admitted,
to the extent such counsel deems proper and to the extent specified in such
opinion, if at all, upon an opinion or opinions (in form and substance
satisfactory to the Underwriters' counsel) of other counsel reasonably
acceptable to the Underwriters' counsel, familiar with the applicable laws.
A-3
<PAGE> 34
The opinion of counsel for the Company shall include a statement to the
effect that it may be relied upon by counsel for the Underwriters in their
opinion delivered to the Underwriters.
A-4
<PAGE> 1
EXHIBIT 11.1
STATEMENT RE PER SHARE EARNINGS (1)
<TABLE>
<CAPTION>
Years Ended April 30, 1996
(In thousands, except per share data) 1996 1995 1994
------ ------- -------
<S> <C> <C> <C>
Net income (loss) $1,300 $ (305) $ (140)
====== ======= =======
Common and Common Equivalent Shares:
Weighted average number of shares of
common stock outstanding 6,235 5,208 2,074
Weighted average common
equivalent shares outstanding (2) 638 320 320
------ ------- -------
Weighted average number of shares of
common and common equivalent
stock outstanding 6,873 5,528 2,394
------ ------- -------
Net income (loss) per common share $ 0.19 $ (0.06) $ (0.06)
====== ======= =======
</TABLE>
(1) Fully diluted net income per share has not been separately presented, as
the amounts would not be materially different from primary net income per
share.
(2) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, certain common and common equivalent shares issued by the Company
during the twelve months immediately preceding the initial filing of the
registration statement relating to the Company's initial public offering
have been included in the calculation of weighted average shares, using
the treasury stock method and the initial public offering price, as if
these shares were outstanding for all periods prior to the initial public
offering.
35
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENT OF
INCOME FOR YEAR ENDED APRIL 30, 1996 AND THE BALANCE SHEET AT APRIL 30, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000849433
<NAME> ANSOFT CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> APR-30-1996
<CASH> 11
<SECURITIES> 1,459
<RECEIVABLES> 1,666
<ALLOWANCES> 125
<INVENTORY> 0
<CURRENT-ASSETS> 13,304
<PP&E> 724
<DEPRECIATION> 944
<TOTAL-ASSETS> 15,391
<CURRENT-LIABILITIES> 1,100
<BONDS> 0
0
0
<COMMON> 76
<OTHER-SE> 14,215
<TOTAL-LIABILITY-AND-EQUITY> 15,391
<SALES> 7,995
<TOTAL-REVENUES> 8,695
<CGS> 0
<TOTAL-COSTS> 8,042
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 688
<INCOME-TAX> 612
<INCOME-CONTINUING> 1,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,300
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
</TABLE>
