<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 29, 1996
REGISTRATION NO. 333-06285
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
VISIGENIC SOFTWARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7372 94-3173927
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
951 MARINER'S ISLAND BLVD.
SUITE 120
SAN MATEO, CA 94404
(415) 286-1900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
ROGER J. SIPPL
CHIEF EXECUTIVE OFFICER
VISIGENIC SOFTWARE, INC.
951 MARINER'S ISLAND BLVD.
SUITE 120
SAN MATEO, CA 94404
(415) 286-1900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
THOMAS W. FURLONG, ESQ. MARK C. STEVENS, ESQ.
DAVID A. HUBB, ESQ. JEFFREY R. VETTER, ESQ.
GILBERT GALLARDO, ESQ. MICHAEL J. MCADAM, ESQ.
GRAY CARY WARE & FREIDENRICH FENWICK & WEST LLP
A PROFESSIONAL CORPORATION TWO PALO ALTO SQUARE
400 HAMILTON AVENUE PALO ALTO, CA 94306
PALO ALTO, CA 94301-1825 (415) 494-0600
(415) 328-6561
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
VISIGENIC SOFTWARE, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING
LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF FORM S-1.
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN
FORM S-1 REGISTRATION STATEMENT LOCATION IN PROSPECTUS
------------------------------- ----------------------
<S> <C>
1. Forepart of this Registration
Statement and Outside Front
Cover Page of Prospectus....... Facing Page of this Registration Statement
and Outside Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus...... Inside Front and Outside Back Cover Pages
3. Summary Information, Risk
Factors and Ratio of Earnings
to Fixed Charges............... Prospectus Summary; Risk Factors
4. Use of Proceeds................ Prospectus Summary; Use of Proceeds
5. Determination of Offering
Price.......................... Outside Front Cover Page; Underwriting
6. Dilution....................... Dilution
7. Selling Security Holders....... Principal and Selling Stockholders
8. Plan of Distribution........... Outside Front Cover Page; Underwriting
9. Description of Securities to be
Registered..................... Prospectus Summary; Capitalization;
Description of Capital Stock
10. Interests of Named Experts and
Counsel........................ Legal Matters
11. Information with Respect to the
Registrant..................... Outside Front and Inside Front Cover Pages;
Prospectus Summary; Risk Factors; Dividend
Policy; Capitalization; Selected
Consolidated Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Certain
Transactions; Principal and Selling
Stockholders; Description of Capital
Stock; Shares Eligible for Future Sale;
Financial Statements
12. Disclosure of Commission
Position on Indemnification for
Securities Act Liabilities..... Not Applicable
</TABLE>
<PAGE>
FILED PURSUANT TO RULE 424(a)
REGISTRATION NO. 333-06285
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JULY 22, 1996
PROSPECTUS
2,100,000 SHARES
LOGO
OF VISIGENIC SOFTWARE, INC.
COMMON STOCK
Of the 2,100,000 shares of Common Stock offered hereby, 1,700,000 shares are
being sold by the Company and 400,000 shares are being sold by the Selling
Stockholders. The Company will not receive any of the proceeds from the sale of
the shares by the Selling Stockholders. See "Principal and Selling
Stockholders."
Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price will be between $9.00 and $11.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. The Company has applied to have the Common Stock approved for
quotation on the Nasdaq National Market under the symbol VSGN.
-----------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 5.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
PUBLIC DISCOUNT (1) COMPANY (2) STOCKHOLDERS
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<S> <C> <C> <C> <C>
Per Share.............. $ $ $ $
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Total (3).............. $ $ $ $
</TABLE>
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(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.
(2) Before deducting expenses payable by the Company estimated at $750,000.
(3) The Company and the Selling Stockholders have granted the Underwriters a
30-day option to purchase up to 315,000 additional shares of Common Stock
solely to cover over-allotments, if any. If all such shares are purchased,
the total Price to Public, Underwriting Discount, Proceeds to Company and
Proceeds to Selling Stockholders will be $ , $ , $ and $ ,
respectively. See "Underwriting."
-----------
The shares of Common Stock are offered by the several Underwriters subject to
prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about , 1996, at the office of the agent of Hambrecht &
Quist LLC in New York, New York.
HAMBRECHT & QUIST ROBERTSON, STEPHENS & COMPANY
, 1996
<PAGE>
[Examples of applications which embed Visigenic's database
connectivity and distributed object connectivity products
appear in color here]
Visigenic, the Visigenic logo, VisiBroker, VisiODBC and VisiChannel are
trademarks of the Company. This Prospectus also includes trademarks of
companies other than the Company.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET THE OVER-THE-
COUNTER MARKET, OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE>
Digitalized artwork illustrating how the Visigenic database connectivity and
distributed object connectivity products simplify the development, deployment
and management of reliable and flexible distributed applications while enabling
enterprise users, customers, suppliers and other business partners to easily
access enterprise data.
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
See "Risk Factors" for a discussion of certain factors to be considered by
prospective investors.
THE COMPANY
Visigenic Software, Inc. ("Visigenic" or the "Company") is a leading provider
of software tools for database and distributed object connectivity for the
Internet, Intranet and enterprise computing environments. The Company's
standards-based products facilitate the development, deployment and management
of distributed applications by providing database-independent access to leading
databases and the communications infrastructure for distributed object-oriented
applications.
In today's complex computing environment, enterprises require flexible access
to data and applications, regardless of whether the data and applications are
located at the central office, a remote office or across the Internet.
Enterprise computing environments are increasingly using multiple database
management systems ("DBMSs"), operating systems, networks and hardware
platforms and relying on object-oriented technologies to develop and deploy
distributed applications for these heterogeneous environments. The rapid growth
of the Internet and Intranets, both of which are heterogeneous distributed
computing environments, is accelerating the need for tools to develop, deploy
and manage distributed applications.
The Visigenic solution provides key components of the software infrastructure
that enables developers and information technology ("IT") professionals to
develop, deploy and manage distributed applications. The Company believes
business applications increasingly will be comprised of objects, Java applets
and databases that are distributed on networks and dynamically assembled into
highly customized distributed solutions. The Company's products enable the
enterprise to adapt its application architecture to meet changing business and
computing requirements by simplifying the development and deployment of
distributed database and object-oriented applications. Visigenic's products
support existing and emerging industry standards, making the Company's
solutions open, flexible and interoperable across multiple operating
environments. The Company believes that its products are especially well suited
for large distributed computing environments such as the Internet and
Intranets.
The Company's strategy is to become the premier provider of software tools
which enable developers and IT professionals to develop, deploy and manage
distributed applications for Internet, Intranet and enterprise computing
environments. Visigenic supports and contributes to the enhancement of open
industry standards through active participation in several standards setting
organizations. The Company intends to continue to develop strategic
relationships with leading technology companies to promote the widespread
acceptance and distribution of Visigenic products. Visigenic has established
strategic relationships with Cisco, Hitachi, Microsoft, Netscape and Platinum
technology. Additionally, the Company intends to leverage its products and
expertise to exploit the emergence of the Internet and Intranets.
The Company markets and sells its software through its direct sales and
telesales forces, independent software vendors ("ISVs"), value added resellers
("VARs"), international distributors and on-line Internet sales in North
America, Europe and Asia. The Company's customers include ASCII Corporation,
Cisco, Compuware, Borland, Healtheon, Hewlett-Packard, Hitachi, Merrill Lynch,
MCI Telecommunications, Microsoft, Netscape, Oracle, Platinum technology and
Software AG.
In May 1996, the Company acquired PostModern Computing Technologies, Inc.
("PostModern"), a supplier of distributed object connectivity software.
PostModern had revenue of $1.0 million and net income of
3
<PAGE>
$58,849 in the year ended March 31, 1996, and had total assets of $473,771 at
March 31, 1996. In the acquisition, which was structured as a merger, the
Company issued 3,099,821 shares of its Common Stock and paid a total of $2.3
million in exchange for all PostModern shares. The Company also assumed
PostModern's outstanding stock options and made cash payments, subject to one-
year vesting, totaling $1.5 million, to certain PostModern employees. A portion
of the proceeds from the Company's issuance of its Series C Preferred Stock and
convertible notes to three investors in May 1996 was used to finance the cash
portion of the acquisition.
The Company was incorporated in February 1993. The Company's principal
executive offices are located at 951 Mariner's Island Boulevard, Suite 120, San
Mateo, California, 94404. Its telephone number is (415) 286-1900. Its email
address is [email protected] and its World Wide Web site is located at
http://www.visigenic.com. Information contained on the Company's Web site shall
not be deemed to be a part of this Prospectus.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.................... 1,700,000 shares
Common Stock offered by the Selling Stockholders....... 400,000 shares
Common Stock to be outstanding after the offering...... 12,169,971 shares (1)
Use of proceeds........................................ General corporate purposes,
including working capital and
possible repayment of revolving and
bridge credit facilities
Proposed Nasdaq National Market symbol................. VSGN
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, QUARTER ENDED JUNE 30,
--------------------------------------- ------------------------------
1996 1996
--------------------- ----------------------
PRO FORMA PRO FORMA
1994 1995 ACTUAL COMBINED (2) 1995 ACTUAL COMBINED (2)
------- ------- ------- ------------ ------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenue................. -- $ 1,115 $ 5,575 $ 6,577 $ 911 $ 2,961 $ 3,093
Gross profit............ -- 820 4,564 5,303 722 2,528 2,584
Loss from operations.... (2,496) (4,723) (4,464) (6,422) (978) (13,665) (13,901)
Net loss................ $(2,454) $(4,629) $(4,379) $(6,337) $ (977) $(13,659) $(13,895)
Pro forma net loss per
share (3).............. -- -- $ (.39) $ (.57) $ (.09) $ (1.21) $ (1.23)
Pro forma weighted
average common and
common equivalent
shares (3)............. -- -- 11,120 11,120 10,602 11,289 11,289
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------------
PRO
ACTUAL FORMA (4) AS ADJUSTED (5)
------ --------- ---------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents..................... $1,890 $1,890 $16,426
Working capital............................... 2,331 2,331 17,391
Total assets.................................. 9,962 9,962 24,498
Convertible notes payable to stockholders..... 2,000 -- --
Stockholders' equity.......................... 3,111 5,111 20,171
</TABLE>
- -------------
(1) Excludes 1,449,285 shares of Common Stock issuable upon exercise of options
outstanding as of June 30, 1996 with a weighted average exercise price of
$1.76 per share. See "Capitalization" and "Management--Stock Plans."
(2) The pro forma combined statement of operations data gives effect to the May
1996 acquisition of PostModern Computing Technologies Inc. as if it had
occurred on April 1, 1995. The acquisition was accounted for as a purchase
and resulted in the write-off of approximately $12.0 million of in process
product development in the quarter ended June 30, 1996. The pro forma
combined statement of operations data for the year ended March 31, 1996
does not give effect to this write-off. See Note 9 of Notes to Consolidated
Financial Statements of Visigenic and Pro Forma Condensed Combined
Financial Statements.
(3) See Note 2 of Notes to Consolidated Financial Statements of Visigenic for
an explanation of the method used to determine the number of shares used to
compute per share amounts.
(4) Gives pro forma effect to the conversion upon the closing of this offering
of all outstanding shares of Preferred Stock and convertible notes into
shares of Common Stock.
(5) Adjusted to reflect the sale of 1,700,000 shares of Common Stock offered by
the Company hereby at an assumed public offering price of $10.00 per share
and the application of the estimated net proceeds therefrom. See "Use of
Proceeds" and "Capitalization."
---------------
Except as otherwise noted herein, information in this Prospectus assumes (i)
no exercise of the Underwriters' over-allotment option, (ii) the amendment and
restatement of the Company's Certificate of Incorporation prior to the
effective date of this offering effecting a 1 for 2 reverse stock split, (iii)
the conversion of outstanding convertible notes into an aggregate of
approximately 200,000 shares of Common Stock upon the consummation of this
offering, and (iv) the conversion of all outstanding shares of Preferred Stock
of the Company into an aggregate of 4,119,069 shares of Common Stock upon the
consummation of this offering. See "Capitalization," "Description of Capital
Stock" and "Underwriting."
5
<PAGE>
RISK FACTORS
The following risk factors should be considered carefully in addition to the
other information contained in this Prospectus before purchasing the Common
Stock offered hereby. This Prospectus contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Actual results could differ
materially from those projected in the forward-looking statements as a result
of the risk factors set forth below and elsewhere in this Prospectus.
Limited Operating History; History of Losses; Recent Acquisition of
Distributed Object Connectivity Business. The Company was incorporated in 1993
and commenced shipment of its initial products in November 1994. In May 1996,
the Company acquired PostModern Computing Technologies Inc. ("PostModern"), a
developer of distributed object connectivity software. PostModern was founded
in 1991, commenced shipment of its initial products in 1992 and had very
limited product sales prior to the acquisition. Accordingly, the Company has
only a limited operating history, particularly with respect to its newly
acquired distributed object connectivity business, upon which an evaluation of
the Company and its future operating results can be based.
Since inception, the Company has incurred significant losses and negative
cash flow. At June 30, 1996, the Company had cumulative operating losses of
$25.1 million, with net losses of $2.5 million, $4.6 million, $4.4 million and
$13.7 milion for fiscal 1994, fiscal 1995, fiscal 1996 and the quarter ended
June 30, 1996, respectively. A substantial portion of the accumulated deficit
is due to the significant commitment of resources to the Company's product
development and sales and marketing activities and the write-off of
approximately $12.0 million of in process product development in the quarter
ended June 30, 1996 in connection with the acquisition of PostModern. The
Company expects to continue to devote substantial resources in these areas and
as a result will need to generate significant revenue in order to achieve
profitability. The Company currently anticipates that it will operate at a
loss through at least the middle of 1997. The Company has experienced
substantial growth in revenue in fiscal 1996. The Company expects that prior
growth rates of the Company's software product revenue will not be sustainable
in the future. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The Company, which prior to the acquisition of PostModern did not provide
distributed object connectivity software, expects that its revenue growth
commencing in the current fiscal year will be dependent, in part, on sales of
distributed object connectivity products. The Company's ability to develop a
distributed object connectivity software business will depend upon several
factors, including, but not limited to, its ability to integrate the
operations and personnel of PostModern into the Company, the ability of the
Company's sales personnel and distribution channels to sell distributed object
connectivity software and the commercial acceptance of the Company's
distributed object connectivity software. Because the market for distributed
object technology is new and emerging and customers' expertise about this
technology is limited, the Company believes that customer support is critical
to achieving sales of the Company's distributed object connectivity products.
The Company currently has few dedicated support engineers capable of providing
the required level of customer support with respect to its distributed object
technology business. If the Company is unsuccessful at attracting additional
support and engineering personnel, this is likely to have a material adverse
effect on the Company's distributed object connectivity business. There can be
no assurance, particularly in light of the recent acquisition of PostModern by
the Company and the limited operating history of PostModern itself, that the
Company's distributed object connectivity software business will be
successful. Any failure by the Company to develop a successful distributed
object connectivity software business would have a material adverse effect on
the Company's business, results of operations and financial condition.
The process of integrating PostModern into the Company may result in
unforeseen operating difficulties and expenditures and may absorb significant
management attention that would otherwise be available for ongoing development
of the Company's business. Moreover, there can be no assurance that the
anticipated benefits of this acquisition will be realized.
Potential Fluctuations in Operating Results. The Company's revenue and
results of operations have varied on a quarterly basis in the past and are
expected to vary significantly in the future. Accordingly, the Company
6
<PAGE>
believes that period to period comparisons of its results of operations are
not necessarily meaningful and should not be relied upon as indications of
future performance. The Company's revenue and results of operations are
difficult to forecast and could be adversely affected by many factors,
including, among others, the size, timing and terms of individual license
transactions; the relatively long sales and implementation cycles for the
Company's products; the delay or deferral of customer implementations; changes
in the Company's operating expenses; the ability of the Company to develop and
market new products and control costs; market acceptance of new products;
timing of introduction or enhancement of products by the Company or its
competitors; the level of product and price competition; the ability of the
Company to expand its direct sales and telesales forces, its indirect
distribution channels and its customer support capabilities; activities of and
acquisitions by competitors; changes in connectivity software, database
technology and industry standards; changes in the mix of products and services
sold; changes in the mix of channels through which products and services are
sold; levels of international sales; personnel changes and difficulties in
attracting and retaining qualified sales, marketing and technical personnel;
changes in customers' budgeting cycles; foreign currency exchange rates;
quality control of products sold; and general economic conditions. In
particular, the ability of the Company to achieve revenue growth in the future
will depend on its success in adding a substantial number of sales and sales
support personnel in fiscal 1997. Competition for such personnel is intense
and there can be no assurance the Company will be able to attract and retain
these personnel.
Licensing of the Company's software products historically has accounted for
the substantial majority of the Company's revenue, and the Company anticipates
that this trend will continue for the foreseeable future. The Company's
software products revenue is difficult to forecast for a number of reasons.
The Company typically does not have a material backlog of unfilled orders, and
revenue in any quarter is substantially dependent on contracts received in
that quarter. A significant portion of the Company's revenue in prior periods
has been derived from relatively large sales to a limited number of customers,
and the Company currently anticipates that future quarters will continue to
reflect this trend. In fiscal 1996, approximately 78% of the Company's revenue
was derived from ten customers and revenue from one customer, Platinum
technology, Inc., accounted for approximately 25% of the Company's total
revenue. For the quarter ended June 30, 1996, approximately 75% of the
Company's revenue was derived from ten customers, and revenue from one
customer, Cisco Systems, Inc., accounted for approximately 34% of the
Company's total revenue. Sales cycles for the Company's products typically
range from six to twelve months, and the terms and conditions of individual
license transactions, including prices and discounts, are often highly
negotiated based on volumes and commitments and vary considerably from
customer to customer. In addition, the Company has generally recognized a
substantial portion of its revenue in the last month of each quarter, with
this revenue concentrated in the last weeks of the quarter. Accordingly, the
cancellation or deferral of even a small number of purchases of the Company's
products has in the past and could in the future have a material adverse
effect on the Company's business, results of operations and financial
condition in any particular quarter. Cancellations or deferrals of orders may
be caused by any of a number of factors, including delays in new or enhanced
product shipments. To the extent that significant sales occur earlier than
expected, operating results for subsequent quarters may be adversely affected.
A significant portion of the Company's revenue has been and is expected in the
future to continue to be based upon sales to third party vendors, who will
incorporate the Company's products in their own products. This revenue depends
upon the success of third parties, and as a result is difficult for the
Company to predict and may be subject to extreme fluctuation.
The Company's expense levels are based, in part, on its expectations as to
future revenue and to a large extent are fixed in the short term. The Company
may be unable to adjust spending in a timely manner to compensate for any
unexpected revenue shortfall. Accordingly, any significant shortfall of
revenue in relation to the Company's expectations would have an almost
immediate adverse effect on the Company's business, financial condition and
results of operations. Further, the Company intends to continue to expand its
development teams and its sales and marketing force. The timing of such
expansion and the rate at which new development and sales and marketing
personnel become productive could cause material fluctuations in quarterly
results of operations.
7
<PAGE>
As a result of the foregoing or other factors, it is likely that in some
future period the Company's results of operations will fail to meet the
expectations of public market analysts or investors, and the price of the
Company's Common Stock would likely be materially adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Product Concentration. Prior to the acquisition of PostModern in May 1996,
the Company derived all of its revenue from the licensing of its database
connectivity software products, particularly its Open Database Connectivity
("ODBC") product line, and fees from related services. These products and
services are expected to continue to account for a substantial majority of the
Company's revenue for the foreseeable future. As a result, a reduction in
demand or increase in competition for these products, or a decline in sales of
such products, would have a material adverse effect on the Company's business,
results of operations and financial condition. See "Business--Products."
Dependence on Emerging Markets and Evolving Standards; Acceptance of the
Company's Products. The Company's future financial performance will depend on
the growth in demand for standards-based database connectivity and distributed
object connectivity software products. These markets are new and emerging, are
rapidly evolving, are characterized by an increasing number of market entrants
and will be subject to frequent and continuing changes in customers'
preferences and technology. As is typical in new and evolving markets, demand
and market acceptance for products are subject to a high level of uncertainty.
To date, substantially all of the Company's revenue is derived from the
licensing of database connectivity products and fees for related services.
These products are based on the ODBC standard, which was developed to enable
applications to access data from all ODBC-compliant data sources. While the
ODBC standard is supported by most of the major database and software vendors,
it is a recent standard that has not yet gained widespread acceptance and that
currently co-exists with proprietary database connectivity solutions from many
of these same database and software vendors.
With the acquisition of PostModern in May 1996, the Company began to offer
standards-based distributed object connectivity products. The Company's
current distributed object connectivity products are based on several
standards, including the Common Object Request Broker Architecture ("CORBA")
and the Internet Inter-ORB Protocol ("IIOP"). These standards are intended to
facilitate the management and communication of applications created in object-
oriented programming languages such as C++ and Java. These standards are new,
have not yet gained widespread acceptance and compete with proprietary
solutions such as Microsoft's ActiveX and Distributed Component Object Model
("DCOM"). The distributed object connectivity software market is relatively
young and there are few proven products. Further, some of the Company's
distributed object connectivity products are designed specifically for use in
applications for the Internet and Intranets. Because critical issues
concerning the Internet and Intranets -- including security, reliability,
cost, ease of use and access and quality of service -- remain unresolved, the
growth of applications targeted at the Internet and Intranets is uncertain and
difficult to predict.
Because the markets for the Company's products are new and evolving, it is
difficult to assess or predict with any assurance the size or growth rate, if
any, of these markets. There can be no assurance that the markets for the
Company's products will develop, or that the Company's products will be
adopted. If these markets fail to develop, develop more slowly than expected
or attract new competitors, or if the Company's products do not achieve market
acceptance, the Company's business, results of operations and financial
condition could be materially adversely affected. Because the Company's
strategy is to develop standards-based products and these standards are
relatively new, not widely accepted and compete with other emerging standards,
to the extent that these standards are not commercially successful, this will
have a material adverse affect on the Company's business, results of
operations and financial condition. Competing or alternative technologies are
being or are likely in the future to be promoted by current and potential
competitors of the Company, some of which have well-established relationships
with the current and potential customers of the Company and have extensive
knowledge of the markets served by the Company, better name recognition and
more extensive development, sales and marketing resources than the Company.
8
<PAGE>
While the Company has licensed its products to numerous customers, most of
these customers are currently developing applications that incorporate the
Company's products, and only a very limited number of them have deployed or
shipped such applications. To the extent these customers are unable to or
otherwise do not deploy or ship applications that incorporate the Company's
products, or if these applications are not successful, this will have a
material adverse effect on the Company's business, results of operations and
financial condition. See "--Intense Competition" and "Business--Industry
Background."
Reliance on VARs and ISVs. A significant element of the Company's strategy
is to embed its technology in products offered by the Company's VAR and ISV
customers, such as Cisco, Healtheon, Hewlett-Packard, Microsoft, Netscape,
Oracle and Platinum technology. A relatively small number of VAR and ISV
customers have accounted for a significant percentage of the Company's
revenue. In fiscal 1996, ten VAR and ISV customers accounted for approximately
78% of the Company's revenue, while in the first quarter of fiscal 1997, ten
VAR and ISV customers accounted for approximately 75% of the Company's
revenue. The Company intends to seek similar distribution arrangements with
other VARs and ISVs to embed the Company's technology in their products and
expects that these arrangements will account for a significant portion of the
Company's revenue in future periods. To date, the terms and conditions,
including prices and discounts, of the Company's agreements with its VAR and
ISV customers have been highly negotiated and vary significantly between
customers, however, all of these agreements are non-exclusive and do not
require the VAR or ISV to make minimum purchases. Many of the markets for the
VAR and ISV products in which the Company's technology are being embedded are
new and evolving and, therefore, subject to the same risks faced by the
Company in the markets for its own products. If the Company is unsuccessful in
securing license agreements with additional VARs and ISVs on commercially
reasonable terms or at all, or if the Company's VAR and ISV customers are
unsuccessful in selling their products, this would have a material adverse
effect on the Company's business, results of operations and financial
condition. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
Dependence on the Internet and Intranets. The Company believes that sales of
its connectivity products, particularly its distributed object connectivity
products, will depend in large part upon the adoption by businesses and end-
users of the Internet and Intranets for commerce and communications. The
Internet and Intranets are new and evolving, and there can be no assurance of
their widespread adoption. Critical issues concerning the Internet and
Intranets, including security, reliability, cost, ease of use and access and
quality of service, remain unresolved at this time, inhibiting adoption by
many enterprises and end-users. If the Internet and Intranets are not widely
used by businesses and end-users, this will have a material adverse effect on
the Company's business, results of operations and financial condition.
Dependence on Java; Risks Associated with Encryption Technology. Certain of
the Company's products are based on Java, an object-oriented programming
language developed by JavaSoft, a subsidiary of Sun Microsystems. Java was
developed primarily for Internet and Intranet applications. Java was only
recently introduced and does not yet have sufficient history to establish its
reliability, thereby inhibiting adoption of Java. To date, there have been
only a very limited number of commercially significant Java-based products,
and it is too early to determine whether Java will become a significant
technology. Alternatives to Java have been announced by several companies,
including Microsoft. To the extent that Java is not adopted or is adopted more
slowly than anticipated, this could have a material adverse effect on the
Company's business, results of operations and financial condition.
The Company plans to use encryption technology in certain of its future
products to provide the security required for the exchange of confidential
information. Encryption technologies have been breached in the past. There can
be no assurance that there will not be a compromise or breach of the security
technology used by the Company. If any such compromise or breach were to
occur, it could have a material adverse effect on the Company's business,
results of operations and financial condition.
Need to Develop New Software Products and Enhancements. The markets for the
Company's products are characterized by rapid technological developments,
evolving industry standards, swift changes in customer
9
<PAGE>
requirements, computer operating environments and software applications, and
frequent new product introductions and enhancements. As a result, the
Company's success depends substantially upon its ability to anticipate changes
and continue to enhance its existing products, develop and introduce in a
timely manner new products incorporating technological advances, comply with
emerging industry standards and meet increasing customer expectations. The
Company's products may be rendered obsolete if the Company fails to anticipate
or react to change. To the extent one or more of the Company's competitors
introduce products that better address customer needs, the Company's business,
results of operations and financial condition could be materially adversely
affected. There can be no assurance that the Company will be successful in
developing and marketing new products or enhancements to its existing products
on a timely basis or at all or that any new or enhanced products will
adequately address the changing needs of the marketplace. The Company has in
the past incurred product development expenses and sales and marketing
expenses in connection with product development activities that did not result
in commercially introduced products. Some of the Company's products are based
on technology from third parties and the Company therefore has limited control
over whether and when these technologies are enhanced. For instance, the
VisiODBC Software Developers Kit ("SDK") products are based upon ODBC software
licensed from Microsoft. The failure or delay in enhancements of technology
from third parties used in the Company's products could have a material
adverse effect on the Company's ability to develop and enhance its own
products. Also, negative reviews of the Company's new products or product
versions in industry publications could have a material adverse effect on the
Company's sales. The Company has in the past experienced delays in the
development of new products and product versions. If the Company is unable to
develop and introduce new products or enhancements to existing products in a
timely manner in response to changing market conditions or customer
requirements, the Company's business, results of operations and financial
condition would be materially and adversely affected.
The Company has in the past engaged and expects that it will continue in the
future to engage in joint development projects with third parties. Currently,
the Company is engaged in joint development with Hitachi of distributed object
connectivity software targeted at transaction processing applications. Joint
development creates several risks for the Company, including loss of control
over the development of aspects of the jointly developed product and over the
timing of product availability. There can be no assurance that joint
development activities will result in products, or that any products developed
will be commercially successful.
Dependence on Key Personnel; Need to Increase Technical, Sales and Marketing
and Managerial Personnel. The Company's future performance depends to a
significant extent upon the continued service of its key technical, sales and
marketing and senior management personnel. The loss of the services of any of
these individuals would have a material adverse effect on the Company. All
employees are employed at-will, and the Company has no fixed term employment
agreements with any of its employees. The Company's future success also
depends on its continuing ability to attract, train and retain highly
qualified technical, sales and marketing and managerial personnel. In
particular, the Company currently has a very limited technical staff devoted
to its distributed object connectivity business. An increase in the technical
staff will be required to rapidly develop the database connectivity and
distributed object connectivity products currently being planned, while an
increase in the sales and marketing staff will be required to expand both the
Company's direct and indirect sales activities and achieve revenue growth. The
Company intends to hire a significant number of additional technical and sales
and marketing personnel in fiscal 1997 and beyond. Competition for such
personnel is intense, and there can be no assurance that the Company can
attract, assimilate or retain such personnel. Because of the complexity of
database connectivity and distributed object connectivity software products,
the Company has in the past experienced and expects to continue in the future
to experience a time lag between the date technical and sales personnel are
hired and the date such persons become fully productive. If the Company is
unable to hire and train such personnel on a timely basis in the future, the
Company's business, results of operations and financial condition could be
materially adversely affected.
Management of Growth; Need to Increase Financial Personnel and Implement
Policies. The Company's business has grown rapidly in recent periods, with
revenue increasing from $1.1 million in fiscal 1995 to $5.6 million in fiscal
1996. In addition, the Company acquired PostModern in May 1996 as part of its
strategy of
10
<PAGE>
adding distributed object connectivity products to its product line. The
growth of the Company's business, the expansion of the Company's customer base
and the recent acquisition and integration of PostModern have placed a
significant strain on the Company's management, operations and financial
systems, policies and procedures. The Company's recent expansion has also
resulted in substantial growth in the number of its employees, the scope of
its operating and financial systems and the geographic area of its operations,
resulting in increased responsibility for management personnel. The Company's
future results of operations will depend in part on the ability of its
officers and other key employees to continue to implement its operational,
customer support and financial control systems and to expand, train and manage
its employee base. The Company hired a new Chief Financial Officer and a new
controller in July 1996. The Company's current financial systems, policies and
procedures are limited. The Company is in the process of developing a more
comprehensive set of written financial policies and procedures to supplement
its limited current policies and procedures and still must hire additional
accounting staff experienced in the software industry. There can be no
assurance that the Company will be able to manage any future expansion of its
business, if any, successfully, or that its management, personnel, procedures
and systems will be adequate to support the Company's operations. Any such
inabilities or inadequacies to do so would have a material adverse effect on
the Company's business, results of operations and financial condition.
Potential Acquisitions. If appropriate opportunities present themselves, the
Company intends to acquire businesses, products or technology that the Company
believes are strategic, although the Company currently has no understandings,
commitments or agreements with respect to any material acquisition and no
material acquisition is currently being pursued. There can be no assurance
that the Company will be able to successfully identify, negotiate or finance
such acquisitions, or to integrate such acquisitions with its current
business. The process of integrating an acquired business, product or
technology into the Company may result in unforeseen operating difficulties
and expenditures and may absorb significant management attention that would
otherwise be available for ongoing development of the Company's business.
Moreover, there can be no assurance that the anticipated benefits of any
acquisition will be realized. Acquisitions could result in potentially
dilutive issuances of equity securities, the incurrence of debt and contingent
liabilities and amortization expenses related to goodwill and other intangible
assets, which could materially adversely affect the Company's business,
results of operations and financial condition. Any such future growth and any
acquisitions of other technologies, products or companies may require the
Company to obtain additional equity or debt financing, which may not be
available or may be dilutive.
Intense Competition. The Company's products are targeted at the emerging
markets for standards-based database connectivity software and standards-based
distributed object connectivity software. The markets for the Company's
products are intensely competitive, subject to rapid change and significantly
affected by new product introductions and other market activities of industry
participants. The Company believes that the principal competitive factors in
these markets are product quality, performance and price, vendor and product
reputation, product architecture and quality of support.
In the standards-based database connectivity market, the Company competes
principally against Intersolv. The Company's database connectivity products
also indirectly compete against proprietary database connectivity solutions
from database vendors. In the standards-based distributed object connectivity
market, the Company competes principally against two private companies, Iona
and Expersoft. The Company's distributed object connectivity products also
compete against existing or proposed distributed object connectivity solutions
from hardware vendors such as DEC, Hewlett-Packard, IBM and Sun. In addition,
because there are relatively low barriers to entry in the software market and
because the Company's products are based on publicly available standards, the
Company expects to experience additional competition in the future from other
established and emerging companies if the market for database connectivity and
distributed object connectivity software continues to develop and expand. In
particular, relational database vendors including Informix, Microsoft, Oracle
and Sybase may offer standards-based database connectivity software to their
customers, eliminating or reducing demand for the Company's products.
Similarly, operating system vendors such as DEC, Hewlett-Packard, IBM,
Microsoft and Sun may offer standards-based distributed object connectivity
products bundled with their
11
<PAGE>
operating systems. For instance, Microsoft has announced plans to introduce
DCOM, which would eliminate the need for CORBA-compliant ORBs, such as those
offered by the Company, for Microsoft operating systems. Many of these current
and potential competitors have well-established relationships with the current
and potential customers of the Company, have extensive knowledge of the
markets serviced by the Company, better name recognition and more extensive
development, sales and marketing resources and are capable of offering single
vendor solutions. As a result, these current and potential competitors may be
able to respond more quickly to new or emerging technologies and changes in
customer requirements, or to devote greater resources to the development,
promotion and sale of their products, than the Company. It is also possible
that new competitors or alliances among competitors may emerge and rapidly
acquire significant market share. The Company also expects that competition
will increase as a result of software industry consolidations.
The Company expects that it will face increasing pricing pressures from its
current competitors and new market entrants. Increased price competition may
result in price reductions, reduced gross margins and loss of market share,
any of which could materially adversely affect the Company's business,
financial condition or results of operations. There can be no assurance that
the Company will be able to compete successfully against current and future
competitors or that competitive pressures will not materially and adversely
affect its business, results of operations and financial condition. See
"Business--Competition."
Risk of Product Defects. Software products as complex as those offered by
the Company frequently contain undetected errors or failures that may be
detected at any point in the product's life cycle. The Company has in the past
discovered software errors in certain of its new products and enhancements and
has experienced delays in shipment of products during the period required to
correct these errors. There can be no assurance that, despite testing by the
Company and potential customers, errors will not occur, resulting in loss of
or delay in market acceptance and sales, diversion of development resources,
injury to the Company's reputation or increased service and warranty costs,
any of which could have a material adverse effect on the Company's business,
results of operations and financial condition. This risk is amplified for the
Company because a significant portion of its future sales are expected to be
derived from arrangements under which third parties embed the Company's
products in their own products. Any significant errors in the Company's
products, or in the products of VARs or ISVs which embed the Company's
products, might discourage such third parties or other customers from
utilizing the Company's products, which would have a material adverse effect
on the Company's business, results of operations and financial condition.
Although the Company generally attempts to limit by contract its exposure to
incidental and consequential damages, and to cap the Company's liabilities to
its proceeds under a contract, if a court failed to enforce the liability
limiting provisions of the Company's contracts for any reason, or if
liabilities arose which were not effectively limited, the Company's business,
results of operations and financial condition could be materially and
adversely affected. See "Business--Product Development."
Dependence on Company and Third Party Proprietary Technology. The Company's
success is dependent in part upon its proprietary technology. While the
Company relies on a combination of copyright and trademark laws, trade
secrets, confidentiality procedures and contractual provisions to protect its
proprietary rights, the Company believes that factors such as the technical
and creative skills of its personnel, new product developments, frequent
product enhancements, name recognition and reliable products and product
support are more essential to establishing and maintaining a technology
leadership position, particularly because the Company is supplying standards-
based products. The Company seeks to protect its software, published data,
documentation and other written materials under trade secret and copyright
laws, which afford only limited protection. The Company has granted limited
access to its source code to third parties under confidentiality obligations.
Despite the Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy aspects of the Company's products or to obtain and
use information that the Company regards as proprietary.
Policing unauthorized use of the Company's products is difficult, and while
the Company is unable to determine the extent to which piracy of its software
products exists, software piracy can be expected to be a
12
<PAGE>
persistent problem. In addition, the laws of some foreign countries do not
protect the Company's proprietary rights to as great an extent as do the laws
of the United States. There can be no assurance that the Company's means of
protecting its proprietary rights will be adequate or that the Company's
competitors will not independently develop similar technology. The Company
distributes its products electronically through the Internet. Distributing the
Company's products through the Internet makes the Company's software more
susceptible than other software to unauthorized copying and use. The Company
has historically allowed and currently intends to continue to allow, customers
to electronically download its client and server software. If as a result of
changing legal interpretations of liability for unauthorized use of the
Company's software or otherwise, users were to become less sensitive to
avoiding copyright infringement, the Company's business, results of operations
and financial condition could be materially adversely affected.
The Company is not aware that any of its products infringes the proprietary
rights of third parties. There can be no assurance, however, that third
parties will not claim infringement by the Company with respect to current or
future products. The Company expects that software developers will
increasingly be subject to infringement claims as the number of products and
competitors in the Company's industry segment grows and the functionality of
products in different industry segments overlaps. Any such claims, with or
without merit, could be time-consuming, result in costly litigation, cause
product shipment delays or require the Company to enter into royalty or
licensing agreements. Such royalty or licensing agreements, if required, may
not be available on terms acceptable to the Company or at all, which could
have a material adverse effect upon the Company's business, results of
operations and financial condition.
In addition, the Company relies on certain software that it licenses from
third parties, including software that is integrated with internally developed
software and used in the Company's products to perform key functions. The
Company licenses from Microsoft the base technology for the VisiODBC SDK
products and licenses from RSA Data Security, Inc. ("RSA") security technology
it plans to use in several of its future products. Microsoft has the right to
terminate its license with the Company at any time after delivery to the
Company of the Microsoft SDK for ODBC 3.0, which is expected to occur in the
second half of 1996. While certain licenses from Microsoft are granted to the
Company on an exclusive basis, Microsoft has the right to convert such
licenses to non-exclusive licenses. The Company's license with RSA may only be
terminated for breach. The Company has entered into a joint technology
agreement with JavaSoft, a subsidiary of Sun Microsystems, that grants the
Company the right to sublicense JavaSoft's Java database connectivity ("JDBC")
test suites and ODBC bridge. There can be no assurances that such firms will
remain in business, that they will continue to support their technology or
that their technology will otherwise continue to be available to the Company
on commercially reasonable terms. The loss of or inability to maintain any of
these software licenses could result in delays or cancellations in product
shipments until equivalent software can be identified and licensed or
developed and integrated with the Company's products. Any such delay or
cancellation could materially adversely affect the Company's business, results
of operations and financial condition. See "Business--Intellectual Property
and Other Proprietary Rights."
International Sales. The Company's export sales accounted for approximately
10% and 4% of the Company's total revenue in fiscal 1996 and the first quarter
of fiscal 1997, respectively. The Company had no material export sales in
fiscal 1994 or 1995. The Company expects to increase its emphasis on export
sales. Revenue derived from export sales may account for a growing percentage
of the Company's revenue in future periods, although there can be no assurance
that the Company will achieve significant penetration in any international
market. The Company has only one international sales office, which is located
in Paris, France. The Company believes that its continued growth will require
expansion of its international operations and export sales. To successfully
expand export sales, the Company must establish additional foreign sales
offices, hire additional personnel and recruit additional international
resellers. To the extent the Company is unable to do so in a timely manner,
the Company's growth in export sales, if any, will be limited, and the
Company's business, results of operations and financial condition could be
materially adversely affected. The Company has granted exclusive distribution
rights in Japan for the Japanese versions of its ODBC products to ASCII
Corporation, a Japanese software distributor. The Company may not terminate
these exclusive rights unless ASCII fails to meet
13
<PAGE>
certain minimum annual sales objectives commencing in fiscal year 1998 or
otherwise breaches the agreement. There can be no assurance that ASCII will be
successful selling the Company's products.
There are a number of risks inherent in the Company's international business
activities, including unexpected changes in regulatory requirements, tariffs
and other trade barriers, costs and risks of localizing and internationalizing
products for foreign countries, longer accounts receivable payment cycles,
potentially adverse tax consequences, repatriation of earnings and the burdens
of complying with a wide variety of foreign laws. None of the Company's
products is currently a "double byte" product, which is required to localize
these products in certain non-English character set markets such as Asia. The
Company believes that it will be required to develop double byte versions of
its products and engage in other internationalization and localization
activities. There can be no assurance the Company will successfully complete
these activities in a timely manner. All of the Company's sales are currently
denominated in U.S. dollars and, therefore, increases in the value of the U.S.
dollar relative to foreign currencies could make the Company's products less
competitive in foreign markets. In addition, revenue of the Company earned in
various countries where the Company does business may be subject to taxation
by more than one jurisdiction, thereby adversely affecting the Company's
earnings. There can be no assurance that such factors will not have an adverse
effect on the revenue from the Company's future international sales and,
consequently, the Company's financial condition or results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Sales and Marketing."
Concentration of Share Ownership and Voting Power; Anti-Takeover
Provisions. Upon completion of this offering (assuming no exercise of the
Underwriters' over-allotment option), officers, directors and affiliates of
the Company will beneficially own approximately 54.1% of the Company's
outstanding Common Stock. As a result, these stockholders as a group will be
able to control the management and affairs of the Company and all matters
requiring stockholder approval, including election of directors, any merger,
consolidation or sale of all or substantially all of the Company's assets and
any other significant corporate transactions. The concentration of ownership
could have the effect of delaying or preventing a change in control of the
Company, reducing the likelihood of any acquisition of the Company at a
premium price. See "Principal and Selling Stockholders."
Upon the closing of this offering, the Company's Board of Directors ("Board
of Directors" or "Board") has the authority to issue up to 2,000,000 shares of
Preferred Stock and to determine the price, rights, preferences and privileges
of those shares without any further vote or action by the stockholders. The
rights of the holders of Common Stock will be subject to, and may be adversely
affected by, the rights of the holders of any Preferred Stock that may be
issued in the future. The issuance of shares of Preferred Stock, while
potentially providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding
voting stock of the Company. The Company has no present intention to issue
shares of Preferred Stock. In addition, certain provisions of the Company's
Restated Certificate of Incorporation may have the effect of delaying or
preventing a change of control of the Company, which could adversely affect
the market price of the Company's Common Stock. These provisions provide,
among other things, that the Board of Directors is divided into three classes
to serve for staggered three-year terms, that a director may be removed from
the Board of Directors only for cause and only upon the vote of at least 66
2/3% of the voting power of all outstanding shares of the Company's capital
stock, that stockholders may not take action by written consent, that the
ability of stockholders to call special meetings of stockholders and to raise
matters at meetings of stockholders is restricted and that certain amendments
of the Company's Restated Certificate of Incorporation, and all amendments by
the stockholders of the Company's Amended and Restated Bylaws, require the
approval of holders of at least 66 2/3% of the voting power of all outstanding
shares. In addition, the Company is subject to the anti-takeover provisions of
Section 203 of the Delaware General Corporation Law, which will prohibit the
Company from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. The application of Section 203
also could have the effect of delaying or preventing a change of control of
the Company. See "Description of Capital Stock."
14
<PAGE>
Broad Management Discretion over Use of Proceeds. The primary purposes of
this offering are to increase the Company's equity capital, to create a public
market for the Company's Common Stock and to facilitate future access by the
Company to public capital markets. A significant portion of the anticipated
net proceeds to the Company from this offering have not been designated for
specific uses. Accordingly, management of the Company will have broad
discretion with respect to the use of these funds. See "Use of Proceeds."
No Prior Market; Possible Volatility. Prior to this offering there has been
no public market for the Common Stock of the Company. The initial public
offering price will be determined by negotiations among the Company, the
Selling Stockholders and the Representatives of the Underwriters. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price. There can be no assurance that an active
public market will develop or be sustained after this offering or that the
market price of the Common Stock will not decline below the initial public
offering price. Future announcements concerning the Company or its
competitors, quarterly variations in operating results, announcements of
technological innovations, the introduction of new products or changes in
product pricing policies by the Company or its competitors, proprietary rights
or other litigation, changes in earnings estimates by market analysts or other
factors could cause the market price of the Common Stock to fluctuate
substantially. In addition, stock prices for many technology companies
fluctuate widely for reasons which may be unrelated to operating results.
These fluctuations, as well as general economic, market and political
conditions such as recessions or military conflicts, may materially and
adversely affect the market price of the Company's Common Stock. See "--
Potential Fluctuations in Operating Results."
Shares Eligible for Future Sale; Registration Rights. Sale of substantial
amounts of Common Stock in the public market following this offering could
have an adverse effect on the price of the Common Stock. Immediately upon the
effectiveness of this offering, 2,100,000 shares will be freely tradeable.
Commencing 180 days following the date of this offering, 8,048,789 additional
shares will become freely tradeable upon the expiration of agreements not to
sell such shares, subject to compliance with Rule 144. Hambrecht & Quist LLC
may, in its sole discretion and at any time without notice, release all or any
portion of the securities subject to such agreements. The remaining 2,021,182
shares held by existing stockholders become eligible for sale at various times
over a period of less than two years, subject to the limitations of Rule 144.
Immediately after this offering, the Company intends to register approximately
3,150,000 shares of the Company's Common Stock reserved for issuance under its
stock option and purchase plans. See "Shares Eligible for Future Sale."
As of the effective date of the Registration Statement, the holders of
6,789,050 shares of the Company's Common Stock will be entitled to certain
piggyback registration rights with respect to such shares. If the Company were
required to include in a Company initiated registration shares held by such
holders pursuant to the exercise of their piggyback registration rights, such
sale might have an adverse effect on the Company's ability to raise needed
capital. See "Description of Capital Stock."
Immediate and Substantial Dilution to New Investors. The initial public
offering price is substantially higher than the book value per outstanding
share of Common Stock. Investors purchasing Common Stock in this offering
will, therefore, incur immediate dilution of $8.34 in net tangible book value
per share of Common Stock from the initial public offering price and may incur
additional dilution upon the exercise of outstanding stock options. See
"Dilution."
15
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,700,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$15,060,000 (approximately $17,431,500 if the Underwriters' over-allotment
option is exercised in full), assuming the shares offered hereby are sold at a
public offering price of $10.00 per share. The principal purposes of the
offering are to obtain additional working capital, establish a public market
for the Company's Common Stock and facilitate future access to public markets.
The Company will not receive any proceeds from the sale of Common Stock by the
Selling Stockholders.
The Company expects the net proceeds to be used for general corporate
purposes, including working capital and possible repayment of borrowings under
the Company's revolving and bridge credit facilities. As of June 30, 1996 the
Company had outstanding borrowings of $524,000 under its $3.0 million
revolving credit facility and no borrowings outstanding under its $2.0 million
bridge credit facility. The Company's revolving line of credit and its bridge
credit facilities bear interest at the bank's prime lending rate plus 1.0%.
The Company's revolving credit facility expires on July 15, 1997, while
amounts borrowed under the bridge facility would be due on the earlier of 120
days following the loan advance or November 28, 1996. The Company has borrowed
under its credit facilities to provide working capital. A portion of the net
proceeds may also be used to acquire or invest in complementary businesses or
products or to obtain the right to use complementary technologies. While from
time to time the Company evaluates potential acquisitions of such businesses,
products or technologies, and anticipates continuing to make such evaluations,
there are no present understandings, commitments or agreements with respect to
any acquisition of other businesses, products or technologies. Pending such
uses, the proceeds will be invested in interest-bearing securities.
DIVIDEND POLICY
The Company has never paid or declared any cash dividends. It is the present
policy of the Company to retain earnings to finance the growth and development
of the business and, therefore, the Company does not anticipate paying cash
dividends on its Common Stock in the foreseeable future. In addition, the
Company's bank credit facilities contain covenants that prohibit the Company
from paying dividends without prior bank consent.
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CAPITALIZATION
The following table sets forth (i) the actual capitalization of the Company
at June 30, 1996, (ii) the pro forma capitalization to reflect conversion upon
the closing of this offering of all outstanding shares of Preferred Stock and
convertible notes into shares of Common Stock, and (iii) the pro forma
capitalization as adjusted to reflect the sale of 1,700,000 shares of Common
Stock offered by the Company hereby (assuming an initial public offering price
of $10.00) and the application of the estimated net proceeds therefrom.
<TABLE>
<CAPTION>
JUNE 30, 1996
------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- -------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt (1)...................... $ 524 $ 524 $ --
======== ======== ========
Long-term debt (2)....................... $ 2,000 $ -- $ --
-------- -------- --------
Stockholders' equity (3):
Preferred stock, $0.001 par value,
10,000,000 shares authorized, 4,119,069
shares issued and outstanding actual;
none issued and outstanding pro forma
and as adjusted......................... 4 -- --
Common stock, $0.001 par value,
30,000,000 shares authorized, 6,150,902
shares issued and outstanding actual;
30,000,000 shares authorized, 10,469,971
shares issued and outstanding pro forma;
50,000,000 shares authorized, 12,169,971
shares issued and outstanding
as adjusted............................. 6 10 12
Additional paid in capital............... 28,222 30,222 45,280
Accumulated deficit...................... (25,121) (25,121) (25,121)
-------- -------- --------
Stockholders' equity .................. 3,111 5,111 20,171
-------- -------- --------
Total capitalization................. $ 5,111 $ 5,111 $ 20,171
======== ======== ========
</TABLE>
- --------
(1) See Note 3 of Notes to Consolidated Financial Statements of Visigenic.
(2) See Note 9 of Notes to Consolidated Financial Statements of Visigenic.
(3) Excludes shares of Common Stock reserved for future issuance pursuant to
the Company's stock plans. As of June 30, 1996, options to purchase
1,449,285 shares at a weighted average exercise price of $1.76 per share
were outstanding. See Note 6 of Notes to Consolidated Financial Statements
of Visigenic.
17
<PAGE>
DILUTION
The net tangible book value of the Company as of June 30, 1996 was $5.1
million or $.49 per share of Common Stock. Net tangible book value per share
represents the amount of total tangible assets of the Company reduced by the
amount of its total liabilities and divided by the total number of shares of
Common Stock outstanding (reflecting the conversion of all outstanding
Preferred Stock and convertible notes into shares of Common Stock upon the
closing of the offering made hereby). Without taking into account any other
change in such net tangible book value after June 30, 1996, other than to give
effect to the sale by the Company of 1,700,000 shares offered hereby at an
assumed initial public offering price of $10.00 per share and receipt of the
estimated net proceeds therefrom, the pro forma net tangible book value of the
Company as of June 30, 1996 would have been approximately $20.2 million, or
$1.66 per share. This represents an immediate increase in such net tangible
book value of $1.17 per share to existing stockholders and an immediate
dilution of $8.34 per share to new investors. The following table illustrates
this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $10.00
Net tangible book value per share as of June 30, 1996 before
the offering................................................ $ .49
Increase per share attributable to new investors............. 1.17
-----
Pro forma net tangible book value per share after the
offering...................................................... 1.66
------
Dilution per share to new investors............................ $ 8.34
======
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1996,
the differences between the existing stockholders and the new investors with
respect to the number of shares of Common Stock purchased from the Company,
the total consideration paid to the Company and the average price per share
paid:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ ------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Existing stockholders(1)... 10,469,971 86.0% $30,232,000 64.0% $ 2.89
New investors(1)........... 1,700,000 14.0 17,000,000 36.0 $10.00
---------- ----- ----------- -----
Total.................... 12,169,971 100.0% $47,232,000 100.0%
========== ===== =========== =====
</TABLE>
- --------
(1) Sales by Selling Stockholders in this offering will reduce the number of
shares held by existing stockholders to 10,069,971 or approximately 82.7%
of the total number of shares of Common Stock outstanding after this
offering (10,009,971 or 80.6% if the Underwriters' over-allotment option
is exercised in full), and will increase the number of shares held by new
investors to 2,100,000 or approximately 17.3% of the total number of
shares of Common Stock outstanding after the offering (2,415,000 or 19.4%
if the Underwriters' over-allotment option is exercised in full). See
"Principal and Selling Stockholders."
The above computations assume no exercise of options after June 30, 1996. As
of June 30, 1996, there were outstanding options to purchase 1,449,285 shares
of Common Stock at a weighted average exercise price of $1.76 per share. To
the extent outstanding options are exercised, there will be further dilution
to new investors. See Note 6 of Notes to Financial Statements of Visigenic.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data at March 31, 1995 and
1996 and for the years ended March 31, 1994, 1995, and 1996 have been derived
from the audited financial statements of the Company included elsewhere in
this Prospectus. The consolidated balance sheet data at March 31, 1994 are
derived from audited financial statements not included herein. The following
selected financial data at June 30, 1996 and for the quarters ended June 30,
1995 and 1996 have been derived from unaudited financial statements of the
Company included elsewhere in this Prospectus and which include all
adjustments (consisting only of normal recurring adjustments) that the Company
considers necessary for a fair presentation of its financial position and
results of operations for these periods. The following selected pro forma
combined statement of operations data for the year ended March 31, 1996 and
the quarter ended June 30, 1996 has been derived from the unaudited pro forma
condensed combined financial statements of the Company and PostModern included
elsewhere in this Prospectus. The results of operations for the quarter ended
June 30, 1996 are not necessarily indicative of the results that may be
expected for the fiscal year ending March 31, 1997 or any other period. The
data set forth below is qualified by reference to, and should be read in
conjunction with the financial statements and notes thereto and the discussion
thereof included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, QUARTER ENDED JUNE 30,
-------------------------------------- -----------------------------
1996 1996
-------------------- ---------------------
PRO FORMA PRO FORMA
1994(1) 1995 ACTUAL COMBINED(2) 1995 ACTUAL COMBINED(2)
------- ------- ------- ----------- ------ -------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenue:
Software products..... $ -- $ 892 $ 4,479 $ 4,783 $ 544 $ 2,505 $ 2,529
Service and other..... -- 223 1,096 1,794 367 456 564
------- ------- ------- ------- ------ -------- -------- ---
Total revenue....... -- 1,115 5,575 6,577 911 2,961 3,093
------- ------- ------- ------- ------ -------- -------- ---
Cost of revenue:
Software products..... -- 36 284 328 43 138 149
Service and other..... -- 259 727 946 146 295 360
------- ------- ------- ------- ------ -------- -------- ---
Total cost of
revenue............ -- 295 1,011 1,274 189 433 509
------- ------- ------- ------- ------ -------- -------- ---
Gross profit............ -- 820 4,564 5,303 722 2,528 2,584
------- ------- ------- ------- ------ -------- -------- ---
Operating expenses:
Product development... 1,393 3,160 4,348 5,888 729 1,657 1,721
Sales and marketing... 503 1,511 3,215 3,638 636 2,006 2,074
General and
administrative....... 600 872 1,465 1,677 335 473 547
Purchased in process
product development.. -- -- -- -- -- 12,014 12,014
Amortization of excess
of purchase price
over net assets
acquired............. -- -- -- 522 -- 43 129
------- ------- ------- ------- ------ -------- -------- ---
Total operating
expenses........... 2,496 5,543 9,028 11,725 1,700 16,193 16,485
------- ------- ------- ------- ------ -------- -------- ---
Loss from
operations......... (2,496) (4,723) (4,464) (6,422) (978) (13,665) (13,901)
Interest and other
income, net............ 42 94 85 85 1 6 6
------- ------- ------- ------- ------ -------- -------- ---
Net loss................ $(2,454) $(4,629) $(4,379) $(6,337) $ (977) $(13,659) $(13,895)
======= ======= ======= ======= ====== ======== ======== ===
Pro forma net loss per
share (3).............. $ (.39) $ (.57) $ (.09) $ (1.21) $ (1.23)
======= ======= ====== ======== ======== ===
Pro forma weighted
average common and
common equivalent
shares (3)............. 11,120 11,120 10,602 11,289 11,289
======= ======= ====== ======== ======== ===
<CAPTION>
MARCH 31,
---------------------------
JUNE 30,
1994 1995 1996 1996
------- ----------- ------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............... $ 2,901 $ 553 $2,399 $ 1,890
Working capital......................... 2,722 488 816 2,331
Total assets............................ 3,346 1,829 4,820 9,962
Convertible notes payable to
stockholders........................... -- -- -- 2,000
Stockholders' equity.................... 3,132 1,117 2,220 3,111
</TABLE>
- -------
(1) The statement of operations data for the year ended March 31, 1994 is
presented for the period from inception (February 12, 1993) to March 31,
1994. See Note 1 of Notes to Consolidated Financial Statements of
Visigenic.
(2) The pro forma combined statement of operations data gives effect to the
May 1996 acquisition of PostModern as if it had occurred on April 1, 1995.
The acquisition was accounted for as a purchase and resulted in the write-
off of approximately $12.0 million of in process product development in
the quarter ended June 30, 1996. The pro forma combined statement of
operations data for the year ended March 31, 1996 does not give effect to
this write-off. See Note 9 of Notes to Consolidated Financial Statements
of Visigenic and Pro Forma Condensed Combined Financial Statements.
(3) See Note 2 of Notes to Consolidated Financial Statements of Visigenic for
an explanation of the method used to determine the number of shares used
to compute per share amounts.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains forward-looking statements. Actual results could
differ materially from those projected in the forward-looking statements as a
result of the risks described below and elsewhere in this Prospectus.
OVERVIEW
The Company commenced operations in February 1993 and was engaged
principally in product and market research and product development until the
launch of its initial products in November 1994. The Company shipped version
1.0 of the VisiODBC Software Development Kit ("SDK") and the VisiODBC Drivers
and DriverSets in November 1994, version 1.0 of its VisiChannel product in
March 1996 and version 2.0 of its VisiODBC product line in June 1996. The
Company first recognized material revenue in the fourth quarter of fiscal
1995.
The Company's revenue is derived from license fees from licensing its
products, royalties from VARs, ISVs and distributors, and fees for services
related to its products, including software maintenance, development
contracts, consulting and training. License fees for the Company's products
vary according to the specific products licensed. Terms and conditions of
individual license transactions, including prices and discounts, are often
highly negotiated based on volumes and commitments and vary considerably from
customer to customer. Certain of the Company's license arrangements with VARs
and ISVs provide for sublicense fees payable to the Company based on a percent
of the VAR's or ISV's net revenue. Certain of the Company's license
arrangements with VARs and ISVs provide for fixed fees for the right to make
and distribute an unlimited number of copies of the Company's product for a
specified period of time. Service revenue is primarily attributable to lower
margin maintenance and other revenue, including training revenue and
engineering development fees. Most of the Company's license revenue to date is
attributable to non-recurring license fees for its database connectivity
products, particularly its VisiODBC product line, and fees from related
services. The Company currently expects that license revenue from its database
connectivity products will account for a substantial majority of its revenue
for the remainder of fiscal 1997 and for the foreseeable future. Factors
adversely affecting the pricing of or demand for its products could have a
material adverse effect on the Company's business, results of operations and
financial condition.
The Company generally recognizes revenue from license and pre-paid royalty
fees upon delivery of software products if there are no significant post-
delivery obligations, if collection is probable and if the license agreement
requires payment within 90 days. If significant post-delivery obligations
exist or if a product is subject to customer acceptance, revenue is deferred
until no significant obligations remain or acceptance has occurred. Royalty
revenue (other than from pre-paid royalties) is recognized when it is reported
by VARs, ISVs and distributors. Maintenance revenue from ongoing customer
support and product upgrades is recognized ratably over the term of the
applicable maintenance period, which is typically 12 months. Consulting and
training revenue is generally recognized as services are performed over the
term of the agreement. If maintenance revenue is included in a license
agreement, such amount is unbundled from the license fee at its fair market
value. Revenue from engineering development work is generally recognized on a
percentage of completion basis. If a transaction includes both license and
service elements, license fee revenue is recognized upon shipment of the
software, provided services do not include significant customization or
modification of the base product and payment terms are not subject to
acceptance criteria. In cases where license fee payments are contingent upon
the acceptance of services, revenues from both the license and service
elements are deferred until the acceptance criteria are met. See Note 2 of
Notes to Consolidated Financial Statements of Visigenic.
The Company licenses its products to VARs and ISVs, who include the
Company's products in their own products, and to end users, who deploy the
Company's products in their own computing environments. A substantial portion
of the Company's license revenue to date is attributable to licenses to VARs
and ISVs. A relatively small number of VAR and ISV customers have accounted
for a significant percentage of the
20
<PAGE>
Company's license revenue. For fiscal 1996, licenses to the Company's ten
largest customers accounted for approximately 78% of the Company's total
revenue and licenses to one customer, Platinum technology, Inc., accounted for
approximately 25% of the Company's total revenue. For the first quarter of
fiscal 1997, licenses to the Company's ten largest customers accounted for
approximately 75% of the Company's total revenue and licenses to one customer,
Cisco, accounted for approximately 34% of the Company's total revenue. The
Company expects that licenses to a limited number of VAR and ISV customers
will continue to account for a large percentage of revenue for the foreseeable
future.
The sales cycles associated with the license of the Company's products is
often lengthy (typically ranging from six to twelve months) and is subject to
a number of significant delays over which the Company has little or no
control. In some cases, the license of the Company's software products is an
enterprise-wide decision by prospective end user customers or a product
strategy decision by VARs and ISVs. Generally, the Company must provide a
significant amount of information to prospective customers regarding the use
and benefits of the Company's products as part of its sales efforts. In
addition, the implementation of some of the Company's products involves a
significant commitment of resources by prospective customers and may require
substantial reengineering of customers' computing environments. The cost to
the customer of the Company's product is typically only a portion of the
related hardware, software, development, training and integration costs of
implementing a large scale system. Given these factors and the expected
continued dependence on a limited number of customers for a substantial part
of license revenue, the loss of a major customer or any reduction or delay in
sales to or implementations by such customers could have a material adverse
effect on the Company's business, results of operations, and financial
condition.
The Company markets its products in North America through its direct sales
and telesales organizations and through VARs and ISVs. Throughout the rest of
the world, the Company markets its products through distributors, VARs and
ISVs. International revenue accounted for approximately 10% of total revenue
in fiscal 1996 and approximately 4% of total revenue for the first quarter of
fiscal 1997. In February 1996, the Company opened a European sales office in
France. The Company intends to increase its international sales force and
focus on establishing additional international distributor, VAR and ISV
relationships. The Company expects that international revenue will account for
an increasing portion of total revenue in the future. As a result, failure to
manage international sales appropriately could have a material adverse effect
on the Company's business, results of operations and financial condition. See
"Risk Factors--International Sales."
With the exception of the third quarter of fiscal 1996, the Company's
revenue has increased in each of the last six quarters. The Company's limited
operating history, however, makes the prediction of future operating results
difficult. The Company expects that prior growth rates of the Company's
software products revenue will not be sustainable in the future. The Company's
future operating results will depend on many factors, including the size,
timing and terms and conditions of individual license transactions; the
relatively long sales and implementation cycles for the Company's products;
the delay or deferral of customer implementations; changes in the Company's
operating expenses; the ability of the Company to develop and market new
products and control costs; market acceptance of new products; timing of
introduction or enhancement of products by the Company or its competitors; the
level of product and price competition; the ability of the Company to expand
its direct sales and telesales force, its indirect distribution channels and
its customer support capabilities; activities of and acquisitions by
competitors; changes in connectivity software, database technology and
industry standards; changes in the mix of products and services sold; changes
in the mix of channels through which products and services are sold; levels of
international sales; personnel changes and difficulties in attracting and
retaining qualified sales, marketing and technical personnel; changes in
customers' budgeting cycles; foreign currency exchange rates; quality control
of products sold; and general economic conditions. The Company has not been
profitable to date and the Company currently anticipates that it will operate
at a loss through at least the middle of 1997. There can be no assurance that
any of the Company's business or strategies will be successful or that the
Company will be able to achieve or sustain profitability on a quarterly or
annual basis.
The Company's sales generally reflect a relatively high amount of revenue
per order. The loss or delay of individual orders, therefore, can have a
significant impact on the revenue and quarterly results of the Company.
21
<PAGE>
Because the Company's operating expenses are relatively fixed, a delay in the
recognition of revenue from a limited number of license transactions could
cause significant variations in operating results from quarter to quarter and
could result in significant losses. To the extent such expenses precede, or
are not subsequently followed by, increased revenue, the Company's operating
results would be materially adversely affected. As a result of these and other
factors, revenue for any quarter is subject to significant variation, and the
Company believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and should not be relied upon as
indications of future performance. It is likely that in some future quarter
the Company's operating results will be below the expectations of market
analysts and investors. In such event, the price of the Company's Common Stock
would likely be materially adversely affected.
The Company acquired PostModern effective May 31, 1996. The transaction was
accounted for as a purchase. Except for certain combined condensed financial
statements included elsewhere in this Prospectus and for the presentation of
certain pro forma revenue amounts herein, PostModern's financial results prior
to the effective date of the acquisition are not included in the Company's
financial results presented herein. The operating results of the PostModern
business are included in the Company's results of operations for the last
month of the first quarter of fiscal 1997. The Company's ability to
successfully integrate PostModern will depend upon several factors, including
but not limited to, successful integration of the products and operations of
PostModern into the Company. See "Risk Factors -- Limited Operating History;
History of Losses; Recent Acquisition of Distributed Object Connectivity
Business."
22
<PAGE>
RESULTS OF OPERATIONS
The Company first recognized material revenue in the fourth quarter of
fiscal 1995 after the Company shipped version 1.0 of its VisiODBC product
line. As a result, the Company believes that period-to-period comparisons of
annual operating results are less meaningful than an analysis of recent
quarterly results.
The following tables set forth statements of operations for each of the six
quarters ended June 30, 1996, including such amounts expressed as a percentage
of total revenue. This quarterly information is unaudited, but has been
prepared on the same basis as the annual consolidated financial statements
and, in the opinion of the Company's management, reflects all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
representation of the information for the periods presented. Such statements
of operations should be read in conjunction with the Company's audited
consolidated financial statements and notes thereto included elsewhere herein.
Operating results for any quarter are not necessarily indicative of results
for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1995 1995 1995 1995 1996 1996
-------- -------- --------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Software products...... $ 500 $ 544 $ 1,033 $ 840 $2,062 $ 2,505
Service and other...... 155 367 268 253 208 456
------- ------ ------- ------- ------ --------
Total revenue........ 655 911 1,301 1,093 2,270 2,961
------- ------ ------- ------- ------ --------
Cost of revenue:
Software products...... 34 43 62 107 72 138
Service and other...... 105 146 180 200 201 295
------- ------ ------- ------- ------ --------
Total cost of
revenue............. 139 189 242 307 273 433
------- ------ ------- ------- ------ --------
Gross profit............ 516 722 1,059 786 1,997 2,528
------- ------ ------- ------- ------ --------
Operating expenses:
Product development.... 660 729 972 1,429 1,218 1,657
Sales and marketing.... 543 636 770 732 1,077 2,006
General and
administrative........ 324 335 336 371 423 473
Purchased in process
product development... -- -- -- -- -- 12,014
Amortization of excess
of purchase price
over net assets
acquired.............. -- -- -- -- -- 43
------- ------ ------- ------- ------ --------
Total operating
expenses............ 1,527 1,700 2,078 2,532 2,718 16,193
------- ------ ------- ------- ------ --------
Loss from
operations.......... (1,011) (978) (1,019) (1,746) (721) (13,665)
Interest and other
income, net............ 4 1 28 48 8 6
------- ------ ------- ------- ------ --------
Net loss................ $(1,007) $ (977) $ (991) $(1,698) $ (713) $(13,659)
======= ====== ======= ======= ====== ========
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUE
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Software products...... 76.3% 59.7% 79.4% 76.9% 90.8% 84.6%
Service and other...... 23.7 40.3 20.6 23.1 9.2 15.4
------- ------ ------- ------- ------ --------
Total revenue........ 100.0 100.0 100.0 100.0 100.0 100.0
------- ------ ------- ------- ------ --------
Cost of revenue:
Software products...... 5.2 4.7 4.8 9.8 3.2 4.6
Service and other...... 16.0 16.0 13.8 18.3 8.8 10.0
------- ------ ------- ------- ------ --------
Total cost of
revenue............. 21.2 20.7 18.6 28.1 12.0 14.6
------- ------ ------- ------- ------ --------
Gross profit............ 78.8 79.3 81.4 71.9 88.0 85.4
------- ------ ------- ------- ------ --------
Operating expenses:
Product development.... 100.8 80.1 74.7 130.7 53.7 56.0
Sales and marketing.... 82.9 69.8 59.2 67.0 47.4 67.7
General and
administrative........ 49.4 36.8 25.8 33.9 18.6 16.0
Purchased in process
product development... -- -- -- -- -- 405.7
Amortization of excess
of purchase price
over net assets
acquired.............. -- -- -- -- -- 1.5
------- ------ ------- ------- ------ --------
Total operating
expenses............ 233.1 186.7 159.7 231.6 119.7 546.9
------- ------ ------- ------- ------ --------
Loss from
operations.......... (154.3) (107.4) (78.3) (159.7) (31.7) (461.5)
Interest and other
income, net............ 0.6 0.2 2.1 4.3 0.3 0.2
------- ------ ------- ------- ------ --------
Net loss................ (153.7)% (107.2)% (76.2)% (155.4)% (31.4)% (461.3)%
======= ====== ======= ======= ====== ========
</TABLE>
23
<PAGE>
REVENUE
Software Products. Software products revenue increased by 402% from $892,000
in fiscal 1995 to $4.5 million in fiscal 1996 and increased by 360% from
$544,000 in the first quarter of fiscal 1996 to $2.5 million in the first
quarter of fiscal 1997. The Company had no software products revenue in fiscal
1994. The revenue increases from fiscal 1995 to fiscal 1996 and from the first
quarter of fiscal 1996 to the first quarter of fiscal 1997 were primarily due
to an increased volume of licensing of the Company's database connectivity
products, resulting from an increase in the number of products offered and the
expansion of the Company's direct sales and telesales organizations. The
decline in software products revenue in the third quarter of fiscal 1996
resulted primarily from the delay in completion of a large sale which closed
in the fourth quarter.
Service and Other. Service and other revenue, including maintenance revenue,
development fees and consulting and training revenue, increased by 391% from
$223,000 in fiscal 1995 to $1.1 million in fiscal 1996 and increased by 24%
from $367,000 in the first quarter of fiscal 1996 to $456,000 in the first
quarter of fiscal 1997. The Company had no service and other revenue in fiscal
1994. The revenue increases from fiscal 1995 to fiscal 1996 and from the first
quarter of fiscal 1996 to the first quarter of fiscal 1997 were due to the
greater licensing of products to customers under agreements with a maintenance
component and growth in training, consulting and development activities.
COST OF REVENUE
Software Products. Cost of software products revenue includes product
packaging, documentation, production and shipping. Cost of software products
revenue increased from $36,000 in fiscal 1995 to $284,000 in fiscal 1996 and
increased from $43,000 in the first quarter of fiscal 1996 to $138,000 in the
first quarter of fiscal 1997. The increases resulted from increased volume of
licensing of the Company's products. The Company had no costs of software
products revenue in fiscal 1994.
Service and Other. Cost of service and other revenue consists primarily of
personnel and personnel related overhead allocation, facility and systems
costs incurred in providing consulting, training, customer support and
engineering development services. Cost of service and other revenue increased
from $259,000 in fiscal 1995 to $727,000 in fiscal 1996 and increased from
$146,000 in the first quarter of fiscal 1996 to $295,000 in the first quarter
of fiscal 1997. This increase reflects the effect of fixed costs resulting
from the Company's investment during fiscal 1996 and the first quarter of
fiscal 1997 in a larger customer support organization in anticipation of
entering into an increasing number of licenses with maintenance components.
The Company had no costs of service and other revenue in fiscal 1994. The
Company intends to continue investing resources in its customer support
organization. The Company currently expects that costs of service and other
revenue will increase in absolute dollar amount from the level for fiscal
1996.
OPERATING EXPENSES
Product Development. Product development expenses include expenses
associated with the development of new products, enhancements of existing
products and quality assurance activities, and consist primarily of employee
salaries, personnel-related overhead allocation, benefits, consulting costs,
the cost of technology licensed from other software companies and the cost of
software development tools. Product development expenses increased by 38% from
$3.2 million in fiscal 1995 to $4.3 million in fiscal 1996 and by 127% from
$1.4 million in fiscal 1994 to $3.2 million in fiscal 1995. Product
development expenses increased by 127% from $729,000 in the first quarter of
fiscal 1996 to $1.7 million in the first quarter of fiscal 1997. The increases
in the dollar amount of product development expenses were primarily
attributable to costs of additional personnel and full-time contractors in the
Company's product development operations and, to a lesser extent, the
licensing of existing technology from third parties which has been or will be
incorporated into the Company's products. The increase of product development
expenses in the third quarter of fiscal 1996 was the result of increased
consulting fees and licensing of third party technology which was expensed
because it was used exclusively in the development process. Of the product
development costs, approximately $1.3 million in fiscal 1994 and $1.2 million
in fiscal 1995 consisted of expenses for the development of a product the
Company later chose not to
24
<PAGE>
introduce commercially. There can be no assurance that the Company will not
devote significant resources in the future to develop and market other
products that the Company may choose not to introduce commercially. The
Company anticipates that it will continue to devote substantial resources to
product development, including acquiring or licensing technology from others,
in order to introduce new products, enhance existing products or accelerate
its time to market. The Company plans to hire a substantial number of product
development personnel in fiscal 1997. The Company currently expects that
product development expenses will increase in absolute dollar amount from the
level for fiscal 1996.
In accordance with Statement of Financial Accounting Standards No. 86, the
Company has charged all software development costs to product development
expense as incurred because expenditures which were eligible for
capitalization in prior periods were insignificant.
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses earned by sales and marketing personnel,
personnel related overhead allocation, field office rent and related expenses,
travel and entertainment, and advertising and promotional expenses. Sales and
marketing expenses increased by 113% from $1.5 million in fiscal 1995 to $3.2
million in fiscal 1996 and by 200% from $503,000 in fiscal 1994 to $1.5
million in fiscal 1995. Sales and marketing expenses increased by 215% from
$636,000 in the first quarter of fiscal 1996 to $2.0 million in the first
quarter of fiscal 1997. The increases in sales and marketing expenditures
reflect primarily the hiring of additional sales and marketing personnel,
costs associated with expanded advertising and promotional activities,
increased sales commissions and increased costs associated with field sales
offices. Of sales and marketing costs, approximately $500,000 in fiscal 1994
and $900,000 in fiscal 1995 consisted of expenses relating to a product the
Company later chose not to introduce commercially, none of which expenses is
of a recurring nature. The Company plans to hire a substantial number of sales
and sales support personnel in fiscal 1997. The Company expects that sales and
marketing expenses will continue to increase in absolute dollar amount as the
Company continues to expand its sales and marketing efforts domestically and
internationally, establishes additional sales offices and increases
advertising and promotional activities. The Company currently expects that
sales and marketing expenses will increase in absolute dollar amount from the
level for fiscal 1996.
General and Administrative. General and administrative expenses consist
primarily of salaries and occupancy costs for administrative, executive and
finance personnel and personnel related overhead allocation. These expenses
increased by 68% from $872,000 in fiscal 1995 to $1.5 million in fiscal 1996
and by 45% from $600,000 in fiscal 1994 to $872,000 in fiscal 1995. General
and administrative expenses increased by 41% from $335,000 in the first
quarter of fiscal 1996 to $473,000 in the first quarter of fiscal 1997. The
increases in the absolute dollar amounts of general and administrative
expenses were primarily due to increased staffing and associated expenses
necessary to manage and support the Company's increased scale of operations.
The Company believes that the absolute dollar amount of its general and
administrative expenses will continue to increase as a result of the
anticipated expansion of the Company's administrative staff to support growing
operations and expenses associated with being a public company.
INTEREST AND OTHER INCOME, NET
Interest and other income, net, is comprised primarily of interest income
earned on the Company's cash and cash equivalents. Interest and other income,
net, decreased by 10% from $94,000 in fiscal 1995 to $85,000 in fiscal 1996
and increased by 124% from $42,000 in fiscal 1994 to $94,000 in fiscal 1995.
Interest and other income, net, increased from $1,000 in the first quarter of
fiscal 1996 to $6,000 in the first quarter of fiscal 1997. The variations
reflect changing cash balances.
PROVISION FOR INCOME TAXES
As of March 31, 1996, the Company had federal and state net operating loss
carryforwards of approximately $9.8 million and $2.0 million, respectively,
which expire at various dates through 2011. In addition, as of March 31, 1996,
the Company had general business credit carryforwards of approximately
$372,000, which expire at various dates through 2011. Utilization of the net
operating loss carryforwards and business credits may
25
<PAGE>
be subject to a substantial annual limitation due to the ownership change
limitations provided by the Internal Revenue Code of 1986, as amended, and
similar state provisions. See Note 8 of Notes to Consolidated Financial
Statements of Visigenic.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations and met its capital
expenditure requirements primarily from proceeds from the private sales of
Preferred and Common Stock. Through June 30, 1996, the Company had raised
$17.8 million from the sale of Preferred and Common Stock. At June 30, 1996,
the Company's principal sources of liquidity included cash and cash
equivalents of $1.9 million and a $1.0 million revolving line of credit
agreement which expires on August 15, 1996. Advances under the agreement,
which bear interest at the bank's prime lending rate plus 1.25%, are limited
to 80% of eligible accounts receivable and are secured by substantially all of
the assets and contractual rights of the Company. After the end of fiscal
1996, the Company borrowed $524,000 under the line of credit, which bore
interest at a rate of 9.5%, as of June 30, 1996. The line of credit agreement
also contains certain financial restrictions and covenants. The Company is in
compliance with these financial restrictions and covenants. See Note 3 of
Notes to Consolidated Financial Statements of Visigenic.
On July 16, 1996 the Company executed an amended loan and security agreement
which increased the revolving line of credit to $3.0 million and extended its
term to July 15, 1997. The amended agreement also provides for a $2.0 million
bridge loan for a term ending the earlier of 120 days following the loan
advance or November 28, 1996. As consideration for the bridge loan the Company
will issue a five year warrant to purchase up to 6,666 shares of the Company's
Common Stock. Borrowings outstanding under the amended agreement will bear
interest at the bank's prime lending rate plus 1.0%.
On May 24, 1996, the Company sold 444,444 shares of its Series C Preferred
Stock at a price of $9.00 per share to three investors, for aggregate proceeds
of $4.0 million. The Company has the right to require these investors to
purchase up to an additional $4.0 million in convertible notes at any time
prior to October 31, 1996. If the Company has not completed an initial public
offering of its Common Stock by August 30, 1996, in order to require the
purchase of these convertible notes after September 30, 1996, the Company must
achieve revenue of at least $3.6 million for the quarter ended September 30,
1996. Between May 28 and June 7, 1996, the Company issued $2.0 million
principal amount of these convertible notes, bearing interest at the rate of
8.25% per annum. The principal amount of the notes and all accrued interest
are due three years after the issuance date. However, upon the closing of the
Company's initial public offering, the principal amount of each note and all
accrued interest will automatically convert into shares of the Company's
Common Stock at the lesser of $13.00 per share or the offering price per share
to the public. Upon the closing of the Company's initial public offering, the
Series C Preferred Stock will automatically convert into shares of the
Company's Common Stock. The Company used a portion of the proceeds from the
sale of the Series C Preferred Stock and the convertible notes to pay amounts
payable in connection with the closing of the acquisition of PostModern. See
"--PostModern Acquisition" and Note 9 of Notes to Consolidated Financial
Statements of Visigenic.
The Company's operating activities used cash of $2.2 million in fiscal 1994,
$4.6 million in fiscal 1995, $2.6 million in fiscal 1996 and $4.6 million in
the first quarter of fiscal 1997. The increased use of cash in fiscal 1995 as
compared with fiscal 1994 was primarily attributable to increased operating
costs and increased accounts receivable reduced by an increase in accounts
payable, accrued liabilities and deferred revenue. The decline in net cash
used in operations in fiscal 1996 as compared with fiscal 1995 was primarily
due to an increase in accounts payable, accrued liabilities and deferred
revenue. The increased use of cash in the first quarter of fiscal 1997 was
primarily due to an increase in accounts receivable.
The Company used $477,000, $378,000, $1.1 million and $2.6 million of net
cash during fiscal 1994, fiscal 1995, fiscal 1996 and the first quarter of
fiscal 1997, respectively, for investing activities, due primarily to
purchases of property and equipment. Financing activities provided $5.6
million, $2.6 million, $5.5 million and $6.7 million of net cash during fiscal
1994, fiscal 1995, fiscal 1996 and the first quarter of fiscal 1997,
respectively, due to the issuance of Preferred and Common Stock and
convertible notes and debt financing.
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<PAGE>
Deferred revenue consists primarily of the unrecognized portion of revenue
under maintenance and support contracts (which revenue is deferred and
recognized ratably over the term of such contracts) and advance payment of
software development fees and software license fees. The Company expects
deferred revenue of $560,000 from maintenance and support contracts and
$400,000 from software development and software license fees to be realized in
the next twelve months. Capital expenditures were primarily for computers,
furniture and equipment. The Company expects that its capital expenditures
will increase as the Company's employee base grows, and has budgeted $1.4
million for such capital expenditures for fiscal 1997. As of June 30, 1996,
the Company did not have any material commitments for capital expenditures.
The Company believes that the proceeds from the sale of the Common Stock
offered hereby, together with its existing sources of liquidity and cash
generated from operations, will satisfy the Company's projected working
capital and other cash requirements for at least the next twelve months.
Although operating activities may provide cash in certain periods, to the
extent the Company experiences growth in the future, the Company anticipates
that its operating and investing activities will use cash. Any such future
growth and any acquisitions of other technologies, products or companies may
require the Company to obtain additional equity or debt financing, which may
not be available or may be dilutive.
POSTMODERN ACQUISITION
In May 1996, the Company completed the acquisition of PostModern, a supplier
of distributed object connectivity software. In the acquisition, which was
structured as a merger, the Company issued 3,099,821 shares of its Common
Stock and paid a total of $2.3 million in exchange for all of PostModern's
outstanding shares. The Company also assumed PostModern's outstanding stock
options and reserved 361,785 shares of the Company's Common Stock for issuance
upon exercise of such options. The Company also incurred acquisition-related
costs of approximately $450,000, resulting in a total purchase price of
approximately $13.1 million. In addition, the Company made cash payments,
subject to one-year vesting and totaling $1.5 million, to certain PostModern
employees. The acquisition of PostModern was accounted for as a purchase in
the quarter ended June 30, 1996. The Company recorded a write-off in the
quarter ended June 30, 1996 of approximately $12.0 million of in process
product development that had not reached technological feasibility and, in
management's opinion, had no probable alternative future use. The remaining
purchase price of approximately $1.1 million will be amortized over two years.
The following pro forma revenue information gives effect to the May 1996
acquisition of PostModern as if it had occurred on April 1, 1995. This
information is unaudited and is based on the respective historical financial
statements of the Company and PostModern. The Company's acquisition of
PostModern was accounted for as a purchase under accounting rules which
require presentation of combined operating results subsequent to the
acquisition date. The following pro forma data are presented for comparison
purposes only. This data should be read in conjunction with the pro forma
condensed combined financial statements and historical financial statements
contained herein.
This revenue data has been prepared on the same basis as the annual
consolidated financial statements and, in the opinion of the Company's
management, reflects all adjustments necessary for a fair presentation of the
information for the periods presented.
<TABLE>
<CAPTION>
PRO FORMA COMBINED QUARTER ENDED
----------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1995 1995 1995 1996 1996
-------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Pro Forma Revenue:
Software products........... $ 580 $1,179 $ 868 $2,156 $2,529
Service and other........... 422 605 394 373 564
------ ------ ------ ------ ------
Total revenue............. $1,002 $1,784 $1,262 $2,529 $3,093
====== ====== ====== ====== ======
</TABLE>
The majority of PostModern's revenue consisted of service and other revenue,
attributable to development, training and consulting fees.
27
<PAGE>
BUSINESS
OVERVIEW
Visigenic Software, Inc. is a leading provider of software tools for
database and distributed object connectivity for the Internet, Intranet and
enterprise computing environments. The Company's standards-based products
facilitate the development, deployment and management of distributed
applications by providing database-independent access to leading databases and
the communications infrastructure for distributed object-oriented
applications. The Company markets and sells its software through its direct
sales and telesales forces, independent software vendors ("ISVs"), value added
resellers ("VARs"), international distributors and on-line Internet sales in
North America, Europe, and Asia. The Company's customers include ASCII
Corporation, Cisco, CompuWare, Borland, Healtheon, Hewlett Packard, Hitachi
Ltd., Merrill Lynch, MCI Telecommunications, Microsoft, Netscape, Oracle,
Platinum technology and Software AG.
INDUSTRY BACKGROUND
In an increasingly complex computing environment, today's enterprises
require flexible access to data and applications, regardless of whether the
data and applications are located at the central office, a remote office or
across the Internet. This requirement is being driven by the following market
trends:
. The increasing use of multiple database management systems ("DBMSs"),
requiring DBMS-independent client/server database connectivity solutions.
. The increasing use of object-oriented technologies to provide distributed
application solutions.
. The increasing use of Internet and Intranet technologies within
mainstream commercial markets, which is increasing the demand for
applications capable of operating in distributed computing environments.
Database Connectivity
Client/server computing has given organizations the flexibility to develop
and deploy applications on a wide variety of computer platforms and DBMSs. The
computing infrastructure of the typical enterprise now consists of a
heterogeneous mix of operating systems, databases, networks and hardware. One
industry survey of Fortune 500 companies found that these companies use an
average of six different DBMSs. For example, an enterprise may support the
Windows 3.1, Windows NT, UNIX and MVS operating system platforms running
Microsoft SQL Server, Oracle and IBM DB2 DBMSs. To manage this heterogeneous,
cross-platform database environment, a common method of accessing, managing
and analyzing data from multiple databases was needed. The Open Database
Connectivity ("ODBC") standard was created to address this problem.
ODBC, originally developed by Microsoft, is an industry standard that is
based on a specification defined by the SQL Access Group, a consortium of
database, software and hardware vendors. ODBC provides a common data access
application programming interface ("API") for developers building DBMS-
independent applications. With ODBC, a single application can access multiple
databases on multiple platforms, avoiding the need for developers to write
versions of each application for each DBMS vendor's proprietary data access
API. The ODBC API is supported by most major software vendors in their
programming languages, application development tools and report writing tools,
including Microsoft Visual Basic and Visual C++, Sybase PowerBuilder and the
Oracle 2000 family, and Seagate Crystal Reports.
Although ODBC provides heterogeneous database connectivity, organizations
seeking the benefits afforded by ODBC have encountered two limitations as they
move to a more distributed computing environment. First, ODBC development
tools and ODBC drivers originally were only available for Windows platforms.
This limited the ability of enterprises to realize the multi-platform
potential of ODBC and to deploy ODBC solutions in multi-platform computing
environments such as Intranets and the Internet. Second, initial
implementations of ODBC are client-centric and are suitable for departmental
or limited enterprise deployments. These client-centric implementations
require that an ODBC driver and database-specific network libraries for each
DBMS to be accessed reside on each client system. For larger deployments,
which may involve hundreds, or even thousands,
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of ODBC-enabled client systems accessing multiple DBMSs, maintaining and
managing this client/server infrastructure is expensive and difficult because
each client system must be updated for each new version of the DBMS and the
ODBC driver. The Company believes that organizations need a simplified,
server-centric ODBC database access architecture for larger deployments,
including Intranet and Internet computing environments.
Distributed Object Connectivity
In today's rapidly evolving computing environments, enterprises require
improved data access as well as improved software application architectures.
Computing environments are becoming more distributed, with numerous client and
server machines networked together within a single enterprise as well as
across the Internet. The traditional method of building applications as
monolithic programs is not suited for this distributed environment. Instead,
applications must be more modular in nature, where the application is built as
a set of modules that can be distributed over a number of client and server
systems. Enterprises can improve computing performance by distributing
application logic over these computing networks so that the appropriate
application logic resides on the most appropriate system. For example, logic
for the graphical user interface could reside on a client machine while the
business logic is located on one or more servers where the business
application resides and the logic that manipulates the data in the DBMS is
located on one or more servers where the data resides.
Object-oriented programming languages like C++ and Java have enabled
software developers to develop and deploy distributed applications more
easily. These languages are based on the concept of objects, which are
reusable software components that contain both data and the related procedures
that act upon them. Objects are modular in nature and can be arranged or
reused in many different combinations to form new applications. This modular,
self-contained characteristic makes objects ideal for distributed computing
environments because applications can now be created by linking a series of
objects that may be distributed over a number of different systems.
Significant challenges in distributed application development and deployment
include communications and interoperability between objects that are
distributed over a network. The Common Object Request Broker Architecture
("CORBA") specification, developed by the Object Management Group, a
consortium of software and hardware vendors and corporate end users, was
created to address these challenges. The CORBA specification defines an Object
Request Broker ("ORB") that manages and monitors the interactions of
distributed objects on a network. To enable interoperability among
applications using ORBs, CORBA also specifies the Internet Inter-ORB Protocol
("IIOP"), which defines a standard distributed messaging protocol for
communication between objects. CORBA-compliant objects are portable across
programming languages, development environments, computer platforms and
networks, which is an increasingly important attribute of applications in the
heterogeneous computing environments of the Internet, Intranets and
enterprises.
Before the CORBA specification, many enterprises had not undertaken the
development and deployment of distributed applications because of the lack of
software development tools that provide a distributed object communication
infrastructure. This meant that building enterprise-wide distributed
applications entailed writing a new, proprietary communication
infrastructure--a task that was difficult and time-consuming for many
enterprises. The introduction of CORBA-compliant ORBs has freed enterprises
from having to write their own communication infrastructure and allows
enterprises to focus their development efforts on business logic. The Company
believes that enterprises now need commercially available ORBs from third
party vendors that provide this communications infrastructure.
The Internet and Intranets Increase the Need for Distributed Applications
The Internet has quickly emerged as an important aspect of business
computing. Internet-based business applications have expanded beyond
electronic mail to a broad range of business applications and services,
including electronic publishing, direct-to-customer transactions, product
marketing, advertising and customer support. The widespread use of the
Internet by enterprises has also resulted in the emergence of Intranets,
internal information systems based upon the Internet infrastructure. Intranets
use Internet protocols and applications to share information and services both
within the enterprise and across the Internet. Intranets allow the enterprise
to
29
<PAGE>
distribute data and applications across geographically dispersed facilities as
well as enable customers, suppliers and other business partners to easily
access enterprise data and applications.
The Internet and Intranets are large heterogeneous distributed computing
environments, consisting of vast numbers of networked client and server
systems and distributed databases. The rapid growth of the Internet and
Intranets is accelerating the importance of distributed applications that can
access data wherever the data resides. The Company believes business
applications increasingly will be comprised of objects, Java applets and
databases that are distributed on networks and dynamically assembled into
highly customized solutions. As a result, development and deployment tools for
database access and distributed object connectivity solutions are increasingly
key components of the software infrastructure required for Internet, Intranet
and enterprise computing environments.
VISIGENIC SOLUTION
Visigenic provides key components of the software infrastructure that enable
developers and IT professionals to develop, deploy and manage distributed
applications. The Company provides software tools for database and distributed
object connectivity for Internet, Intranet and enterprise computing
environments. The Company's cross-platform database connectivity products,
based on the ODBC API, are open, flexible and cost effective for developing,
deploying and maintaining DBMS-independent applications. The Company's
distributed object connectivity products, consisting of CORBA-compliant ORBs,
provide a communication infrastructure and enable the development and
deployment of reliable, flexible and cost-effective distributed applications.
The Company's solution provides the following benefits:
Application Architecture Flexibility. Visigenic's products are designed to
enable developers and IT professionals to build applications for a variety of
enterprise architectures. The Company's database connectivity products provide
application developers with the flexibility to implement the ODBC database
connection on the client, on the server or across the Internet. The Company's
distributed object connectivity products allow developers to build
applications that can be distributed over multiple client and server machines
and can interoperate with other CORBA-compliant applications. This flexibility
allows the enterprise to adapt its application architecture to meet changing
business or computing requirements.
Simplification of Application Development. Visigenic's products simplify
application development by reducing the time and expertise required to develop
applications. The Company's database connectivity products allow developers to
access multiple DBMSs by writing to a single API rather than multiple
proprietary APIs. The Company's distributed object connectivity products
provide the developer with the communications infrastructure required for
distributed object applications, allowing the developer to focus on developing
business objects and facilitating the reuse of these objects in multiple
applications.
Simplification of Distributed Application Deployment. Visigenic's products
simplify the deployment of distributed applications. The VisiChannel product
is based on Visigenic's server-centric ODBC architecture that shifts the
database connectivity software components from clients to servers, thereby
simplifying deployment and centralizing administration. The VisiBroker for C++
and VisiBroker for Java agent-based architecture reduces the deployment and
administration effort for distributed applications by automatically launching
objects, tracking their state and adapting to their changing resource
requirements.
Support of Open Industry Standards. Visigenic's products for database and
distributed object connectivity support existing and emerging industry
standards, enabling developers and IT professionals to build solutions that
are open, flexible and interoperable across multiple operating environments.
Visigenic's products support key industry standards including database
connectivity standards such as ODBC and X/Open SQL Access and distributed
object standards such as CORBA 2.0 and IIOP. The Company is currently
developing products that support Java Database Connectivity ("JDBC") and other
de facto industry standards such as RSA data encryption technology.
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Technology Independence. Visigenic's products enable the development of
solutions for the heterogeneous computing environments confronting the
enterprise by supporting multiple operating systems, DBMSs, development
languages and hardware platforms.
Manageability. Visigenic's products provide monitoring tools that control
the computing environment while reducing the time and resources spent on
managing distributed applications. The VisiChannel product provides a monitor
that supplies information regarding client/server database connections and
provides administrators with the ability to adjust system configuration
parameters. The Company's VisiBroker products provide monitoring capabilities
for distributed object usage and location. These monitoring tools provide
administrators with the information needed to manage and administer
distributed application environments.
VISIGENIC STRATEGY
The Company's strategy is to become the premier provider of software tools
which enable developers and IT professionals to develop, deploy and manage
distributed applications for Internet, Intranet and enterprise computing
environments. The Company's strategy incorporates the following key elements:
Support and Enhance Open Industry Standards. The Company's products are
based on existing and emerging industry standards for heterogeneous database
connectivity and distributed object connectivity. The Company actively
participates in standards-setting organizations including X/OPEN and the
Object Management Group. The Company intends to contribute to the expansion of
existing standards and the development of future standards created by these
and other standards-setting organizations. For example, the Company was
instrumental in accelerating ODBC's acceptance as a standard for heterogeneous
database access by exclusively licensing certain ODBC enabling technology from
Microsoft and providing the VisiODBC SDK on Macintosh, OS/2 and many UNIX
platforms. In addition, the Company has developed the first commercial
implementation of IIOP, defined as part of the CORBA 2.0 specification, in its
ORB products. The Company intends to promote acceptance of IIOP as the de
facto standard for distributed object messaging for the Internet and
Intranets.
Leverage Strategic Partners. The Company intends to continue to establish
close relationships with leading technology companies through technology
licensing, joint development, strategic investments, and distribution and
marketing arrangements to promote the widespread acceptance and distribution
of Visigenic products. Key partnerships include the following:
. Cisco is a strategic investor in the Company and has entered into a
license agreement to incorporate the Company's database connectivity
products in Cisco's network management product line.
. Hitachi has entered into a joint-development agreement with the Company
for the development of a transaction-enabled ORB based on the VisiBroker
for C++ and VisiBroker for Java products.
. JavaSoft, a division of Sun Microsystems, has entered into an agreement
for JDBC technology that grants the Company the right to sub-license
JavaSoft's JDBC test suites and its JDBC-to-ODBC bridge.
. Microsoft has entered into a series of agreements to incorporate certain
of the Company's VisiODBC products with certain Microsoft products and to
exclusively license to the Company the Microsoft ODBC SDK and test suites
for non-Microsoft operating systems. Such licenses may be converted into
non-exclusive licenses at Microsoft's option.
. Netscape is a strategic investor in the Company and has entered into a
license agreement to incorporate VisiBroker technology in future versions
of Netscape products.
. Oracle has entered into a license agreement with the Company to
incorporate the Company's VisiODBC products with a number of Oracle's
Transparent Gateway products.
. Platinum technology is a strategic investor in the Company and has
entered into an agreement to incorporate the Company's VisiODBC,
VisiChannel and VisiBroker products with certain Platinum products.
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Provide a Broad Suite of Products and Services. The Company offers a suite
of software tools for database and distributed object connectivity, as well as
support, consulting and training services. The Company intends to develop new
products, enhance its current products and integrate its database connectivity
software products with its distributed object connectivity products to address
the requirements of the emerging Internet and Intranet distributed markets.
Maintain Technology Leadership. The Company is committed to maintaining its
technological leadership through internal product development efforts and, if
appropriate opportunities present themselves, through acquisitions of
technologies, products and companies to address the specific requirements of
distributed applications in the areas of database connectivity, distributed
object connectivity and the monitoring of distributed environments. The
Company has invested and will continue to invest in technology so that it can
react and adapt to changing technological trends and market needs.
Exploit and Develop Internet/Intranets Market Opportunities. The Company
believes that the emergence of the Internet and Intranets will significantly
increase the market for database and distributed object connectivity software.
Visigenic intends to leverage its products and expertise in heterogeneous
database connectivity and distributed object connectivity to exploit the
market opportunity for distributed applications for the Internet and
Intranets.
Expand Brand Name Awareness. Visigenic believes that the brand name
awareness of the Company and its products will be an important element of its
success. Visigenic is targeting its marketing efforts to establish and expand
the recognition of the Company and its products through advertising,
promotional activities, selected sales channels and strategic partners. The
Company believes that establishing and expanding market awareness is
particularly important given the emerging nature of the market in which it
competes.
Expand Distribution Channels Worldwide. To achieve broad distribution of its
database and distributed object connectivity software, the Company believes it
must continue to build multiple distribution channels worldwide. The Company
is expanding its direct sales and telesales forces as well as broadening its
indirect channels of distribution, including VARs, ISVs, systems integrators
("SIs"), Internet sales and international distributors. The Company's
international distribution strategy is to penetrate key international markets
by seeking additional VARs, ISVs and regional distributors and by further
developing its existing relationships with these customers.
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<PAGE>
PRODUCTS
The Company provides software tools for database connectivity and
distributed object connectivity for Internet, Intranet and enterprise
computing environments. The Company's products provide key components of the
software infrastructure that enable developers and IT professionals to
develop, deploy and manage distributed applications.
The following table identifies the Company's current products:
<TABLE>
<CAPTION>
MOST
ORIGINAL RECENT
PRODUCT RELEASE RELEASE SUPPORTED US SUGGESTED
NAMES DATE DATE PLATFORMS LIST PRICE (1)
<S> <C> <C> <C> <C>
DATABASE CONNECTIVITY
- --------------------------------------------------------------------------------
VisiODBC Drivers 11/94 6/96 Windows 3.1 $95-$150/Driver
and DriverSet Windows 95 $295-$595/DriverSet
Windows NT
UNIX
Macintosh
OS/2
- --------------------------------------------------------------------------------
VisiODBC SDK 11/94 6/96 UNIX $995/user
Macintosh
OS/2
- --------------------------------------------------------------------------------
VisiChannel 3/96 3/96 Windows 3.1 $500-$700/user
Windows 95
Windows NT
- --------------------------------------------------------------------------------
DISTRIBUTED OBJECT CONNECTIVITY
- --------------------------------------------------------------------------------
VisiBroker for Java 4/96 4/96 Windows 95 $3,000-$5,000/
Windows NT developer
UNIX $150-$250/runtime
- --------------------------------------------------------------------------------
VisiBroker for C++ 9/94 9/95 Windows 95 $3,000-$5,000/
Windows NT developer
UNIX $150-$250/runtime
</TABLE>
(1) Actual price depends upon platform selected and quantity purchased, among
other factors. The terms and conditions, including prices and discounts
from list prices, of individual license transactions are often highly
negotiated based on volumes and commitments and vary considerably from
customer to customer.
Database Connectivity Products
The Visigenic software tools for database connectivity are based on the ODBC
standard and enable data access independent of both the DBMS and platform. The
ODBC products include the VisiODBC Drivers and DriverSets (formerly Visigenic
ODBC Drivers and Driver Sets), VisiODBC Software Development Kits (formerly
Visigenic ODBC Software Development Kits) and VisiChannel (formerly Visigenic
OpenChannel).
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[DIGITIZED ARTWORK OF VISIODBC DRIVERS APPEARS HERE]
VisiODBC Drivers and DriverSets. The VisiODBC Drivers and DriverSets
(formerly Visigenic ODBC Drivers and DriverSets) provide cross-platform access
to multiple SQL relational DBMSs--including CA-Ingres, IBM DB2, Informix,
Microsoft SQL Server, Oracle and Sybase SQL Server (DBLib and CTLib)--from any
ODBC-enabled application. The VisiODBC Driver and DriverSets are made up of two
ODBC components: the Driver Manager and a set of database drivers. The Driver
Manager loads the ODBC drivers that an ODBC-enabled application requests. The
VisiODBC drivers provide the communication link between the ODBC-enabled
application and a specific DBMS; the drivers process ODBC function calls from
the application, translate them to DBMS-specific calls and return the results
of those calls to the application. For example, to access an Oracle DBMS, an
ODBC-enabled application, such as Microsoft Excel, would send SQL calls through
the VisiODBC Oracle driver. Likewise, to access an Informix DBMS, Microsoft
Excel would send the same SQL calls through a VisiODBC Informix driver. The
Company sells VisiODBC drivers separately or as the VisiODBC DriverSet, which
consists of the full set of VisiODBC drivers available for each platform.
VisiODBC Drivers are available for Windows 3.1, Windows NT, Windows 95, ATT
GIS, HP-UX, IBM AIX, SGI Irix, SCO, Solaris, Sun OS, Macintosh and Power
Macintosh and OS/2. The Company initially released VisiODBC Drivers and
DriverSets in November 1994.
VisiODBC SDKs. VisiODBC SDKs (formerly Visigenic ODBC SDKs) allow developers
to develop vendor-independent database applications and ODBC drivers. Using the
VisiODBC SDKs, developers write database-independent C and C++ applications
that communicate simultaneously with multiple databases from different vendors.
Each VisiODBC SDK comes with the Driver Manager, header files, programmer's
reference and graphical utilities.
Visigenic has ported the Microsoft ODBC 2.X SDK to ATT GIS, HP-UX, IBM AIX,
SGI Irix, SCO, Solaris, Sun OS, Macintosh, Power Macintosh and OS/2. Visigenic
currently has the exclusive right to license and port the Microsoft ODBC SDK
versions 2.X and 3.0 for Windows to all non-Microsoft platforms. The Company
released its first VisiODBC SDK in November 1994.
VisiChannel. VisiChannel (formerly Visigenic OpenChannel) provides an
architecture that simplifies database connectivity in large distributed
application environments such as the Internet, Intranets and enterprise
computing environments. The Company initially released VisiChannel in March
1996.
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[DIGITIZED ARTWORK OF VISICHANNEL APPEARS HERE]
VisiChannel's server-centric architecture shifts the administrative burden
and processing load for ODBC-enabled applications by relocating ODBC drivers
and network libraries away from each user's individual machine to a central
server, allowing easier administration and control. A "thin" database-
independent client driver connects to any database through the VisiChannel
Server, where server-side ODBC drivers manage the actual database connections.
Since database connections are centralized, VisiChannel can reduce the time and
resources spent on deploying and managing database applications.
VisiChannel consists of the VisiChannel Client, Server and Manager. The
VisiChannel Client replaces the ODBC drivers and database vendor's proprietary
libraries on the client. The VisiChannel Server can be used to access any ODBC
data source, either through a VisiODBC Driver or other third party ODBC
drivers. The VisiChannel Server has been designed to support large numbers of
concurrent users through the use of a multi-threaded architecture, which
provides for efficient resource utilization, enhanced throughput and shared
resource integrity. The VisiChannel Manager is a monitoring tool that allows IT
professionals to monitor all VisiChannel connections and adjust system
configuration parameters from a single location.
VisiChannel can be deployed for use with existing ODBC applications without
any changes to the client application. VisiChannel is optimized for large-scale
ODBC traffic and runs over standard TCP/IP transports, enabling it to be used
for database connectivity across the Internet. The Company is developing a
version of VisiChannel that will support the JDBC API for Java applets and
applications.
The VisiChannel Server is available for Windows NT, and VisiChannel Clients
are available for Windows 3.1, Windows NT and Windows 95. The Company expects
to begin shipping VisiChannel Servers and Clients for UNIX in the second half
of 1996.
Distributed Object Connectivity Products
Visigenic develops and markets two Object Request Broker ("ORB") products:
VisiBroker for C++ and VisiBroker for Java (formerly Orbeline and BlackWidow).
Visigenic's ORBs, which are based on the Common Object Request Broker
Architecture ("CORBA") specification, provide an object-oriented solution for
the development and deployment of distributed applications.
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[DIGITIZED ARTWORK OF VISIBROKER FOR JAVA APPEARS HERE]
VisiBroker for C++. VisiBroker for C++ (formerly ORBeline) provides a
communication framework that enables the development, deployment and management
of complex, distributed C++ applications. VisiBroker for C++ consists of two
main components: a development component and a runtime component. The
development component includes a code generator that converts object interfaces
specified in CORBA's Interface Definition Language ("IDL") into C++. The
developer adds application logic and the runtime code to the generated code to
create a distributed application. The generated code is used by the objects'
application logic to interact with the VisiBroker runtime component which
manages the communication among the distributed objects.
VisiBroker for C++ operates on SunOS, Solaris, Digital UNIX, HP-UX, IBM AIX,
Windows NT and Windows 95 platforms. VisiBroker for C++ was first released in
September 1994 and the Company is currently shipping version 2.0.
VisiBroker for Java. VisiBroker for Java (formerly BlackWidow) is the
industry's first client and server Java ORB. VisiBroker for Java enables
distributed computing on the Internet and Intranets. Like VisiBroker for C++,
VisiBroker for Java consists of a development component and a runtime
component. The VisiBroker for Java development component converts IDL
interfaces into client-side and server-side Java code. The VisiBroker for Java
runtime is written entirely in Java and can run in any Java-enabled Web
browser, such as Netscape Navigator 2.0. The VisiBroker for Java environment
allows Internet, Intranet and enterprise deployment. On the Internet, a user
can load a client-side VisiBroker for Java applet into any Java-enabled
browser, execute the applet and establish IIOP connectivity with CORBA objects,
whether the objects are written in Java or in another language such as C++ or
Smalltalk.
The VisiBroker for Java development environment is available on Windows NT,
Windows 95 and Solaris. Distributed applications developed with VisiBroker for
Java can be deployed on any platform supporting the Java environment.
VisiBroker was first released in April 1996.
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VisiBroker Architecture. VisiBroker for C++ and VisiBroker for Java share a
common architecture. Both products use IIOP as their internal communications
protocol and do not rely on conversion of a proprietary protocol into IIOP in
order to interoperate with other ORB implementations. IIOP is an emerging
standard for distributed object messaging and is designed for applications
distributed across the Internet and Intranets. Each of the Company's VisiBroker
products is multi-threaded, facilitating scalability and enhancing throughput.
Applications developed using the Company's VisiBroker products can support
multiple concurrent threads to service both incoming and outgoing object
requests simultaneously, permitting objects within an application to process a
request without affecting the responsiveness of other objects within the
application. The Company's VisiBroker products have an agent-based architecture
and include one or more agents that communicate and monitor the location of the
ORB objects on the network. This agent-based architecture is designed to adapt
itself to changes in the objects and the network, such as a heavy system load
or the failure of objects. The architecture minimizes the need for
configuration files, making it easier to deploy and administer applications,
and enables automatic fail-over capabilities, significantly reducing
interruptions in any service provided as part of or implemented using the ORB.
CUSTOMERS
The Company's customers include the following:
FINANCIAL SERVICES NETWORK MANAGEMENT/SYSTEMS MANAGEMENT
Global Trade Technologies Bytex--A Division of Storage
Merrill Lynch Technology
Wells Fargo Bank Cisco
Compuware
TELECOMMUNICATIONS Embarcadero Technologies
Hewlett-Packard
Bell Northern Research Network General
British Telecom-North America Platinum technology
DSC Communications Software Professionals
MCI Telecommunications
INDEPENDENT SOFTWARE VENDORS AND VALUE ADDED RESELLERS
AimTech Corporation Oracle
Applix Premenos
AT&T Global Information Solutions Research Systems
Borland Software AG
Healtheon Starware
Hitachi UniSQL
Information Builders Vmark
Informix Software Wall Data
Investment Intelligence Systems Corporation
Wang
Microsoft XVT Software
Netscape
In fiscal 1996, one customer, Platinum technology, accounted for
approximately 25% of revenue and in the first quarter of fiscal 1997, one
customer, Cisco, accounted for approximately 34% of revenue. No other customer
accounted for more than 10% of revenue in either period. A relatively small
number of VAR and ISV customers have accounted for a significant percentage of
the Company's revenue, and the Company expects that sales to VAR and ISV
customers will continue to represent a significant portion of the Company's
revenue in future periods. In fiscal 1996, approximately 78% of the Company's
revenue was derived from ten customers. In the first quarter of fiscal 1997,
approximately 75% of the Company's revenue was derived from ten customers.
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The Company's products can be used in many applications, including the
following examples:
Oracle Corporation. Oracle Corporation, a leading supplier of information
management software, wanted to provide their customers with access to
competitors' DBMSs. Their customers are increasingly operating in
heterogeneous environments and require a solution that allows them to develop
applications that access multiple DBMSs. Oracle integrated VisiODBC technology
in their Transparent Gateway, allowing them to support a single, standard
DBMS-independent API versus supporting multiple proprietary APIs of their
competitors. For the first time, Oracle provided their customers with direct
gateway access, providing distributed database capabilities, from the Oracle7
database to Sybase, Informix, and CA-Ingres.
Healtheon. Healtheon, an Internet-based on-line healthcare and benefit
information and service company, needed a distributed object connectivity
solution for its applications. Healtheon is using VisiBroker for C++ as an
integral part of its technology infrastructure for its applications.
Platinum technology. Platinum technology, a provider of application
development, business intelligence, database administration, data warehousing,
and systems software solutions, was seeking a consistent database access
solution for their Platinum Open Enterprise Management System ("POEMS")
products. Platinum was supporting several proprietary database access methods.
Platinum integrated VisiODBC technology and VisiChannel into the POEMS
architecture, providing Platinum with a single database access architecture to
support and providing their customers with database connectivity across
multiple databases, operating systems and hardware platforms.
SALES AND MARKETING
The Company's sales and marketing objective is to achieve broad market
penetration by targeting multiple channels of distribution, including direct
sales and telesales, ISVs, VARs, SIs, international distributors and on-line
Internet sales. The Company is actively seeking to increase its base of VARs,
ISVs, SIs and international distributors.
Direct Sales/Telesales. The Company's direct sales and telesales forces
focus on medium to large-sized VARs, ISVs and corporate IT opportunities. To
date, the direct sales and telesales forces have been primarily targeting
strategic VARs and ISVs to leverage their sales and marketing expertise as
well as their position in the market. The Company has direct sales offices or
personnel in San Mateo, California; Atlanta, Georgia; Boston, Massachusetts;
Dallas, Texas; Reston, Virginia and Paris, France. The Company's telesales
organization, based in San Mateo, California, works jointly with the direct
sales force to receive customer orders as well as proactively identify,
contact and qualify customer leads.
Independent Software Vendors. The Company has relationships with a number of
ISVs to leverage their sales and marketing channels through joint marketing
programs and product bundling agreements.
Value Added Resellers and System Integrators. VARs and SIs customize,
configure and install the Company's software products and bundle these
products with their software solutions and services.
International Distributors. The Company believes that it is important to
develop a strong international presence and intends to do business in markets
outside of North America principally through distributors. International sales
accounted for 10% and 4% of revenue in fiscal 1996 and the first quarter of
fiscal 1997, respectively. The Company is working with its distributors to
develop end user, ISV, VAR and SI relationships in their respective
territories. As of June 30, 1996, the Company had 12 international
distributors, mostly in Europe and Asia.
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Internet Sales. Certain of the Company's products can be evaluated and
purchased electronically over the Internet. The Company believes that the
Internet can be an effective way to market its products to potential
customers.
The Company's marketing efforts are directed at building brand name
awareness while also highlighting the value of the Company's database
connectivity and distributed object connectivity products. The Company's
marketing efforts include market research, product planning, creating
collateral materials, managing press coverage and other public relations,
identifying potential customers, advertising, attending tradeshows, speaking
at industry conferences, direct mail campaigns and establishing and
maintaining close relationships with recognized industry analysts. The Company
also maintains a home page on the Internet that is a source of sales leads.
As of June 30, 1996, the Company's sales organization included 29 employees
and its marketing organization included 8 employees. The Company intends to
hire a significant number of additional sales and marketing personnel in
fiscal 1997 and beyond. An increase in the sales and marketing staff will be
required to expand both the Company's direct and indirect sales activities and
achieve revenue growth. Competition for such personnel is intense, and there
can be no assurance that the Company can attract, assimilate or retain such
personnel. Because of the complexity of database connectivity and distributed
object connectivity software products, the Company has in the past and expects
to continue in the future to experience a time lag between the date sales
personnel are hired and the date such persons become fully productive. If the
Company is unable to hire and train such personnel on a timely basis in the
future, the Company's business, financial condition and results of operations
could be materially adversely affected. See "Risk Factors--Reliance on VARs
and ISVs" and "--International Sales."
CUSTOMER SERVICE AND SUPPORT
The Company believes that a high level of customer service and support is
critical to the Company's success. The services provided by the Company
include technical support, maintenance, training and consulting. These
services are designed to increase customer satisfaction and provide feedback
to the Company as to customers' demands and requirements.
Technical Support and Maintenance. The Company offers customer support
through telephone, electronic mail and fax. Visigenic provides new software
releases, maintenance releases and enhancements under annual support
agreements with customers. Maintenance and customer support license fees are
not included in software license fees but are purchased separately for an
annual fee.
Training and Consulting. The Company offers its customers education and
training programs, as well as customized consulting services. Fees for
training and consulting services are generally charged on a per diem basis,
separately from the Company's software products.
PRODUCT DEVELOPMENT
The Company believes its future success will depend in large part on its
ability to expand the Visigenic product family by enhancing existing products,
integrating database connectivity technology with distributed object
connectivity technology and developing new products to meet a broad range of
customer needs. The Company's product development organization is responsible
for new product and technology development, product testing and user interface
development. This organization is working to expand the availability of the
Company's products on the leading hardware platforms, operating systems,
DBMSs, programming languages and networking and communication protocols.
Since inception, the Company has made substantial investments in product
development and related activities. The Company's products have been developed
primarily by the Company's internal development staff and, in some instances,
with the assistance of external consultants. Certain technologies have been
acquired and
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integrated into Company's products through licensing arrangements. The Company
expects that most of its new products will be developed internally. However,
the Company will evaluate on an ongoing basis externally developed
technologies and products for integration into its product lines.
The Company expects that development activities with respect to its database
connectivity products will include development of VisiODBC SDKs, VisiODBC
drivers and test suites compliant with the ODBC 3.0 specification as well as
additional features for its VisiChannel products, including high performance
scalability, message and queuing capabilities, a server-procedure architecture
and Simple Network Management Protocol ("SNMP") agents and other management
and monitoring tools. The Company intends to support the JDBC API through a
JDBC-to-ODBC product that will allow Java programmers using the JDBC API to
access heterogeneous data sources through the Company's VisiODBC Drivers or
VisiChannel products. Visigenic also expects to ship a VisiChannel Client
implementation in Java in the second half of fiscal 1997.
The Company expects to enhance its VisiBroker for C++ and VisiBroker for
Java products and expand its distributed object connectivity product line. The
Company is developing an object-oriented transaction processing system based
on the Object Transaction Service ("OTS") specified by the OMG that enables
mission-critical On-line Transaction Process ("OLTP") applications. This
product is being jointly developed with Hitachi and is a combination of the
Company's VisiBroker for C++ product, the OTS interface implementations and
OpenTP1, Hitachi's advanced transaction processing engine. The Company
currently expects to release the product in the second half of fiscal 1997.
The Company also plans to leverage its CORBA expertise to develop products
that enable Microsoft's Active/X objects to interact with CORBA objects.
The Company also intends to leverage its database connectivity expertise to
provide integrated database connectivity capabilities for its VisiBroker
product line. The Company's VisiBroker products would then provide a more
complete distributed object solution, addressing both the distributed object
and data connectivity requirements of its customer base.
As of June 30, 1996, there were 51 employees on the Company's research and
development staff. The Company's product development expenditures in fiscal
1995, fiscal 1996 and the first quarter of fiscal 1997 were $3.2 million, $4.3
million and $1.7 million, respectively. The Company expects that it will
continue to commit substantial resources to product development in the future.
The markets for the Company's products are characterized by rapid
technological developments, evolving industry standards, swift changes in
customer requirements, computer operating environments and software
applications, and frequent new product introductions and enhancements. As a
result, the Company's success depends substantially upon its ability to
anticipate changes and continue to enhance its existing products, develop and
introduce in a timely manner new products incorporating technological
advances, comply with emerging industry standards and meet increasing customer
expectations. If the Company is unable to develop and introduce new products
or enhancements to existing products in a timely manner in response to
changing market conditions or customer requirements, the Company's business,
operating results and financial condition would be materially and adversely
affected. See "Risk Factors--Need to Develop New Software Products and
Enhancements" and "--Dependence on Java; Risks Associated with Encryption
Technology."
COMPETITION
The Company's products are targeted at the emerging markets for standards-
based database connectivity software and standards-based distributed object
connectivity software. The markets for the Company's products are intensely
competitive, subject to rapid change and significantly affected by new product
introductions and other market activities of industry participants. The
Company believes that the principal competitive factors in these markets are
product quality, performance and price, vendor and product reputation, product
architecture and quality of support.
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In the standards-based database connectivity market, the Company competes
principally against Intersolv. The Company's database connectivity products
also indirectly compete against proprietary database connectivity solutions
from database vendors. In the standards-based distributed object connectivity
market, the Company competes principally against two private companies, Iona
and Expersoft. The Company's distributed object connectivity products also
compete against existing or proposed distributed object connectivity solutions
from hardware vendors such as DEC, Hewlett-Packard, IBM and Sun. In addition,
because there are relatively low barriers to entry in the software market and
because the Company's products are based on publicly available standards, the
Company expects to experience additional competition in the future from other
established and emerging companies if the market for database connectivity and
distributed object connectivity software continues to develop and expand. In
particular, relational database vendors including Informix, Microsoft, Oracle
and Sybase may offer standards-based database connectivity software to their
customers, eliminating or reducing demand for the Company's products.
Similarly, operating system vendors such as DEC, Hewlett-Packard, IBM,
Microsoft and Sun may offer standards-based distributed object connectivity
products bundled with their operating systems. For instance, Microsoft has
announced plans to introduce DCOM, which would eliminate the need for CORBA-
compliant ORBs, such as those offered by the Company, for Microsoft operating
systems. Many of these current and potential competitors have well-established
relationships with the current and potential customers of the Company, have
extensive knowledge of the markets serviced by the Company, better name
recognition and more extensive development, sales and marketing resources and
are capable of offering single vendor solutions. As a result, these current
and potential competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements, or to devote
greater resources to the development, promotion and sale of their products,
than the Company. It is also possible that new competitors or alliances among
competitors may emerge and rapidly acquire significant market share. The
Company also expects that competition will increase as a result of software
industry consolidations.
The Company expects that it will face increasing pricing pressures from its
current competitors and new market entrants. Increased price competition may
result in price reductions, reduced gross margins and loss of market share,
any of which could materially adversely affect the Company's business,
financial condition or results of operations. There can be no assurance that
the Company will be able to compete successfully against current and future
competitors or that competitive pressures will not materially and adversely
affect its business, financial condition or results of operations. See "Risk
Factors--Intense Competition."
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
The Company's success is dependent in part upon its proprietary technology.
While the Company relies on a combination of copyright and trademark laws,
trade secrets, confidentiality procedures and contractual provisions to
protect its proprietary rights, the Company believes that factors such as the
technical and creative skills of its personnel, new product developments,
frequent product enhancements, name recognition and reliable products and
product support are more essential to establishing and maintaining a
technology leadership position, particularly because the Company is supplying
standards-based products. The Company seeks to protect its software, published
data, documentation and other written materials under trade secret and
copyright laws, which afford only limited protection. The Company has granted
limited access to its source code to third parties under confidentiality
obligations. Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of the Company's products or
to obtain and use information that the Company regards as proprietary.
Policing unauthorized use of the Company's products is difficult, and while
the Company is unable to determine the extent to which piracy of its software
products exists, software piracy can be expected to be a persistent problem.
In addition, the laws of some foreign countries do not protect the Company's
proprietary rights to as great an extent as do the laws of the United States.
There can be no assurance that the Company's means of protecting its
proprietary rights will be adequate or that the Company's competitors will not
independently develop similar technology. The Company distributes its products
electronically through the Internet. Distributing the Company's products
through the Internet makes the Company's software more
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susceptible to unauthorized copying and use. The Company has historically
allowed and currently intends to continue to allow customers to electronically
download its client and server software. If as a result of changing legal
interpretations of liability for unauthorized use of the Company's software or
otherwise, users were to become less sensitive to avoiding copyright
infringement, the Company's business, results of operations and financial
condition could be materially adversely affected.
The Company is not aware that any of its products infringes the proprietary
rights of third parties. There can be no assurance, however, that third
parties will not claim infringement by the Company with respect to current or
future products. The Company expects that software developers will
increasingly be subject to infringement claims as the number of products and
competitors in the Company's industry segment grows and the functionality of
products in different industry segments overlaps. Any such claims, with or
without merit, could be time-consuming, result in costly litigation, cause
product shipment delays or require the Company to enter into royalty or
licensing agreements. Such royalty or licensing agreements, if required, may
not be available on terms acceptable to the Company or at all, which could
have a material adverse effect upon the Company's business, results of
operations and financial condition.
In addition, the Company relies on certain software that it licenses from
third parties, including software that is integrated with internally developed
software and used in the Company's products to perform key functions. The
Company licenses from Microsoft the base technology for the VisiODBC SDK
products and licenses from RSA security technology it plans to use in several
of its future products. Microsoft has the right to terminate its license with
the Company any time after delivery to the Company of the Microsoft SDK for
ODBC 3.0, which is expected to occur in the second half of 1996. The Company's
license with RSA may only be terminated for breach. The Company has entered
into a joint technology agreement with JavaSoft, a subsidiary of Sun
MicroSystems, that grants the Company the right to sub-license JavaSoft's JDBC
test suites and ODBC bridge. There can be no assurances that such firms will
remain in business, that they will continue to support their technology or
that their technology will otherwise continue to be available to the Company
on commercially reasonable terms. The loss of or inability to maintain any of
these software licenses could result in delays or cancellations in product
shipments until equivalent software can be identified and licensed or
developed and integrated with the Company's products. Any such delay or
cancellation could materially adversely affect the Company's business, results
of operations and financial condition. See "Risk Factors--Dependence on
Company and Third Party Proprietary Technology."
EMPLOYEES
As of June 30, 1996, the Company employed 109 full time personnel, including
51 in product development, 7 in technical support, 37 in sales and marketing
and 14 in finance and administration. See "Risk Factors--Dependence on Key
Personnel; Need to Increase Technical, Sales and Marketing and Managerial
Personnel."
FACILITIES
The Company's principal executive offices and research and development
facilities are located in San Mateo, California and consist of approximately
25,000 square feet under leases that will expire between July 2000 and January
2001. The Company also leases approximately 5,000 square feet of additional
office space, previously used for research and development activities by
PostModern, in Mountain View, California pursuant to a lease that terminates
July 31, 1996. The Company has sales offices in Atlanta, Boston, Dallas and
the Washington D.C. area and in Paris, France. The Company anticipates that it
will require additional space in the near term and that such space will be
available on reasonable terms.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company as of the date of this
Prospectus are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Roger J. Sippl (1)...... 41 Chairman of the Board of Directors
and Chief Executive Officer
Mark D. Hanson.......... 35 President and Chief Operating Officer
Jens Christensen, 33 Vice President, Chief Technical Officer and Director
Ph.D...................
Kevin C. Eichler........ 36 Vice President, Finance, Chief Financial
Officer, Treasurer and Secretary
Therese H. Langlais..... 37 Vice President, Marketing
David T. Shewmake, 44 Vice President, Technical Services
Ph.D...................
Richard L. Gerould...... 43 Vice President, Corporate Development and General Counsel
Robert Perreault........ 39 Vice President, Research and Development
Gill Cogan (2).......... 44 Director
Cristina M. Morgan...... 43 Director
Michael Moritz.......... 41 Director
E. E. van Bronkhorst 72 Director
(2)....................
J. Sidney Webb (1)...... 76 Director
Eric Young (1).......... 40 Director
</TABLE>
- --------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Roger J. Sippl is the founder of the Company and has served as a Director
and the Chief Executive Officer since February 1993. Mr. Sippl is a co-founder
of The Vantive Corporation, a customer interaction applications software
company ("Vantive") and has served as a director of Vantive since December
1990. Prior to his relationship with Vantive, Mr. Sippl founded Informix
Software, a database software company ("Informix"), in 1980 and served as that
company's Chairman of the Board until December 1992.
Mark D. Hanson has served as President and Chief Operating Officer of the
Company since January 1995. Mr. Hanson served as Vice President of Worldwide
Sales from June 1994 when he joined the Company until his appointment as
President and Chief Operating Officer. From July 1992 to March 1994, Mr.
Hanson was Vice President of Channel Sales of Sybase, a database software
company, and Vice President, International Sales of Gain Technology ("Gain"),
a software company, before the acquisition of Gain by Sybase. From January
1991 to June 1992, Mr. Hanson served as Vice President, Worldwide Sales and
Support for Macromedia, a supplier of PC multimedia software and services.
Prior to that time, Mr. Hanson was employed as Vice President at Informix from
1984 to January 1991, most recently as Vice President, Americas Sales.
Jens Christensen has served as Vice President, Chief Technical Officer and a
Director of the Company since May 1996. From October 1991 to May 1996, Mr.
Christensen served as President and Chief Executive Officer of PostModern
Computing Technologies Inc., a software company he founded in 1991. From
October 1990 to September 1991, Mr. Christensen was employed as a software
engineer for Teknekron, a software company.
Kevin C. Eichler has served as Vice President, Finance, Chief Financial
Officer, Treasurer and Secretary of the Company since July 1996. From July
1995 to July 1996, Mr. Eichler served as Executive Vice President,
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Finance, and Chief Financial Officer for National Insurance Group, a financial
services and related technology solution provider. From January 1991 to June
1995, Mr. Eichler served as Executive Vice President, Finance and Chief
Financial Officer for Mortgage Quality Management, Inc., a national provider
of quality control services and technologies to residential mortgage lenders.
From January 1990 to January 1991, Mr. Eichler served as Tax Manager,
Corporate Finance for NeXT Software, Inc., a software company. From May 1988
to January 1990, Mr. Eichler served as Domestic Tax Manager for Microsoft
Corporation, a software company.
Therese H. Langlais has served as Vice President, Marketing of the Company
since November 1993. Ms. Langlais served as Director of Marketing from April
1993, when she joined the Company until her appointment as Vice President,
Marketing. Prior to this, Ms. Langlais was employed for nine years at
Informix, where she held various positions, the most recent being Director of
Strategic Projects.
David T. Shewmake has served as Vice President, Technical Services of the
Company since September, 1993. In April 1983, Dr. Shewmake co-founded
Interactive Development Environments, a computer-aided-software engineering
tools company, where he served as Vice President until September 1993.
Richard L. Gerould has served as Vice President, Corporate Development and
General Counsel of the Company since December 1993. From April 1993 to
November 1993, Mr. Gerould worked as an independent attorney primarily for
Cadence Design Systems, Inc., a software company. In November 1990, Mr.
Gerould founded Configurex, Inc., a software tools company, where he served as
President until March 1993. From 1984 to 1990, Mr. Gerould was employed at
Micro Focus, a COBOL software tools company, most recently as Vice President
of Corporate Services and previously as Vice President, Marketing Operations.
Robert Perreault has served as Vice President, Research and Development of
the Company since September 1995. From May 1994 to September 1995, Mr.
Perreault served as Vice President of Client/Server Technology at Compuware
Corporation, a software company. From September 1993 to May 1994, he served as
Vice President of Database and Connectivity Products at Uniface Corporation, a
software company which merged with Compuware Corporation in May 1994. In 1993,
Mr. Perreault co-founded and served as President of Data Accessibility
Solutions, Inc., a consulting company which merged with the Company in May
1996. Mr. Perreault co-founded and served as Vice President of U.S. Operations
for RIAL, Inc., a consulting company, from September 1991 to August 1993.
Gill Cogan has served as a Director of the Company since January 1994. Since
October 1991, Mr. Cogan has been a partner at Weiss, Peck & Greer Venture
Partners. Mr. Cogan serves as a director for Electronics for Imaging, Inc.,
Harmonic Lightwaves, Inc., Integrated Packaging Assembly Corp., Microlinear
Corporation, Number Nine Visual Technology, and P-Com Inc.
Cristina M. Morgan has served as a Director of the Company since March 1993.
Ms. Morgan is a Managing Director of Hambrecht & Quist LLC, an investment
banking firm, where she has been employed since October 1982. Hambrecht &
Quist LLC is a managing underwriter of the offering made hereby.
Michael Moritz has served as a Director of the Company since March 1993. Mr.
Moritz has been a partner at Sequoia Capital, a venture capital company, since
1986. Mr. Moritz serves as a director for Yahoo!, Flextronics International
and Global Village Communications.
E. E. van Bronkhorst has served as a Director of the Company since March
1993. Since 1984, Mr. van Bronkhorst has been an independent financial
consultant to various technology companies. From 1962 until 1984, Mr. van
Bronkhorst served as Senior Vice President, Chief Financial Officer and
Treasurer at Hewlett-Packard Company. Mr. van Bronkhorst serves as a director
of California Water Service Co., Nellcor Puritan Bennett Inc. and Mid-
Peninsula Bank.
J. Sidney Webb has served as a Director of the Company since March 1993.
Since May 1984, Mr. Webb has served as director and Chairman of the Board of
The Titan Corporation, a consulting company. Mr. Webb
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also serves as a director of Amdahl Corporation, EIP Microwave, Inc. and
Plantronics, Inc. Mr. Webb previously was Vice Chairman and a director of TRW.
Eric Young has served as a Director of the Company since July 1995. Mr.
Young is a general partner of Canaan Capital Partners, a venture capital
company, where he has been employed since October 1987. Mr. Young also serves
as a director for Spectrian Corporation and Integrated Packaging Assembly
Corporation.
The Company's Bylaws currently authorize eight directors, which number may
be changed from time-to-time by the Board of Directors. All directors hold
office until the next annual meeting of stockholders or until their successors
are duly elected and qualified. The Amended and Restated Bylaws which will
become effective upon consummation of this offering will provide that,
beginning with the first annual meeting of stockholders following this
offering, the Board of Directors will be divided into three classes, with each
class serving staggered three-year terms. There are no family relationships
among the directors or executive officers of the Company.
In April 1996, the Board of Directors established an Audit Committee and a
Compensation Committee. The Audit Committee oversees actions taken by the
Company's independent auditors, recommends the engagement of auditors and
reviews the Company's internal audits. The Compensation Committee approves the
compensation of executives of the Company and makes recommendations to the
Board of Directors with respect to standards for setting compensation levels.
The Compensation Committee also administers the Company's employee stock
option and stock purchase plans. See "--Stock Plans."
EXECUTIVE COMPENSATION
The following summary compensation table sets forth the compensation paid by
the Company during the fiscal year ended March 31, 1996 to the Company's Chief
Executive Officer and the four other most highly compensated executive
officers (collectively, the "Named Executive Officers") whose salary and bonus
for services rendered in all capacities to the Company exceeded $100,000
during such fiscal year.
SUMMARY COMPENSATION TABLE FOR FISCAL 1996
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-----------------
ANNUAL
COMPENSATION AWARDS
------------ -----------------
NO. OF SECURITIES
NAME AND UNDERLYING
PRINCIPAL POSITION SALARY (1) OPTIONS
------------------ ------------ -----------------
<S> <C> <C>
Roger J. Sippl ................................. $ 90,001 --
Chairman of the Board
and Chief Executive Officer
Mark D. Hanson.................................. $140,000 62,500
President and Chief Operating Officer
Therese H. Langlais............................. $106,667 27,500
Vice President, Marketing
David T. Shewmake............................... $115,000 10,000
Vice President, Technical Services
Richard L. Gerould.............................. $115,000 15,000
Vice President, Corporate Development and
General Counsel
</TABLE>
- --------
(1) Amounts shown are on a full year basis and include cash and noncash
compensation earned and received by executive officers.
45
<PAGE>
The following table provides information concerning grants of options to
purchase the Company's Common Stock made during the fiscal year ended March
31, 1996 to each of the Named Executive Officers:
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
% OF TOTAL ASSUMED ANNUAL RATES
NUMBER OF OPTIONS OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM (4)
OPTIONS IN FISCAL PRICE PER EXPIRATION ----------------------
NAME GRANTED (1) 1996 (2) SHARE (3) DATE 5% 10%
---- ----------- ---------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Roger J. Sippl.......... -- -- -- -- -- --
Mark D. Hanson.......... 25,000 3.0% $0.40 04/18/05 $ 6,289 $ 15,937
12,500 1.5 $0.40 07/27/05 3,144 7,969
12,500 1.5 $0.40 10/25/05 3,144 7,969
12,500 1.5 $0.40 03/31/06 3,144 7,969
Therese H. Langlais..... 7,500 0.9 $0.40 04/18/05 1,887 4,781
10,000 1.2 $0.40 07/27/05 2,516 6,375
10,000 1.2 $0.40 03/15/06 2,516 6,375
David T. Shewmake....... 2,500 0.3 $0.40 04/18/05 629 1,594
7,500 0.9 $0.40 03/15/06 1,887 4,781
Richard L. Gerould...... 5,000 0.6 $0.40 04/18/05 1,258 3,187
10,000 1.2 $0.40 03/15/06 2,516 6,375
</TABLE>
- --------
(1) Options granted in fiscal 1996 are immediately exercisable and generally
vest over five years, with 10% of the option shares becoming fully vested
six months from the initial vesting date and 1/60th of the option shares
vesting each successive month, with full vesting occurring on the fifth
anniversary of the initial vesting date. The Company has a repurchase
right for shares not vested. Under the terms of the Company's 1995 Stock
Option Plan (the "Option Plan"), the Board or a committee of the Board
retains discretion, subject to Option Plan limits, to modify the terms of
outstanding options and to reprice outstanding options. The options have
a term of ten years, subject to earlier termination in certain situations
related to termination of employment. See "--Stock Plans" for a
description of the material terms of the options.
(2) Based on a total of 832,500 options granted to all employees and
consultants during fiscal 1996.
(3) All options were granted at an exercise price equal to the fair market
value of the Company's Common Stock as determined by the Board of
Directors of the Company on the date of grant. The Company's Common Stock
was not publicly traded at the time of the option grants to the officers.
(4) Potential realizable values are calculated based on the exercise price of
$0.40 per share and are net of exercise price, but before taxes
associated with exercise. Amounts represent hypothetical gains that could
be achieved for the respective options if exercised at the end of the
option term. The assumed 5% and 10% annual rates of stock price
appreciation from the date of grant to the end of the option term are
provided in accordance with rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of
the future Common Stock price. Actual gains, if any, on stock option
exercises are dependent on the future performance of the Common Stock,
overall market conditions and the option holders' continued employment
through the vesting period. This table does not take into account any
actual appreciation in the price of the Common Stock from the date of
grant to the present. Assuming the fair market value of the Common Stock
at the date of grant is the initial public offering price of $10.00, the
potential realizable value of these options (a) at a 5% assumed annual
rate of stock price appreciation from the date of this offering would be
$397,224, $198,612, $198,612 and $198,612 for Mr. Hanson's options,
$119,167, $158,889 and $158,889 for Ms. Langlais' options, $39,722 and
$119,167 for Mr. Shewmake's options, and $79,445 and $158,889 for Mr.
Gerould's options and (b) at a 10% assumed annual rate of stock price
appreciation from the date of this offering would be $638,436, $319,218,
$319,218 and $319,218 for Mr. Hanson's options, $191,531, $255,374 and
$255,374 for Ms. Langlais' options, $63,844 and $191,531 for Mr.
Shewmake's options, and $127,687 and $255,374 for Mr. Gerould's options.
46
<PAGE>
AGGREGATE OPTION EXERCISES AND FISCAL 1996 YEAR-END VALUES
The following table provides the specified information concerning
unexercised options held as of March 31, 1996 by each of the Named Executive
Officers:
AGGREGATE OPTION EXERCISES
AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT 3/31/96
OPTIONS AT 3/31/96 (1) (2)
------------------------ ------------------------
NAME VESTED UNVESTED VESTED UNVESTED
- ---- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Roger J. Sippl................ -- -- -- --
Mark D. Hanson................ 7,500 55,000 -- --
Therese H. Langlais........... 4,750 22,750 -- --
David T. Shewmake............. 583 9,417 -- --
Richard L. Gerould............ 1,167 13,833 -- --
</TABLE>
- --------
(1) These options are immediately exercisable in full at the date of grant,
but shares purchased on exercise of unvested options are subject to a
repurchase right in favor of the Company which lapses ratably over five
years and entitles the Company to repurchase unvested shares at their
original issuance price.
(2) Calculated on the basis of the fair market value of the underlying
securities as of March 31, 1996 of $0.40 per share, as determined by the
Company's Board of Directors, minus the aggregate exercise price.
No options to purchase the Company's Common Stock were exercised during the
fiscal year ended March 31, 1996 by the Named Executive Officers. No
compensation intended to serve as incentive for performance to occur over a
period longer than one fiscal year was paid pursuant to a long-term incentive
plan during the last fiscal year to any Named Executive Officer. The Company
does not have any defined benefit or actuarial plan under which benefits are
determined primarily by final compensation (or average final compensation) and
years of service with any of the Named Executive Officers.
STOCK PLANS
1995 Stock Option Plan. The 1995 Stock Option Plan of the Company (the
"Option Plan") provides for the grant of stock options to employees (including
officers), directors and consultants of the Company and its subsidiaries.
Options may be incentive stock options within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code") or nonstatutory
stock options, although incentive stock options may be granted only to
employees. All options granted under the Option Plan must be granted by April
18, 2005.
The Option Plan is administered by the Board of Directors or a committee
thereof. Subject to the provisions of the Option Plan, the Board or committee
has the authority to select the persons to whom options are granted and
determine the terms of each option, including (i) the number of shares of
Common Stock covered by the option, (ii) when the option becomes exercisable,
(iii) the option exercise price, which, in the case of incentive stock
options, must be at least 100% of the fair market value of a share of Common
Stock as of the date of grant, and, in the case of nonstatutory stock options
must be at least 85% of the fair market value of a share of Common Stock as of
the date of grant, and (iv) the duration of the option (which, in the case of
incentive stock options, may not exceed ten years). Generally, options granted
under the Option Plan are immediately exercisable but remain subject to
repurchase by the Company until vested under a schedule established by the
Board or committee. The Company's repurchase right will terminate upon certain
changes in control of the Company unless the outstanding options are assumed
or replaced by the acquiring corporation or if, following certain changes in
control of the Company, the option holder is terminated without cause or
resigns following "constructive termination" as defined in the Option Plan.
All incentive stock options are nontransferable other than by will or the laws
of descent and distribution. With the Company's consent, nonstatutory stock
options may be transferred to an optionee's immediate family, a trust for his
or her benefit or a partnership in which only the optionee and immediate
family members are partners.
47
<PAGE>
Of the 2,500,000 shares of Common Stock reserved for issuance under the
Option Plan as of June 30, 1996, a total of 225,501 shares had been issued
upon the exercise of options, of which 134,716 remain subject to repurchase,
options for the purchase of a total of 1,087,500 shares at a weighted average
exercise price of $2.24 per share were outstanding and 1,186,999 shares were
available for future option grants.
1996 Outside Directors Stock Option Plan. In June 1996, the Board of
Directors, subject to stockholder approval, adopted the 1996 Outside Directors
Stock Option Plan (the "Directors Plan") and reserved a total of 200,000
shares of Common Stock for issuance thereunder. Stockholder approval of the
Directors Plan will be sought prior to the closing of the offering. The
Directors Plan provides for the grant of nonstatutory stock options to
nonemployee directors of the Company. The Directors Plan is designed to work
automatically without administration; however, to the extent administration is
necessary, it will be performed by the Board of Directors. The Directors Plan
provides that each future nonemployee director of the Company will be granted
an option to purchase 15,000 shares of Common Stock on the date on which the
optionee first becomes a nonemployee director of the Company and each current
nonemployee director will be granted an option to purchase 15,000 shares of
Common Stock on the date following the first annual meeting of the
stockholders of the Company after this offering (the "Initial Grant").
Thereafter, on each anniversary of a nonemployee director's Initial Grant, the
director will be granted an additional option to purchase 5,000 shares of
Common Stock (an "Annual Grant"). Subject to an optionee's continuous service
with the Company, 1/8th of an Initial Grant will become exercisable six months
after the date of grant and 1/48th of the Initial Grant will become
exercisable monthly thereafter. Each Annual Grant will become exercisable in
twelve monthly installments beginning in the 37th month after the date of
grant, subject to the optionee's continuous service. The exercise price per
share of all options granted under the Directors Plan will equal the fair
market value of a share of Common Stock on the date of grant. Options granted
under the Directors Plan will have a term of ten years. In the event of
certain changes in control of the Company, options outstanding under the
Directors Plan will become immediately exercisable and vested in full. With
the Company's consent, the options may be transferred to an optionee's
immediate family, a trust for their benefit or a partnership in which only the
optionee and immediate family members are partners.
1996 Employee Stock Purchase Plan. In June 1996, the Board of Directors,
subject to stockholder approval, adopted the 1996 Employee Stock Purchase Plan
(the "Purchase Plan") and reserved a total of 450,000 shares of Common Stock
for issuance thereunder, none of which have been issued as of the effective
date of this offering. The Purchase Plan, which is intended to qualify under
Section 423 of the Code, is administered by the Board of Directors or by a
committee thereof. Employees (including officers and employee directors) of
the Company or any subsidiary designated by the Board for participation in the
Purchase Plan are eligible to participate in the Purchase Plan if they are
customarily employed for more than 20 hours per week and more than five months
per year, and do not own 5% or more of the Company's Common Stock. The
Purchase Plan will be implemented by sequential six-month offerings, the first
of which will commence on the effective date of this offering. The initial
offering period will terminate on January 31, 1997. Thereafter, offering
periods will begin on February 1 and August 1 of each year. The Board may
change the dates or duration of one or more offerings, but no offering may
exceed 27 months. The Purchase Plan permits eligible employees to purchase
Common Stock through payroll deductions at a price no less than 85% of the
lower of the fair market value of the Company's Common Stock on the first day
or the last day of each six-month offering period. Participants generally may
not purchase more than 1,500 shares in a six-month offering period or stock
having a value (measured at the beginning of the offering) greater than
$25,000 in any calendar year. In the event of certain changes in control of
the Company, the Board may accelerate the purchase of shares under the
Purchase Plan unless the acquiring corporation assumes or replaces the
purchase rights outstanding under the Purchase Plan.
Executive Performance Incentive Plan. Under the Company's Executive
Performance Incentive Plan (the "Incentive Plan"), the Compensation Committee
of the Board of Directors (the "Committee") may award performance units to
designated executives that will vest and become payable if one or more
preestablished performance goals are attained during a specified performance
period and the participant remains an employee. Performance goals may be
either absolute or relative (in comparison to a standard determined by the
Committee)
48
<PAGE>
measures of revenue, operating income, net income, earnings per share, or
departmental expenses. Performance units are dollar-denominated in an amount
specified by the Committee at the time of initial award and become payable at
a time determined by the Committee following its certification of the
attainment of the performance goals. Participants may elect to receive payment
of vested performance units either in cash or in shares of the Company's
Common Stock having a fair market value on the date of payment equal to the
dollar value of the vested performance units. Immediately prior to certain
changes in control of the Company, Incentive Plan participants will be paid
the value of their performance units for the current performance period that
would have vested had the performance goals been attained at the target level,
prorated, however, for the portion of the performance period elapsed prior to
the change in control.
COMPENSATION OF DIRECTORS
Directors of the Company do not receive cash for services provided as a
director. Directors are reimbursed for all travel and related expenses
incurred in connection with attending board and committee meetings. Upon
adoption of the Directors Plan, directors who are not employees of the Company
will receive yearly grants of options to purchase Common Stock. The Directors
Plan will become effective upon consummation of this offering. See "--Stock
Plans--1996 Outside Directors Stock Option Plan."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Compensation Committee was formed in April 1996, and is composed of
Roger J. Sippl, J. Sidney Webb and Eric Young. No interlocking relationship
exists between any member of the Company's Compensation Committee and any
member of any other company's board of directors or compensation committee.
During the fiscal year completed March 31, 1996, the Board of Directors of the
Company, of which Roger J. Sippl, Chief Executive Officer of the Company, was
and is a member, fulfilled all functions of the Compensation Committee with
regard to compensation of executive officers of the Company.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Pursuant to the provisions of the Delaware General Corporation Law, the
Company has adopted provisions in its Certificate of Incorporation, as
amended, which provide that directors of the Company shall not be personally
liable for monetary damages to the Company or its stockholders for a breach of
fiduciary duty as a director, except for liability as a result of: (i) a
breach of the director's duty of loyalty to the Company or its stockholders;
(ii) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (iii) an act related to the unlawful
stock repurchase or payment of a dividend under Section 174 of Delaware
General Corporation Law; and (iv) transactions from which the director derived
an improper personal benefit. Such limitation of liability does not affect the
availability of equitable remedies such as injunctive relief or rescission.
The Company's Certificate of Incorporation, as amended, also authorizes the
Company to indemnify its officers, directors and other agents, by bylaws,
agreements or otherwise, to the full extent permitted under Delaware law. The
Company intends to enter into separate indemnification agreements with its
directors and officers which may, in some cases, be broader than the specific
indemnification provisions contained in the Delaware General Corporation Law.
The indemnification agreements may require the Company, among other things, to
indemnify such officers and directors against certain liabilities that may
arise by reason of their status or service as directors or officers (other
than liabilities arising from willful misconduct of a culpable nature), to
advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified, and to obtain directors' and officers'
insurance if available on reasonable terms. The Company believes that the
provisions and agreements are necessary to attract and retain qualified
directors and officers.
The Company's Amended and Restated Bylaws provide that the Company shall
indemnify its directors and officers and may indemnify its employees to the
fullest extent permitted by law. The Company believes that indemnification
under its Amended and Restated Bylaws covers at least negligence and gross
negligence on the part of the indemnified party.
49
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened
litigation or proceeding which may result in a claim for such indemnification.
50
<PAGE>
CERTAIN TRANSACTIONS
Since February 12, 1993 (the date of the Company's inception), there has not
been, nor is there currently proposed, any transaction or series of similar
transactions to which the Company was or is to be a party in which the amount
involved exceeds $60,000 and in which any director, executive officer or
holder of more than 5% of any class of voting securities of the Company or
members of such person's immediate family had or will have a direct or
indirect material interest other than the transactions described below.
On March 3, 1993, the Company issued for cash 2,000,000 shares of Common
Stock at a price of $0.08 per share to Roger J. Sippl, the Company's founder,
Chairman of the Board and Chief Executive Officer.
On March 31, 1993, the Company sold 803,000 shares of Series A Preferred
Stock at a price of $2.40 per share. The following executive officers,
directors, beneficial holders of more than 5% of a class of the Company's
capital stock and immediate family members of such persons purchased Series A
Preferred Stock:
<TABLE>
<CAPTION>
SHARES OF
SERIES A
PURCHASER(1) PREFERRED STOCK
------------ ---------------
<S> <C>
Cristina M. Morgan (2)....................................... 10,000
J. Sidney Webb (2)........................................... 20,000
Mark D. Hanson (3)........................................... 5,000
Therese H. Langlais (3)...................................... 15,000
Elizabeth G. Salmon (4)...................................... 197,500
Entities affiliated with Sequoia Capital (4)(5).............. 250,000
</TABLE>
- --------
(1) See notes to table of beneficial ownership in "Principal and Selling
Stockholders" for information relating to the beneficial ownership of such
shares.
(2) Director of the Company.
(3) Executive officer of the Company.
(4) A beneficial holder of more than 5% of a class of the Company's capital
stock.
(5) Represents 227,500 shares held by Sequoia Capital VI, 12,500 shares held
by Sequoia Technology Partners VI and 10,000 shares held by Sequoia XXIII.
Upon the consummation of this offering, all outstanding shares of Series A
Preferred Stock will convert into shares of Common Stock on a one-for-one
basis.
In June 1993, the Company issued 12,500 shares of Common Stock at a price of
$0.20 per share to each of Cristina M. Morgan, J. Sidney Webb, and E. E. van
Bronkhorst, outside directors of the Company.
51
<PAGE>
Between December 17, 1993 and January 14, 1994, the Company sold an
aggregate of 871,625 shares of Series B Preferred Stock at a price of $4.00
per share. Between April 29, 1994 and August 2, 1994, the Company sold an
aggregate of 625,000 shares of Series B Preferred Stock at a price of $4.00
per share. Between May 26, 1995 and August 3, 1995, the Company sold an
aggregate of 1,375,000 shares of Series B Preferred Stock at a price of $4.00
per share. The following executive officers, directors, beneficial holders of
more than 5% of a class of the Company's capital stock and immediate family
members of such persons purchased Series B Preferred Stock:
<TABLE>
<CAPTION>
SHARES OF
SERIES B
PURCHASER (1) PREFERRED STOCK
------------- ---------------
<S> <C>
Roger J. Sippl (2)(3)(4)................................... 261,250
J. Sidney Webb (2)......................................... 37,500
Cristina M. Morgan (2)..................................... 2,500
Mark D. Hanson (3)......................................... 2,500
Therese H. Langlais (3).................................... 3,750
Richard L. Gerould (3)..................................... 12,625
Elizabeth G. Salmon (4).................................... 216,500
Entities Affiliated with Sequoia Capital (4)(5)............ 490,500
Entities Affiliated with Weiss, Peck & Greer Venture
Partners (4)(6)........................................... 592,500
Entities Affiliated with Canaan Capital Partners (4)(7).... 550,000
</TABLE>
- --------
(1) See notes to table of beneficial ownership in "Principal and Selling
Stockholders" for information relating to the beneficial ownership of such
shares.
(2) Director of the Company.
(3) Executive officer of the Company.
(4) A beneficial holder of more than 5% of a class of the Company's capital
stock.
(5) Represents 446,355 shares held by Sequoia Capital VI, 24,525 shares held
by Sequoia Technology Partners VI, 8,820 shares held by Sequoia XXIII and
10,800 shares held by Sequoia XXIV.
(6) Represents 49,888 shares held by Weiss, Peck & Greer Venture Associates II
(Overseas), Ltd., 227,638 shares held by Weiss, Peck & Greer Venture
Associates II, L.P. and 314,973 shares held by WPG Enterprise Fund.
(7) Represents 446,500 shares held by Canaan Capital Offshore Limited
Partnership C.V., 53,500 shares held by Canaan Capital Limited Partnership
and 50,000 shares held by Quai Limited.
Upon the consummation of this offering, all outstanding shares of Series B
Preferred Stock will convert into shares of Common Stock on a one-for-one
basis.
On May 24, 1996, the Company sold an aggregate of 444,444 shares of Series C
Preferred Stock at a price of $9.00 per share, and shortly thereafter issued
convertible notes in the aggregate principal amount of $2.0 million. Cisco
purchased 222,222 of these shares, and a note in the principal amount of $1.0
million. Upon the consummation of this offering, all outstanding shares of
Series C Preferred Stock will convert into shares of Common Stock on a one-
for-one basis, and the amount borrowed by the Company pursuant to the
convertible notes will convert into shares of the Company's Common Stock at a
conversion price equal to the lesser of (i) $13.00 per share or (ii) the
offering price per share to the public in the offering.
In connection with the merger of PostModern with and into the Company in May
1996, the Company issued an aggregate of 3,099,821 shares of its Common Stock
to the former shareholders of PostModern, including 844,486 shares to Jens
Christensen, 851,235 shares to Neguine Navab, 844,486 shares to Prasad
Mokkapati and 426,507 shares to Suresh Challa, and options to purchase an
aggregate of 361,785 shares of its Common Stock at exercise prices ranging
from $0.24 to $0.60 to the former holders of options to purchase Common Stock
of
52
<PAGE>
PostModern, including options to purchase 67,494 shares of the Company's
Common Stock issued to Neguine Navab. Also in connection with the merger, the
Company paid, subject to vesting, an aggregate of $1,500,000 to certain former
employees of PostModern, including $400,000 to each of Messrs. Christensen and
Mokkapati and $400,000 to Ms. Navab, and $2,307,152 to certain former
shareholders of PostModern, including $750,655 to each of Messrs. Christensen
and Mokkapati, $183,000 to Mr. Challa, and $696,659 to Ms. Navab. Upon the
closing of the merger, Hambrecht & Quist LLC, of which Cristina M. Morgan, a
Director of the Company, is a Managing Director, received shares of PostModern
common stock for financial advisory services rendered to PostModern in
connection with the Company's acquisition of PostModern, which shares were
immediately converted into 84,374 shares of the Company's Common Stock. The
consideration issued by the Company in the merger was determined through
negotiations between the managements of the Company and PostModern.
In connection with the merger of Data Accessibility Solutions, Inc. ("Data
Accessibility") with and into the Company in May 1996, the Company issued an
aggregate of 12,500 shares of its Common Stock to the former shareholders of
Data Accessibility, including 6,250 shares to Robert Perreault, the Company's
Vice President, Research and Development.
Mr. Sippl, the Company's founder and the Chief Executive Officer and
Chairman of the Board of Directors of the Company, formed Java Development
Corp. ("JDC") in February 1996, in order to pursue technology research and
development projects of interest to him. Mr. Sippl is the sole owner, director
and officer of JDC. In June 1996, the Company acquired certain technology and
other assets being developed by JDC that the Company expects it may use in a
future product or products. The Company paid Mr. Sippl $40,000 to acquire
these assets. JDC's cost of development of the technology, consisting chiefly
of salaries of JDC employees and fees paid to consultants, exceeded the price
paid by the Company. In connection with the asset sale, five employees of JDC
became employees of Visigenic.
The Company has entered into non-compete agreements with certain employees
who joined the Company in connection with the PostModern merger. The Company
intends to enter into indemnification agreements with each of its directors
and executive officers. Such indemnification agreements will require the
Company to indemnify such individuals to the fullest extent permitted by
Delaware law.
53
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of June 30, 1996, and as adjusted
to reflect the sale of the shares offered hereby, assuming no exercise of the
Underwriters' over-allotment option, (i) by each person who is known by the
Company to own beneficially more than 5% of the Company's Common Stock, (ii)
by each of the Named Executive Officers and by each of the Company's
directors, (iii) by all current executive officers and directors as a group,
and (iv) by each Selling Stockholder. Except pursuant to applicable community
property laws or as indicated in the footnotes to this table, each stockholder
identified in the table possesses sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by such
stockholder.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE THE OWNED AFTER THE
OFFERING (1) OFFERING (1)
----------------------- SHARES BEING -----------------------
BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ---------------- ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
EXECUTIVE OFFICERS AND
DIRECTORS
Roger J. Sippl (2)...... 2,468,750 23.6% -- 2,468,750 20.3%
Mark D. Hanson (3)...... 275,000 2.6 -- 275,000 2.3
Jens Christensen (4).... 1,695,720 16.1 87,376 1,528,720 12.5
Therese H. Langlais
(5).................... 96,250 * -- 96,250 *
David T. Shewmake (6)... 45,000 * -- 45,000 *
Richard L. Gerould (7).. 90,125 * -- 90,125 *
Michael Moritz (8)...... 740,500 7.1 -- 740,500 6.1
Cristina M. Morgan (9).. 109,374 1.0 -- 109,374 *
Gill Cogan (10)......... 592,500 5.7 -- 592,500 4.9
E. E. van Bronkhorst
(11)................... 12,500 * -- 12,500 *
J. Sidney Webb (11)..... 70,000 * -- 70,000 *
Eric Young (12)......... 550,000 5.3 -- 550,000 4.5
All executive officers
and directors as a
group
(14 persons) (13)...... 6,856,969 64.2 167,000 6,689,969 54.1
5% STOCKHOLDERS
Elizabeth G. Salmon
(14)................... 2,468,750 23.6 -- 2,468,750 20.3
Neguine Navab (15)...... 1,695,720 16.1 79,624 1,528,720 12.5
Prasad Mokkapati (16)... 844,485 8.1 75,000 769,485 6.3
Funds affiliated with
Sequoia Capital (17)... 740,500 7.1 -- 740,500 6.1
3000 Sand Hill Road
Menlo Park, California
94025
Funds affiliated with
Weiss, Peck & Greer 592,500 5.7 -- 592,500 4.9
Venture Partners
(18)..................
555 California Street
San Francisco,
California 94104
Funds affiliated with
Canaan Capital Partners 550,000 5.3 -- 550,000 4.5
(19)..................
2884 Sand Hill Road
Menlo Park, California
94025
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE THE OWNED AFTER THE
OFFERING (1) OFFERING (1)
----------------------SHARES BEING ----------------------
BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ---------------- ----------- ---------------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
OTHER SELLING
STOCKHOLDERS
Justin Broughton........ 6,000 * 6,000 -- *
Suresh Challa (20)...... 426,507 4.1 80,000 346,507 2.8
John D. Fleischhauer.... 1,000 * 1,000 -- *
Richard J. Foley........ 15,000 * 1,500 13,500 *
Tommy Hawkins........... 67,500 * 17,500 50,000 *
Mark Hayes (21)......... 30,500 * 1,000 29,500 *
Miles Kurland........... 2,000 * 500 1,500 *
Lion Investments 100,000 * 50,000 50,000 *
Limited................
Clifford S. Robbins..... 1,875 * 500 1,375 *
</TABLE>
- --------
* Represents less than 1%.
(1) The amounts reported in this table include shares of Common Stock
issuable upon the automatic conversion of outstanding Preferred Stock,
which conversion will occur upon consummation of this offering. Based on
10,469,971 shares of Common Stock outstanding prior to the offering. A
person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days upon the exercise of options.
Calculations of percentages of beneficial ownership assume the exercise
by only the respective named stockholder of all options for the purchase
of Common Stock held by such stockholder which are exercisable within 60
days of June 30, 1996. Unless otherwise indicated, the address of each of
the named individuals is: c/o Visigenic Software, Inc., 951 Mariner's
Island Boulevard, Suite 120, San Mateo, California 94404.
(2) Includes 393,750 shares held by Elizabeth G. Salmon, Mr. Sippl's spouse,
as separate property and 20,000 shares held by Nelson D. Salmon and
Elizabeth G. Salmon, Trustees of the Nelson D. Salmon Trust dated October
14, 1994. Mr. Sippl disclaims beneficial ownership of all such shares.
See footnote 14.
(3) Includes 111,014 shares subject to a right of repurchase in favor of the
Company which lapses over time. Also includes 30,000 shares issuable upon
exercise of options.
(4) Includes 783,740 shares held by Neguine Navab, Mr. Christensen's spouse,
and 67,494 shares issuable upon exercise of options held by Ms. Navab.
Mr. Christensen acquired his shares in the Company in connection with the
Company's acquisition of PostModern. See footnote 15 below. See "Certain
Transactions."
(5) Includes 3,750 shares held by Ms. Langlais, as Co-Trustee of the Halloran
1990 Living Trust dated March 12, 1990. Also includes 18,214 shares
subject to a right of repurchase in favor of the Company which lapses
over time.
(6) Includes 15,419 shares subject to a right of repurchase in favor of the
Company which lapses over time. Also includes 10,000 shares issuable upon
exercise of options.
(7) Includes 30,559 shares subject to a right of repurchase in favor of the
Company which lapses over time.
(8) Represents all shares held by entities affiliated with Sequoia Capital.
See footnote 17 below. Mr. Moritz, as a general partner of Sequoia
Capital, may be deemed to beneficially own shares, but Mr. Moritz
disclaims beneficial ownership of all such shares except to the extent of
his proportional interest therein.
(9) Includes 4,576 shares subject to a right of repurchase in favor of the
Company which lapses over time. Also includes 84,374 shares issued to
Hambrecht & Quist LLC ("H&Q") for financial advisory services rendered to
PostModern in connection with the Company's acquisition of PostModern.
Ms. Morgan is a Managing Director of H&Q. Ms. Morgan disclaims beneficial
ownership of all such shares except to the extent of her proportional
interest therein.
(10) Represents all shares held by entities affiliated with Weiss, Peck &
Greer Venture Partners. See footnote 18 below. Mr. Cogan, as a general
partner of Weiss, Peck & Greer Venture Partners, may be deemed to
beneficially own shares, but Mr. Cogan disclaims beneficial ownership of
all such shares except to the extent of his proportional interest
therein.
(11) Includes 4,576 shares subject to a right of repurchase in favor of the
Company which lapses over time.
55
<PAGE>
(12) Represents all shares held by entities affiliated with Canaan Capital
Partners. See footnote 19 below. Mr. Young, as a general partner of
Canaan Capital Partners, may be deemed to beneficially own shares, but
Mr. Young disclaims beneficial ownership of all such shares except to the
extent of his proportional interest therein.
(13) See footnotes 2 through 12, footnote 15, and footnotes 17 through 19.
Includes 16,250 shares held by Robert Perreault. Also includes 202,067
shares subject to a right of repurchase in favor of the Company which
lapses over time, and 202,494 shares issuable upon exercise of options.
Of the 167,000 shares to be sold by the executive officers and directors
of the Company, Mr. Christensen intends to sell 87,376 shares and Ms.
Navab intends to sell 79,624 shares.
(14) Includes 2,055,000 shares held by Roger J. Sippl, Ms. Salmon's spouse,
and 20,000 shares held by Nelson D. Salmon and Elizabeth G. Salmon,
Trustees of the Nelson D. Salmon Trust dated October 14, 1994. See
footnote 2 above.
(15) Includes 67,494 shares issuable upon exercise of options. Also includes
844,486 shares held by Mr. Christensen, Ms. Navab's spouse. Ms. Navab is
Director of Object Technologies for the Company. Ms. Navab acquired her
shares and options in the Company in connection with the Company's
acquisition of PostModern. See "Certain Transactions."
(16) Mr. Mokkapati is Senior Architect for Distributed Objects for the
Company. Mr. Mokkapati acquired his shares in connection with the
Company's acquisition of PostModern. See "Certain Transactions."
(17) Represents 673,855 shares held by Sequoia Capital VI, 37,025 shares held
by Sequoia Technology Partners VI, 18,820 shares held by Sequoia XXIII
and 10,800 shares held by Sequoia XXIV. Michael Moritz, a Director of the
Company, is a general partner of Sequoia Capital. See footnote 8 above.
(18) Represents 49,888 shares held by Weiss, Peck & Greer Venture Associates
II (Overseas), Ltd., 227,638 shares held by Weiss, Peck & Greer Venture
Associates II, L.P. and 314,973 shares held by WPG Enterprise Fund. Gill
Cogan, a Director of the Company, is a general partner of Weiss, Peck &
Greer Venture Partners. See footnote 10 above.
(19) Represents 446,500 shares held by Canaan Capital Offshore Limited
Partnership C.V., 53,500 shares held by Canaan Capital Limited
Partnership and 50,000 shares held by Quai Limited. Eric Young, a
Director of the Company, is a general partner of Canaan Capital Partners.
See footnote 12 above.
(20) Includes 25,590 shares issuable upon exercise of options. Mr. Challa is
Director of Business Development for the Company. Mr. Challa acquired his
shares and options in the Company in connection with the Company's
acquisition of PostModern. See "Certain Transactions."
(21) Includes 7,838 shares subject to a right of repurchase in favor of the
Company. Also includes 8,500 shares issuable upon exercise of options.
56
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon consummation of this offering, the authorized capital stock of the
Company will consist of 50,000,000 shares of Common Stock and 2,000,000 shares
of Preferred Stock, par value $0.001 per share. Each outstanding share of
Preferred Stock will be automatically converted into one share of Common Stock
upon the closing of the offering being made hereby. Upon such conversion, such
Preferred Stock will be canceled, retired and eliminated from the shares that
the Company is authorized to issue. The following summary of certain
provisions of the Common Stock and the preferred stock of the Company does not
purport to be complete and is subject to, and qualified in its entirety by,
the Certificate of Incorporation and By-Laws of the Company that are included
as exhibits to the Registration Statement of which this Prospectus forms a
part and by the provisions of applicable law.
COMMON STOCK
As of June 30, 1996, there were approximately 10,469,971 shares of Common
Stock outstanding held of record by 160 stockholders, as adjusted to reflect
the conversion of the outstanding shares of Preferred Stock and convertible
promissory notes upon the closing of the offering. The holders of Common Stock
are entitled to one vote for each share held of record on all matters
submitted to a vote of the holders of Common Stock. Subject to preferences
applicable to any outstanding preferred stock, holders of Common Stock are
entitled to receive ratably such dividends as may be declared by the Board of
Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference of any preferred stock. Holders of
Common Stock have no preemptive or subscription rights, and there are no
redemption or conversion rights with respect to such shares. All outstanding
shares of Common Stock are fully paid and non-assessable, and the shares of
Common Stock to be issued upon completion of the offering will be fully paid
and non-assessable.
PREFERRED STOCK
The Board of Directors has the authority, without action by the
stockholders, to designate and issue preferred stock in one or more series and
to designate the dividend rate, voting rights and other rights, preferences
and restrictions of each series any or all of which may be greater than the
rights of the Common Stock. It is not possible to state the actual effect of
the issuance of any shares of preferred stock upon the rights of holders of
the Common Stock until the Board of Directors determines the specific rights
of the holders of such preferred stock. However, the effects might include,
among other things, restricting dividends on the Common Stock, diluting the
voting power of the Common Stock, impairing the liquidation rights of the
Common Stock and delaying or preventing a change in control of the Company
without further action by the stockholders. The Company has no present plans
to issue any shares of preferred stock.
REGISTRATION RIGHTS
Following the sale of the shares of Common Stock offered hereby, the holders
of approximately 6,789,050 shares: issuable upon conversion of the outstanding
shares of Preferred Stock and outstanding convertible notes; held by the
founder and certain early employees of the Company; and held by former
PostModern shareholders, and their transferees, will have certain rights to
register those shares under the Securities Act of 1933, as amended. These
rights are provided under the terms of an agreement among the Company and the
holders of such shares. If the Company registers any of its Common Stock
either for its own account or for the account of other security holders, the
holders of such shares are entitled to include their shares of Common Stock in
the registration, subject to the ability of the underwriters to limit the
number of shares included in the offering. All fees, costs and expenses of
such registrations (other than underwriting discounts and commissions) will be
borne by the Company.
57
<PAGE>
DELAWARE LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS
The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which, subject to certain exceptions, prohibits a
Delaware corporation from engaging in any business combination with any
interested stockholder for a period of three (3) years following the date that
such stockholder became an interested stockholder, unless: (i) prior to such
date, the board of directors of the corporation approved either the business
combination or the transaction that resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction that
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (x) by persons
who are directors and also officers and (y) by employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or (iii) on or subsequent to such date, the business
combination is approved by the board of directors and authorized at an annual
or special meeting of stockholders, and not by written consent, by the
affirmative vote of at least 66 2/3% of the outstanding voting stock that is
not owned by the interested stockholder.
Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii)
any sale, transfer, pledge or other disposition of 10% or more of the assets
of the corporation involving the interested stockholder; (iii) subject to
certain exceptions, any transaction that results in the issuance or transfer
by the corporation of any stock of the corporation to the interested
stockholder; (iv) any transaction involving the corporation that has the
effect of increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested stockholder; or
(v) the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation. In general, Section 203 defines an interested
stockholder as any entity or person beneficially owning 15% or more of the
outstanding voting stock of the corporation and any entity or person
affiliated with or controlling or controlled by such entity or person.
The Company's Restated Certificate of Incorporation, which will become
effective upon consummation of this offering, will require that any action
required or permitted to be taken by stockholders of the Company must be
effected at a duly called annual or special meeting of the stockholders and
may not be effected by a consent in writing. In addition, special meetings of
the stockholders of the Company may be called only by the Board of Directors
or certain officers of the Company. The Restated Certificate of Incorporation
which will become effective upon consummation of this offering will provide
that, beginning with the first annual meeting of stockholders following this
offering, the Board of Directors will be divided into three classes, with each
class serving staggered three-year terms, that a director may be removed from
the Board of Directors only for cause and only upon the vote of at least 66
2/3% of the voting power of all outstanding stock, and that certain amendments
of the Company's Restated Certificate of Incorporation, and all amendments by
the stockholders of the Company's Amended and Restated Bylaws, require the
approval of holders of at least 66 2/3% of the voting power of all outstanding
shares. These provisions may have the effect of deferring hostile takeovers or
delaying changes in control or management of the Company.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is The First National
Bank of Boston.
58
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the Common
Stock. Future sales of substantial amounts of Common Stock in the public
market could adversely affect the market price of the Common Stock.
Upon completion of this offering, the Company will have outstanding an
aggregate of 12,169,971 shares of Common Stock, assuming (i) the issuance of
2,100,000 shares of Common Stock offered hereby, (ii) no exercise of the
Underwriters' over-allotment option and (iii) no exercise of options to
purchase Common Stock after June 30, 1996. Of these shares, the 2,100,000
shares sold in the offering will be freely tradeable without restriction or
further registration under the Securities Act of 1933, as amended (the
"Securities Act"), except for any shares purchased by "affiliates" of the
Company as that term is defined in Rule 144 under the Securities Act (whose
sales would be subject to certain limitations and restrictions described
below).
The remaining 10,069,971 shares of Common Stock held by existing
stockholders were issued and sold by the Company in reliance on exemptions
from the registration requirements of the Securities Act. All such outstanding
shares will be subject to the "lock-up" agreements described below on the date
of this Prospectus. Upon expiration of lock-up agreements 180 days after the
date of this Prospectus, 8,048,789 shares will become eligible for sale,
subject in most cases to the limitations of Rule 144. The remaining 2,021,182
shares held by existing stockholders will become eligible for sale at various
times over a period of less than two years and could be sold earlier if the
holders exercise registration rights. In addition, holders of stock options
could exercise these options and sell certain of the shares issued upon
exercise as described below.
As of June 30, 1996, there were a total of 1,087,500 shares of Common Stock
subject to outstanding options under the Option Plan, all of which were
exercisable. However, these shares are subject to lock-up agreements. All
options held by officers and directors of the Company are subject to a 180 day
lock-up agreement described below, and all other options are subject to a 180
day lock-up agreement with the Company.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least
two years (including the holding period of any prior owner except an
affiliate) is entitled to sell in "broker's transactions" or to market makers,
within any three-month period commencing 90 days after the date of this
prospectus, a number of shares that does not exceed the greater of (i) one
percent of the number of shares of Common Stock then outstanding
(approximately 121,700 shares immediately after this offering) or (ii)
generally, the average weekly trading volume in the Common Stock during the
four calendar weeks preceding the required filing of a Form 144 with respect
to such sale. Sales under Rule 144 are generally subject to the availability
of current public information about the Company. Under Rule 144(k), a person
who is deemed not to have been an affiliate of the Company at any time during
the 90 days preceding a sale, and who has beneficially owned the shares
proposed to be sold for a least three years, is entitled to sell such shares
without having to comply with the manner of sale, public information, volume
limitation or notice filing provisions of Rule 144. Under Rule 701 under the
Securities Act, persons who purchase shares upon exercise of options granted
prior to the effective date of this offering are entitled to sell such shares
90 days after the effective date of this offering in reliance on Rule 144,
without having to comply with the holding period and notice filing
requirements of Rule 144 and, in the case of non-affiliates, without having to
comply with the public information, volume limitation or notice filing
provisions of Rule 144.
The Company intends to file registration statements under the Securities Act
180 days after the effective date of the offering to register shares of Common
Stock reserved for issuance under the Option Plan and the Directors Plan, thus
permitting the resale of such shares by non-affiliates and by affiliates,
subject to Rule 144 volume limitations applicable thereto, in the public
market without restriction under the Securities Act. Such registration
statements will become effective immediately upon filing.
As of June 30, 1996, the holders of approximately 6,789,050 shares are
entitled to certain registration rights with respect to such shares. If such
registration rights are exercised, the shares can be sold without any holding
period or sales volume limitation. If such holders, by exercising their
registration rights, cause a large number of
59
<PAGE>
shares to be registered and sold in the public market, such sales could have
an adverse effect on the market price for the Company's Common Stock. If the
Company were required to include in a Company initiated registration the
shares held by such holders pursuant to the exercise of their registration
rights, such sales might have an adverse effect on the Company's ability to
raise needed capital. See "Description of Capital Stock--Registration Rights."
All existing stockholders of the Company have agreed that they will not,
subject to certain limited exceptions, directly or indirectly, offer, sell or
otherwise dispose of any shares of Common Stock or any securities convertible
into or exchangeable or exercisable for any such shares for a period of 180
days after the effective date of the offering without the prior written
consent of the Company, and in most cases, Hambrecht & Quist LLC.
60
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their representatives, Hambrecht & Quist LLC
and Robertson, Stephens & Company LLC (collectively, the "Representatives"),
have severally agreed to purchase from the Company and the Selling
Stockholders the following respective numbers of shares of Common Stock:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Hambrecht & Quist LLC..............................................
Robertson, Stephens & Company LLC..................................
---------
Total.......................................................... 2,100,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, including the absence of any
material adverse change in the Company's business and the receipt of certain
certificates, opinions and letters from the Company and its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if
any of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock directly to the
public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow and such dealers may
reallow a concession not in excess of $ per share to certain other dealers.
After the initial public offering of the shares, the offering price and other
selling terms may be changed by the Representatives.
The Company and the Selling Stockholders have granted to the Underwriters an
option, exercisable no later than 30 days after the date of this Prospectus,
to purchase up to 255,000 and 60,000, respectively, additional shares of
Common Stock at the initial public offering price, less the underwriting
discount, set forth on the cover page of this Prospectus. To the extent that
the Underwriters exercise this option, each of the Underwriters will have a
firm commitment to purchase approximately the same percentage thereof which
the number of shares of Common Stock to be purchased by it shown in the above
table bears to the total number of shares of Common Stock offered hereby. The
Company and the Selling Stockholders will be obligated, pursuant to the
option, to sell shares to the Underwriters to the extent the option is
exercised. The Underwriters may exercise such option only to cover-allotments
made in connection with the sale of shares of Common Stock offered hereby.
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the
right to reject an order for the purchase of shares in whole or in part.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments the Underwriters may be required
to make in respect thereof.
The Selling Stockholders and the other stockholders of the Company,
including the executive officers and directors, who will own in the aggregate
10,069,971 shares of Common Stock after this offering, have agreed that they
will not, without the prior written consent of Hambrecht & Quist LLC, offer,
sell or otherwise dispose of any shares of Common Stock, options or warrants
to acquire shares of Common Stock or securities exercisable
61
<PAGE>
for or convertible into shares of Common Stock owned by them during the 180-
day period following the effective date of the Registration Statement for this
offering. The Company has agreed that it will not, without the prior written
consent of Hambrecht & Quist LLC, offer, sell or otherwise dispose of any
shares of Common Stock, options or warrants to acquire shares of Common Stock
or securities exchangeable for or convertible into shares of Common Stock
during the 180-day period following the effective date of the Registration
Statement for this offering, except that the Company may grant additional
options under its stock plans and issue securities under, or pursuant to the
exercise of options granted under, its stock plans. See "Shares Eligible for
Future Sale."
The Representatives currently anticipate that up to 105,000 shares of Common
stock may be sold at the initial public offering price to directors (or their
affiliated entities) and employees of the Company who have expressed an
interest in purchasing such shares of Common Stock in the offering. The number
of shares available for sale to the general public will be reduced to the
extent such persons purchase such shares. Any such shares not so purchased
will be offered by the Representatives to the general public on the same basis
as other shares offered hereby.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales of Common Stock offered hereby to any accounts over
which they have discretionary authority.
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price of the Common Stock was determined by
negotiation among the Company, the representatives of the Selling Stockholders
and the Representatives. Among the factors considered in determining the
initial public offering price were prevailing market and economic conditions
revenues and earnings of the Company, market valuations of other companies
engaged in activities similar to the Company, estimates of the business
potential and prospects of the Company, the present state of the Company's
business operations, the Company's management and other factors deemed
relevant.
LEGAL MATTERS
The validity of the securities offered hereby and general corporate legal
matters will be passed upon for the Company by Gray Cary Ware & Freidenrich, A
Professional Corporation ("GCWF"), Palo Alto, California. As of June 30, 1996,
certain members and investment partnerships of GCWF beneficially owned an
aggregate of 37,000 shares of the Company's Common Stock. Certain legal
matters in connection with this offering will be passed upon for the
Underwriters by Fenwick & West LLP. Fenwick & West LLP owns an aggregate of
18,979 shares of the Company's Common Stock.
EXPERTS
The consolidated financial statements of Visigenic Software, Inc. and
PostModern Computing Technologies Inc. included in this Prospectus and
elsewhere in the Registration Statement to the extent and for the periods
indicated in their reports have been audited by Arthur Andersen LLP,
independent public accountants, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
under the Securities Act, with respect to the Common Stock offered hereby.
This Prospectus which constitutes a part of the Registration Statement does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto. For further information with respect to
the Company and such Common Stock, reference is made to the Registration
Statement and the exhibits and schedules thereto. Statements contained in this
Prospectus as to
62
<PAGE>
the contents of any contract or any other document referred to are not
necessarily complete. In each instance, reference is made to the copy of such
contract or document filed as an exhibit to the Registration Statement, and
each such statement is qualified in all respects by such reference. Copies of
the Registration Statement, including exhibits and schedules thereto, may be
inspected without charge at the Commission's principal office in Washington,
D.C., or obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices located at 7 World Trade Center, Suite 1300, New
York, New York 10048 and at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. The Commission maintains a World Wide Web
site that contains reports, proxy and information statements and other
information filed electronically with the Commission. The address of the site
is http://www.sec.gov.
63
<PAGE>
VISIGENIC SOFTWARE, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
VISIGENIC SOFTWARE, INC.:
Report of Independent Public Accountants............................... F-2
Consolidated Balance Sheets............................................ F-3
Consolidated Statements of Operations.................................. F-4
Consolidated Statements of Stockholders' Equity........................ F-5
Consolidated Statements of Cash Flows.................................. F-6
Notes to Consolidated Financial Statements............................. F-7
POSTMODERN COMPUTING TECHNOLOGIES INC.:
Report of Independent Public Accountants............................... F-15
Balance Sheets......................................................... F-16
Statements of Operations............................................... F-17
Statements of Shareholders' Equity..................................... F-18
Statements of Cash Flows............................................... F-19
Notes to Financial Statements.......................................... F-20
VISIGENIC SOFTWARE, INC. AND POSTMODERN COMPUTING TECHNOLOGIES INC.--
PRO FORMA:
Pro Forma Condensed Combined Financial Statements...................... P-1
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Visigenic Software, Inc.:
We have audited the accompanying consolidated balance sheets of Visigenic
Software, Inc. (a Delaware corporation) and subsidiary as of March 31, 1995
and 1996 and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended March
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 Visigenic Software, Inc.
and subsidiary as of March 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended March 31, 1996 in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
San Jose, California
June 17, 1996
F-2
<PAGE>
VISIGENIC SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, 1996
PRO FORMA
MARCH 31, LIABILITIES AND
----------------- JUNE 30, STOCKHOLDERS'
1995 1996 1996 EQUITY (NOTE 5)
------- -------- -------- ---------------
ASSETS (UNAUDITED)
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents....... $ 553 $ 2,399 $ 1,890
Accounts receivable, net of al-
lowance for doubtful accounts
of $0, $60 and $97............. 472 760 3,263
Prepaid compensation............ -- -- 1,478
Other current assets............ 175 257 551
------- -------- --------
Total current assets.......... 1,200 3,416 7,182
------- -------- --------
PROPERTY AND EQUIPMENT, net....... 607 1,349 1,731
OTHER ASSETS, net:
Excess of purchase price over
net assets acquired............ -- -- 1,000
Other........................... 22 55 49
------- -------- --------
$ 1,829 $ 4,820 $ 9,962
======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQ-
UITY
CURRENT LIABILITIES:
Line of credit.................. $ -- $ -- $ 524 $ 524
Accounts payable................ 201 811 1,374 1,374
Accrued liabilities-
Payroll and related benefits... 86 347 408 408
Other.......................... 122 301 928 928
Deferred revenue................ 303 1,141 1,617 1,617
------- -------- -------- --------
Total current liabilities..... 712 2,600 4,851 4,851
------- -------- -------- --------
CONVERTIBLE NOTES PAYABLE TO
STOCKHOLDERS..................... -- -- 2,000 --
------- -------- -------- --------
COMMITMENTS (Note 4)
STOCKHOLDERS' EQUITY:
Convertible preferred stock,
$.001 par value, aggregate
liquidation preference of
$17,414
Authorized--10,000,000 shares
Outstanding--Series A, 803,000
shares in 1995, 1996 and June
30, 1996; Series B, 1,496,625
shares in 1995 and 2,871,625
shares in 1996 and June 30,
1996; Series C, 444,444
shares at June 30, 1996; no
shares outstanding pro
forma........................ 3 4 4 --
Common stock, $.001 par value,
Authorized--20,000,000 shares
at March 31, 1996; 30,000,000
at June 30, 1996
Outstanding--2,782,877 shares
in 1995, 2,835,905 shares in
1996 and 6,150,902 shares at
June 30, 1996; 10,469,971
shares outstanding pro
forma........................ 3 3 6 10
Additional paid-in capital...... 8,194 13,675 28,222 30,222
Accumulated deficit............. (7,083) (11,462) (25,121) (25,121)
------- -------- -------- --------
Total stockholders' equity.... 1,117 2,220 3,111 5,111
------- -------- -------- --------
$ 1,829 $ 4,820 $ 9,962 $ 9,962
======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
VISIGENIC SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED MARCH 31, JUNE 30,
------------------------- ----------------
1994 1995 1996 1995 1996
------- ------- ------- ------ --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE:
Software products............... $ -- $ 892 $ 4,479 $ 544 $ 2,505
Service and other............... -- 223 1,096 367 456
------- ------- ------- ------ --------
Total revenue................. -- 1,115 5,575 911 2,961
------- ------- ------- ------ --------
COST OF REVENUE:
Software products............... -- 36 284 43 138
Service and other............... -- 259 727 146 295
------- ------- ------- ------ --------
Total cost of revenue......... -- 295 1,011 189 433
------- ------- ------- ------ --------
GROSS PROFIT...................... -- 820 4,564 722 2,528
------- ------- ------- ------ --------
OPERATING EXPENSES:
Product development............. 1,393 3,160 4,348 729 1,657
Sales and marketing............. 503 1,511 3,215 636 2,006
General and administrative...... 600 872 1,465 335 473
Purchased in process product de-
velopment...................... -- -- -- -- 12,014
Amortization of excess of pur-
chase price over net assets ac-
quired......................... -- -- -- -- 43
------- ------- ------- ------ --------
Total operating expenses...... 2,496 5,543 9,028 1,700 16,193
------- ------- ------- ------ --------
Loss from operations.......... (2,496) (4,723) (4,464) (978) (13,665)
INTEREST AND OTHER INCOME, net.... 42 94 85 1 6
------- ------- ------- ------ --------
NET LOSS.......................... $(2,454) $(4,629) $(4,379) $ (977) $(13,659)
======= ======= ======= ====== ========
PRO FORMA NET LOSS PER SHARE...... $ (.39) $ (.09) $ (1.21)
======= ====== ========
PRO FORMA WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT SHARES..... 11,120 10,602 11,289
======= ====== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
VISIGENIC SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL TOTAL
---------------- ----------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY
--------- ------ --------- ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common
stock to founder in
February 1993......... -- $ -- 2,000,000 $ 2 $ 158 $ -- $ 160
Issuance of common
stock................. -- -- 427,019 -- 81 -- 81
Issuance of Series A
convertible preferred
stock................. 803,000 1 -- -- 1,898 -- 1,899
Issuance of Series B
convertible preferred
stock................. 871,625 1 -- -- 3,445 -- 3,446
Net loss............... -- -- -- -- -- (2,454) (2,454)
--------- ----- --------- ---- ------- -------- -------
BALANCE, MARCH 31,
1994................... 1,674,625 2 2,427,019 2 5,582 (2,454) 3,132
Issuance of common
stock................. -- -- 459,575 1 183 -- 184
Repurchase of common
stock................. -- -- (103,717) -- (35) -- (35)
Issuance of Series B
convertible preferred
stock................. 625,000 1 -- -- 2,464 -- 2,465
Net loss............... -- -- -- -- -- (4,629) (4,629)
--------- ----- --------- ---- ------- -------- -------
BALANCE, MARCH 31,
1995................... 2,299,625 3 2,782,877 3 8,194 (7,083) 1,117
Issuance of Series B
convertible preferred
stock................. 1,375,000 1 -- -- 5,459 -- 5,460
Exercise of stock
options............... -- -- 54,068 -- 22 -- 22
Repurchase of common
stock, net of
issuances............. -- -- (1,040) -- -- -- --
Net loss............... -- -- -- -- -- (4,379) (4,379)
--------- ----- --------- ---- ------- -------- -------
BALANCE, MARCH 31,
1996................... 3,674,625 4 2,835,905 3 13,675 (11,462) 2,220
Issuance of Series C
convertible preferred
stock................. 444,444 -- -- -- 4,000 -- 4,000
Issuance of common
stock in connection
with the acquisition
of PostModern
Computing Technologies
Inc................... -- -- 3,099,821 3 10,382 -- 10,385
Exercise of stock
options (unaudited)... -- -- 171,433 -- 69 -- 69
Issuance of common
stock (unaudited)..... -- -- 43,743 -- 96 -- 96
Net loss (unaudited)... -- -- -- -- -- (13,659) (13,659)
--------- ----- --------- ---- ------- -------- -------
BALANCE, JUNE 30, 1996
(unaudited)............ 4,119,069 $ 4 6,150,902 $ 6 $28,222 $(25,121) $ 3,111
========= ===== ========= ==== ======= ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
VISIGENIC SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED
YEARS ENDED MARCH 31, JUNE 30,
------------------------- -----------------
1994 1995 1996 1995 1996
------- ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss....................... $(2,454) $(4,629) $(4,379) $ (977) $(13,659)
Adjustments to reconcile net
loss to net cash used in
operating activities--
Depreciation and
amortization................. 67 158 310 52 164
Purchased in process product
development.................. -- -- -- -- 12,014
Provision for allowance for
doubtful accounts............ -- -- 60 15 12
Changes in net assets and
liabilities, net of
acquisition of PostModern--
Increase in accounts
receivable.................. -- (472) (348) (941) (2,375)
Increase in prepaid expenses
and other current assets.... (35) (139) (82) (93) (1,685)
Increase in accounts
payable..................... 148 53 610 75 472
Increase in accrued
liabilities................. 66 142 440 21 183
Increase in deferred
revenue..................... -- 303 838 488 293
------- ------- ------- ------- --------
Net cash used in operating
activities................. (2,208) (4,584) (2,551) (1,360) (4,581)
------- ------- ------- ------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Payment for purchase of
PostModern, net of cash
acquired...................... -- -- -- -- (2,182)
Purchases of property and
equipment..................... (457) (373) (1,052) (148) (435)
Organization costs and other
assets........................ (20) (5) (33) (17) --
------- ------- ------- ------- --------
Net cash used in investing
activities................. (477) (378) (1,085) (165) (2,617)
------- ------- ------- ------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net borrowings on bank line of
credit........................ -- -- -- -- 524
Proceeds from issuance of
convertible notes............. -- -- -- -- 2,000
Net proceeds from issuance of
preferred stock............... 5,345 2,465 5,460 2,992 4,000
Net proceeds from issuance of
common stock.................. 241 149 22 -- 165
------- ------- ------- ------- --------
Net cash provided by
financing activities....... 5,586 2,614 5,482 2,992 6,689
------- ------- ------- ------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............ 2,901 (2,348) 1,846 1,467 (509)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD............. -- 2,901 553 553 2,399
------- ------- ------- ------- --------
CASH AND CASH EQUIVALENTS, END OF
PERIOD.......................... $ 2,901 $ 553 $ 2,399 $ 2,020 $ 1,890
======= ======= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
VISIGENIC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(INFORMATION RELATING TO THE QUARTERS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
1. ORGANIZATION AND OPERATIONS OF THE COMPANY:
Visigenic Software, Inc. (the "Company") was incorporated on February 12,
1993. The Company operates in a single industry segment and is involved in the
design, development and marketing of database connectivity software products.
Through March 31, 1995 the Company's principal efforts were focused on raising
capital, developing its products and applications, establishing marketing and
sales channels and recruiting key personnel. During fiscal 1996, the Company
emerged from the development stage, however, the Company continues to be
subject to the risks associated with companies in a comparable stage of
development including, but not limited to, dependence on key personnel;
limited operating history and a history of losses; and the need to develop new
software products and product enhancements.
Although the Company was incorporated on February 12, 1993, its activities
during the first two months involved limited cash expenditures and consisted
only of recruiting of key personnel and raising capital. Accordingly, the
accompanying consolidated statements of operations, stockholders' equity and
cash flows for the year ended March 31, 1994 are presented for the period from
inception (February 12, 1993) to March 31, 1994.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation and Functional Currency
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary after elimination of intercompany transactions
and balances. The functional currency of the Company's foreign subsidiary is
the U.S. dollar. Foreign exchange gains and losses resulting from the
remeasurement of the financial statements for the subsidiary, which are not
material, are included in other income in the accompanying consolidated
statements of operations.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported results of operations during the reporting period.
Actual results could differ from those estimates.
Cash Equivalents and Short-Term Investments
The Company considers all highly liquid investments with an original
maturity of three months or less from the date of purchase to be cash
equivalents. The Company's short-term investments are accounted for pursuant
to the provisions of Statement of Financial Accounting Standards (SFAS) No.
115, "Accounting for Certain Investments in Debt and Equity Securities." As of
March 31, 1995 and 1996, the Company's cash and cash equivalents were
deposited in checking and money market accounts, U.S. Government Treasury
Bills and certificates of deposits.
Software Development Costs
In accordance with SFAS No. 86, "Accounting for the Costs of Computer
Software to be Sold, Leased, or Otherwise Marketed," the Company capitalizes
eligible computer software development costs upon the establishment of
technological feasibility, which it has defined as completion of a working
model. For the years ended March 31, 1994, 1995 and 1996, the amount of costs
eligible for capitalization, after consideration of factors such as realizable
value, were not material and, accordingly, all software development costs have
been charged to product development expense in the accompanying consolidated
statements of operations.
F-7
<PAGE>
VISIGENIC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets (or
over the lease term if it is shorter for leasehold improvements), which range
from three to five years. Property and equipment consists of the following (in
thousands):
<TABLE>
<CAPTION>
MARCH 31,
-------------- JUNE 30,
1995 1996 1996
----- ------- --------
<S> <C> <C> <C>
Computer equipment................................ $ 453 $ 1,126 $ 1,394
Furniture and fixtures............................ 125 320 373
Purchased software................................ 239 401 572
Leasehold improvements............................ 12 34 39
----- ------- -------
829 1,881 2,378
Less--Accumulated depreciation and amortization... (222) (532) (647)
----- ------- -------
Property and equipment, net..................... $ 607 $ 1,349 $ 1,731
===== ======= =======
</TABLE>
Revenue Recognition and Deferred Revenue
The Company's revenue is derived from fixed license fees from licensing its
products, royalties from VARs, ISVs and distributors, and fees for services
related to its products, including software maintenance, development contracts
and consulting and training. Certain of the Company's license arrangements
with VARs and ISVs provide for sublicense fees payable to the Company based on
a percentage of the VAR's or ISV's net revenue. Other license arrangements
provide for fixed license fees for the right to make and distribute an
unlimited number of copies of the Company's product for a specified period of
time. Ongoing sublicense fee revenue, other than from guaranteed sublicense
fees, is recognized when it is reported by the VAR, ISV or distributor.
Service revenue is primarily attributable to lower margin maintenance and
other revenue, including training revenue and engineering development fees.
The Company generally recognizes revenue from fixed license and guaranteed
sublicense fees upon delivery of software products if there are no significant
post-delivery obligations, if collection is probable and if the license
agreement requires payment within 90 days. If significant post-delivery
obligations exist or if a product is subject to customer acceptance, revenue
is deferred until no significant obligations remain or acceptance has
occurred.
Maintenance revenue from ongoing customer support and product upgrades is
recognized ratably over the term of the applicable maintenance period, which
is typically 12 months. If maintenance is included in a license agreement,
such amounts are unbundled from the license fee at its fair market value.
Consulting and training revenue is generally recognized as services are
performed over the term of the agreement. Revenue from engineering development
work is generally recognized on a percentage of completion basis. If a
transaction includes both license and service elements, license fee revenue is
recognized upon shipment of the software, provided services do not include
significant customization or modification of the base product and payment
terms are not subject to acceptance criteria. In cases where license fee
payments are contingent upon the acceptance of services, revenues from both
the license and service elements are deferred until the acceptance criteria
are met.
Deferred revenue consists primarily of the unrecognized portion of revenue
under maintenance and support contracts (which revenue is deferred and
recognized ratably over the term of such contract) and advance payment of
software development fees and license fees.
F-8
<PAGE>
VISIGENIC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Significant Customers and Related Parties
A relatively small number of customers have accounted for a significant
percentage of the Company's total revenue. The following four customers
accounted for more than 10% of total revenue:
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
------------- QUARTER ENDED
1995 1996 JUNE 30,1996
----- ----- -------------
<S> <C> <C> <C>
Customer A..................................... 55% * *
Customer B..................................... 20% * *
Customer C..................................... * 25% *
Customer D..................................... * * 34%
</TABLE>
- --------
*less than 10%
Customers C and D are related parties as they were purchasers of Series C
convertible preferred stock in May 1996 and are also holders of the
convertible notes payable to stockholders (see Note 9). Accounts receivable
from these related parties as of June 30, 1996 totalled approximately $1.4
million.
Export Sales
The Company markets its products in North America and in foreign countries
(primarily Europe and Japan) through its sales personnel, VARs, ISVs and
distributors. For fiscal 1996, export sales, which consist of domestic sales
to customers in foreign countries, were 10% of total revenue. For fiscal 1995
and for the quarter ended June 30, 1996 export sales were less than 10% of
total revenue.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to a
concentration of credit risk consist principally of accounts receivable. As of
March 31, 1996, approximately 75% of accounts receivable were concentrated
with ten customers. The Company generally does not require collateral on
accounts receivable as the majority of the Company's customers are large, well
established companies. The Company provides reserves for credit losses, which
to date have been insignificant.
New Accounting Standard
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation," which will be effective for
the Company's 1997 fiscal year. SFAS No. 123 allows companies which have
stock-based compensation arrangements with employees to adopt a new fair-value
basis of accounting for stock options and other equity instruments or to
continue to apply the existing accounting rules under Accounting Principles
Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," but
with additional financial statement disclosure. The Company expects to
continue to account for stock-based compensation arrangements under APB
Opinion No. 25 and, therefore, does not expect SFAS No. 123 to have a material
impact on its financial position, results of operations and cash flows.
Pro Forma Net Loss per Share
Pro forma net loss per share is computed using the pro forma weighted
average number of common and common equivalent shares outstanding during the
period. Common equivalent shares consist of convertible preferred stock (using
the if converted method) and stock options (using the treasury stock method).
Common stock options are excluded from the computation if their effect is
antidilutive. Convertible preferred stock outstanding during the period is
included (using the if converted method) in the computation of common
equivalent shares even though the effect is antidilutive. Also, pursuant to
the Securities and Exchange Commission Staff Accounting Bulletins and staff
policy, such computations include all common and common equivalent shares
issued within the 12 months preceding the filing date of this registration
statement as if they were outstanding for all periods presented. Historical
net loss per share amounts have not been presented since such amounts are not
deemed meaningful due to the significant change in the Company's capital
structure that will occur in connection with the proposed offering.
F-9
<PAGE>
VISIGENIC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Unaudited Interim Financial Data
The unaudited interim financial statements as of June 30, 1996 and for the
quarters ended June 30, 1995 and 1996 have been prepared on the same basis as
the audited financial statements and, in the opinion of management, include
all adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial information set forth therein, in accordance with
generally accepted accounting principles. The data disclosed in the notes to
the consolidated financial statements for these periods are unaudited. The
results of operations for the quarter ended June 30, 1996 are not necessarily
indicative of the results to be expected for any future period.
3. LINE OF CREDIT:
The Company has a $1.0 million revolving line of credit agreement (the
"Agreement") with a bank, which expires on August 15, 1996. Advances under the
Agreement bear interest at the bank's prime lending rate plus 1.25% (9.5% at
March 31, 1996), are limited to 80% of eligible accounts receivable and are
secured by substantially all of the assets and contractual rights of the
Company. The Agreement also contains certain financial restrictions and
covenants which require, among others, that the Company maintain a minimum
monthly tangible net worth, and a minimum monthly ratio of debt to equity. In
addition, the Agreement prohibits the Company from paying dividends without
prior bank consent. As of March 31 and June 30, 1996, the Company was in
compliance with the financial covenants. There were no borrowings outstanding
under the Agreement as of March 31, 1996. As of June 30, 1996, the Company had
borrowed $524,000 under the Agreement.
4. COMMITMENTS:
The Company leases its facilities under operating lease agreements expiring
through January 2001. Rent expense for all operating leases totaled
approximately $131,000, $192,000 and $304,000 for the years ended March 31,
1994, 1995 and 1996, respectively. Minimum future lease payments under all
noncancellable operating leases as of March 31, 1996 were as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING
MARCH 31,
- -----------
<S> <C>
1997................................................................... $ 434
1998................................................................... 559
1999................................................................... 571
2000................................................................... 582
2001................................................................... 277
------
$2,423
======
</TABLE>
5. CONVERTIBLE PREFERRED STOCK:
In June 1996, the Company's Board of Directors approved a one-for-two
reverse split of its common and preferred stock. All common and preferred
share and per share amounts in the accompanying consolidated financial
statements have been adjusted retroactively to give effect to this reverse
stock split.
In conjunction with the proposed initial public offering of the Company's
common stock, all outstanding shares of convertible preferred stock will
automatically convert into common stock upon closing of the offering. The pro
forma effects of this conversion, including the Series C preferred stock and
convertible notes payable to stockholders issued in May and June 1996 (see
Note 9), have been reflected in the accompanying consolidated balance sheet as
of June 30, 1996.
The Company's certificate of incorporation, as amended in May 1996,
authorizes the issuance of up to 10,000,000 shares of convertible preferred
stock, of which the Company has designated 1,606,000 shares as
F-10
<PAGE>
VISIGENIC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Series A preferred stock, 6,000,000 shares as Series B preferred stock and
1,000,000 shares as Series C preferred stock. The rights and preferences of
the Series A, B and C preferred stock are as follows:
Dividends
The holders of Series A, B and C preferred stock are entitled to receive
dividends when and as declared by the Board of Directors. No cash dividends
can be paid on common stock or preferred stock unless, at the same time, a
dividend is paid with respect to all outstanding shares of preferred stock in
an amount for each such share equal to the aggregate amount of such dividends
payable on that number of shares of common stock into which each such share of
preferred stock could then be converted.
Liquidation Preference
In the event of any liquidation, dissolution or winding up of the Company,
holders of Series A, B and C preferred stock are entitled to receive, in
preference to holders of common stock, the amount of $2.40, $4.00 and $9.00
per share, respectively. Such amounts will be adjusted for any stock split,
combination, distribution or dividend. After payment of the above amounts,
holders of common stock are entitled to receive the amount of $2.40 per share,
adjusted for any stock split, combination, distribution or dividend. After
payment of the above amounts, holders of Series A preferred stock and common
stock are entitled to receive the amount of $1.60 per share for each share of
such stock, adjusted for any stock split, combination, distribution or
dividend. Any remaining assets would then be distributed ratably among
stockholders in proportion to their aggregate preferential amounts.
Voting Rights
The holders of preferred stock are entitled to the number of votes equal to
the number of shares of common stock into which such preferred stock is
convertible.
Conversion
Each share of preferred stock is convertible into one share of common stock,
at the option of the holder thereof, at any time after the date of issuance.
The conversion rate is subject to adjustment for dilution, including, but not
limited to, stock splits, stock dividends and stock combinations. In addition,
each share of Series A, B and C preferred stock will automatically convert
into common stock at the then conversion rate upon the written consent of
holders of a majority of all outstanding Series A, B and C preferred stock or
upon the closing of an underwritten public offering of the Company's common
stock at an aggregate offering price of not less than $10,000,000 and at an
offering price per share of at least $4.00 per share, of at least $6.67 per
share and of at least $12.00 per share, for Series A, B and C preferred stock,
respectively. Holders of Series C preferred stock have agreed to reduce the
automatic conversion price of the Series C preferred stock if necessary to
cause such stock to convert automatically into shares of common stock upon the
completion of the Company's initial public offering.
6. COMMON STOCK:
In June 1996, the Company's Board of Directors approved a one-for-two
reverse split of its common and preferred stock. All common and preferred
share and per share amounts in the accompanying consolidated financial
statements have been adjusted retroactively to give effect to this reverse
stock split.
Prior to July 1993, the Company issued 232,575 shares of common stock to
certain employees and directors of the Company that are subject to certain
repurchase rights. These rights of repurchase lapse over a five-year period.
As of March 31, 1996, 64,228 shares of common stock are subject to repurchase
by the Company at prices ranging from $.08 to $.20 per share.
F-11
<PAGE>
VISIGENIC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock Purchase Plans
In April 1993 and August 1994, the Company adopted Stock Purchase Plans (the
"Plans") and authorized the issuance of 952,500 shares thereunder to employees
and consultants. Stock purchased under these Plans generally vests ratably
over a five-year period. Unvested shares may be repurchased by the Company at
the original issuance price in the event of termination.
As of March 31, 1996, 526,287 shares were issued and outstanding under these
Plans at prices ranging from $.20 to $.40 per share, which was the fair market
value of the common stock, as determined by the Board of Directors, on the
date of grant, of which 289,522 were subject to repurchase. As of March 31,
1996, no further shares were available for issuance under the Plans.
Stock Option Plan
In fiscal 1996, the Company established the 1995 Stock Option Plan (the
"1995 Plan") and reserved 2,000,000 shares of common stock for issuance. Under
the 1995 Plan, the Board of Directors may grant incentive and nonqualified
stock options to employees, consultants and directors of the Company. The
exercise price per share for an incentive stock option cannot be less than the
fair market value, as determined by the Board of Directors, on the date of
grant. The exercise price per share for nonqualified stock options cannot be
less than 85% of the fair market value, as determined by the Board of
Directors, on the date of grant. Options generally expire ten years after the
date of grant and vest over a period of five years. Option activity under the
1995 Plan was as follows:
<TABLE>
<CAPTION>
OPTIONS
OUTSTANDING
---------------------
OPTIONS PRICE PER
AVAILABLE SHARES SHARE
--------- --------- ----------
<S> <C> <C> <C>
Authorized................................ 2,000,000 -- --
Granted................................... (820,250) 820,250 $ .40
Exercised................................. -- (54,068) $ .40
Canceled.................................. 12,932 (12,932) $ .40
--------- --------- ----------
Balance at March 31, 1996.................. 1,192,682 753,250 $ .40
Authorized................................ 500,000 -- --
Granted................................... (520,250) 520,250 $.40-$6.00
Exercised................................. -- (171,433) $ .40
Canceled.................................. 14,567 (14,567) $ .40
--------- --------- ----------
Balance at June 30, 1996................... 1,186,999 1,087,500 $.40-$6.00
========= ========= ==========
</TABLE>
At June 30, 1996, options outstanding for the purchase of 59,634 shares were
vested under the 1995 Plan at an exercise price of $.40 per share.
Common Stock Reserved for Future Issuance
As of June 30, 1996, the Company has reserved the following shares of common
stock for future issuance:
<TABLE>
<S> <C>
Conversion of Series A preferred stock............................. 803,000
Conversion of Series B preferred stock............................. 2,871,625
Conversion of Series C preferred stock............................. 444,444
Conversion of convertible notes payable to stockholders............ 200,000
Stock Option Plan and options assumed from PostModern.............. 2,636,284
1996 Stock Plans................................................... 650,000
---------
7,605,353
=========
</TABLE>
F-12
<PAGE>
VISIGENIC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. EMPLOYEE BENEFIT PLAN:
In June 1995, the Company adopted the Visigenic Software, Inc. 401(k) Plan
(the "401(k) Plan"), as allowed under Section 401(k) of the Internal Revenue
Code, which provides for tax deferred salary deductions for eligible employees
of the Company. Employees who are 21 years of age or older are eligible to
participate immediately upon the date of hire and may make voluntary
contributions of their compensation to the 401(k) Plan. The 401(k) Plan does
not provide for Company contributions and the Company is the administrator.
8. INCOME TAXES:
The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting
for Income Taxes." SFAS No. 109 requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statements or tax returns based upon
enacted tax laws and rates applicable to the periods in which taxes become
payable. A valuation allowance has been recorded for the entire deferred tax
asset as a result of uncertainties regarding realization of the asset
including the limited operating history of the Company, the lack of
profitability to date and the uncertainty over future operating profitability.
Components of the net deferred tax asset are as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
--------------
1995 1996
------ ------
<S> <C> <C>
Net operating loss carryforwards............................. $1,894 $3,398
Cumulative book to tax differences........................... 750 994
General business credit carryforwards........................ 311 372
------ ------
2,955 4,764
Valuation allowance.......................................... (2,955) (4,764)
------ ------
Net deferred tax asset................................... $ -- $ --
====== ======
</TABLE>
As of March 31, 1996, the Company had Federal and state net operating loss
carryforwards of approximately $9.8 million and $2.0 million, respectively,
which expire at various dates through 2011. In addition, as of March 31, 1996,
the Company had general business credit carryforwards of approximately
$372,000 which expire at various dates through 2011.
Under current tax law, net operating loss and credit carryforwards available
in any given year may be limited upon the occurrence of certain events,
including significant changes in ownership interests.
9. SUBSEQUENT EVENTS:
Acquisition of PostModern Computing Technologies Inc.
In May 1996, the Company completed the acquisition of PostModern, a
developer of distributed object connectivity software. In the acquisition,
which was structured as a merger, the Company issued 3,099,821 shares of its
common stock, valued at $3.00 per share based on an independent appraisal of
the Company's common stock, and paid a total of $2.3 million in exchange for
all of PostModern's outstanding shares. The Company also incurred acquisition-
related costs of approximately $450,000, resulting in a total purchase price
of approximately $13.1 million. In addition, the Company made cash payments,
subject to one-year vesting and totaling $1.5 million, to certain PostModern
employees. The acquisition of PostModern was accounted for as a purchase in
the quarter ended June 30, 1996.
F-13
<PAGE>
VISIGENIC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In connection with the purchase price allocation, the Company received an
appraisal of the intangible assets which indicated that approximately $12.0
million of the acquired intangible assets consisted of in process product
development. Because there can be no assurance that the Company will be able
to successfully complete the development and integration of the PostModern
products or that the acquired technology has any alternative future use, the
acquired in process product development was charged to expense by Visigenic in
its quarter ended June 30, 1996.
As a result of the purchase price allocation, the excess of the purchase
price over net assets acquired is $1.1 million, which is being amortized on a
straight-line basis over a period of two years. Management believes that the
unamortized balance is recoverable through future operating results.
In connection with the acquisition, the Company also assumed PostModern's
outstanding stock options and reserved 361,785 shares of the Company's common
stock for issuance upon exercise of such options at an exercise price of $0.24
to $0.60 per share under similar vesting terms.
Issuance of Series C Convertible Preferred Stock and Convertible Notes
On May 24, 1996, the Company sold 444,444 shares of its Series C preferred
stock at a price of $9.00 per share to three investors, for aggregate proceeds
of $4.0 million. The Company has the right to require these investors to
purchase up to an additional $4.0 million in convertible notes at any time
prior to October 31, 1996. If the Company has not completed an initial public
offering of its Common Stock by August 30, 1996, in order to require the
purchase of these convertible notes after September 30, 1996, the Company must
achieve revenue of at least $3.6 million for the quarter ended September 30,
1996. Between May 28 and June 7, 1996, the Company issued convertible notes,
bearing interest at the rate of 8.25% per annum, for $2.0 million of the
available $4.0 million. The principal amount of the notes and all accrued
interest are due and payable 3 years after the issuance date. However, upon
the closing of the Company's initial public offering, the principal amount of
each note and all accrued interest will automatically convert into shares of
the Company's common stock at the lesser of $13.00 per share or the offering
price per share to the public, and the Series C preferred stock will
automatically convert into shares of the Company's common stock. The Company
used a portion of the proceeds from the sale of the Series C preferred stock
and the convertible notes to pay amounts payable in connection with the
acquisition of PostModern.
1996 Employee Stock Purchase Plan
The Company's 1996 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Company's Board of Directors in June 1996, subject to approval
by the stockholders. A total of 450,000 shares of common stock has been
reserved for issuance under the Purchase Plan. The Purchase Plan permits
eligible employees to purchase common stock at 85% of the lower of the fair
market value of the Company's common stock on the first day or the last day of
each six-month offering period.
1996 Outside Directors Stock Option Plan
The Company's 1996 Outside Directors Stock Option Plan (the "Directors
Plan") was adopted by the Company's Board of Directors in June 1996, subject
to approval by the stockholders. A total of 200,000 shares of common stock has
been reserved for issuance under the Directors Plan. The Directors Plan
provides for the initial grant of nonstatutory stock options to purchase
15,000 shares of common stock on the earlier of the first annual meeting
following the initial public offering of the Company's common stock or the
date on which the optionee first becomes a nonemployee director of the
Company, and an additional option to purchase 5,000 shares of common stock on
the next anniversary to existing and future nonemployee directors of the
Company. The exercise price per share of all options granted under the
Directors Plan will equal the fair market value of a share of the Company's
common stock on the date of grant of the option.
F-14
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To PostModern Computing Technologies Inc.:
We have audited the accompanying balance sheets of PostModern Computing
Technologies Inc. (a California corporation) as of March 31, 1995 and 1996 and
the related statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended March 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
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 PostModern Computing
Technologies Inc. as of March 31, 1995 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
March 31, 1996 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Jose, California
May 31, 1996
F-15
<PAGE>
POSTMODERN COMPUTING TECHNOLOGIES INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
------------------
1995 1996
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash..................................................... $ 38,342 $ 56,860
Accounts receivable...................................... 138,383 303,604
Prepaid expenses......................................... 6,200 33,714
-------- --------
Total current assets................................... 182,925 394,178
-------- --------
PROPERTY AND EQUIPMENT:
Computer equipment....................................... 53,719 85,596
Furniture and fixtures................................... 5,295 27,626
-------- --------
59,014 113,222
Less--Accumulated depreciation........................... (29,479) (47,680)
-------- --------
Net property and equipment............................. 29,535 65,542
-------- --------
OTHER ASSETS............................................... 6,457 14,051
-------- --------
$218,917 $473,771
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable to shareholders............................. $ 22,500 $ --
Accounts payable......................................... 13,035 109,488
Accrued payroll and related benefits..................... 95,541 55,312
Deferred revenue......................................... 19,321 189,252
-------- --------
Total current liabilities.............................. 150,397 354,052
-------- --------
COMMITMENTS (Note 3)
SHAREHOLDERS' EQUITY:
Convertible preferred stock, no par value -- --
Authorized--5,000,000 shares
Outstanding--none
Common stock, no par value
Authorized--20,000,000 shares
Outstanding--6,600,000 and 6,920,000 shares in 1995 and
1996, respectively..................................... 18,775 50,775
Note receivable from shareholder......................... -- (32,000)
Retained earnings........................................ 49,745 100,944
-------- --------
Total shareholders' equity............................. 68,520 119,719
-------- --------
$218,917 $473,771
======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-16
<PAGE>
POSTMODERN COMPUTING TECHNOLOGIES INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------
1994 1995 1996
-------- --------- ---------
<S> <C> <C> <C>
REVENUE:
Software products.............................. $324,874 $ 253,056 $ 304,161
Consulting, maintenance and other.............. 319,349 250,758 697,702
-------- --------- ---------
Total revenue................................ 644,223 503,814 1,001,863
-------- --------- ---------
COST OF REVENUE:
Software products.............................. 9,459 31,746 43,340
Consulting, maintenance and other.............. 74,613 140,622 219,228
-------- --------- ---------
Total cost of revenue........................ 84,072 172,368 262,568
-------- --------- ---------
GROSS PROFIT..................................... 560,151 331,446 739,295
-------- --------- ---------
OPERATING EXPENSES:
Research and development....................... 116,840 150,428 223,297
Sales and marketing............................ 87,681 183,264 240,383
General and administrative..................... 83,104 176,672 211,766
-------- --------- ---------
Total operating expenses..................... 287,625 510,364 675,446
-------- --------- ---------
Income (loss) before provision for income
taxes....................................... 272,526 (178,918) 63,849
PROVISION FOR INCOME TAXES....................... -- -- 5,000
-------- --------- ---------
NET INCOME (LOSS)................................ $272,526 $(178,918) $ 58,849
======== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-17
<PAGE>
POSTMODERN COMPUTING TECHNOLOGIES INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------- NOTES RETAINED
SHARES AMOUNT RECEIVABLE EARNINGS TOTAL
---------- ------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1993.... 10,000,000 $35,775 $ -- $ (3,863) $ 31,912
Declaration and payment
of dividend............. -- -- -- (40,000) (40,000)
Net income............... -- -- -- 272,526 272,526
---------- ------- -------- -------- --------
BALANCE, MARCH 31, 1994.... 10,000,000 35,775 -- 228,663 264,438
Issuance of common stock
........................ 500,000 25,000 -- -- 25,000
Repurchase of common
stock .................. (3,900,000) (42,000) -- -- (42,000)
Net loss................. -- -- -- (178,918) (178,918)
---------- ------- -------- -------- --------
BALANCE, MARCH 31, 1995.... 6,600,000 18,775 -- 49,745 68,520
Declaration and payment
of dividend............. -- -- -- (7,650) (7,650)
Issuance of common stock
........................ 320,000 32,000 (32,000) -- --
Net income............... -- -- -- 58,849 58,849
---------- ------- -------- -------- --------
BALANCE, MARCH 31, 1996.... 6,920,000 $50,775 $(32,000) $100,944 $119,719
========== ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE>
POSTMODERN COMPUTING TECHNOLOGIES INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------
1994 1995 1996
-------- --------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................. $272,526 $(178,918) $ 58,849
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities--
Depreciation and amortization................ 7,680 11,572 18,201
Changes in net assets and liabilities--
Decrease (increase) in accounts receivable.. (139,206) 37,532 (165,221)
Increase in prepaid expenses................ -- (6,200) (27,514)
Increase (decrease) in accounts payable..... 7,053 (2,715) 96,453
Increase (decrease) in accrued liabilities.. (6,000) 87,041 (40,229)
Increase in deferred revenue................ 8,344 10,977 169,931
-------- --------- --------
Net cash provided by (used in) operating
activities................................ 150,397 (40,711) 110,470
-------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment........... (13,850) (20,995) (54,208)
Other assets.................................. (2,567) (2,703) (7,594)
-------- --------- --------
Net cash used in investing activities...... (16,417) (23,698) (61,802)
-------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock........ -- 25,000 --
Repurchase of common stock.................... -- (42,000) --
Payment of cash dividends to shareholders..... (40,000) -- (7,650)
Borrowings from (repayments to) shareholders.. -- 22,500 (22,500)
-------- --------- --------
Net cash provided by (used in) financing
activities................................ (40,000) 5,500 (30,150)
-------- --------- --------
NET INCREASE (DECREASE) IN CASH................. 93,980 (58,909) 18,518
CASH, BEGINNING OF PERIOD....................... 3,271 97,251 38,342
-------- --------- --------
CASH, END OF PERIOD............................. $ 97,251 $ 38,342 $ 56,860
======== ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE>
POSTMODERN COMPUTING TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
1. THE COMPANY:
PostModern Computing Technologies Inc. (the "Company") was incorporated in
October 1991 in California. The Company, which is closely held, operates in a
single industry segment and is involved in the design, marketing and support
of distributed object connectivity software.
In May 1996, the Company was acquired by Visigenic Software, Inc.
("Visigenic"), a Delaware corporation, according to the terms of an agreement
which provides that the Company be merged with and into Visigenic (the
"Acquisition"). In connection with the Acquisition, Visigenic issued 3,099,821
shares of its common stock and paid cash consideration of approximately $2.3
million in exchange for all of the outstanding shares of common stock of the
Company and assumed all issued and outstanding options to purchase common
stock of the Company. In addition, at the closing of the Acquisition,
Visigenic made cash payments to certain employees of the Company totaling $1.5
million, subject to one-year vesting. The Acquisition was structured as a tax-
free exchange according to Section 368(a)(II)(E) of the Internal Revenue Code.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
The Company generates revenue from licensing the rights to use its software
products, sales of post-contract support, development contracts, consulting
services and training services performed for customers who license its
products.
Revenue from software license agreements is recognized upon shipment of the
software if there are no significant post-delivery obligations and collection
is probable. If an acceptance period is required, revenue is recognized upon
the earlier of customer acceptance or the expiration of the acceptance period.
Revenue from post-contract support services is recognized ratably over the
term of the support period. Consulting revenue is primarily related to
development and customization services performed on a time and material basis
under separate service and consulting arrangements. Revenue from development
contracts and training services is recognized as the services are performed
over the term of the agreement. In cases where license fee payments are
contingent upon the acceptance of services, revenue from both the license and
the service elements is deferred until the acceptance criteria are met.
Significant Customers
For fiscal 1994, 1995 and 1996, the combined revenue from five customers
accounted collectively for 96%, 88% and 83% of total revenue, respectively.
The following customers accounted for more than 10% of total revenue:
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
----------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Customer A....................................................... 74% * *
Customer B....................................................... * 44% 29%
Customer C....................................................... * 18% *
Customer D....................................................... * 11% 10%
Customer E....................................................... * * 25%
Customer F....................................................... * * 12%
</TABLE>
- --------
*less than 10%
F-20
<PAGE>
POSTMODERN COMPUTING TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Export Revenue
Export revenue for fiscal 1996, which consisted of sales to a customer in
Japan, was 12% of total revenue. Export revenue was less than 10% of total
revenue for fiscal 1994 and 1995.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to a
concentration of credit risk consist principally of accounts receivable. As of
March 31, 1996, approximately 72% of accounts receivable were concentrated
with five customers. The Company believes that its credit and collection
procedures are adequate to monitor and evaluate risk among its customer base.
For fiscal 1994, 1995 and 1996 credit losses have been insignificant.
Software Development Costs
The Company capitalizes eligible software development costs upon the
establishment of technological feasibility, which the Company has defined as
completion of a working model. For fiscal 1994, 1995 and 1996, costs which
were eligible for capitalization, after consideration of factors such as
realizable value, were insignificant and, thus, the Company has charged all
software development costs to research and development expense in the
accompanying statements of operations.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
the double declining balance method over the estimated useful lives of the
assets of five to seven years.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reporting amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported results of operations during the reporting period.
Actual results could differ from those estimates.
3. COMMITMENTS:
The Company leases its office space under a non-cancelable operating lease
which expires on March 31, 1998. Rent expense for all operating leases was
approximately $23,000, $38,000 and $38,000 for fiscal 1994, 1995 and 1996,
respectively. Future minimum lease payments under all non-cancelable operating
leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
MARCH 31,
-----------
<S> <C>
1997............................................................. $126,000
1998............................................................. 129,000
--------
$255,000
========
</TABLE>
4. LINE OF CREDIT:
In December 1995, the Company entered into a line of credit agreement (the
"Agreement") with a bank which allows for borrowings of up to $125,000 and
expires in December 1996. Advances under the Agreement, which are secured by
substantially all of the Company's assets and contractual rights of the
Company, bear interest at the bank's prime lending rate plus 1.0% (9.25% at
March 31, 1996). As of March 31, 1996, there were no borrowings outstanding
under the Agreement.
F-21
<PAGE>
POSTMODERN COMPUTING TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. STOCK OPTION PLAN:
In November 1995, the Company established the 1995 Stock Option Plan (the
"Plan") and reserved 1,980,000 shares of common stock for issuance thereunder.
Under the Plan, the Board of Directors may grant incentive stock options to
employees and directors at the fair market value of the shares, as determined
by the Board of Directors, on the date of grant. The exercise price per share
for nonqualified stock options cannot be less than 85% of fair market value of
the shares, as determined by the Board of Directors, on the date of grant.
Options generally expire ten years after the date of grant and vest over a
period of four years. Activity under the Plan is summarized as follows:
<TABLE>
<CAPTION>
OPTIONS
AVAILABLE OPTIONS PRICE
FOR ISSUANCE OUTSTANDING PER SHARE
------------ ----------- ------------
<S> <C> <C> <C>
Authorized for issuance............... 1,980,000 -- --
Granted............................... (1,644,500) 1,644,500 $0.10--$0.25
---------- --------- ------------
Balance, March 31, 1996............... 335,500 1,644,500 $0.10--$0.25
========== ========= ============
</TABLE>
As of March 31, 1996, options to purchase 826,250 shares of common stock at
prices ranging from $0.10 to $0.25 were fully vested and exercisable. In
connection with the Acquisition, Visigenic assumed all outstanding options of
the Company.
6. INCOME TAXES:
Through December 31, 1995, the Company was an S corporation. Effective
January 1, 1996, the Company changed to C corporation status. Federal and
state income tax regulations require that the income or loss of an S
corporation be included in the tax returns of the individual shareholders.
Accordingly, no provision for taxes is made in the accompanying financial
statements for fiscal 1994, 1995 and for the period from April 1, 1995 to
December 31, 1995.
The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting
for Income Taxes." SFAS No. 109 provides for an asset and liability approach
to accounting for income taxes under which deferred income taxes are provided
based upon enacted tax laws and rates applicable to the periods in which taxes
become payable. The provision for income taxes for the year ended March 31,
1996 was as follows:
<TABLE>
<S> <C>
Current provision:
Federal............................................................ $5,000
State.............................................................. 1,000
------
6,000
------
Deferred benefit:
Federal............................................................ (1,000)
State.............................................................. --
------
(1,000)
------
Total provision for income taxes..................................... $5,000
======
</TABLE>
As of March 31, 1996, the components of the net deferred income tax asset of
approximately $1,000 consisted of differences in book versus tax depreciation
and nondeductible reserves and accruals.
F-22
<PAGE>
VISIGENIC SOFTWARE, INC. AND POSTMODERN COMPUTING TECHNOLOGIES INC.
----------------
PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
(UNAUDITED)
In May 1996, Visigenic Software, Inc. (the "Company" or "Visigenic")
completed the acquisition of PostModern Computing Technologies Inc., a
California corporation ("PostModern"). PostModern is a developer of
distributed object software. The acquisition of PostModern has been accounted
for as a purchase.
The accompanying pro forma condensed combined statement of operations for
the fiscal year ended March 31, 1996 and the quarter ended June 30, 1996
assumes that the acquisition took place as of the beginning of fiscal 1996,
and combines Visigenic's and PostModern's statements of operations for each
Company's respective fiscal year ended March 31, 1996 and quarters ended June
30, 1996. The historical financial statements of PostModern for the quarter
ended June 30, 1996 only include two months of operations as it was merged
into Visigenic effective May 31, 1996. The pro forma condensed combined
statement of operations for the fiscal year ended March 31, 1996 does not
include the effect of any nonrecurring charges directly attributable to the
acquisition.
The purchase price allocation reflected in the accompanying pro forma
condensed combined financial statements has been prepared on an estimated
basis. The effects resulting from any differences in the final allocation of
the purchase price are not expected to have a material effect on the Company's
financial statements.
The accompanying pro forma condensed combined financial statements should be
read in conjunction with the historical financial statements and related notes
thereto for both Visigenic and PostModern, which are included in this
Prospectus.
P-1
<PAGE>
VISIGENIC SOFTWARE, INC. AND
POSTMODERN COMPUTING TECHNOLOGIES INC.
----------------
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1996
-------------------------------------------
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
VISIGENIC POSTMODERN ADJUSTMENTS COMBINED
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUE:
Software products.............. $ 4,479 $ 304 $ -- $ 4,783
Service and other.............. 1,096 698 -- 1,794
------- ------ -------
Total revenue................ 5,575 1,002 6,577
------- ------ -------
COST OF REVENUE:
Software products.............. 284 44 -- 328
Service and other.............. 727 219 -- 946
------- ------ -------
Total cost of revenue........ 1,011 263 1,274
------- ------ -------
GROSS PROFIT..................... 4,564 739 5,303
------- ------ -------
OPERATING EXPENSES:
Product development............ 4,348 223 1,317(a) 5,888
Sales and marketing............ 3,215 240 183(a) 3,638
General and administrative..... 1,465 212 -- 1,677
Amortization of excess of
purchase price over net assets
acquired...................... -- -- 522(a) 522
------- ------ -------
Total operating expenses..... 9,028 675 11,725
------- ------ -------
Operating income (loss)...... (4,464) 64 -- (6,422)
INTEREST AND OTHER INCOME, net... 85 -- -- 85
------- ------ -------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES................ (4,379) 64 -- (6,337)
PROVISION FOR INCOME TAXES....... -- 5 5(b) --
------- ------ -------
NET INCOME (LOSS)................ $(4,379) $ 59 $(6,337)
======= ====== =======
NET LOSS PER SHARE............... $ (.39) $ (.57)
======= =======
PRO FORMA WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT SHARES.... 11,120 11,120(c)
======= =======
</TABLE>
The accompanying notes are an integral part of this statement.
P-2
<PAGE>
VISIGENIC SOFTWARE, INC. AND
POSTMODERN COMPUTING TECHNOLOGIES INC.
----------------
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30, 1996
-------------------------------------------
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
VISIGENIC POSTMODERN ADJUSTMENTS COMBINED
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUE:
Software products.............. $ 2,505 $ 24 $ -- $ 2,529
Service and other.............. 456 108 -- 564
-------- ----- --------
Total revenue................ 2,961 132 3,093
-------- ----- --------
COST OF REVENUE:
Software products.............. 138 11 -- 149
Service and other.............. 295 65 -- 360
-------- ----- --------
Total cost of revenue........ 433 76 509
-------- ----- --------
GROSS PROFIT..................... 2,528 56 2,584
-------- ----- --------
OPERATING EXPENSES:
Product development............ 1,657 64 -- 1,721
Sales and marketing............ 2,006 68 -- 2,074
General and administrative..... 473 74 -- 547
Purchased in process product
development................... 12,014 -- -- 12,014
Amortization of excess of
purchase price over net assets
acquired...................... 43 -- 86(a) 129
-------- ----- --------
Total operating expenses..... 16,193 206 16,485
-------- ----- --------
Operating income (loss)...... (13,665) (150) -- (13,901)
INTEREST AND OTHER INCOME, net... 6 -- -- 6
-------- ----- --------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES................ (13,659) (150) -- (13,895)
PROVISION FOR INCOME TAXES....... -- -- -- --
-------- ----- --------
NET INCOME (LOSS)................ $(13,659) $(150) $(13,895)
======== ===== ========
NET LOSS PER SHARE............... $ (1.21) $ (1.23)
======== ========
PRO FORMA WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT SHARES.... 11,289 11,289(c)
======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
P-3
<PAGE>
VISIGENIC SOFTWARE, INC. AND POSTMODERN COMPUTING TECHNOLOGIES INC.
----------------
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. PRO FORMA ADJUSTMENTS
Certain pro forma adjustments have been made to the accompanying pro forma
condensed combined statements of operations as described below:
(a) Reflects the amortization of the excess of the purchase price over net
assets acquired of approximately $1.1 million, which will be amortized
on a straight line basis over its estimated life of two years, and $1.5
million of cash payments made to certain PostModern employees subject
to one-year vesting.
(b) Reflects the elimination of the PostModern tax provision for fiscal
1996 due to the pro forma 1996 net loss.
(c) Pro forma weighted average common and common equivalent shares do not
include common stock equivalents as inclusion of these shares would be
anti-dilutive. The stand alone Visigenic and the pro forma combined
weighted average common and common equivalent shares are identical as
the Visigenic shares issued to PostModern shareholders are included in
the stand alone Visigenic weighted average share calculation pursuant
to the Securities and Exchange Commission Staff Accounting Bulletin No.
83.
NOTE 2. PURCHASE PRICE ALLOCATION
In connection with the acquisition, the Company exchanged 3,099,821 shares
of its common stock, valued at $3.00 per share based on an independent
appraisal of the Company's stock, and paid cash consideration of approximately
$2.3 million in exchange for all of the outstanding shares of common stock of
PostModern. The Company also incurred acquisition related costs of
approximately $450,000 resulting in a total purchase price of approximately
$13.1 million. In addition to the forgoing, at the closing of the acquisition,
the Company made cash payments to certain PostModern employees totaling $1.5
million. In the event that such employees leave the Company within the 12
months following the date of acquisition, the employees must refund back to
the Company a pro rata portion of the payment for the months they are no
longer employees.
In connection with the purchase price allocation, the Company received an
appraisal of the intangible assets which indicated that approximately $12.0
million of the acquired intangible assets consisted of in process product
development. Because there can be no assurance that the Company will be able
to successfully complete the development and integration of the PostModern
products or that the acquired technology has any alternative future use, the
acquired in process product development was charged to expense by Visigenic in
its quarter ended June 30, 1996 and is reflected in the accompanying pro forma
statement of operations for the quarter ended June 30, 1996.
As a result of the purchase price allocation, the excess of the purchase
price over net assets acquired is $1.1 million, which is being amortized on a
straight-line basis over a period of two years. Management believes that the
unamortized balance is recoverable through future operating results.
P-4
<PAGE>
Digitalized artwork illustrating how the Visigenic database connectivity and
distributed object connectivity products simplify the development, deployment
and management of distributed applications in today's complex environment.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCK-
HOLDER OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM
IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF
OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Consolidated Financial Data..................................... 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20
Business................................................................. 28
Management............................................................... 43
Certain Transactions..................................................... 51
Principal and Selling Stockholders....................................... 54
Description of Capital Stock............................................. 57
Shares Eligible for Future Sale.......................................... 59
Underwriting............................................................. 61
Legal Matters............................................................ 62
Experts.................................................................. 62
Additional Information................................................... 62
Index to Financial Statements............................................ F-1
</TABLE>
-----------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2,100,000 SHARES
[LOGO OF OF VISIGENIC SOFTWARE, INC. APPEARS HERE]
COMMON STOCK
---------------
PROSPECTUS
---------------
HAMBRECHT & QUIST
ROBERTSON, STEPHENS & COMPANY
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Company in connection with the sale
of the Common Stock being registered. Pursuant to the Registration Rights
Agreement dated March 31, 1993, as supplemented on May 10, 1996, the Company
is paying all of the expenses incurred on behalf of the Selling Stockholders
(other than underwriting discounts and commissions). All amounts shown are
estimates except for the registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
---------
<S> <C>
Registration fee...................................................... $ 9,160
NASD filing fee....................................................... 3,157
Nasdaq National Market fee............................................ *
Blue sky qualification fees and expenses.............................. 10,000
Printing and engraving expenses....................................... *
Legal fees and expenses............................................... *
Accounting fees and expenses.......................................... *
Transfer agent and registrar fees..................................... *
Fee for Custodian for Selling Stockholders............................ *
Miscellaneous......................................................... *
--------
Total............................................................. $750,000
========
</TABLE>
--------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the Delaware General Corporation Law permits indemnification
of officers, directors, and other corporate agents under certain circumstances
and subject to certain limitations. The Company's Certificate of
Incorporation, as amended, and Bylaws provide that the Company shall indemnify
its directors, officers, employees and agents to the full extent permitted by
Delaware General Corporation Law, including in circumstances in which
indemnification is otherwise discretionary under Delaware law. In addition,
the Company intends to enter into separate indemnification agreements with its
directors, officers and certain employees which would require the Company,
among other things, to indemnify them against certain liabilities which may
arise by reason of their status or service (other than liabilities arising
from willful misconduct of a culpable nature) and to maintain directors' and
officers' liability insurance, if available on reasonable terms.
These indemnification provisions and the indemnification agreement to be
entered into between the Company and its officers and directors may be
sufficiently broad to permit indemnification of the Company's officers and
directors for liabilities (including reimbursement of expenses incurred)
arising under the Securities Act.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Company and
its officers and directors for certain liabilities arising under the
Securities Act, or otherwise.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since February 12, 1993, the date of its incorporation, the Company has sold
and issued the following unregistered securities (as adjusted where
appropriate for the proposed reverse stock split whereby each two outstanding
shares of Common Stock will be converted into one share of Common Stock):
(a) On March 3, 1993, the Company issued 2,000,000 shares of its Common Stock
to Roger Sippl at $0.08 per share, for an aggregate purchase price of
$160,000.
(b) On March 31, 1993, the Company issued 803,000 shares of its Series A
Preferred Stock to 55 stockholders at $2.40 per share, for an aggregate of
$1,927,200.
(c) In June 1993, the Company issued 37,500 shares of its Common Stock to 3
stockholders at $0.20 per share, for an aggregate purchase of $7,500.
(d) From December 1993 through January 1994, the Company issued 871,625 shares
of its Series B Preferred Stock to 40 stockholders at $4.00 per share, for
an aggregate of $3,486,500.
(e) From April 1994 through August 1994, the Company issued 625,000 shares of
its Series B Preferred Stock to 29 stockholders at $4.00 per share, for an
aggregate of $2,500,000.
(f) From May 1995 through August 1995, the Company issued 1,375,000 shares of
its Series B Preferred Stock to 29 stockholders at $4.00 per share, for an
aggregate of $5,500,000.
(g) In April 1996, the Company entered into an Agreement and Plan of
Reorganization with PostModern Computing Technologies Inc. ("PostModern")
pursuant to which the Company issued 3,099,821 shares of its Common Stock,
and options to purchase 361,785 shares of its Common Stock to the seven
former shareholders and optionholders of PostModern.
(h) In May 1996, the Company entered into an Agreement and Plan of
Reorganization with Data Accessibility Solutions, Inc. ("DASI") pursuant
to which the Company issued 12,500 shares of its Common Stock to the two
former shareholders of DASI.
(i) In May 1996, the Company issued 444,444 shares of its Series C Preferred
Stock to 3 stockholders at $9.00 per share, for an aggregate of
$3,999,996.
(j) In May and June 1996, the Company issued convertible notes to 3
stockholders in the aggregate principal amount of $2.0 million.
(k) Between February 12, 1993 and June 30, 1996, the Company sold an aggregate
of 971,462 shares of its Common Stock to 60 stockholders for an aggregate
of $604,594 and issued options to purchase an aggregate of 1,341,000
shares of Common Stock with an exercise price equal to the fair market
value on the date of grant as determined by the Board of Directors to 117
optionholders.
There were no underwriters employed in connection with any of the
transactions set forth in Item 15.
For additional information concerning these equity investment transactions,
reference is made to the information contained under the caption "Certain
Transactions" in the form of Prospectus included herein.
The issuances described in Items 15(a) through 15(f) and Items 15(i), 15(j)
and 15(k) were deemed to be exempt from registration under the Securities Act
in reliance on Section 4(2) of the Securities Act as transactions by an issuer
not involving a public offering. In addition, certain issuances described in
Items 15(g) and Item 15(h) were deemed to be exempt from registration under
the Securities Act in reliance on Section 3(a)(10) of the Securities Act.
Certain issuances described in Item 15(k) were deemed exempt from registration
under the Securities Act in reliance on Section 4(2) or Rule 701 promulgated
thereunder as transactions pursuant to compensatory benefit plans and
contracts relating to compensation. The recipients of securities in each such
transaction represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates and other instruments issued in such transactions. All recipients
either received adequate information about the Company or had access, through
employment or other relationships, to such information.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1+ Form of Underwriting Agreement.
2.1+ Agreement and Plan of Reorganization between the Company and
PostModern Computing Technologies Inc., dated April 28, 1996.
3.1A Certificate of Incorporation, as amended.
3.1B Form of Restated Certificate of Incorporation to be filed after the
effectiveness of the offering.
3.2A+ Amended and Restated Bylaws.
3.2B Proposed form of Bylaws to be adopted before the effective date of
this Registration Statement.
4.1 Specimen Common Stock Certificate of the Company.
4.2+ Registration Rights Agreement between the Company and certain
investors dated March 31, 1993.
4.3+ Supplemental Registration Rights Agreement between the Company and
certain investors dated May 10, 1996.
5.1+ Opinion of Gray Cary Ware & Freidenrich, A Professional Corporation.
10.1 Form of Indemnification Agreement for directors and officers.
10.2+ 1995 Stock Option Plan and forms of agreements thereunder.
10.3 1996 Employee Stock Purchase Plan.
10.4 1996 Outside Directors Stock Option Plan.
10.5+ Non-Compete and Non-Solicitation Agreement between the Company and
Jens Christensen dated April 28, 1996.
10.6+ Non-Compete and Non-Solicitation Agreement between the Company and
Neguine Navab dated April 28, 1996.
10.7+ Non-Compete and Non-Solicitation Agreement between the Company and
Prasad Mokkapatti dated April 28, 1996.
10.8+ Convertible Note and Series C Preferred Stock Purchase Agreement by
and among the Company, Cisco Systems, Inc., Netscape Communications
Corporation and Platinum technology dated May 24, 1996.
10.9+ Form of Convertible Promissory Note.
10.10* Source Code License Agreement, as amended, between the Company and
Microsoft Corporation ("Microsoft") dated June 20, 1995.
10.11* Source Code License Agreement between the Company and Microsoft
Corporation dated February 10, 1995.
10.12 Lease Agreement, as amended, between the Company and San Mateo
Office Limited, dated March 7, 1993.
11.1+ Statement regarding computation of per share loss.
23.1 Consent of Independent Auditors (see page II-7).
23.2+ Consent of Counsel (included in Exhibit 5.1).
24.1+ Power of Attorney (see page II-5 of Registration Statement No. 333-
06285 filed on June 19, 1996).
27.0+ Financial Data Schedule (available in EDGAR format only).
</TABLE>
--------
* To be filed by amendment.
+ Previously filed.
(b) Financial Statement Schedules.
All schedules have been omitted because the information required to be set
forth therein is not applicable or is shown in the financial statements or
notes thereto.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered hereunder, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective; and
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO ITS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF SAN MATEO, COUNTY OF SAN MATEO, STATE OF CALIFORNIA, ON THE 29TH DAY
OF JULY 1996.
VISIGENIC SOFTWARE, INC.
/s/ Mark D. Hanson
By: _________________________________
MARK D. HANSON
PRESIDENT AND CHIEF OPERATING
OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON
THE DATES INDICATED:
SIGNATURE TITLE DATE
/s/ Roger J. Sippl* Chief Executive
- ------------------------------------- Officer and July 29, 1996
ROGER J. SIPPL Director (Principal
Executive Officer)
/s/ Kevin C. Eichler Vice President--
- ------------------------------------- Finance (Principal July 29, 1996
KEVIN C. EICHLER Financial and
Accounting Officer)
/s/ Gill Cogan* Director
- ------------------------------------- July 29, 1996
GILL COGAN
/s/ Cristina Morgan* Director
- ------------------------------------- July 29, 1996
CRISTINA MORGAN
II-5
<PAGE>
SIGNATURE TITLE DATE
/s/ Michael Moritz* Director
- ------------------------------------- July 29, 1996
MICHAEL MORITZ
/s/ E. E. van Bronkhorst* Director
- ------------------------------------- July 29, 1996
E. E. VAN BRONKHORST
/s/ J. Sidney Webb* Director
- ------------------------------------- July 29, 1996
J. SIDNEY WEBB
/s/ Eric Young* Director
- ------------------------------------- July 29, 1996
ERIC YOUNG
/s/ Jens Christensen* Director
- ------------------------------------- July 29, 1996
JENS CHRISTENSEN
*By: /s/ Mark D. Hanson
----------------------------------
MARK D. HANSON
(ATTORNEY-IN-FACT)
II-6
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
San Jose, California
July 29, 1996
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER PAGE
------- ------------
<C> <S> <C>
1.1+ Form of Underwriting Agreement.
2.1+ Agreement and Plan of Reorganization between the
Company and PostModern Computing Technologies Inc.,
dated April 28, 1996.
3.1A Certificate of Incorporation, as amended.
3.1B Form of Restated Certificate of Incorporation to be
filed after the effectiveness of the offering.
3.2A+ Amended and Restated Bylaws.
3.2B Proposed form of Bylaws to be adopted before the
effective date of this Registration Statement.
4.1 Specimen Common Stock Certificate of the Company.
4.2+ Registration Rights Agreement between the Company and
certain investors dated March 31, 1993.
4.3+ Supplemental Registration Rights Agreement between
the Company and certain investors dated May 10, 1996.
5.1+ Opinion of Gray Cary Ware & Freidenrich, A
Professional Corporation.
10.1 Form of Indemnification Agreement for directors and
officers.
10.2+ 1995 Stock Option Plan and forms of agreements
thereunder.
10.3 1996 Employee Stock Purchase Plan.
10.4 1996 Outside Directors Stock Option Plan.
10.5+ Non-Compete and Non-Solicitation Agreement between
the Company and Jens Christensen dated April 28,
1996.
10.6+ Non-Compete and Non-Solicitation Agreement between
the Company and Neguine Navab dated April 28, 1996.
10.7+ Non-Compete and Non-Solicitation Agreement between
the Company and Prasad Mokkapatti dated April 28,
1996.
10.8+ Convertible Note and Series C Preferred Stock
Purchase Agreement by and among the Company, Cisco
Systems, Inc., Netscape Communications Corporation
and Platinum technology dated May 24, 1996.
10.9+ Form of Convertible Promissory Note.
10.10* Source Code License Agreement, as amended, between
the Company and Microsoft Corporation ("Microsoft")
dated June 20, 1995.
10.11* Source Code License Agreement between the Company and
Microsoft dated February 10, 1995.
10.12 Lease Agreement, as amended, between the Company and
San Mateo Office Limited, dated March 7, 1993.
11.1+ Statement regarding computation of per share loss.
23.1 Consent of Independent Auditors (see page II-7).
23.2+ Consent of Counsel (included in Exhibit 5.1).
24.1+ Power of Attorney (see page II-5 of Registration
Statement No. 333-06285 filed on June 19, 1996).
27.0 Financial Data Schedule (available in EDGAR format
only).
</TABLE>
--------
* To be filed by amendment.
+ Previously filed.
<PAGE>
EXHIBIT 3.1A
RESTATED CERTIFICATE OF INCORPORATION
OF
VERY VISUAL SOFTWARE, INC.
-----------------------
(Originally incorporated under the same name on February 12, 1993)
-----------------------
FIRST: The name of the Corporation is Very Visual Software, Inc.
-----
(hereinafter sometimes referred to as the "Corporation").
SECOND: The address of the registered office of the Corporation in
------
the State of Delaware is 15 East North Street, in the City of Dover, County of
Kent. The name of the registered agent of the Corporation at that address is
Incorporating Services, Ltd.
THIRD: The purpose of the Corporation is to engage in any lawful act
-----
or activity for which a corporation may be organized under the General
Corporation Law of Delaware.
FOURTH: The Corporation is authorized to issue a total of fourteen
------
million (14,000,000) shares of stock in two classes designated respectively
"Preferred Stock" and "Common Stock." The total number of shares of Preferred
Stock the Corporation shall have authority to issue is four million (4,000,000),
par value one-tenth of one cent ($.001) per share, and the total number of
shares of Common Stock the Corporation shall have authority to issue is ten
million (10,000,000), par value one-tenth of one cent ($.001) per share.
The Corporation's Board of Directors (the "Board") is authorized, subject
to any limitations prescribed by law, to provide for the issuance of the shares
of Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the state of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the designation,
powers, preferences, and rights of the shares of each such series and any
qualifications, limitations or restrictions thereof. The number of authorized
shares of any class of capital stock of the Corporation may be increased or
1
<PAGE>
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the outstanding Common Stock of
the Corporation, without the approval of the holders of the Preferred Stock, or
of any series thereof, unless the approval of any such holders is required
pursuant to the certificate or certificates establishing any series of Preferred
Stock.
FIFTH: A director of this Corporation shall not be personally liable
-----
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit.
If the Delaware General Corporation Law is hereafter amended to authorize
corporate action further eliminating or limiting the personal liability of a
director, then the liability of a director of the Corporation, without any
further corporate action on the part of the Corporation, shall be eliminated or
limited to the fullest extent permitted by the Delaware General Corporation Law,
as so amended.
Any repeal or modification of the foregoing provisions of this Article
SIXTH by the stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.
SIXTH: The authorized number of directors initially shall be one (1)
-----
and, thereafter, shall be fixed from time to time exclusively by the Board
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board for
adoption). The holders of Common Stock will be entitled to elect, voting
together as a single group with the holders of any series of Preferred Stock
that is entitled to vote with the Common Stock in such election, a majority of
the directors (other than any directors who are separately elected by any series
of Preferred Stock) (the "Majority Directors"), and holders of Common Stock will
be entitled to elect, voting together as a single group with the holders of any
series of Preferred Stock that is entitled to vote with the Common Stock in such
election, the remaining directors (other than any directors who are separately
elected by any series of Preferred Stock) (the "Minority Directors"). In any
election of Majority Directors or Minority Directors by the stockholders of the
Corporation, each holder of shares of Common Stock shall have one vote per
share, and each holder of shares of any series of Preferred Stock that has the
right to vote in such election shall be entitled to such number of votes as is
set forth in the certificate establishing the powers, preferences and rights of
such series. Vacancies and newly-created directorships resulting from any
increase in the authorized number of directors shall only be filled by the vote
of a
2
<PAGE>
majority of directors elected by holders of shares of the class, classes or
series of stock of the Corporation entitled to elect directors to such vacant or
newly-created directorship.
SEVENTH: The Board is expressly empowered to adopt, amend or repeal
-------
Bylaws of the Corporation. Any adoption, amendment or repeal of Bylaws of the
Corporation by the Board shall require the approval of a majority of the total
number of authorized directors (whether or not there exist any vacancies in
previously authorized directorships at the time any resolution providing for any
such adoption, amendment or repeal is presented to the Board). The stockholders
shall also have power to adopt, amend or repeal the Bylaws of the Corporation.
EIGHTH: Elections of directors need not be by written ballot.
------
NINTH: This Corporation reserves the right to amend, alter, change or
-----
repeal any provision contained in this Restated Certificate of Incorporation, in
the manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
TENTH: Whenever a compromise or arrangement is proposed between
-----
this Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
3
<PAGE>
IN WITNESS WHEREOF, this Restated Certificate of Incorporation, which
restates, integrates and amends the provisions of the Certificate of
Incorporation of the Corporation and which has been duly adopted in accordance
with Sections 242 and 245 of the Delaware General Corporation Law, written
notice having been given as provided in Section 228 of the Delaware General
Corporation Law, has been executed and attested by the undersigned, Roger J.
Sippl and Glenn C. Myers, as President and Secretary, respectively, of Very
Visual Software, Inc., this ____th day of March, 1993.
VERY VISUAL SOFTWARE, INC.
By:________________________________
President
Attest:
By: __________________________________
Secretary
4
<PAGE>
- --------------------------------------------------------------------------------
CERTIFICATE OF DESIGNATION
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
- --------------------------------------------------------------------------------
SERIES A PREFERRED STOCK
Very Visual Software, Inc., a Delaware corporation (the "Corporation"),
hereby certifies that the following resolution has been duly adopted by the
Board of Directors of the Corporation:
RESOLVED, that pursuant to the authority expressly granted to and vested in
the Board of Directors of the Corporation (the "Board") by the provisions of the
Restated Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation"), there hereby is created, out of the 4,000,000 shares of
Preferred Stock, par value $0.001 per share, of the Corporation authorized in
Article FOURTH of the Certificate of Incorporation (the "Preferred Stock"), a
series of the Preferred Stock of the Corporation consisting of 1,606,000 shares,
which series shall have the following powers, designations, preferences and
relative, participating, optional and other rights, and the following
qualifications, limitations and restrictions:
1. Designation and Amount.
----------------------
This series of Preferred Stock shall be designated the Series A Preferred
Stock (the "Series A Preferred Stock"), and the authorized number of shares
constituting such series shall be 1,606,000. The par value of the Series A
Preferred Stock shall be $0.001 per share.
2. Dividend Rights of Series A Preferred Stock. Subject to the
-------------------------------------------
dividend provisions fixed by the Board for any series of Preferred Stock
designated by the Board in the future, the holders of Series A Preferred Stock
shall be entitled to receive dividends, out of any assets at the time legally
available therefor, when and as declared by the Board. No cash dividends shall
be paid on any Common Stock unless at the same time a dividend is paid with
respect to all outstanding shares of Series A Preferred Stock in an amount for
each such share of Series A Preferred Stock equal to the aggregate amount of
such dividends payable on that number of shares of Common Stock into which each
such share of Series A Preferred Stock could then be converted.
1
<PAGE>
2
<PAGE>
3. Preference on Liquidation.
-------------------------
Subject to the liquidation preferences of any series of Preferred Stock
other than the Series A Preferred Stock, including, without limitation, any
liquidation preference prior to any liquidation preference set forth in this
Section 2, in the event of any liquidation, dissolution or winding up of the
Corporation, distributions to holders of Series A Preferred Stock and holders of
Common Stock shall be made in the following manner:
(a) The holders of Series A Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets of the
Corporation to the holders of the Common Stock by reason of their ownership of
such stock, the amount of $1.20 per share for each share of Series A Preferred
Stock then held by them, adjusted for any stock split, stock combination, stock
distribution or stock dividend with respect to such shares. If the assets and
funds available for distribution among the holders of Series A Preferred Stock
and among the holders of any series of Preferred Stock ranking on a parity with
the Series A Preferred Stock with respect to this subsection (a) of Section 2 as
to the distribution of assets and funds upon such dissolution, liquidation or
winding up shall be insufficient to permit the payment to such holders of their
full liquidation payments, then the entire assets and funds of the Corporation
legally available for such distribution shall be distributed ratably among such
holders in proportion to their aggregate preferential amounts.
(b) After payment in full to the holders of Series A Preferred
Stock of all amounts exclusively payable on or with respect to said shares
pursuant to subsection (a) of this Section 3, the holders of the Common Stock
shall be entitled to receive, prior and in preference to any further
distribution of any of the assets of the Corporation to its stockholders, the
amount of $1.20 per share for each share of Common Stock then held by them,
adjusted for any stock split, stock combination, stock distribution or stock
dividend with respect to such shares. If the assets and funds available for
distribution among the holders of the Common Stock and among the holders of any
series of Preferred Stock ranking on a parity with the Common Stock with respect
to this subsection (b) of Section 2 as to the distribution of assets upon such
dissolution, liquidation or winding up shall be insufficient to permit the
payment to such holders of their full liquidation payments, then the entire
remaining assets and funds of the Corporation legally available for such
distribution shall be distributed ratably among such holders in proportion to
their aggregate preferential amounts.
(c) After payment in full to the holders of Common Stock of all
amounts exclusively payable on or with
3
<PAGE>
respect to said shares pursuant to subsection (b) of this Section 3, the
remaining assets of the Corporation, if any, shall be distributed ratably among
the holders of Series A Preferred Stock, among the holders of Common Stock and
among the holders of any series of Preferred Stock ranking on a parity with the
Series A Preferred Stock and Common Stock with respect to this subsection (c) of
Section 2 as to the distribution of assets upon dissolution, liquidation or
winding up, on an "as converted" basis. For purposes of determining
distributions under this Section 3(c), the term "as converted" shall mean that
Series A Preferred Stock and any Liquidation Parity Stock shall be deemed to
have been converted into Common Stock at the Conversion Price in effect for
Series A Preferred Stock and the conversion price in effect for any Liquidation
Parity Stock, respectively, on the record date for such distribution.
4. Redemption.
----------
(a) At any time and from time to time after March 31, 1994, the Corporation
may, at the option of the Board, and out of assets at the time legally available
therefor, redeem all or part (selected pro rata from among all of the shares of
Series A Preferred Stock) of the outstanding shares of Series A Preferred Stock
at the redemption price set forth in Section 4(b) below, provided that the
Corporation shall give written notice by mail, postage prepaid, to the holders
of the Series A Preferred Stock to be redeemed at least twenty (20) days prior
to the date specified for redemption (a "Redemption Date"). The notice shall
further call upon such holders to surrender to the Corporation on or before the
Redemption Date at the place designated in the notice such holder's certificate
or certificates representing the shares to be redeemed and shall state that, in
lieu of redemption, a holder may, prior to the Redemption Date, convert its
Series A Preferred Stock into Common Stock in accordance with Section 6 below.
On or after the Redemption Date, each holder of shares of Series A Preferred
Stock called for redemption shall surrender the certificate evidencing such
shares to the Corporation, except that such number of shares shall be reduced by
the number of shares which have been converted into Common Stock between the
date of notice and the Redemption Date, at the place designated in such notice
and shall thereupon be entitled to receive payment of the Redemption Price.
(b) The Series A Preferred Stock may be redeemed at a cash price equal to
$1.20 per share, adjusted for any stock split, stock combination, stock
distribution or stock dividend with respect to such shares.
(c) From and after the Redemption Date, unless there shall have been a
default in payment of the Redemption Price, all rights of the holders with
respect to such redeemed shares of Series A Preferred Stock (except the right to
receive the
4
<PAGE>
Redemption Price without interest upon surrender of their certificate) shall
cease and such shares shall not thereafter be transferred on the books of this
Corporation or be deemed to be outstanding for any purpose whatsoever.
(d) If the funds of the Corporation legally available for redemption of
shares of Series A Preferred Stock on the Redemption Date are insufficient to
redeem the total number of shares of Series A Preferred Stock to be redeemed,
the Corporation shall use those funds which are legally available to redeem the
maximum possible number of such shares ratably among the holders of such shares
to be redeemed. The shares of Series A Preferred Stock not redeemed shall remain
outstanding and entitled to all the rights and preferences provided herein.
5. Voting.
------
Except as otherwise required by law, and except as otherwise provided in
the last sentence of Article FOURTH of the Certificate of Incorporation and in
Article SIXTH of the Certificate of Incorporation, the shares of Series A
Preferred Stock shall be voted together with the Common Stock at any annual or
special meeting of the stockholders of the Corporation, or may act by written
consent in the same manner as the Common Stock, and shall have the voting rights
and powers equal to the voting rights of the Common Stock, upon the following
basis: each holder of shares of Series A Preferred Stock shall be entitled to
such number of votes for the shares of Series A Preferred Stock held by him on
the record date for such meeting or action to be taken by written consent, as
shall be equal to the nearest whole number of shares of the Common Stock into
which such holder's shares of Series A Preferred Stock are convertible
immediately after the close of business on the record date for such meeting or
action to be taken by written consent, as the case may be. Holders of Series A
Preferred Stock will be entitled to vote on such basis with holders of Common
Stock in the election of the Minority Directors pursuant to Article SIXTH of the
Certificate of Incorporation.
6. Conversion Rights. The holders of Series A Preferred Stock shall
-----------------
have conversion rights as follows:
(a) Each share of Series A Preferred Stock shall be convertible,
at the option of the holder thereof, at any time at the principal office of the
Corporation or any transfer agent for such shares, into fully paid and
nonassessable shares of Common Stock of the Corporation. The number of shares of
Common Stock into which each share of Series A Preferred Stock may be converted
shall be determined by dividing $1.20 by the Conversion Price determined as
hereinafter provided in effect at the time of the conversion. The Conversion
Price per share at which shares of Common Stock shall be initially issuable upon
conversion of
5
<PAGE>
any shares of Series A Preferred Stock shall be $1.20, subject to adjustment as
provided herein.
(b) Each share of Series A Preferred Stock shall be converted
into Common Stock automatically in the manner provided herein upon the earlier
to occur of (i) the time holders of a majority of the outstanding shares of all
series of Preferred Stock which are subject to conversion upon the written
consent of holders of a majority of all outstanding shares of Preferred Stock
consent in writing to the conversion of all such outstanding Preferred Stock, or
(ii) immediately prior to the closing of the sale of securities of the
Corporation pursuant to a firm commitment underwritten public offering
registered with the Securities and Exchange Commission, other than on Form S-4,
or Form S-18, or any successor form thereto, with a public offering price of not
less than $2.00 per share (adjusted to reflect subsequent stock dividends, stock
splits, recapitalization and the like) and with aggregate gross proceeds of not
less than $5,000,000.
(c) The holder of any shares of Series A Preferred Stock may
exercise the conversion right specified in Section 6(a) by surrendering to the
Corporation or any transfer agent of the Corporation the certificate or
certificates for the shares to be converted, accompanied by written notice
specifying the number of shares to be converted. Upon the occurrence of any
event specified in Section 6(b), the outstanding shares of Series A Preferred
Stock shall be converted automatically without any further action by the holders
of such shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided that the
Corporation shall not be obligated to issue to any holder certificates
evidencing the shares of Common Stock issuable upon such conversion unless
certificates evidencing such shares of Series A Preferred Stock are delivered
either to the Corporation or any transfer agent of the Corporation. Conversion
shall be deemed to have been effected on the date when delivery of notice of an
election to convert and of certificates for shares being converted is made or on
the date of the occurrence of any event specified in Section 6(b), as the case
may be, and such date is referred to herein as the "Conversion Date." As
promptly as practicable thereafter (and after surrender of the certificate or
certificates representing shares of Series A Preferred Stock to the Corporation
or any transfer agent of the Corporation in the case of conversions pursuant to
Section 6(b)) the Corporation shall issue and deliver to such holder a
certificate or certificates for the number of full shares of Common Stock to
which such holder is entitled. No fractional shares of Common Stock shall be
issued by the Corporation and all such fractional shares shall be disregarded.
In lieu thereof, the Corporation shall pay in cash the fair market value of any
such fractional share as determined by the Board. The person in whose name the
6
<PAGE>
certificate or certificates for Common Stock are to be issued shall be deemed to
have become a holder of record of such Common Stock on the applicable Conversion
Date. Upon conversion of only a portion of the number of shares covered by a
certificate representing shares of Series A Preferred Stock surrendered for
conversion (in the case of conversion pursuant to Section 6(a)), the Corporation
shall issue and deliver to or upon the written order of the holder of the
certificate so surrendered for conversion, at the expense of the Corporation, a
new certificate covering the number of shares of Series A Preferred Stock
representing the unconverted portion of the certificate so surrendered.
(d) In case the Corporation shall at any time (i) subdivide the
outstanding Common Stock, or (ii) issue a stock dividend on its outstanding
Common Stock, the number of shares of Common Stock issuable upon conversion of
Series A Preferred Stock immediately prior to such subdivision or the issuance
of such stock dividend shall be proportionately increased by the same ratio as
the subdivision or dividend (with appropriate adjustments in the Conversion
Price of Series A Preferred Stock). In case the Corporation shall at any time
combine its outstanding Common Stock, the number of shares of Common Stock
issuable upon conversion of Series A Preferred Stock immediately prior to such
combination shall be proportionately decreased by the same ratio as the
combination (with appropriate adjustments in the Conversion Price of Series A
Preferred Stock). All such adjustments described herein shall be effective at
the close of business on the date of such subdivision, stock dividend or
combination, as the case may be.
(e) In case of any merger (other than a merger in which the
Corporation is not the continuing or surviving entity) or any reclassification
of the Common Stock of the Corporation, each share of the Series A Preferred
Stock shall thereafter be convertible into that number of shares of stock or
other securities or property to which a holder of the number of shares of Common
Stock issuable upon conversion of a share of Series A Preferred Stock
immediately prior to such merger or reclassification would have been entitled
upon such merger or reclassification. In any such case, appropriate adjustment
(as determined by the Board) shall be made in the application of the provisions
herein set forth with respect to the rights and interests thereafter of the
holders of Series A Preferred Stock, such that the provisions set forth herein
shall thereafter be applicable, as nearly as reasonably may be, in relation to
any share of stock or other property thereafter issuable upon conversion.
(f) The Corporation shall at all times reserve and keep
available, out of its authorized but unissued Common Stock, solely for the
purpose of effecting the conversion of
7
<PAGE>
Series A Preferred Stock, the full number of shares of Common Stock deliverable
upon the conversion of all Series A Preferred Stock from time to time
outstanding. The Corporation shall from time to time (subject to obtaining
necessary director and stockholder authorizations), in accordance with the laws
of the State of Delaware, increase the authorized amount of its Common Stock if
at any time the authorized number of shares of Common Stock remaining unissued
shall not be sufficient to permit the conversion of all of the shares of Series
A Preferred Stock at the time outstanding.
(g) Upon any conversion of Series A Preferred Stock pursuant to
this Section 6, the shares of Series A Preferred Stock which are converted shall
not be reissued. Upon conversion of all of the then outstanding Series A
Preferred Stock pursuant to this Section 6 and upon the taking of any action
required by law, all matters set forth in this Certificate of Designation shall
be eliminated from the Certificate of Incorporation, shares of Series A
Preferred Stock shall not be deemed outstanding for any purpose whatsoever and
all such shares shall revert to the status of authorized and unissued shares of
Preferred Stock.
(h) Upon the occurrence of each adjustment or readjustment of the
Conversion Price for Series A Preferred Stock pursuant to this Section 6, the
Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series A Preferred Stock a certificate setting forth such adjustment
or readjustment showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the reasonable written
request at any time of any holder of Series A Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, and (ii) the number of shares of Common Stock and
the amount, if any, of other property which at the time would be received upon
the conversion of Series A Preferred Stock.
(i) Any notices required by the provisions of this Section 6 to
be given to the holders of shares of Series A Preferred Stock shall be deemed
given if deposited in the United States mail, first class, postage prepaid and
addressed to each holder of record at its address appearing on the books of the
Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed by its President, and attested by its Secretary, this
______ day of March, 1993.
VERY VISUAL SOFTWARE, INC.
8
<PAGE>
By:_____________________________________
President
Attest:
By: __________________________________
Corporate Secretary
9
<PAGE>
-----------------------------------
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
VERY VISUAL SOFTWARE, INC.
-----------------------------------
Very Visual Software, Inc., a Delaware corporation (the "Corporation"),
hereby certifies:
1. That the Corporation's Board of Directors has duly adopted the
following resolutions:
RESOLVED, that Article First of the Restated Certificate of Incorporation
is hereby amended to read in full as follows:
FIRST: The name of the Corporation is Visigenic Software, Inc.
-----
(hereinafter sometimes referred to as the "Corporation").
RESOLVED, that Section 3 of the Certificate of Designation of Series A
Preferred Stock filed on March 31, 1993 in the office of the Secretary of
State of the State of Delaware is hereby amended to read in full as
follows:
Subject to the liquidation preferences of any series of Preferred
Stock other than the Series A Preferred Stock, including, without
limitation, any liquidation preference that provides for payments to
any series of Preferred Stock or the Common Stock prior to or on a
parity with any payment to holders of the Series A Preferred Stock
provided for below (including any preferences that provide for
additional parity or non-parity payments to the holders of the Series
A Preferred Stock), in the event of any liquidation, dissolution or
winding up of the Corporation, distributions to holders of Series A
Preferred Stock and holders of Common Stock shall be made in the
following manner:
(a) The holders of Series A Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the
assets of the Corporation to the holders of the Common Stock by reason
of their ownership of such stock, the amount of $1.20 per share for
each share of Series A Preferred Stock then held by them, adjusted for
any stock split, stock combination, stock distribution or stock
dividend with respect to such
CERTIFICATE OF AMENDMENT
1 OF RESTATED CERTIFICATE OF INCORPORATION
<PAGE>
shares. If the assets and funds available for distribution among the
holders of Series A Preferred Stock and among the holders of any
series of Preferred Stock ranking on a parity with the Series A
Preferred Stock with respect to this subsection (a) of Section 3 as to
the distribution of assets and funds upon such dissolution,
liquidation or winding up shall be insufficient to permit the payment
to such holders of their full liquidation payments, then the entire
assets and funds of the Corporation legally available for such
distribution shall be distributed ratably among such holders in
proportion to their aggregate preferential amounts.
(b) After payment in full to the holders of Series A Preferred
Stock of all amounts exclusively payable on or with respect to said
shares pursuant to subsection (a) of this Section 3, the holders of
the Common Stock shall be entitled to receive, prior and in preference
to any further distribution of any of the assets of the Corporation to
its stockholders, the amount of $1.20 per share for each share of
Common Stock then held by them, adjusted for any stock split, stock
combination, stock distribution or stock dividend with respect to such
shares. If the assets and funds available for distribution among the
holders of the Common Stock and among the holders of any series of
Preferred Stock ranking on a parity with the Common Stock with respect
to this subsection (b) of Section 3 as to the distribution of assets
upon such dissolution, liquidation or winding up shall be insufficient
to permit the payment to such holders of their full liquidation
payments, then the entire remaining assets and funds of the
Corporation legally available for such distribution shall be
distributed ratably among such holders in proportion to their
aggregate preferential amounts.
(c) After payment in full to the holders of Common Stock of all
amounts exclusively payable on or with respect to said shares pursuant
to subsection (b) of this Section 3, the remaining assets of the
Corporation, if any, shall be distributed ratably among the holders of
Series A Preferred Stock, among the holders of Common Stock and among
the holders of any series of Preferred Stock ranking on a parity with
the Series A Preferred Stock and Common Stock with respect to this
subsection (c) of Section 3 as to the distribution of assets upon
dissolution, liquidation or winding up, on an "as converted" basis.
As used in this Certificate, the term "as converted" shall mean that
Series A Preferred Stock and all other series of Preferred Stock
entitled to payment under this Section 3(c) shall be deemed to have
been converted into Common Stock at the Conversion Price in effect for
Series A Preferred Stock and the conversion prices in effect for all
such other series of Preferred Stock, respectively, on the record date
for such distribution.
CERTIFICATE OF AMENDMENT
2 OF RESTATED CERTIFICATE OF INCORPORATION
<PAGE>
RESOLVED FURTHER, that Section 5 of the Certificate of Designation of
Series A Preferred Stock filed on March 31, 1993 in the office of the
Secretary of State of the State of Delaware is hereby amended to add the
following paragraph at the end of such section:
The Corporation shall not, without the consent of the holders of a
majority of the outstanding shares of Series A Preferred Stock and any
other series of Preferred Stock granted similar voting rights, voting
together as a single class on an as converted basis, merge or
consolidate with or into any other corporation or entity in any merger
or consolidation in which the Common Stock is converted into cash or
other consideration unless each share of Series A Preferred Stock and
each share of such other series of Preferred Stock is converted into
cash or other consideration equal to the greater of (1) the aggregate
amount of such cash or other consideration payable on such shares in
connection with a liquidation, dissolution or winding up of the
Corporation (excluding any amount payable on a parity with the Common
Stock on an as converted basis) or (2) the amount that would be
payable on such shares on a liquidation, dissolution or winding up of
the Corporation immediately prior to such merger or consolidation.
2. That the proposed amendment has been duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware and that notice of the taking of such action by written consent has
been given as provided in Section 228 of the General Corporation Law of the
State of Delaware.
The Corporation has caused this Certificate of Amendment of Restated
Certificate of Incorporation to be signed by Glenn C. Myers, its Vice President,
and attested by George H. Hohnsbeen II, its Assistant Secretary, this ______ day
of December 1993.
VERY VISUAL SOFTWARE, INC.
By:__________________________________
Vice President of Finance
Attest:
By: ____________________________________________
Corporate Assistant Secretary
CERTIFICATE OF AMENDMENT
3 OF RESTATED CERTIFICATE OF INCORPORATION
<PAGE>
----------------------------------------------
CERTIFICATE OF DESIGNATION
OF
VISIGENIC SOFTWARE, INC.
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
----------------------------------------------
SERIES B PREFERRED STOCK
Visigenic Software, Inc., a Delaware corporation (the "Corporation"),
formerly known as Very Visual Software, Inc., hereby certifies that the
following resolution has been duly adopted by the Board of Directors of the
Corporation:
RESOLVED, that pursuant to the authority expressly granted to and vested in
the Board of Directors of the Corporation (the "Board") by the provisions of the
Restated Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation"), there hereby is created, out of the 4,000,000 shares of
Preferred Stock, par value $0.001 per share, of the Corporation authorized in
Article FOURTH of the Certificate of Incorporation (the "Preferred Stock"), a
series of the Preferred Stock of the Corporation consisting of 1,750,000 shares,
which series shall have the following powers, designations, preferences and
relative, participating, optional and other rights, and the following
qualifications, limitations and restrictions:
1. Designation and Amount.
----------------------
This series of Preferred Stock shall be designated the Series B Preferred
Stock (the "Series B Preferred Stock"), and the authorized number of shares
constituting such series shall be 1,750,000. The par value of the Series B
Preferred Stock shall be $0.001 per share.
2. Dividend Rights of Series A Preferred Stock. Subject to the
-------------------------------------------
dividend provisions fixed by the Board for any series of Preferred Stock
designated by the Board in the future, the holders of Series B Preferred Stock
shall be entitled to receive dividends, out of any assets at the time legally
available therefor, when and as declared by the Board. No cash dividends shall
be paid on any Common Stock or Series A Preferred Stock of the Corporation (the
"Series A Preferred Stock") unless at the same time a dividend is paid with
respect to all outstanding shares of Series B Preferred Stock in an amount for
each such share of Series B Preferred Stock equal to the aggregate amount of
such dividends payable on that number of shares of Common Stock into which each
such share of Series B Preferred Stock could then be converted.
1 CERTIFICATE OF DESIGNATION
<PAGE>
3. Preference on Liquidation.
-------------------------
Subject to the liquidation preferences of any series of Preferred
Stock other than the Series B Preferred Stock, including, without limitation,
any liquidation preference that provides for payments to any series of Preferred
Stock or the Common Stock prior to or on a parity with any payment to holders of
the Series B Preferred Stock provided for below (including any preferences that
provide for additional parity or non-parity payments to the holders of the
Series B Preferred Stock), in the event of any liquidation, dissolution or
winding up of the Corporation, distributions to holders of Series B Preferred
Stock, holders of Series A Preferred Stock and holders of Common Stock shall be
made in the following manner:
(a) The holders of Series B Preferred Stock shall be entitled
to receive, prior and in preference to any distribution of any of the assets of
the Corporation to the holders of the Common Stock by reason of their ownership
of such stock, the amount of $2.00 per share for each share of Series B
Preferred Stock then held by them, adjusted for any stock split, stock
combination, stock distribution or stock dividend with respect to such shares.
The Series B Preferred Stock shall rank on a parity with the Series A Preferred
Stock with respect to subsection (a) of Section 3 of the Certificate of
Designation of Series A Preferred Stock filed March 31, 1993, as amended (the
"Series A Certificate"), as to the distribution of assets and funds upon
dissolution, liquidation or winding up of the Corporation, with the effect
stated in said subsection (a).
(b) After payment in full to (i) the holders of Series B
Preferred Stock of all amounts exclusively payable on or with respect to said
shares pursuant to subsection (a) of this Section 3, (ii) the holders of Series
A Preferred Stock of all amounts exclusively payable on or with respect to said
shares pursuant to subsection (a) of Section 3 of the Series A Certificate, and
(iii) the holders of Common Stock of all amounts exclusively payable on or with
respect to said shares pursuant to subsection (b) of Section 3 of the Series A
Certificate, the holders of the Series A Preferred Stock and the holders of the
Common Stock shall be entitled to receive, prior and in preference to any
further distribution of any of the assets of the Corporation to its
stockholders, the amount of $0.80 per share for each share of such stock then
held by them, adjusted for any stock split, stock combination, stock
distribution or stock dividend with respect to such shares. If the assets and
funds available for distribution among the holders of the Common Stock and among
the holders of any series of Preferred Stock ranking on a parity with the Common
Stock with respect to this subsection (b) of Section 3 as to the distribution of
assets upon such dissolution, liquidation or winding up shall be insufficient to
permit the payment to such holders of their full liquidation payments, then the
entire remaining assets and funds of the Corporation legally available for such
distribution shall be distributed ratably among such holders in proportion to
their aggregate preferential amounts.
(c) The Series B Preferred Stock shall rank on a parity with
the Series A Preferred Stock and the Common Stock with respect to subsection (c)
of Section 3 of the Series A Certificate, as to the distribution of remaining
assets upon
2 CERTIFICATE OF DESIGNATION
<PAGE>
dissolution, liquidation or winding up of the Corporation, with the effect
stated in said subsection (c).
4. Redemption.
----------
(a) At any time and from time to time after December 17, 1994, the
Corporation may, at the option of the Board, and out of assets at the time
legally available therefor, redeem all or part (selected pro rata from among all
of the shares of Series B Preferred Stock) of the outstanding shares of Series B
Preferred Stock at the redemption price set forth in Section 4(b) below,
provided that the Corporation shall give written notice by mail, postage
prepaid, to the holders of the Series B Preferred Stock to be redeemed at least
twenty (20) days prior to the date specified for redemption (a "Redemption
Date"). The notice shall further call upon such holders to surrender to the
Corporation on or before the Redemption Date at the place designated in the
notice such holder's certificate or certificates representing the shares to be
redeemed and shall state that, in lieu of redemption, a holder may, prior to the
Redemption Date, convert its Series B Preferred Stock into Common Stock in
accordance with Section 6 below. On or after the Redemption Date, each holder
of shares of Series B Preferred Stock called for redemption shall surrender the
certificate evidencing such shares to the Corporation, except that such number
of shares shall be reduced by the number of shares which have been converted
into Common Stock between the date of notice and the Redemption Date, at the
place designated in such notice and shall thereupon be entitled to receive
payment of the Redemption Price.
(b) The Series B Preferred Stock may be redeemed at a cash price equal to
$2.00 per share, adjusted for any stock split, stock combination, stock
distribution or stock dividend with respect to such shares.
(c) From and after the Redemption Date, unless there shall have been a
default in payment of the Redemption Price, all rights of the holders with
respect to such redeemed shares of Series B Preferred Stock (except the right to
receive the Redemption Price without interest upon surrender of their
certificate) shall cease and such shares shall not thereafter be transferred on
the books of this Corporation or be deemed to be outstanding for any purpose
whatsoever.
(d) If the funds of the Corporation legally available for redemption of
shares of Series B Preferred Stock on the Redemption Date are insufficient to
redeem the total number of shares of Series B Preferred Stock to be redeemed,
the Corporation shall use those funds which are legally available to redeem the
maximum possible number of such shares ratably among the holders of such shares
to be redeemed. The shares of Series B Preferred Stock not redeemed shall
remain outstanding and entitled to all the rights and preferences provided
herein.
5. Voting.
------
(a) Except as otherwise required by law, and except as otherwise provided
in the last sentence of Article FOURTH of the Certificate of Incorporation and
in Article
3 CERTIFICATE OF DESIGNATION
<PAGE>
SIXTH of the Certificate of Incorporation, the shares of Series B Preferred
Stock shall be voted together with the Common Stock at any annual or special
meeting of the stockholders of the Corporation, or may act by written consent in
the same manner as the Common Stock, and shall have the voting rights and powers
equal to the voting rights of the Common Stock, upon the following basis: each
holder of shares of Series B Preferred Stock shall be entitled to such number of
votes for the shares of Series B Preferred Stock held by him on the record date
for such meeting or action to be taken by written consent, as shall be equal to
the nearest whole number of shares of the Common Stock into which such holder's
shares of Series B Preferred Stock are convertible immediately after the close
of business on the record date for such meeting or action to be taken by written
consent, as the case may be. Holders of Series B Preferred Stock will be
entitled to vote on such basis with holders of Common Stock in the election of
the Minority Directors pursuant to Article SIXTH of the Certificate of
Incorporation.
(b) The Corporation shall not, without the consent of the holders of a
majority of the outstanding shares of Series B Preferred Stock and any other
series of Preferred Stock granted similar voting rights, voting together as a
single class on an as converted basis, merge or consolidate with or into any
other corporation or entity in any merger or consolidation in which the Common
Stock is converted into cash or other consideration unless each share of Series
B Preferred Stock and each share of such other series of Preferred Stock is
converted into cash or other consideration equal to the greater of (1) the
aggregate amount of such cash or other consideration payable on such shares in
connection with a liquidation, dissolution or winding up of the Corporation
(excluding any amount payable on a parity with the Common Stock on an as
converted basis) or (2) the amount that would be payable on such shares on a
liquidation, dissolution or winding up of the Corporation immediately prior to
such merger or consolidation.
6. Conversion Rights. The holders of Series B Preferred Stock shall
-----------------
have conversion rights as follows:
(a) Each share of Series B Preferred Stock shall be
convertible, at the option of the holder thereof, at any time at the principal
office of the Corporation or any transfer agent for such shares, into fully paid
and nonassessable shares of Common Stock of the Corporation. The number of
shares of Common Stock into which each share of Series B Preferred Stock may be
converted shall be determined by dividing $2.00 by the Conversion Price
determined as hereinafter provided in effect at the time of the conversion. The
Conversion Price per share at which shares of Common Stock shall be initially
issuable upon conversion of any shares of Series B Preferred Stock shall be
$2.00, subject to adjustment as provided herein.
(b) Each share of Series B Preferred Stock shall be converted
into Common Stock automatically in the manner provided herein upon the earlier
to occur of (i) the time holders of a majority of the outstanding shares of all
series of Preferred Stock which are subject to conversion upon the written
consent of holders of a majority of all outstanding shares of Preferred Stock
consent in writing to the conversion of all such outstanding Preferred Stock, or
(ii) immediately prior to the closing of the sale
4 CERTIFICATE OF DESIGNATION
<PAGE>
of securities of the Corporation pursuant to a firm commitment underwritten
public offering registered with the Securities and Exchange Commission, other
than on Form S-4, or Form S-18, or any successor form thereto, with a public
offering price of not less than $3.33 per share (adjusted to reflect subsequent
stock dividends, stock splits, recapitalization and the like) and with aggregate
gross proceeds of not less than $5,000,000.
(c) The holder of any shares of Series B Preferred Stock may
exercise the conversion right specified in Section 6(a) by surrendering to the
Corporation or any transfer agent of the Corporation the certificate or
certificates for the shares to be converted, accompanied by written notice
specifying the number of shares to be converted. Upon the occurrence of any
event specified in Section 6(b), the outstanding shares of Series B Preferred
Stock shall be converted automatically without any further action by the holders
of such shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided that the
Corporation shall not be obligated to issue to any holder certificates
evidencing the shares of Common Stock issuable upon such conversion unless
certificates evidencing such shares of Series B Preferred Stock are delivered
either to the Corporation or any transfer agent of the Corporation. Conversion
shall be deemed to have been effected on the date when delivery of notice of an
election to convert and of certificates for shares being converted is made or on
the date of the occurrence of any event specified in Section 6(b), as the case
may be, and such date is referred to herein as the "Conversion Date." As
promptly as practicable thereafter (and after surrender of the certificate or
certificates representing shares of Series B Preferred Stock to the Corporation
or any transfer agent of the Corporation in the case of conversions pursuant to
Section 6(b)) the Corporation shall issue and deliver to such holder a
certificate or certificates for the number of full shares of Common Stock to
which such holder is entitled. No fractional shares of Common Stock shall be
issued by the Corporation and all such fractional shares shall be disregarded.
In lieu thereof, the Corporation shall pay in cash the fair market value of any
such fractional share as determined by the Board. The person in whose name the
certificate or certificates for Common Stock are to be issued shall be deemed to
have become a holder of record of such Common Stock on the applicable Conversion
Date. Upon conversion of only a portion of the number of shares covered by a
certificate representing shares of Series B Preferred Stock surrendered for
conversion (in the case of conversion pursuant to Section 6(a)), the Corporation
shall issue and deliver to or upon the written order of the holder of the
certificate so surrendered for conversion, at the expense of the Corporation, a
new certificate covering the number of shares of Series B Preferred Stock
representing the unconverted portion of the certificate so surrendered.
(d) In case the Corporation shall at any time (i) subdivide
the outstanding Common Stock, or (ii) issue a stock dividend on its outstanding
Common Stock, the number of shares of Common Stock issuable upon conversion of
Series B Preferred Stock immediately prior to such subdivision or the issuance
of such stock dividend shall be proportionately increased by the same ratio as
the subdivision or dividend (with appropriate adjustments in the Conversion
Price of Series B Preferred Stock). In case the Corporation shall at any time
combine its outstanding Common
5 CERTIFICATE OF DESIGNATION
<PAGE>
Stock, the number of shares of Common Stock issuable upon conversion of Series B
Preferred Stock immediately prior to such combination shall be proportionately
decreased by the same ratio as the combination (with appropriate adjustments in
the Conversion Price of Series B Preferred Stock). All such adjustments
described herein shall be effective at the close of business on the date of such
subdivision, stock dividend or combination, as the case may be.
(e) In case of any merger (other than a merger in which the
Corporation is not the continuing or surviving entity) or any reclassification
of the Common Stock of the Corporation, each share of the Series B Preferred
Stock shall thereafter be convertible into that number of shares of stock or
other securities or property to which a holder of the number of shares of Common
Stock issuable upon conversion of a share of Series B Preferred Stock
immediately prior to such merger or reclassification would have been entitled
upon such merger or reclassification. In any such case, appropriate adjustment
(as determined by the Board) shall be made in the application of the provisions
herein set forth with respect to the rights and interests thereafter of the
holders of Series B Preferred Stock, such that the provisions set forth herein
shall thereafter be applicable, as nearly as reasonably may be, in relation to
any share of stock or other property thereafter issuable upon conversion.
(f) The Corporation shall at all times reserve and keep
available, out of its authorized but unissued Common Stock, solely for the
purpose of effecting the conversion of Series B Preferred Stock, the full number
of shares of Common Stock deliverable upon the conversion of all Series B
Preferred Stock from time to time outstanding. The Corporation shall from time
to time (subject to obtaining necessary director and stockholder
authorizations), in accordance with the laws of the State of Delaware, increase
the authorized amount of its Common Stock if at any time the authorized number
of shares of Common Stock remaining unissued shall not be sufficient to permit
the conversion of all of the shares of Series B Preferred Stock at the time
outstanding.
(g) Upon any conversion of Series B Preferred Stock pursuant
to this Section 6, the shares of Series B Preferred Stock which are converted
shall not be reissued. Upon conversion of all of the then outstanding Series B
Preferred Stock pursuant to this Section 6 and upon the taking of any action
required by law, all matters set forth in this Certificate of Designation shall
be eliminated from the Certificate of Incorporation, shares of Series B
Preferred Stock shall not be deemed outstanding for any purpose whatsoever and
all such shares shall revert to the status of authorized and unissued shares of
Preferred Stock.
(h) Upon the occurrence of each adjustment or readjustment of
the Conversion Price for Series B Preferred Stock pursuant to this Section 6,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series B Preferred Stock a certificate setting forth such adjustment
or readjustment showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the reasonable written
request at any time of any holder of Series B
6 CERTIFICATE OF DESIGNATION
<PAGE>
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, and (ii) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of Series B Preferred Stock.
(i) Any notices required by the provisions of this Section 6 to be
given to the holders of shares of Series B Preferred Stock shall be deemed given
if deposited in the United States mail, first class, postage prepaid and
addressed to each holder of record at its address appearing on the books of the
Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed by its Vice President, and attested by its Assistant
Secretary, this ______ day of December, 1993.
VISIGENIC SOFTWARE, INC.
By:__________________________________
Glenn C. Myers,
Vice President of Finance
Attest:
By: __________________________________
George H. Hohnsbeen II
Corporate Assistant Secretary
7 CERTIFICATE OF DESIGNATION
<PAGE>
- --------------------------------------------------------------------------------
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
VISIGENIC SOFTWARE, INC.
- --------------------------------------------------------------------------------
Visigenic Software, Inc., a Delaware corporation (the "Corporation"),
hereby certifies:
1. That the Corporation's Board of Directors has duly adopted the
following resolutions:
RESOLVED, that the first paragraph of Article FOURTH of the Restated
------
Certificate of Incorporation is hereby amended to read in full as follows:
FOURTH: The Corporation is authorized to issue a total of fifteen
------
million (15,000,000) shares of stock in two classes designated
respectively "Preferred Stock" and "Common Stock." The total number of
shares of Preferred Stock the Corporation shall have authority to
issue is five million (5,000,000), par value one-tenth of one cent
($.001) per share, and the total number of shares of Common Stock the
Corporation shall have authority to issue is ten million (10,000,000),
par value one-tenth of one cent ($.001) per share.
2. That the proposed amendment has been duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware and that notice of the taking of such action by written consent has
been given as provided in Section 228 of the General Corporation Law of the
State of Delaware.
The Corporation has caused this Certificate of Amendment of Restated
Certificate of Incorporation to be signed by Roger J. Sippl, its President, and
attested by Glenn C. Myers, its Secretary, this ______ day of April 1994.
VISIGENIC SOFTWARE, INC.
By:________________________________
President
Attest:
By: _____________________________________________
Corporate Secretary
CERTIFICATE OF AMENDMENT OF RESTATED
CERTIFICATE OF INCORPORATION
<PAGE>
---------------------------------------------
CERTIFICATE OF INCREASE
OF
SERIES B PREFERRED STOCK
---------------------------------------------
Visigenic Software, Inc., a Delaware corporation (the "Corporation"),
hereby certifies:
1. That the Restated Certificate of Incorporation of the Corporation was
filed in the office of the Secretary of State of Delaware on March 30, 1993, and
a Certificate of Designation of the Corporation's Series B Preferred Stock,
$0.001 par value per share (the "Series B Preferred Stock"), which designated
1,750,000 shares of the Corporation's class of Preferred Stock, $0.001 par value
per share, as Series B Preferred Stock, was filed in said office of the
Secretary of State on December 17, 1993.
2. That the Board of Directors of the Corporation duly adopted a
resolution authorizing and directing an increase in the authorized number of
shares of Series B Preferred Stock from 1,750,000 shares to 3,000,000 shares, in
accordance with the provisions of Section 151 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Increase
to be signed by Roger J. Sippl, its President, and attested by Glenn C. Myers,
its Secretary, this ______ day of April 1994.
VISIGENIC SOFTWARE, INC.
By:__________________________________
President
Attest:
By: __________________________________
Corporate Secretary
CERTIFICATE OF INCREASE
1 OF SERIES B PREFERRED STOCK
<PAGE>
-----------------------------
CERTIFICATE OF INCREASE
OF
SERIES B PREFERRED STOCK
-----------------------------
Visigenic Software, Inc., a Delaware corporation (the "Corporation"),
hereby certifies:
1. That the Restated Certificate of Incorporation of the Corporation was
filed in the office of the Secretary of State of Delaware on March 30, 1993 (the
"Restated Certificate"); a Certificate of Designation of the Corporation's
Series B Preferred Stock, $0.001 par value per share (the "Series B Preferred
Stock"), which designated 1,750,000 shares of the Corporation's class of
Preferred Stock, $0.001 par value per share, as Series B Preferred Stock, was
filed in said office of the Secretary of State on December 17, 1993; a
Certificate of Amendment of the Restated Certificate, which increased the
authorized numbers of shares of Preferred Stock of the Corporation to 5,000,000
was filed in said office of the Secretary of State on April 28, 1994; and a
Certificate of Increase of Series B Preferred Stock, which increased the
authorized number of shares of Series B Preferred Stock to 3,000,000 shares was
filed in said office of the Secretary of State on April 28, 1994.
2. That the Board of Directors of the Corporation duly adopted a
resolution authorizing and directing an increase in the authorized number of
shares of Series B Preferred Stock from 3,000,000 shares to 6,000,000 shares, in
accordance with the provisions of Section 151 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Increase
to be signed by George H. Hohnsbeen II, its Assistant Secretary, this ______ day
of May 1995.
VISIGENIC SOFTWARE, INC.
By:
---------------------------------------
Assistant Secretary
CERTIFICATE OF INCREASE
1 OF SERIES B PREFERRED STOCK
<PAGE>
------------------------
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
VISIGENIC SOFTWARE, INC.
------------------------
Visigenic Software, Inc., a Delaware corporation (the "Corporation"),
hereby certifies:
1. That the Corporation's Board of Directors has duly adopted the
following resolutions:
RESOLVED, that the first paragraph of Article FOURTH of the Restated
------
Certificate of Incorporation is hereby amended to read in full as follows:
FOURTH: The Corporation is authorized to issue a total of twenty-four
------
million (24,000,000) shares of stock in two classes designated
respectively "Preferred Stock" and "Common Stock." The total number
of shares of Preferred Stock the Corporation shall have authority to
issue is eight million (8,000,000), par value one-tenth of one cent
($.001) per share, and the total number of shares of Common Stock the
Corporation shall have authority to issue is sixteen million
(16,000,000), par value one-tenth of one cent ($.001) per share.
RESOLVED FURTHER, that the Restated Certificate of Incorporation is hereby
amended to delete section 4. (entitled "Redemption") from the Certificate
of Designation of Series A Preferred Stock filed in the office of the
Secretary of State of the State of Delaware on March 31, 1993, and to
delete section 4. (entitled "Redemption") from the Certificate of
Designation of Series B Preferred Stock filed in the office of the
Secretary of State of the State of Delaware on December 17, 1993.
2. That the proposed amendment has been duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware and that notice of the taking of such action by written consent has
been given as provided in Section 228 of the General Corporation Law of the
State of Delaware.
The Corporation has caused this Certificate of Amendment of Restated
Certificate of Incorporation to be signed by Mark Hanson, its President, this
day of May 1995.
- ------
VISIGENIC SOFTWARE, INC.
By:
------------------------------
President
<PAGE>
--------------------------
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
VISIGENIC SOFTWARE, INC.
--------------------------
Visigenic Software, Inc., a Delaware corporation (the "Corporation"),
hereby certifies:
1. That the Corporation's Board of Directors has duly adopted the
following resolutions:
RESOLVED, that the first paragraph of Article FOURTH of the Restated
------
Certificate of Incorporation is hereby amended to read in full as follows:
FOURTH: The Corporation is authorized to issue a total of forty
------
million (40,000,000) shares of stock in two classes designated
respectively "Preferred Stock" and "Common Stock." The total number
of shares of Preferred Stock the Corporation shall have authority to
issue is ten million (10,000,000), par value one-tenth of one cent
($.001) per share, and the total number of shares of Common Stock the
Corporation shall have authority to issue is thirty million
(30,000,000), par value one-tenth of one cent ($.001) per share.
RESOLVED, that Article SIXTH of the Restated Certificate of Incorporation
-----
is hereby amended to read in full as follows:
SIXTH: The authorized number of directors initially shall be one (1)
-----
and, thereafter, shall be fixed from time to time exclusively by the
Board pursuant to a resolution adopted by a majority of the total
number of authorized directors (whether or not there exist any
vacancies in previously authorized directorships at the time any such
resolution is presented to the Board for adoption). The holders of
Common Stock will be entitled to elect, voting together as a single
group with the holders of any series of Preferred Stock that is
entitled to vote with the Common Stock in such election, all directors
(other than any directors who are separately elected by any series of
Preferred Stock ("Preferred Directors")). In any election of
directors other than Preferred Directors by the stockholders of the
Corporation, each holder of shares of Common Stock shall have one vote
per share, and each holder of shares of any series of Preferred Stock
that has the right to vote in such election shall be entitled to such
number of votes as is set forth in the certificate establishing the
powers, preferences and rights of such series. Vacancies and
newly-created directorships resulting from any increase in the authorized number
of directors shall only be filled by the vote of a majority of directors elected
by holders of shares of the class, classes or series of stock of the Corporation
entitled to elect directors to such vacant or newly-created directorship.
CERTIFICATE OF AMENDMENT OF RESTATED
CERTIFICATE OF INCORPORATION
1
<PAGE>
2. That the proposed amendment has been duly adopted in accordance with
the provisions of Section 242 of the General Corporation law of the State of
Delaware and that notice of the taking of such action by written consent has
been given as provided in Section 228 of the General Corporation Law of the
State of Delaware.
The Corporation has caused this Certificate of Amendment of Restated
Certificate of Incorporation to be signed by George H. Hohnsbeen II, its
Assistant Secretary, this day of May 1996.
------
VISIGENIC SOFTWARE, INC.
By: ________________________________
Assistant Secretary
CERTIFICATE OF AMENDMENT OF RESTATED
CERTIFICATE OF INCORPORATION
2
<PAGE>
--------------------------------------------------------
CERTIFICATE OF DESIGNATION
OF
VISIGENIC SOFTWARE, INC.
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
--------------------------------------------------------
SERIES C PREFERRED STOCK
Visigenic Software, Inc., a Delaware corporation (the "Corporation"),
hereby certifies that the following resolution has been duly adopted by the
Board of Directors of the Corporation:
RESOLVED, that pursuant to the authority expressly granted to and vested in
the Board of Directors of the Corporation (the "Board") by the provisions of the
Restated Certificate of Incorporation of the Corporation, as amended (the
"Certificate of Incorporation"), there hereby is created, out of the 10,000,000
shares of Preferred Stock, par value $0.001 per share, of the Corporation
authorized in Article FOURTH of the Certificate of Incorporation (the "Preferred
Stock"), a series of the Preferred Stock of the Corporation consisting of
1,000,000 shares, which series shall have the following powers, designations,
preferences and relative, participating, optional and other rights, and the
following qualifications, limitations and restrictions:
1. Designation and Amount.
----------------------
This series of Preferred Stock shall be designated the Series C Preferred
Stock (the "Series C Preferred Stock"), and the authorized number of shares
constituting such series shall be 1,000,000. The par value of the Series C
Preferred Stock shall be $0.001 per share.
2. Dividend Rights of Series C Preferred Stock.
-------------------------------------------
Subject to the dividend provisions fixed by the Board for any series of
Preferred Stock designated by the Board in the future, the holders of Series C
Preferred Stock shall be entitled to receive dividends, out of any assets at the
time legally available therefor, when and as declared by the Board. No cash
dividends shall be paid on any Common Stock, Series A Preferred Stock (the
"Series A Preferred Stock") or Series B Preferred Stock of the Corporation (the
"Series B Preferred Stock") unless at the same time a dividend is paid with
respect to all outstanding shares of Series C Preferred Stock in an amount for
each such share of Series C Preferred Stock equal to the aggregate amount of
such dividends payable on that number of shares of Common Stock into which each
such share of Series C Preferred Stock could then be converted.
1
<PAGE>
3. Preference on Liquidation.
-------------------------
Subject to the liquidation preferences of any series of
Preferred Stock other than the Series C Preferred Stock, including, without
limitation, any liquidation preference that provides for payments to any series
of Preferred Stock or the Common Stock prior to or on a parity with any payment
to holders of the Series C Preferred Stock provided for below (including any
preferences that provide for additional parity or non-parity payments to the
holders of the Series C Preferred Stock), in the event of any liquidation,
dissolution or winding up of the Corporation, distributions to holders of Series
C Preferred Stock, holders of Series B Preferred Stock, holders of Series A
Preferred Stock and holders of Common Stock shall be made in the following
manner:
(a) The holders of Series C Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets of the
Corporation to the holders of the Common Stock by reason of their ownership of
such stock, the amount of $4.50 per share for each share of Series C Preferred
Stock then held by them, adjusted for any stock split, stock combination, stock
distribution or stock dividend with respect to such shares. The Series C
Preferred Stock shall rank on a parity with the Series A Preferred Stock with
respect to subsection (a) of Section 3 of the Certificate of Designation of
Series A Preferred Stock filed March 31, 1993, as amended (the "Series A
Certificate"), as to the distribution of assets and funds upon dissolution,
liquidation or winding up of the Corporation, with the effect stated in said
subsection (a).
(b) After payment in full to (i) the holders of Series C
Preferred Stock of all amounts exclusively payable on or with respect to said
shares pursuant to subsection (a) of this Section 3, (ii) the holders of Series
B Preferred Stock of all amounts exclusively payable on or with respect to said
shares pursuant to subsection (a) of Section 3 of the Certificate of Designation
of Series B Preferred Stock filed December 17, 1993, as amended (the "Series B
Certificate"), (iii) the holders of Series A Preferred Stock of all amounts
exclusively payable on or with respect to said shares pursuant to subsection (a)
of Section 3 of the Series A Certificate, (iv) the holders of Common Stock of
all amounts exclusively payable on or with respect to said shares pursuant to
subsection (b) of Section 3 of the Series A Certificate, and (v) the holders of
Series A Preferred Stock and the holders of Common Stock of all amounts
exclusively payable on or with respect to said shares pursuant to subsection (b)
of Section 3 of the Series B Certificate, the Series C Preferred Stock shall
rank on a parity with the Series A Preferred Stock and the Common Stock with
respect to subsection (c) of Section 3 of the Series A Certificate, as to the
distribution of remaining assets upon dissolution, liquidation or winding up of
the Corporation, with the effect stated in said subsection (c).
4. Voting.
------
(a) Except as otherwise required by law, and except as otherwise
provided in the last sentence of Article FOURTH of the Certificate of
Incorporation, the shares of Series C Preferred Stock shall be voted together
with the Common Stock at any annual or special meeting of the stockholders of
the Corporation, or may act by written
2
<PAGE>
consent in the same manner as the Common Stock, and shall have the voting rights
and powers equal to the voting rights of the Common Stock, upon the following
basis: each holder of shares of Series C Preferred Stock shall be entitled to
such number of votes for the shares of Series C Preferred Stock held by him on
the record date for such meeting or action to be taken by written consent, as
shall be equal to the nearest whole number of shares of the Common Stock into
which such holder's shares of Series C Preferred Stock are convertible
immediately after the close of business on the record date for such meeting or
action to be taken by written consent, as the case may be. Holders of Series C
Preferred Stock will be entitled to vote on such basis with holders of Common
Stock in the election of all directors other than Preferred Directors pursuant
to Article SIXTH of the Certificate of Incorporation.
(b) The Corporation shall not, without the consent of the
holders of a majority of the outstanding shares of Series C Preferred Stock and
any other series of Preferred Stock granted similar voting rights, voting
together as a single class on an as converted basis, merge or consolidate with
or into any other corporation or entity in any merger or consolidation in which
the Common Stock is converted into cash or other consideration unless each share
of Series C Preferred Stock and each share of such other series of Preferred
Stock is converted into cash or other consideration equal to the greater of (1)
the aggregate amount of such cash or other consideration payable on such shares
in connection with a liquidation, dissolution or winding up of the Corporation
(excluding any amount payable on a parity with the Common Stock on an as
converted basis) or (2) the amount that would be payable on such shares on a
liquidation, dissolution or winding up of the Corporation immediately prior to
such merger or consolidation.
5. Conversion Rights. The holders of Series C Preferred Stock
-----------------
shall have conversion rights as follows:
(a) Each share of Series C Preferred Stock shall be
convertible, at the option of the holder thereof, at any time at the principal
office of the Corporation or any transfer agent for such shares, into fully paid
and nonassessable shares of Common Stock of the Corporation. The number of
shares of Common Stock into which each share of Series C Preferred Stock may be
converted shall be determined by dividing $4.50 by the Conversion Price
determined as hereinafter provided in effect at the time of the conversion. The
Conversion Price per share at which shares of Common Stock shall be initially
issuable upon conversion of any shares of Series C Preferred Stock shall be
$4.50, subject to adjustment as provided herein.
(b) Each share of Series C Preferred Stock shall be converted
into Common Stock automatically in the manner provided herein upon the earlier
to occur of (i) the time holders of a majority of the outstanding shares of all
series of Preferred Stock which are subject to conversion upon the written
consent of holders of a majority of all outstanding shares of Preferred Stock
consent in writing to the conversion of all such outstanding Preferred Stock, or
(ii) immediately prior to the closing of the sale of securities of the
Corporation pursuant to a firm commitment underwritten public offering
registered with the Securities and Exchange Commission, other than on
Form S-
3
<PAGE>
S-4, or Form S-18, or any successor form thereto, with a public offering price
of not less than $6.00 per share (adjusted to reflect subsequent stock
dividends, stock splits, recapitalization and the like) and with aggregate gross
proceeds of not less than $5,000,000.
(c) The holder of any shares of Series C Preferred Stock may
exercise the conversion right specified in Section 5(a) by surrendering to the
Corporation or any transfer agent of the Corporation the certificate or
certificates for the shares to be converted, accompanied by written notice
specifying the number of shares to be converted. Upon the occurrence of any
event specified in Section 5(b), the outstanding shares of Series C Preferred
Stock shall be converted automatically without any further action by the holders
of such shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided that the
Corporation shall not be obligated to issue to any holder certificates
evidencing the shares of Common Stock issuable upon such conversion unless
certificates evidencing such shares of Series C Preferred Stock are delivered
either to the Corporation or any transfer agent of the Corporation. Conversion
shall be deemed to have been effected on the date when delivery of notice of an
election to convert and of certificates for shares being converted is made or on
the date of the occurrence of any event specified in Section 5(b), as the case
may be, and such date is referred to herein as the "Conversion Date." As
promptly as practicable thereafter (and after surrender of the certificate or
certificates representing shares of Series C Preferred Stock to the Corporation
or any transfer agent of the Corporation in the case of conversions pursuant to
Section 5(b)) the Corporation shall issue and deliver to such holder a
certificate or certificates for the number of full shares of Common Stock to
which such holder is entitled. No fractional shares of Common Stock shall be
issued by the Corporation and all such fractional shares shall be disregarded.
In lieu thereof, the Corporation shall pay in cash the fair market value of any
such fractional share as determined by the Board. The person in whose name the
certificate or certificates for Common Stock are to be issued shall be deemed to
have become a holder of record of such Common Stock on the applicable Conversion
Date. Upon conversion of only a portion of the number of shares covered by a
certificate representing shares of Series C Preferred Stock surrendered for
conversion (in the case of conversion pursuant to Section 5(a)), the Corporation
shall issue and deliver to or upon the written order of the holder of the
certificate so surrendered for conversion, at the expense of the Corporation, a
new certificate covering the number of shares of Series C Preferred Stock
representing the unconverted portion of the certificate so surrendered.
(d) In case the Corporation shall at any time (i) subdivide the
outstanding Common Stock, or (ii) issue a stock dividend on its outstanding
Common Stock, the number of shares of Common Stock issuable upon conversion of
Series C Preferred Stock immediately prior to such subdivision or the issuance
of such stock dividend shall be proportionately increased by the same ratio as
the subdivision or dividend (with appropriate adjustments in the Conversion
Price of Series C Preferred Stock). In case the Corporation shall at any time
combine its outstanding Common Stock, the number of shares of Common Stock
issuable upon conversion of Series C Preferred Stock immediately prior to such
combination shall be proportionately
4
<PAGE>
decreased by the same ratio as the combination (with appropriate adjustments in
the Conversion Price of Series C Preferred Stock). All such adjustments
described herein shall be effective at the close of business on the date of such
subdivision, stock dividend or combination, as the case may be.
(e) In case of any merger (other than a merger in which the
Corporation is not the continuing or surviving entity) or any reclassification
of the Common Stock of the Corporation, each share of the Series C Preferred
Stock shall thereafter be convertible into that number of shares of stock or
other securities or property to which a holder of the number of shares of Common
Stock issuable upon conversion of a share of Series C Preferred Stock
immediately prior to such merger or reclassification would have been entitled
upon such merger or reclassification. In any such case, appropriate adjustment
(as determined by the Board) shall be made in the application of the provisions
herein set forth with respect to the rights and interests thereafter of the
holders of Series C Preferred Stock, such that the provisions set forth herein
shall thereafter be applicable, as nearly as reasonably may be, in relation to
any share of stock or other property thereafter issuable upon conversion.
(f) The Corporation shall at all times reserve and keep
available, out of its authorized but unissued Common Stock, solely for the
purpose of effecting the conversion of Series C Preferred Stock, the full number
of shares of Common Stock deliverable upon the conversion of all Series C
Preferred Stock from time to time outstanding. The Corporation shall from time
to time (subject to obtaining necessary director and stockholder
authorizations), in accordance with the laws of the State of Delaware, increase
the authorized amount of its Common Stock if at any time the authorized number
of shares of Common Stock remaining unissued shall not be sufficient to permit
the conversion of all of the shares of Series C Preferred Stock at the time
outstanding.
(g) Upon any conversion of Series C Preferred Stock pursuant to
this Section 5, the shares of Series C Preferred Stock which are converted shall
not be reissued. Upon conversion of all of the then outstanding Series C
Preferred Stock pursuant to this Section 6 and upon the taking of any action
required by law, all matters set forth in this Certificate of Designation shall
be eliminated from the Certificate of Incorporation, shares of Series C
Preferred Stock shall not be deemed outstanding for any purpose whatsoever and
all such shares shall revert to the status of authorized and unissued shares of
Preferred Stock.
(h) Upon the occurrence of each adjustment or readjustment of
the Conversion Price for Series C Preferred Stock pursuant to this Section 5,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series C Preferred Stock a certificate setting forth such adjustment
or readjustment showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the reasonable written
request at any time of any holder of Series C Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, and (ii) the number of shares of Common
5
<PAGE>
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of Series C Preferred Stock.
(i) Any notices required by the provisions of this Section 5 to
be given to the holders of shares of Series C Preferred Stock shall be deemed
given if deposited in the United States mail, first class, postage prepaid and
addressed to each holder of record at its address appearing on the books of the
Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed by George H. Hohnsbeen II, its Assistant Secretary,
this ______ day of May, 1996.
VISIGENIC SOFTWARE, INC.
By:
--------------------------------------
Assistant Secretary
6
<PAGE>
CERTIFICATE OF MERGER
OF
POST MODERN COMPUTING TECHNOLOGIES INC.
(a California corporation)
INTO
VISIGENIC SOFTWARE, INC.
(a Delaware corporation)
The undersigned corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware, does hereby certify:
First: That the name and state of incorporation of each of the constituent
corporations of the merger is as follows:
<TABLE>
<CAPTION>
Name State of Incorporation
---- ----------------------
<S> <C>
Post Modern Computing Technologies Inc. California
Visigenic Software, Inc. Delaware
</TABLE>
Second: That an Agreement and Plan of Reorganization dated as of April 28,
1996 between Visigenic Software, Inc. and Post Modern Computing Technologies
Inc. has been approved, adopted, certified, executed and acknowledged by each of
the constituent corporations in accordance with the requirements of Section 251
of the General Corporation Law of the State of Delaware and Section 1201 of the
California General Corporate Law.
Third: That the name of the surviving corporation of the merger is
Visigenic Software, Inc. (the "Surviving Corporation").
Fourth: That the Certificate of Incorporation of Visigenic Software, Inc.
shall, as of the effective time of the merger, be the Certificate of
Incorporation of the Surviving Corporation.
Fifth: That the executed Agreement and Plan of Reorganization is on file
at the principal place of business of the Surviving Corporation. The address of
said principal place of business is 951 Mariner's Island Boulevard, San Mateo,
California 94404.
Sixth: That a copy of the Agreement and Plan of Reorganization will be
furnished by the Surviving Corporation upon request and without charge to any
stockholder of any constituent corporation.
Seventh: The aggregate number of shares of stock which Post Modern
Computing Technologies Inc. has authority to issue is 25,000,000 shares, of
which 20,000,000 shares, all of which are without par value, are designated
Common Stock, and 5,000,000 shares, all of which
1
<PAGE>
are without par value, are designated Preferred Stock.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
executed by its duly authorized officer this ________ day of ___________, 1996.
VISIGENIC SOFTWARE, INC.
(a Delaware corporation)
By:
----------------------------------------
Mark Hanson
2
<PAGE>
CERTIFICATE OF MERGER
OF
DATA ACCESSIBILITY SOLUTIONS, INC.
(a California corporation)
INTO
VISIGENIC SOFTWARE, INC.
(a Delaware corporation)
The undersigned corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware, does hereby certify:
First: That the name and state of incorporation of each of the constituent
corporations of the merger is as follows:
Name State of Incorporation
---- ----------------------
Data Accessibility Solutions, Inc. California
Visigenic Software, Inc. Delaware
Second: That an Agreement and Plan of Reorganization dated as of May 14,
1996, between Visigenic Software, Inc. and Data Accessibility Solutions, Inc.
has been approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with the requirements of Section 251 of
the General Corporation Law of the State of Delaware and Section 1201 of the
California General Corporate Law.
Third: That the name of the surviving corporation of the merger is
Visigenic Software, Inc. (the "Surviving Corporation").
Fourth: That the Certificate of Incorporation of Visigenic Software, Inc.
shall, as of the effective time of the merger, be the Certificate of
Incorporation of the Surviving Corporation.
Fifth: That the executed Agreement and Plan of Reorganization is on file
at the principal place of business of the Surviving Corporation. The address of
said principal place of business is 951 Mariner's Island Boulevard, San Mateo,
California 94404.
Sixth: That a copy of the Agreement and Plan of Reorganization will be
furnished by the Surviving Corporation upon request and without charge to any
stockholder of any constituent corporation.
Seventh: The total number of shares of stock which Data Accessibility
Solutions, Inc. has authority to issue is 1,000,000 shares, all of which are
designated Common Stock, and all of
1
<PAGE>
which are without par value.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
executed by its duly authorized officer this ________ day of ___________, 1996.
VISIGENIC SOFTWARE, INC.
(a Delaware corporation)
By:
---------------------------------------------
Mark Hanson
2
<PAGE>
EXHIBIT 3.1B
RESTATED CERTIFICATE OF INCORPORATION OF
VISIGENIC SOFTWARE, INC.
Pursuant to Sections 228, 242 and 245 of the General Corporation Law of the
State of Delaware, Mark D. Hanson, President and Chief Operating Officer of
Visigenic Software, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), does hereby certify:
The date of filing of the Corporation's original Certificate of
Incorporation was February 12, 1993. This Restated Certificate of Incorporation
was duly proposed by the directors and adopted by the stockholders in the manner
and by the vote prescribed by Sections 211, 212 and 242 of the Delaware General
Corporation Law.
The Certificate of Incorporation of the Corporation is amended and restated
to read in its entirety as follows:
FIRST: The name of the Corporation is Visigenic Software, Inc.
-----
(hereinafter sometimes referred to as the "Corporation").
SECOND: The address of the registered office of the Corporation in the
------
State of Delaware is Incorporating Services, Ltd., 15 East North
Street, in the City of Dover, County of Kent. The name of the
registered agent at that address is Incorporating Services, Ltd.
THIRD: The purpose of the Corporation is to engage in any lawful act or
-----
activity for which a corporation may be organized under the
General Corporation Law of Delaware.
FOURTH:
------
A. The Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the Corporation is authorized to
issue is fifty-two Million (52,000,000) shares. Fifty Million
(50,000,000) shares shall be Common Stock, $0.001 par value per
share, and two Million (2,000,000) shares shall be Preferred
Stock, $0.001 par value per share.
B. The Board of Directors is authorized, subject to any limitations
prescribed by law, to provide for the issuance of shares of
Preferred Stock in series, and by filing a certificate pursuant
to the applicable law of the State of Delaware (such certificate
being hereinafter referred to as a "Preferred Stock
Designation"), to establish from time to time the number of
shares to be included
1
<PAGE>
in each such series, and to fix the designation, powers,
preferences, and rights of each such series and any
qualifications, limitations or restrictions thereof. The number
of authorized shares of Preferred Stock may be increased or
decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority
of the Common Stock, without a vote of the holders of the
Preferred Stock, or of any series thereof, unless a vote of any
such holders is required pursuant to the terms of any Preferred
Stock Designation.
FIFTH: The following provisions are inserted for the management of the
-----
business and the conduct of the affairs of the Corporation, and
for further definition, limitation and regulation of the powers
of the Corporation and of its directors and stockholders:
A. The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors. In addition to
the powers and authority expressly conferred upon them by statute
or by this Restated Certificate of Incorporation or the Bylaws of
the Corporation, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be
exercised or done by the Corporation.
B. The directors of the Corporation need not be elected by written
ballot unless the Bylaws so provide.
C. Any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called annual or
special meeting of stockholders of the Corporation and may not be
effected by any consent in writing by such stockholders.
D. Special meetings of stockholders of the Corporation may be called
only by either the Board of Directors pursuant to a resolution
adopted by a majority of the total number of authorized directors
(whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is
presented to the Board for adoption), the Chief Executive Officer
or the President.
SIXTH:
-----
A. Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified
circumstances, the number of directors shall initially be set at
eight (8) and, thereafter, shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution
adopted by a majority
2
<PAGE>
of the total number of authorized directors (whether or not there
exist any vacancies in previously authorized directorships at the
time any such resolution is presented to the Board for adoption).
The directors, other than those who may be elected by the holders
of Preferred Stock under specified circumstances, shall be
divided into three classes with the term of office of the first
class (Class I) to expire at the annual meeting of the
stockholders held in 1997; the term of office of the second class
(Class II) to expire at the annual meeting of stockholders held
in 1998; the term of office of the third class (Class III) to
expire at the annual meeting of stockholders held in 1999; and
thereafter for each such term to expire at each third succeeding
annual meeting of stockholders after such election. All
directors shall hold office until the expiration of the term for
which elected, and until their respective successors are elected,
except in the case of the death, resignation, or removal of any
director.
B. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, newly created directorships resulting
from any increase in the authorized number of directors or any
vacancies in the Board of Directors resulting from death,
resignation or other cause may be filled only by a majority vote
of the directors then in office, though less than a quorum, and
directors so chosen shall hold office for a term expiring at the
next annual meeting of stockholders at which the term of office
of the class to which they have been elected expires, and until
their respective successors are elected, except in the case of
the death, resignation, or removal of any director. No decrease
in the number of directors constituting the Board of Directors
shall shorten the term of any incumbent director.
C. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, any directors, or the entire Board of
Directors, may be removed from office at any time, but only for
cause and only by the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the voting power of
all of the then outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of
directors, voting together as a single class.
SEVENTH: The Board of Directors is expressly empowered to adopt, amend or
-------
repeal Bylaws of the Corporation. Any adoption, amendment or
repeal of Bylaws of the Corporation by the Board of Directors
shall require the approval of a majority of the total number of
authorized directors (whether or not there exist any vacancies in
previously authorized directorships at the time any resolution
3
<PAGE>
providing for adoption, amendment or repeal is presented to the
Board). The stockholders shall also have power to adopt, amend
or repeal the Bylaws of the Corporation. Any adoption, amendment
or repeal of Bylaws of the Corporation by the stockholders shall
require, in addition to any vote of the holders of any class or
series of stock of the Corporation required by law or by this
Restated Certificate of Incorporation, the affirmative vote of
the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of all of the then outstanding
shares of the capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a
single class.
EIGHTH: A director of the Corporation shall not be personally liable to
------
the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involved intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware
General Corporation Law, or (iv) for any transaction from which
the director derived an improper personal benefit.
If the Delaware General Corporation Law is hereafter amended to
authorize the further elimination or limitation of the liability
of a director, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing provisions of this
Article EIGHTH by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification.
NINTH: The Corporation reserves the right to amend or repeal any
-----
provision contained in this Restated Certificate of Incorporation
in the manner prescribed by the laws of the State of Delaware and
all rights conferred upon stockholders are granted subject to
this reservation; provided, however, that, notwithstanding any
-------- -------
other provision of this Restated Certificate of Incorporation or
any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any vote of the holders of any
class or series of the stock of this Corporation required by law
or by this Restated Certificate of Incorporation, the affirmative
vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of all of the then outstanding
shares of the capital stock of the Corporation entitled to vote
generally in the
4
<PAGE>
election of directors, voting together as a single class, shall
be required to amend or repeal this Article NINTH, Article FIFTH,
Article SIXTH, Article SEVENTH or Article EIGHTH.
IN WITNESS WHEREOF, the Corporation has caused this Restated Certificate of
Incorporation to be signed by a duly authorized officer on this ______ day of
August 1996.
----------------------------------------
Mark D. Hanson,
President and Chief Operating Officer
<PAGE>
Exhibit 3.2B
BY-LAWS
OF
VISIGENIC SOFTWARE, INC.
<PAGE>
I N D E X
Section Page
ARTICLE I
STOCKHOLDERS
<TABLE>
<S> <C> <C>
Section 1.1 Annual Meeting............................................ 1
Section 1.2 Special Meetings.......................................... 1
Section 1.3 Notice of Meetings........................................ 1
Section 1.4 Quorum.................................................... 1
Section 1.5 Conduct of the Stockholders' Meeting...................... 2
Section 1.6 Conduct of Business....................................... 2
Section 1.7 Notice of Stockholder Business............................ 3
Section 1.8 Proxies and Voting........................................ 3
Section 1.9 Stock List................................................ 4
</TABLE>
ARTICLE II
BOARD OF DIRECTORS
<TABLE>
<S> <C> <C>
Section 2.1 Number and Term of Office................................. 4
Section 2.2 Vacancies and Newly Created Directorships................. 4
Section 2.3 Removal................................................... 5
Section 2.4 Regular Meetings.......................................... 5
Section 2.5 Special Meetings.......................................... 5
Section 2.6 Quorum.................................................... 5
Section 2.7 Participation in Meetings by Conference Telephone......... 5
Section 2.8 Conduct of Business....................................... 5
Section 2.9 Powers.................................................... 6
Section 2.10 Compensation of Directors................................. 6
Section 2.11 Nomination of Director Candidates......................... 6
ARTICLE III
COMMITTEES
<S> <C> <C>
Section 3.1 Committees of the Board of Directors...................... 7
Section 3.2 Conduct of Business....................................... 8
ARTICLE IV
OFFICERS
<S> <C> <C>
Section 4.1. Generally................................................. 8
Section 4.2 Chairman of the Board..................................... 8
Section 4.3 President................................................. 8
Section 4.4 Vice President............................................ 9
Section 4.5 Chief Financial Officer................................... 9
Section 4.6 Secretary................................................. 9
Section 4.7 Delegation of Authority................................... 9
Section 4.8 Removal................................................... 9
Section 4.9. Action with Respect to Securities of Other Corporations... 10
</TABLE>
i
<PAGE>
ARTICLE V
STOCK
<TABLE>
<S> <C> <C>
Section 5.1 Certificates of Stock..................................... 10
Section 5.2 Transfers of Stock........................................ 10
Section 5.3 Record Date............................................... 10
Section 5.4 Lost, Stolen or Destroyed Certificates.................... 10
Section 5.5 Regulations............................................... 10
ARTICLE VI
NOTICES
<S> <C> <C>
Section 6.1 Notices................................................... 11
Section 6.2 Waivers................................................... 11
ARTICLE VII
MISCELLANEOUS
<S> <C> <C>
Section 7.1 Facsimile Signatures...................................... 11
Section 7.2 Corporate Seal............................................ 11
Section 7.3 Reliance Upon Books, Reports and Records.................. 11
Section 7.4 Fiscal Year............................................... 11
Section 7.5 Time Periods.............................................. 12
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
<S> <C> <C>
Section 8.1 Right to Indemnification.................................. 12
Section 8.2 Right of Claimant to Bring Suit........................... 13
Section 8.3 Indemnification of Employees and Agents................... 13
Section 8.4 Non-Exclusivity of Rights................................. 13
Section 8.5 Indemnification Contracts................................. 13
Section 8.6 Insurance................................................. 14
Section 8.7 Effect of Amendment....................................... 14
ARTICLE IX
AMENDMENTS
Section 9.1 Amendment of Bylaws......................................... 14
</TABLE>
ii
<PAGE>
VISIGENIC SOFTWARE, INC.
A DELAWARE CORPORATION
BY-LAWS
ARTICLE I
---------
STOCKHOLDERS
------------
Section 1.1 Annual Meeting. An annual meeting of the stockholders, for
----------- --------------
the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place, on such date, and at such time as the Board of
Directors shall each year fix, which date shall be within thirteen months
subsequent to the later of the date of incorporation or the last annual meeting
of stockholders.
Section 1.2 Special Meetings. Special meetings of the stockholders, for
----------- ----------------
any purpose or purposes prescribed in the notice of the meeting, may be called
only (i) by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there
exists any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board of Directors for adoption), (ii) the
Chairman of the Board or (iii) the President and shall be held at such place, on
such date, and at such time as they shall fix. Business transacted at special
meetings shall be confined to the purpose or purposes stated in the notice.
Section 1.3 Notice of Meetings. Written notice of the place, date, and
----------- ------------------
time of all meetings of the stockholders shall be given, not less than ten (10)
nor more than sixty (60) days before the date on which the meeting is to be
held, to each stockholder entitled to vote at such meeting, except as otherwise
provided herein or required by law (meaning, here and hereinafter, as required
from time to time by the Delaware General Corporation Law or the Certificate of
Incorporation of the Corporation).
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty (30) days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date, and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 1.4 Quorum. At any meeting of the stockholders, the holders of a
----------- ------
majority of all of the shares of the stock entitled to vote at the meeting,
present in
1
<PAGE>
person or by proxy, shall constitute a quorum for all purposes, unless or except
to the extent that the presence of a larger number may be required by law.
If a quorum shall fail to attend any meeting, the chairman of the meeting
or the holders of a majority of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting to another place, date,
or time.
If a notice of any adjourned special meeting of stockholders is sent to all
stockholders entitled to vote thereat, stating that it will be held with those
present constituting a quorum, then except as otherwise required by law, those
present at such adjourned meeting shall constitute a quorum, and all matters
shall be determined by a majority of the votes cast at such meeting.
Section 1.5 Conduct of the Stockholders' Meeting. At every meeting of the
----------- ------------------------------------
stockholders, the Chairman, if there is such an officer, or if not, the
President of the Corporation, or in his absence the Vice President designated by
the President, or in the absence of such designation any Vice President, or in
the absence of the President or any Vice President, a chairman chosen by the
majority of the voting shares represented in person or by proxy, shall act as
Chairman. The Secretary of the Corporation or a person designated by the
Chairman shall act as Secretary of the meeting. Unless otherwise approved by
the Chairman, attendance at the stockholders' meeting is restricted to
stockholders of record, persons authorized in accordance with Section 8 of these
Bylaws to act by proxy, and officers of the Corporation.
Section 1.6 Conduct of Business. The Chairman shall call the meeting to
----------- -------------------
order, establish the agenda, and conduct the business of the meeting in
accordance therewith or, at the Chairman's discretion, it may be conducted
otherwise in accordance with the wishes of the stockholders in attendance. The
date and time of the opening and closing of the polls for each matter upon which
the stockholders will vote at the meeting shall be announced at the meeting.
The Chairman shall also conduct the meeting in an orderly manner, rule on
the precedence of and procedure on, motions and other procedural matters, and
exercise discretion with respect to such procedural matters with fairness and
good faith toward all those entitled to take part. The Chairman may impose
reasonable limits on the amount of time taken up at the meeting on discussion in
general or on remarks by any one stockholder. Should any person in attendance
become unruly or obstruct the meeting proceedings, the Chairman shall have the
power to have such person removed from participation. Notwithstanding anything
in the Bylaws to the contrary, no business shall be conducted at a meeting
except in accordance with the procedures set forth in this Section 1.6 and
Section 1.7, below. The Chairman of a meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting and in accordance with the provisions of this Section 1.6 and
Section 1.7, and if he should so determine, he shall so declare to the meeting
and any such business not properly brought before the meeting shall not be
transacted.
2
<PAGE>
Section 1.7 Notice of Stockholder Business. At an annual or special
----------- ------------------------------
meeting of the stockholders, only such business shall be conducted as shall have
been properly brought before the meeting. To be properly brought before a
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
properly brought before the meeting by or at the direction of the Board of
Directors, (c) properly brought before an annual meeting by a stockholder, or
(d) properly brought before a special meeting by a stockholder, but if, and only
if, the notice of a special meeting provides for business to be brought before
the meeting by stockholders. For business to be properly brought before a
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation. To be timely, a stockholder
proposal to be presented at an annual meeting shall be received at the
Corporation's principal executive offices not less than 120 calendar days in
advance of the date that the Corporation's (or the Corporation's predecessor's)
proxy statement was released to stockholders in connection with the previous
year's annual meeting of stockholders, except that if no annual meeting was held
in the previous year or the date of the annual meeting has been changed by more
than 30 calendar days from the date contemplated at the time of the previous
year's proxy statement, or in the event of a special meeting, notice by the
stockholder to be timely must be received not later than the close of business
on the tenth day following the day on which such notice of the date of the
meeting was mailed or such public disclosure was made. A stockholder's notice
to the Secretary shall set forth as to each matter the stockholder proposes to
bring before the annual or special meeting (a) a brief description of the
business desired to be brought before the annual or special meeting and the
reasons for conducting such business at the special meeting, (b) the name and
address, as they appear on the Corporation's books, of the stockholder proposing
such business, (c) the class and number of shares of the Corporation which are
beneficially owned by the stockholder, and (d) any material interest of the
stockholder in such business.
Section 1.8 Proxies and Voting. At any meeting of the stockholders, every
----------- ------------------
stockholder entitled to vote may vote in person or by proxy authorized by an
instrument in writing or by a transmission permitted by law filed in accordance
with the procedure established for the meeting. No stockholder may authorize
more than one proxy for his shares.
Each stockholder shall have one vote for every share of stock entitled to
vote which is registered in his or her name on the record date for the meeting,
except as otherwise provided herein or required by law.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefor by a stockholder entitled to vote or his or her proxy, a stock
vote shall be taken. Every stock vote shall be taken by ballots, each of which
shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
Every vote taken by ballots shall be counted by an inspector or inspectors
appointed by the chairman of the meeting.
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All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law or the Certificate of Incorporation or the
Bylaws of this Corporation, all other matters shall be determined by a majority
of the votes cast.
Section 1.9 Stock List. A complete list of stockholders entitled to vote
----------- ----------
at any meeting of stockholders, arranged in alphabetical order for each class of
stock and showing the address of each such stockholder and the number of shares
registered in his or her name, shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at the place
where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
ARTICLE II
----------
BOARD OF DIRECTORS
------------------
Section 2.1 Number and Term of Office. The number of directors shall
----------- -------------------------
initially be eight (8) and, thereafter, shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board for adoption). Upon the closing of the
first sale of the Corporation's common stock pursuant to a firmly underwritten
registered public offering (the "IPO"), the directors shall be divided into
three classes, with the term of office of the first class, which class shall
initially consist of three directors, to expire at the first annual meeting of
stockholders held after the IPO; the term of office of the second class, which
class shall initially consist of three directors, to expire at the second annual
meeting of stockholders held after the IPO; the term of office of the third
class, which class shall initially consist of two directors, to expire at the
third annual meeting of stockholders held after the IPO; and thereafter for each
such term to expire at each third succeeding annual meeting of stockholders
after such election. All directors shall hold office until the expiration of
the term for which elected and until their respective successors are elected,
except in the case of the death, resignation or removal of any director.
Section 2.2 Vacancies and Newly Created Directorships. Subject to the
----------- -----------------------------------------
rights of the holders of any series of Preferred Stock then outstanding, newly
created directorships resulting from any increase in the authorized number of
directors or any vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification or other cause (other than removal
from office by a vote of the stockholders) may be filled only by a majority vote
of the directors then in office, though less than a quorum, and directors so
chosen shall hold office for a term expiring at the next annual meeting of
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stockholders at which the term of office of the class to which they have been
elected expires. No decrease in the number of directors constituting the Board
of Directors shall shorten the term of any incumbent director.
Section 2.3 Removal. Subject to the rights of holders of any series of
----------- -------
Preferred Stock then outstanding, any directors, or the entire Board of
Directors, may be removed from office at any time, with or without cause, but
only by the affirmative vote of the holders of at least 66-2/3% of the voting
power of all of the then outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class. Vacancies in the Board of Directors resulting from such removal
may be filled by a majority of the directors then in office, though less than a
quorum. Directors so chosen shall hold office until the next annual meeting of
stockholders.
Section 2.4 Regular Meetings. Regular meetings of the Board of Directors
----------- ----------------
shall be held at such place or places, on such date or dates, and at such time
or times as shall have been established by the Board of Directors and publicized
among all directors. A notice of each regular meeting shall not be required.
Section 2.5 Special Meetings. Special meetings of the Board of Directors
----------- ----------------
may be called by one-third of the directors then in office (rounded up to the
nearest whole number), by the Chairman of the Board, or by the chief executive
officer and shall be held at such place, on such date, and at such time as they
or he or she shall fix. Notice of the place, date, and time of each such
special meeting shall be given to each director by whom it is not waived by
mailing written notice not fewer than five (5) days before the meeting, by
sending notice one (1) day before the meeting by an overnight courier service or
two (2) days before the meeting by overseas courier service, or by telephoning,
telecopying, telegraphing or personally delivering the same not fewer than
twenty-four (24) hours before the meeting. Unless otherwise indicated in the
notice thereof, any and all business may be transacted at a special meeting.
Section 2.6 Quorum. At any meeting of the Board of Directors, a majority
----------- ------
of the total number of authorized directors shall constitute a quorum for all
purposes. If a quorum shall fail to attend any meeting, a majority of those
present may adjourn the meeting to another place, date, or time, without further
notice or waiver thereof.
Section 2.7 Participation in Meetings by Conference Telephone. Members of
----------- -------------------------------------------------
the Board of Directors, or of any committee thereof, may participate in a
meeting of such Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and such participation shall constitute presence in
person at such meeting.
Section 2.8 Conduct of Business. At any meeting of the Board of
----------- -------------------
Directors, business shall be transacted in such order and manner as the Board
may from time to time determine, and all matters shall be determined by the vote
of a majority of the directors present, except as otherwise provided herein or
required by law. Action may be taken by the Board of Directors without a
meeting if all members thereof consent
5
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thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
Section 2.9 Powers. The Board of Directors may, except as otherwise
----------- ------
required by law, exercise all such powers and do all such acts and things as may
be exercised or done by the Corporation, including, without limiting the
generality of the foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as
it may determine, of written obligations of every kind, negotiable or non-
negotiable, secured or unsecured, and to do all things necessary in connection
therewith;
(4) To remove any officer of the Corporation with or without cause,
and from time to time to devolve the powers and duties of any officer upon any
other person for the time being;
(5) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock, option, stock purchase,
bonus or other compensation plans for directors, officers, employees and agents
of the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers, employees and agents of the Corporation
and its subsidiaries as it may determine; and
(8) To adopt from time to time regulations, not inconsistent with
these bylaws, for the management of the Corporation's business and affairs.
Section 2.10 Compensation of Directors. Directors, as such, may receive,
------------ -------------------------
pursuant to resolution of the Board of Directors, fixed fees and other
compensation for their services as directors, including, without limitation,
their services as members of committees of the Board of Directors.
Section 2.11 Nomination of Director Candidates. Subject to the rights of
------------ ---------------------------------
holders of any class or series of Preferred Stock then outstanding, nominations
for the election of Directors may be made by the Board of Directors or a proxy
committee appointed by the Board of Directors or by any stockholder entitled to
vote in the election of Directors generally. However, any stockholder entitled
to vote in the election of Directors generally may nominate one or more persons
for election as Directors at a meeting only if timely notice of such
stockholder's intent to make such nomination or nominations has been given in
writing to the Secretary of the Corporation. To be timely, a stockholder
nomination for a director to be elected at an annual meeting shall be received
at the Corporation's principal executive offices not less than 120 calendar days
in advance of the date that the Corporation's (or the Corporation's
Predecessor's) Proxy statement was released to stockholders in connection with
the previous year's annual meeting of stockholders, except that if no annual
meeting was held in the previous year or the date of the annual meeting has been
changed by more than 30 calendar days from the date
6
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contemplated at the time of the previous year's proxy statement, or in the event
of a nomination for director to be elected at a special meeting, notice by the
stockholders to be timely must be received not later than the close of business
on the tenth day following the day on which such notice of the date of the
special meeting was mailed or such public disclosure was made. Each such notice
shall set forth: (a) the name and address of the stockholder who intends to
make the nomination and of the person or persons to be nominated; (b) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote for the election of Directors on the date of such
notice and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (c) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder; (d) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission, had the nominee been nominated, or
intended to be nominated, by the Board of Directors; and (e) the consent of each
nominee to serve as a director of the Corporation if so elected.
In the event that a person is validly designated as a nominee in accordance
with this Section 2.11 and shall thereafter become unable or unwilling to stand
for election to the Board of Directors, the Board of Directors or the
stockholder who proposed such nominee, as the case may be, may designate a
substitute nominee upon delivery, not fewer than five days prior to the date of
the meeting for the election of such nominee, of a written notice to the
Secretary setting forth such information regarding such substitute nominee as
would have been required to be delivered to the Secretary pursuant to this
Section 2.11 had such substitute nominee been initially proposed as a nominee.
Such notice shall include a signed consent to serve as a director of the
Corporation, if elected, of each such substitute nominee.
If the chairman of the meeting for the election of Directors determines
that a nomination of any candidate for election as a Director at such meeting
was not made in accordance with the applicable provisions of this Section 2.11,
such nomination shall be void.
ARTICLE III
-----------
COMMITTEES
----------
Section 3.1 Committees of the Board of Directors. The Board of Directors,
----------- ------------------------------------
by a vote of a majority of the whole Board, may from time to time designate
committees of the Board, with such lawfully delegable powers and duties as it
thereby confers, to serve at the pleasure of the Board and shall, for those
committees and any others provided for herein, elect a director or directors to
serve as the member or members, designating, if it desires, other directors as
alternate members who may replace any absent or disqualified member at any
meeting of the committee. Any committee so designated may exercise the power
and authority of the Board of Directors to declare a dividend, to authorize the
issuance of stock or to adopt a certificate of ownership and merger pursuant to
7
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Section 253 of the Delaware General Corporation Law if the resolution which
designates the committee or a supplemental resolution of the Board of Directors
shall so provide. In the absence or disqualification of any member of any
committee and any alternate member in his place, the member or members of the
committee present at the meeting and not disqualified from voting, whether or
not he or she or they constitute a quorum, may by unanimous vote appoint another
member of the Board of Directors to act at the meeting in the place of the
absent or disqualified member.
Section 3.2 Conduct of Business. Each committee may determine the
----------- -------------------
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as otherwise provided herein or required by law.
Adequate provision shall be made for notice to members of all meetings; one-half
of the authorized members shall constitute a quorum unless the committee shall
consist of one or two members, in which event all members of the committee shall
constitute a quorum; and all matters shall be determined by a majority vote of
the members present. Action may be taken by any committee without a meeting if
all members thereof consent thereto in writing, and the writing or writings are
filed with the minutes of the proceedings of such committee.
ARTICLE IV
----------
OFFICERS
--------
Section 4.1 Generally. The officers of the Corporation shall consist of a
----------- ---------
President, a Secretary and a Chief Financial Officer. The Corporation may also
have, at the discretion of the Board of Directors, a Chairman of the Board, one
or more Vice Presidents, and such other officers as may from time to time be
appointed by the Board of Directors. Officers shall be elected by the Board of
Directors, which shall consider that subject at its first meeting after every
annual meeting of stockholders. Each officer shall hold office at the pleasure
of the Board, until his successor is elected and qualified or until his earlier
resignation or removal. Any number of offices may be held by the same person.
Section 4.2 Chairman of the Board. The Chairman of the Board, if there
----------- ---------------------
shall be such an officer, shall, if present, preside at all meetings of the
Board of Directors, and exercise and perform such other powers and duties as may
be from time to time assigned to him by the Board of Directors or as provided by
these Bylaws.
Section 4.3 President and Chief Executive Officer. Subject to such
----------- -------------------------------------
supervisory powers, if any, as may be given by the Board of Directors to the
Chairman of the Board, if there be such an officer, the President shall be the
general manager and chief executive officer of the Corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction, and control of the business and other officers, employees and agents
of the Corporation. He shall preside at all meetings of the stockholders. He
shall be ex-officio a member of all the standing committees, including the
executive committee, if any, and shall have the general powers and duties of
management usually vested in the office of president of a corporation, and shall
have such other powers and duties as may be prescribed by the Board of Directors
or by these
8
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Bylaws. He shall have power to sign all stock certificates, contracts and other
instruments of the Corporation which are authorized by the Board of Directors.
Section 4.4 Vice President. In the absence or disability of the
----------- --------------
President, the Vice Presidents, if any, in order of their rank as fixed by the
Board of Directors, or if not ranked, the Vice President designated by the Board
of Directors, shall perform the duties of the President, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
President. The Vice Presidents, if any, shall have such other powers and
perform such other duties as from time to time may be prescribed for them
respectively by the Board of Directors or these Bylaws.
Section 4.5 Chief Financial Officer. The Chief Financial Officer shall
----------- -----------------------
keep and maintain or cause to be kept and maintained, adequate and correct
financial books and records of account of the Corporation in written form or any
other form capable of being converted into written form.
The Chief Financial Officer shall deposit all monies and other valuables in
the name and to the credit of the Corporation with such depositaries as may be
designated by the Board of Directors. He shall disburse all funds of the
Corporation as may be ordered by the Board of Directors, shall render to the
President and Directors, whenever they request it, an account of all of his
transactions as Chief Financial Officer and of the financial condition of the
Corporation, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by these Bylaws.
Section 4.6 Secretary. The Secretary shall keep, or cause to be kept, a
----------- ---------
book of minutes in written form of the proceedings of the Board of Directors,
committees of the Board, and stockholders. Such minutes shall include all
waivers of notice, consents to the holding of meetings, or approvals of the
minutes of meetings executed pursuant to these Bylaws or the General Delaware
Corporation Law. The Secretary shall keep, or cause to be kept at the principal
executive office or at the office of the Corporation's transfer agent or
registrar, a record of its stockholders, giving the names and addresses of all
stockholders and the number and class of shares held by each.
The Secretary shall give or cause to be given, notice of all meetings of
the stockholders and of the Board of Directors required by these Bylaws or by
law to be given, and shall keep the seal of the Corporation in safe custody, and
shall have such other powers and perform such other duties as may be prescribed
by the Board of Directors or these Bylaws.
Section 4.7 Delegation of Authority. The Board of Directors may from time
----------- -----------------------
to time delegate the powers or duties of any officer to any other officers or
agents, notwithstanding any provision hereof.
Section 4.8 Removal. Any officer of the Corporation may be removed at any
----------- -------
time, with or without cause, by the Board of Directors.
9
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Section 4.9 Action With Respect to Securities of Other Corporations.
----------- -------------------------------------------------------
Unless otherwise directed by the Board of Directors, the President or any
officer of the Corporation authorized by the President shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE V
---------
STOCK
-----
Section 5.1 Certificates of Stock. Each stockholder shall be entitled to
----------- ---------------------
a certificate signed by, or in the name of the Corporation by, the President or
a Vice President, and by the Secretary or an Assistant Secretary, or the
Treasurer or an Assistant Treasurer, certifying the number of shares owned by
him or her. Any of or all the signatures on the certificate may be facsimile.
Section 5.2 Transfers of Stock. Transfers of stock shall be made only
----------- ------------------
upon the transfer books of the Corporation kept at an office of the Corporation
or by transfer agents designated to transfer shares of the stock of the
Corporation. Except where a certificate is issued in accordance with Section 4
of Article V of these bylaws, an outstanding certificate for the number of
shares involved shall be surrendered for cancellation before a new certificate
is issued therefor.
Section 5.3 Record Date. The Board of Directors may fix a record date,
----------- -----------
which shall not be more than sixty (60) nor fewer than ten (10) days before the
date of any meeting of stockholders, nor more than sixty (60) days prior to the
time for the other action hereinafter described, as of which there shall be
determined the stockholders who are entitled: to notice of or to vote at any
meeting of stockholders or any adjournment thereof; to receive payment of any
dividend or other distribution or allotment of any rights; or to exercise any
rights with respect to any change, conversion or exchange of stock or with
respect to any other lawful action.
Section 5.4 Lost, Stolen or Destroyed Certificates. In the event of the
----------- --------------------------------------
loss, theft or destruction of any certificate of stock, another may be issued in
its place pursuant to such regulations as the Board of Directors may establish
concerning proof of such loss, theft or destruction and concerning the giving of
a satisfactory bond or bonds of indemnity.
Section 5.5 Regulations. The issue, transfer, conversion and registration
----------- -----------
of certificates of stock shall be governed by such other regulations as the
Board of Directors may establish.
10
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ARTICLE VI
----------
NOTICES
-------
Section 6.1 Notices. Except as otherwise specifically provided herein or
----------- -------
required by law, all notices required to be given to any stockholder, director,
officer, employee or agent shall be in writing and may in every instance be
effectively given by hand delivery to the recipient thereof, by depositing such
notice in the mails, postage paid, or by sending such notice by prepaid
telegram, mailgram, telecopy or commercial courier service. Any such notice
shall be addressed to such stockholder, director, officer, employee or agent at
his or her last known address as the same appears on the books of the
Corporation. The time when such notice shall be deemed to be given shall be the
time such notice is received by such stockholder, director, officer, employee or
agent, or by any person accepting such notice on behalf of such person, if hand
delivered, or the time such notice is dispatched, if delivered through the mails
or by telegram, telecopy, courier or mailgram.
Section 6.2 Waivers. A written waiver of any notice, signed by a
----------- -------
stockholder, director, officer, employee or agent, whether before or after the
time of the event for which notice is to be given, shall be deemed equivalent to
the notice required to be given to such stockholder, director, officer, employee
or agent. Neither the business nor the purpose of any meeting need be specified
in such a waiver.
ARTICLE VII
-----------
MISCELLANEOUS
-------------
Section 7.1 Facsimile Signatures. In addition to the provisions for use
----------- --------------------
of facsimile signatures elsewhere specifically authorized in these bylaws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors or a committee thereof.
Section 7.2 Corporate Seal. The Board of Directors may provide a suitable
----------- --------------
seal, containing the name of the Corporation, which seal shall be in the charge
of the Secretary. If and when so directed by the Board of Directors or a
committee thereof, duplicates of the seal may be kept and used by the Treasurer
or by an Assistant Secretary or Assistant Treasurer.
Section 7.3 Reliance Upon Books, Reports and Records. Each director, each
----------- ----------------------------------------
member of any committee designated by the Board of Directors, and each officer
of the Corporation shall, in the performance of his duties, be fully protected
in relying in good faith upon the books of account or other records of the
Corporation, including reports made to the Corporation by any of its officers,
by an independent certified public accountant, or by an appraiser.
Section 7.4 Fiscal Year. The fiscal year of the Corporation shall be as
----------- -----------
fixed by the Board of Directors.
11
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Section 7.5 Time Periods. In applying any provision of these bylaws which
----------- ------------
require that an act be done or not done a specified number of days prior to an
event or that an act be done during a period of a specified number of days prior
to an event, calendar days shall be used, the day of the doing of the act shall
be excluded, and the day of the event shall be included.
ARTICLE VIII
------------
INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
Section 8.1 Right to Indemnification. Each person who was or is made a
----------- ------------------------
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
("proceeding"), by reason of the fact that he or she or a person of whom he or
she is the legal representative, is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or agent
in any other capacity while serving as a director, officer, employee or agent
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by Delaware Law, as the same exists or may hereafter be amended (but,
in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than said Law
permitted the Corporation to provide prior to such amendment) against all
expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties, amounts paid or to be paid in settlement and amounts
expended in seeking indemnification granted to such person under applicable law,
this bylaw or any agreement with the Corporation) reasonably incurred or
suffered by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in Section 8.2 of
-------- -------
this Article VIII, the Corporation shall indemnify any such person seeking
indemnity in connection with an action, suit or proceeding (or part thereof)
initiated by such person only if (a) such indemnification is expressly required
to be made by law, (b) the action, suit or proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation, (c) such
indemnification is provided by the Corporation, in its sole discretion, pursuant
to the powers vested in the Corporation under the Delaware General Corporation
Law, or (d) the action, suit or proceeding (or part thereof) is brought to
establish or enforce a right to indemnification under an indemnity agreement or
any other statute or law or otherwise as required under Section 145 of the
Delaware General Corporation Law. Such right shall be a contract right and
shall include the right to be paid by the Corporation expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
--------
however, that, unless the Delaware General Corporation Law then so prohibits,
- -------
the payment of such expenses incurred by a director or officer of the
Corporation in his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an
12
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employee benefit plan) in advance of the final disposition of such proceeding,
shall be made only upon delivery to the Corporation of an undertaking, by or on
behalf of such director or officer, to repay all amounts so advanced if it
should be determined ultimately that such director or officer is not entitled to
be indemnified under this Section or otherwise.
Section 8.2 Right of Claimant to Bring Suit. If a claim under Section 1
----------- -------------------------------
of this Article VIII is not paid in full by the Corporation within ninety (90)
days after a written claim has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if such suit is not frivolous or brought in bad
faith, the claimant shall be entitled to be paid also the expense of prosecuting
such claim. The burden of proving such claim shall be on the claimant. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any, has been tendered to this
Corporation) that the claimant has not met the standards of conduct which make
it permissible under the Delaware General Corporation Law for the Corporation to
indemnify the claimant for the amount claimed. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct.
Section 8.3 Indemnification of Employees and Agents. The Corporation may,
----------- ---------------------------------------
to the extent authorized from time to time by the Board of Directors, grant
rights to indemnification, and to the advancement of related expenses, to any
employee or agent of the Corporation to the fullest extent of the provisions of
this Article with respect to the indemnification of and advancement of expenses
to directors and officers of the Corporation.
Section 8.4 Non-Exclusivity of Rights. The rights conferred on any person
----------- -------------------------
in Sections 1 and 2 shall not be exclusive of any other right which such persons
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, bylaw, agreement, vote of stockholders or disinterested directors
or otherwise.
Section 8.5 Indemnification Contracts. The Board of Directors is
----------- -------------------------
authorized to enter into a contract with any director, officer, employee or
agent of the Corporation, or any person serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including employee
benefit plans, providing for indemnification rights equivalent to or, if the
Board of Directors so determines, greater than, those provided for in this
Article VIII.
13
<PAGE>
Section 8.6 Insurance. The Corporation may maintain insurance, at its
----------- ---------
expense, to protect itself and any such director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
Section 8.7 Effect of Amendment. Any amendment, repeal or modification of
----------- -------------------
any provision of this Article VIII by the stockholders or the directors of the
Corporation shall not adversely affect any right or protection of a director or
officer of the Corporation existing at the time of such amendment, repeal or
modification.
ARTICLE IX
----------
AMENDMENTS
----------
Section 9.1 Amendment of Bylaws. The Board of Directors is expressly
----------- -------------------
empowered to adopt, amend or repeal Bylaws of the Corporation. Any adoption,
amendment or repeal of Bylaws of the Corporation by the Board of Directors shall
require the approval of a majority of the total number of authorized directors
(whether or not there exist any vacancies in previously authorized directorships
at the time any resolution providing for adoption, amendment or repeal is
presented to the Board). The stockholders shall also have power to adopt, amend
or repeal the Bylaws of the Corporation. Any adoption, amendment or repeal of
By-Laws of the Corporation by the stockholders shall require, in addition to any
vote of the holders of any class or series of stock of the Corporation required
by law or by the Certificate of Incorporation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class.
14
<PAGE>
EXHIBIT 4.1
[DECORATED CIRCULAR [DECORATED CIRCULAR
DESIGN APPEARS HERE] DESIGN APPEARS HERE]
------------- --------------
Number Shares
VSI
------------- VISIGENIC SOFTWARE, INC ---------------
COMMON STOCK COMMON STOCK
THIS CERTIFICATE IS TRANSFERABLE
IN BOSTON, MA OR NEW YORK, NY
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT SEE REVERSE FOR
CERTAIN DEFINITIONS AND
A STATEMENT AS TO THE RIGHTS,
PREFERENCES, PRIVILEGES AND
RESTRICTIONS ON SHARES
IS THE OWNER OF
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK $.001
PAR VALUE PER SHARE, OF
VISIGENIC SOFTWARE, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned and registered by
the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
/s/ [SIGNATURE APPEARS [SEAL OF VISIGENIC SOFTWARE /s/[SIGNATURE APPEARS
HERE] APPEARS HERE] HERE]
CHIEF FINANCIAL OFFICER PRESIDENT
AND CHIEF OPERATING OFFICER
COUNTERSIGNED AND REGISTERED:
THE FIRST NATIONAL BANK OF BOSTON
TRANSFER AGENT AND REGISTRANT
BY: /s/ [SIGNATURE APPEARS HERE]
AUTHORIZED SIGNATURE
<PAGE>
A statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights as established, from time to time, by the Certificate of
Incorporation of the Corporation and by any certificate of determination, the
number of shares constituting each class and series, and the designations
thereof, may be obtained by the holder hereof upon request and without charge at
the principal office of the Corporation.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
TEN ENT - as tenants by the ------- -------
entireties (Cust) (Minor)
JT TEN - as joint tenants under Uniform Gifts to
with right of Minors Act
survivorship and --------------
not as tenants in (State)
common UNIF TRF MINOR ACT - Custodian
-------------
(Cust)
(until age)
-----------
---------------------
(Minor)
under Uniform
Transfers to Minors
Act
------------------
(State)
Additional abbreviations may also be used though not in the above list
FOR VALUE RECEIVED, hereby sell, assign and
-------------------------
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[_____________________________________]
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Shares
- ------------------------------------------------------------------------
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
- -----------------------------------------------------------------------
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
--------------------------------
X
--------------------------------------------------
X
--------------------------------------------------
THE SIGNATURE(S)TO THIS ASSIGNMENT MUST
NOTICE: CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
Signature(s) Guaranteed
By
---------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED
BY ANY ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAMS, PURSUANT
TO S.E.C. RULE.17AG-15.
<PAGE>
EXHIBIT 10.1
INDEMNITY AGREEMENT
This Indemnity Agreement, dated as of ____________________________, 1996 is
made by and between Visigenic Software, Inc., a Delaware corporation (the
"Company"), and _____________________________________________ (the
"Indemnitee").
RECITALS
--------
A. The Company is aware that competent and experienced persons are
reluctant to serve as directors, officers or agents of corporations unless they
are protected by comprehensive liability insurance or indemnification, due to
exposure to litigation costs and risks resulting from their service to such
corporations, and due to the fact that the exposure frequently bears no
reasonable relationship to the compensation of such directors, officers and
other agents.
B. The statutes and judicial decisions regarding the duties of directors
and officers are often difficult to apply, ambiguous, or conflicting, and
therefore fail to provide such directors, officers and agents with adequate,
reliable knowledge of legal risks to which they are exposed or information
regarding the proper course of action to take.
C. Plaintiffs often seek damages in such large amounts and the costs of
litigation may be so enormous (whether or not the case is meritorious), that the
defense and/or settlement of such litigation is often beyond the personal
resources of directors, officers and other agents.
D. The Company believes that it is unfair for its directors, officers and
agents and the directors, officers and agents of its subsidiaries to assume the
risk of huge judgments and other expenses which may occur in cases in which the
director, officer or agent received no personal profit and in cases where the
director, officer or agent was not culpable.
E. The Company recognizes that the issues in controversy in litigation
against a director, officer or agent of a corporation such as the Company or its
subsidiaries are often related to the knowledge, motives and intent of such
director, officer or agent, that he is usually the only witness with knowledge
of the essential facts and exculpating circumstances regarding such matters, and
that the long period of time which usually elapses before the trial or other
disposition of such litigation often extends beyond the time that the director,
officer or agent can reasonably recall such matters; and may extend beyond the
normal time for retirement for such director, officer or agent with the result
that he, after retirement or in the event of his death, his spouse, heirs,
executors or administrators, may be faced with limited ability and undue
hardship in maintaining an adequate defense, which may discourage such a
director, officer or agent from serving in that position.
F. Based upon their experience as business managers, the Board of
Directors of the Company (the "Board") has concluded that, to retain and attract
talented and experienced individuals to serve as directors, officers and agents
of the Company and its subsidiaries and to encourage such individuals to take
the business risks necessary for the success of the Company and its
subsidiaries, it is necessary for the Company to contractually indemnify its
directors, officers and agents and the directors, officers and agents of its
subsidiaries, and to assume for itself maximum liability for expenses and
damages in connection with claims against such directors, officers and agents in
connection with their service to the Company and its subsidiaries, and has
further concluded that the failure to provide such contractual indemnification
could result in great harm to the Company and its subsidiaries and the Company's
stockholders.
<PAGE>
G. Section 145 of the General Corporation Law of Delaware, under which the
Company is organized ("Section 145"), empowers the Company to indemnify its
directors, officers, employees and agents by agreement and to indemnify persons
who serve, at the request of the Company, as the directors, officers, employees
or agents of other corporations or enterprises, and expressly provides that the
indemnification provided by Section 145 is not exclusive.
H. The Company desires and has requested the Indemnitee to serve or
continue to serve as a director, officer or agent of the Company and/or one or
more subsidiaries of the Company free from undue concern for claims for damages
arising out of or related to such services to the Company and/or one or more
subsidiaries of the Company.
I. Indemnitee is willing to serve, or to continue to serve, the Company
and/or one or more subsidiaries of the Company, provided that he is furnished
the indemnity provided for herein.
AGREEMENT
---------
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Definitions.
-----------
(a) Agent. For the purposes of this Agreement, "agent" of the Company
-----
means any person who is or was a director, officer, employee or other agent of
the Company or a subsidiary of the Company; or is or was serving at the request
of, for the convenience of, or to represent the interests of the Company or a
subsidiary of the Company as a director, officer, employee or agent of another
foreign or domestic corporation, partnership, joint venture, trust or other
enterprise; or was a director, officer, employee or agent of another enterprise
at the request of, for the convenience of, or to represent the interests of such
predecessor corporation.
(b) Expenses. For purposes of this Agreement, "expenses" include all
--------
direct and indirect costs of any type or nature whatsoever (including, without
limitation, all attorneys' fees and related disbursements, other out-of-pocket
costs actually and reasonably incurred by the Indemnitee in connection with
either the investigation, defense or appeal of a proceeding or establishing or
enforcing a right to indemnification under this Agreement or Section 145 or
otherwise); provided, however, that "expenses" shall not include any judgments,
fines, ERISA excise taxes or penalties, or amounts paid in settlement of a
proceeding.
(c) Proceeding. For the purposes of this Agreement, "proceeding"
----------
means any threatened, pending, or completed action, suit or other proceeding,
whether civil, criminal, administrative, or investigative.
(d) Subsidiary. For purposes of this Agreement, "subsidiary" means
----------
any corporation of which more than 50% of the outstanding voting securities is
owned directly or indirectly by the Company, by the Company and one or more
other subsidiaries, or by one or more other subsidiaries.
2. Agreement to Serve. The Indemnitee agrees to serve and/or continue to
------------------
serve as agent of the Company, at its will (or under separate agreement, if such
agreement exists), in the capacity Indemnitee currently serves as an agent of
the Company, so long as he is duly appointed or elected and qualified in
accordance with the applicable provisions of the Bylaws of the Company or
2
<PAGE>
any subsidiary of the Company or until such time as he tenders his resignation
in writing; provided, however, that nothing contained in this Agreement is
intended to create any right to continued employment by Indemnitee.
3. Liability Insurance.
-------------------
(a) Maintenance of D&O Insurance. The Company hereby covenants and
----------------------------
agrees that, so long as the Indemnitee shall continue to serve as an agent of
the Company and thereafter so long as the Indemnitee shall be subject to any
possible proceeding by reason of the fact that the Indemnitee was an agent of
the Company, the Company, subject to Section 3(c), shall promptly obtain and
maintain in full force and effect directors' and officers' liability insurance
("D&O Insurance") in reasonable amounts from established and reputable insurers.
(b) Rights and Benefits. In all policies of D&O Insurance, the
-------------------
Indemnitee shall be named as an insured in such a manner as to provide the
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if the Indemnitee is a director; or of the
Company's officers, if the Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, if the Indemnitee is not a director
or officer but is a key employee.
(c) Limitation on Required Maintenance of D&O Insurance.
---------------------------------------------------
Notwithstanding the foregoing, the Company shall have no obligation to obtain or
maintain D&O Insurance if the Company determines in good faith that such
insurance is not reasonably available, the premium costs for such insurance are
disproportionate to the amount of coverage provided, the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or the Indemnitee is covered by similar insurance maintained by a
subsidiary of the Company.
4. Mandatory Indemnification. Subject to Section 9 below, the Company
-------------------------
shall indemnify the Indemnitee as follows:
(a) Successful Defense. To the extent the Indemnitee has been
------------------
successful on the merits or otherwise in defense of any proceeding (including,
without limitation, an action by or in the right of the Company) to which the
Indemnitee was a party by reason of the fact that he is or was an Agent of the
Company at any time, against all expenses of any type whatsoever actually and
reasonably incurred by him in connection with the investigation, defense or
appeal of such proceeding.
(b) Third Party Actions. If the Indemnitee is a person who was or is
-------------------
a party or is threatened to be made a party to any proceeding (other than an
action by or in the right of the Company) by reason of the fact that he is or
was an agent of the Company, or by reason of anything done or not done by him in
any such capacity, the Company shall indemnify the Indemnitee against any and
all expenses and liabilities of any type whatsoever (including, but not limited
to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in
settlement) actually and reasonably incurred by him in connection with the
investigation, defense, settlement or appeal of such proceeding, provided the
Indemnitee acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company and its stockholders, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
(c) Derivative Actions. If the Indemnitee is a person who was or is a
------------------
party or is threatened to be made a party to any proceeding by reason of the
fact that he is or was an agent of the Company, or by reason of anything done or
not done by him in any such capacity, the Company shall indemnify the Indemnitee
against any amounts paid in settlement of any such proceeding and all
3
<PAGE>
expenses actually and reasonably incurred by him in connection with the
investigation, defense, settlement, or appeal of such proceeding, provided the
Indemnitee acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company and its stockholders. The
Company shall indemnify the Indemnitee against judgments, fines, and ERISA
excise taxes and penalties to the same extent and subject to the same conditions
as described in the immediately preceding sentence. Notwithstanding the
foregoing, no indemnification under this subsection 4(c) shall be made in
respect to any claim, issue or matter as to which such person shall have been
finally adjudged to be liable to the Company by a court of competent
jurisdiction unless and only to the extent that the court in which such
proceeding was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such amounts which the
court shall deem proper.
(d) Actions where Indemnitee is Deceased. If the Indemnitee is a
------------------------------------
person who was or is a party or is threatened to be made a party to any
proceeding by reason of the fact that he is or was an agent of the Company, or
by reason of anything done or not done by him in any such capacity, and if prior
to, during the pendency of after completion of such proceeding Indemnitee
becomes deceased, the Company shall indemnify the Indemnitee's heirs, executors
and administrators against any and all expenses and liabilities of any type
whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes
and penalties, and amounts paid in settlement) actually and reasonably incurred
to the extent Indemnitee would have been entitled to indemnification pursuant to
Sections 4(a), 4(b), or 4(c) above were Indemnitee still alive.
(e) Notwithstanding the foregoing, the Company shall not be obligated
to indemnify the Indemnitee for expenses or liabilities of any type whatsoever
(including, but not limited to, judgments, fines, ERISA excise taxes and
penalties, and amounts paid in settlement) for which payment is actually made to
Indemnitee under a valid and collectible insurance policy of D&O Insurance, or
under a valid and enforceable indemnity clause, by-law or agreement.
5. Partial Indemnification. If the Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of any expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts
paid in settlement) incurred by him in the investigation, defense, settlement or
appeal of a proceeding, but not entitled, however, to indemnification for all of
the total amount hereof, the Company shall nevertheless indemnify the Indemnitee
for such total amount except as to the portion hereof to which the Indemnitee is
not entitled.
6. Mandatory Advancement of Expenses. Subject to Section 8(a) below, the
---------------------------------
Company shall advance all expenses incurred by the Indemnitee in connection with
the investigation, defense, settlement or appeal of any proceeding to which the
Indemnitee is a party or is threatened to be made a party by reason of the fact
that the Indemnitee is or was an agent of the Company. Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall be determined ultimately that the Indemnitee is not entitled to be
indemnified by the Company as authorized hereby. The advances to be made
hereunder shall be paid by the Company to the Indemnitee within twenty (20) days
following delivery of a written request therefor by the Indemnitee to the
Company.
4
<PAGE>
7. Notice and Other Indemnification Procedures.
-------------------------------------------
(a) Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee
shall, if the Indemnitee believes that indemnification with respect thereto may
be sought from the Company under this Agreement, notify the Company of the
commencement or threat of commencement thereof.
(b) If, at the time of the receipt of a notice of the commencement of
a proceeding pursuant to Section 7(a) hereof, the Company has D&O Insurance in
effect, the Company shall give prompt notice of the commencement of such
proceeding to the insurers in accordance with the procedures set forth in the
respective policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of the Indemnitee, all
amounts payable as a result of such proceeding in accordance with the terms of
such policies.
(c) In the event the Company shall be obligated to pay the expenses of
any proceeding against the Indemnitee, the Company, if appropriate, shall be
entitled to assume the defense of such proceeding, with counsel approved by the
Indemnitee, upon the delivery to the Indemnitee of written notice of its
election so to do. After delivery of such notice, approval of such counsel by
the Indemnitee and the retention of such counsel by the Company, the Company
will not be liable to the Indemnitee under this Agreement for any fees of
counsel subsequently incurred by the Indemnitee with respect to the same
proceeding, provided that (i) the Indemnitee shall have the right to employ his
counsel in any such proceeding at the Indemnitee's expense; and (ii) if (A) the
employment of counsel by the Indemnitee has been previously authorized by the
Company, (B) the Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and the Indemnitee in the conduct of
any such defense, or (C) the Company shall not, in fact, have employed counsel
to assume the defense of such proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
8. Exceptions. Any other provision herein to the contrary
----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance expenses
------------------------------
to the Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by the Indemnitee and not by way of defense, unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding was
authorized by the Board, (iii) such indemnification is provided by the Company,
in its sole discretion, pursuant to the powers vested in the Company under the
General Corporation Law of Delaware or (iv) the proceeding is brought to
establish or enforce a right to indemnification under this Agreement or any
other statute or law or otherwise as required under Section 145.
(b) Lack of Good Faith. To indemnify the Indemnitee for any expenses
------------------
incurred by the Indemnitee with respect to any proceeding instituted by the
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that the proceeding was not brought by the Indemnitee in
good faith or was frivolous; or
(c) Unauthorized Settlements. To indemnify the Indemnitee under this
------------------------
Agreement for any amounts paid in settlement of a proceeding unless the Company
consents to such settlement, which consent shall not be unreasonably withheld.
5
<PAGE>
9. Non-exclusivity. The provisions for indemnification and advancement
--------------
of-expenses set forth in this Agreement shall not be deemed exclusive
of any other rights which the Indemnitee may have under any provision
of law, the Company's Certificate of Incorporation or Bylaws, the vote
of the Company's stockholders or disinterested directors, other
agreements, or otherwise, both as to action in his official capacity
and to action in another capacity while occupying his position as an
agent of the Company, and the Indemnitee's rights hereunder shall
continue after the Indemnitee has ceased acting as an agent of the
Company and shall inure to the benefit of the heirs, executors and
administrators of the Indemnitee.
10. Enforcement. Any right to indemnification or advances granted by
-----------
this Agreement to Indemnitee shall be enforceable by or on behalf of Indemnitee
in any court of competent jurisdiction if (i) the claim for indemnification or
advances is denied, in whole or in part, or (ii) no disposition of such claim is
made within ninety (90) days of request therefor. Indemnitee, in such
enforcement action, if successful in whole or in part, shall be entitled to be
paid also the expense of prosecuting his claim. It shall be a defense to any
action for which a claim for indemnification is made under this Agreement (other
than an action brought to enforce a claim for expenses pursuant to Section 6
hereof, provided that the required undertaking has been tendered to the Company)
that Indemnitee is not entitled to indemnification because of the limitations
set forth in Sections 4 and 8 hereof. Neither the failure of the Corporation
(including its Board of Directors or its stockholders) to have made a
determination prior to the commencement of such enforcement action that
indemnification of Indemnitee is proper in the circumstances, nor an actual
determination by the Company (including its Board of Directors or its
stockholders) that such indemnification is improper, shall be a defense to the
action or create a presumption that Indemnitee is not entitled to
indemnification under this Agreement or otherwise.
11. Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
12. Survival of Rights.
------------------
(a) All agreements and obligations of the Company contained herein
shall continue during the period Indemnitee is an agent of the Company and shall
continue thereafter so long as Indemnitee shall be subject to any possible claim
or threatened, pending or completed action, suit or proceeding, whether civil,
criminal, arbitrational, administrative or investigative, by reason of the fact
that Indemnitee was serving in the capacity referred to herein.
(b) The Company shall require any successor to the Company (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform if no such succession had taken
place.
13. Interpretation of Agreement. It is understood that the parties hereto
---------------------------
intend this Agreement to be interpreted and enforced so as to provide
indemnification to the Indemnitee to the fullest extent permitted by law
including those circumstances in which indemnification would otherwise be
discretionary.
6
<PAGE>
14. Severability. If any provision or provisions of this Agreement shall
------------
be held to be invalid, illegal or unenforceable for any reason whatsoever, (i)
the validity, legality and enforceability of the remaining provisions of the
Agreement (including without limitation, all portions of any paragraphs of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, and (ii) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable and to give
effect to Section 13 hereof.
15. Modification and Waiver. No supplement, modification or amendment of
-----------------------
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
16. Notice. All notices, requests, demands and other communications under
------
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee or (ii) if mailed by
certified or registered mail with postage prepaid, on the third business day
after the mailing date. Addresses for notice to either party are as shown on
the signature page of this Agreement, or as subsequently modified by written
notice.
17. Governing Law. This Agreement shall be governed exclusively by and
-------------
construed according to the laws of the State of Delaware as applied to contracts
between Delaware residents entered into and to be performed entirely within
Delaware.
The parties hereto have entered into this Indemnity Agreement effective as
of the date first above written.
VISIGENIC SOFTWARE, INC.
By
-----------------------------------
Title
-----------------------------------
Address: 951 Mariner's Island Blvd., Suite 460
San Mateo, California 94404
INDEMNITEE:
-----------------------------------------
[Indemnitee's Printed Name]
Address:
-----------------------------------------
-----------------------------------------
7
<PAGE>
EXHIBIT 10.3
VISIGENIC SOFTWARE, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
---------------------------------------
1.1 ESTABLISHMENT. The Visigenic Software, Inc. 1996 Employee Stock
Purchase Plan (the "PLAN") is established effective as of the effective date of
the initial registration by the Company of its Stock under Section 12 of the
Exchange Act (the "EFFECTIVE DATE").
1.2 PURPOSE. The purpose of the Plan is to provide Eligible Employees
of the Participating Company Group with an opportunity to acquire a proprietary
interest in the Company through the purchase of Stock. The Company intends that
the Plan shall qualify as an "employee stock purchase plan" under Section 423 of
the Code (including any amendments or replacements of such section), and the
Plan shall be so construed.
1.3 TERM OF PLAN. The Plan shall continue in effect until the earlier
of its termination by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued.
2. DEFINITIONS AND CONSTRUCTION.
----------------------------
2.1 DEFINITIONS. Any term not expressly defined in the Plan but
defined for purposes of Section 423 of the Code shall have the same definition
herein. Whenever used herein, the following terms shall have their respective
meanings set forth below:
(a) "BOARD" means the Board of Directors of the Company. If one
or more Committees have been appointed by the Board to administer the Plan,
"Board" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986, as amended,
and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means a committee of the Board duly appointed to
administer the Plan and having such powers as shall be specified by the Board.
Unless the powers of the Committee have been specifically limited, the Committee
shall have all of the powers of the Board granted herein, including, without
limitation, the power to amend or terminate the Plan at any time, subject to the
terms of the Plan and any applicable limitations imposed by law.
(d) "COMPANY" means Visigenic Software, Inc., a Delaware
corporation, or any successor corporation thereto.
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(e) "COMPENSATION" means, with respect to an Offering Period under the
Plan, a Participant's base salary, bonuses, and commissions paid in cash during
such Offering Period before deduction for any contributions to any plan
maintained by a Participating Company and described in Section 401(k) or Section
125 of the Code. Compensation shall not include other incentive payments,
reimbursements of expenses, allowances, long-term disability, workers'
compensation or any amount deemed received without the actual transfer of cash
or any amounts directly or indirectly paid pursuant to the Plan or any other
stock purchase or stock option plan.
(f) "ELIGIBLE EMPLOYEE" means an Employee who meets the requirements
set forth in Section 5 for eligibility to participate in the Plan.
(g) "EMPLOYEE" means any person treated as an employee (including an
officer or a director who is also treated as an employee) in the records of a
Participating Company and for purposes of Section 423 of the Code; provided,
however, that neither service as a director nor payment of a director's fee
shall be sufficient to constitute employment for purposes of the Plan.
(h) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(i) "FAIR MARKET VALUE" means, as of any date, if there is then a
public market for the Stock, the closing price of a share of Stock (or the mean
of the closing bid and asked prices of a share of Stock if the Stock is so
reported instead) as reported on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") System, the NASDAQ National Market System or such
other national or regional securities exchange or market system constituting the
primary market for the Stock. If the relevant date does not fall on a day on
which the Stock is trading on NASDAQ, the NASDAQ National Market System or other
national or regional securities exchange or market system, the date on which the
Fair Market Value shall be established shall be the last day on which the Stock
was so traded prior to the relevant date, or such other appropriate day as shall
be determined by the Board, in its sole discretion. If there is then no public
market for the Stock, the Fair Market Value on any relevant date shall be as
determined by the Board without regard to any restriction other than a
restriction which, by its terms, will never lapse. Notwithstanding the
foregoing, the Fair Market Value per share of Stock on the Effective Date shall
be deemed to be the public offering price set forth in the final prospectus
filed with the Securities and Exchange Commission in connection with the initial
public offering of the Stock.
(j) "OFFERING" means an offering of Stock as provided in Section 6.
(k) "OFFERING DATE" means, for any Offering Period, the first day of
such Offering Period.
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(l) "OFFERING PERIOD" means a period determined in accordance with
Section 6.1.
(m) "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.
(n) "PARTICIPANT" means an Eligible Employee participating in the
Plan.
(o) "PARTICIPATING COMPANY" means the Company or any Parent
Corporation or Subsidiary Corporation designated by the Board for inclusion in
the Plan. The Board shall have the sole and absolute discretion to determine
from time to time which Parent Corporations or Subsidiary Corporations shall be
Participating Companies.
(p) "PARTICIPATING COMPANY GROUP" means, at any point in time, the
Company and all other corporations collectively which are then Participating
Companies.
(q) "PURCHASE DATE" means, for any Offering Period (or Purchase Period
if so determined by the Board in accordance with Section 6.2), the last day of
such period.
(r) "PURCHASE PERIOD" means a period, if any, determined in accordance
with Section 6.2.
(s) "PURCHASE PRICE" means the price at which a share of Stock may be
purchased pursuant to the Plan, as determined in accordance with Section 9.
(t) "PURCHASE RIGHT" means an option pursuant to the Plan to purchase
shares of Stock as provided in Section 8 which may or may not be exercised
during an Offering Period. Such option arises from the right of a Participant
to withdraw any accumulated payroll deductions of the Participant not previously
applied to the purchase of Stock under the Plan and to terminate participation
in the Plan or any Offering therein at any time during an Offering Period.
(u) "STOCK" means the common stock of the Company, as adjusted from
time to time in accordance with Section 4.2.
(v) "SUBSIDIARY CORPORATION" means any present or future "subsidiary
corporation" of the Company, as defined in Section 424(f) of the Code.
2.2 CONSTRUCTION. Captions and titles contained herein are for convenience
only and shall not affect the meaning or interpretation of any provision of the
Plan. Except when otherwise indicated by the context, the singular shall include
the plural, the plural shall include the singular, and use of the term "or"
shall include the conjunctive as well as the disjunctive.
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3. ADMINISTRATION. The Plan shall be administered by the Board, including
--------------
any duly appointed Committee of the Board. All questions of interpretation of
the Plan or of any Purchase Right shall be determined by the Board and shall be
final and binding upon all persons having an interest in the Plan or the
Purchase Right. Subject to the provisions of the Plan, the Board shall
determine all of the relevant terms and conditions of Purchase Rights granted
pursuant to the Plan; provided, however, that all Participants granted Purchase
Rights pursuant to the Plan shall have the same rights and privileges within the
meaning of Section 423(b)(5) of the Code. All expenses incurred in connection
with the administration of the Plan shall be paid by the Company.
4. SHARES SUBJECT TO PLAN.
----------------------
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be four hundred fifty thousand (450,000) and
shall consist of authorized but unissued or reacquired shares of the Stock, or
any combination thereof. If an outstanding Purchase Right for any reason expires
or is terminated or canceled, the shares of Stock allocable to the unexercised
portion of such Purchase Right shall again be available for issuance under the
Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company, or
in the event of any merger (including a merger effected for the purpose of
changing the Company's domicile), sale of assets or other reorganization in
which the Company is a party, appropriate adjustments shall be made in the
number and class of shares subject to the Plan, the Per Offering Share Limit set
forth in Section 8.1 and each Purchase Right and in the Purchase Price.
5. ELIGIBILITY.
-----------
5.1 EMPLOYEES ELIGIBLE TO PARTICIPATE. Any Employee of a Participating
Company is eligible to participate in the Plan except the following:
(a) Employees who are customarily employed by the Participating
Company Group for twenty (20) hours or less per week;
(b) Employees who are customarily employed by the Participating
Company Group for not more than five (5) months in any calendar year; and
(c) Employees who own or hold options to purchase or who, as a
result of participation in the Plan, would own or hold options to purchase,
stock of the Company or of any Parent Corporation or Subsidiary Corporation
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of such corporation within the meaning of Section
423(b)(3) of the Code.
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5.2 LEASED EMPLOYEES EXCLUDED. Notwithstanding anything herein to the
contrary, any individual performing services for a Participating Company solely
through a leasing agency or employment agency shall not be deemed an "Employee"
of such Participating Company.
6. OFFERINGS.
---------
6.1 OFFERING PERIODS. Except as otherwise set forth below, the Plan
shall be implemented by sequential Offerings of approximately six (6) months
duration (an "OFFERING PERIOD"); provided, however that the first Offering
Period shall commence on the Effective Date and end on January 31, 1997 (the
"INITIAL OFFERING PERIOD"). Subsequent Offerings shall commence on the first
days of February and August of each year and end on the last days of the next
July and January, respectively, occurring thereafter. Notwithstanding the
foregoing, the Board may establish a different term for one or more Offerings or
different commencing or ending dates for such Offerings; provided, however, that
no Offering may exceed a term of twenty-seven (27) months. An Employee who
becomes an Eligible Employee after an Offering Period has commenced shall not be
eligible to participate in such Offering but may participate in any subsequent
Offering provided such Employee is still an Eligible Employee as of the
commencement of any such subsequent Offering. Eligible Employees may not
participate in more than one Offering at a time. In the event the first or last
day of an Offering Period is not a business day, the Company shall specify the
business day that will be deemed the first or last day, as the case may be, of
the Offering Period.
6.2 PURCHASE PERIODS. If the Board so determines, in its discretion,
each Offering Period may consist of two (2) or more consecutive purchase periods
having such duration as the Board shall specify (individually, a "PURCHASE
PERIOD"), and the last day of each such Purchase Period shall be a Purchase
Date. In the event the first or last day of a Purchase Period is not a business
day, the Company shall specify the business day that will be deemed the first or
last day, as the case may be, of the Purchase Period.
6.3 GOVERNMENTAL APPROVAL; STOCKHOLDER APPROVAL. Notwithstanding any
other provision of the Plan to the contrary, any Purchase Right granted pursuant
to the Plan shall be subject to (a) obtaining all necessary governmental
approvals or qualifications of the sale or issuance of the Purchase Rights or
the shares of Stock and (b) obtaining stockholder approval of the Plan.
7. PARTICIPATION IN THE PLAN.
-------------------------
7.1 INITIAL PARTICIPATION. An Eligible Employee shall become a
Participant on the first Offering Date after satisfying the eligibility
requirements of Section 5 and delivering to the Company's payroll office or
other office designated by the Company not later than the close of business for
such office on the last business day before such Offering Date (the
"SUBSCRIPTION DATE") a subscription agreement indicating the Employee's election
to participate in the Plan and authorizing payroll
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deductions. An Eligible Employee who does not deliver a subscription agreement
to the Company's payroll or other designated office on or before the
Subscription Date shall not participate in the Plan for that Offering Period or
for any subsequent Offering Period unless such Employee subsequently enrolls in
the Plan by filing a subscription agreement with the Company by the Subscription
Date for such subsequent Offering Period. The Company may, from time to time,
change the Subscription Date as deemed advisable by the Company in its sole
discretion for proper administration of the Plan.
7.2 CONTINUED PARTICIPATION. A Participant shall automatically
participate in the Offering Period commencing immediately after the final
Purchase Date of each Offering Period in which the Participant participates
until such time as the Participant (a) ceases to be an Eligible Employee, (b)
withdraws from the Plan pursuant to Section 13.2 or (c) terminates employment as
provided in Section 14. If a Participant automatically may participate in a
subsequent Offering Period pursuant to this Section 7.2, then the Participant is
not required to file any additional subscription agreement for the subsequent
Offering Period in order to continue participation in the Plan. However, a
Participant may file a subscription agreement for a subsequent Offering Period
if the Participant desires to change any of the Participant's elections
contained in the Participant's then effective subscription agreement.
8. RIGHT TO PURCHASE SHARES.
------------------------
8.1 PURCHASE RIGHT. Except as set forth below, during an Offering
Period each Participant in the Offering Period shall have a Purchase Right
consisting of the right to purchase that number of whole shares of Stock
determined by dividing Twelve Thousand Five Hundred Dollars ($12,500) by the
Fair Market Value of a share of Stock on the Offering Date of the Offering
Period; provided, however, that such number shall not exceed one thousand five
hundred (1,500) shares (the "PER OFFERING SHARE LIMIT"). Shares of Stock may
only be purchased through a Participant's payroll deductions pursuant to Section
10.
8.2 PRO RATA ADJUSTMENT OF PURCHASE RIGHT. Notwithstanding the
foregoing, if the Board establishes an Offering Period of less than five and
one-half (5 1/2) months or more than six and one-half (6 1/2) months in
duration (a) the dollar amount in Section 8.1 shall be determined by multiplying
$2,083.33 by the number of months in the Offering Period and rounding to the
nearest whole dollar, and (b) the Per Offering Share Limit shall be determined
by multiplying 250 shares by the number of months in the Offering Period and
rounding to the nearest whole share. For purposes of the preceding sentence,
fractional months shall be rounded to the nearest whole month.
9. PURCHASE PRICE. The Purchase Price at which each share of Stock may be
--------------
acquired in a given Offering Period pursuant to the exercise of all or any
portion of a Purchase Right shall be set by the Board; provided, however, that
the Purchase Price shall not be less than eighty-five percent (85%) of the
lesser of (a) the Fair Market Value of a share of Stock on the Offering Date of
the Offering Period, or (b) the Fair
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Market Value of a share of Stock on the Purchase Date. Unless otherwise
provided by the Board prior to the commencement of an Offering Period, the
Purchase Price for that Offering Period shall be eighty-five percent (85%) of
the lesser of (a) the Fair Market Value of a share of Stock on the Offering Date
of the Offering Period, or (b) the Fair Market Value of a share of Stock on the
Purchase Date.
10. ACCUMULATION OF PURCHASE PRICE THROUGH PAYROLL DEDUCTION. Shares of
--------------------------------------------------------
Stock which are acquired pursuant to the exercise of all or any portion of a
Purchase Right for an Offering Period may be paid for only by means of payroll
deductions from the Participant's Compensation accumulated during the Offering
Period. Except as set forth below, the amount of Compensation to be deducted
from a Participant's Compensation on each payday during an Offering Period shall
be determined by the Participant's subscription agreement.
10.1 COMMENCEMENT OF PAYROLL DEDUCTIONS. Payroll deductions shall
commence on the first payday following the Offering Date and shall continue to
the end of the Offering Period unless sooner altered or terminated as provided
in the Plan.
10.2 LIMITATIONS ON PAYROLL DEDUCTIONS. The amount deducted from a
Participant's Compensation on any payday during an Offering Period pursuant to
the Participant's subscription agreement shall be in one percent (1%) increments
not exceeding ten percent (10%) of the Participant's Compensation on such
payday. Notwithstanding the foregoing, the Board may change the limits on
payroll deductions effective as of a future Offering Date, as determined by the
Board. Amounts deducted from Compensation shall be reduced by any amounts
contributed by the Participant and applied to the purchase of Company stock
pursuant to any other employee stock purchase plan qualifying under Section 423
of the Code.
10.3 ELECTION TO DECREASE OR STOP PAYROLL DEDUCTIONS. During an
Offering Period, a Participant may elect to decrease the amount deducted or stop
deductions from his or her Compensation by filing an amended subscription
agreement with the Company on or before the "Change Notice Date." The "CHANGE
NOTICE DATE" shall initially be the seventh (7th) day prior to the end of the
first pay period for which such election is to be effective; however, the
Company may change the Change Notice Date from time to time. A Participant may
not elect to increase the amount deducted from the Participant's Compensation
during an Offering Period.
10.4 PARTICIPANT ACCOUNTS. Individual Plan accounts shall be
maintained for each Participant. All payroll deductions from a Participant's
Compensation shall be credited to such account and shall be deposited with the
general funds of the Company. All payroll deductions received or held by the
Company may be used by the Company for any corporate purpose.
10.5 NO INTEREST PAID. Interest shall not be paid on sums deducted
from a Participant's Compensation pursuant to the Plan.
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10.6 COMPANY ESTABLISHED PROCEDURES. The Company may, from time to
time, establish or change (a) a minimum required payroll deduction amount for
participation in an Offering, (a) limitations on the frequency or number of
changes in the rate of payroll deduction during an Offering, (c) an exchange
ratio applicable to amounts withheld in a currency other than U.S. dollars, (d)
payroll deduction in excess of or less than the amount designated by a
Participant in order to adjust for delays or mistakes in the Company's
processing of subscription agreements, (e) the date(s) and manner by which the
Fair Market Value of a share of Stock is determined for purposes of
administration of the Plan, or (vi) such other limitations or procedures as
deemed advisable by the Company in the Company's sole discretion which are
consistent with the Plan and in accordance with the requirements of Section 423
of the Code.
11. PURCHASE OF SHARES.
------------------
11.1 EXERCISE OF PURCHASE RIGHT. On each Purchase Date of an Offering
Period, each Participant who has not withdrawn from the Offering or whose
participation in the Offering has not terminated on or before such Purchase Date
shall automatically acquire pursuant to the exercise of the Participant's
Purchase Right the number of whole shares of Stock determined by dividing the
total amount of the Participant's accumulated payroll deductions for the
Offering Period not previously applied toward the purchase of Stock by the
Purchase Price; provided, however, in no event shall the number of shares
purchased by the Participant during an Offering Period exceed the number of
shares subject to the Participant's Purchase Right. No shares of Stock shall be
purchased on a Purchase Date on behalf of a Participant whose participation in
the Offering or the Plan has terminated on or before such Purchase Date.
11.2 RETURN OF CASH BALANCE. Any cash balance remaining in the
Participant's Plan account shall be refunded to the Participant as soon as
practicable after the Purchase Date. However, if the cash to be returned to a
Participant pursuant to the preceding sentence is an amount less than the amount
necessary to purchase a whole share of Stock, the Company may establish
procedures whereby such cash is maintained in the Participant's Plan account and
applied toward the purchase of shares of Stock in the subsequent Offering Period
(or Purchase Period, as the case may be).
11.3 TAX WITHHOLDING. At the time a Participant's Purchase Right is
exercised, in whole or in part, or at the time a Participant disposes of some or
all of the shares of Stock he or she acquires under the Plan, the Participant
shall make adequate provision for the foreign, federal, state and local tax
withholding obligations of the Participating Company Group, if any, which arise
upon exercise of the Purchase Right or upon such disposition of shares,
respectively. The Participating Company Group may, but shall not be obligated
to, withhold from the Participant's compensation the amount necessary to meet
such withholding obligations.
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11.4 EXPIRATION OF PURCHASE RIGHT. Any portion of a Participant's
Purchase Right remaining unexercised after the end of the Offering Period to
which the Purchase Right relates shall expire immediately upon the end of the
Offering Period.
11.5 REPORTS TO PARTICIPANTS. Each Participant who has exercised all
or part of his or her Purchase Right shall receive, as soon as practicable after
the Purchase Date, a report of such Participant's Plan account setting forth the
total payroll deductions accumulated, the number of shares of Stock purchased,
the Purchase Price for such shares, the date of purchase and the remaining cash
balance to be refunded or retained in the Participant's Plan account pursuant to
Section 11.2, if any. In addition, each Participant shall be provided
information concerning the Company equivalent to that information generally made
available to the Company's common stockholders.
12. LIMITATIONS ON PURCHASE OF SHARES; RIGHTS AS A STOCKHOLDER.
----------------------------------------------------------
12.1 FAIR MARKET VALUE LIMITATION. Notwithstanding any other
provision of the Plan, no Participant shall be entitled to purchase shares of
Stock under the Plan (or any other employee stock purchase plan intended to meet
the requirements of Section 423 of the Code sponsored by the Company or a Parent
Corporation or Subsidiary Corporation) at a rate which exceeds $25,000 (or such
other limit as may be imposed by the Code) in Fair Market Value for each
calendar year in which the Participant participates in the Plan (or any other
employee stock purchase plan described in this sentence). For purposes of the
preceding sentence, the Fair Market Value of shares purchased during a given
Offering Period shall be determined as of the Offering Date for such Offering
Period. The limitation described in this Section 12.1 shall be applied in
conformance with applicable regulations under Section 423 of the Code.
12.2 PRO RATA ALLOCATION. In the event the number of shares of Stock
which might be purchased by all Participants in the Plan exceeds the number of
shares of Stock available in the Plan as provided in Section 4.1, the Company
shall make a pro rata allocation of the remaining shares in as uniform a manner
as shall be practicable and as the Company shall determine to be equitable.
12.3 RIGHTS AS A STOCKHOLDER AND EMPLOYEE. A Participant shall have
no rights as a stockholder by virtue of the Participant's participation in the
Plan until the date of the issuance of a stock certificate for the shares of
Stock being purchased pursuant to the exercise of the Participant's Purchase
Right. No adjustment shall be made for cash dividends or distributions or other
rights for which the record date is prior to the date such stock certificate is
issued. Nothing herein shall confer upon a Participant any right to continue in
the employ of the Participating Company Group or interfere in any way with any
right of the Participating Company Group to terminate the Participant's
employment at any time.
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13. WITHDRAWAL.
----------
13.1 WITHDRAWAL FROM AN OFFERING. A Participant may withdraw from an
Offering by signing and delivering to the Company's payroll or other designated
office a written notice of withdrawal on a form provided by the Company for such
purpose. Such withdrawal may be elected at any time prior to the end of an
Offering Period; provided, however, if a Participant withdraws after a Purchase
Date, the withdrawal shall not affect shares of Stock acquired by the
Participant on such Purchase Date. Unless otherwise indicated, withdrawal from
an Offering shall not result in a withdrawal from the Plan or any succeeding
Offering therein. A Participant is prohibited from again participating in an
Offering at any time following withdrawal from such Offering. The Company may
impose, from time to time, a requirement that the notice of withdrawal be on
file with the Company's payroll office or other designated office for a
reasonable period prior to the effectiveness of the Participant's withdrawal
from an Offering.
13.2 WITHDRAWAL FROM THE PLAN. A Participant may withdraw from the
Plan by signing and delivering to the Company's payroll office or other
designated office a written notice of withdrawal on a form provided by the
Company for such purpose. Withdrawals made after a Purchase Date shall not
affect shares of Stock acquired by the Participant on such Purchase Date. In
the event a Participant voluntarily elects to withdraw from the Plan, the
Participant may not resume participation in the Plan during the same Offering
Period, but may participate in any subsequent Offering under the Plan by again
satisfying the requirements of Sections 5 and 7.1. The Company may impose, from
time to time, a requirement that the notice of withdrawal be on file with the
Company's payroll office or other designated office for a reasonable period
prior to the effectiveness of the Participant's withdrawal from the Plan.
13.3 RETURN OF PAYROLL DEDUCTIONS. Upon a Participant's withdrawal
from an Offering or the Plan pursuant to Sections 13.1 or 13.2, respectively,
the Participant's accumulated payroll deductions which have not been applied
toward the purchase of shares of Stock shall be returned as soon as practicable
after the withdrawal, without the payment of any interest, to the Participant,
and the Participant's interest in the Offering or the Plan, as applicable, shall
terminate. Such accumulated payroll deductions may not be applied to any other
Offering under the Plan.
13.4 WAIVER OF WITHDRAWAL RIGHT. The Company may, from time to time,
establish a procedure pursuant to which a Participant may elect, at least six
(6) months prior to a Purchase Date, to have all payroll deductions accumulated
in his or her Plan account as of such Purchase Date applied to purchase shares
of Stock under the Plan, and (a) to waive his or her right to withdraw from the
Offering or the Plan and (b) to waive his or her right to increase, decrease, or
cease payroll deductions under the Plan from his or her Compensation during the
period ending on such Purchase Date. Such election shall be made in writing on
a form provided by the Company for such purpose and must be delivered to the
Company not later than the
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close of business on the day preceding the date which is six (6) months before
the Purchase Date for which such election is to first be effective.
14. TERMINATION OF EMPLOYMENT OR ELIGIBILITY. Termination of a
----------------------------------------
Participant's employment with the Participating Company Group for any reason,
including retirement, disability or death or the failure of a Participant to
remain an Eligible Employee, shall terminate the Participant's participation in
the Plan immediately. In such event, the payroll deductions credited to the
Participant's Plan account since the last Purchase Date shall, as soon as
practicable, be returned to the Participant or, in the case of the Participant's
death, to the Participant's legal representative, and all of the Participant's
rights under the Plan shall terminate. Interest shall not be paid on sums
returned to a Participant pursuant to this Section 14. A Participant whose
participation has been so terminated may again become eligible to participate in
the Plan by again satisfying the requirements of Sections 5 and 7.1.
15. TRANSFER OF CONTROL.
-------------------
15.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Company: (i) the
direct or indirect sale or exchange in a single or series of related
transactions by the stockholders of the Company of more than fifty percent (50%)
of the voting stock of the Company; (ii) a merger or consolidation in which the
Company a party; (iii) the sale, exchange, or transfer of all or substantially
all of the assets of the Company; or (iv) a liquidation or dissolution of the
Company.
(b) A "TRANSFER OF CONTROL" shall mean an Ownership Change
Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the stockholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
15.2 EFFECT OF TRANSFER OF CONTROL ON PURCHASE RIGHTS. In the event
of a Transfer of Control, the surviving, continuing, successor, or purchasing
corporation
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or parent corporation thereof, as the case may be (the "ACQUIRING CORPORATION"),
may assume the Company's rights and obligations under the Plan or substitute
substantially equivalent Purchase Rights for stock of the Acquiring Corporation.
If the Acquiring Corporation elects not to assume or substitute for the
outstanding Purchase Rights, the Board may, in its sole discretion and
notwithstanding any other provision herein to the contrary, adjust the Purchase
Date of the then current Purchase Period to a date on or before the date of the
Transfer of Control, but shall not adjust the number of shares of Stock subject
to any Purchase Right. All Purchase Rights which are neither assumed or
substituted for by the Acquiring Corporation in connection with the Transfer of
Control nor exercised as of the date of the Transfer of Control shall terminate
and cease to be outstanding effective as of the date of the Transfer of Control.
Notwithstanding the foregoing, if the corporation the stock of which is subject
to the outstanding Purchase Rights immediately prior to an Ownership Change
Event described in Section 15.1(a)(i) constituting a Transfer of Control is the
surviving or continuing corporation and immediately after such Ownership Change
Event less than fifty percent (50%) of the total combined voting power of its
voting stock is held by another corporation or by other corporations that are
members of an affiliated group within the meaning of section 1504(a) of the Code
without regard to the provisions of section 1504(b) of the Code, the outstanding
Purchase Rights shall not terminate unless the Board otherwise provides in its
sole discretion.
16. NONTRANSFERABILITY OF PURCHASE RIGHTS. A Purchase Right may not be
-------------------------------------
transferred in any manner otherwise than by will or the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant. The Company, in its absolute discretion, may impose
such restrictions on the transferability of the shares purchasable upon the
exercise of a Purchase Right as it deems appropriate and any such restriction
shall be set forth in the respective subscription agreement and may be referred
to on the certificates evidencing such shares.
17. RESTRICTION ON ISSUANCE OF SHARES. The issuance of shares under the
---------------------------------
Plan shall be subject to compliance with all applicable requirements of foreign,
federal or state law with respect to such securities. A Purchase Right may not
be exercised if the issuance of shares upon such exercise would constitute a
violation of any applicable foreign, federal or state securities laws or other
law or regulations. In addition, no Purchase Right may be exercised unless (a)
a registration statement under the Securities Act of 1933, as amended, shall at
the time of exercise of the Purchase Right be in effect with respect to the
shares issuable upon exercise of the Purchase Right, or (b) in the opinion of
legal counsel to the Company, the shares issuable upon exercise of the Purchase
Right may be issued in accordance with the terms of an applicable exemption from
the registration requirements of said Act. The inability of the Company to
obtain from any regulatory body having jurisdiction the authority, if any,
deemed by the Company's legal counsel to be necessary to the lawful issuance and
sale of any shares under the Plan shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of a
12
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Purchase Right, the Company may require the Participant to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation, and to make any representation or warranty
with respect thereto as may be requested by the Company.
18. LEGENDS. The Company may at any time place legends or other
-------
identifying symbols referencing any applicable foreign, federal or state
securities law restrictions or any provision convenient in the administration of
the Plan on some or all of the certificates representing shares of Stock issued
under the Plan. The Participant shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to a Purchase Right in the possession of the Participant in order to
carry out the provisions of this Section. Unless otherwise specified by the
Company, legends placed on such certificates may include but shall not be
limited to the following:
"THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE
CORPORATION TO THE REGISTERED HOLDER UPON THE PURCHASE OF SHARES UNDER AN
EMPLOYEE STOCK PURCHASE PLAN AS DEFINED IN SECTION 423 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY
SHALL NOTIFY THE CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE
REGISTERED HOLDER HEREOF MADE ON OR BEFORE ______________, 19__. THE REGISTERED
HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE PLAN IN THE REGISTERED HOLDER'S
NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE."
19. NOTIFICATION OF SALE OF SHARES. The Company may require the
------------------------------
Participant to give the Company prompt notice of any disposition of shares
acquired by exercise of a Purchase Right within two years from the date of
granting such Purchase Right or one year from the date of exercise of such
Purchase Right. The Company may require that until such time as a Participant
disposes of shares acquired upon exercise of a Purchase Right, the Participant
shall hold all such shares in the Participant's name (and not in the name of any
nominee) until the lapse of the time periods with respect to such Purchase Right
referred to in the preceding sentence. The Company may direct that the
certificates evidencing shares acquired by exercise of a Purchase Right refer to
such requirement to give prompt notice of disposition.
20. AMENDMENT OR TERMINATION OF THE PLAN. The Board may at any time amend
------------------------------------
or terminate the Plan, except that (a) such termination shall not affect
Purchase Rights previously granted under the Plan, except as permitted under the
Plan, and (b) no amendment may adversely affect a Purchase Right previously
granted under the Plan (except to the extent permitted by the Plan or as may be
necessary to qualify the Plan as an employee stock purchase plan pursuant to
Section 423 of the Code or to obtain qualification or registration of the shares
of Stock under applicable foreign, federal or state securities laws). In
addition, an amendment to the Plan must be approved by the stockholders of the
Company
13
<PAGE>
within twelve (12) months of the adoption of such amendment if such amendment
would authorize the sale of more shares than are authorized for issuance under
the Plan or would change the definition of the corporations that may be
designated by the Board as Participating Companies.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that
the foregoing Visigenic Software, Inc. 1996 Employee Stock Purchase Plan was
duly adopted by the Board of Directors of the Company on June 17, 1996.
_______________________________________
Secretary
14
<PAGE>
PLAN HISTORY
June 17, 1996 Board adopts Plan, with an initial reserve of 450,000
shares.
________, 1996 Stockholders approve Plan, with an initial reserve of
450,000 shares.
15
<PAGE>
VISIGENIC SOFTWARE, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
[_] Original Application for participation commencing with the Offering Period
beginning _________________________, 199__.
[_] Change in Percentage of Payroll Deductions effective with the pay period
ending _________________________, 199__.
I hereby elect to participate in the 1996 Employee Stock Purchase Plan (the
"PLAN") of Visigenic Software, Inc. (the "COMPANY") and subscribe to purchase
from the Company shares of the Company's common stock as determined in
accordance with the terms of the Plan.
I hereby authorize payroll deductions in the amount of ______________
percent (in 1% increments not to exceed 10%) of my "COMPENSATION" (as defined in
the Plan) from each paycheck throughout the "OFFERING PERIOD" (as defined in the
Plan) in accordance with the terms of the Plan. I understand that these payroll
deductions will be accumulated for the purchase of shares of common stock of the
Company at the applicable purchase price determined in accordance with the Plan.
I further understand that, except as otherwise set forth in the Plan, I will
automatically purchase shares on each Purchase Date under the Plan unless I
withdraw from the Plan or from the Offering by giving written notice on a form
provided by the Company or unless my employment terminates.
I further understand that I will automatically participate in each
subsequent Offering which commences immediately after the last day of an
Offering in which I am participating under the Plan until such time as I file
with the Company a notice of withdrawal from the Plan on a form provided by the
Company or my employment terminates.
Shares I purchase under the Plan should be issued in the name set forth
below. (I understand that shares may be issued either in my name alone or
together with my spouse as community property or in joint tenancy.)
NAME: ___________________________________________________________
ADDRESS: ________________________________________________________
________________________________________________________
MY SOCIAL SECURITY NUMBER: ______________________________________
I hereby authorize withholding from my compensation in order to satisfy the
foreign, federal, state and local tax withholding obligations, if any, which may
arise upon my purchase of shares under the Plan and/or upon my disposition of
shares I acquired under the Plan. I hereby agree that until I dispose of the
shares, unless otherwise permitted by the Company, I will hold all shares I
acquire under the Plan in the name entered above (and not in the name of any
nominee) for at least two (2) years from the first day of the Offering Period in
which, and at least one (1) year from the Purchase Date on which, I acquired
such shares. I further agree that I will promptly notify the Chief Financial
Officer of the Company in writing of any transfer of such shares prior to the
end of the periods referred to in the preceding sentence.
I am familiar with the provisions of the Plan and hereby agree to
participate in the Plan subject to all of the provisions thereof. I understand
that the Board of Directors of the Company reserves the right to amend or
terminate the Plan and my right to purchase stock under the Plan. I understand
that the effectiveness of this subscription agreement is dependent upon my
eligibility to participate in the Plan.
Date: ________________________ Signature:________________________________
Name Printed:_____________________________
<PAGE>
VISIGENIC SOFTWARE, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
I hereby elect to withdraw from the offering of the common stock of
Visigenic Software, Inc. under the 1996 Employee Stock Purchase Plan (the
"PLAN") which began on _________________________, 199__ and in which I am
currently participating (the "CURRENT OFFERING").
A. Current Offering. I elect to terminate my participation in the Current
----------------
Offering immediately. I hereby request that all payroll deductions
credited to my account under the Plan (if any) not previously used to
purchase shares under the Plan shall not be used to purchase shares on the
---
last day of the Current Offering. Instead, I request that all such amounts
be paid to me as soon as practicable. I understand that this election
immediately terminates my interest in the Current Offering.
B. Future Offerings. As to my participation in future offerings of common
----------------
stock under the Plan, I elect as follows (check one):
[_] 1. I elect to participate in future offerings under the Plan.
I understand that by making this election I will participate in the
next offering under the Plan commencing subsequent to the Current
Offering, and in each subsequent offering commencing immediately after
the last day of an offering in which I participate, until such time as
I elect to withdraw from the Plan or from any such subsequent offering
or I become ineligible to participate in the Plan.
[_] 2. I elect not to participate in future offerings under the Plan.
---
I understand that by making this election I terminate my interest in
the Plan and that no further payroll deductions will be made unless I
elect in accordance with the Plan to become a participant in another
offering under the Plan.
I understand that if no election is made as to participation in future
offerings under the Plan, I will be deemed to have elected to participate in
future offerings.
Date: _________________ Signature: __________________________________
Name Printed: _______________________________
<PAGE>
EXHIBIT 10.4
VISIGENIC SOFTWARE, INC.
1996 OUTSIDE DIRECTORS STOCK OPTION PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
---------------------------------------
1.1 ESTABLISHMENT. The Visigenic Software, Inc. 1996 Outside
Directors Stock Option Plan (the "PLAN") is hereby established effective as of
the effective date of the initial registration by the Company of its Stock under
Section 12 of the Exchange Act (the "EFFECTIVE DATE").
1.2 PURPOSE. The purpose of the Plan is to advance the interests of
the Participating Company Group and its stockholders by providing an incentive
to attract and retain highly qualified persons to serve as Outside Directors of
the Company and by creating additional incentive for Outside Directors to
promote the growth and profitability of the Participating Company Group.
1.3 TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued and all
restrictions on such shares under the terms of the Plan and the agreements
evidencing Options granted under the Plan have lapsed.
2. DEFINITIONS AND CONSTRUCTION.
----------------------------
2.1 DEFINITIONS. Whenever used herein, the following terms shall
have their respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the Company. If one
or more Committees have been appointed by the Board to administer the Plan,
"Board" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986, as amended,
and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means a committee of the Board duly appointed to
administer the Plan and having such powers as shall be specified by the Board.
Unless the powers of the Committee have been specifically limited, the Committee
shall have all of the powers of the Board granted herein, including, without
limitation, the power to amend or terminate the Plan at any time, subject to the
terms of the Plan and any applicable limitations imposed by law.
(d) "COMPANY" means Visigenic Software, Inc., a Delaware
corporation, or any successor corporation thereto.
1
<PAGE>
(e) "CONSULTANT" means any person, including an advisor, engaged
by a Participating Company to render services other than as an Employee or a
Director.
(f) "DIRECTOR" means a member of the Board or the board of
directors of any other Participating Company.
(g) "EMPLOYEE" means any person treated as an employee
(including an officer or a Director who is also treated as an employee) in the
records of a Participating Company; provided, however, that neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
employment for purposes of the Plan.
(h) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(i) "FAIR MARKET VALUE" means, as of any date, if there is then a
public market for the Stock, the closing price of the Stock (or the mean of the
closing bid and asked prices of the Stock if the Stock is so reported instead)
as reported on the National Association of Securities Dealers Automated
Quotation ("NASDAQ") System, the NASDAQ National Market System or such other
national or regional securities exchange or market system constituting the
primary market for the Stock. If the relevant date does not fall on a day on
which the Stock is trading on NASDAQ, the NASDAQ National Market System or other
national or regional securities exchange or market system, the date on which the
Fair Market Value shall be established shall be the last day on which the Stock
was so traded prior to the relevant date. If there is then no public market for
the Stock, the Fair Market Value on any relevant date shall be as determined by
the Board without regard to any restriction other than a restriction which, by
its terms, will never lapse.
(j) "OPTION" means a right to purchase Stock (subject to
adjustment as provided in Section 4.2) pursuant to the terms and conditions of
the Plan.
(k) "OPTIONEE" means a person who has been granted one or more
Options.
(l) "OPTION AGREEMENT" means a written agreement between the
Company and an Optionee setting forth the terms, conditions and restrictions
of the Option granted to the Optionee.
(m) "OUTSIDE DIRECTOR" means a Director of the Company who is
not an Employee.
(n) "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.
2
<PAGE>
(o) "PARTICIPATING COMPANY" means the Company or any Parent
Corporation or Subsidiary Corporation.
(p) "PARTICIPATING COMPANY GROUP" means, at any point in time,
all corporations collectively which are then Participating Companies.
(q) "RULE 16B-3" means Rule 16b-3 as promulgated under the
Exchange Act, as amended from time to time, or any successor rule or regulation.
(r) "SERVICE" means the Optionee's service with the Participating
Company Group, whether in the capacity of an Employee, a Director or a
Consultant. The Optionee's Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Optionee renders Service
to the Participating Company Group or a change in the Participating Company for
which the Optionee renders such Service, provided that there is no interruption
or termination of the Optionee's Service. The Optionee's Service shall be
deemed to have terminated either upon an actual termination of Service or upon
the corporation for which the Optionee performs Service ceasing to be a
Participating Company. Subject to the foregoing, the Company, in its sole
discretion, shall determine whether the Optionee's Service has terminated and
the effective date of such termination.
(s) "STOCK" means the common stock of the Company, as adjusted
from time to time in accordance with Section 4.2.
(t) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.
2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural, the plural shall include the singular, and
use of the term "or" shall include the conjunctive as well as the disjunctive.
3. ADMINISTRATION.
--------------
3.1 ADMINISTRATION BY THE BOARD. The Plan shall be administered by
the Board, including any duly appointed Committee of the Board. All questions of
interpretation of the Plan or of any Option shall be determined by the Board,
and such determinations shall be final and binding upon all persons having an
interest in the Plan or such Option. Any officer of a Participating Company
shall have the authority to act on behalf of the Company with respect to any
matter, right, obligation, determination or election which is the responsibility
of or which is allocated to the Company herein, provided the officer has
apparent authority with respect to such matter, right, obligation, determination
or election.
3
<PAGE>
3.2 LIMITATIONS ON AUTHORITY OF THE BOARD. Notwithstanding any other
provision herein to the contrary, the Board shall have no authority, discretion,
or power to select the Outside Directors who will receive Options, to set the
exercise price of the Options, to determine the number of shares of Stock to be
subject to an Option or the time at which an Option shall be granted, to
establish the duration of an Option, or to alter any other terms or conditions
specified in the Plan, except in the sense of administering the Plan subject to
the provisions of the Plan.
4. SHARES SUBJECT TO PLAN.
----------------------
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be two hundred thousand (200,000) and shall
consist of authorized but unissued shares or reacquired shares of Stock or any
combination thereof. If an outstanding Option for any reason expires or is
terminated or canceled or shares of Stock acquired, subject to repurchase, upon
the exercise of an Option are repurchased by the Company, the shares of Stock
allocable to the unexercised portion of such Option, or such repurchased shares
of Stock, shall again be available for issuance under the Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of
any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, appropriate adjustments shall be made in the number and class of shares
subject to the Plan, to the "Initial Option" and "Annual Option" (as defined in
Section 6.1), and to any outstanding Options, and in the exercise price of any
outstanding Options. If a majority of the shares which are of the same class as
the shares that are subject to outstanding Options are exchanged for, converted
into, or otherwise become (whether or not pursuant to a Transfer of Control as
defined in Section 8.1) shares of another corporation (the "NEW SHARES"), the
Board may unilaterally amend the outstanding Options to provide that such
Options are exercisable for New Shares. In the event of any such amendment, the
number of shares subject to, and the exercise price of, the outstanding Options
shall be adjusted in a fair and equitable manner as determined by the Board, in
its sole discretion. Notwithstanding the foregoing, any fractional share
resulting from an adjustment pursuant to this Section 4.2 shall be rounded down
to the nearest whole number, and in no event may the exercise price of any
Option be decreased to an amount less than the par value, if any, of the stock
subject to the Option.
5. ELIGIBILITY AND TYPE OF OPTIONS.
-------------------------------
5.1 PERSONS ELIGIBLE FOR OPTIONS. An Option shall be granted only
to a person who, at the time of grant, is an Outside Director.
4
<PAGE>
5.2 OPTIONS AUTHORIZED. Options shall be nonstatutory stock
options; that is, options which are not treated as incentive stock options
within the meaning of Section 422(b) of the Code.
6. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by Option
-------------------------------
Agreements specifying the number of shares of Stock covered thereby, in such
form as the Board shall from time to time establish. Option Agreements may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:
6.1 AUTOMATIC GRANT OF OPTIONS. Subject to execution by an Outside
Director of the appropriate Option Agreement, Options shall be granted
automatically and without further action of the Board, as follows:
(a) INITIAL OPTION. Each Outside Director shall be granted an
initial Option as follows (an "INITIAL OPTION"):
(i) Each Outside Director who was an Outside Director on
the Effective Date shall be granted an Option to purchase fifteen thousand
(15,000) shares of Stock on the day following the first annual meeting of the
Company's stockholders after the Effective Date.
(ii) Each person who is first elected or appointed as an
Outside Director after the Effective Date shall be granted an Option to purchase
fifteen thousand (15,000) shares of Stock on the date of such initial election
or appointment.
(b) ANNUAL OPTION. Each Outside Director shall be granted an
Option to purchase five thousand (5,000) shares of Stock (the "ANNUAL OPTION")
on each anniversary of the date of grant of his or her Initial Option.
(c) RIGHT TO DECLINE OPTION. Notwithstanding the foregoing, any
person may elect not to receive an Option by delivering written notice of such
election to the Board no later than the day prior to the date such Option would
otherwise be granted. A person so declining an Option shall receive no payment
or other consideration in lieu of such declined Option. A person who has
declined an Option may revoke such election by delivering written notice of such
revocation to the Board no later than the day prior to the date such Option
would be granted pursuant to Section 6.1(a) or (b), as the case may be.
6.2 EXERCISE PRICE. The exercise price per share of Stock subject
to an Option shall be the Fair Market Value of a share of Stock on the date
the Option is granted.
6.3 EXERCISE PERIOD. Each Option shall terminate and cease to be
exercisable on the date ten (10) years after the date
of grant of the Option unless earlier terminated pursuant to the terms of the
Plan or the Option Agreement.
5
<PAGE>
6.4 RIGHT TO EXERCISE OPTIONS.
(a) INITIAL OPTION. Except as otherwise provided in the Plan
or in the Option Agreement, an Initial Option shall (i) first become exercisable
on the date which is six (6) months after the date on which the Initial Option
was granted (the "INITIAL OPTION VESTING DATE"); and (ii) be exercisable on and
after the Initial Option Vesting Date and prior to the termination thereof in an
amount equal to the number of shares of Stock initially subject to the Initial
Option multiplied by the Vested Ratio as set forth below, less the number of
shares previously acquired upon exercise thereof. The Vested Ratio described in
the preceding sentence shall be determined as follows:
Vested Ratio
------------
Prior to Initial Option Vesting Date 0
On Initial Option Vesting Date, 1/8
provided the Optionee's Service
is continuous from the date of grant
of the Initial Option until the
Initial Option Vesting Date
Plus
----
For each full month of 1/48
of the Optionee's continuous
Service from the Initial Option
Vesting Date until the Vested
Ratio equals 1/1, an additional
(b) ANNUAL OPTION. Except as otherwise provided in the Plan or
in the Option Agreement, an Annual Option shall (i) first become exercisable on
the date which is thirty-seven (37) months after the date on which the Annual
Option was granted (the "ANNUAL OPTION VESTING DATE"); and (ii) be exercisable
on and after the Annual Option Vesting Date and prior to the termination thereof
in an amount equal to the number of shares of Stock initially subject to the
Annual Option multiplied by the Vested Ratio as set forth below, less the number
of shares previously acquired upon exercise thereof. The Vested Ratio described
in the preceding sentence shall be determined as follows:
6
<PAGE>
Vested Ratio
------------
Prior to Annual Option
Vesting Date 0
On Annual Option Vesting Date, 1/12
provided the Optionee's Service
is continuous from the date of grant
of the Annual Option until the
Annual Option Vesting Date
Plus
----
For each full month of 1/12
of the Optionee's continuous
Service from the Annual
Option Vesting Date until the
Vested Ratio equals 1/1, an additional
6.5 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the exercise price for the number of shares of Stock
being purchased pursuant to any Option shall be made (i) in cash, by check, or
cash equivalent, (ii) by tender to the Company of shares of Stock owned by the
Optionee having a Fair Market Value not less than the exercise price, (iii) by
the assignment of the proceeds of a sale or loan with respect to some or all of
the shares being acquired upon the exercise of the Option (including, without
limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve
System) (a "CASHLESS EXERCISE"), or (iv) by any combination thereof.
(b) TENDER OF STOCK. Notwithstanding the foregoing, an Option
may not be exercised by tender to the Company of shares of Stock to the extent
such tender of Stock would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock.
Unless otherwise provided by the Board, an Option may not be exercised by tender
to the Company of shares of Stock unless such shares either have been owned by
the Optionee for more than six (6) months or were not acquired, directly or
indirectly, from the Company.
(c) CASHLESS EXERCISE. The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to establish,
decline to approve or terminate any program or procedures for the exercise of
Options by means of a Cashless Exercise.
7
<PAGE>
6.6 TAX WITHHOLDING. The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable upon the exercise of an
Option, or to accept from the Optionee the tender of, a number of whole shares
of Stock having a Fair Market Value equal to all or any part of the federal,
state, local and foreign taxes, if any, required by law to be withheld by the
Participating Company Group with respect to such Option or the shares acquired
upon exercise thereof. Alternatively or in addition, in its sole discretion,
the Company shall have the right to require the Optionee to make adequate
provision for any such tax withholding obligations of the Participating Company
Group arising in connection with the Option or the shares acquired upon exercise
thereof. The Company shall have no obligation to deliver shares of Stock until
the Participating Company Group's tax withholding obligations have been
satisfied.
7. STANDARD FORM OF OPTION AGREEMENT.
---------------------------------
7.1 INITIAL OPTION. Unless otherwise provided for by the Board at
the time an Initial Option is granted, each Initial Option shall comply with and
be subject to the terms and conditions set forth in the form of Nonstatutory
Stock Option Agreement for Outside Directors (Initial Option) adopted by the
Board concurrently with its adoption of the Plan and as amended from time to
time.
7.2 ANNUAL OPTION. Unless otherwise provided for by the Board at the
time an Annual Option is granted, each Annual Option shall comply with and be
subject to the terms and conditions set forth in the form of Nonstatutory Stock
Option Agreement for Outside Directors (Annual Option) adopted by the Board
concurrently with its adoption of the Plan and as amended from time to time.
7.3 AUTHORITY TO VARY TERMS. Subject to the limitations set forth in
Section 3.2, the Board shall have the authority from time to time to vary the
terms of any of the standard forms of Option Agreement described in this Section
7 either in connection with the grant or amendment of an individual Option or in
connection with the authorization of a new standard form or forms; provided,
however, that the terms and conditions of any such new, revised or amended
standard form or forms of Option Agreement shall be in accordance with the terms
of the Plan. Such authority shall include, but not by way of limitation, the
authority to grant Options which are immediately exercisable subject to the
Company's right to repurchase any unvested shares of Stock acquired by the
Optionee upon the exercise of an Option in the event such Optionee's Service is
terminated for any reason. In no event, however, shall the Board be permitted
to vary the terms of any standard form of Option Agreement if such change would
cause the Plan to cease to qualify as a formula plan pursuant to Rule 16b-3 at
any such time as any class of equity security of the Company is registered
pursuant to Section 12 of the Exchange Act.
8
<PAGE>
8. TRANSFER OF CONTROL.
-------------------
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a single
or series of related transactions by the stockholders of the Company of more
than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the Company is a
party;
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
(b) A "TRANSFER OF CONTROL" shall mean an Ownership Change
Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the stockholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 EFFECT OF TRANSFER OF CONTROL ON OPTIONS. In the event of a
Transfer of Control, any unexercisable or unvested portion of the outstanding
Options shall be immediately exercisable and vested in full as of the date ten
(10) days prior to the date of the Transfer of Control. Any exercise or vesting
of any Option that was permissible solely by reason of this Section 8.2 shall be
conditioned upon the consummation of the Transfer of Control. In addition, the
surviving, continuing, successor, or purchasing corporation or parent
corporation thereof, as the case may be (the "ACQUIRING CORPORATION"), may
either assume the Company's rights and obligations under outstanding Options or
substitute for outstanding Options substantially equivalent options for the
Acquiring Corporation's
9
<PAGE>
stock. Any Options which are neither assumed or substituted for by the
Acquiring Corporation in connection with the Transfer of Control nor exercised
as of the date of the Transfer of Control shall terminate and cease to be
outstanding effective as of the date of the Transfer of Control.
Notwithstanding the foregoing, shares acquired upon exercise of an Option prior
to the Transfer of Control and any consideration received pursuant to the
Transfer of Control with respect to such shares shall continue to be subject to
all applicable provisions of the Option Agreement evidencing such Option except
as otherwise provided in such Option Agreement. Furthermore, notwithstanding
the foregoing, if the corporation the stock of which is subject to the
outstanding Options immediately prior to an Ownership Change Event described in
Section 8.1(a)(i) constituting a Transfer of Control is the surviving or
continuing corporation and immediately after such Ownership Change Event less
than fifty percent (50%) of the total combined voting power of its voting stock
is held by another corporation or by other corporations that are members of an
affiliated group within the meaning of Section 1504(a) of the Code without
regard to the provisions of Section 1504(b) of the Code, the outstanding Options
shall not terminate.
9. TRANSFERABILITY OF OPTIONS. Except as provided below, an Option may
--------------------------
be exercised during the lifetime of the Optionee only by the Optionee or the
Optionee's guardian or legal representative and may not be assigned or
transferred in any manner except by will or by the laws of descent and
distribution. Notwithstanding the foregoing and with the consent of the
Company, to the extent that the restrictions of the preceding sentence are not
required for compliance with the conditions of Rule 16b-3 or any other
applicable law or regulation, an Optionee may, without receipt of any
consideration, transfer the Option to, and the Option may be exercised by, only
the following: (a) the Optionee's immediate family, (b) a trust for the benefit
of the Optionee or the Optionee's immediate family, or (c) a partnership in
which only the Optionee's immediate family and the Optionee are partners
(collectively, the "PERMITTED TRANSFEREES"). For purposes of this Section 5,
"immediate family" shall mean the Optionee's children, grandchildren or spouse.
As a condition to such transfer, each Permitted Transferee to whom the Option or
any interest therein is transferred shall agree in writing (in a form
satisfactory to the Company) to be bound by all of the terms and conditions of
the Option.
10. INDEMNIFICATION. In addition to such other rights of indemnification
---------------
as they may have as members of the Board or officers or employees of the
Participating Company Group, members of the Board and any officers or employees
of the Participating Company Group to whom authority to act for the Board is
delegated shall be indemnified by the Company against all reasonable expenses,
including attorneys' fees, actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, or any right
granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding,
10
<PAGE>
except in relation to matters as to which it shall be adjudged in such action,
suit or proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within sixty (60) days
after the institution of such action, suit or proceeding, such person shall
offer to the Company, in writing, the opportunity at its own expense to handle
and defend the same.
11. TERMINATION OR AMENDMENT OF PLAN. The Board may terminate or amend
--------------------------------
the Plan at any time. However, subject to changes in the law or other legal
requirements that would permit otherwise, without the approval of the Company's
stockholders, there shall be (a) no increase in the total number of shares of
Stock that may be issued under the Plan (except by operation of the provisions
of Section 4.2), and (b) no expansion in the class of persons eligible to
receive Options. Furthermore, to the extent required by Rule 16b-3, provisions
of the Plan addressing eligibility to participate in the Plan and the amount,
price and timing of Options shall not be amended more than once every six (6)
months, other than to comport with changes in the Code, the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder. In any event,
no termination or amendment of the Plan may adversely affect any then
outstanding Option, or any unexercised portion thereof, without the consent of
the Optionee, unless such termination or amendment is necessary to comply with
any applicable law or government regulation.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that
the foregoing Visigenic Software, Inc. 1996 Outside Directors Stock Option Plan
was duly adopted by the Board on June _______, 1996.
-----------------------------------
Secretary
11
<PAGE>
PLAN HISTORY
------------
June _____, 1996 Board adopts Plan, with an initial reserve of 200,000 shares.
________, 1996 Stockholders approve Plan, with an initial reserve of 200,000
shares.
12
<PAGE>
STANDARD FORM OF
VISIGENIC SOFTWARE, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
FOR OUTSIDE DIRECTORS
(INITIAL OPTION)
<PAGE>
STANDARD FORM OF
VISIGENIC SOFTWARE, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
FOR OUTSIDE DIRECTORS
(ANNUAL OPTION)
<PAGE>
EXHIBIT 10.12
TERMINATION OF LEASE AGREEMENT
This agreement is made on June 6, 1996, between Landmark Investments, Limited,
("Landlord), and Post Modern Computing ("Tenant", who agree as follows:
1. Existing Lease. Landlord and Tenant entered into a written Lease
--------------
Agreement dated January 18, 1996 in which Landlord leased to Tenant, and Tenant
leased from Landlord, premises located in the City of Mountain View, California,
commonly known as 1975 Landings Drive.
2. Termination. The parties agree to terminate the Lease Agreement so
-----------
that Landlord may lease said premises to SmartPatents, Inc., and Tenant may be
released and discharged from further performance of the Lease Agreement's
provisions all under the terms contained herein.
3. Effective Date. The effective date of the Lease Agreement's
--------------
termination shall be July 31, 1996.
4. Conditions To Termination. This termination is conditioned on all of
-------------------------
the following:
i) Landlord has received a signed Lease Agreement from SmartPatents,
Inc., for 1975 Landings Drive, Mountain View, California on or before June 24,
1996, and
ii) That Landlord has received a check on or before June 24, 1996 in
the amount of $11,565.85 from SmartPatents, Inc., for the remaining unamortized
commissions, and
iii) Tenant vacates the Premises no later than 5:00 pm, Saturday July
30, 1996 and leaves same in a clean and undamaged
5. Release of Liability. Conditioned on all provisions of this
--------------------
modification being satisfied in a timely manner, Landlord and Tenant shall be
fully and unconditionally released and discharged from their respective
obligations arising from or connected with the provisions of the Lease Agreement
dated January 18, 1996.
LANDLORD: LANDMARK INVESTMENTS, LIMITED
Thrust IV, Inc., General Partner
By: ---------------------------- Date: -----------------
TENANT: VISIGENIC SOFTWARE INC. SUCCESSOR
<PAGE>
TO POST MODERN COMPUTING
By: --------------------------- Date: --------------
--------------------------- Tax ID# ------------
(Print Name) (Title)
<PAGE>
SUBLEASE AGREEMENT
------------------
This Sublease Agreement (the "Sublease"), dated as of January 1, 1996, is
entered into by and between Visigenic Software, Inc., a Delaware Corporation,
("Sublessor") and AT Systems, a California Corporation (the "Sublessee").
WITNESSETH
----------
WHEREAS, by Lease dated March 7, 1993 as amended December 20, 1995 (the
"Base Lease"), Sublessor leases from San Mateo Offices Limited, a California
Limited Partnership, (the "Landlord") certain premises at 951 Mariner's Island
Blvd. (the "Base Lease Premises") (to the extent that the Base Lease Premises
are part of a larger structure, shall be referred to herein as the "Building");
and
WHEREAS, Sublessor is willing to Sublease to Sublessee and Sublessee is
willing to Sublease from Sublessor, a portion of the Base Lease Premises (as may
be applicable), as more fully described herein, on the terms and conditions set
forth herein.
NOW, THEREFORE, Sublessor and Sublessee agree as follows:
1. Premises. Sublessor hereby Subleases to Sublessee and Sublessee hereby
--------
Subleases and takes from Sublessor approximately 3,928 rentable square feet of
space in the Base Lease Premises, such Base Lease Premises being known as suite
430, with such subleased space located substantially as shown on Exhibit "A"
attached hereto and made a part hereof(the "Demised Premises").
2. Term. The term of this Sublease shall commerce on February 1, 1996, and
----
shall expire on January 31, 1997, unless terminated sooner pursuant to the
provisions hereof.
3. Base Lease Incorporated.
-----------------------
A. Except as set forth herein, this subletting shall be on the same
terms and conditions as are contained in the Base Lease, as set forth on Exhibit
"B" attached hereto. Further, Sublessee acknowledges and agrees that this
Sublease shall be in all respects subject and subordinate to the Base Lease.
Nothing contained in this Sublease shall be deemed to confer upon Sublessee any
rights which are in conflict with the Base Lease. Sublessee shall not do or
permit to be done any act or thing which would contravene the terms of the Base
Lease, and the Base Lease shall govern in the event of a conflict with this
Sublease. In the event that the Base Lease is cancelled or terminated for any
reason, the term of this Sublease shall automatically terminate simultaneously
therewith.
B. Sublessor represents that the Base Lease is in full force and
effect, without default to the knowledge of Sublessor on the part of either
party thereto. Sublessor shall perform all obligations of the tenant under the
Master Lease not made the responsibility of Sublessee by this Sublease.
Sublessor shall use its best efforts to
1
<PAGE>
enforce the obligations of Landlord under the Base Lease for the benefit of
Sublessee, including the obligation to provide utilities and services to the
Demised Premises.
4. Use. During the term hereof, Sublessee shall use and occupy the
---
Demised Premises for general office use and related services, and for no other
purpose.
5. Rent.
----
A. Rent. As rental for the Demised Premises, Sublessee shall pay
----
Landlord a base rental of Eight Thousand Six Hundred Forty Two Dollars
($8,642.00) per month from commencement through January 31, 1997, without
set-off or deduction, due and payable in advance on the first day of each month
during the term hereof. In the event this Sublease commences or terminates on
other than the last day of any particular month, all rentals hereunder shall be
prorated.
B. Additional Rent: Increased in Operating Costs and Taxes.
-------------------------------------------------------
(1) Definitions. For purposes of this Sublease the following
-----------
terms shall be defined as follows:
(a) "Base Operating Costs and Taxes" means the Gross
Operating Costs and Taxes incurred for the calendar year 1995 (excluding,
therefrom, however, any gross operating costs of a nature that would not be
ordinarily and regularly incurred in each and every calendar year);
(b) "Operating Costs" means the total Gross Operating
Costs for any calendar year divided by the number of rentable square feet of
office space in the Building. Operating Costs for any year during which average
occupancy of the Building is less than one hundred percent (100%) shall be
calculated based upon the Gross Operating Costs that would have been incurred if
the Building were so occupied during the entire calendar year. Sublessee's
Share of Operating Costs shall not be reduced as a result of Sublessee's
performing for itself any of the services that Landlord provides for the
Property or the tenants of the Property.
(c) "Taxes" means the total Gross Taxes for any calendar
year divided by the number of rentable square feet in the building. Taxes for
any year during which average occupancy of the Building is less than one hundred
percent (100%) shall be calculated based upon the Gross Taxes that would have
been incurred if the Building were so occupied during the entire calendar year.
(d) "Sublessee's Share" means an amount equal to the
number of rentable square feet of office space in the Premises multiplied
by any increases in Operating Costs and Taxes over Base Operating Costs and
Taxes.
2
<PAGE>
(2) Additional Rent. If Operating Costs and Taxes for any calendar year
---------------
during the term of this Sublease exceed Base Operating Costs and Taxes,
Sublessee shall pay Landlord as "Additional Rent", Sublessee's Share of such
increase in Operating Costs and Taxes (whether such increase, in the case of
Taxes, is caused by changes in valuation, rate or other factors or
circumstances).
C. Security Deposit. Upon full execution of this Sublease, Sublessee will
-----------------
pay to Sublessor the sum of Eight Thousand Six Hundred Forty-Two ($8,642.00), as
security for the full and faithful performance of every provision of this
Sublease to be performed by Sublessee.
If Sublessee defaults with respect to any provisions of this Sublease,
including but not limited to the provisions relating to the payment of rent,
repair or damage to the premises caused by Sublessee and/or cleaning the
Premises upon termination of this Sublease, Sublessor may use, apply or retain
all or any part of this security deposit for the payment of any rent, or any
other sum in default, the repair of such damage to the premises, to the cost of
such cleaning or for the payment of any other amount which Sublessor may spend
or become obligated to spend by reason of Sublessee's default or to compensate
Sublessor for any other loss or damage which Sublessor may suffer by reason of
Sublessee's default to the full extent permitted by law.
If any portion of said deposit is so used or applied, Sublessee shall
within ten (10) days after written demand therefor, deposit cash with Sublessor
in the amount sufficient to restore the security deposit to its original amount
and Sublessee's failure to do so shall be a material breach of this Sublease.
Sublessor shall not be required to keep this security deposit separate from its
general funds, and Sublessee shall not be entitled to interest on such deposit.
The security deposit, or so much thereof as has not been properly applied
to cure any default by Sublessee hereunder, shall be returned to Sublessee at
the expiration of the Sublease.
6. Suite Improvements. Sublessor will deliver and Sublessee accepts the
-------------------
premises in it's existing condition.
3
<PAGE>
7. Right of Entry. Sublessor shall have the right to enter the
--------------
Demised Premises for any reasonable purpose during business (hours) and upon
reasonable notice (except in the event of an emergency), including to gain
access to and egress from those portions of the Base Lease Premises or the
Building not leased to Sublessee hereunder and to perform such functions as may
be necessary or convenient for the maintenance and operation thereof and
including to show the space to other prospective Sublessees. Prior to the
exercising its right of entry, Sublessor shall provide reasonable advance
notice to Sublessee of such intended entry, and shall comply while in the
Demised Premises with all reasonable safety and security measures instituted by
Sublessee.
8. Compliance with Law. Sublessee shall comply with all applicable
-------------------
statutes, ordinances, rules, regulations, orders and directives of any
governmental authority applicable to the Demised Premises or to Sublessee's use
or occupancy thereof and shall perform, at its own expenses, all obligations
imposed thereby.
9. Release and Indemnity.
---------------------
A. Release. Sublessee hereby agrees that Sublessor shall not be
-------
liable for any loss or any damage to any property (including the property of
Sublessee, its officers, directors, employees, agents, customers,
concessionaires, vendors, contractors or invitees) or the death or injury of any
persons (including Sublessee, its officers; directors, employees, agents,
customers, concessionaires, vendors, contractors or invitees) occasioned by
theft, fire, acts of God, public enemy, injunction, governmental body or
authority, by other Sublessees of the Base Lease Premises or the Building or any
other matter beyond the control of Sublessor, or for any injury or damage or
inconvenience which may arise through repair or alteration of any part of the
Demised Premises or the Base Lease Premises or the Building, or failure to make
repairs, or for any cause whatsoever, except the negligence or willful
misconduct of Sublessor, or its officers, directors, employees, or agents or a
breach of the obligations of Sublessor hereunder.
B. Indemnity. Sublessee hereby releases and will defend indemnify
---------
and hold harmless Sublessor and the Landlord, their respective officers,
directors, employees, agents, concessionaires, vendors and contractors (the
"Indemnified Parties") from and against any and all liability, claims,
penalties, fines, causes of action, suits, liens, losses, loss of use, damages,
costs and expenses of any kind (including legal fees and litigation costs) which
may be suffered by, accrued against, charged to or recoverable from the
Indemnified Parties by reason of (i) any occurrence in, upon, or at the Demised
Premises, including, occurrences caused, in whole or in part, by the negligence
or misconduct of Sublessee, its officers, directors, employees, agents,
customers, concessionaires, vendors, contractors or invitees; or (ii) any
occupancy, use, or misuse of the Demised Premises, or the areas, surrounding the
Demised Premises, or the service areas, parking areas, pedestrian areas,
pedestrian walks or driveways in or around the Demised Premises, by Sublessee,
its officers, directors, employees, agents, customers, concessionaires, vendors,
contractors or invitees; or (iii) any occurrence elsewhere in the Base Lease
Premises or the Building occasioned in whole or in part by the act or omission
of Sublessee; or (iv) any occurrence occasioned by the violation of any law,
regulation or ordinance by Sublessee or its employees,
4
<PAGE>
officers, directors, employees, agents, customers, concessionaires,
vendors, contractors or invitees. The foregoing indemnification shall not apply
to any such claim or liability resulting solely from the negligence or willful
misconduct of Sublessor, or its respective officers, directors, employees or
agents.
10. Insurance
---------
A. Coverage. During the term of this Sublease, Sublessee, at its
--------
own cost and expense, shall maintain with insurers reasonably acceptable to
Sublessor, the following coverage: (i) Comprehensive General Liability Insurance
coverages in an amount not less than $1,000,000 for bodily injury and property
damage combined single limit per occurrence, and (ii) all risk property
insurance covering loss of or damage to property of the Sublessee in an amount
at least equal to the replacement value of such property. Sublessee shall also
maintain Workers' Compensation coverage as may be required by law and Employer's
Liability coverage with a combined single limit of not less than $1,000,000 to
cover employees.
B. Form and Certificates. The liability policies shall: (i)
---------------------
name Sublessor and the Landlord as additional insureds to the extent of
Sublessee's indemnity obligation hereunder; (ii) specifically insure the
liability assumed by Sublessee hereunder; (iii) be primary without right of
contribution from any insurance carried by Sublessor or the Landlord hereunder;
and (iv) provide for thirty (30) days written notice to Sublessor and the
Landlord prior to cancellation or material change. Certificates evidencing the
above coverages and special endorsements shall be provided to Sublessor and the
Landlord on or before the date Sublessee takes possession of the Demised
Premises.
C. Waiver of Subrogation. Sublessee, Sublessor and Landlord on
---------------------
behalf of themselves and their respective insurers, each hereby waives any claim
or right of recovery from each other, their officers, directors, employees,
agents, concessionaires and contractors, for loss of or damage to its property
or the property of others under its control, to the extent that such loss or
damage is covered by valid insurance policies or is of the type which would be
covered by "all risk" extended casualty coverage. Each party shall provide
notice of this waiver of subrogation to its insurers.
11. Defaults. The occurrence of any of the following shall constitute a
--------
default by Sublessee under this Sublease:
(i) Sublessee fails to pay any sum as required hereunder and
such failure continues for ten (10) days following receipt of notice;
(ii) Sublessee (i) fails to pay its bills to Sublessor or
Landlord when due without just cause; or (ii) takes any steps leading to its
cessation as a going concern or ceases or suspends operations for reasons other
than a strike; or (iii) becomes insolvent or makes transfers in fraud of
creditors or makes an assignment for the benefit of creditors; or (iv) files a
petition for protection under any state or federal bankruptcy act or a trustee
or receiver is appointed for all or substantially all of Sublessee's assets.
5
<PAGE>
12. Remedies Upon Default. Upon the occurrence of an event of default
----------------------
hereunder, Sublessor may take any one or more of the following actions:
(i) Maintain this Sublease in full force and effect and recover any and
all rent and other monetary charges as they become due, without terminating
Sublessee's right to possession, regardless of whether Sublessee shall have
abandoned the Demised Premises. If Sublessor elects not to terminate this
Sublease, Sublessor shall have the right to attempt to relet the Premises on
behalf of Sublessee upon such conditions and for such a term and to do all acts
necessary to maintain or preserve the Demised Premises as Sublessor deems
reasonable and necessary, including the removal of all persons and property from
the Demised premises, without being deemed to have elected to terminate this
Sublease. Any property so removed may be disposed of or stored in a public
warehouse or elsewhere, at Sublessor's election, at the cost of and for the
account of Sublessee. Notwithstanding that Sublessor's fails to elect to
terminate this Sublease initially, Sublessor at any time thereafter may elect to
terminate this Sublease as a result of such previous and then existing default
of Sublessee;
(ii) Terminate this Sublease by written notice to Sublessee, in which
event this Sublease shall be ended as to Sublessee and all persons holding under
Sublessee, and all of Sublessee's rights shall be forfeited and lapsed, as
fully as if this Sublease had expired by lapse of time. In such event, Sublessee
shall be required to vacate the Demised Premises immediately and surrender same
to Sublessor. If Sublessee fails to surrender the Demised Premises immediately
to Sublessor, Sublessor, without prejudice to any other remedy, may enter upon
and take possession of the Demised Premises and expel or remove Sublessee and
any part thereof, without being liable for prosecution or any other claim of
damages. In the event of termination in accordance with this provision, the
rental or any other sums payable by Sublessee pursuant to this Sublease that
have accrued hereunder but are unpaid shall be immediately due and payable by
Sublessee to Sublessor. In addition, Sublessee agrees to pay to Sublessor upon
demand the amount of all loss and damages which Sublessor may suffer by reason
of such termination, whether through inability to relet the premises on
satisfactory terms or otherwise, including reasonable court costs and attorney's
fees, in recovering possession of the Demised Premises or enforcing Sublessor
rights under this Sublease; (ii) all costs and charges for care of the Demised
Premises while vacant; (iii) all costs of restoring the Demised Premises to a
good condition; and (iv) all reasonable costs associated with Sublessor's
efforts to relet the Demised premises. In the event Sublessor relets the
Demised Premises for any portion of the remaining term of this Sublease,
Sublessee's rental payment obligation hereunder shall then be limited to the
difference between the rental payment Sublessor receives under such relet, if
any, and the rental amount Sublessee would have paid to Sublessor had this
Sublease not been terminated. The failure of Sublessor to relet the Demised
Premises or any part or parts thereof shall not release or effect Sublessee's
liability for damages hereunder;
6
<PAGE>
(iii) Cure the default on the behalf of the Sublessee, in which event
the Sublessee shall, upon demand by Sublessor, pay all sums expended by
Sublessor in accomplishing such cure;
(iv) Exercise any right available to Sublessor in law or in equity.
13. Cumulative rights. Sublessor's rights and remedies hereunder shall
-----------------
be cumulative and shall not be exclusive of one another, and Sublessor shall
have the right to pursue any one or more of them. Sublessor's acceptance of any
rent or other payments due hereunder or Sublessor's failure to take any action
on account of a default if such default persists or is repeated, shall not be
deemed a waiver of any default. Sublessor's consent to any act by Sublessee
requiring Sublessor's consent or approval shall not be deemed to waive or render
unnecessary Sublessor's consent or approval to any subsequent or similar acts by
Sublessee.
14. Surrender of Premises/Holding Over. At the expiration or earlier
----------------------------------
termination of this Sublease, Sublessee shall surrender the Demised Premises to
Sublessor in good condition, broom clean, reasonable wear and tear excepted. In
the event that Sublessee remains in possession after the expiration of or
termination of this Sublease without a written agreement, or without Sublessee
being engaged in active negotiations with Sublessor in good faith to renew or
extend the term, the tenancy shall be deemed to be a month-to-month tenancy at a
monthly equal to one and one-half (1-1/2) times the sum of the Base Rent and
Additional Rent(s) payable during the last month of the Term. In the event
Sublessee is actively negotiating with Sublessor to renew or extend the term,
the month-to-month tenancy shall be at a rent equal to Sublessee's prorata share
of the Base Rent and Additional Rent(s) then payable by Sublessor to Landlord;
such tenancy shall be subject to all terms and conditions of this Sublease.
15. Assignment and Sublease. Sublessee shall not assign this Sublease or
-----------------------
any right hereunder or sublet the Demised Premises during the term of this
Sublease, without the prior written consent of Sublessor. In the event of an
assignment or sublease, Sublessor shall be entitled to receive fifty percent
(50%) of the excess of the rent and other sums payable by the Subtenant over the
amount of Rent payable hereunder for the Subleased Space. Sublessor's
acceptance of rent from any person other than Sublessee shall not be deemed to
be a waiver of this provision. Consent to one assignment or subletting shall
not be deemed to be consent to any subsequent assignment or subletting.
16. Accord and Satisfaction. No payment or receipt by Sublessor of a
-----------------------
lesser amount than the rent or other charges herein stipulated shall be deemed
to be other than on account of the rent or such charges. Further, no
endorsement or statement on any check or any letter accompanying any check shall
be deemed to be an accord and satisfaction. Sublessor may accept such check or
payment without prejudice to Sublessor's right to recover the balance of such
rent or other charges or pursue any other remedy provided in this Sublease.
17. Entire Agreement. This Sublease constitutes the complete agreement of
----------------
the parties with respect to the subject matter hereof and supersedes all
previous agreements, representations and understandings concerning the same,
whether written
7
<PAGE>
or oral. The provisions of the Sublease may be modified, amended or waived only
by a written instrument, executed by Sublessor and Sublessee.
18. Approval by Landlord. This Sublease is conditional upon written
---------------------
consent being obtained from the Landlord. In the event the Landlord does not
give its consent, either the undersigned parties may, at its option, rescind
its signature and this Sublease shall thereafter be of no force or effect.
19. Brokers. Sublessee warrants and represents to Sublessor and
-------
Landlord that in the negotiating or making of this Lease neither Sublessee nor
anyone acting on its behalf has dealt with any real estate broker or finder who
might be entitled to a fee or commission for this Lease. Sublessee agrees to
indemnify and hold Sublessor and Landlord harmless from any claim or claims,
including costs, expenses and attorney's fee incurred by Sublessor asserted by
any broker or finder for a fee or commission based upon any dealings with or
statements made by Sublessee or its Representatives.
20. Notices. Any notice required or sent hereunder shall be in
--------
writing and shall be sent as follows:
When to Sublessor: When to Sublessee:
Visigenic Software, Inc. A T Systems
951 Mariner's Island Blvd., Suite 460 951 Mariner's Island Blvd., Suite 430
San Mateo, CA 94404 San Mateo, CA 94404
Overnight Delivery Address: Overnight Delivery Address:
- --------------------------- ---------------------------
Same as above. Same as above.
Either party from time to time, may change its address by written notice to the
other party. Notices hereunder shall be deemed effective when delivered by hand
delivery or overnight courier, or three days after deposit in the United States
mail, first class, postage prepaid.
21. Binding Effect. Subject to prohibitions against assignment, this
--------------
Sublease shall be binding upon the parties, their personal representatives,
successors and assigns.
<PAGE>
22. Approvals. Whenever in this Sublease, the written approval of either
----------
Sublessor or Sublessee is required, the parties hereto agree that such approval
shall not be unreasonably withheld.
WITNESS the signatures of the parties as of the date first written above.
Sublessee: Sublessor:
- ---------- ----------
A T Systems, a California Corporation, Visigenic Software, Inc.
By: By:
----------------------------------- --------------------------
Name: Name:
--------------------------------- ------------------------
Title: Title:
-------------------------------- -----------------------
Title:
--------------
Agreed to by Landlord this ______ the Day of__________, 1996
By:
------------------------------------
Name:
---------------------------------
Title:
--------------------------------
9
<PAGE>
BLDG 1
4TH FLOOR PLAN
SAN MATEO BAY CENTER
SPIEKER PARTNERS
(415)570-5990
10
<PAGE>
San Mateo
Bay Center
Mariners Island
San Mateo, California
LEASE
VERY VISUAL SOFTWARE, INC.
A Delaware Corporation.
<PAGE>
BASIC LEASE INFORMATION
OFFICE LEASE
Lease Date: March 7, 1993
Landlord: SAN MATEO OFFICE LIMITED
A California Limited Partnership
Address of Landlord 951 Mariner's Island Boulevard, Suite #200
San Mateo, CA 94404
Tenant: VERY VISUAL
A Delaware Corporation
Address of Tenant: 951 Mariner's Island Boulevard, Suite #460
San Mateo, CA 94404
Contact: Mr. Roger Sippl Telephone:
Chief Executive Officer
Premises: Approximately 2,177 sq. ft. of rentable area on the third floor and
6,871 sq. ft. of rentable area on the fourth floor of San Mateo
Bay Center, 951 Mariner's Island Boulevard, San Mateo.
Scheduled Term Commencement Date: April 1, 1993 - Suite #370
Scheduled Length of Term: 24 Months
Scheduled Term Expiration Date: March 31, 1995
Security Deposit: $3,701 ($1.70 x 2,177 sqft)
To be increased to $11,681 upon occupancy of Suite #460
Tenant's Proportionate Share: Suite #370 1.84%
Suite #460 5.81%
Permitted Use: General Office
Occupancy Density: 4/1,000 sqft
The foregoing Basic Lease Information is incorporated into and made a part of
this Lease. Each reference in this Lease to any of the Basic Lease Information
shall mean the respective information above set forth and shall be construed to
incorporate all of the terms provided under the particular Lease paragraph
pertaining to such information. In the event of any conflict between the Basic
Lease Information and the Lease, the latter shall control.
LANDLORD: TENANT:
SAN MATEO OFFICE LIMITED VERY VISUAL SOFTWARE INC.
A California Limited Partnership A Delaware Corporation
By ----------------------------- By ---------------------------
Dennis E Singleton Roger Sippl
Its General Partner Its Chief Executive Officer
Date: Date:
- -------------------------------- ------------------------------
-1-
<PAGE>
LEASE
TABLE OF CONTENTS
Page
----
1. Premises................................................................. 3
2. Occupancy................................................................ 3
3. Terms And Possession..................................................... 3
4. Rent..................................................................... 3
5. Restrictions On Use...................................................... 3
6. Compliance With Laws..................................................... 3
7. Alterations.............................................................. 3
8. Repairs.................................................................. 3
9. Liens.................................................................... 4
10. Assignments And Subletting............................................... 4
11. Insurance And Indemnification............................................ 4
12. Waiver Of Subrogation.................................................... 5
13. Service And Utilities.................................................... 5
14. Estoppel Certificate..................................................... 5
15. Security Deposit......................................................... 6
16. Substitution............................................................. 6
17. Holding Over............................................................. 6
18. Subordination............................................................ 6
19. Rules And Regulations.................................................... 6
20. Re-Entry By Landlord..................................................... 6
21. Default By Tenant........................................................ 6
22. Damage By Fire, Etc...................................................... 7
23. Eminent Domain........................................................... 8
24. Sale By Landlord And Tenant's Remedies................................... 8
25. Right Of Landlord To Perform............................................. 8
26. Surrender Of Premises.................................................... 8
27. Waiver................................................................... 8
28. Notices.................................................................. 8
29. Rental Adjustments....................................................... 9
30. Taxes Payable By Tenant................................................. 10
31. Successors And Assigns.................................................. 10
32. Attorneys' Fees......................................................... 10
33. Light And Air........................................................... 10
34. Public Transportation Information....................................... 10
35. Miscellaneous........................................................... 10
36. Lease Effective Date.................................................... 10
Signatures................................................................... 10
EXHIBIT "A"............................................... Rules and Regulations
EXHIBIT "B" & B-1........................................... Outline of Premises
EXHIBIT "C" & C-1......................................... Improvement Agreement
EXHIBIT "D".......................................... Form of Tenant Certificate
2
<PAGE>
LEASE
THIS LEASE is made as of this 7th day of March, 1993,
--- -----
between SAN MATEO OFFICE LIMITED, A CALIF. LIMITED
------------------------------------------
PARTNERSHIP (called "Landlord") and VERY VISUAL SOFTWARE
--------------------------------------------------------
INC., A DELAWARE CORPORATION (hereinafter called
----------------------------
"Tenant").
PREMISES 1. Landlord leases to Tenant and Tenant leases from
Landlord those premises (hereinafter called "Premises")
outlined in red on Exhibit B attached hereto and made a
part hereof, specified in the Basic Lease Information
attached hereto (the "Building").
OCCUPANCY 2. Tenant shall use the Premises for the Permitted
Use and for no other use or purpose without the prior
written consent of Landlord. No increase in occupant
density of the Leased Premises shall be made which shall
add to the burden of such use of the Building as
determined by Landlord without the prior written consent
of Landlord.
TERM AND 3. (a) The parties project that the term shall
POSSESSION commence on the Scheduled Term Commencement Date and,
except as otherwise provided herein or in any exhibit or
addendum hereto, shall continue in full force until the
Term Expiration Date. If the Premises are not delivered by
Landlord by the Scheduled Term Commencement Date for any
reason, Landlord shall not be liable to Tenant for any
loss or damage resulting from such delay. The Term
Commencement Date shall be the first day of the calendar
month next following the earlier of (i) the day when the
Premises are substantially complete, or (ii) the date
on which Tenant takes possession of, or commences the
operation of its business in some or all of the Premises.
See Addendum #11, attached hereto and made a part hereof.
RENT 4. Tenant shall pay to Landlord throughout the Term
Rent as specified in *See Addendum #1 attached hereto and
made a part hereof, payable in equal monthly installments
in advance on the first day of each calendar month during
every year of the Term in lawful money of the United
States, without deduction or offset whatsoever, to
Landlord at the address specified in the Basic Lease
Information or to such other firm or to such other place
as Landlord may from time to time designate in writing by
notice given as herein provided. Rent for the first month
of the Term shall be paid by Tenant upon execution of this
Lease. If the obligation for payment of Rent commences on
other than the first day of a month as provided in
paragraph 3(a), then Rent provided for such partial month
shall be prorated and the prorated installment shall be
paid on the first day of the calendar month next
succeeding the Term Commencement Date. If the Term
terminates on other than the last day of a calendar
month, then the Rent provided for such partial month shall
be prorated and the prorated installment shall be paid on
the first day of the calendar month next preceding the
date of termination.
RESTRICTIONS 5. Tenant shall not do or permit anything to be done
ON USE in or about the Premises which will in anyway obstruct
or interfere with the rights of other tenants or occupants
of the Building or injure or annoy them, nor use or allow
the Premises to be used for any improper, immoral,
unlawful or objectionable purpose, nor shall Tenant cause
or maintain or permit any nuisance in, on or about the
Premises. Tenant shall not commit or suffer the commission
of any waste in, on or about the Premises.
COMPLIANCE 6. Tenant shall not use the Premises or permit anything
WITH LAWS to be done in or about the Premises which will in any way
conflict with any law, statute, ordinance or governmental
rule or regulation now in force or which may hereafter be
enacted or promulgated. Tenant shall not do or permit
anything to be done on or about the Premises or bring or
keep anything therein which will in any way increase the
rate of any insurance upon the Building or any of its
contents or cause a cancellation of said insurance or
otherwise affect said insurance in any manner, and Tenant
shall at its sole cost and expense promptly comply with
all laws, statutes, ordinances and governmental rules,
regulations or requirements now in force or which may
hereafter be in force and with the requirements of any
board of fire underwriters or other similar body now or
hereafter constituted relating to or affecting the
condition, use or occupancy of the Premises, excluding
structural changes not related to or affected by
alterations or improvements made by or for Tenant or
Tenant's acts. The judgment of any court of competent
jurisdiction or the admission of Tenant in any actions
against Tenant, whether Landlord be a party thereto or
not, that Tenant has so violated any such law, statute,
ordinance, rule, regulation or requirement, shall be
conclusive of such violation as between Landlord and
Tenant.
ALTERATIONS 7. Tenant shall not make or suffer to be made any
alterations, additions or improvements in, on or to the
Premises or any part thereof without the prior written
consent of Landlord; and any such alterations, additions
or improvements in, on or to said Premises, except for
Tenant's movable furniture and equipment, shall
immediately become Landlord's property and, at the end of
the Term, shall remain on the Premises without
compensation to Tenant. In the event Landlord consents to
the making of any such alteration, addition or improvement
by Tenant, the same shall be made by Tenant, at Tenant's
sole cost and expense, in accordance with plans and
specifications approved by Landlord, and any contractor
or person selected by Tenant to make the same must first
be approved in writing by Landlord.
Notwithstanding the foregoing, at Landlord's option, all
or any portion of the alteration, addition or improvement,
work shall be performed by Landlord for Tenant's account
and Tenant shall pay Landlord's estimate of the cost
thereof (including a reasonable charge for Landlord's
overhead and profit) prior to commencement of the work
Overhead and profit allowances shall total fifteen percent
(15%). Upon the expiration or sooner termination of the
Term, Tenant shall upon demand by Landlord, at Tenant's
sole cost and expense, with all due diligence remove all
those alterations, additions or improvements made by or
for the account of Tenant, designated by Landlord to be
removed, and Tenant shall with all due diligence, at its
sole cost and expense, repair and restore the Premises to
their original condition. At Landlord's election and
notwithstanding the foregoing, however, Tenant shall pay
to Landlord the cost of removing any such alterations,
additions or improvements and restoring the Premises to
their original condition such cost to include a reasonable
charge for Landlord's overhead and profit as provided
above, and such amount may be deducted from the Security
Deposit or any other sums or amounts held by Landlord
under this Lease.
REPAIRS 8. By taking posession of the Premises, Tenant accepts
the Premises as being in the condition in which Landlord
is obligated to deliver them and otherwise in good order
condition and repair. At all
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<PAGE>
times during the Term Tenant shall, at Tenant's sole cost
and expense, keep the Premises and every part thereof in
good order, condition and repair, excepting damage thereto
by fire, earthquake, act of God or the elements. Tenant
waives all right it may have under Section 1942 of the
Civil Code of the State of California and any similar law,
statute or ordinance now or hereafter in effect (to the
full extent that such waiver may lawfully be given)
authorizing or purporting to authorize Tenant to make
repairs to or for the account of Landlord. Tenant shall
upon the expiration or sooner termination of the Term
hereof, unless Landlord demands otherwise pursuant to
LIENS paragraph 7 hereof, surrender to Landlord the Premises and
all repairs, changes, alterations. additions and
improvements thereto in the same condition as when
received or when first installed, damage by fire,
earthquake, act of God, ordinary wear and tear or the
elements excepted. Landlord has no obligation to alter,
remodel, improve, repair, decorate or paint the Premises
or any part thereof, except as specified in the Office
Lease Improvement Agreement and no representations
respecting the condition of the Premises or the Building
have been made by Landlord to Tenant, except as
specifically set forth herein or in Exhibit C and C-1.
9. Tenant shall keep the Premises free from liens arising
out of or related to work performed, materials or supplies
furnished or obligations incurred by Tenant or in
connection with work made, suffered or done by Tenant in
Premises or Building. In the event that Tenant shall not,
within ten (10) days following the imposition of any such
lien, cause the same to be released of record by payment
ASSIGNMENT AND or posting of a proper bond, Landlord shall have, in
SUBLETTING addition to all remedies provided herein and by law, the
right but no obligation, to cause the same to be released
by such means as it shall deem proper, including payment
of the claim giving rise to such lien. Landlord shall have
the right at all times to post and keep posted on the
Premises any notices permitted or required by law, or
which Landlord shall deem proper, for the protection of
Landlord, the Premises, the Building and any other
party having an interest therein, from mechanics' and
materialmen's liens, and Tenant shall give Landlord not
less than ten (10) business days prior written notice of
the commencement of any work in the Building or Premises
which could lawfully give rise to a claim for mechanics'
or materialmen's lien.
10. Tenant shall not sell, assign, encumber or otherwise
transfer this Lease or any interest therein (by operation
of law or otherwise), sublet the Premises or any part
thereof or suffer any other person to occupy or use the
Premises or any portion thereof, nor shall Tenant permit
any lien to be placed on Tenant's interest under this
Lease by operation of law except in accordance with the
provisions of this paragraph 10. For purposes hereof,
sales, transfers or assignments of or of (ii) the general
partnership interests sufficient to control management
decisions if Tenant is a partnership or of (iii) the
majority or controlling underlying beneficial interest, if
Tenant is any other form of business entity, shall
constitute an assignment subject to the terms of this
paragraph 10.
(a) In the event that Tenant should desire to sublet the
Premises or any part thereof, Tenant shall provide
Landlord with written notice of such desire at least
thirty (30) in advance of the date on which Tenant desires
to make such sublease. Landlord shall then have a period
of thirty (30) days following receipt of such notice
within which to notify Tenant in writng that Landlord
elects either (i) to terminate this lease as to the space
so affected as of the date so specified by Tenant, in
which event Tenant shall be relieved of all further
obligations hereunder as to such space from and after that
date, or (ii) to permit Tenant to sublet such space,
subject, however, to the prior written approval of the
proposed sublessee by Landlord which said consent shall
not be unreasonably withheld. If Landlord should fail to
notify Tenant in writing of its election within said
thirty (30) day period, Landlord shall be deemed to have
waived option (i) above, but written approval of the
proposed sublessee shall not constitute a termination of
this Lease. In exercising its right of consent to a
sublessee it shall be reasonable for Landlord to withhold
consent to any sublessee who (aa) does not agree to assume
the obligations of the Lease with respect to the space to
be so sublet, (bb) does not agree to utilize the space so
sublet for the Permitted Use, (cc) is of unsound financial
condition as determined by Landlord, or (dd) will, in
Landlord's opinion increase the occupant density in the
Leased Premises. If Tenant proposes to sublease less than
all of the Premises, election by Landlord of termination
of this Lease with respect to the remainder of the space,
the Rent and Tenant's Proportionate Share of Operating
Expenses and taxes shall be adjusted on a pro rata basis
to reflect the reduction in Net Rentable Area of the
Premises as retained by Tenant. This Lease as so amended
shall continue thereafter in full force and effect and
reference herein to the Premises shall mean that portion
thereof as to which the Lease has not been terminated.
(b) Tenant shall not enter into any other transaction
subject to this paragraph 10 without Landlord's prior
written consent which said consent shall not be
unreasonably withheld. It shall be reasonable for Landlord
to withhold consent to any proposed transaction described
in this paragraph 10 on any of the grounds specified in
paragraph 10(a) with respect to sublessees or any other
reasonable grounds.
(c) Any rent or other consideration realized by Tenant
under any such sublease or assignment to which Landlord
has consented hereunder, in excess of the Rent payable
hereunder, after amortization of the reasonable cost of
the improvements over the remainder of the Term for which
Tenant has paid and reasonable subletting and assignments
costs, shall be divided and paid fifty percent (50%) to
Tenant.
(d) Any subletting hereunder by Tenant shall not result in
Tenant being released or discharged from any liability
under this lease. Any purported assignment, subletting or
other transaction to which paragraph 10 applies, which
occurs contrary to the provisions hereof, shall be void.
Landlord's consent to any assignment, subletting or other
transaction to which this paragraph 10 applies shall not
release Tenant from any of Tenant's obligations hereunder
or constitute a consent with respect to any subsequent
transaction to which this paragraph applies.
INSURANCE AND 11. (a) Landlord shall not be liable to Tenant and Tenant
INDEMNIFICATION hereby waives all claims against Landlord for any injury
or damage to any person or property in or about the
Premises by or from any cause whatsoever, (other than
Landlord's gross negligence or willful misconduct) and,
without limiting the generality of the foregoing, whether
caused by water leakage of any character from the roof,
walls, basement or other portion of the Premises or the
Building, or caused by gas, fire, oil or electricity in,
on or about the Premises or the Building.
(b) Tenant shall hold Landlord harmless from and defend
Landlord against any and all claims or liability for any
injury or damage to any person or property whatsoever:
(i) occurring in, on or about the
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<PAGE>
Premises or any part thereof, or (ii) occurring in, on or
about any facilities (including, without prejudice to the
generality of the term "facilities", elevators, stairways,
lobbies, health clubs, passageways or hallways), the use of
which Tenant may have in conjunction with other tenants of the
Building, when such injury or damage shall be caused in part
or in whole by the act, neglect, fault of or omission of any
duty with respect to the same by Tenant, its agents, servants,
employees or invitees. Tenant shall further indemnify and save
harmless Landlord against and from any and all claims by or on
behalf of any person, firm or corporation arising from the
conduct or management of any work or thing whatsoever done by
Tenant in or about or from transactions of Tenant concerning
the Premises, and will further indemnify and save Landlord
harmless against and from any and all claims arising from any
breach or default on the part of Tenant in the performance of
any covenant or agreement on the part of Tenant to be
performed pursuant to the terms of this Lease or arising from
any act or negligence of Tenant, or any of its agents,
contractors, servants, employees or licensees, and from and
against all costs, counsel fees, expenses and liabilities
incurred in connection with any such claim or action or
proceeding brought thereon. In case any action or proceeding
is brought against Landlord by reason of any claims or
liability within the limits of the foregoing indemnity, Tenant
shall defend such action or proceeding at Tenant's sole
expense by counsel reasonably satisfactory to Landlord.
(c) Landlord shall hold tenant harmless from and defend Tenant
against any and all claims or liability for any injury or
damage to any person or property occurring in or about any
facilities (including without prejudice to the generality of
the term "facilities", elevators, stairways, passageways or
hallways) the use of which Tenant may have in conjunction with
other tenants of the building, when such injury or damage
shall be caused in whole or in part by the act, neglect, fault
of or omission of any duty with respect to the same by
Landlord, its agents, servants, employees or invitees.
Landlord shall further indemnify and save harmless Tenant
against and from any and all claims by or on behalf of any
person, firm or corporation arising from the conduct or
management of any work or thing whatsoever done by Landlord in
or about, or from transactions of Landlord concerning, the
Premises where such work is not being done for the account of
Tenant; and Landlord will further indemnify and save Tenant
harmless against and from any and all claims arising from any
breach or default on the part of Landlord in the performance
of any covenant or agreement on the part of Landlord to be
performed pursuant to the terms of this Lease or arising from
any act or negligence of Landlord, or any of its agents
contractors, servants, employees or licensees, and from and
against all costs, counsel fees, expenses and liabilities
incurred in connection with any such claim or action or
proceeding brought thereon,. In case any action or proceeding
is brought against Tenant by reason of any claims or liability
within the limits of the foregoing indemnity, Landlord shall
defend such action or proceeding at Landlord's sole expense by
counsel reasonable satisfactory to Tenant.
(d) The provisions of paragraph 11(b) and 11(c) shall survive
the expiration or termination of this Lease with respect to
any claims or liability occurring prior to such expiration or
termination.
(e) Tenant shall purchase at its own expense and keep in force
during the Term of this Lease a policy or policies of workers'
compensation and comprehensive liability insurance, including
personal injury and property damage, in the amount of Five
Hundred Thousand Dollars ($500,000.00) for property damage and
Two Million Dollars ($2,000,000.00) per occurrence for
personal injuries or deaths of persons occurring in or about
the Premises. The foregoing limits shall be increased in
proportion to increases during the Term in the United States
Department of Labor, Bureau of Labor Statistics, Cost of
Living Index, All Urban Consumers (1967=100) for the region in
which the Leased Premises are located. Said policies shall:
(i) name Landlord and any party holding an interest to which
this Lease may be subordinated under paragraph 18 hereof, as
additional insureds and insure Landlord's contingent
liability under this Lease; (ii) be issued by an insurance
company acceptable to Landlord and licensed to do business in
the State of California; and (iii) provide that said insurance
shall not be cancelled unless ten (10) days prior written
notice shall have been given to Landlord. Said policy or
policies or certificates thereof shall be delivered to
Landlord by Tenant upon commencement of the term of this Lease
and upon each renewal of said insurance.
WAIVER OF
SUBROGATION 12. To the extent permitted by law and without affecting the
coverage provided by insurance required to be maintained
hereunder, Landlord and Tenant each waive any right to recover
against the other (i) damages for injury to or death of
persons, (ii) damages to property, (iii) damage to the
Premises or any part thereof, (iv) damage to the Building or
any part thereof, or (v) claims arising by reason of the
foregoing, but only to the extent that any of the foregoing
damages and/or claims referred to above are covered (and only
to the extent of such coverage) by insurance actually carried
by either Landlord or Tenant. This provision is intended to
waive fully, and for the benefit of each party, any rights
and/or claims which might give rise to a right of subrogation
on any insurance carrier. The coverage obtained by each party
pursuant to this Lease shall include, but without limitation,
a waiver of subrogation by the carrier which conforms to the
provisions of this paragraph.
SERVICES AND
UTILITIES 13. (a) Landlord shall maintain the public and common areas of the
Building, including lobbies, stairs, elevators, corridors and
restrooms, the windows in the Building, the mechanical,
plumbing and electrical equipment serving the Building, and
the structure itself, in reasonably good order and condition
except for damage occasioned by the act of Tenant, which
damage shall be repaired by Landlord at Tenant's expense.
(b) Provided Tenant shall not be in default hereunder, and
subject to the provisions elsewhere herein contained and to
the rules and regulations of the Building, Landlord shall
furnish to the Premises during ordinary business hours of
generally recognized business days, to be determined by
Landlord (but exclusive, in any event, of Saturdays, Sundays
and legal holidays), water and electricity suitable for the
Permitted Uses of the Premises, heat and air conditioning
required in Landlord's judgment for the comfortable use and
occupation of the Premises for the Permitted Uses, janitorial
services during the times and in the manner that such services
are, in Landlord's judgment, customarily furnished in
comparable office buildings in the immediate market area, and
elevator service which shall mean service either by
nonattended automatic elevators or elevators with attendants
or both, at the option of Landlord. Landlord shall have no
obligation to provide additional or after-hours heating or air
conditioning, but if Landlord elects to provide such services
at Tenant's request, Tenant shall pay to Landlord a reasonable
charge for such services as determined by Landlord. Tenant
agrees to keep and cause to be kept closed all window covering
when necessary because of the sun's position, and Tenant also
agrees at all times to cooperate fully with Landlord and to
abide by all the regulations and requirements which Landlord
may prescribe for the proper functioning and protection of
heating,
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<PAGE>
ventilating and air conditioning systems. Wherever heat-
generating machines, excess lighting or equipment are used
in the Premises which affect the temperature otherwise
maintained by the air conditioning system, Landlord
reserves the right to install supplementary air
conditioning units in the Premises, and the cost thereof
including the cost of installation and the cost of
operation and maintenance thereof, shall be paid by Tenant
to Landlord upon demand by Landlord. See Addendum #6
attached hereto and made a part hereof.
(c) Tenant shall not without the written consent of
Landlord use any apparatus or device in the Premises,
including without limitation, electronics data processing
machines, punch card machines, and machines using excess
lighting or using current in excess of that which is
determined by Landlord as reasonable and normal for the
Permitted Use or which will in any way increase the amount
of electricity or water usually furnished or supplied for
the Permitted Uses of the Premises; nor connect with
electric current except through existing electrical
outlets in the Premises or water pipes, any apparatus or
device for the purposes of using electrical current or
water. If Tenant shall require water or electric current
or any other resource in excess of that usually furnished
or supplied for the Permitted Use of the Premises, Tenant
shall first procure the consent of Landlord which Landlord
may refuse, to the use thereof, and Landlord may cause a
special meter to be installed in the Premises so as to
measure the amount of water, electrical current or other
resource consumed for any such other use. Tenant shall pay
directly to Landlord as an addition to and separate from
payment of Basic Operating Cost the cost of all such
energy, utility service and meters (and of installation,
maintenance and repair thereof). Landlord may add to the
metered charge a recovery of additional expense incurred
in keeping account of the water, electric current or other
resource so consumed. Landlord shall not be liable for any
damages directly or indirectly resulting from, nor shall
the Rent herein reserved be abated by reason of (i) the
installation, use or interruption of use of any equipment
in connection with the furnishing of any of the foregoing
utilities and services, (ii) failure to furnish or delay
in furnishing any such utilities or services when such
failure or delay is caused by acts of God or the elements,
labor disturbances of any character, any other accident or
other conditions beyond the reasonable control of
Landlord, or by the making of repairs or improvements to
the Premises or to the Building, or (iii) the limitation,
curtailment, rationing or restriction on use of water,
electricity, gas or any other form of energy or any other
service or utility whatsoever serving the Premises or the
Building. Landlord shall be entitled to cooperate
voluntarily and in a reasonable manner with the efforts of
national, state or local governmental agencies or utility
suppliers in reducing energy or other resource
consumption. The obligation to make services available
hereunder shall be subject to the limitations of any such
voluntary, reasonable program.
(d) Any sums payable under this paragraph 13 shall
constitute Additional Rent hereunder.
ESTOPPEL 14. Within ten (10) days following any written request
CERTIFICATE which Landlord may make from time to time, Tenant shall
execute and deliver to Landlord a certificate
substantially in the form attached hereto as Exhibit D and
made a part hereof, indicating thereon any exceptions
thereto which may exist at that time. Failure by Tenant to
execute and deliver such certificate shall constitute an
acceptance of the Premises and acknowledgment by Tenant
that the statements included in Exhibit D are true and
correct without exception. Landlord and tenant intend that
any statements included in Exhibit D are true and correct
without exception. Landlord and Tenant intend that any
statement delivered pursuant to this paragraph may be
relied upon by any mortgagee, beneficiary, purchaser or
prospective purchaser of the Building or any interest
therein. Landlord shall have the right to substitute for
the attached exhibit D a certificate in form required by
Landlord's mortgagee or provider of financing.
SECURITY
DEPOSIT 15. Concurrently with execution hereof, Tenant has paid to
Landlord the Security Deposit in the amount stated on the
Basic Lease Information sheet as security for the full and
faithful performance of Tenant's obligations under this
Lease. Upon expiration of the Term or earlier termination
hereof, the Security Deposit shall be returned to Tenant,
reduced by such amounts as may be required by Landlord to
remedy defaults on the part of Tenant in the payment of
Rent, to repair damages to the Premises caused by Tenant
and to clean the Premises. Landlord shall hold the
Security Deposit for the foregoing purposes in accordance
with the provisions of all applicable law.
SUBSTITUTION
16. At any time after execution of this Lease, Landlord may
substitute for the Premises other premises in the Building
(the "New Premises") upon not less than ninety (90) days
prior written notice, in which event the new Premises
shall be deemed to be the Premises for all purposes
hereunder, provided, however, that:
(a) The Net Rentable Area in the Premises is less than
five thousand (5,000) square feet;
(b) The New Premises shall be similar in area and in
appropriateness for Tenant's purposes;
(c) Any such substitution is effected for the purpose of
accommodating a tenant who will occupy all or a
substantial portion of the Net Rentable Area of the floor
on which the Premises are located; and
(d) If Tenant is occupying the Premises at the time of
such substitution, Landlord shall pay the expense of
moving Tenant, its property and equipment to the New
Premises and shall, at its sole cost, improve the New
Premises with improvements substantially similar to those
Landlord has committed to provide or has provided in the
HOLDING OVER Premises.
17. If Tenant shall retain possession of the Premises or
any part thereof without Landlord's consent following the
expiration of the Term or sooner termination of this Lease
for any reason, then Tenant shall pay to Landlord for each
day of such retention double the amount of the daily
rental for the last period prior to the date of such
expiration or termination. Tenant shall also indemnify and
hold Landlord harmless from any loss or liability
resulting from delay by Tenant in surrendering the
Premises, including, without limitation, any claims made
by any succeeding tenant founded on such delay.
Alternatively, if Landlord gives notice to Tenant of
Landlord's election thereof, such holding over shall
constitute renewal of this Lease for a period from month
to month whichever shall be specified in such notice.
Acceptance of Rent by Landlord following expiration or
termination shall not constitute a renewal of this Lease,
and nothing contained in this paragraph shall waive
Landlord's right of reentry or any other right. Unless
Landlord exercises the option hereby given to it, Tenant
shall be only a Tenant at sufferance, whether or not
Landlord accepts any Rent from Tenant while Tenant is
SUBORDINATION holding over without Landlord's written consent.
18. Without the necessity of any additional document being
executed by Tenant for the purpose of effecting a
subordination, this Lease shall be subject and subordinate
at all times to: (a) all ground leases or underlying
leases which may now exist or hereafter be executed
affecting the Building or the land upon which the Building
is situated or both, and (b) the lien of any mortgage or
deed of trust which
<PAGE>
may now exist or hereafter be executed in any amount for which
said Building, land, ground leases or underlying leases, or
Landlord's interest or estate in any of said items, is
specified as security. Notwithstanding the foregoing, Landlord
shall have the right to subordinate or cause to be subordinated
any such ground leases or underlying leases or any such liens
to this Lease. In the event that any ground lease or underlying
lease terminates for any reason or any mortgage or deed of
trust is foreclosed or a conveyance in lieu of foreclosure is
made for any reason, Tenant shall, notwithstanding any
subordination, attorn to and become the Tenant of the successor
in interest to Landlord at the option of such successor in
interest. Tenant shall execute and deliver, upon demand by
Landlord and in the form requested by Landlord, any additional
documents evidencing the priority or subordination of this
Lease with respect to any such ground leases or underlying
leases or the lien of any such mortgage or deed of trust.
Tenant hereby irrevocably appoints Landlord as attorney-in-
fact of Tenant to execute, deliver and record any such
documents in the name and on behalf of Tenant. At the request
of Landlord, Tenant shall provide to Landlord its current
financial statement or other information disclosing financial
worth which Landlord shall use solely for purposes of this
Lease and in connection with the ownership, management and
disposition of the property subject hereto.
RULES AND 19. Tenant shall faithfully observe and comply with the rules
REGULATIONS and regulations printed on or annexed to this Lease and all
reasonable modifications thereof and additions thereto from
time to time put into effect by Landlord. Landlord shall not be
responsible to Tenant for the non-compliance by any other
tenant or occupant of the Building with any of the rules and
regulations.
RE-ENTRY BY 20. Landlord reserves and shall with reasonable advance notice
LANDLORD except in emergencies have the right to reenter the premises to
inspect the same, to supply janitor service and any other
service to be provided by Landlord to Tenant hereunder, to show
the Premises to prospective purchasers, mortgagees or tenants,
to post notices of nonresponsibility and to alter, improve or
repair the Premises and any portion of the Building, without
abatement of Rent, and may for that purpose erect, use and
maintain scaffolding, pipes, conduits and other necessary
structures in and through the Premises where reasonably
required by the character of the work to be performed: provided
that entrance to the Premises shall not be blocked thereby, and
further provided that the business of Tenant shall not be
interfered with unreasonably. Tenant waives any claim for
damages for any injury or inconveniences to or interference
with Tenant's business, any loss of occupancy or quiet
enjoyment of the Premises, and any other loss occasioned
thereby, Landlord shall at all times have and retain a key with
which to unlock all of the doors in, upon and about the
premises, excluding Tenant's vaults and safes or special
security areas (designated in advance), and Landlord shall have
the right to use any and all means which Landlord may deem
necessary or proper to open said doors in an emergency, in
order to obtain entry to any portion of the Premises, and any
entry to the Premises or portions thereof obtained by Landlord
by any of said means, or otherwise, shall not be construed to
be a forcible or unlawful entry into, or a detainer of, the
Premises, or an eviction, actual or constructive, of Tenant
from the Premises or any portions thereof. Landlord shall also
have the right at any time, without the same constituting an
actual or constructive eviction and without incurring any
liability to Tenant thereof, to change the arrangement and/or
location of entrances or passageways, doors and doorways, and
corridors, elevators, stairs, toilets or other public parts of
the Building and to change the name, number or designation by
which the Building is commonly known.
DEFAULT BY
TENANT 21.(a) Events of Default: The occurrence of any of the following
shall constitute an event of default on the part of Tenant:
(1) Abandonment. Abandonment of the Premises for a continuous
period in excess of five (5) business days. Tenant waives
any right to notice Tenant may have under Section 1951.3
of the Civil Code of the State of California, the terms of
this subsection (a) being deemed such notice to Tenant as
required by said Section 1951.3:
(2) Nonpayment of Rent. Failure to pay any installment of Rent
due and payable hereunder (or failure to pay any other
amount required to be paid hereunder, all such obligations
to be construed as the equivalent of obligations for
payment of Rent) upon the date when said payment is due,
such failure continuing without cure by payment of the
delinquent Rent and late charges for a period of five (5)
business days after written notice and demand; provided,
however, that except as expressly otherwise provided
herein, Landlord shall not be required to provide such
notice more than twice during the Term, the third such
non-payment constituting default for all purposes hereof
without requirement of notice. For purposes of
subparagraph 21(e), such failure shall constitute a
default without requirement of notice.
(3) Other Obligations. Failure to perform any obligations,
agreement or covenant under this Lease other than those
matters specified in subparagraphs (1) and (2) of this
subparagraph (a), such failure continuing for fifteen (15)
business days after written notice of such failure (or
such longer period as Landlord determines to be necessary
to remedy such default, provided that Tenant shall
continuously and diligently pursue such remedy at all time
until such default is cured);
(4) General Assignment. A general assignment by Tenant for the
Benefit of creditors:
(5) Bankruptcy. The filing of any voluntary petition in
bankruptcy by Tenant, or the filing of an involuntary
petition by Tenant's creditors, which involuntary petition
remains undischarged for a period of thirty (30) days. In
the event that under applicable law the trustee in
bankruptcy or Tenant has the right to affirm this Lease
and continue to perform the obligations of Tenant
hereunder, such trustee or Tenant shall, in such time
period as may be permitted by the bankruptcy court having
jurisdiction, cure all defaults of Tenant hereunder
outstanding as of the date of the affirmance of this Lease
and provide to Landlord such adequate assurances as may be
necessary to ensure Landlord of the continued performance
of Tenant's obligations under this Lease;
(6) Receivership. The employment of a receiver to take
possession of substantially all of the Tenant's assets or
the Premises, if such receivership remains indissolved for
a period of ten (10) business days after creation thereof;
<PAGE>
(7) Attachment. The attachment, execution or other judicial
seizure of all or substantially all of Tenant's assets or the
Premises, if such attachment or other seizure remains
undismissed or undischarged for a period of ten (10) business
days after the levy thereof;
(8) Insolvency. The admission by Tenant in writing of its
inability to pay its debts as they become due, the filing by
Tenant of a petition seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or
similar relief under any present or future statute, law or
regulation, the filing by Tenant of an answer admitting or
failing timely to contest a material allegation of a petition
filed against Tenant in any such proceeding or, if within
thirty (30) days after the commencement of any proceeding
against Tenant seeking any reorganization or arrangement,
composition, readjustment, liquidation, dissolution or
similar relief under any present or future statute, law or
regulation, such proceeding shall not have been dismissed.
(b) Remedies Upon Default.
(1) Rent. All failures to pay any monetary obligation to be paid
by Tenant under this lease shall be construed as obligations
for payment of rent.
(2) Termination. In the event of the occurrence of any event of
default, Landlord shall have the right, with or without
notice or demand, immediately to terminate this lease, and at
any time thereafter recover possession of the Premises or any
part thereof and expel and remove therefrom Tenant and any
other person occupying the same, by any lawful means, and
again repossess and enjoy the Premises without prejudice to
any of the remedies that Landlord may have under this lease.
or at law or equity by reason of Tenant's default or of such
termination.
(3) Continuation After Default. Even though Tenant has breached
this Lease and/or abandoned the Premises, this Lease shall
continue in effect for so long as Landlord does not terminate
Tenant's right to possession under paragraph 21 (b)(2)
hereof, and Landlord may enforce all its right and remedies
under this lease, including (but without limitation) the
right to recover Rent as it becomes due; and Landlord,
without terminating this Lease, may exercise all of the
rights and remedies of a landlord under Section 1951.4 of the
Civil Code of the State of California or any successor code
section. Acts of maintenance, preservation or efforts to
lease the Premises or the appointment of receiver upon
application of Landlord to protect Landlord's interests under
this Lease shall not constitute an election to terminate
Tenant's right to possession.
(c) Damages Upon Termination. Should Landlord terminate this
Lease pursuant to the provisions of paragraph 21 (b)(2)
hereof, Landlord shall have all the rights and remedies of a
landlord provided by Section 1951.2 of the Civil Code of the
State of California, or successor code section. Upon such
termination, in addition to any other rights and remedies to
which Landlord may be entitled under applicable law, Landlord
shall be entitled to recover from Tenant: (i) the worth at
the time of award of the unpaid Rent and other amounts which
had been earned at the time of termination; (ii) the worth at
the time of award of the amount by which the unpaid Rent
which would have been earned after termination until the time
of award exceeds the amount of such Rent loss that the Tenant
proves could have been reasonably avoided; (iii) the worth
at the time of award of the amount by which the unpaid Rent
for the balance of the Term after the time of award exceeds
the amount of such Rent loss that the Tenant proves could be
reasonably avoided; and (iv) any other amount necessary to
compensate Landlord for all the detriment proximately caused
by Tenant's failure to perform its obligations under this
Lease or which, in the ordinary course of things, would be
likely to result therefrom. The "worth at the time of award"
of the amounts referred to in (i) and (ii) shall be computed
with interest at the lesser of eighteen percent (18%) per
annum or the maximum rate allowed by law. The "worth at the
time of award" of the amount referred to in (iii) shall be
computed by reference to competent appraisal evidence or the
formula prescribed by using the lowest discount rate
permitted under applicable law.
(d) Computation Of Rent For Purposes Of Default.
For purposes of computing unpaid Rent which would have
accrued and become payable under this Lease pursuant to the
provisions of paragraph 21(c) unpaid Rent shall consist of the
sum of
(1) the total Basic Rent for the balance of the Term then
remaining (with the amount of Basic Rent to be determined by
reference to fair rental value being the subject of proof by
competent evidence), plus
(2) a computation of the excess of Gross Rent (the term "Gross
Rent" meaning the sum of (i) rental adjustments payable
pursuant to paragraph 29 and (ii) Basic Rent) over Basic Rent
for the balance of the Term then remaining ("Excess Gross
Rental"), the assumed excess Gross Rental for the calendar
year of the default and each future calendar year in the Term
to be equal to the Excess Gross Rental for the calendar year
prior to the year in which default occurs compounded at a per
annum rate equal to the mean average rate of inflation for
the preceding five (5) calendar years as determined by the
United States Department of Labor, Bureau of Labor Statistics
Consumer Price Index (All Urban Consumers) for the
Metropolitan Area or Region of which San Francisco,
California is a part.
(e) Late Charge. In addition to its other remedies, Landlord
shall have the right without notice or demand to add to the
amount of any payment required to be made by Tenant hereunder,
and which is not paid on or before the date the same is due, an
amount equal to five percent (5%) of the delinquency for each
month or portion thereof that the delinquency remains outstanding
to compensate Landlord for the loss of the use of the amount not
paid and the administrative costs caused by the delinquency, the
parties agreeing that Landlord's damage by virtue of such
delinquencies would be difficult to compute and the amount stated
herein represents a reasonable estimate thereof.
(f) Remedies Cumulative. All right, privileges and elections or
remedies of the parties are cumulative and not alternative to the
extent permitted by law and except as otherwise provided herein.
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<PAGE>
DAMAGED BY 22. If the Premises or the Building are damaged by fire or
FIRE, ETC. other casualty, Landlord shall forthwith repair the
same, provided such repairs can be made within one
See Addendum hundred eighty (180) days from the date of such damage
#7 attached under the laws and regulations of the federal, state and
hereto and made local governmental authorities having jurisdiction
a part hereof. thereof. In such event, this Lease shall remain in full
force and effect except that Tenant shall be entitled to
a proportionate reduction of Rent while such repairs to
be made hereunder by Landlord are being made. Said
proportionate reduction shall be based upon the extent
to which the making of such repairs to be made hereunder
by Landlord shall interfere with the business carried on
by Tenant in the Premises. Within twenty (20) days from
the date of such damage, Landlord shall notify Tenant
whether or not such repairs can be made within one
hundred eighty (180) days from the date of such damage
and Landlord's determination thereof shall be binding on
Tenant. If such repairs cannot be made within one
hundred eighty (180) days from the date of such damage,
Landlord shall have the option within thirty (30) days
of the date of such damage either to: (a) notify Tenant
of Landlord's intention to repair such damage and
diligently prosecute such repairs, in which event this
Lease shall continue in full force and effect and the
Rent shall be reduced as provided herein; or (b) notify
Tenant of Landlord's election to terminate this Lease as
of a date specified in such notice, which date shall be
not less than thirty (30) nor more than sixty (60) days
after notice is given. In the event such notice to
terminate is given by Landlord this Lease shall
terminate on the date specified in such notice. In case
of termination by either event, the Rent shall be
reduced by a proportionate amount based upon the extent
to which said damage interfered with the business
carried on by Tenant in the Premises, and Tenant shall
pay such reduced Rent Up to the date of termination.
Landlord agrees to refund to Tenant any Rent previously
paid for any period of time subsequent to such date of
termination. The repairs be made hereunder by Landlord
shall not include, and Landlord shall not be required to
repair, any damage by fire or other cause to the
property of Tenant or any repairs or replacements of any
paneling, decorations, railings, floor coverings or any
alterations, additions fixtures or improvements
installed on the premises by or at the expense of
Tenant. The provisions of Section 1942, subdivision 2,
and Section 1933, subdivision 4, of the Civil Code of
California are superseded by the foregoing.
<PAGE>
EMINENT
DOMAIN 23. If any part of the Premises shall be taken or
appropriated under the power of eminent domain or conveyed in
lieu thereof, either party shall have the right to terminate
this Lease at its option. If any part of the Building shall
be taken or appropriated under power of eminent domain or
conveyed in lieu thereof, Landlord may terminate this Lease
at its option. In either of such events, Landlord shall
receive (and Tenant shall assign to Landlord upon demand from
Landlord) any income, rent, award or any interest therein
which may be paid in connection with the exercise of such
power of eminent domain, and Tenant shall have no claim
against Landlord for any part of the sums paid by virtue of
such proceedings, whether or not attributable to the value of
the unexpired Term. If a part of the Premises shall be so
taken or appropriated or conveyed and neither party hereto
shall elect to terminate this Lease and the Premises have
been damaged as a consequence of such partial taking or
appropriation or conveyance, Landlord shall restore the
Premises continuing under this Lease at Landlord's cost and
expense; provided, however, that Landlord shall not be
required to repair or restore any injury or damage to the
property of Tenant or to make any repairs or restoration of
any alterations, additions, fixtures or improvements
installed on the Premises by or at the expense of Tenant.
Thereafter, the Rent for the remainder of the Term shall be
proportionately reduced, such reduction to be based upon the
extent to which the partial taking or appropriation or
conveyance shall interfere with the business carried on by
Tenant in the Premises. Notwithstanding anything to the
contrary contained in this paragraph, if the temporary use or
occupancy of any part of the Premises shall be taken or
appropriated under power of eminent domain during the Term,
this Lease shall be and remain unaffected by such taking or
appropriation and Tenant shall continue to pay in full all
Rent payable hereunder by Tenant during the Term; in the
event of any such temporary appropriation or taking, Tenant
shall be entitled to receive that portion of any award which
represents compensation for the use of or occupancy of the
Premises during the Term, and Landlord shall be entitled to
receive that portion of any award which represents the cost
of restoration of the Premises and the use and occupancy of
the Premises after the end of the Term. SALE BY LANDLORD AND
24. In the event of a sale or conveyance by Landlord of the
TENANT'S Building, the same shall operate to release Landlord
from any REMEDIES future liability upon any of the convenants
or conditions, express or implied, herein contained in favor
of Tenant, and in such event Tenant agrees to look solely to
the responsibility of the successor in interest of Landlord
in and to this Lease. This Lease shall not be affected by any
such sale and Tenant agrees to attorn to the purchaser or
assignee. Tenant shall look solely to Landlord's interest in
the Building for recovery of any judgment from Landlord.
Landlord, or if Landlord is a partnership, its partners
whether general or limited, or if Landlord is a corporation,
its directors, officers or shareholders, shall never be
personally liable for any such judgment.
RIGHT OF
LANDLORD TO 25. All convenants and agreements to be performed by
PERFORM Tenant under any of the terms of this Lease shall be
performed by Tenant at Tenant's sole cost and expense and
without any abatement of Rent. If Tenant shall fail to pay
any sum of money, other than Rent, required to be paid by it
hereunder or shall fail to perform any other act on its part
to be performed hereunder, and such failure shall continue
for ten (10) days after notice thereof by Landlord, Landlord
may, but shall not be obligated to do so, and without waiving
or releasing Tenant from any obligations of the Tenant, make
any such payment or perform any such act on the Tenant's part
to be made or performed. All sums so paid by Landlord and all
necessary incidental costs together with interest thereon at
the rate of eighteen percent (18%) per annum or the maximum
rate permitted by law, whichever is less per annum from the
date of such payment by the Landlord shall be payable as
Additional Rent to Landlord on demand, and Tenant covenants
to pay such sums, and Landlord shall have, in addition to any
other right or remedy of Landlord, the same right and
remedies in the event of the nonpayment thereof by Tenant as
SURRENDER OF in the case of default by Tenant in the payment of the Rent.
PREMISES
26. (a) Tenant shall, at least ninety (90) days before the last
day of the Term, give to Landlord a written notice of
intention to surrender the Premises on that date, but nothing
contained herein shall be construed as an extension of the
Term or as consent of Landlord to any holding over by Tenant.
(b) At the end of the term or any renewal thereof or other
sooner termination of this Lease, Tenant shall peaceably
deliver up to Landlord possession of the Premises, together
with all improvements, fixtures or ordinary wear additions
thereto by whomsoever made, in the same condition as
received, or first installed, damage by fire, earthquake, act
of God, ordinary wear and tear or the elements alone
excepted. Tenant may, upon the termination of this Lease,
remove all movable furniture and equipment belonging to
Tenant, at Tenant's sole cost, title to which shall be in
Tenant until such termination, repairing any damage caused by
such removal. Property not so removed shall be deemed
abandoned by the Tenant, and title to the same shall
thereupon pass to Landlord.
(c) The voluntary or other surrender of this Lease by Tenant,
or a mutual cancellation thereof, shall not work a merger and
shall, at the option of Landlord, terminate all or any
WAIVER existing subleases or subtenancies or may, at the option of
Landlord, operate as an assignment to it of any or all such
subleases or subtenancies.
27. If either Landlord or Tenant waives the performance of
any term, covenant or condition contained in this Lease, such
waiver shall not be deemed to be a waiver of any subsequent
breach of the same or any other term, covenant or condition
contained herein. The acceptance of Rent by Landlord shall
not constitute a waiver of any preceding breach by Tenant of
any term, covenant or condition of this Lease, regardless of
Landlord's knowledge of such preceding breach at the time
Landlord accepted such Rent. Failure by Landlord to enforce
any of the terms, convenants or conditions of this Lease for
any length of time shall not be deemed to waive or to
decrease the right of Landlord to insist thereafter upon
strict performance by Tenant. Waiver by Landlord of any term,
covenant or condition contained in this lease may only be
made by a written document signed by Landlord.
<PAGE>
NOTICES
28. All notices and demands which may or are required to be given by
either party to the other hereunder shall be in writing. All
notices and demand by Landlord to Tenant shall be sent by United
States certified or registered mail, postage prepaid, addressed to
Tenant at the Premises, or to such other place as Tenant may from
time to time designate in a notice to Landlord. All notices and
demands by Tenant to Landlord shall be sent by United States
certified or registered mail, postage prepaid, addressed to
Landlord at the address specified in the Basic Lease Information,
or to such other firm or to such other place as Landlord may from
time to time designate in a notice to Tenant.
RENTAL 29. In addition to Basic Rent provided to be paid hereunder, Tenant
ADJUSTMENT shall pay as Rent Tenant's Proportionate Share of Basic Operating
Cost in the manner set forth below.
See (a) Definition: For purposes hereof, the terms used in this
Addendum #1 paragraph 29 shall have the following meanings:
attached (b) "Basic Operating Cost" shall mean all expenses and costs of
hereto every kind and nature which Landlord shall pay or become obligated
and made a to pay because of or in connection with the ownership and operation
part hereof of the Building and supporting facilities of the Building, and such
additional facilities now and in subsequent years as may be
determined by Landlord to be necessary to the Building, including,
but not limited to the following:
(i) Wages, salaries and related expenses and benefits of all on-
site and off-site employees engaged directly in the operation,
management, maintenance, engineering and security of the Building,
and the costs of an office in the Building: provided, however, that
Basic Operating Cost shall not include leasing commissions paid to
any real estate broker, salesperson of agent.
(ii) Supplies, materials and rental of equipment used in the
operation, management and maintenance of the Building.
(iii) Utilities, including water and power, heating, lighting, air
conditioning and ventilating of the Building.
(iv) All maintenance, janitorial and service agreements for the
Building and the equipment therein, including, without limitation,
alarm services, window cleaning and elevator maintenance.
(v) A management cost recovery determined by Landlord equal to
three percent (3%) of Gross Rent derived from the Building.
(vi) Legal expenses and the cost of audits by certified public
accountant; provided, however, that legal expenses chargeable as
Basic Operating Cost shall not include the cost of negotiating
leases, collecting rents, evicting tenants nor shall it include
costs incurred in legal proceedings with or against any tenant or
to enforce the provisions of any lease.
(vii) All insurance premiums and costs, including but not limited
to, the premiums and cost of fire, casualty and liability coverage
and rental abatement and earthquake insurance (if Landlord elects
to provide such coverage) applicable to the Building and
Landlord's personal property used in connection therewith.
(viii) Repair, replacements and general maintenance (excluding
repairs and general maintenance paid by proceeds of insurance or by
Tenant or other third parties, and alterations attributable solely
to tenants of the Building other than Tenant).
(ix) All maintenance costs relating to public and service areas of
the Building, including (but without limitation) sidewalks,
landscaping, service areas, mechanical rooms and building
exteriors.
(x) All taxes, service payments in lieu of taxes, annual or
periodic license or use fees, fees, real estate taxes, impositions
or charges imposed upon or levied in connection with use of the
Building to raise funds for public transit, housing or other
environmental, sociological or fiscal effects of the Building or
land use, assessments whether general or special, ordinary and
extraordinary, unforseen as well as foreseen, of any kind which are
assessed, levied, charged, confirmed or imposed by any public
authority upon the Building, the land upon which it is located,
Building operations or Rent payable under this Lease (or any
portion or component thereof), excepting only inheritance of estate
taxes imposed upon or assessed against the interest of any person
in the Building or any part thereof of interest therein, and taxes
computed upon the basis of the net income of the owners of the
Building or any part thereof or interest therein.
(xi) Amortization (together with reasonable financing charges) of
capital improvement made to the Building subsequent to the Term
Commencement Date which will improve the operating efficiency of
the Building or which may be required to comply with the laws,
ordinances, rules or regulations promulgated, adopted or enforced
after completion of the initial construction of the Building and
improvements of the Premises pursuant to Exhibit C and C-!.
Notwithstanding anything to the contrary herein contained, Basic
Operating Cost shall not include (aa) the initial construction cost
of the Building; (bb) depreciation on the initial construction of
the Building; (cc) the cost of providing Tenant improvements to
tenant or any other tenant: (dd) debt service (including, but
without limitation, interest, principal and any impound payments)
required to be made on any mortgage or deed of trust recorded with
respect to the Building and/or the real property on which the
Building is located other than debt service and financing charges
imposed pursuant to paragraph 29(a)(1)(xi) above; and (ee) the cost
of special services, goods or materials provided to any tenant. In
the event that the building is not fully occupied during any fiscal
year of the Term as determined by Landlord, an adjustment shall be
made in computing the Basic Operating Cost for such year so that
Basic Operating Cost shall be computed as though the Building had
been one hundred percent (100%) occupied; provided, however, that
in no event shall Landlord be entitled to collect in excess of one
hundred percent (100%) of the total Basic Operating Cost from all
of the tenants in the Building including Tenant. All costs and
expenses shall be determined in accordance with generally accepted
accounting principles which shall be consistently applied (with
accruals appropriate to Landlord's business). Basic Operating Cost
shall not include specific costs incurred for the account of,
separately billed to and paid by specific tenants.
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<PAGE>
(2) "Estimated Basic Operating Cost" for any particular
year shall mean Landlord's estimate of the Basic
Operating Cost for such calendar year made prior to
commencement of such calendar year as hereinafter
provided. Landlord shall have the right from time to time
to revise its fiscal year and interim accounting periods
so long as the periods as so revised are reconciled with
prior periods in accordance with generally accepted
accounting principles applied in a consistent manner.
(3) "Basic Operating Cost Adjustment" shall mean the
difference between Basic Operating Cost and Estimated
Basic Operating Cost for any calendar year determined as
hereinafter provided.
(B) Payment Of Estimated Operating Cost.
During December of each calendar year during the
Term, or as soon thereafter as practicable, Landlord
shall give Tenant written notice of the Estimated Basic
Operating Cost for the ensuing calendar year. The
Estimated Basic Operating Cost for the calendar year in
which the Scheduled Term Commencement Date falls is set
forth in the Basic Lease information sheet. Tenant shall
pay Tenant's Proportionate Share of the Estimated Basic
Operating Costs with Installments of Basic Rent required
to be paid pursuant to paragraph 3 above for the calendar
year to which the estimate applies in monthly
installments on the first day of each calendar month
during such year, in advance. Such payment shall be
construed to be Rent for all purposes hereof. If at any
time during the course of a calendar year, Landlord
determines that Basic Operating Cost will apparently vary
from the then Estimated Basic Operating Cost by more than
five percent (5%), Landlord may, by written notice to
Tenant, revise the Estimated Basic Operating Cost for the
balance of such calendar year and Tenant shall pay Tenant
Proportionate Share of the Estimated Basic Operating Cost
as so revised for the balance of the then current
calendar year on the first day of each calendar month
thereafter, such revised installment amounts to be Rent
for all purposes hereof.
(C) Computation Of Basic Operating Cost Adjustment.
Within one hundred twenty (120) days after the
end of each fiscal year as determined by Landlord or as
soon thereafter as practicable, Landlord shall deliver to
Tenant a statement of Basic Operating Cost for the fiscal
year just ended, accompanied by a computation of Basic
Operating Cost Adjustment. If such statement shows that
Tenant's payment based upon Estimated Basic Operating
Cost is less than Tenant's Proportionate Share of Basic
Operating Cost, then Tenant shall pay the difference
within twenty (20) days after receipt of such statement,
such payment to constitute additional rent hereunder. If
such statement shows that Tenant's payments of Estimated
Basic Operating Cost exceed Tenant's Proportionate Share
of Basic Operating Costs, then (provide that Tenant is
not in default under this Lease), Tenant shall receive a
credit for the amount of such payment against Tenant's
obligation for payment of Tenant's Proportionate Share of
Estimated Basic Operating Cost next becoming due
hereunder. If this Lease has been terminated or the Term
hereof has expired prior to the date of such statement,
then the Basic Operating Cost Adjustment shall be paid by
the appropriate party within twenty (20) days after the
date of delivery of the statement.
(D) Net Lease. This shall be a net lease and Base Rent
shall be paid to Landlord absolutely net of all costs and
expenses. The provisions for payment of Basic Operating
Cost by means of periodic payments of Tenant's
Proportionate Share of Estimated Basic Operating Cost and
the Basic Operating Cost Adjustment are intended to pass
on to Tenant and reimburse Landlord for all cost and
expenses of the nature described in paragraph 29(a)(1)
above incurred in connection with ownership and operation
of the Building and such additional facilities now and in
subsequent years as may be determined by Landlord to be
necessary to the Building.
(e) Tenant Audit. Tenant shall have the right, at
Tenant's expense and upon not less than forty-eight (48)
hours prior written notice to Landlord to review at
reasonable times Landlord's books and records for any
calendar year a portion of which falls within the Term
for purposes of verifying Landlord's calculation of Basic
Operating cost and Basic Operating Cost Adjustment. In
the event that Tenant shall dispute the amount set forth
in any statement provided by Landlord under paragraph
2g(c) above, Tenant shall have the right not later than
twenty (20) days following the receipt of such statement,
and upon condition that Tenant shall first deposit with
Landlord the full amount in dispute, to cause Landlord's
books and records with respect to such calendar year to
be audited by certified public accountants selected by
Tenant subject to Landlord's reasonable right of
approval. The Basic Operating Cost Adjustment shall be
appropriately adjusted on the basis of such audit. If
such audit discloses a liability for a refund or credit
by Landlord to Tenant in excess of ten Percent (10%) of
Tenant's Proportionate Share of the Basic Operating cost
Adjustment previously reported, the cost of such audit
shall be borne by Landlord. Otherwise the cost of such
audit shall be paid by Tenant. If Tenant shall not
request an audit in accordance with the provisions of
this paragraph 29(e) within twenty (20) days of receipt
of Landlord's statement provided pursuant to paragraph
29(d), such statement shall be final and binding for all
purposes hereof.
TAXES 30. (a) Tenant shall pay before delinquency any and all taxes
PAYABLE BY levied or assessed and which become payable by Landlord
TENANT (or Tenant) during the Term of this Lease, whether or not
now customary or within the contemplation of the parties
hereto, which are based upon, measured by or otherwise
calculated with respect to: (a) the value of Tenant's
equipment, furniture, fixtures or other personal property
located in the Premises; (b) the value of any leasehold
improvements, alterations, or additions made in or to the
Premises, regardless of whether title to such
improvements, alterations or additions shall be in Tenant
or Landlord; or (c) this transaction or any document to
which Tenant is a party creating or transferring an
interest or an estate in the Premises. (b) In the event
that it shall not be lawful for Tenant so to reimburse
Landlord, the Rent shall be revised to net Landlord the
same net rent after imposition of any such tax upon
Landlord as would have been payable to Landlord prior to
the imposition of any such tax. All taxes payable by
Tenant under this Paragraph 30 shall be additional
rental.
--10--
<PAGE>
SUCCESSORS 31. Subject to the provisions of paragraph 10 hereof, the
AND ASSIGNS terms, covenants and conditions contained herein shall be
binding upon and inure to the benefit of the heirs, successors,
executors, administrators and assigns of the parties hereto.
ATTORNEYS' 32. In the event that any action or proceeding is brought to
FEES enforce any term, covenant or condition of this lease on the
part of Landlord or Tenant, the prevailing party in such
litigation shall be entitled to reasonable attorneys' fees to
be fixed by the court in such action or proceeding.
LIGHT AND AIR 33. No diminution of light, air or view by any structure
which may hereafter be erected (whether or not by Landlord)
shall entitle Tenant to any reduction of Rent, result in any
liability of Landlord to Tenant, or in any other way affect
this Lease or Tenant's obligations hereunder.
PUBLIC TRANS- 34. Tenant shall establish and maintain during the Term
PORTATION hereof a program to encourage maximum use of public
INFORMATION transportation by personnel of Tenant employed on the Premises,
including without limitation the distribution to such employees
of written materials explaining the convenience and
availability of public transportation facilities adjacent to
the Building, staggering working hours of employees, and
encouraging use of such facilities, all at Tenant's sole
reasonable cost and expense.
MISCELLANEOUS 35.(a) The term "Premises" shall be deemed to include
(except where such meaning would be clearly repugnant to the
context) the office space demised and improvements now or at
any time hereinafter comprising or built in the space hereby
demised.
(b) The paragraph headings herein are for convenience of
reference and shall in no way define, increase, limit or
describe the scope or intent of any provision of this lease.
(c) The term "Landlord" in these presents shall include the
Landlord, its successors and assigns. In any case where this
Lease is signed by more than one person, the obligation
hereinunder shall be joint and several.
(d) The term "Tenant" or any pronoun used in place thereof
shall indicate and include the masculine or feminine, the
singular or plural number, individuals, firms or corporations,
and their and each of their respective successors, executors,
administrators and permitted assigns, according to the context
hereof.
(e) Time is of the essence of this Lease and all of its
provisions.
(f) This Lease shall in all respects be governed by the laws of
the State of California.
(g) This Lease, together with its exhibits, contains all the
agreements of the parties hereto and supersedes any previous
negotiations.
(h) There have been no representations made by the Landlord or
understandings made between the parties other than those set
forth in the Lease and its exhibits.
(i) This Lease may not be modified except by a written
instrument by the parties hereto.
(j) If for any reason whatsoever any of the provisions hereof
shall be enforceable or ineffective, all of the other
provisions shall be and remain in full force and effect.
LEASE EFFECTIVE (k) See Addenda #1-11 attached hereto and made a part hereof.
DATE
36. Submission of this instrument for examination or
signature by Tenant does not constitute a reservation or option
for lease, and it is not effective as a lease or otherwise
until execution and delivery by both Landlord and Tenant.
IN WITNESS WHEREOF. the parties hereto have executed
this Lease the day and year first above written.
"LANDLORD"
SAN MATEO OFFICE LIMITED
A California Limited Partnership
Date By
--------------------- --------------------------
Dennis E. Singleton
Its General Partner
"TENANT"
VERY VISUAL SOFTWARE
A DELAWARE CORPORATION
Date By
--------------------- --------------------------
Roger Sippl
Its Chief Executive Office
<PAGE>
Rules and Regulations
Exhibit A.
1. Sidewalks, halls, passages, exits, entrances, elevators,
escalators and stairways shall not be obstructed by Tenants or
used by them for any purposes other than for ingress to and
egress from their respective premises. The halls, passages,exits
entrances, elevators and stairways are not for the use of the
general public and Landlord shall in all cases retain the right
to control and prevent access thereto by all persons whose
presence, in the judgement of Landlord, shall be prejudicial to
the safety, character, reputation and interests of the Building
and its Tenants, provided that nothing herein contained shall be
construed to prevent such access to persons with whom any Tenant
normally deals in the ordinary course of such Tenant's business
unless such persons are engaged in illegal activities. No Tenant,
and no employees or invitees of any Tenant, shall go upon the
roof of the Building, except as authorized by Landlord.
2. No sign, placard, picture, name, advertisement or notice, visible
from the exterior of leased premises shall be inscribed, painted,
affixed, installed or otherwise displayed by any Tenant either on
its premises or any part of the Building without the prior written
consent of Landlord, and Landlord shall have the right to remove
any such sign, placard, picture, name, advertisement or notice
without notice to and at the expense of the Tenant.
If Landlord shall have given such consent to any Tenant at any
time, whether before or after the execution of the lease, such
consent shall in no way operate as a waiver or release of any of
the provisions hereof or of such lease, and shall be deemed to
relate only to the particular sign, placard, picture, name,
advertisement or notice so consented to by Landlord and shall not
be construed as dispensing with the necessity of obtaining the
specific written consent of Landlord with respect to any other
such sign, placard, picture, name, advertisement or notice.
All approved signs or lettering on doors and walls shall be
printed, painted, affixed or inscribed at the expense of the
Tenant by a person approved by Landlord.
3. The bulletin board or directory of the Building will be provided
exclusively for the display of the name and location of Tenants
only and Landlord reserves the right to exclude any other names
therefrom.
4. No curtains draperies, blinds, shutters, screens or other
coverings awnings, hangings or decorations shall be attached to,
hung or placed in, or used in connection with, any window or door
on any premises without prior written consent of Landlord. In any
event with the prior written consent of Landlord, all such items
shall be installed inboard of Landlords window covering and shall
in no way be visible from exterior of the Building. No articles
shall be placed or kept on the window sills so as to be visible
from the exterior of the Building. No articles shall be placed
against glass partition s or doors which might appear unsightly
from outside Tenants Premises.
5. Landlord reserves the right to exclude from the Building between
the hours of 6 pm and 6 am and at all hours on Saturdays, Sundays,
and holidays all persons who are not Tenants or their accompanied
guests in the Building. Each Tenant shall be responsible for all
persons for whom it allows to enter the building and shall be
liable to Landlord for all acts of such persons.
Landlord shall in no case be liable for damages for error with
regard to the admission to or exclusion from the Building of
any person.
During the continuances of any invasion, mob. riot, public
excitement or other circumstance rendering such action advisable
in Landlord's opinion, Landlord reserves the right to prevent
access to the Building by closing the doors, or otherwise, for the
safety of Tenants and protection of the Building and property in
the Building.
6. No Tenant shall employ any person or persons other than the
janitor of Landlord for the purpose of cleaning premises unless
otherwise agreed to by Landlord in writing. Except with the
written consent of Landlord no person or persons other than those
approved by Landlord shall be permitted to enter the Building for
the purpose of cleaning the same. No Tenant shall cause any
unnecessary labor by reason of such Tenant's carelessness or
indifference in the preservation of good order and cleanliness of
the premises. Landlord shall in no way be responsible to any
tenant for loss of property on the premises, however occurring, or
for any damage done to the effects of any Tenant by the janitor or
any other employee or any other person.
7. No Tenant shall obtain for use upon its premises ice, drinking
water, food, beverage, towel or other similar services except
through facilities provided by Landlord (and maintained by Tenant)
and under regulations fixed by Landlord, or accept barbering or
bootblacking services in its premises except from persons
authorized by Landlord.
8. Each Tenant shall see that all doors of its premises are closed
and securely locked and must observe strict care and caution that
all water faucets or water apparatus are entirely shut off before
the Tenant or its employees leave such premises, and that all
utilities shall likewise be carefully shut off, so as to prevent
waste or damage, and for any default or carelessness the Tenant
shall make good all injuries sustained by other Tenants or
occupants of the Building or Landlord. On multiple-tenancy floors,
all Tenants shall keep the door or doors to the Building corridors
closed at all times except for ingress or egress.
9. As more specifically provided in the Tenant's Lease of the
Prenuses, Tenant shall not waste electricity, water or air-
conditioning and agrees to cooperate fully with Landlord to assure
the most effective operation of the Building's heating and air-
conditioning, and shall refrain from attempting to adjust any
controls other than room thermostats installed for Tenant's use.
10. No Tenant shall after any lock or access device or install a new
additional lock or access device or any bolt on any door of its
premises without the prior written consent of Landlord. If
Landlord shall give its consent, the Tenant shall in each case
furnish Landlord with a key for any such lock.
11. No Tenant shall make or have made additional copies of any keys or
access devices provided by Landlord. Each Tenant, upon the
termination of the Tenancy, shall deliver to Landlord all the keys
or
EXHIBIT "A" Page 1
<PAGE>
access devices for the Building, offices, rooms and
toilet rooms which shall have been furnished the
Tenant or which the Tenant shall have had made. In the
event of the loss of any keys or access devices so
furnished by Landlord, Tenant shall pay Landlord
therefor.
12. The toilet rooms, toilets, urinal, wash bowls and other
apparatus shall not be used for any purpose other than
that for which they were constructed and no foreign
substance of any kind whatsoever shall be thrown
therein, and the expense of any breakage, stoppage or
damage resulting from the violation of this rule shall
be borne by the Tenant who, or whose employees or
invitees, shall have caused it.
13. No Tenant shall use or keep in its premises of the
Building any kerosene, gasoline or inflammable or
combustible fluid or material other than limited
quantities necessary for the operation or maintenance of
office or office equipment. no Tenant shall use any
method or heating or air-conditioning other than that
supplied by Landlord.
14. No Tenant shall use, keep or permit to be used or kept
in its premises any foul or noxious gas or substance or
permit or suffer such premises to be occupies or used
in a manner offensive or objectionable to landlord or
other occupants of the Building by reason of noise,
odors and/or vibrations or interfere in any way with
other Tenants of those having business therein, nor
shall any animals or birds be brought or kept in or
about any premises of the Building.
15. No cooking shall be done or permitted by any Tenant on
it premises (except that use by the Tenant of
Underwriters' laboratory approved equipment for the
preparation of coffee, tea, hot chocolate and similar
beverages for Tenants and their employees shall be
permitted, provided that such equipment and use is in
accordance with all applicable federal, state and city
laws, codes, ordinances, rules and regulations), nor
shall premises be used for lodging. microwave accepted.
16. Except with the prior written consent of Landlord, no
Tenant shall sell, or permit the sale, at retail, of
newspapers, magazines, periodicals, theatre tickets or
any other goods or merchandise in or on any premises,
nor shall Tenant carry on, or permit or allow any
employee or other person to carry on , the Business of
stenography, typewriting or any similar business in or
from any premises for the service or accommodation of
occupants of any other portion of the Building, nor
shall the premises of any Tenant be used for the storage
of merchandise or for manufacturing of any kind, or the
business of a public barber shop, beauty parlor, nor
shall the premises of any Tenant be used for any
improper, immoral or objectionable purpose, or any
business or activity other than that specifically
provided for in such Tennant's lease.
17. If Tenant requires telegraphic, telephonic, burglar
alarm or similar services, it shall first obtain and
comply with, Landlord's instructions in their
installation.
18. Landlord will direct electricians as to where and how
telephone, telegraph and electrical wires are to be
introduced or installed. No boring ar cutting for wires
will be allowed without the prior written consent of
Landlord. The location of burglar alarms, telephones,
call boxes and other office equipment affixed to all
premises shall be subject to the written approval of
Landlord.
19. No Tenant shall install any radio or television antenna,
loudspeaker or any other device on the exterior walls or
the roof of the Building. Tenant shall not interfere
with radio or television broadcasting or reception from
or in the Building or elsewhere.
20. No Tenant shall lay linoleum, tile, carpet or an other
floor covering so that the same shall be affixed to the
floor of its premises in any manner except as approved
in writing by Landlord. The expense of repairing any
damage resulting from a violation of this rule or the
removal of any floor covering shall be borne by the
Tenant by whom, or by whose contractors, employees or
invitees, the damage shall have been caused.
21. No furniture, freight, equipment, materials, supplies,
packages, merchandise or other property will be received
in the Building or carried up or down the elevators
except between such hours and in such elevators as shall
be designated by Landlord.
Landlord shall have the right to prescribe the
weight, size and position of all safes, furniture or
other heavy equipment brought into the Building. Safes
or other heavy objects shall, if considered necessary by
Landlord, stand on wood strips of such thickness as
determined by Landlord to be necessary to properly
distribute the weight thereof. Landlord will not be
responsible for loss of or damage to any such safe,
equipment or properly from any cause, and all damage
done to the Building by moving or maintaining any such
safe, equipment or other property shall be repaired at
the expense of Tenant.
Business machines and mechanical equipment
belonging to Tenant which cause noise or vibration that
may be transmitted to the structure of the Building or
to an space therein to such a degree as to be
objectionable to Landlord or to an tenants in the
building shall be placed and maintained by Tenant, at
Tennant's expense, on vibration eliminators or other
devices sufficient to eliminate noise or vibration. The
persons employed to move such equipment in or out of the
Building must be acceptable to Landlord.
22. No Tenant shall place a load upon any floor of the
premises which exceeds the load per square foot which
such floor was designed to carry and which is allowed by
law. No Tenant shall mark, or drive nails, screw or
drill into, the partitions, woodwork or plaster or in
any way deface such premises or any part thereof.
23. No Tenant shall install, maintain or operate upon the
Premises any vending machine without the written consent
of Landlord.
24. There shall not be used in any space, or in the public
areas of the Building, either by any Tenant or others,
any hand trucks except those equipped with rubber tires
and side guards or such other material-handling
equipment as Landlord may approve. No other vehicles of
any kind shall be brought by any Tenant into or kept in
or about the premises.
EXHIBIT "A"
18. Landlord will direct
<PAGE>
25. Each Tenant shall store all its trash and garbage
within the interior of its premises. No material shall
be placed in the trash boxes or receptacles if such
material is of such nature that it may not be disposed
of in the ordinary and customary manner of removing and
disposing of trash and garbage in the city without
violation of any law or ordinance governing such
disposal. All trash, garbage and refuse disposal shall
be made only through entryways and elevators provided
for such purposes and at such times as Landlord shall
designate.
26. Canvassing, soliciting, distribution of handbills or any
other written material, and peddling in the Building are
prohibited and each Tenant shall cooperate to prevent
the same. No Tenant shall make room-to-room solicitation
of business from other tenants in the building.
27. Landlord shall have the right, exercisable without
liability to any Tenant, to change the name and address
of the Building.
28. Landlord reserves the right to exclude or expel from the
Building any person who, in Landlord's judgment is
intoxicated or under the influence of liquor or drugs or
who is in violation of any of the rules and regulations
of the Building.
29. Without the prior written consent of Landlord, Tenant
shall not use the name of the Building in connection
with or in promoting or advertising the business of
Tenant except as Tenant's address.
30. Tenant shall comply with all safety, fire protection and
evacuation procedures and regulations established by
Landlord or any governmental agency.
31. Tenant assumes any and all responsibility for protecting
its Premises from theft, robbery and pilferage, which
includes keeping doors locked and other means of entry
to the Premises closed.
32. The requirements of Tenants will be attended to only
upon application at the office of the Building by an
authorized individual. Employees of Landlord shall not
perform any work or do anything outside of their regular
duties unless under special instructions from Landlord,
and no employees will admit any person Tenant or
otherwise) to any office without specific instructions
from Landlord.
33. Landlord may waive any one or more of these Rules and
Regulations for the benefit of any particular Tenant or
Tenants, but no such waiver by Landlord shall be
construed as a waiver of such Rules and Regulations in
favor of any other Tenant or Tenants, nor prevent
Landlord from thereafter enforcing any such Rules and
Regulations against any or all Tenants of the Building.
34. Landlord reserves the right to make such other and
reasonable rules and regulations as in its judgement may
from time to time be needed for safety and security, for
care and cleanliness of the Building and for the
preservation of good order therein. Tenant agrees to
abide by all such Rules and Regulations hereinabove
stated and any additional rules and regulations which
are adopted.
35. Landlord reserves the right to designate the use of the
parking spaces on the premises.
36. Tenant shall use carpet protector under all desk chairs.
37. Tenant agrees to keep balcony doors closed at all times,
except during ingress and egress.
38. Tenant Or Tenant's guests shall park between designated
parking lines only, and shall not occupy two parking
spaces with one car. Vehicles in violation of the above
shall be subject to tow-away, at vehicle owner's
expense.
39. Vehicles parked on premises overnight without prior
written consent of the Landlord shall be deemed
abandoned and shall be subject to tow-away at vehicle
owner's expense.
40. Tenant shall be responsible for the observance of all of
the foregoing Rules and Regulations by Tenant's
employees, agents, clients, customers, invitees and
guests.
41. The Rules and Regulations are in addition to, and shall
not be construed to in any way modify, alter or amend,
in whole or in part the terms, covenants, agreements and
conditions of any Lease of Premises in the Building. The
word "Building" as used herein means the building of
which the premises are part.
EXHIBIT "A" Page 3
<PAGE>
BLDG. 1
4TH FLOOR PLAN
SAN MATEO BAY CENTER
SPIEKER PARTNERS
(415) 570-5990
EXHIBIT B-1
<PAGE>
Suite 370 2,177 Sq. Ft.
San Mateo BayCenter
951 Mariner's Island Boulevard
San Mateo, CA
Tenant to accept the premises in "as is" condition
EXHIBIT C - Interior Improvements
<PAGE>
FOURTH FLOOR
SOUTH BLDG.
SUITE 460
6871 RSF
SAN MATEO BAY CENTER
901/951 MARINER'S ISLAND BLVD.
SAN MATEO, CALIFORNIA
SPIEKER PARTNERS
Tenant to accept the premises in "as is" condition except Landlord shall, at
Landlord's sole cost and expense, provide the following interior improvements:
1. Repaint all walls, color to be selected by tenant.
2. Landlord shall replace the existing carpet with building standard carpet,
color to be selected by tenant.
3. 3 - 3' sidelights (location to be selected by tenant).
4. 3'x5' window on wall separating Reception/Training Rooms.
5. Mini-blinds to be installed on new 3'x5' window.
<PAGE>
Form of Tenant Certificate
- --------------
EXHIBIT D
- --------------
------------------------------
------------------------------
------------------------------
------------------------------
RE:
Gentlemen:
The undersigned, as Tenant under that certain lease (the "Lease") dated
________________ 19__, made with __________________________ as Landlord
(the "Landlord"), does hereby certify:
1. That the copy of the Lease attached hereto as Exhibit A is a true and
complete copy of the Lease, and there are no amendments, modifications
or extensions of or to the Lease and the Lease is now in full force
and effect.
2. That its leased premises at the above location have been completed in
accordance with the terms of the Lease, that it has accepted
possession of said premises, and that it now occupies the same.
3. That it began paying rent on __________________, 19__, and that, save
only as may be required by the terms of the Lease, no rental has been
paid in advance, nor has the undersigned deposited any sums with the
Landlord as security.
4. That there exist no defenses or offsets to enforcement of the Lease by
the Landlord and, so far as is known to the undersigned, the Landlord
is not, as of the date hereof, in default in the performance of the
Lease, nor has the Landlord committed any breach thereof, nor has any
event occurred which, with the passage of time or the giving of
notice, or both, would constitute a default or breach by the Landlord.
The undersigned acknowledges that you are relying on the above
representation of the undersigned in (advancing funds to purchase the
existing first mortgage Joan covering the building in which the
leased premises are located)(in purchasing the building in which the
leased premises are located) and does hereby warrant and affirm to and
for your benefit, and that of your successors and assigns, that each
of the foregoing representations is true, correct and complete as of
the date hereof.
Dated:
-------------------------------------------------
By
Its:
----------------------------------------------------
<PAGE>
EXHIBIT "D"
<PAGE>
ADDENDA TO LEASE
951 Mariner's Island Boulevard
San Mateo, California
LEASE DATE: March 7, 1993
LANDLORD: SAN MATEO OFFICE LIMITED
a California Limited Partnership
TENANT: VERY VISUAL SOFTWARE, INC.
A California Company
ADDENDUM #1 RENT
Rent for the Premises shall be as follows:
Months 1-2.5 (4/1/93 - 6/14/93)
Suite #370 (2,177 sqft)
Base Rent $ 2,373
Estimated Basic
Operating Costs 1,328
-----
(Calendar Year 1993)
$ 3,701 per month
Months 2.5-3 (6/15/93 - 6/30/93)
Suite #460 (6,871 sqft)
Base Rent $ 7,489
Estimated Basic
Operating Costs 4,191
-----
(Calendar Year 1993)
$ 11,680 per month
Months 3-24 (7/1/93 - 3/31/95)
Suite #460 (6,871 sqft)
Base Rent $ 7,489
Estimated Basic
Operating Costs 4,191
-----
(Calendar Year 1993)
$ 11,680 per month
ADDENDUM #2 TENANT IMPROVEMENTS
Landlord shall deliver Suite #370 in "AS IS" condition as built per attached
Exhibit C. Landlord shall provide to Suite #460 Tenant Improvements as
described in Exhibit C-1.
ADDENDUM #3 OPTION TO RE-RELEASE
Providing Tenant is not, and has not been, in default of any terms and
conditions of this Lease, Tenant shall have one three (3) year option to release
the Premises in as is condition at the then current market rate for San Mateo
BayCenter. In no event will the monthly rental be less than the rental for the
last month of the previous term.
Tenant shall give landlord written notice of its intent to exercise its option
at least one hundred twenty (120) days prior to the expiration of the current
lease term. Within fifteen (15) days after Landlord receives notice of such
intent, Landlord will provide Tenant with the current market rental, as
determined by Landlord as well as terms and conditions for the extended term.
Tenant shall have thirty (30) days from notification by Landlord of option rent
and terms and conditions to accept Landlord's current market rent, terms and
conditions and thereby exercises its option to re-lease. If Tenant does not
accept Landlord's rental figure and terms and conditions within the thirty (30)
day period, this option shall be null and void and Landlord shall have no
further obligation to Tenant and Landlord may enter into a lease for the
Premises with a third party.
<PAGE>
ADDENDA TO LEASE
VERY VISUAL SOFTWARE, INC.
Page -2-
Notwithstanding anything to the contrary set forth in this Lease, the Option to
Re-Lease shall apply only to the Primary tenant and not to any assignee or
subtenant of Very Visual Software, Inc.
ADDENDUM #4 PRIOR RIGHT OF REFUSAL
- ----------------------------------
Provided Tenant is not, and has not been, in default of any terms and conditions
of this Lease, tenant shall have a Prior Right of Refusal during the term of the
lease, to lease up to an additional 4,800 square feet of contiguous space on the
fourth floor of the building. Landlord shall, before leasing the same to any
party other than Tenant, first offers to lease the same to Tenant. Such offer
shall specify the rental rate, lease term, amount of tenant improvement
allowance, and other terms on which Tenant is entitled to lease the space, which
terms shall be at the sole discretion of Landlord. Tenant shall exercise its
rights to lease the space, if at all, within ten (10) business days after the
receipt from Landlord of the Offer Terms, by written notice, thereof to
Landlord. If Tenant exercises its Prior Right to Lease in the manner described,
Tenant shall immediately deliver to Landlord payment for the first month's rent
for the adjacent space. If Tenant does not so exercise such right to lease
within said ten (10) day period, Landlord shall be entitled thereafter to lease
said Option Space to any third party Landlord desires, provided that if Landlord
has not received a letter of intent or entered into Lease negotiations on the
Option Space with any third party within ninety (90) days after expiration of
said ten (10) day period, Landlord shall once again offer to lease said space to
Tenant pursuant to the provisions of this paragraph. Should Landlord enter into
Lease negotiation with a third party, Landlord agrees that the effective rental
rate offered to the third party is within 85% of that offered to said Tenant
(VVSI) at the rent set forth in the original Offer Terms.
ADDENDUM #5 COMPLIANCE WITH LAWS
- --------------------------------
Landlord warrants, to the best of its knowledge, that the Building does conform
or that Landlord will cause it to conform to applicable requirements of law or
duly constituted authority or of any Board of Fire Underwriters, rating bureau
of similar organization, or the requirements of the carriers of Landlord's
insurance on or relating to the Building. The Tenant shall comply with all
applicable statutes, ordinances, rules and regulations of federal, state, and
municipal governments and all applicable rules and regulations of the Board of
Fire Underwriters as such statutes, ordinances, rules and regulations pertain to
Tenant's use of the demised Premises.
ADDENDUM #6 SERVICES AND UTILITIES
- ----------------------------------
Tenant shall be charged a fee of $30.00 per hour for after-hours HVAC use.
Normal building hours are Monday through Friday from 8:00 a.m. to 6:00 p.m.
Landlord reserves the right to adjust the hourly charge to reflect any increase
or decrease set by the local utility company.
ADDENDUM #7 DAMAGE BY FIRE. ETC.
- --------------------------------
Notwithstanding the provisions of Paragraph 22, Tenant shall have the right to
terminate this Lease if such repairs cannot be made within one hundred eighty
(180) days from the date of such damage if such damage occurs within the last
six (6) months of the lease term.
ADDENDUM #8 PARKING
- -------------------
Tenant shall have the non-exclusive use of no more than 4 on-site parking spaces
per every 1,000 square feet of leased office space.
<PAGE>
ADDENDA TO LEASE
VERY VISUAL SOFTWARE, INC.
Page -3-
ADDENDUM #9 SIGNAGE
- -------------------
Tenant shall be entitled to building standard signage located at the following
locations: entrance to the suite, elevator floor directory and main lobby
directory.
ADDENDUM #10 BASIC OPERATING COSTS
- ----------------------------------
Notwithstanding the provisions of Paragraph 29 of the Lease Agreement, Tenant's
Proportionate Share of Basic Operating Costs which are within Landlord's Control
shall not increase by more than ten percent (10%) over the previous year's cost.
Basic Operating costs which are not within Landlord's control include, but are
not limited to, utilities, taxes and insurance.
ADDENDUM #11 TERM AND POSSESSION
- --------------------------------
Notwithstanding the provisions of Paragraph 3(a) of the Lease Agreement,
Landlord will use its best efforts to deliver to Tenant 6,871 rentable square
feet located on the 4th floor of 951 Mariner's Island Boulevard known as Suite
#460 on or before June 15, 1993. Should Landlord be unable to deliver said
space, 6,871 rentable square feet, on or before July 15, 1993, Landlord agrees
to offer to Tenant one day free base rent and operating expenses for each day
Tenant must occupy 2,177 square feet of rentable space on the third floor
thereafter. If Landlord is unable to deliver said space, 6,871 rentable square
feet, on or before September 30, 1993, Tenant shall have the right to terminate
this Lease.
LANDLORD:
SPIEKER-SINGLETON #68, LTD. PARTNERSHIP
A California Limited Partnership
By:
---------------------------------
Dennis E. Singleton
Its: General Partner
Date:
---------------------------------
TENANT:
VERY VISUAL SOFTWARE, INC.
A Delaware Corporation
By:
---------------------------------
Roger Sippl
Its: Chief Executive Officer
By:
---------------------------------
<PAGE>
LEASE AMENDMENT
ORIGINAL LEASE DATE: March 7, 1993
LEASE AMENDMENT DATE: May 25, 1993
LANDLORD: SAN MATEO OFFICE LIMITED
A California Limited
Partnership
TENANT: VERY VISUAL SOFTWARE, INC.
A California Corporation
Landlord and Tenant, by executing this Lease Amendment as provided do hereby
amend the Original Lease referred to above as follows:
1. RENTAL
Rent for the Premises shall be as follows:
Months 1 - 2.5 (4/1/93 - 6/17/93)
Suite #370 *2,177 sqft)
Base Rent $ 2,373
Operating Costs 1,328
-------
(1993 estimate)
$ 3,701 per month
Months 2.5 - 3 (6/18/93 - 6/30-93)
Suite #460 (6,871 sqft)
Base Rent $ 7,489
Operating Costs 4,191
-------
(1993 estimate)
$11,680 per month
Months 3 - 24 (7/1/93 - 3/31/95)
Suite #460 (6,871 sqft)
Base Rent $ 7,489
Operating Costs 4,191
-------
(1993 estimate)
$11,680 per month
2. All other terms and conditions of the original Lease Agreement shall
apply to this Lease Amendment.
Agreed to this 25th day of May, 1993.
---- ----
<PAGE>
VERY VISUAL SOFTWARE, INC.
Lease Amendment 5/25/93
Page -2-
LANDLORD:
SAN MATEO OFFICE LIMITED
A California Limited Partnership
By: ----------------------------------
Dennis E. Singleton
Its: General Partner
Date: ----------------------------------
TENANT:
VERY VISUAL SOFTWARE, INC.
A Delaware Corporation
By: ----------------------------------
Roger Sippl
Its: Chief Executive Officer
Date: ---------------------------------
<PAGE>
LEASE AMENDMENT #2
------------------
ORIGINAL LEASE DATE: March 7, 1993
LEASE AMENDMENT DATE: October 6, 1994
LANDLORD: SAN MATEO OFFICE LIMITED
A California Limited Partnership
TENANT: VISIGENIC SOFTWARE, INC.
A Delaware Corporation
Landlord and Tenant, by executing this Lease Amendment as provided do hereby
amend the Original Lease referred to above as follows:
1. TERM
----
11/01/94 - 04/30/96
2. Premises
--------
Approximately 981 square feet of leasable space on the fourth floor of San
Mateo BayCenter, Phase I shall be incorporated into the original Lease
Agreement. Total square footage shall increase from 6,871 to 7,852 square
feet leasable.
3. Rental
------
<TABLE>
<S> <C> <C>
11/01/94 - 03/31/95
Base Rent $ 8,559.00
Op. Exp.(est.'94) $ 4,790.00
----------
Total Rent $13,349.00
04/01/95 - 04/30/97
Base Rent $ 8,951.00
Op. Exp. (est '94) $ 4,790.00
----------
Total Rent $13,741.00
</TABLE>
4. Proportionate Share
-------------------
Tenants proportionate share shall increase from 5.81% to 6.64%.
5. Security Deposit
----------------
Security Deposit shall increase from $11,681.00 to $13,349.00.
All other terms and conditions of the original Lease Agreement shall apply to
this Lease Amendment #2 Agreed to this________________day of__________________,
1994.
LANDLORD:
SAN MATEO OFFICE LIMITED
A California Limited Partnership
By: ---------------------------------
Peter H. Schnugg
Its: Agent for Owner
Date: ---------------------------------
TENANT:
VERY VISUAL SOFTWARE, INC.
A Delaware Corporation
By: ---------------------------------
Glenn Myers
Its: Vice President of Finance
Date: ---------------------------------
<PAGE>
LEASE AMENDMENT #3
------------------
ORIGINAL LEASE DATE: March 7, 1993
LEASE AMENDMENT DATE: November 3, 1994
LANDLORD: SAN MATEO OFFICE LIMITED
A California Limited Partnership
TENANT VISIGENIC SOFTWARE, INC.
A Delaware Corporation
Landlord and Tenant, by executing this Lease Amendment as provided do hereby
amend the Original Lease referred to above as follows:
<TABLE>
<CAPTION>
1. Rental
------
<S> <C> <C>
11/01/94 - 03/31/95
Base Rent $ 8,559.00
Op. Exp. (est. '94) $ 4,790.00
----------
Total Rent $13,349.00
04/01/95 - 04/30/96 Base Rent $ 8,951.00
Op. Exp. (est. '94) $ 4,790.00
----------
Total Rent $13,741.00
</TABLE>
All other terms and conditions of the original Lease Agreement shall apply to
this Lease Amendment #3 Agreed to this ______ day of ________________, 1994.
LANDLORD:
SAN MATEO OFFICE LIMITED
A California Limited Partnership
By: _____________________________
Peter H. Schnugg
Its: Agent for Owner
Date: _____________________________
TENANT:
VERY VISUAL SOFTWARE, INC.
A Delaware Corporation
By: _____________________________
Glenn Myers
Its: Vice President of Finance
Date: _____________________________
<PAGE>
LEASE AMENDMENT 24
ORIGINAL LEASE DATE: March 7, 1993
LEASE AMENDMENT DATE: February 15, 1995
LANDLORD: SAN MATEO OFFICE LIMITED
A California Limited Partnership
TENANT: VISIGENIC SOFTWARE, INC.
A Delaware Corporation
Landlord and Tenant, by executing this Lease Amendment as provided do hereby
amend the Original Lease referred to above as follows:
1. Term
----
03/01/95 - 04/30/96
2. Premises
--------
Approximately 1,677 square feet of leasable space on the third floor of San
Mateo BayCenter, Phase I shall be incorporated into the original Lease
Agreement. Total square footage shall increase from 7,852 to 9,529 square
feet leasable.
3. Rental
03/01/95 - 03/31/95
Base Rent $10,773.00
Op. Exp. (est. '95) $6,004.00
----------
Total Rent $16,777.00
04/01/95 - 04/30/96 Base Rent $11,165.00
Op. Exp. (est '95) $6,004.00
----------
Total Rent $17,169.00
4. Proportionate Share
-------------------
Tenants proportionate share shall increase from 6.64% to 8.05%.
5. Security Deposit
----------------
Security Deposit shall increase from $13,349 to $17,168.00.
All other terms and conditions of the original Lease Agreement shall apply to
this Lease Amendment #4 Agreed to this day of , 1995.
---- -------------
LANDLORD:
SAN MATEO OFFICE LIMITED
A California Limited Partnership
By: --------------------------------------
Peter H. Schnugg as Attorney-In-Fact
for Dennis E. Singleton, General Partner
Date:
--------------------------------------
TENANT:
VERY VISUAL SOFTWARE, INC.
A Delaware Corporation
By:
--------------------------------------
Glenn Myers
Its: Vice President of Finance
<PAGE>
Date:
----------------------------
<PAGE>
BLDG. 1
3RD FLOOR PLAN
SAN MAETO BAY CENTER
SPIEKER PARTNERS
(415) 570-5990
<PAGE>
REVISED LEASE AMENDMENT #5
--------------------------
<TABLE>
<S> <C>
ORIGINAL LEASE DATE: March 7, 1993
LEASE AMENDMENT DATE: June 28, 1995
LANDLORD: SAN MATEO OFFICE LIMITED
A California Limited Partnership
TENANT: VISIGENIC SOFTWARE, INC.
A Delaware Corporation
</TABLE>
Landlord and Tenant, by executing this Lease Amendment as provided do hereby
amend the Original Lease referred to above as follows:
1. Term
----
08/01/95 - 07/31/2000
2. Premises
--------
Effective August 1, 1995 approximately 3,305 square feet of rentable
space on the fourth floor (Suite 400) of San Mateo BayCenter, Phase I,
shall be incorporated into the original Lease Agreement. Total square
footage shall increase from 9,529 to 12,834 rentable. Effective May 1,
1996 approximately 1,495 square feet of rentable space on the fourth
floor (Suite 420) of San Mateo BayCenter, Phase I, shall be incorporated
into the original Lease Agreement. Total square footage shall increase
from 12,834 to 14,329.
3. Rental
------
<TABLE>
<S> <C> <C>
08/01/95 - 04/30/96
(12,834 rsf) Base Rent $14.888.00
Op. Exp. (est. '95) $ 8,085.00
-----------
Total Rent $22,973.00
05/01/96 - 11/30/97
(14,329 rsf) Base Rent $19,631.00
Op. Exp. (est. '95) $ 9,027.00
----------
Total Rent $28,658.00
12/01/97 - 07/31/99
(14,329 rsf) Base Rent $20,777.00
Op. Exp. (est. '95) $ 9,027.00
----------
Total Rent $29,804.00
08/01/99 - 07/31/2000
(14,329 rsf) Base Rent $21,207.00
Op. Exp. (est. '95) $ 9,027.00
----------
Total Rent $30,234.00
</TABLE>
4. Proportionate Share
-------------------
Tenant's proportionate share shall increase from 8.05% to 10.85%. Effective May
1, 1996, Tenant's proportionate share shall increase from 10.85% to 12.11%.
5. Security Deposit
----------------
Security Deposit shall increase from $17,168.00 to $28,658.00.
<PAGE>
6.
<PAGE>
LEASE AMENDMENT #10
-------------------
ORIGINAL LEASE DATE: March 7, 1993
LEASE AMENDMENT DATE: June 11, 1996
LANDLORD: SAN MATEO OFFICE LIMITED
A California Limited Partnership
TENANT: VISIGENIC SOFTWARE, INC.
A Delaware Corporation
Landlord and Tenant, by executing this Lease Amendment as provided do hereby
amend the Original Lease referred to above as follows:
1. PREMISES
--------
The Premises of the Lease as defined per the Basic Lease Information and as
previously amended, shall be amended such that effective July 1, 1996,
approximately 2,674 square feet of rentable space on the first floor of San
Mateo BayCenter, known as Suite #120 within the Phase I building, shall be
incorporated into the Original Lease Agreement. Total square footage shall
increase from 22,476 to 25,150 rentable square feet. Effective August 1, 2000,
approximately 16,506 square feet of rentable space on the third and fourth
floors known as Suites 360, 370, 400, 420, & 460 within the Phase I building,
shall be reduced from the Original Lease Agreement. Total square footage shall
decrease from 25,150 to 8,644 rentable square feet. Effective February 1, 2001,
approximately 5,970 square feet of rentable space on the second and third floors
known as Suites 230 & 430 within the Phase 1 building, shall be reduced from the
Original Lease Agreement. Total square footage shall decrease from 8,644 to
2,674 rentable square feet.
2. TERM
----
The term of the Lease shall be extended so that the Scheduled Term
Expiration Date, as defined per the Basic Lease Information within the Original
Lease Agreement, shall be June 30, 2001.
3. RENTAL TOTAL
------ AMOUNT
DUE:
Additional Existing
07/01/96 - 04/30/97 2,674 rsf. 22,476 rsf. 25,150 rsf.
- -------------------------------------------------------------------------------
Base Rent $ 4,706.00 $31,540.00 $36,246.00
Op. Exp. (est '96) $ 1,711.00 $14,385.00 $16,096.00
--------- ---------- ----------
Total Rent $ 6,417.00 $45,925.00 $52,342.00
Additional Existing
05/01/97 - 06/30/97 2,674 rsf. 22,476 rsf. 25,150 rsf.
- --------------------------------------------------------------------------------
Base Rent $ 4,706.00 $31,663.00 $36,369.00
Op. Exp. (est '96) $ 1,711.00 $14,385.00 $16,096.00
---------- ---------- ----------
Total Rent $ 6,417.00 $46,048.00 $52,465.00
Additional Existing
07/01/97 - 11/30/97 2,674 rsf. 22,476 rsf. 25,150 rsf.
- -------------------------------------------------------------------------------
Base Rent $ 4,893.00 $31,663.00 $36,556.00
Op. Exp. (est '96) $ 1,711.00 $14,385.00 $16,096.00
---------- ---------- ----------
Total Rent $ 6,604.00 $46,048.00 $52,652.00
Additional Existing
12/01/97 - 06/30/98 2,674 rsf. 22,476 rsf. 25,150 rsf.
- -------------------------------------------------------------------------------
Base Rent $ 4,893.00 $33,223.00 $38,116.00
Op. Exp. (est '96) $ 1,711.00 $14,385.00 $16,096.00
---------- ---------- ----------
Total Rent $ 6,604.00 $47,608.00 $54,212.00
<PAGE>
Visigenic Software
Lease Amendment #10
6/11/96
Page 2
RENTAL (Continued)
<TABLE>
<S> <C> <C> <C>
Additional Existing
07/01/98-04/30/99 2,674 rsf. 22,476 rsf. 25,150 rsf.
----------------------------------------------------------------------------------------------------------
Base Rent $ 5,081.00 $33,223.00 $38,304.00
Op. Exp. (est '96) $ 1.71 1.00 $14,385.00 $16,096.00
Total Rent $ 6,792.00 $47,608.00 $54,400.00
Additional Existing
05/01/99 - 06/30/99 2,674 rsf. 22,476 rsf. 25,150 rsf.
----------------------------------------------------------------------------------------------------------
Base Rent $ 5,081.00 $33,407.00 $38,488.00
Op. Exp. (est '96) $ 1,711.00 $14,385.00 $16,096.00
Total Rent $ 6,792.00 $47,792.00 $54,584.00
Additional Existing
07/01/99 - 07/31/99 2,674 rsf. 22,476 rsf. 25,150 rsf.
----------------------------------------------------------------------------------------------------------
Base Rent $ 5,295.00 $33,407.00 $38,702.00
Op. Exp. (est '96) $ 1,711.00 $14,385.00 $16,096.00
Total Rent $ 7,006.00 $47,792.00 $54,798.00
Additional Existing
08/01/99 - 06/30/00 2,674 rsf. 22,476 rsf. 25,150 rsf.
----------------------------------------------------------------------------------------------------------
Base Rent $ 5,295.00 $34,448.00 $39,743.00
Op. Exp. (est '96) $ 1,711.00 $14,385.00 $16,096.00
Total Rent $ 7,006.00 $48,833.00 $55,839.00
Additional Existing
07/01/00 - 07/31/00 2,674 rsf. 22,476 rsf. 25,150 rsf.
----------------------------------------------------------------------------------------------------------
Base Rent $ 5,508.00 $34,448.00 $39,956.00
Op. Exp. (est '96) $ 1,711.00 $14,385.00 $16,096.00
Total Rent $ 7,219.00 $48,833.00 $56,052.00
Additional Existing
08/01/00 - 01/31/01 2,674 rsf. 5,970 rsf. 8,644 rsf.
----------------------------------------------------------------------------------------------------------
Base Rent $ 5,508.00 $ 9,714.00 $15,222.00
Op. Exp. (est '96) $ 1,711.00 $ 3,821.00 $ 5,532.00
Total Rent $ 7,219.00 $13,535.00 $20,754.00
Additional
02/01/01 - 06/30/01 2,674 rsf.
Base Rent $ 5,508.00
Op. Exp. (est '96) $ 1,711.00
Total Rent $ 7,219.00
</TABLE>
4. PROPORTIONATE SHARE
-------------------
Tenant's Proportionate Share, as defined per the Basic Lease Information
within the Original Lease Agreement and as amended shall increase effective
July 1, 1996 from 18.99% to 21.25%. Effective August 1, 2000 Tenant's
Proportionate Share shall decrease from 21.25% to 7.31%. Effective February
1, 2001 Tenant's Proportionate Share shall decrease from 7.31% to 2.26%.
5. SECURITY DEPOSIT
----------------
Security Deposit shall increase $6,500.00. Total Security Deposit to be
$52,500.00.
6. TENANT IMPROVEMENTS
-------------------
Landlord, at Landlords sole cost and expense shall provide the following
tenant improvements to Suite #120:
. Purchase and Install building standard carpet throughout Suite #120.
Color to be selected by Tenant.
<PAGE>
Visigenic Software
Lease Amendment #10
6/11/96
Page 3
TENANT IMPROVEMENTS (Continued)
-------------------------------
* Paint entire Suite with building standard material. Color to be selected
by Tenant.
* Demo existing work area and storage room as highlighted in yellow on the
attached exhibit A-1.
* Purchase and Install mini-blinds on existing glass door as highlighted
in blue on the attached Exhibit A-1.
In addition, Landlord agrees to contribute an additional tenant
improvement allowance of one thousand five hundred dollars ($1,500.00) to
be applied towards the interior improvements as highlighted in yellow on
the attached exhibit A-2. Landlord will act as General Contractor to
perform all work as required provided, however, that Landlord not
withstanding anything to the contrary contained in the Original Lease
Agreement, shall not charge Tenant any construction supervisory fee or
similar such fee in connection with said improvements.
7. RIGHT TO TERMINATE
------------------
It is hereby agreed and understood that the Right to Terminate as provided
for in Lease Amendment #5, dated June 28, 1995 shall not apply to the
additional 2,674 rentable square feet as provided for in this Lease
Amendment #10 nor the 2,042 rentable square feet as provided for in this
Lease Amendment #9, dated March 25, 1996 nor the 3,928 rentable square feet
as provided for in Lease Amendment #7, dated December 20, 1995. Should
Tenant exercise its Right to Terminate as outlined in Lease Amendment #5,
dated June 28, 1995 and as amended to include 2,177 remitable square feet
in Lease Amendment #6, dated July 25, 1995, it shall only apply to 16,506
rentable square feet known as Suites 360, 370, 400, 420 & 460 located at
951 Mariner's Island Blvd., San Mateo, CA 94404.
All other terms amid conditions of the original Lease Agreement amid Lease
Amendments 1 - 9 shall apply to this Lease Amendment #10. Agreed to this
---
day of June, 1996.
---------
LANDLORD:
SAN MATEO OFFICE LIMITED
a California Limited Partnership
By: Spieker-Singleton 1168 Limited Partnership
a California Limited Partnership,
its General Partner
By:
-------------------------------------
Peter H. Schnugg, as Attorney-In-Fact
for Dennis E. Singleton,
General Partner
Date:
------------------------------------
TENANT:
VISIGENIC SOFTWARE, INC.
A Delaware Corporation
By:
------------------------------------
Its: Vice President of Finance
-----------------------------------
Date:
-----------------------------------
<PAGE>
[ART APPEARS HERE]
"Exhibit A-2"
<PAGE>
[ART APPEARS HERE]
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VISIGENIC
SOFTWARE, INC. CONSOLIDATED BALANCE SHEET, MARCH 31, 1996 AND JUNE 30, 1996,
VISIGENIC SOFTWARE, INC. CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED
MARCH 31, 1996 AND QUARTER ENDED JUNE 30, 1996.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> MAR-31-1996 MAR-31-1996
<PERIOD-START> APR-01-1995 APR-01-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996
<CASH> 2,399 1,890
<SECURITIES> 0 0
<RECEIVABLES> 820 3,360
<ALLOWANCES> 60 97
<INVENTORY> 35 45
<CURRENT-ASSETS> 3,416 7,182
<PP&E> 1,882 2,378
<DEPRECIATION> 533 647
<TOTAL-ASSETS> 4,820 9,962
<CURRENT-LIABILITIES> 2,600 4,851
<BONDS> 0 2,000
0 0
4 4
<COMMON> 3 6
<OTHER-SE> 2,213 3,101
<TOTAL-LIABILITY-AND-EQUITY> 4,820 9,962
<SALES> 5,575 2,961
<TOTAL-REVENUES> 5,575 2,961
<CGS> 1,011 433
<TOTAL-COSTS> 10,039 16,626
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (85) (6)
<INCOME-PRETAX> (4,379) (13,659)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (4,379) (13,659)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,379) (13,659)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> (.39) (1.21)
</TABLE>
