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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 22, 1998
REGISTRATION NO. 333-44367
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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FORM S-3/A-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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ON TECHNOLOGY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-3162846
(STATE OF INCORPORATION) (IRS EMPLOYER IDENTIFICATION NUMBER)
ONE CAMBRIDGE CENTER
CAMBRIDGE, MASSACHUSETTS 02142
(617) 374-1400
HTTP://WWW.ON.COM
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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HERMAN DELATTE
ONE CAMBRIDGE CENTER
CAMBRIDGE, MASSACHUSETTS 02142
(617) 374-1400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
GABOR GARAI, ESQ.
EPSTEIN BECKER & GREEN, P.C.
75 STATE STREET, 27TH FLOOR
BOSTON, MASSACHUSETTS 02109
(617) 342-4000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box [_]
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, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box [X]
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 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 [_]
THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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PROSPECTUS
1,471,041 SHARES
ON TECHNOLOGY CORPORATION
COMMON STOCK
This Prospectus relates to the public offering, which is not being
underwritten, of 1,471,041 shares (the "Shares") of common stock, $.01 par
value per share (the "Common Stock") of ON Technology Corporation ("ON" or the
"Company"). The Shares are outstanding shares that may be sold from time to
time by or on behalf of certain stockholders of the Company (the "Selling
Stockholders"). The Selling Stockholders acquired the Shares in private
transactions in which the Company acquired all of the outstanding stock of
Purview Technologies, Inc., a Pennsylvania corporation ("Purview"), and csd
Software GmbH, a German corporation ("csd").
The Shares may be offered by the Selling Stockholders from time to time in
transactions on the Nasdaq National Market, in privately negotiated
transactions, or by a combination of such methods of sale, at fixed prices
that may be changed, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. The
Selling Stockholders may effect such transactions by selling the Shares to or
through broker-dealers and such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the Selling Stockholders or
the purchasers of the Shares for whom such broker-dealers may act as agent or
to whom they sell as principal, or both (which compensation to a particular
broker-dealer might be in excess of customary commissions). See "Selling
Stockholders" and "Plan of Distribution".
The Company will not receive any of the proceeds from the sale of the Shares
by the Selling Stockholders. The Company has agreed to bear certain expenses
in connection with the registration and sale of the Shares being offered by
the Selling Stockholders. The Company has agreed to indemnify the Selling
Stockholders against certain liabilities, including liabilities arising under
the Securities Act of 1933, as amended (the "Securities Act"), or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). See "Selling
Stockholders".
On January 14, 1998, the closing bid price of the Company's Common stock on
the Nasdaq National Market was $1.25 per share. The Common Stock is traded
under the Nasdaq National Market symbol "ONTC".
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The Selling Stockholders and any broker-dealers or agents that participate
with the Selling Stockholders in the distribution of the Shares may be deemed
to be "underwriters" within the meaning of Section 2(11) of the Securities
Act, and any commissions received by them and any profit on the resale of the
Shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
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SEE "RISK FACTORS" COMMENCING ON PAGE 3 FOR A DISCUSSION OF RISK FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE SECURITIES OFFERED
HEREBY.
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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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The date of this Prospectus is January 22, 1998.
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AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Information filed by the Company may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located at 7 World Trade Center, New York,
New York, 10048. Copies of such material can also be obtained at prescribed
rates by addressing written requests for such copies to the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
In addition, the Company is required to file electronic versions of such
material with the Commission through the Commission's Electronic Data
Gathering, Analysis and Retrieval ("EDGAR") system. The Commission maintains a
World Wide Web site that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission. Electronic filings are publicly available on the Commission's
World Wide Web site within 24 hours of acceptance. The address of such site is
http://www.sec.gov.
The Company has filed with the Commission a registration statement on Form
S-3, including this Prospectus and other information (herein, together with
all amendments, exhibits and schedules, referred to as the "Registration
Statement"), under the Securities Act with respect to the shares of Common
Stock offered hereby. This Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission, and to which
reference is hereby made. Statements made in this Prospectus as to the
contents of any document referred to are not necessarily complete. With
respect to each such document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. The Registration Statement, including the exhibits
and schedules thereto, may be inspected at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of such material may be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are hereby incorporated by
reference in this Prospectus:
(i) the Company's Annual Report on Form 10-K for the year ended December
31, 1996;
(ii) the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997;
(iii) the Company's Current Report on Form 8-K pertaining to the
acquisition of the outstanding securities of csd Software GmbH filed with
the Commission on February 6, 1997 and the exhibits thereto;
(iv) the Company's Current Report on Form 8-K pertaining to that certain
Asset Purchase Agreement by and among the Company and Elron Software, Inc.
filed with the Commission on November 12, 1997 and the exhibits thereto;
and
(v) the Company's Current Report on Form 8-K pertaining to a special
meeting of the Company's stockholders filed with the Commission on January
9, 1998 and the definitive Proxy Statement for Special Meeting of
Stockholders attached as an exhibit thereto (the "Special Proxy").
All documents filed pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this Prospectus and prior to the termination of
this offering shall be deemed incorporated by reference in this Prospectus and
to be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or
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superseded for purposes of this Prospectus to the extent that a statement
contained herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, upon
written or oral request of such person, a copy of any and all of the
information that has been incorporated by reference in this Prospectus (not
including exhibits to the information that is incorporated by reference unless
such exhibits are specifically incorporated by reference into the information
that the Prospectus incorporates). Requests should be directed to John M.
Bogdan, Chief Financial Officer, ON Technology Corporation, One Cambridge
Center, Cambridge, Massachusetts 02142, telephone number (617) 374-1400.
THE COMPANY
The Company's principal executive offices are located at One Cambridge
Center, Cambridge, Massachusetts 02142 and its telephone number is (617) 374-
1400. The Company's Internet address is http://www.on.com. Information
contained on the Company's World Wide Web site shall not be deemed part of
this Prospectus.
On October 29, 1997 the Company and Elron Software, Inc. ("Elron") entered
into an Asset Purchase Agreement (the "Purchase Agreement") pursuant to which
Elron agreed to purchase, subject to the approval of ON's stockholders, the
Company's Network Management and Security product, catalog business and Free
Trial Marketing system. The Purchase Agreement and the transactions
contemplated thereby (the "Transaction") are described in a Proxy Statement
for Special Meeting of Stockholders dated January 9, 1998, which is an exhibit
to the Company's Current Report on Form 8-K filed with the Commission on
January 9, 1998 (the "Special Proxy").
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
Common Stock offered by this Prospectus. Potential investors are advised that
statements contained herein or incorporated by reference into this Prospectus
expressing the beliefs and expectations of management regarding the Company's
future results or performance are forward-looking statements based on current
expectations that involve a number of risks and uncertainties. The Company's
actual results and the timing of certain events could differ materially from
those anticipated by such forward-looking statements as a result of certain
factors discussed in this Prospectus and the documents incorporated herein by
reference, including the factors set forth in the "Risk Factors",
"Management's Discussion and Analysis of Financial Condition and Results of
Operation" and "Business" sections in the Special Proxy.
CHANGE IN MARKETING STRATEGY
Historically, the Company has marketed all of its products other than its
Comprehensive Client Management ("CCM") products through its Free Trial
Marketing system. See "--Free Trial Marketing" below and "THE PROPOSED
TRANSACTION--GENERAL" in the Special Proxy. Under the Purchase Agreement,
Elron has agreed to purchase the Company's Free Trial Marketing system,
subject to a limited license back to the Company. This would allow the Company
to continue to use the Free Trial Marketing system to market its current
Groupware products, including future versions and feature extensions of such
products, to existing customers and identified potential customers, for a
period of three years from the closing date of the transactions contemplated
by the Purchase Agreement (the "Closing Date"), subject to termination in the
event of a sale of the Groupware products or a sale of all or substantially
all of the Company's business or assets.
Although the Company would retain limited rights to the Free Trial Marketing
system after the consummation of the Transaction, the Company's ability to
implement a marketing strategy based on the Free
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Trial Marketing system would be severely curtailed because the Company would
no longer have the personnel and infrastructure necessary to support to such a
strategy. Moreover, the Company has made the strategic decision to limit its
Groupware marketing efforts to exclusively selling new seats to its existing
customer base, while focusing the majority of its management, financial and
technical resources on the CCM products. Inasmuch as the Company's historical
marketing strategy has been based primarily on the Free Trial Marketing
system, the Company's decision to sell substantially all of its rights to the
Free Trial Marketing system would, if consummated, significantly limit the
marketing strategies available to the Company.
CCM PRODUCT MARKETING STRATEGY
If the Transaction is consummated, the Company will be focused primarily on
its CCM products. The target market for the CCM products is entirely different
from the target market for the products the Company has marketed and sold
through its Free Trial Marketing system. The target market for the CCM
products consists primarily of large corporations such as Deutsche Telekom and
Munich Reinsurance (both existing CCM customers). In addition, CCM product
sales per customer are generally in the range of $20,000 to $500,000, as
opposed to an average sale per customer for the Company's other products of
approximately $2,000. Sales of CCM products pose significantly greater
financial risks, and require greater up-front investments in marketing,
technical and financial resources, than sales of the Company's historical
products. As a result, the Company is adopting a new and untested marketing
strategy using a direct sales force and in-field service organization. This
marketing strategy requires significant investments in additional marketing
and technical personnel, retraining of existing personnel, ongoing product
development and creation of an in-field service organization. To date,
substantially all of the Company's marketing of CCM products has been in
Europe. While the Company has developed valuable experience and expertise in
Europe, there can be no assurance that the Company will be able to transfer
such experience and expertise to the North American market.
If the proposed Transaction is consummated, the Company will rely on fewer
large customers for its revenue since the target market for CCM products is
primarily large corporations. Currently, only one customer accounts for more
than 10% of net revenue of the products that are not being sold as part of the
Proposed Transaction. For the nine months ended September 30, 1997, Deutsche
Telekom accounted for $4.5 million, or 22.2%, of net revenue for such
products. It is possible that the Company's change in marketing strategy will
result in other customers accounting for more than 10% of the Company's net
revenues.
TECHNOLOGICAL REQUIREMENTS OF THE CCM PRODUCTS; PRODUCT DEVELOPMENT
The technological demands of the CCM products require a commitment of
significant ongoing financial, technical and personnel resources to product
development, training of service technicians and customer training. Because
the Company's historical products are not as technologically demanding as the
CCM products, the Company has not to date made the required investment and has
not proven that it can develop and maintain the organization required to
support such products. The Company believes that its experience with the CCM
products in Europe will provide a valuable base on which to build the
necessary financial, technical and personnel resources to sell, market,
develop and support the CCM products in North America; however, there can be
no assurance that the Company will be able to expand and develop its resources
to support CCM products in North America.
If the Transaction is consummated, the Company will be focused primarily on
its CCM product. The CCM product is typically larger and more complex than the
products that the Company has previously developed. The Company's ability to
continue to enhance the CCM product to meet customer and market requirements
will depend substantially on its ability to effectively manage its development
effort, to attract and retain the required development personnel in Cambridge,
Massachusetts and Starnberg, Germany and to coordinate and manage
geographically remote development efforts.
REQUIRED FINANCIAL RESOURCES
The Company has estimated that the product development, marketing and sales
costs of the CCM products
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are approximately $1.0 to $1.5 million per month. The Company believes that it
will have sufficient financial resources to fund these costs through March
1998, whether or not the Transaction is consummated. If the Transaction is
consummated, the Company believes that it will have sufficient financial
resources to fund these costs through at least December 1998. If the
Transaction is not consummated, the Company will have to seek additional
sources of capital to fund CCM product costs beyond March 1998. There can be
no assurance that the Company's estimate of the marketing, sales and product
development costs of the CCM products will prove correct, that such costs will
not increase beyond the Company's available financial resources, or that
additional sources of capital, if and when needed, will be sufficient or
available.
MANAGEMENT AGREEMENT; TRANSFERRED EMPLOYEES
Contemporaneously with the execution and delivery of the Purchase Agreement,
the Company and Elron Software, Inc. entered into a Management Agreement (the
"Management Agreement") pursuant to which Elron is managing the assets being
acquired by Elron pursuant to the Purchase Agreement (the "Proposed Assets")
for its benefit and at its risk and expense. Pursuant to the Management
Agreement, Elron, has, subject to certain covenants regarding extraordinary
transactions, complete discretion to operate the business of the Company with
regard to the Proposed Assets. In the event that the Transaction is not
consummated, Elron will be obligated to return the Proposed Assets to the
Company, subject to the terms and conditions of the Management Agreement. See
"TERMS OF THE PROPOSED TRANSACTION--MANAGEMENT OF PROPOSED BUSINESS PRIOR TO
CLOSING--The Management Agreement" in the Special Proxy. There can be no
assurance that the Proposed Assets would upon return by Elron have at least
the same value as such assets had at the time the Management Agreement was
executed. Any diminution in value of the Proposed Assets could have a material
adverse effect on the Company's business, condition (financial and otherwise),
prospects and results of operations.
Pursuant to the Purchase Agreement, certain employees of the Company will
continue to be employed by the Company, but will from the date of the Purchase
Agreement until the Closing Date, to the extent allowed by law, be subject to
the complete supervision, direction and control of Elron (the "Transferred
Employees"). The Company has been advised that the Transferred Employees have
been offered various benefits and incentives to be granted by Elron after the
consummation of the Transaction. In the event that the Transaction is not
consummated, and as a result such benefits and incentives are not provided,
the performance of the Transferred Employees could be materially adversely
affected and a significant portion of such employees may seek employment
elsewhere.
FAILURE OF THE COMPANY TO OBTAIN CERTAIN THIRD-PARTY CONSENTS
Although the only conditions to closing the Transaction (the "Closing") are
that the Purchase Agreement and Transaction be approved by the stockholders of
the Company and that the Company deliver $3,000,000 of guaranteed receivables
to Elron, the Company is obligated to obtain certain third-party consents on
or prior to the Closing. In the event that the Company does not obtain such
consents, it will be obligated to pay certain specified financial damages. The
payment of such financial penalties may have a material adverse effect on the
Company's business, condition (financial and otherwise), prospects and results
of operations.
INTERNATIONAL REVENUE
In fiscal 1996 and the nine-month period ending September 30, 1997, total
revenue from international licenses (license revenue from outside the United
States) represented approximately 17% and 35%, respectively, of the Company's
total revenue. For the fourth quarter of 1997 and thereafter (assuming the
Transaction is consummated), the Company expects that international revenue
will constitute a significantly greater portion of the Company's total
revenue. Accordingly, a greater percentage of the Company's total revenue will
be subject to the risks inherent in international sales, including the impact
of fluctuating exchange rates on demand for its products, longer payment
cycles, greater difficulty in protecting intellectual property, greater
difficulty in accounts receivable collection, unexpected changes in legal and
regulatory requirements, seasonality due to the slowdown of European business
activity in the third quarter and tariffs and other trade barriers. There can
be no assurance that these factors will not have a material adverse effect on
the Company's future international license revenue.
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LOSS OF KEY MANAGEMENT PERSONNEL
Ivan O'Sullivan and Chadwick Roll, Vice President--Worldwide Marketing and
Vice President of Inside Sales of the Company, respectively, are among the
Transferred Employees. Messrs. O'Sullivan and Roll are key employees of the
Company. The loss of their services may have a material adverse effect on the
Company's business, condition (financial or otherwise), prospects and results
of operations.
The Company's success depends to a significant extent upon a number of key
technical and management employees. While the Company's employees are required
to sign standard agreements concerning confidentiality and ownership of
inventions, the employees, with the exception of Messrs. Herman DeLatte, Loren
Platzman and John Bogdan, are generally not otherwise subject to employment
agreements or noncompetition covenants. The loss of the services of any of the
Company's key employees could have a material adverse effect on the Company's
business, condition (financial or otherwise), prospects and results of
operation. The Company does not maintain life insurance policies on key
employees. The Company's success also depends in large part upon its ability
to attract and retain highly skilled technical, managerial, sales and
marketing personnel.
Competition in the software industry for such personnel is intense. There
can be no assurance that the Company will be successful in retaining its
existing key personnel and in attracting and retaining the personnel it
requires.
GROUPWARE BUSINESS
If the Transaction consummated, the Company's products will consist of the
CCM and the Groupware products. The Company has made the strategic decision to
limit its Groupware marketing efforts to exclusively selling new seats to its
existing customer base, while focusing the majority of its management,
financial and technical resources on the CCM products. The Company believes
that in the short-term the Company can significantly reduce the costs
associated with the Groupware products while continuing to generate cash flow
from the sale of these products. However, there can be no assurance that cash
flow from the sale of the Groupware products will not decrease faster than
expected. In addition, over the longer term, the Company's strategic decision
to cease marketing the Groupware products to new customers will lead to an
erosion of the customer base and a reduction of revenue from such products.
The Company's ability to attract and retain the employees needed to service
the Groupware products may be materially adversely affected by the Company's
strategic decision to de-emphasize the Groupware products. Any loss of revenue
from the Groupware products may have a material adverse effect on the
Company's business, condition (financial and otherwise), prospects and results
of operation.
STRATEGIC REORGANIZATION
On July 29, 1997, the Company reorganized and restructured its operations.
On October 29, 1997, additional restructuring actions were implemented. These
actions were designed to focus the Company on the Comprehensive Client
Management business (the "CCM Business"). To date, implementation of this new
corporate strategy has included hiring a new Chief Executive Officer, electing
a new Chairman of the Board of Directors, deemphasizing the acquisition of new
customers in the Company's Groupware and Network Management and Security
businesses, discontinuing sales of the Company's virus protection software,
closing or reducing the Company's offices in Sydney, Australia; Paris, France;
London, United Kingdom; and Munich, Germany while building up the Company's
office in Starnberg, Germany and laying off approximately 160 employees. There
can be no assurance that the Company's new corporate strategy will be
successfully implemented. Furthermore, there can be no assurance that the
Company will not engage in further reorganizations or restructurings in the
future.
VARIABILITY OF QUARTERLY OPERATING RESULTS
The Company's licensing activity and results of operations can fluctuate
significantly on a quarterly basis. Causes of such fluctuations may include,
among other factors, the volume and timing of new and repeat orders, the
introduction or announcement of new products or product enhancements by ON or
third parties, failure to ship trials, changes in response rates to the
Company's mailings and telemarketing programs, interruption in the Company's
overnight delivery, telephone or internal networks and databases, work
stoppages, changes in product prices, changes in operating expenses, changes
in product mix, increase in international sales as a percentage of total
revenue, seasonality, trends in the computer industry, unavailability of
product, potential software viruses
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and perceived threats thereof, customer order deferrals, general economic
conditions, extraordinary events such as acquisitions or litigation and the
occurrence of unexpected events. While to date, the Company has not
experienced any significant failure to ship trials, work stoppages or
unavailability of products, there can be no assurance any of such events will
not occur in the future. The occurrence of any such event could have a
material adverse effect on the Company's business, condition (financial or
otherwise), prospects and results of operations. Because of the nature of its
distribution methods for its Groupware and Network Management and Security
products, the Company has virtually no backlog with respect to such products
and generally cannot predict when users will license such products. As a
result of the longer enterprise sales and product rollout cycle for CCM, the
Company will be better able to assess anticipated customer orders for CCM.
Historically, repeat orders have accounted for a significant portion of the
Company's total revenue; however, there can be no assurance that the Company
will be able to sustain current repeat order rates in the future, especially
if the Transaction is consummated and in light of the de-emphasis in marketing
efforts for the Groupware and Network Management and Security products.
Furthermore, since the Company's cost of total revenue is relatively low and
its operating expenses are relatively fixed, any revenue shortfall in a
quarter will result in a substantially similar shortfall in net income. In
addition, significant quarterly fluctuations in licensing activity will cause
significant fluctuations in the Company's cash flows and the cash and cash
equivalents, accounts receivable and deferred revenue accounts on the
Company's balance sheet.
The Company's business has experienced and is expected to continue to
experience seasonality, due in part to customer buying patterns. In recent
years, the Company generally has had greater demand for its products in the
fourth quarter and has had weaker demand for its products during the first
quarter. These fluctuations are caused primarily by customer budgeting and
purchasing patterns. The Company believes this pattern will continue.
The Company believes that period-to-period comparisons of its financial
results should not be relied upon as an indication of future performance.
RAPID TECHNOLOGICAL CHANGE
The Groupware, Network Management and Security and Client Management
software markets are characterized by rapid technological developments,
changes in customer requirements, evolving industry standards and frequent new
product introductions. The Company's future success will depend, in part, upon
its ability to enhance its existing applications, develop and introduce new
products that take advantage of technological advances, and respond promptly
to new customer requirements and evolving industry standards. As discussed
above, the Company has made a strategic decision to limit its Groupware
marketing efforts to exclusively selling new seats to its existing customer
base and has agreed to sell, subject to stockholder approval, its Network
Management and Security products. The Company has identified a number of
enhancements to CCM which it believes are important to its continued success
in the Client Management software market. There can be no assurance that the
Company will be successful in developing and marketing, on a timely basis,
enhancements to its existing products or new products, or that its new
products will adequately address the changing needs of the marketplace.
Failure by the Company in any of these areas could materially and adversely
affect the Company's business, condition (financial or otherwise), prospects
and results of operations. In addition, from time to time the Company or its
competitors may announce new products with capabilities or technologies that
could have a potential to replace or shorten the life cycles of the Company's
existing products or render such products obsolete. There can be no assurance
that announcements by the Company or its competitors of new products will not
cause customers to defer purchasing the Company's existing products. In
addition, there can be no assurance that future changes in DOS, Windows,
Windows NT, Unix, NetWare or other popular operating systems would not result
in incompatibility with the Company's products. The Company's failure to
introduce new products on a timely basis that are compatible with operating
systems and environments preferred by desktop computer users would have a
material adverse effect on the Company's business, condition (financial or
otherwise), prospects and results of operations.
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COMPETITION
The market for the Company's products is highly competitive, and the Company
expects competition to increase in the future. The Company believes that the
principal competitive factors affecting the market for its products include
performance, functionality, quality, customer support, breadth of product
line, speed of product delivery, frequency of upgrades and updates, brand name
recognition, company reputation, adherence to industry standards, integration
with third-party solutions and price. Certain of the criteria upon which the
performance and quality of the Company's Groupware and Network Management and
Security software compete include speed of response, ease of use, ease of
installation, interoperability with other messaging systems and simplicity of
administration. The Company believes that it generally competes favorably with
respect to each of these factors; however, there can be no assurance that the
Company will be able to continue to compete successfully against current and
future competitors. Certain of the Company's competitors have been in the
market longer than the Company, and other competitors are larger and may have
greater name recognition that the Company. As is the case in many segments of
the software industry, the Company may encounter increasing price competition
in the future. This could reduce average selling prices and, therefore, profit
margins. Competitive pressures could result not only in sustained price
reductions but also in a decline in sales volume, which could have a material
adverse effect on the Company's business, condition (financial or otherwise),
prospects and results of operations. There can be no assurance that the
Company will continue to compete effectively against existing and potential
competitors in these markets, many of whom have substantially greater
financial, technical, marketing and support resources and name recognition
than the Company.
The Groupware, Network Management and Security and Client Management
software markets are highly fragmented, with products offered by many vendors.
In the e-mail market, the Company competes with offerings from software,
shareware and freeware developers. Shareware is software that is made
available electronically on bulletin boards systems. Shareware users are
encouraged to evaluate the software for a short period of time and then either
cease using it or pay a license fee. In the group scheduling market, the
Company also competes with personal information manager products ("PIMs") that
have been enhanced to include some group scheduling features. In addition, the
trend toward enterprise-wide communications software solutions may result in a
consolidation of the communications software market around a smaller number of
vendors who are able to provide all of the necessary software and support
capabilities.
In the Client Management market, the Company faces competition from large
and established companies, such as Microsoft, Intel and IBM/Tivoli, which
offer client management capabilities as part of their systems, network and/or
desktop management systems. Moreover, Microsoft has announced the Zero
Administration Initiative for Windows ("ZAW"), which includes a set of
technologies that address some of the same client management issues as CCM.
Microsoft has described components of ZAW as being available for future
versions of the Windows NT and Windows 95 operating systems, as well as the
Microsoft Systems Management Server product. There can be no assurance that
the Company can continue to compete effectively against Client Management
software which is included free with operating system software. See
"BUSINESS--Competition" in the Special Proxy.
PRODUCT DEVELOPMENT
The Company has in the past experienced delays in software development, and
there can be no assurance that it will not experience further delays in
connection with its current or future product development activities. The
Company puts all of its products through alpha and beta test cycles and makes
significant efforts to debug all products before commercial release. The
Company makes well-marked alpha and beta versions of its software available
for evaluation and testing and solicits and responds to input from evaluators.
However, there can be no assurance that the Company's products will not
contain undetected errors or version compatibility issues, particularly when
first introduced or when new versions are released, resulting in loss of or
delay in market acceptance. Delays and difficulties associated with new
product introductions or product enhancements could have a material adverse
effect on the Company's business, condition (financial or otherwise),
prospects and results of operations.
8
<PAGE>
In addition to developing new products, the Company's internal development
staff is focused on developing upgrades and updates to existing products and
modifying, enhancing and completing any acquired products and incomplete
projects. Future enhancements may, among other things, include additional
functionality, respond to user problems or address issues of compatibility
with changing operating systems and environments. Failure to release such
enhancements on a timely basis could have a material adverse effect on the
Company's business, condition (financial or otherwise), prospects and results
of operation. There can be no assurance that the Company will be successful in
these efforts.
If the Company believes that a licensed product continues to be valuable
after the expiration of the initial license term, it will seek to extend the
term of the license. There can be no assurance that the Company will be able
to extend the term of expiring licenses, or that the economic arrangements for
such extensions would be comparable to the arrangements in effect during the
initial license term.
INCLUSION OF CCM, GROUPWARE, NETWORK MANAGEMENT AND SECURITY SOFTWARE IN
SYSTEM SOFTWARE AND APPLICATION SUITES
In the future, vendors of operating system software and applications sold
for a single price (generally referred to as application suites) may continue
to enhance their products to include certain functions that are currently
provided most often by CCM, Groupware, Network Management and Security
software or may bundle these products in their application suites at no
additional charge. The widespread inclusion of the functions provided by the
Company's products as standard features of operating system software could,
particularly if the quality of such functions were comparable to that of the
Company's products, render the Company's products obsolete and unmarketable.
Furthermore, even if the CCM, Groupware, Network Management and Security
software functions provided as standard features by operating systems are more
limited than those of the Company's products, there is no assurance that a
significant number of customers would not elect to accept such functions in
lieu of purchasing additional software. If the Company were unable to develop
new CCM, Groupware, Network Management and Security software products to
further enhance operating systems and to replace successfully any obsolete
products, the Company's business, condition (financial or otherwise),
prospects and results of operations would be materially and adversely
affected.
FREE TRIAL MARKETING
If the Transaction is not consummated and the rights to the Free Trial
Marketing system revert to the Company and, in any event, to the extent the
Company retains certain limited rights to the Free Trial Marketing system
pursuant to the Purchase Agreement, the Company would be exposed to the risks
associated with the Free Trial Marketing system set forth below.
As part of the Free Trial Marketing system, customers are provided with 30-
day free trials of certain of the Company's principal products. The trials are
full featured versions of the product that are internally designed to cease
operation in 30 days. The Company depends on direct mail, trade shows and
telemarketing to find prospects and install trials. There can be no assurance
that this strategy will continue to be effective in the future for either
current or new products. The failure of this strategy to continue to
effectively generate license revenue would have a material adverse effect on
the Company's business, condition (financial or otherwise), prospects and
results of operations. In addition, as mailings are mailed repeatedly to the
same customers, customers' responsiveness to particular offers and products
declines. There can be no assurance that the Company will be able to sustain
current response rates to its mailings in the future. The Company's growth
with respect to products sold and marketed through the Free Trial Marketing
system depends both on its ability to select names from rented lists and to
grow its "house list." The availability and relevance of rentable names to the
Company's products are not certain. In addition, since the ability of the
Company to grow its house list is dependent on the supply of rentable names,
house list growth cannot be assured. In both the domestic and international
markets, increases in postal rates (including modifications in the
classification of mail) or telephone rates, or changes in postage or telephone
regulations which prohibit unsolicited direct mail or unsolicited telephone
calls, could significantly impact the economics of the Company's Free Trial
Marketing strategy. In addition, it is possible that other software vendors
could adopt all or parts of the Company's strategy and compete more directly
or effectively with the Company.
9
<PAGE>
If some of the Company's Free Trial Marketing disks were to become infected
with a computer virus, they would cause difficulties for prospects and could
damage the Company's reputation. The Company does extensive testing for
viruses. The Company's use of outside fulfillment contractors increases the
risk that a virus could be shipped undetected on disks bearing the Company's
label. There can be no assurance that ON would be able to collect adequate
compensation from such fulfillment contractors if such a virus infected disks
bearing the Company's label.
The Company fulfills orders received directly from customers through a
third-party fulfillment contractor, which warehouses the Company's products
and ships them directly to ON's customers. The Company also maintains a
private use prospects list at a bonded third-party database firm. In the event
that either the customer fulfillment contractor or the private use database
firm experience a substantial business interruption, whether through business
failure or interruption or some natural calamity, or the Company's
relationship with either of such parties is terminated for any reason, the
Company's ability to continue to mail free trial offers to prospective
customers and to fulfill orders placed by customers would be adversely
affected.
INDIRECT CHANNELS OF DISTRIBUTION
The Company markets its products (other than CCM) through distributors and
resellers in addition to its direct sales force and its Free Trial Marketing
system. These distributors and resellers also sell other products that are
complementary to, or compete with, those of ON. There can be no assurance that
these distributors and resellers will not give greater priority to products of
other suppliers. They have no long-term obligation to purchase products from
the Company. Since the Company's agreements with its distributors provide for
a right of return, revenue recognized upon sales to distributors is subject to
a reserve for returns. Although management believes that the current reserve
balance is adequate to cover this exposure, there can be no assurance that any
future period reserves for returns will be adequate. Moreover, these
distributors and resellers generally have limited financial resources, and
there can be no assurance with respect to the collectibility of accounts
receivable owed by such distributors and resellers. In addition, the Company
may be unaware of the nature and scope of the representations made to
customers by these distributors and resellers. For example, they could make
representations to customers about the Company's current and future products
which are inaccurate or incomplete. This could result in the products not
meeting the customers' expectations or requirements. Although the Company's
agreements with its distributors generally provide the Company with recourse
against unauthorized action taken by the distributors, there can be no
assurance that the Company could recover adequate compensation to cover the
damage caused by an inaccurate representation.
PROPRIETARY TECHNOLOGY
The Company's success is heavily dependent upon its proprietary software
technology. The Company relies on a combination of contractual rights,
trademarks, trade secrets and copyrights to establish and protect its
proprietary rights in its software.
The Company uses a printed "shrink-wrap" license for users of its Groupware,
Network Management and Security products distributed through traditional
distribution channels in order to protect its copyrights and trade secrets in
those products. Since these shrink-wrap licenses are not signed by the
licensee, many authorities believe that they may not be enforceable under many
state laws and the laws of many foreign jurisdictions. If such licenses are
not enforceable, the user would not be bound by the terms thereof, including
the terms which seek to protect the Company's proprietary technology. If the
printed shrink-wrap licenses prove to be unenforceable, this may have a
material adverse effect on the Company's business, condition (financial or
otherwise), prospects and results of operations.
The laws of some foreign countries either do not protect the Company's
proprietary rights or offer only limited protection for those rights.
Furthermore, in countries with a high incidence of software piracy, the
Company may experience a higher rate of piracy of its products.
10
<PAGE>
The Company has obtained registrations in the United States for the
following trademarks: ON Technology, Notework, Meeting Maker, ON Technology &
Design, ON Location, Instant Update and DaVinci Systems. The Company has filed
for the trademark "ON Command CCM" in the United States, the European
Community, Canada and Australia. The Company has obtained only four foreign
registrations of its Notework mark and two foreign registrations of its
MeetingMaker mark, due to the significant costs involved in obtaining foreign
registrations. As a result, the Company may not be able to prevent a third
party from using its trademarks in many foreign jurisdictions. The Company has
not to date registered any of its copyrights.
There can be no assurance that the steps taken by the Company to protect its
proprietary software technology will be adequate to deter misappropriation of
this technology. Lesser sensitivity by corporate, government or institutional
users to avoiding copyright infringement could have a material adverse effect
on the Company's business, condition (financial or otherwise), prospects and
results of operation. While the Company to date has not taken any legal action
to enforce its intellectual property rights against infringing users, it
believes, based upon current interpretations of law, that its use of Free
Trial Marketing and the widespread availability of its trials do not
significantly impact its ability to enforce its intellectual property rights
against infringing users, including corporate, institutional and government
entities. However, there is no assurance that a court or other authority may
not rule otherwise in the future. Such a ruling would have a material adverse
effect on the Company's business, condition (financial or otherwise),
prospects and results of operations.
There has been substantial litigation in the software industry involving
intellectual property rights of technology companies, although, to date, the
Company has not been subject to any such litigation. Although the Company does
not believe that it is infringing the intellectual property rights of others,
there can be no assurance that such claims, if asserted, would not have a
material adverse effect on the Company's business, condition (financial or
otherwise), prospects and results of operations. In addition, as the Company
may acquire or license a portion of the software included in its future
products from third parties, its exposure to infringement actions may increase
because the Company must rely upon such third parties for information as to
the origin and ownership of any software being acquired. The Company generally
obtains representations as to the origin and ownership of such acquired or
licensed software and generally obtains indemnification to cover any breach of
such representations. However, there can be no assurance that such
representations are accurate or that such indemnification will provide
adequate compensation for a breach of such representations. In the future,
litigation may be necessary to enforce and protect trade secrets and other
intellectual property rights owned by the Company. The Company may also be
subject to litigation to defend against claimed infringement of the rights of
others or to determine the scope and validity of the proprietary rights of
others. Any such litigation could be costly and cause diversion of
management's attention, either of which could have a material adverse effect
on the Company's business, condition (financial or otherwise), prospects and
results of operations. Adverse determinations in such litigation could result
in the loss of the Company's proprietary rights, subject the Company to
significant liabilities, require the Company to seek licenses from third
parties or prevent the Company from manufacturing or selling its products, any
one of which could have a material adverse effect on the Company's business,
condition (financial or otherwise), prospects and results of operations.
Furthermore, there can be no assurance that any necessary licenses will be
available on reasonable terms, or at all.
The Company could be subjected to lawsuits by customers, past, present or
future, and others due to possible errors in the Company's software. The
Company is not aware of any material errors in its software or any pending or
threatened litigation. The Company maintains insurance covering such
liabilities in the amounts of $12 million domestically and $4 million
internationally. The Company believes that its insurance coverages are
sufficient to cover any such losses.
VOLATILITY OF STOCK PRICE
The trading price of the Company's Common Stock has been, and in the future
may be, subject to wide fluctuations in response to actual or anticipated
quarterly operating results of the Company, announcements of technological
innovations or new applications by the Company or its competitors and general
market conditions
11
<PAGE>
in the software industry, as well as other events or factors. In addition,
stock markets have experienced extreme price and volume trading volatility in
recent years. This volatility has had a substantial effect on the market price
of many technology companies and has often been unrelated to the operating
performance of those companies. This volatility may adversely affect the
market price of the Company's Common Stock.
ANTI-TAKEOVER EFFECT OF CHARTER PROVISIONS
The Board of Directors has the authority to issue up to 2,000,000 shares of
Preferred Stock and to determine the price, rights, preferences, privileges
and restrictions, including voting rights, of those shares without any further
vote or action by the stockholders of the Company. 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.
Additionally, the issuance of Preferred Stock, while 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 plans to issue shares of Preferred Stock. The Company's
Fourth Restated Certificate of Incorporation and the Amended and Restated By-
Laws provide for a classified Board of Directors and contains other provisions
which may also discourage an unsolicited takeover attempt. These provisions
could limit the price that investors might be willing to pay in the future for
shares of Common Stock and could make it more difficult for stockholders of
the Company to effect certain corporate actions.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the Shares
by the Selling Stockholders. See "Selling Stockholders".
SELLING STOCKHOLDERS
The following table lists the Selling Stockholders, the number of shares of
the Company's Common Stock which each owned as of January 5, 1998, the number
of shares of the Company's Common Stock expected to be sold by each and the
number of the shares of the Company's Common Stock which each will own after
the offering pursuant to this Registration Statement, assuming the sale of all
the Shares expected to be sold. The Shares are being registered to permit
public secondary trading of the Shares and the Selling Stockholders may offer
the Shares for resale from time to time. See "Plan of Distribution". Assuming
the sale of all the Shares registered hereby, each of the Selling Stockholders
will own less than 1% of the outstanding Common Stock of the Company.
The Shares being offered by the Selling Stockholders were acquired from the
Company in connection with the Company's acquisition of all of the outstanding
stock of either (i) Purview Technologies, Inc. (the "Purview Acquisition") or
(ii) csd Software GmbH (the "csd Acquisition"). The Purview Acquisition was
completed pursuant to the terms of a Stock Purchase Agreement dated January
24, 1997 whereby all issued and outstanding stock of Purview Technologies,
Inc. was acquired by the Company for $1,000,000 in cash, 155,251 shares of the
Company's Common Stock and an option to purchase 50,461 shares of Common
Stock. The option was granted to a stockholder of Purview Technologies, Inc.
who is not among the Selling Stockholders. As part of the Purview Acquisition,
the Company entered into a Registration Rights Agreement dated January 30,
1997 (the "Purview Rights Agreement") with certain of the Selling Stockholders
pursuant to which the Company agreed, under certain circumstances, to effect a
registration of the Shares in order to permit the Selling Stockholders to
effect sales of such Shares from time to time in the market or in privately
negotiated transactions. Reference is made to the full text of the Purview
Rights Agreement which is an exhibit to the Registration Statement of which
this Prospectus forms a part. The csd Acquisition was completed pursuant to
the terms of a Stock Purchase Agreement dated January 28, 1997 whereby all the
issued and outstanding stock of csd was acquired by the Company for $5,000,000
in cash and 1,315,790 shares of the Company's Common Stock. As part of the csd
Acquisition, the Company entered into a Registration Rights Agreement dated
January 28, 1997 (the "csd Rights Agreement") with certain of the Selling
Stockholders pursuant to which the Company agreed, under certain
circumstances, to effect a registration of the Shares in order to permit the
Selling Stockholders to effect sales of such Shares from time to time in the
market or in privately negotiated transactions. Reference is made to the full
text of the csd Rights Agreement which is an exhibit to the Registration
Statement of which this Prospectus forms a part.
12
<PAGE>
The Company has filed with the Commission, under the Act, a Registration
Statement on Form S-3, of which this Prospectus forms a part, with respect to
the resale of the Shares from time to time on the Nasdaq National Market or in
privately-negotiated transactions. The Company has agreed to use reasonable
efforts to keep such Registration Statement effective for up to 180 days from
the date of effectiveness of the Registration Statement on Form S-3, of which
this Prospectus forms a part, subject to certain restrictions or, if earlier,
until the distribution contemplated in this Prospectus has been completed.
The Shares offered by this Prospectus may be offered from time to time by
the Selling Stockholders named below:
<TABLE>
<CAPTION>
TOTAL
NO. OF NUMBER OF NO. OF SHARES TO
SHARES SHARES TO BE BE OWNED
NAME OWNED OFFERED OR SOLD AFTER THE OFFERING
---- ------- --------------- ------------------
<S> <C> <C> <C>
Mary Shaeffer Smith................. 100,943 100,943 0
Jaime Ellertson..................... 30,857 30,857 0
William Calcagni.................... 4,114 4,114 0
Mark Coticchia...................... 5,349 5,349 0
Larry A. Krueger.................... 13,988 13,988 0
Eugen Heiter........................ 238,116 238,116 0
Harald Moller....................... 250,636 250,636 0
Hans Till Freiherr von Ruxleben..... 100,265 100,265 0
Jochen Tschunke..................... 125,319 125,319 0
Reinhold Weber...................... 12,532 12,532 0
Iska Heiter......................... 263,158 263,158 0
Liliane Freifrau von Ruxleben....... 263,158 263,158 0
</TABLE>
PLAN OF DISTRIBUTION
All or a portion of the Shares offered hereby by the Selling Stockholders
may be delivered and/or sold from time to time in transactions on the Nasdaq
National Market, in privately negotiated transactions, or by a combination of
such methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. After the effectiveness of the Registration
Statement of which this Prospectus is a part, the Selling Stockholders may
engage in hedging transactions, make short sales of the Company's Common Stock
and may use the Shares to cover the resulting short positions. The Selling
Stockholders may effect such transactions by selling the Shares to or through
broker-dealers and such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholders or the
purchasers of the Shares for whom such broker-dealers may act as agent or to
whom they sell as principal or both (which compensation to a particular
broker-dealer might be in excess of customary commissions). There is no
assurance that any of the Selling Stockholders will sell any or all of the
Shares offered by them.
Any Selling Stockholder and any broker-dealer that participate in the
distribution may under certain circumstances be deemed to be "underwriters"
within the meaning of the Securities Act, and any commissions received by such
broker-dealers and any profits realized on the resale of Shares may be deemed
to be underwriting discounts and commissions under the Securities Act. Each
Selling Stockholder may agree to indemnify such broker-dealers against certain
liabilities, including liabilities under the Securities Act. In addition, the
Company has agreed to indemnify in certain circumstances the Selling
Stockholders against certain liabilities, including liabilities arising under
the Securities Act and the Exchange Act. The Selling Stockholders have agreed
to indemnify in certain circumstances the Company against certain liabilities,
including liabilities arising under the Securities Act and the Exchange Act.
13
<PAGE>
Any broker-dealer participating in such transactions as agent may receive
commissions from a Selling Stockholder (or a purchaser for whom such broker-
dealer may act as agent). Broker-dealers may agree with such Selling
Stockholder to sell a specified number of Shares at a stipulated price per
share, and, to the extent such a broker-dealer is unable to do so acting as
agent for such Selling Stockholder, to purchase as principal any unsold
Shares. Broker-dealers who acquire Shares as principal may thereafter resell
such Shares from time to time in transactions (which may involve crosses and
block transactions and which may involve sales to and through other broker-
dealers, including transactions of the nature described above) on the Nasdaq
National Market, in privately negotiated transactions, or by a combination of
such methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices, and in connection with such resales may pay to
or receive from the purchasers of such Shares commissions computed as
described above.
Each Selling Stockholder will be subject to applicable provisions of the
Exchange Act, and the rules and regulations promulgated thereunder. Each
Selling Stockholder will pay all commissions and other expenses associated
with the sale of the Shares by such Selling Stockholder. The Shares offered
hereby are being registered pursuant to contractual obligations of the
Company, and the Company has agreed to bear certain expenses in connection
with the registration and sale of the Shares being offered by every such
Selling Stockholder. The Company has not made any underwriting arrangements
with respect to the sale of Shares offered hereby.
MATERIAL CHANGES
All material changes in the Company's affairs that have occurred since
December 31, 1996 are set forth in the Company's Proxy Statement for Special
Meeting of Stockholders to be held on February 11, 1998. The Proxy Statement
is an exhibit to the Company's Current Report on Form 8-K, which was filed
with the Commission on January 9, 1998 and is incorporated herein by
reference.
INTERESTS OF NAMED EXPERTS AND COUNSEL
The validity of the securities offered hereby will be passed upon for the
Company by Epstein Becker & Green, P.C., a New York professional corporation,
Boston, Massachusetts. Gabor Garai, a partner in Epstein Becker & Green, P.C.,
is the Assistant Secretary of the Company.
EXPERTS
The Consolidated Financial Statements and Schedule incorporated in this
Registration Statement by reference have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference in reliance upon the authority of
said firm as experts in giving said reports.
14
<PAGE>
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- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT 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 OR ANY OF ITS AGENTS. THIS PRO-
SPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO
WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO
ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UN-
LAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 3
Risk Factors............................................................... 3
Use of Proceeds............................................................ 12
Selling Stockholders....................................................... 12
Plan of Distribution....................................................... 13
Material Changes........................................................... 14
Interest of Named Experts and Counsel...................................... 14
Experts.................................................................... 14
</TABLE>
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
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1,471,041 SHARES
ON TECHNOLOGY CORPORATION
COMMON STOCK
----------------
PROSPECTUS
----------------
JANUARY 22, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses payable by the
Registrant in connection with the distribution of the securities being
registered hereunder. All of the amounts shown are estimates, except the
Securities and Exchange Commission registration fee.
<TABLE>
<S> <C>
SEC Registration Fee.......................................... $ 556.01
Legal Fees and Expenses....................................... 25,000.00
Accounting Fees and Expenses.................................. 2,500.00
Miscellaneous................................................. 5,000.00
----------
Total....................................................... $33,056.01
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware, as
amended, gives Delaware corporations the power to indemnify each of their
present and former directors or officers under certain circumstances, if such
person acted in good faith and in a manner which he or she reasonably believed
to be in or not opposed to the best interests of the corporation.
Article Seventh of the Registrant's Fourth Restated Certificate of
Incorporation provides that no director of the Registrant shall be personally
liable to the Registrant or its stockholders for monetary damages for any
breach of fiduciary duty as a director, except to the extent that the Delaware
General Corporation Law prohibits the limitation or elimination of liability
of directors for breaches of fiduciary duty.
Article Seventh of the Registrant's Fourth Restated Certificate of
Incorporation further provides that a director or officer of the Registrant
(a) shall be indemnified by the Registrant against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her or on his or her behalf in connection with
any action, suit or proceeding, whether civil, administrative or investigative
(other than an action by or in the right of the Registrant), brought against
him or her by reason of the fact that he or she is or was, or has agreed to
become, a director or officer of the Registrant, or is or was serving, or has
agreed to serve, at the request of the Registrant, as a director, officer or
trustee of, or in a similar capacity with, another corporation, partnership,
joint venture, trust or other enterprise (including any employee benefit
plan), or by reason of any action alleged to have been taken or omitted in
such capacity if he or she acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
Registrant and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful and (b) shall be
indemnified by the Registrant against all expenses (including attorneys' fees)
and amounts paid in settlement actually and reasonably incurred by him or her
or on his or her behalf in connection with any action, suit or proceeding by
or in the right of the Registrant to procure a judgment in its favor by reason
of the fact that he or she is or was, or has agreed to become, a director or
officer of the Registrant, or is or was serving, or has agreed to serve, at
the request of the Registrant, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust
or other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted in such capacity if he or she
acted in good faith and in a manner he or she reasonably believed to be in, or
not opposed to, the best interests of the Registrant, except that no
indemnification shall be made with respect to any matter as to which such
person shall have been adjudged to be liable to the Registrant unless and only
to the extent the Court of Chancery of Delaware or the court in which such
action or suit was brought shall determine upon application that, despite such
adjudication but in view of all of the circumstances, he or she is fairly and
reasonably entitled to indemnification of such expenses (including attorneys'
fees) which the Court of Chancery of Delaware or such other court shall deem
proper. Notwithstanding the foregoing, to the extent that a director or
officer has been
II-1
<PAGE>
successful, on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, he or she is required to be
indemnified by the Registrant against all expenses (including attorneys' fees)
incurred in connection therewith. Expenses shall be advanced to a director or
officer at his or her request, provided that he or she undertakes to repay the
amount advanced if it is ultimately determined that he or she is not entitled
to indemnification for such expenses.
Indemnification is required to be made unless the Registrant determines that
the applicable standard of conduct required for indemnification has not been
met. If the Registrant denies a request for indemnification, in whole or in
part, or if no disposition thereof is made within 60 days after such payment
is claimed by such director or officer, the right to indemnification or
advances is enforceable by such director or officer in any court of competent
jurisdiction. As a condition precedent to the right of indemnification, the
director or officer must give the Registrant notice of the action for which
indemnity is sought and the Registrant has the right to participate in such
action or assume the defense thereof.
Article Seventh of the Registrant's Fourth Restated Certificate of
Incorporation further provides that the indemnification provided therein is
not exclusive, and provides that in the event that the Delaware General
Corporation law is amended to expand the indemnification permitted to
directors or offices the Registrant must indemnify those persons to the
fullest extent permitted by such law as so amended.
The Company has entered into agreements to indemnify its directors and
certain of its officers in addition to the indemnification provided for in the
Charter and By-Laws. These agreements, among other things, indemnify the
Company's directors and certain of its officers for certain expenses
(including attorneys' fees), judgments, fines and settlement amounts incurred
by such person in any action or proceeding, including any action by or in the
right of the Company, on account of services as a director or officer of the
Company, or as a director or officer of any other company or enterprise to
which the person provides services at the request of the Company.
ITEM 16. EXHIBITS.
The Exhibits to this Registration Statement are listed in the Index to
Exhibits on page II-6.
ITEM 17. UNDERTAKINGS.
1. The Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that paragraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or section 15(d) of the Exchange Act that are
incorporated by reference in this Registration Statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-2
<PAGE>
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
2. The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in this Registration Statement shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be in the initial
bona fide offering thereof.
3. The Registrant hereby undertakes to deliver or cause to be delivered with
the Prospectus, to each person to whom the Prospectus is sent or given, the
latest annual report to security holders that is incorporated by reference in
the Prospectus and furnished pursuant to and meeting the requirements of Rule
14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X are not set forth in the Prospectus, to deliver, or cause to be
delivered to each person to whom the Prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
Prospectus to provide such interim financial information.
4. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, 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 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, 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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cambridge, Commonwealth of Massachusetts, on
January 22, 1998.
ON TECHNOLOGY CORPORATION
/s/ Herman DeLatte
By:__________________________________
Herman DeLatte
Chief Executive Officer and
President
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on January 22, 1998.
Date: /s/ Herman DeLatte
-----------------------------
Name: Herman DeLatte
Title: President and Director (principal
Executive Officer)
Date: *
-----------------------------
Name: John M. Bogdan
Title: Vice President, Finance; Treasurer;
Secretary; Chief Accounting
Officer; and Chief Financial Officer
(Principal Accounting Officer and
Principal Financial Officer
Date: *
---------------------------
Name: Christopher Risley
Title: Director
Date: *
---------------------------
Name: Brian T. Horey
Title: Director
Date: *
---------------------------
Name: William C. Hulley
Title: Director
Date: *
---------------------------
Name: Michael J. Zak
Title: Director
Date: *
---------------------------
Name: R. Stephen Cheheyl
Title: Director
* By: /s/ Herman DeLatte
-----------------------------
Herman Delatte
Attorney-in-Fact
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S>
2.1 Stock Purchase Agreement dated January 24, 1997 by and among the
Registrant and the stockholders of Purview Technologies, Inc.
2.2* Stock Purchase Agreement dated January 28, 1997 by and among the
Registrant and the stockholders of csd Software GmbH
4.1 Registration Rights Agreement dated January 30, 1997 by and among the
Registrant and the stockholders of Purview Technologies, Inc.
4.2 Registration Rights Agreement dated January 28, 1997 by and among the
Registrant and the stockholders of csd Software GmbH
5.1 Opinion of Epstein Becker & Green, P.C.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Epstein Becker & Green, P.C. (included in Exhibit 5.1)
24.1 Power of Attorney (included in Part II of this Registration Statement
under the caption "Signatures")
</TABLE>
- --------
* Incorporated by reference to the Registrant's Current Report on Form 8-K
filed with the Commission on February 6, 1997).
II-6
<PAGE>
EXHIBIT 5.1
[EBG LETTERHEAD]
January 16, 1998
ON Technology Corporation
One Cambridge Center
Cambridge, MA 02142
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 filed by ON
Technology Corporation with the Securities and Exchange Commission on January
16, 1998 (Registration No. 33-344367), as amended (the "Registration
Statement"), in connection with the registration under the Securities Act of
1933, as amended, of a total of 1,471,041 shares of Common Stock, $.01 par
value per share, in ON Technology Corporation (the "Shares"). We understand
that the Shares are to be sold from time to time on the Nasdaq National Market
at prevailing prices or as otherwise described in the Registration Statement.
As your legal counsel, we have examined the proceedings taken by you in
connection with the sale of the Shares.
It is our opinion that the Shares are legally and validly issued, fully paid
and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto.
EPSTEIN BECKER & GREEN, P.C.
/s/ Gabor Garai
By:__________________________________
Gabor Garai, Member
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference included in this Registration Statement on Form S-3 of our report
dated January 21, 1997, except for the matters discussed in Note 12 for which
the dates are January 24, 1997 and January 28, 1997,respectively, included in
ON Technology Corporation's Form 10-K for the year ended December 31, 1996 and
our report dated January 21, 1997, except for the matters discussed in Note
4(a) and 4(b) as to which the dates are January 24, 1997 and January 28,1997,
respectively, included in ON Technology Corporation's Current Report on Form
8-K pertaining to a special meeting of the Company's stockholders filed on
January 9, 1998 and to the reference to our firm under the heading "EXPERTS"
included in this Registration Statement.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 16, 1998
