<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER 0-25472
VIASOFT, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 94-2892506
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
3033 NORTH 44TH STREET, PHOENIX, ARIZONA 85018
(Address of principal executive offices) (Zip Code)
(602) 952-0050
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
As of October 31, 1997, there were 19,349,181 outstanding shares of Common
Stock, par value $.001 per share, of Viasoft, Inc.
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VIASOFT, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION ----
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1997
and June 30, 1997 3
Consolidated Statements of Operations for the
three months ended September 30, 1997 and 1996 4
Consolidated Statements of Cash Flows for the three
months ended September 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
2
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VIASOFT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
( in thousands, except share data)
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1997 1997
-------------- -------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 83,456 $ 8,501
Investments, at amortized cost 20,275 12,697
Accounts receivable (less allowance for doubtful accounts
of $653 and $678, respectively) 21,333 21,240
Prepaid expenses and other 3,237 2,954
--------- --------
Total current assets 128,301 45,392
--------- --------
Furniture and equipment:
Computer equipment 5,168 4,789
Office furniture and equipment 3,547 2,986
Capitalized leased equipment 264 279
--------- --------
Total furniture and equipment 8,979 8,054
Less: Accumulated depreciation (4,040) (3,775)
--------- --------
Furniture and equipment, net 4,939 4,279
--------- --------
Other assets:
Investments, at amortized cost 4,268 7,377
Intangible assets, net 4,994 4,675
Other 3,124 2,878
--------- --------
Total other assets 12,386 14,930
--------- --------
Total assets $ 145,626 $ 64,601
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,997 $ 2,016
Accrued compensation 2,414 3,309
Accrued income taxes payable 5,140 3,276
Other accrued expenses 10,225 8,709
Deferred revenue 16,798 18,227
--------- --------
Total current liabilities 36,574 35,537
--------- --------
Deferred revenue, recognized after one year 207 230
--------- --------
Other long term liabilities 169 138
--------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 2,000,000 shares authorized,
no shares issued or outstanding - -
Common stock, $.001 par value, 24,000,000 shares authorized,
19,317,806 and 17,722,772 shares issued and outstanding at
September 30, and June 30, 1997, respectively 19 18
Capital in excess of par value 120,065 43,970
Common stock subscriptions receivable (31) (55)
Accumulated deficit (11,164) (14,930)
Cumulative translation adjustment (213) (307)
--------- --------
Total stockholders' equity 108,676 28,696
--------- --------
Total liabilities and stockholders' equity $ 145,626 $ 64,601
========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
3
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CONSOLIDATED STATEMENTS OF OPERATIONS
( in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------------
1997 1996
-------- --------
<S> <C> <C>
Revenue:
Software license fees $ 13,518 $ 4,714
Maintenance fees 6,884 4,047
Professional services fees 5,619 5,177
Other 41 38
-------- --------
Total revenues 26,062 13,976
-------- --------
Operating expenses:
Cost of software license and
maintenance fees 1,777 624
Cost of professional services fees 4,765 3,921
Sales and marketing 9,321 5,168
Research and development 2,818 1,127
General and administrative 2,038 1,115
-------- --------
Total operating expenses 20,719 11,955
-------- --------
Income from operations 5,343 2,021
-------- --------
Other income (expense):
Interest income 521 386
Interest expense - (1)
Other income (expense), net (122) 4
-------- --------
Total other income (expense) 399 389
-------- --------
Income before income taxes 5,742 2,410
Provision for income taxes 1,977 854
-------- --------
Net income $ 3,765 $ 1,556
======== ========
Earnings per common and
common share equivalent $ 0.20 $ 0.09
======== ========
Weighted average number of common
and common share equivalents
outstanding 18,722 17,668
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
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VIASOFT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------------
1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,765 $ 1,556
-------- --------
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization 735 228
Changes in operating assets and liabilities:
(Increase)decrease in accounts receivable (93) 1,914
Increase in prepaid expenses and other (432) (887)
Increase in other assets (223) -
Increase in accrued income taxes 1,864 412
Increase in accounts payable and other accrued expenses 1,528 156
Decrease in accrued compensation (895) (466)
Decrease in deferred revenue (1,452) (728)
-------- --------
Total adjustments 1,032 629
-------- --------
Net cash provided by operating activities 4,797 2,185
-------- --------
INVESTING ACTIVITIES:
Capital expenditures (1,138) (545)
Cash paid for acquisition of customer list (530) -
Purchase of investments (10,884) (8,828)
Investment maturities 6,495 14,740
-------- --------
Net cash provided by (used in) investing activities (6,057) 5,367
-------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 76,843 194
Payments for offering costs (747) -
Payments received on common stock subscriptions receivable 24 -
Principal payments under equipment lease obligations - (6)
-------- --------
Net cash provided by financing activities 76,120 188
-------- --------
Effect of exchange rate changes on cash 95 2
-------- --------
Net increase in cash and cash equivalents 74,955 7,742
Cash and cash equivalents, beginning period 8,501 5,009
-------- --------
Cash and cash equivalents, end of period $ 83,456 $ 12,751
======== ========
Supplemental cash flow information:
Interest paid $ - $ 1
Income taxes paid 210 375
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE> 6
VIASOFT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Viasoft, Inc.
and its wholly-owned subsidiaries (the "Company") after elimination of all
significant intercompany balances and transactions. The accompanying unaudited
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
the instructions to Form 10-Q. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
("GAAP") for complete financial statements. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary for a
fair presentation of the results for the interim periods presented have been
made. The results for the three-month period ended September 30, 1997 may not
necessarily be indicative of the results for the entire year. These financial
statements should be read in conjunction with the Company's Annual Report on
Form 10-K for the year ended June 30, 1997.
Earnings per Common Share and Common Share Equivalent
Earnings per share is computed by dividing net income by the weighted
average number of common and common share equivalents assumed outstanding during
the period. Shares issuable upon the exercise of employee stock options that are
considered anti-dilutive are not included in the weighted average number of
common and common share equivalents outstanding. Primary and fully diluted
earnings per share are considered to be the same in all periods presented.
In February, 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share," which supersedes Accounting Principles Board Opinion
No. 15, the existing authoritative guidance. SFAS No. 128 is effective for
financial statements for periods ending after December 15, 1997 and, when
adopted, requires restatement of all prior-period earnings per share data
presented. The new statement modifies the calculations of primary and fully
diluted earnings per share and replaces them with basic and diluted earnings per
share. The following table sets forth the proforma effect on net income per
common share for the three months ended September 30, 1997 and 1996,
respectively, assuming the Company had adopted SFAS No. 128 on July 1, 1995:
6
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<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1997 1996
------------- -------------
(SHARES IN THOUSANDS)
<S> <C> <C>
Earnings (loss) per common and common share equivalent
As reported......................................... $ .20 $ .09
Pro forma-basic..................................... $ .21 $ .09
Pro forma-diluted................................... $ .20 $ .09
Weighted average number of common and common share
equivalents outstanding
As reported......................................... 18,722 17,668
Pro forma-basic..................................... 17,924 16,812
Pro forma-diluted................................... 18,722 17,668
</TABLE>
2. ACQUISITION OF ROTTGER & OSTERBERG SOFTWARE-TECHNIK GMBH ("R&O")
On December 5, 1996, the Company acquired all of the outstanding shares of
capital stock of R&O for cash, common stock and the assumption of certain
liabilities pursuant to a stock purchase agreement with the stockholders of R&O.
R&O developed, marketed and supported repository software tools through its
Rochade product line, together with related repository-based services and
solutions. R&O was founded in 1976, was headquartered in Munich, Germany and had
operations in Europe and the United States.
The following unaudited pro forma combined condensed statements of
operations for the three months ended September 30, 1996 give effect to the R&O
acquisition as if it had been consummated as of July 1, 1996 (in thousands
except per share data):
<TABLE>
<S> <C>
Total revenues................. $17,501
Income before income taxes..... 1,539
Net income..................... 994
Earnings per share............. $ .05
</TABLE>
The unaudited pro forma combined financial data is provided for illustrative
purposes only and is not necessarily indicative of the combined results of
operations that would have been reported had the R&O acquisition occurred on the
dates indicated, nor does it purport to project the results of operations of the
Company for the current year or for any future period.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
OVERVIEW
The Company derives its revenues primarily from software license fees,
software maintenance fees and professional services fees. The Company's software
is licensed primarily to Global 5000 companies and similarly-sized business and
governmental organizations worldwide. Professional services are provided in
conjunction with software products and are also provided separately to similar
large organizations. The Company's products and services are marketed through
its United States sales force, both domestically and in Canada, and through
foreign subsidiaries and independent distributors in other international
markets.
The Company licenses software products directly to customers and to
distributors for resale. Software license fees are recognized upon delivery and
acceptance of the software, receipt of an executed noncancellable license
agreement from the customer or the distributor's end-user and completion of any
significant remaining obligations under the agreement. Revenues from software
licensing related to the Company's obligation to provide certain customer
support are deferred and recognized straight-line over the contract support
period, which is generally one year. Software maintenance contracts are
generally renewable on an annual basis, although the Company also negotiates
long-term maintenance contracts from time to time. Revenues from maintenance
contract renewals are deferred and recognized straight-line over the term of the
contracts. Revenues from professional services fees are recognized on a
percentage of completion basis, which is generally as the related services are
provided.
On December 5, 1996, the Company acquired all of the outstanding shares of
capital stock of R&O pursuant to a stock purchase agreement with the
stockholders of R&O. R&O developed, marketed and supported repository software
tools through its Rochade product line, together with related repository based
services and solutions. The Company accounted for the R&O acquisition as a
purchase and allocated approximately $27.0 million of the purchase price to
in-process research and development, resulting in a significant charge to the
Company's results of operations during the year ended June 30, 1997.
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
REVENUES
Total revenues were $26,062,000 for the three months ended September 30,
1997, an increase of 86.5% from $13,976,000 for the three months ended September
30, 1996. Software license fees were $13,518,000 for the three months ended
September 30, 1997, an increase of 186.8% from $4,714,000 for the three months
ended September 30, 1996. Software license fees increased both domestically and
internationally as a result of the continued demand for the Company's tools
8
<PAGE> 9
to assist in addressing the year 2000 century date change problem as well as the
sale of the Rochade product line which was purchased from R&O in December, 1996.
Maintenance fees were $6,884,000 in the three months ended September 30,
1997, an increase of 70.1% from $4,047,000 in the three months ended September
30, 1996. The increase was due in part to the R&O acquisition, with the
remainder attributable to new software licenses, customer system upgrades and
increases in the fees charged for annual maintenance.
Professional services fees were $5,619,000 for the three months ended
September 30, 1997, an increase of 8.5% from $5,177,000 for the three months
ended September 30, 1996. During the fourth quarter of fiscal 1997, the Company
began to enhance its year 2000 solution offerings. The Company's initial
offering was focused on a three-phase, enterprise level solution for the year
2000 problem using Viasoft's Impact 2000, Viasoft's Plan 2000, and Viasoft's
Operation 2000. In the fourth quarter of fiscal 1997, the Company introduced
Viasoft's FastPath 2000, which is designed to provide the primary components of
a successful year 2000 conversion on an application level, rather than an
enterprise-wide level. In addition, the Company recently began developing and
implementing additional enablement services, which are services that assist
customers in utilizing Viasoft products. Examples include services designed to
assist customers in establishing an in-house "factory" for year 2000 conversions
and education services to train customers in the use of Viasoft products. This
new focus of the professional services business is consistent with the Company's
emphasis on reducing the labor resources required to drive license revenue. The
introduction of FastPath 2000 and additional enablement services is designed to
promote continued growth in professional services fees, although at growth rates
expected to be lower than those the Company experienced during fiscal 1997.
However, the Company may see near-term decreases in professional services
revenues during the transition to FastPath 2000 and enablement services as
resources are devoted to training personnel and otherwise implementing these new
initiatives. In addition, the Company re-evaluated a fixed-price services
engagement in the fourth quarter of fiscal 1997 and determined that the level of
effort to complete the engagement was more than originally estimated, requiring
an adjustment in the amount of revenue recognized for that contract. The Company
continues to monitor the progress on this contract and recognizes revenue as
appropriate to reflect the percentage of completion. Compared to fiscal 1997,
professional services fees in fiscal 1998 may continue to be affected by a
decrease in the revenue being recognized from this contract over the remaining
term of the project.
OPERATING EXPENSES
Cost of software license and maintenance fees, which includes royalties,
cost of customer support and packaging and product documentation, was $1,777,000
for the three months ended September 30, 1997, an increase of 184.8% from
$624,000 during the three months ended September 30, 1996. Gross margins on
software license and maintenance fees decreased slightly to 93.2% compared to
95.5% for the three months ended September 30, 1997 and 1996, respectively. The
expense increase and margin decrease are primarily due to additional royalty
expenses to third parties, additional personnel, increased salaries and outside
consultants in the customer support area, as well as amortization of the
purchased research and development from the R&O acquisition.
Cost of professional services fees, which consists principally of personnel
costs, third-party subcontracting fees, and other costs related to the
professional services business, was $4,765,000 for the three months ended
September 30, 1997, an increase of 21.5% from $3,921,000 for the three months
ended September 30, 1996. The increase in expenses is a result of additional
personnel, including R&O personnel, and their related costs, salary increases,
and, to a lesser extent, third-party subcontracting fees to deliver the
Company's solutions. The overall gross margin on professional services fees for
the three months ended September 30, 1997 was 15.2%
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compared to 24.3% for the three months ended September 30, 1996. The decrease in
margins is a result of several factors. The introduction of FastPath 2000 and
related enablement services required significant training of consultants and
salespersons, as well as changes in the skill set of the consultants required
for enablement-type projects. As a result, this transition has taken longer than
originally expected. The decreased utilization of personnel experienced in the
fourth quarter of fiscal 1997 continued throughout the first quarter of fiscal
1998 and is expected to continue, to some extent, for the near future. An
additional factor was the decrease in revenue recognized from the fixed price
contract discussed above, while the costs of performing the services continued.
Finally, the addition of the R&O professional services business has also
contributed to a decrease in the overall services margin for the Company as the
comprehensive consulting services required for selling Roachade result in lower
margins.
Sales and marketing expenses consist primarily of salaries, commissions and
related benefits and administrative costs allocated to the Company's sales and
marketing personnel. Sales and marketing expenses were $9,321,000 for the three
months ended September 30, 1997, an increase of 80.4% from $5,168,000 for the
three months ended September 30, 1996. This increase is attributable primarily
to an increase in personnel, including the R&O personnel, and the associated
costs, including higher salaries, recruiting and relocation costs, travel and
bonuses, as well as general salary increases, increased commissions as a result
of revenue growth, and increased marketing and promotion costs. Sales and
marketing expenses as a percentage of total revenues declined to 35.8% the three
months ended September 30, 1997, compared to 37.0% the three months ended
September 30, 1996, due primarily to the increase in revenues.
Research and development expenditures consist primarily of personnel costs
of research and development staff and the facilities, computing, benefits and
other administrative costs allocated to such personnel and to a lesser extent,
third-party development costs. Total expenditures for research and development
were $2,818,000 for three months ended September 30, 1997, an increase of 150.0%
from $1,127,000 for the three months ended September 30, 1996. The increase in
expenses includes the additional costs associated with R&O's research and
development staff as well as a result of general salary increases, the addition
of personnel and the related cost of recruiting, and costs of external
consultants. As a percentage of total revenues, research and development costs
were 10.8% for the three months ended September 30, 1997 compared to 8.1% for
the same period in fiscal 1996. The increase in costs as a percentage of revenue
is due primarily to the addition of R&O personnel and their costs.
General and administrative expenses include the costs of finance and
accounting, legal, human resources, corporate information systems and other
administrative functions of the Company.
10
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General and administrative expenses were $2,038,000 for the three months ended
September 30, 1997, representing an increase of 82.8% compared to $1,115,000 for
the three months ended September 30, 1996. This increase is a result of
additional administrative personnel, including R&O personnel, and their related
costs, general salary increases, amortization of intangibles related to the R&O
acquisition, and increased legal fees. As a percentage of total revenues,
general and administrative expenses remained relatively constant at 7.8% for the
three months ended September 30, 1997 compared to 8.0% for the three months
ended September 30, 1996.
OTHER INCOME (EXPENSE)
Interest income in the three months ended September 30, 1997 was $521,000,
compared to $386,000 in the three months ended September 30, 1996. This was due
primarily to interest income generated from the cash raised from the Company's
secondary offering on September 22, 1997. Other expense for the three months
ended September 30, 1997 increased to $122,000 as compared to income of $4,000
for the three months ended September 30, 1996, primarily due to exchange losses
on transactions as a result of the strengthening of the U.S. dollar against
various European currencies. See "Effects of Inflation and Foreign Currency
Exchange Fluctuations."
PROVISION FOR INCOME TAXES
The provision for income taxes was $1,977,000 and $854,000 for three months
ended September 30, 1997 and 1996, respectively. The Company's effective tax
rate was 34.4% for the three months ended September 30, 1997, compared to 35.4%
for same period in 1996. This decrease reflects certain tax planning strategies
initiated by the Company.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997 the Company had cash and cash equivalents and
investments of $107,999,000, representing an increase of $79,424,000 from the
total of $28,575,000 at June 30, 1997. The increase is primarily a result of the
successful completion of the Company's secondary offering on September 22, 1997
which raised $76,180,000. The remaining increase is primarily a result of cash
flow from operations.
The Company's net cash provided by operating activities was $4,797,000 and
$2,185,000 for the three months ended September 30, 1997 and 1996, respectively.
Net cash provided from operations for the three months ended September 30, 1997
and 1996 was composed primarily of net income excluding non-cash charges for
depreciation and amortization and a net increase in working capital.
The Company's investing activities used cash of $6,057,000 and provided cash
of $5,367,000, in the three months ended September 30, 1997 and 1996,
respectively. In 1997, cash was used for the purchase of investments in excess
of investment maturities, and to a lesser extent, the
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purchase of furniture, fixtures and equipment and for the acquisition of a
customer list for the Company's new direct operation in France. In 1996, the
primary source of cash was from the maturity of investments in excess of
investment purchases.
The Company's financing activities provided cash of $76,120,000 and $188,000
in the three months ended September 30, 1997 and 1996, respectively. In 1997,
cash was primarily provided by the completion of the Company's secondary
offering net of payments for offering costs. In 1996, cash was provided
primarily by the sale of common stock through the employee stock purchase plan
and the exercise of stock options.
As of September 30, 1997, the Company did not have any material commitments
for capital expenditures. For the remainder of fiscal 1998, the Company
anticipates capital expenditures of approximately $5.0 million, primarily for
computer hardware and software, leasehold improvements for new offices, and to
update the Company's communications equipment and systems.
On September 22, 1997, the Company received proceeds in an aggregate amount
of $76,180,000 from a secondary offering of 1,465,000 shares of its common
stock. The Company expects that the proceeds of this offering and existing
working capital, together with cash from operations, will be sufficient for the
foreseeable future to meet its capital and liquidity needs for existing
operations and general corporate purposes, as well as the addition of direct
sales and research and development personnel, marketing initiatives, and
potential acquisitions of businesses, products and technologies.
EFFECTS OF INFLATION AND FOREIGN CURRENCY EXCHANGE FLUCTUATIONS
The results of operations of the Company for the periods discussed above
have not been significantly affected by inflation or (except as described below)
foreign currency fluctuations. Sales made through the Company's foreign
distributors are denominated in U.S. dollars except in Italy and Spain, where
they are denominated in lira and pesetas, respectively. Sales by the Company's
foreign subsidiaries are principally denominated in the currencies of the
countries where sales are made. The Company experienced losses of approximately
$104,000 from foreign currency fluctuations in the three months ended September
30, 1997. The Company's unhedged foreign currency exposure at September 30, 1997
consisted of the following (in thousands):
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<TABLE>
<CAPTION>
UNITED
KINGDOM AUSTRALIA GERMANY NETHERLANDS FRANCE ITALY OTHER TOTAL
------- --------- -------- ----------- ------ ----- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment in
foreign subsidiaries $ 679 $ 242 $ 10,706 $(14) $ 44 -- $(99) $ 11,558
Net short-term
receivables
(payables) with
foreign subsidiaries 868 967 (5,590) (222) 614 -- 116 (3,247)
Net receivable from
foreign distributor -- -- -- -- -- 680 398 1,078
------ ------ -------- ----- ---- ---- ----- --------
Total $1,547 $1,209 $ 5,116 $(236) $658 $680 $ 415 $ 9,389
====== ====== ======== ===== ==== ==== ===== ========
</TABLE>
The Company has not to date sought to hedge the risks associated with
fluctuations in foreign exchange rates. The Company continues to evaluate the
relative costs and benefits of hedging and may seek to hedge these risks in the
future, if appropriate. Gains and losses relating to translation of the
financial statements of the Company's foreign subsidiaries are included as a
separate component of stockholders' equity in the Company's Consolidated
Financial Statements.
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, this Form 10-Q contains
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act and the Company intends that such
forward-looking statements be subject to the safe harbors created thereby. Such
forward-looking statements involve risks and uncertainties and include, but are
not limited to, statements regarding future events and the Company's plans and
expectations. The Company's actual results may differ materially from such
statements. Factors that may cause or contribute to such differences include,
but are not limited to, the Company's dependence on the year 2000 century date
conversion market and dependence on its ESW primary product line, fluctuations
in revenues and operating results, risks associated with international
operations including longer payment cycles and exchange rate fluctuations, the
Company's ability to manage changes in its professional services business, the
Company's ability to manage rapid change in its business and industry, the
Company's ability to enhance existing products and develop or acquire new
products and technology to keep pace with technological developments and
evolving industry standards and to respond to changes in customer needs, the
Company's ability to identify, complete, manage and integrate acquisitions of
businesses, products and technologies, charges, costs and uncertainties related
to acquisitions, intense competition in the Company's markets, the performance
of the Company's distributors and members of its Provider programs, the
Company's dependence on key management and technical personnel and increasing
competition to attract skilled personnel, and general economic and business
conditions, as well as factors discussed elsewhere in this Form 10-Q, in
"Factors That May Affect Future Results" in the Company's Form 10-K for the year
ended June 30, 1997 and other risks detailed from time to time in the Company's
filings with the Securities and Exchange Commission.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
NUMBER DESCRIPTION
10.1(1)(2) Viasoft Executive Bonus Plan
10.2(1)(2) FY98 Incentive Plan for Executive Vice President
10.3(1)(2) FY98 Incentive Plan for Senior Vice President, International Operations
10.4(1) Consulting Agreement between the Company and Michael A. Wolf dated
August 1, 1997.
10.5(1) Viasoft, Inc. Deferred Compensation Plan
11 Computation of Earnings Per Share for the three month periods ended
September 30, 1997 and 1996.
27 Financial Data Schedule
</TABLE>
(1) Management contract or compensation plan or arrangement.
(2) Portions omitted and filed separately with the Commission pursuant to a
Request for Confidential Treatment dated November 13, 1997.
(B) REPORTS ON FORM 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Viasoft, Inc.
Date: November 13, 1997 By /s/ Steven D. Whiteman
------------------------------
Steven D. Whiteman
President
Date: November 13, 1997 By /s/ Mark R. Schonau
------------------------------
Mark R. Schonau
Chief Financial Officer
15
<PAGE> 1
EXHIBIT 10.1
VIASOFT EXECUTIVE BONUS PLAN
FY98
The VIASOFT Executive Bonus Plan is made up of two parts and works as follows:
1. Quarterly Net Income Bonus :
A fixed quarterly bonus will be paid if VIASOFT meets or exceeds its Net Income
objective for the quarter. If Net Income is below plan for the quarter there
will be no bonus paid. Missed quarterly bonuses cannot be recovered in future
quarters.
<TABLE>
<CAPTION>
Bonus Amounts
Titles Quarterly Target Yearly Total
-------------- ---------------- ------------
<S> <C> <C>
Chairman & CEO $****** $******
EVP/COO ******* *******
CFO ******* *******
VP, Marketing ******* *******
General Counsel ******* *******
TOTALS $****** $******
</TABLE>
2. Annual Net Income Bonus:
A bonus will be paid based on taking VIASOFT's annual Net Income attainment and
applying it against the budgeted Net Income (Profit Attainment Percentage). The
Profit Attainment Percentage will be plugged into the following formula to
determine the bonus:
If Profit Attainment Percentage is (less than) 85%, the bonus is zero.
If Profit Attainment Percentage is (greater than or equal to) 85% and
(less than) 90%, the bonus is the Profit Attainment Percentage
multiplied by (Target Bonus X 0.5).
If Profit Attainment Percentage is (greater than or equal to) 90% and
(less than) 105%, the bonus is the Profit Attainment Percentage
multiplied by the Target Bonus.
If Profit Attainment Percentage is (greater than or equal to) 105% and
(less than) 130%, the bonus is the Profit Attainment percentage
multiplied by (Target Bonus X 1.25).
If Profit Attainment Percentage is (greater than or equal to) 130%, the
bonus is the Profit Attainment Percentage multiplied by (Target Bonus X
1.5).
<TABLE>
<CAPTION>
POSITION TARGET BONUS
- -------- ------------
<S> <C>
Chairman & CEO $******
EVP/COO ******
CFO ******
VP, Marketing ******
VP, International Operations ******
General Counsel ******
TOTAL $******
</TABLE>
"CONFIDENTIAL TREATMENT REQUESTED"
VIASOFT CONFIDENTIAL
<PAGE> 2
VIASOFT EXECUTIVE BONUS PLAN FY98
Examples of Annual Net Income Bonus
<TABLE>
<CAPTION>
PROFIT % = (LESS THAN) 85% 85% 100% 115% 135%
<S> <C> <C> <C> <C> <C>
Chairman & CEO $0 $****** $****** $****** $******
EVP/COO $0 $****** $****** $****** $******
CFO $0 $****** $****** $****** $******
VP, Marketing $0 $****** $****** $****** $******
VP, International $0 $****** $****** $****** $******
General Counsel $0 $****** $****** $****** $******
TOTALS $****** $****** $****** $******
</TABLE>
All bonus payments will be accrued in the financial statements in the quarter
earned and will be included as an expense in determining whether the bonus
criteria has been met. Payment of bonuses will be made only if the criteria for
bonus payments are met with the accrued bonuses in the calculations.
"CONFIDENTIAL TREATMENT REQUESTED"
VIASOFT CONFIDENTIAL
<PAGE> 1
Pages where confidential treatment has been requested
have the words "Confidential Treatment Requested" typed
at the bottom of the page, and the appropriate information
has been marked with asterisks.
EXHIBIT 10.2
[VIASOFT LOGO] FY98 INCENTIVE PLAN
EMPLOYEE Kevin M. Hickey
POSITION Executive Vice President & Chief of Operations
REGION The Americas for Commissions; Corporate for bonuses
EFFECTIVE DATE July 1, 1997
QUOTA $********** Americas Annual License Revenue
$********** Americas Annual Service Revenue
TERRITORY OR GEOGRAPHIC SCOPE
All territories that encompass VIASOFT consolidated.
INCENTIVE COMPENSATION
1. COMMISSION RATES ON REVENUE
Commissions will be paid monthly by multiplying the commission factor by the
monthly commissionable revenue as follows:
<TABLE>
<CAPTION>
Commission Factors
----------------------
License Services
<S> <C> <C>
Up to 100% of the assigned license quota ****** ******
100% - 110% of the assigned license quota ****** ******
Above 100% of the assigned license quota ****** ******
</TABLE>
The commissions will be paid on the basis of a fiscal-year running total and are
not retroactive. To determine the actual commissions payable each month, the
monthly commissionable revenue is multiplied by the appropriate percent based on
fiscal year-to-date performance. License revenue must be at 100% or better of
the target in order to increase the commission on service revenue.
2. QUARTERLY COMPANY PERFORMANCE BONUS TARGET: $******
A quarterly bonus will be paid if VIASOFT meets or exceeds its Net Income
objective for the quarter. If Net Income is below plan for the quarter, there
will be no bonus paid. Missed quarterly bonuses cannot be recovered in future
quarters. Bonuses will be prorated if participation begins within a quarter.
3. ANNUAL COMPANY PERFORMANCE BONUSTARGET: $******
A bonus will be paid based on taking VIASOFT's annual Net Income attainment and
applying it against the budgeted Net Income target (Profit Attainment
Percentage). Bonuses will be paid according to the following table. If the
Profit Attainment is 85% below plan for the year, there will be no bonus paid.
Bonuses will be prorated if participation begins within the fiscal year.
"CONFIDENTIAL TREATMENT REQUESTED"
VIASOFT CONFIDENTIAL
<PAGE> 2
FY98 Executive Vice President & Chief of Operations Page 2
Incentive Plan for Kevin M. Hickey
If Profit Attainment Percentage is (less than) 85%, the bonus is zero.
If Profit Attainment Percentage is (greater than or equal to) 85% and
(less than) 90%, the bonus is the Profit Attainment Percentage
multiplied by (Target Bonus X 0.5).
If Profit Attainment Percentage is (greater than or equal to) 90% and
(less than) 105%, the bonus is the Profit Attainment Percentage
multiplied by the Target Bonus.
If Profit Attainment Percentage is (greater than or equal to) 105% and
(less than) 130%, the bonus is the Profit Attainment Percentage
multiplied by (Target Bonus X 1.25).
If Profit Attainment Percentage is (greater than) 130%, the bonus is
the Profit Attainment Percentage multiplied by (Target Bonus X 1.5).
Example: Profit attainment at 110% of plan will result in a bonus of $******
(110% X $****** X 1.25).
PRESIDENT'S CLUB
The Executive Vice President, Americas and Chief of Operations and his/her
spouse (or boyfriend/girlfriend) will be participate in the President's Club
provided the individual is employed in this capacity at the time of the
President's Club.
President's Club attendance is NOT part of the EVP's regular compensation.
Should the EVP transfer to another department, be unable to attend for personal
reasons (i.e., illness, death in the family, etc.), or leave VIASOFT, the EVP
forfeits the opportunity to attend and will receive no compensation in lieu of
attending.
CHARGEBACKS
Any amounts included in commissionable revenues for which the invoice has not
been paid by the customer within 90 days after inclusion or that is refunded the
customer, will be charged back against any commissionable revenues or applicable
bonuses at the expiration of such 90-day period. In the event of charged back
sales, commission credit will be reinstated only upon the receipt of payment. In
the event of either termination or voluntary resignation, any commissions which
are charged back will be offset against salary, vacation payments, commissions,
or any other compensation available. If additional amounts remain due, the
employee agrees to promptly reimburse VIASOFT. Any amounts not recovered will be
subject to collection action at employee's expense, including reimbursing
VIASOFT for attorney fees and costs.
RESOLUTION
Any questions, disputes, or ambiguities that arise hereunder will be
conclusively resolved by the Chairman/CEO at his sole discretion. Any required
interpretations of this plan will be made by the Chairman/CEO at his sole
discretion.
WHEN COMMISSIONS ARE EARNED
Commissions are earned on product revenue in the month sold, providing all
contractual matters are resolved, and the contract is signed by an authorized
representative of VIASOFT. Commissions are earned on service revenue in the
month performed, providing all contractual matters are resolved, and the
contract is signed by an authorized representative of VIASOFT. The employee must
be actively employed in the assigned role according to the incentive plan when
the commission is earned to receive any commissions.
"CONFIDENTIAL TREATMENT REQUESTED"
VIASOFT CONFIDENTIAL
<PAGE> 3
FY98 Executive Vice President & Chief of Operations Incentive Page 3
Plan for Kevin M. Hickey
VIASOFT reserves sole discretion, without notice or limitation, to deduct
revenues considered questionable or uncollectible from any compensation
calculation, or to accept, reject, or cancel an order to a customer and to deny
sales credit accordingly. In the event of termination, VIASOFT reserves the
right to withhold any commission payments if VIASOFT has not yet received
payment by the customer(s).
WHEN COMMISSIONS ARE PAID
Commissions are paid monthly in the last pay period of the month following the
month earned. For example, commissions earned in July are paid in the last pay
period of August.
WHEN BONUSES ARE EARNED
Bonuses are earned on the last day of the fiscal quarter, or year, to which they
are applicable per the incentive plan. The employee must be actively employed in
the assigned role according to the incentive plan when the bonus is earned to
receive any bonuses. VIASOFT reserves sole discretion, without notice or
limitation, to deny compensation credit for incentive for items considered
questionable or uncollectible as applicable in calculating the bonus.
WHEN BONUSES ARE PAID
Bonuses are paid on the last pay period of the month following the end of the
fiscal quarter, or year, in which the bonus is earned. Bonuses based on company
profit will be paid on the last pay period of the month following the company's
financial audit. For example, a bonus earned at the completion of the first
quarter (September 30) would be paid in the last pay period in October.
NOT AN EMPLOYMENT AGREEMENT
Nothing in this incentive plan is intended to or does create terms of a contract
of employment between any employee and VIASOFT, nor shall anything in this
incentive plan restrict the right of VIASOFT to terminate an employee's
employment at any time. Employees to whom this incentive plan applies are
employed by VIASOFT on an "at-will" basis, and have no guarantee of continued
employment for any period of time. VIASOFT may terminate such employees at any
time without cause, without reason, and without prior notice.
The terms of this incentive plan only apply during VIASOFT's fiscal year
commencing July 1, 1997, and ending June 30, 1998, and shall have no effect
whatsoever in any other period. This plan replaces any and all plans in effect
prior to July 1, 1997.
In the event of employment termination (voluntary or involuntary) during the
stated plan period, the employee will be paid any earned commissions and bonuses
in accordance with this plan and applicable state and federal laws.
VIASOFT reserves the right to change, amend, or separate any employee from this
plan at any time and for any reason, including (without limitation) changes in
business conditions, corporate objectives, or an individual's performance. This
can be done without prior notice.
No participant will have any right to money accrued through the plan unless and
until all terms, provisions, or conditions, as set forth in this plan, have been
met.
EMPLOYEE ACKNOWLEDGMENT AND AGREEMENT
I acknowledge that I have received, read, understand and agree to the terms and
conditions of this plan.
/s/ Kevin M. Hickey August 15, 1997
- ------------------- --------------------------
Kevin M. Hickey DATE
VIASOFT CONFIDENTIAL
<PAGE> 1
Pages where confidential treatment has been requested
have the words "Confidential Treatment Requested" typed
at the bottom of the page, and the appropriate information
has been marked with asterisks.
EXHIBIT 10.3
[VIASOFT LOGO] FY98 INCENTIVE PLAN
<TABLE>
<S> <C>
EMPLOYEE Colin Reardon
POSITION Senior Vice President, International Operations
REGION International Operations
EFFECTIVE DATE 1 July 1997
QUOTA $********** International Annual License Revenue (U.S. dollars)
$********** International Annual Service Revenue (U.S. dollars)
</TABLE>
TERRITORY OR GEOGRAPHIC SCOPE
All territories that encompass VIASOFT International consolidated for
commissions and quarterly bonus. Viasoft worldwide for Company annual bonus.
INCENTIVE COMPENSATION
1. COMMISSION RATES ON REVENUE
Commissions will be paid monthly by multiplying the commission factor by the
monthly commissionable revenue as follows. Commission calculation will be in UK
dollars.
<TABLE>
<CAPTION>
Commission Factors
------------------
License Service
<S> <C> <C>
Up to 100% of the assigned license quota ****** ******
100% - 110% of the assigned license quota ****** ******
Above 110% of the assigned license quota ****** ******
</TABLE>
The commissions will be paid on the basis of a fiscal-year running total and are
not retroactive. To determine the actual commissions payable each month, the
monthly commissionable revenue is multiplied by the appropriate percent based on
fiscal year-to-date performance. License revenue must be at 100% or better of
the target in order to increase the commission on service revenue.
2. QUARTERLY INTERNATIONAL PERFORMANCE BONUS
TARGET: (POUND STERLING)******
A quarterly bonus will be paid based on taking the International Operations
profit attainment (after royalties) and applying it against the actual P&L
statement profit figure to obtain the profit attainment percentage. This
percentage will be multiplied against the target amount using the following
formula:
If Profit Attainment Percentage is (less than) 75%, the bonus is zero.
If Profit Attainment Percentage is (greater than or equal to) 75% and
(less than) 90%, the bonus is the Profit Attainment Percentage
multiplied by (Target Bonus X 0.5).
"CONFIDENTIAL TREATMENT REQUESTED"
VIASOFT CONFIDENTIAL
<PAGE> 2
FY98 Senior Vice President, International Operations Incentive Page 2
Plan for Colin Reardon
If Profit Attainment Percentage is (greater than or equal to) 90% and
(less than) 110%, the bonus is the Profit Attainment Percentage
multiplied by the Target Bonus.
If Profit Attainment Percentage is (greater than or equal to) 110%, the
bonus is the Profit Attainment Percentage multiplied by (Target Bonus X
1.25).
Missed quarterly bonuses cannot be recovered in future quarters.
3. ANNUAL COMPANY PERFORMANCE BONUSTARGET: (POUND STERLING)******
A bonus will be paid based on taking VIASOFT's annual Net Income attainment and
applying it against the budgeted Net Income target (Profit Attainment
Percentage). Bonuses will be paid according to the following table. If the
Profit Attainment is 85% below plan for the year, there will be no bonus paid.
Bonuses will be prorated if participation begins within the fiscal year.
If Profit Attainment Percentage is (less than) 85%, the bonus is zero.
If Profit Attainment Percentage is (greater than or equal to) 85% and
(less than) 90%, the bonus is the Profit Attainment Percentage
multiplied by (Target Bonus X 0.5).
If Profit Attainment Percentage is (greater than or equal to) 90% and
(less than) 105%, the bonus is the Profit Attainment Percentage
multiplied by the Target Bonus.
If Profit Attainment Percentage is (greater than or equal to) 105% and
(less than) 130%, the bonus is the Profit Attainment Percentage
multiplied by (Target Bonus X 1.25).
If Profit Attainment Percentage is (greater than or equal to) 130%, the
bonus is the Profit Attainment Percentage multiplied by (Target Bonus X
1.5).
Example: Profit attainment at 110% of plan will result in a
bonus of (pound sterling)****** (110% X (pound sterling)****** X 1.25).
PRESIDENT'S CLUB
The Senior Vice President, International Operations and his/her spouse (or
boyfriend/girlfriend) will participate in the President's Club provided the
individual is employed in this capacity at the time of the President's Club.
President's Club attendance is NOT part of the SVP's regular compensation.
Should the SVP transfer to another department, be unable to attend for personal
reasons (i.e., illness, death in the family, etc.), or leave VIASOFT, the VP
forfeits the opportunity to attend and will receive no compensation in lieu of
attending.
RESOLUTION
Any questions, disputes, or ambiguities that arise hereunder will be
conclusively resolved by the Chairman/CEO at his sole discretion. Any required
interpretations of this plan will be made by the Chairman/CEO at his sole
discretion.
CHARGEBACKS
Any amounts included in commissionable revenues for which the invoice has not
been paid by the customer within 90 days after inclusion or that is refunded the
customer, will be charged back against any commissionable revenues or applicable
bonuses at the expiration of such 90-day period. In the event of charged back
sales, commission credit will be reinstated only upon the receipt of payment. In
the event of either termination or voluntary resignation, any commissions which
are charged back will be offset against
"CONFIDENTIAL TREATMENT REQUESTED"
VIASOFT CONFIDENTIAL
<PAGE> 3
FY98 Senior Vice President, International Operations Incentive Page 3
Plan for Colin Reardon
salary, vacation payments, commissions, or any other compensation available. If
additional amounts remain due, the employee agrees to promptly reimburse
VIASOFT. Any amounts not recovered will be subject to collection action at
employee's expense, including reimbursing VIASOFT for attorney fees and costs.
WHEN COMMISSIONS ARE EARNED
Commissions are earned on product revenue in the month sold, providing all
contractual matters are resolved, and the contract is signed by an authorized
representative of VIASOFT. Commissions are earned on service revenue in the
month performed, providing all contractual matters are resolved, and the
contract is signed by an authorized representative of VIASOFT. The employee must
be actively employed in the assigned role according to the incentive plan when
the commission is earned to receive any commissions. VIASOFT reserves sole
discretion, without notice or limitation, to deduct revenues considered
questionable or uncollectible from any compensation calculation, or to accept,
reject, or cancel an order to a customer and to deny sales credit accordingly.
In the event of termination, VIASOFT reserves the right to withhold any
commission payments if VIASOFT has not yet received payment by the customer(s).
WHEN COMMISSIONS ARE PAID
Commissions are paid monthly in the pay period following the month earned. For
example, commissions earned in July are paid in August payroll.
WHEN BONUSES ARE EARNED
Bonuses are earned on the last day of the fiscal quarter, or year, to which they
are applicable per the incentive plan. The employee must be actively employed in
the assigned role according to the incentive plan when the bonus is earned to
receive any bonuses. VIASOFT reserves sole discretion, without notice or
limitation, to deny compensation credit for incentive for items considered
questionable or uncollectible as applicable in calculating the bonus.
WHEN BONUSES ARE PAID
Bonuses are paid on the pay period of the month following the end of the fiscal
quarter, or year, in which the bonus is earned. Bonuses based on company profit
will be paid on the last pay period of the month following the company's
financial audit. For example, a bonus earned at the completion of the first
quarter (September 30) would be paid in the October pay period.
OTHER
The terms of this incentive plan only apply during VIASOFT's fiscal year
commencing
1 July 1997 and ending 30 June 1998, and shall have no effect whatsoever in any
other period. This plan replaces any and all plans in effect prior to 1 July
1997.
In the event of employment termination (voluntary or involuntary) during the
stated plan period, the employee will be paid any earned commissions and bonuses
in accordance with this plan and applicable country laws. VIASOFT reserves the
right to withhold any commission or bonus payments if VIASOFT has not yet
received payment by the customer for that sale.
VIASOFT reserves the right to change, amend, or separate any employee from this
plan at any time and for any reason, including (without limitation) changes in
business conditions, corporate objectives, or an individual's performance. This
can be done without prior notice.
No participant will have any right to money accrued through the plan unless and
until all terms, provisions, or conditions, as set forth in this plan, have been
met.
EMPLOYEE ACKNOWLEDGMENT AND AGREEMENT
I acknowledge that I have received, read, understand and agree to the terms and
conditions of this plan.
/s/ Colin Reardon 1st July 1997
- ------------------------- ---------------------------
Colin Reardon DATE
VIASOFT CONFIDENTIAL
<PAGE> 1
EXHIBIT 10.4
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made and entered into as
of the 1st day of August, 1997 (the "Effective Date"), by and between VIASOFT,
INC., a Delaware corporation (the "Company"), and MICHAEL A.
WOLF, an individual ("Consultant").
WITNESSETH:
WHEREAS, Consultant is currently employed by the Company as Executive
Vice President and Chief Technology Officer;
WHEREAS, Consultant desires, as of the Effective Date, to resign his
position as Executive Vice President and Chief Technology Officer in order to
allow Consultant more time to pursue other personal and professional interests;
WHEREAS, the Company is willing to accept such resignations but
desires, commencing on the Effective Date, to retain the services of Consultant
for the purpose of providing consulting advice in the areas of business and
product development, strategic planning and technology acquisitions; and
WHEREAS, Consultant desires to provide such services to the Company,
commencing immediately upon the Effective Date, on the terms and conditions of
this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the Company and Consultant, intending
to be legally bound, hereby agree as follows:
1. Engagement of Consultant. From and after the Effective Date and for
the Term of this Agreement (as defined in Section 2), the Company hereby retains
Consultant to provide the consulting services described on EXHIBIT A, and
Consultant hereby agrees to provide such services to the Company, all upon the
terms and conditions set forth in this Agreement.
2. Term. Subject to the terms and conditions of this Agreement,
Consultant agrees to provide to the Company the consulting services described on
EXHIBIT A during the period commencing on the Effective Date and ending on
August 31, 1998, which term may be extended from time to time pursuant to a
written instrument executed by the Company and Consultant. As used herein, the
"Term" means the initial term, and any extensions thereof, during which
Consultant agrees to provide consulting services to the Company.
3. Consulting Services. The services to be provided by Consultant
hereunder shall consist of the consulting services described in EXHIBIT A and
such other consulting service as the Board of Directors and/or the Chief
Executive Officer of the Company may reasonably request from time to time in
connection with the business of the Company. Consultant shall devote such
<PAGE> 2
time, attention and energies to the business of the Company as is reasonably
necessary in order to provide the services described herein; provided, that the
parties contemplate that Consultant shall devote approximately eighty (80) hours
per month to performing such services.
4. Compensation. During the Term, the Company shall pay the following
compensation to Consultant:
4.1 Retainer. A retainer (the "Consulting Fee") to Consultant
in the amount of $156,000 for the 13-month Term, which Consulting Fee
shall be paid on a monthly basis in equal installments of $12,000 in
arrears.
4.2 Fees for Additional Hours. The parties contemplate that
Consultant shall devote approximately eighty (80) hours per month to
performing the consulting services. Consultant shall document the hours
worked and shall submit these records to the CEO on a monthly basis.
The parties acknowledge that the services may require variable hours
and that some weeks will be full-time and others will not be worked at
all but they anticipate that the average hours worked by Consultant
shall be approximately 80 hours per month. Hours worked by the
Consultant over and above the average hours contemplated will be
compensated at the rate of $300 per hour, calculated as follows:
If the total hours worked by Consultant during the period August
1, 1997 through January 31, 1998 are more than 480 hours, the
additional hours will be paid at $300 per hour and shall be paid
no later than February 28, 1998; and
If the total hours worked by Consultant during the period
February 1, 1998 through August 31, 1998 are more than 560 hours,
the additional hours will be paid at $300 per hour and shall be
paid no later than September 30, 1998.
4.3 Business Expenses. In addition, during the Term Consultant
shall be entitled to receive prompt reimbursement for all reasonable
out-of-pocket expenses incurred in the reasonable discretion of
Consultant in connection with the due and proper performance of his
duties hereunder in accordance with the Company's regular expense
reimbursement practices. Consultant may choose, in his discretion, to
travel business class for any international travel.
5. Other Benefits; Stock Option Rights.
5.1 Benefits. During the Term, the Company shall provide
Consultant those additional benefits described in EXHIBIT B hereto.
5.2 Existing Stock Rights. Consultant and the Company confirm
and agree that as of immediately prior to the Effective Date, all of
Consultant's vested and unvested rights
2
<PAGE> 3
to acquire stock or other securities of the Company are accurately and
completely set forth on EXHIBIT B hereto.
5.3 Amendment of Stock Rights. Each stock option agreement
described in EXHIBIT B is hereby amended to provide that during the Term of this
Agreement, the options thereunder shall continue to vest and shall continue to
be exercisable, in accordance with the terms and conditions thereof, as if
Consultant's employment with the Company had not terminated. Each restricted
stock purchase agreement described on EXHIBIT B is hereby amended to provide
that during the Term of this Agreement, the Company will not exercise its
repurchase option thereunder (which shall be tolled during the Term) and the
shares subject thereto shall continue to be released from the Company's
repurchase option on the schedule therein, as if Consultant's employment with
the Company had not terminated. Termination or expiration of this Agreement
shall be treated in the same manner as termination of employment under such
stock option agreements and restricted stock purchase agreements. Consultant
acknowledges and agrees that as a result of the foregoing amendments, any
incentive stock options described on EXHIBIT B shall hereafter be treated as
non-qualified stock options.
6. Nature of Relationship. Consultant acknowledges and agrees that he
is an independent contractor and will not act as an agent of the Company nor be
deemed an employee of the Company for any purposes, including without limitation
for the purposes of any employee benefit programs, income tax withholding,
F.I.C.A. taxes, unemployment benefits, or otherwise. Consultant shall not enter
into any agreement or incur any obligations on behalf of the Company, or commit
the Company in any manner without the Company's prior written consent. As an
independent contractor, Consultant understands and agrees that he is solely
responsible for the control and supervision of the means by which his
responsibilities are fulfilled. Such means are subject to Consultant's
discretion, which discretion must be exercised consistent with the terms of this
Agreement. The Company shall not enter into any agreement or incur any
obligations on Consultant's behalf, or commit Consultant in any manner without
Consultant's prior written consent.
7. Termination.
7.1 Termination Because of Death. This Agreement shall
terminate if Consultant shall die. The termination of this Agreement pursuant to
this Section 7.1 shall be effective at the time of death.
7.2 Termination by Consultant for Breach. This Agreement may
be terminated by Consultant if the Company commits a material breach of the
terms and conditions of this Agreement and the Company fails to cure such breach
within thirty (30) days after delivery by Consultant to the Company of a written
notice setting forth the nature and extent of such breach. The termination of
this Agreement pursuant to this Section 7.2 shall be effective at a time
specified by Consultant that is no less than sixty (60) days after the aforesaid
cure period.
3
<PAGE> 4
7.3 Termination by the Company. This Agreement may be
terminated by the Company in any of the following circumstances:
(i) for "Cause" (as defined in Section 17);
(ii) if Consultant shall materially breach this Agreement or
habitually neglect his duties hereunder;
(iii) if Consultant shall be unable to perform his material duties
hereunder owing to illness or incapacity for sixty (60)
consecutive days; or
(iv) if the Company determines that it no longer requires the
services of Consultant for any other reason.
The termination of this Agreement pursuant to this Section 7.3 shall be
effective (A) in the case of a termination of this Agreement pursuant to
subsection (i) or (ii) above, immediately upon receipt by Consultant of written
notice of termination from the Company; or (B) in the case of a termination
pursuant to subsection (iii) or (iv) above, 30 days after receipt by Consultant
of written notice of termination from the Company.
7.4 Termination Because of Expiration. This Agreement shall
terminate upon the expiration of the Term, as such may be extended from time to
time in accordance with Section 2.
7.5 Payments Upon Termination Without Cause or for Company
Breach. If this Agreement is terminated by Consultant pursuant to Section 7.2 or
by the Company pursuant to Section 7.3(iv), the Company shall pay to Consultant
liquidated damages and severance equal to $72,000 (representing six months of
Consulting Fee compensation under Section 4), shall accelerate the vesting of
all options that would vest as of the date six months after the termination date
and release all shares from the Company's repurchase option that would be
released as of date six months after the termination date with respect to the
restricted stock, and shall reimburse Consultant for all expenses incurred by
Consultant through the date of termination for which Consultant is entitled to
reimbursement under Section 4.
7.6 Payments Upon Other Termination; Death, Disability or
Expiration. If this Agreement is terminated (i) upon the death of Consultant
pursuant to Section 7.1, (ii) pursuant to Section 7.3(i), 7.3 (ii) or 7.3(iii),
or (iii) upon the expiration of the Term pursuant to Section 7.4, the Company
shall pay to Consultant (or, if applicable, his personal representative) the
Consulting Fee through the date of termination and all expenses incurred by
Consultant through the date of termination for which Consultant is entitled to
reimbursement in accordance with Section 4.
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7.7 No Waiver. The failure or delay by either party hereto to
exercise its right to terminate this Agreement with respect to any one or more
of the matters referred to in this Section 7 shall not be taken or held to be a
waiver by such party of its right of termination of this Agreement in respect to
such matter or any subsequent matter.
7.8 Exclusive Remedy. Except as expressly provided in this
Section 7, upon the expiration or termination of this Agreement, the Company
shall not have any liability or obligation of any kind or character to
Consultant under the terms of this Agreement or in connection with the
expiration or termination hereof.
7.9 Surviving Obligations. Upon any termination or expiration
of this Agreement, Consultant shall continue to be subject to the provisions of
Sections 9, 10, 11, 13, 15 and 16 (it being understood and agreed that such
provisions shall survive any such termination or expiration and shall continue
in full force and effect thereafter).
8. Consultant's Warranties. Consultant hereby warrants that no other
party has exclusive rights to its services in the specific areas described
herein and that Consultant is in no way compromising any rights or trust
relationships between any other party and Consultant, or creating a conflict of
interest, or any possibility thereof, for Consultant or for the Company.
Consultant further warrants that all services provided hereunder: (i) will be
performed in accordance with all applicable Federal, State, or local laws,
regulations and executive orders; and (ii) that performance of Consultant's
obligations hereunder will not result in a breach or default under any agreement
with or obligation to any third party, or in infringement of any intellectual
property rights of any third party. Consultant agrees to indemnify and hold the
Company harmless from any and all claims of other parties, arising out of or
related in any way to any breach of these warranties.
9. Safeguarding Proprietary Information and Other Company Documents and
Materials.
9.1 Ownership; Nondisclosure. All Proprietary Information of
the Company received by Consultant shall remain the exclusive property of the
Company. During and following the Term, Consultant shall not use for his own or
another's benefit or purposes, or disclose or communicate to any Person,
directly or indirectly, any Proprietary Information of any kind concerning any
matters affecting or relating to the Company or its business, EXCEPT as strictly
required to carry out the internal business of the Company consistent with its
policies, or as expressly authorized in writing in advance on behalf of the
Company.
9.2 Third Parties' Rights. Consultant agrees not to use or
disclose to the Company, or induce or cause the Company to use, any Proprietary
Information belonging to any Person without the prior written consent of that
Person. If Consultant uses his own Inventions, Trade Secrets or other
Proprietary Information, Consultant will automatically confer on the Company the
unrestricted right to use freely all of those matters used.
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9.3 Use and Return of Information, Documents and Things.
Consultant agrees that all information, documents and things (including, but not
limited to, printouts, disks, tapes, programs, documentation, reports, records,
notes, supplies, equipment, drawings, designs, and all business, product,
marketing and sales information) which Consultant makes or which come into his
possession or control by reason of the consulting arrangement created under this
Agreement are the property of the Company. Consultant agrees not to use them in
any way except in the regular course of the Company's internal business and
consistent with its policies and Consultant will return them to the Company
promptly upon any termination of this Agreement. Consultant will not deliver,
reproduce, or in any way allow any information, documents or things to be
delivered or used by any Person without the specific direction or consent of the
Company. Consultant will not take or retain originals or copies of any
information, documents or things of the Company.
9.4 Other Obligations. Consultant acknowledges that the
Company from time to time may have agreements with other Persons including the
U.S. Government, or agencies thereof, which impose obligations or restrictions
on the Company regarding Proprietary Information or regarding the confidential
nature of their work. Consultant agrees to be bound by all such obligations and
restrictions and to take all action necessary to discharge the obligations of
the Company thereunder, including signing such other confidentiality agreements
as may be required by other Persons as a condition to the Company obtaining or
using Proprietary Information.
10. Intellectual Property Rights.
10.1 Assignment. Consultant agrees that any Intellectual
Property which it conceives, creates or reduces to practice while providing
consulting services for the Company pursuant to this Agreement, either alone or
with the help of others, belongs to the Company if it (i) is made by use of the
Company's property, staff, facilities, or Proprietary Information or on Company
time, (ii) relates to the Company's actual or anticipated business, research or
development, or (iii) results from or is suggested by, any work which Consultant
performs for the Company, and Consultant hereby assigns all right, title and
interest in this Intellectual Property to the Company or its nominee. Consultant
also agrees that the Company has the right (but not the obligation) to patent,
copyright, keep as a trade secret or otherwise deal with this Intellectual
Property as the Company chooses. Consultant agrees to assign to the Company or
its nominee all rights which Consultant may possess in any Intellectual Property
of the Company regardless of where or how created where the Company is required
to grant those rights to the United States Government or any of its agencies or
to any third party.
If any Intellectual Property relating in any manner to the actual or
anticipated business, research or development of the Company is disclosed by
Consultant to any Person within six (6) months after the termination of this
Agreement, it shall be conclusively presumed that such Intellectual Property was
conceived or resulted from developments made during the period of
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Consultant's consulting relationship with the Company and Consultant agrees that
any such Intellectual Property will belong to the Company. Consultant agrees
that any patent application filed within six (6) months after termination of
this Agreement that (i) is made by use of the Company's property, staff,
facilities, or Proprietary Information or on Company time, (ii) relates to the
Company's actual or anticipated business, research or development, or (iii)
results from or is suggested by, any work which Consultant performs for the
Company shall be conclusively presumed to relate to an Invention made during the
term of Consultant's consulting relationship with the Company. All works of
authorship which Consultant creates under this Section 10.1 are intended to be
and will be deemed "works for hire" within the copyright laws, meaning that the
Company will be the owner of the copyrights.
10.2 Disclosure. To permit the Company to claim rights to
which it may be entitled under this Agreement, Consultant agrees to disclose
promptly and in writing to the Company, in confidence, all Intellectual Property
which Consultant (alone or with others) conceives, makes or creates during the
course of this Agreement, that (i) is made by use of the Company's property,
staff, facilities, or Proprietary Information or on Company time, (ii) relates
to the Company's actual or anticipated business, research or development, or
(iii) results from or is suggested by, any work which Consultant performs for
the Company whether or not Consultant considers it patentable or otherwise
protectable. Consultant agrees that this Intellectual Property will be deemed
the Company's Proprietary Information for purposes of Consultant's nondisclosure
obligations under Section 9.1, beginning on the date of its conception or
creation. Consultant agrees to keep current and complete records concerning all
such Intellectual Property which Consultant develops (which records shall be the
Company's property) and to deliver the records to the Company upon written
request.
10.3 Assistance. Consultant agrees, at any time while this
Agreement is in effect or thereafter, on request of the Company and at the
Company's expense, to execute specific assignments in favor of the Company or
its nominee of any of the Intellectual Property covered by this Section 10, and
to execute all papers and perform all lawful acts the Company considers
necessary, for the procurement, protection from infringement, and enforcement of
patents or copyrights of the United States and foreign countries or other forms
of protection and for the transfer of any interest Consultant may have in such
patents, copyrights or other forms of protection to the Company or its nominee.
Consultant agrees, at any time while this Agreement is in effect and thereafter,
on the request of the Company, to execute all documents and assist at the
Company's expense in the preservation or exercise of all of the Company's
interests arising under this Agreement.
10.4 Consultant's Rights. Consultant will retain all rights to
any Intellectual Property not belonging to or assignable to the Company under
this Section
11. Non-Competition; Solicitation of Customers and Solicitation of
Employees.
11.1 Non-Competition.
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11.1.1 Consultant agrees that, while this Agreement
is in force and for a period of six (6) months thereafter, Consultant shall not,
directly or indirectly, engage in competition with the Company within any state
in the United States, or any country outside of the United States in which the
Company is then conducting its business (the United States and such countries
being the "Territory"), in any manner or capacity (e.g., as a management
consultant, principal, partner, owner, officer, director, stockholder or
management employee).
11.1.2 Ownership by Consultant, as a passive
investment, of less than 1% of the outstanding shares of capital stock of any
corporation listed on a national securities exchange or publicly traded in the
over-the-counter market shall not constitute a breach of this Section 11.
11.1.3 Consultant further agrees that, while this
Agreement is in force and for six (6) months after his termination, he will not,
directly or indirectly, assist or encourage any other person in carrying out,
directly or indirectly, any activity that would be prohibited by this Section 11
if such activity were carried out by Consultant, either directly or indirectly,
and in particular Consultant agrees that he will not, directly or indirectly,
induce any employee or consultant of the Company to carry out, directly or
indirectly, any such activity.
11.2 Agreement Not to Solicit Customers. Consultant agrees
that while this Agreement is in force and for a period of twelve (12) months
thereafter, he will not, either directly or indirectly, on his own behalf or in
the service or on behalf of others, solicit, divert or appropriate, or attempt
to solicit, divert or appropriate, to any competing business (i) any person or
entity whose account with the Company was sold or serviced (including
maintenance) by the Company during the twelve (12) months preceding the
termination of this Agreement, or (ii) any person or entity whose account with
the Company has been directly solicited at least twice by the Company within the
twelve (12) month period prior to the date of termination of this Agreement.
11.3 Agreement Not to Solicit Employees and Contractors.
Consultant agrees that while this Agreement is in force and for a period of nine
(9) months thereafter, he will not, either directly or indirectly, on his own
behalf or in the service or on behalf of others solicit, divert or hire away, or
attempt to solicit, divert or hire away any person then employed by the Company
or then serving as a consultant, sales representative or distributor of the
Company.
11.4 Reformation. In the event that any provision in this
Section 11 is held to be over broad as written, such provision shall be deemed
amended to narrow its application to the extent necessary to make the provision
enforceable to the fullest extent allowable. Consultant and the Company hereby
agree that such amendment shall be accomplished as follows:
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(i) In the case of duration, the length of the covenant or
provision shall be reduced in increments of one (1) month each
until it is of the greatest duration as may be enforceable
under applicable law; and
(ii) In the case of geographic scope, the geographic scope of the
covenant or provision shall be reduced until it is of the
greatest geographic scope as may be enforceable under
applicable law, which reduction shall be effected by
eliminating in the following order, one by one, countries
outside the United States, beginning with the country in which
the Company received the least volume of gross revenue over
the prior six (6) months, and continuing in the inverse order
ranked by the Company's gross revenue over the prior six (6)
months within each country until such scope is enforceable,
and then, if necessary, by eliminating in the following order,
one by one, individual States within the United States,
beginning with the State in which the Company received the
least volume of gross revenue over the prior six (6) months,
and continuing in the inverse order ranked by the Company's
gross revenue over the prior six (6) months within each State
until such scope is enforceable, and then, if necessary and
applicable, by eliminating in the following order the counties
in the State of Arizona, beginning with the county in which
the Company received the least gross revenue over the prior
six (6) months, and continuing in the inverse order ranked by
the Company's gross revenue over the prior six (6) months
within each county in Arizona until such scope is enforceable.
11.5 Reasonableness. Consultant and the Company agree that the
covenants set forth in this Section 11 are appropriate and reasonable when
considered in light of the nature and extent of the Company's business.
Consultant acknowledges that: (i) the Company has a legitimate interest in
protecting the Company's business activities; (ii) the covenants set forth
herein are not oppressive to Consultant and contain reasonable limitations as to
time, scope, geographical area and activity; (iii) the covenants do not harm in
any manner whatsoever the public interest; (iv) Consultant can earn a livelihood
without violating any of the covenants set forth herein; and (v) Consultant has
received and will receive substantial consideration for agreeing to such
covenants, including without limitation the consideration received and to be
received by Consultant under this Agreement.
11.6 Notice to Future Employers. For the period of twelve (12)
months following the Term, Consultant shall provide a copy of this Agreement to
any future or prospective employer (or consulting client) of Consultant and
agrees that the Company also may do so.
12. Subcontracting and Assignments by Consultant. It is understood and
agreed that this Agreement is for the rendering of consulting services by
Consultant who is acting as an independent contractor. Consultant may not assign
any rights or obligations under this
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Agreement or subcontract any part or all of the services to be provided without
the prior written consent of the Company.
13. Surrender of Records and Property. Upon termination or expiration
of this Agreement, Consultant shall deliver promptly to the Company all records,
manuals, books, blank forms, documents, letters, memoranda, notes, notebooks,
reports, data, tables, calculations or copies thereof, which are the property of
the Company and which relate in any way to the business, products, practices or
techniques of the Company, and all other property, Trade Secrets and Proprietary
Information of the Company, including, but not limited to, all documents which
in whole or in part contain any Trade Secrets or Proprietary Information of the
Company, which in any of these cases are in Consultant's possession or under
Consultant's control.
14. Assignment. This Agreement shall not be assignable, in whole or in
part, by either party without the written consent of the other party, except
that the Company may, without the consent of Consultant, assign its rights and
obligations under this Agreement to any corporation, firm or other business
entity: (i) with or into which the Company may merge or consolidate; (ii) to
which the Company may sell or transfer all or substantially all of its assets;
or (iii) which controls, is controlled by or is under common control with, the
Company, where control means the ownership of 50% or more of the equity
investment and of the voting power of an entity.
15. Injunctive Relief. Consultant agrees that it would be difficult to
compensate the Company fully for damages for any violation of the provisions of
this Agreement, including without limitation the provisions of Sections 9, 10
and 11, which violations would cause the Company irreparable harm. Accordingly,
Consultant specifically agrees that the Company shall be entitled to temporary
and permanent injunctive relief to enforce the provisions of this Agreement.
This provision with respect to injunctive relief shall not, however, diminish
the right of the Company to claim and recover damages in addition to injunctive
relief.
16. Dispute Resolution. If there shall be any dispute between the
Company and Consultant whatsoever, the dispute shall be resolved in accordance
with the dispute resolution procedures set forth in EXHIBIT C hereto, the
provisions of which are incorporated as a part hereof, and the parties hereto
hereby agree that such dispute resolution procedures shall be the exclusive
method for resolution of disputes under this Agreement. Notwithstanding anything
herein to the contrary, nothing in this Section 16 or EXHIBIT C shall preclude
either party from seeking interim or provisional relief, in the form of a
temporary restraining order, preliminary injunction or other interim equitable
relief concerning a dispute, either prior to or during any of the negotiations
or proceedings provided for herein, if deemed necessary by the party, in its
discretion, to protect its interests. Further, this Section 16 shall be
specifically enforceable. IT IS EXPRESSLY UNDERSTOOD THAT BY SIGNING THIS
AGREEMENT, WHICH INCORPORATES BINDING ARBITRATION, THE COMPANY AND CONSULTANT
AGREE TO WAIVE COURT OR JURY TRIAL AND TO WAIVE PUNITIVE,
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STATUTORY, CONSEQUENTIAL AND ANY DAMAGES, OTHER THAN COMPENSATORY DAMAGES, TO
THE FULLEST EXTENT ALLOWED BY LAW.
17. Definitions.
For purposes of this Agreement, the following terms have the meanings ascribed
to them below.
"Cause" means the occurrence of any of the following: (i) Consultant's
gross and willful misconduct which is injurious to the Company; (ii)
Consultant's engaging in fraudulent or dishonest conduct with respect
to the Company's business or in conduct of a criminal nature or acts of
serious moral turpitude that may have an adverse impact on the
Company's standing and reputation; (iii) the continued and unjustified
failure or refusal by Consultant to perform the duties required of him
by this Agreement or to adhere to written Company policy, which failure
or refusal shall not be cured within fifteen (15) days following
receipt by Consultant of written notice from the Company specifying the
factors or events constituting such failure or refusal; (iv)
Consultant's use of drugs and/or alcohol in violation of then current
Company policy; or (v) Consultant's material breach of his obligations
under Sections 8, 9, 10 and 11 hereof which, if capable of cure, shall
not be cured within fifteen (15) days after written notice thereof to
Consultant.
"Intellectual Property" means all Inventions (whether or not
patentable), Trade Secrets, works of authorship (whether or not
copyrightable), patents, copyrights, trademarks, trade names, ideas or
concepts, or improvements, modifications or additions to any of the
above.
"Inventions" means any new discoveries, innovations, programs,
machines, manufacturing methods, processes, uses, apparatuses,
compositions of matter, data or designs, or improvements, modifications
or additions to any of the same, and is not limited to the definition
of an invention contained in the United States patent laws.
"Person" means any individual, corporation, partnership, trust or other
association or entity.
"Proprietary Information" means all information treated by a Person as
proprietary, whether in tangible or intangible form, and whether or not
it is marked as proprietary, including without limitation Intellectual
Property and other property rights, as well as all business or
technical information such as, for example, methods of doing business,
business plans, development plans, product information, profit and loss
statements and other financial information and lists of customers,
suppliers and employees.
"Trade Secrets" means all concepts, ideas, formulae, patterns, devices
or compilations of information used in a company's business which may
relate to the development, production, licensing, or sale of the
company's goods or services, to the management or
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administration of the company, or which otherwise give it a competitive
advantage, which are not publicly known without restriction and without
breach of this Agreement. Consultant will have the burden of proving
public knowledge.
18. Miscellaneous.
18.1 Notices. All notices and other communications hereunder
shall be in writing and shall be given by delivery in person, by registered or
certified mail (return receipt requested and with postage prepaid thereon) or by
cable, telex or facsimile transmission to the parties at the following addresses
(or at such other address as either party shall have furnished to the other in
accordance with the terms of this Section 18.1):
Viasoft, Inc. Michael A. Wolf
3033 N. 44th St., Suite 101 11640 S. Warcloud Court
Phoenix, AZ 8518 Phoenix, Arizona 85044
Fax: (602) 840-4068
Attention: General Counsel
All notices and other communications hereunder that are addressed as provided in
or pursuant to this Section 18.1 shall be deemed duly and validly given: (i) if
delivered in person, upon delivery; (ii) if delivered by registered or certified
mail (return receipt requested and with postage paid thereon), 72 hours after
being placed in a depository of the United States mails; or (iii) if delivered
by cable, telex or facsimile transmission, upon transmission thereof and receipt
of the appropriate confirmation of receipt.
18.2 Prior Agreements. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof and supersedes
all prior agreements and understanding with respect to such subject matter,
except for other written agreements between the parties that are specifically
referenced in this Agreement (including EXHIBIT B hereto), and the parties
hereto have made no agreements, inducements, representations or warranties
relating to the subject matter of this Agreement which are not set forth herein.
18.3 Taxes and Fringe Benefits.
(i) Tax Reporting and Withholding. Contractor is not
an employee of the Company and the Company will not withhold any income
tax, FICA, Medicare, worker's compensation, or other employment taxes
from payments to Consultant made pursuant to this Agreement, other than
any taxes required by law to be withheld in connection with the
exercise or sale of Viasoft common stock. Consultant is responsible for
income tax withholding, FICA, Medicare, and other employment taxes, if
any, as required with respect t payments made to Consultant under this
Agreement. The Company will comply with all tax reporting requirements
relating to payments made to an independent contractor. In the event
any person or governmental entity attempts to hold the Company
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liable or responsible for income tax, FICA, Medicare, worker's
compensation, or other employment taxes related to payments the Company
makes to Consultant under this Agreement, Consultants shall indemnify
and hold the Company, and its directors, officers, shareholders,
employees and agents, harmless from and against any loss or liability,
including attorneys' fees, penalties and interest.
(ii) Fringe Benefits. Because Consultant is engaged
as an independent contractor, Consultant is not eligible for, nor entitled to,
and shall not participate in, any of the Company's benefit plans, any fringe
benefits, health insurance workers' compensation insurance allowances, programs
reimbursements, or the like, which the Company makes available to its employees.
18.4 Amendments. No amendment, modification or rescission of
this Agreement shall be deemed effective unless made in writing signed by the
parties hereto.
18.5 No Waiver. No term or condition of this Agreement shall
be deemed to have been waived nor shall there be any estoppel to enforce any
provisions of this Agreement, except by a statement in writing signed by the
party against whom enforcement of the waiver or estoppel is sought. Any written
waiver shall not be deemed a continuing waiver unless specifically stated, shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
18.6 Severability. If, after application of any provision of
this Agreement specifying how reformation shall be accomplished, including
Section 11.4, to the extent any provision of this Agreement shall still be
invalid or unenforceable, it shall be considered deleted here from and the
remainder of such provision and of this Agreement shall be unaffected and shall
continue in full force and effect.
18.7 Survival. Sections 7.5, 7.6, 7.9, 9, 10, 11, 13, 15 and
16 shall survive termination or expiration of this Agreement.
18.8 Governing Law. This Agreement is made under and shall be
governed by and construed in accordance with the laws of the State of Arizona.
18.9 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year first set forth above.
VIASOFT, INC.
By /s/ Catherine R. Hardwick
--------------------------------------
Its Vice President & General Counsel
--------------------------------------
/s/ Michael A. Wolf
--------------------------------------
MICHAEL A. WOLF
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EXHIBIT A
DESCRIPTION OF CONSULTING SERVICES
Consulting services related to identifying, negotiating and consummating
acquisitions of technology, products or companies and assisting in developing a
strategy and vision, as well as short and long term plans, for Viasoft business
development and other services of a similar nature requested by the Board of
Directors or the CEO.
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EXHIBIT B
ADDITIONAL BENEFITS AND STOCK RIGHTS
ADDITIONAL BENEFITS:
OFFICE Consultant shall be provided an office at the
Company's headquarters in Phoenix, Arizona.
PARKING Consultant shall be provided an assigned, covered
parking place at the Company's headquarters in
Phoenix, Arizona.
COMPUTER/ Consultant shall be provided a computer and office
SUPPORT supplies, as well as reasonable administrative support, to
perform the consulting services.
INSURANCE Viasoft will maintain your current health insurance
coverage by paying the cost of COBRA benefits for a
period of one hundred twenty (120) days from the
Effective Date.
STOCK RIGHTS:
Incentive Stock Option Agreement dated February 28, 1995
Non-Qualified Stock Option Agreement dated February 28, 1995
Restricted Stock Purchase Agreement dated October 26, 1993
Restricted Stock Purchase Agreement dated February 19, 1993
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EXHIBIT C
DISPUTE RESOLUTION PROCEDURES
A. If a controversy should arise which is covered by Section 16, then
not later than three (3) months from the date of the event which is the subject
of dispute either party may serve on the other a written notice specifying the
existence of such controversy and setting forth in reasonably specific detail
the grounds thereof ("Notice of Controversy"); provided that, in any event, the
other party shall have at least thirty (30) days from and after the date of the
Notice of Controversy to serve a written notice of any counterclaim ("Notice of
Counterclaim"). The Notice of Counterclaim shall specify the claim or claims in
reasonably specific detail. If the Notice of Controversy or the Notice of
Counterclaim, as the case may be, is not served within the applicable period,
the claim set forth therein will be deemed to have been waived, abandoned and
rendered unenforceable.
B. Following receipt of the Notice of Controversy (or the Notice of
Counterclaim, as the case may be), there shall be a three week period during
which the parties will make a good faith effort to resolve the dispute through
negotiation ("Period of Negotiation"). Neither party shall take any action
during the Period of Negotiation to initiate arbitration proceedings.
C. If the parties should agree during the Period of Negotiation to
mediate the dispute, then the Period of Negotiation shall be extended by an
amount of time to be agreed upon by the parties to permit such mediation. In no
event, however, may the Period of Negotiation be extended by more than five (5)
weeks or, stated differently, in no event may the Period of Negotiation be
extended to encompass more than a total of eight (8) weeks.
D. If the parties agree to mediate the dispute but are thereafter
unable to agree within one (1) week on the format and procedures for the
mediation, then the effort to mediate shall cease, and the Period of Negotiation
shall terminate four (4) weeks from the Notice of Controversy (or the Notice of
Counterclaim, as the case may be).
E. Following the termination of the Period of Negotiation, the dispute
(including the main claim and counterclaim, if any) shall be settled by
arbitration, governed by the Federal Arbitration Act, 9 U.S.C. Section 1 et seq.
("FAA"), and judgment upon the award may be entered in any court of competent
jurisdiction. The format and procedures of the arbitration are set forth below.
F. A notice of intention to arbitrate ("Notice of Arbitration") shall
be served on the opposing party within forty-five (45) days of the termination
of the Period of Negotiation. If the Notice of Arbitration is not served within
this period, the claim set forth in the Notice of
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Controversy (or the Notice of Counterclaim, as the case may be) will be deemed
to have been waived, abandoned and rendered unenforceable.
G. The Company shall designate a neutral third party to administer the
arbitration, such as the American Arbitration Association, or another neutral
individual or entity (the "Administrator").
H. The arbitrators shall reach a decision on the merits on the basis of
applicable legal principals as embodied in the law of the State of Arizona. The
arbitration hearing shall take place in Phoenix, Arizona.
I. There shall be three arbitrators, regardless of the amount in
controversy. Each party shall select one arbitrator within fifteen (15) days
after the Notice of Arbitration is served by notifying the opposing party and
the Administrator of such selection, and the two party-appointed arbitrators
shall select the third arbitrator within fifteen (15) days after they are
selected and shall promptly notify the parties of such selection. The third
arbitrator, in order to be eligible to serve, shall be a lawyer in Phoenix,
Arizona (i) who has at least fifteen (15) years experience specializing in
general commercial litigation, general corporate and commercial matters and (ii)
who has had both training and experience as an arbitrator. In the event the
party-appointed arbitrators cannot agree on a third arbitrator, the
Administrator shall appoint a third arbitrator who shall meet the foregoing
criteria. Until the conclusion of the arbitration, each party shall pay the fees
and costs of its party-appointed arbitrator, and the parties shall each pay
one-half (1/2) the fees and costs of the third arbitrator. Upon the conclusion
of the arbitration, the prevailing party shall be entitled to reimbursement of
the arbitrators' fees it has paid, as set forth below.
J. At the time of appointment and as a condition thereto, each
arbitrator will be apprised of the time limitations and other provisions of this
Exhibit C and shall indicate such arbitrator's agreement to comply with such
provisions and time limitations.
K. During the thirty (30) day period following appointment of the third
arbitrator, either party may serve on the other a request for limited numbers of
documents (no more than twenty (20) categories of documents may be requested)
directly related to the dispute. Such documents will be produced within seven
(7) days of the request to the extent practicable.
L. Following the thirty (30) day period of document production, there
will be a forty-five (45) day period during which limited depositions will be
permissible. Neither party will take more than five (5) depositions, and no
party can question a witness for more than three (3) hours in any deposition.
M. Disputes as to discovery or prehearing matters of a procedural
nature shall be promptly submitted to the arbitrators pursuant to telephone
conference call or otherwise. The
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arbitrators shall make every effort to render a ruling on such interim matters
at the time of the hearing (or conference call) or within five (5) business days
thereafter.
N. Following the period of depositions, the arbitration hearing shall
promptly commence. The arbitrators will make every effort to commence the
hearing within thirty (30) days of the conclusion of the deposition period and,
in addition, will make every effort to conduct the hearing on consecutive
business days to conclusion. The Federal Rules of Evidence will apply during the
arbitration hearing.
O. An award will be rendered, at the latest, within six (6) months of
the date of the Notice of Arbitration and within thirty (30) days of the close
of the arbitration hearing. The award shall set forth the grounds for the
decision (findings of fact and conclusions of law) in reasonably specific
detail. The award shall be final and nonappealable except as provided in the
FAA.
The award may only be made for compensatory damages, and if any other
damages (whether exemplary, punitive, consequential, statutory or other) are
included, the award shall be vacated and remanded, or modified or corrected, as
appropriate to promote this damage limitation.
The prevailing party in the arbitration shall be entitled to
reimbursement from the other party of costs incurred in connection with the
arbitration, including, without limitation, filing fees, attorneys' fees,
disbursements of counsel, costs, and arbitrator's fees.
P. All decisions and awards of the arbitrators must be by a majority of
the arbitrators.
Q. All negotiations and proceedings pursuant to this Exhibit C and
information and documents disclosed therein ("Confidential Information") shall
be used only for negotiation, mediation, and arbitration as provided in this
Exhibit C, and for no other purpose. Specifically, Confidential Information
shall not be disclosed to anyone other than (i) the parties and their attorneys
and staffs; (ii) outside experts or consultants retained by the parties for
purposes of mediation or arbitration, including their secretarial or clerical
personnel, provided that the outside experts and consultants have first read
this paragraph and have agreed to abide by its terms; and (iii) other persons
upon whom the parties mutually agree in writing. All arbitrators and mediators
shall agree in writing, prior to the start of any mediation or arbitration, to
agree to comply with the foregoing restrictions regarding Confidential
Information. All documents will be returned to the party that produced such
documents when the documents are no longer needed or upon the final
determination of the mediation or arbitration.
R. The parties may agree upon different procedures or deadlines only in
a writing signed by both parties.
3
<PAGE> 1
EXHIBIT 10.5
VIASOFT, INC.
DEFERRED COMPENSATION PLAN
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I TITLE AND DEFINITIONS.................................... 1
1.1 Title................................................ 1
1.2 Definitions.......................................... 1
ARTICLE II PARTICIPATION............................................ 4
ARTICLE III DEFERRAL ELECTIONS....................................... 5
3.1 Elections to Defer Compensation...................... 5
3.2 Investment Elections................................. 6
ARTICLE IV DEFERRAL ACCOUNTS AND TRUST FUNDING...................... 6
4.1 Deferral Accounts.................................... 6
4.2 Company Discretionary Contribution Account........... 7
4.3 Trust Funding........................................ 7
ARTICLE V VESTING.................................................. 8
5.1 Deferral Account..................................... 8
5.2 Company Discretionary Contribution Account........... 8
ARTICLE VI DISTRIBUTIONS............................................ 8
6.1 Distribution of Deferred Compensation and
Discretionary Company Contributions................ 8
6.2 Early Distributions................................. 11
6.3 Inability to Locate Participant..................... 12
6.4 Payment of Policy Premiums.......................... 12
ARTICLE VII ADMINISTRATION.......................................... 12
7.1 Committee........................................... 12
7.2 Committee Action.................................... 13
7.3 Powers and Duties of the Committee.................. 13
7.4 Construction and Interpretation..................... 14
7.5 Information......................................... 14
7.6 Compensation, Expenses and Indemnity................ 14
7.7 Quarterly Statements................................ 14
7.8 Disputes............................................ 15
ARTICLE VIII MISCELLANEOUS........................................... 16
8.1 Unsecured General Creditor.......................... 16
8.2 Restriction Against Assignment...................... 16
8.3 Withholding......................................... 16
8.4 Amendment, Modification, Suspension or Termination.. 16
8.5 Governing Law....................................... 17
8.6 Receipt or Release.................................. 17
<PAGE> 3
8.7 Payments on Behalf of Persons Under Incapacity...... 17
8.8 Limitation of Rights and Employment Relationship.... 17
8.9 Headings............................................ 17
ii
<PAGE> 4
VIASOFT, INC.
DEFERRED COMPENSATION PLAN
WHEREAS, Viasoft, Inc. (the "Company") desires to establish
the Viasoft Deferred Compensation Plan to provide supplemental retirement income
benefits for a select group of management and highly compensated employees
through deferrals of salary and incentive compensation effective as of July 1,
1997;
NOW, THEREFORE, effective as of July 1, 1997, the Plan is
hereby adopted to read as follows:
ARTICLE I
TITLE AND DEFINITIONS
1.1 Title.
This Plan shall be known as the Viasoft, Inc. Deferred
Compensation Plan.
1.2 Definitions.
Whenever the following words and phrases are used in this
Plan, with the first letter capitalized, they shall have the meanings specified
below.
(a) "Account" or "Accounts" shall mean a Participant's
Deferral Account and/or Company Discretionary Contribution Account.
(b) "Base Salary" shall mean a Participant's annual base
salary, excluding bonus, incentive and all other remuneration for services
rendered to Company and prior to reduction for any salary contributions to a
plan established pursuant to Section 125 of the Code or qualified pursuant to
Section 401(k) of the Code.
(c) "Beneficiary" or "Beneficiaries" shall mean the
person or persons, including a trustee, personal representative or other
fiduciary, last designated in writing by a Participant in accordance with
procedures established by the Committee to receive the benefits specified
hereunder in the event of the Participant's death (other than the death benefits
described in Section 6.1(b)(1) unless such person is designated as a beneficiary
under the Policy described therein). No beneficiary designation shall become
effective until it is filed with the Committee. Any designation shall be
revocable at any time through a written instrument filed by the Participant with
the Committee with or without the consent of the previous Beneficiary. If there
is no Beneficiary designation in effect, then the person designated to receive
the death benefit specified in Section 6.1(b)(1) shall be the Beneficiary.
However, no designation of a Beneficiary other than the Participant's spouse
shall be valid unless consented to in writing by such spouse. If there is no
such designation or if there is no surviving designated Beneficiary, then the
Participant's surviving spouse shall be the Beneficiary. If there is no
surviving spouse to receive
<PAGE> 5
any benefits payable in accordance with the preceding sentence, the duly
appointed and currently acting personal representative of the Participant's
estate (which shall include either the Participant's probate estate or living
trust) shall be the Beneficiary. In any case where there is no such personal
representative of the Participant's estate duly appointed and acting in that
capacity within 90 days after the Participant's death (or such extended period
as the Committee determines is reasonably necessary to allow such personal
representative to be appointed, but not to exceed 180 days after the
Participant's death), then Beneficiary shall mean the person or persons who can
verify by affidavit or court order to the satisfaction of the Committee that
they are legally entitled to receive the benefits specified hereunder. In the
event any amount is payable under the Plan to a minor, payment shall not be made
to the minor, but instead be paid (a) to that person's living parent(s) to act
as custodian, (b) if that person's parents are then divorced, and one parent is
the sole custodial parent, to such custodial parent, or (c) if no parent of that
person is then living, to a custodian selected by the Committee to hold the
funds for the minor under the Uniform Transfers or Gifts to Minors Act in effect
in the jurisdiction in which the minor resides. If no parent is living and the
Committee decides not to select another custodian to hold the funds for the
minor, then payment shall be made to the duly appointed and currently acting
guardian of the estate for the minor or, if no guardian of the estate for the
minor is duly appointed and currently acting within 60 days after the date the
amount becomes payable, payment shall be deposited with the court having
jurisdiction over the estate of the minor. Payment by Company pursuant to any
unrevoked Beneficiary designation, or to the Participant's estate if no such
designation exists, of all benefits owed hereunder shall terminate any and all
liability of Company.
(d) "Board of Directors" or "Board" shall mean the Board
of Directors of Viasoft, Inc.
(e) "Change in Control" shall mean and include each of
the following:
(1) Any transaction or series of transactions,
whereby any person (as that term is used in Section 13 and 14(d)(2) of
the Securities and Exchange Act of 1934), excluding affiliates of the
Company as of the Effective Date, is or becomes the beneficial owner
(as that term is used in Section 13(d) of the Securities and Exchange
Act of 1934) directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's
then outstanding securities;
(2) Any merger, consolidation, or liquidation of the
Company in which the Company is not the continuing or surviving
corporation or pursuant to which common stock of company with par value
of $.001 would be converted into cash, securities, or other property,
other than a merger or consolidation with a wholly owned subsidiary, a
reincorporation of the Company in a different jurisdiction, or other
transaction in which there is no substantial change in the shareholders
of the Company.
(3) The sale, transfer, or other disposition of all
or substantially all of the assets of the Company.
(f) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
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<PAGE> 6
(g) "Committee" shall mean the Committee appointed by the
Board to administer the Plan in accordance with Article VII.
(h) "Commissions" shall mean a Participant's remuneration
earned from Company which is dependent on sales activity and is not related to
Base Salary or Performance Bonuses.
(i) "Company" shall mean Viasoft, Inc. and any successor
corporations. Company shall include each corporation which is a member of a
controlled group of corporations (within the meaning of Section 414(b) of the
Code) of which Viasoft, Inc. is a component member, if the Board provides that
such corporation shall participate in the Plan.
(j) "Company Discretionary Contribution Account" shall
mean the bookkeeping account maintained by Company for each Participant that is
credited with an amount equal to the Company Discretionary Contribution Amount,
if any, and earnings and losses pursuant to Section 4.2.
(k) "Company Discretionary Contribution Amount" shall
mean, for each Participant for a Plan Year, an additional discretionary amount
allocated to a Participant under this Plan as determined by the Committee. Such
amount may differ from Participant to Participant both in amount, including no
contribution, and as a percentage of Compensation.
(l) "Compensation" shall mean Base Salary, Commissions
and Performance Bonuses that the Participant is entitled to receive for services
rendered to the Company.
(m) "Deferral Account" shall mean the bookkeeping account
maintained by the Committee for each Participant that is credited with amounts
equal to (1) the portion of the Participant's Compensation that he or she elects
to defer, and (2) interest pursuant to Section 4.1.
(n) "Distributable Amount" shall mean the sum of (1) the
amounts credited to a Participant's Deferral Account and (2) the vested portion
of the amount credited to his or her Company Discretionary Contribution Account.
(o) "Early Distribution" shall mean an election by a
Participant in accordance with Section 6.2 to receive a withdrawal of amounts
from his or her Deferral Account and Company Discretionary Contribution Account
prior to the time in which such Participant would otherwise be entitled to such
amounts.
(p) "Effective Date" shall mean July 1, 1997.
(q) "Eligible Employee" shall mean such management and
highly compensated employees as are designated by the Committee for
participation in this Plan.
(r) "Fund" or "Funds" shall mean one or more of the
investment funds selected by the Committee pursuant to Section 3.2(b).
(s) "Initial Election Period" for an Eligible Employee
shall mean the 30-day period
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<PAGE> 7
following July 1, 1997 or the 30-day period following the Eligible Employee's
date of hire.
(t) "Interest Rate" shall mean, for each Fund, an amount
equal to the net rate of gain or loss on the assets of such Fund during each
month.
(u) "Participant" shall mean any Eligible Employee who
becomes a Participant in accordance with Section 2.1.
(v) "Payment Date" shall mean the time as soon as
practicable after (1) the first day of the month following the end of the
calendar quarter in which the Participant's employment terminates for any
reason, or (2) the Scheduled Withdrawal Date.
(w) "Performance Bonuses" shall mean the quarterly
performance bonus and annual performance bonus earned during a Plan Year,
whether or not paid during such Plan Year as such performance bonuses may be
determined by the Company.
(x) "Plan" shall mean the Viasoft, Inc. Deferred
Compensation Plan set forth herein, now in effect, or as amended from time to
time.
(y) "Plan Year" shall mean the 12 consecutive month
period beginning on each July 1 and ending on June 30.
(z) "Policy" shall mean an insurance policy purchased in
accordance with the terms of this Plan.
(aa) "Retirement" or "Retires" shall mean the attainment
of age of 60 by a Participant and his or her termination of employment with
Company.
(bb) "Scheduled Withdrawal Date: shall be the distribution
date elected by the Participant for an inservice withdrawal of all amounts of
Compensation deferred in a given Plan Year, and earnings and losses attributable
thereto, as set forth on the election form for such Plan Year.
(cc) "Trust" shall mean Viasoft Deferred Compensation
Plan Trust.
ARTICLE II
PARTICIPATION
An Eligible Employee shall become a Participant in the Plan by
(1) electing to defer a portion of his or her Compensation in accordance with
Section 3.1, (2) filing a life insurance application form along with his or her
deferral election form, and (3) complying with such medical underwriting
requirements as determined by the life insurance carrier selected by the
Company. An Eligible Employee who completes the requirements of the preceding
sentence shall commence participation in this Plan as of the first day of the
month in which Compensation is deferred. A money market rate of interest will be
applied to all Participant deferrals and
4
<PAGE> 8
Company Contributions until a Participant receives notification that the life
insurance policies which have been applied for have been issued by the life
insurance carrier. In the event it is determined by the Committee, that the
proposed life insurance policy cannot be obtained in a cost efficient manner
after medical underwriting requirements have been met, the Participant shall not
be eligible to receive death benefits in accordance with Section 6.1(c) of the
Plan.
ARTICLE III
DEFERRAL ELECTIONS
3.1 Elections to Defer Compensation.
(a) Initial Election Period. Subject to the provisions of
Article II, each Eligible Employee may elect to defer Base Salary and/or
Performance Bonuses by filing with the Committee an election that conforms to
the requirements of this Section 3.1, on a form provided by the Committee, no
later than the last day of his, her or its Initial Election Period.
(b) General Rule. The amount of Compensation which an
Eligible Employee may elect to defer is such Compensation earned on or after the
time at which the Eligible Employee elects to defer in accordance with Sections
1.2(s) and 3.1(a) and shall be a flat dollar amount which shall not exceed 50%
of the Eligible Employee's Base Salary and/or 100% of his Performance Bonuses
and Commissions, provided that the total amount deferred by a Participant shall
be limited in any calendar year, if necessary, to satisfy Social Security tax
(including Medicare), income tax and employee benefit plan withholding
requirements as determined in the sole and absolute discretion of the Committee.
The minimum contribution which may be made in any Plan Year by an Eligible
Employee shall not be less than $5,000, provided such minimum contribution can
be satisfied from either Base Salary and/or Performance Bonus and Commission
deferrals.
(c) Duration of Compensation Deferral Election. An
Eligible Employee's initial election to defer Base Salary must be filed before
July 30. 1997 and is to be effective for the next pay period. A Participant may
increase, decrease or terminate a deferral election with respect to Base Salary
for any subsequent Plan Year by filing a new election on or before June 30,
which election shall be effective on the first day of the next following Plan
Year. An Eligible Employee's Initial Election to defer Performance Bonuses and
Commissions must be filed by July 30, 1997. Any subsequent election with respect
to Performance Bonuses and Commissions must be filed by June 30 of the year
prior to the year that the Performance Bonuses and Commissions are earned. All
elections with respect to Performance Bonuses and Commissions are for one Plan
Year. In the case of an employee who becomes an Eligible Employee after July 1,
1997, such Eligible Employee shall have 30 days from the date he or she has
become an Eligible Employee to make an Initial Election with respect to Base
Salary, Performance Bonuses and Commissions. Such election shall be for the
remainder of the Plan Year.
(d) Elections other than Elections during the Initial
Election Period. Subject to the limitations of Section 3.1(b) above, any
Eligible Employee who fails to elect to defer
5
<PAGE> 9
Compensation during his or her Initial Election Period may subsequently become a
Participant, and any Eligible Employee who has terminated a prior Compensation
deferral election may elect to again defer Compensation, by filing an election,
on a form provided by the Committee, to defer Compensation as described in
Sections 3.1(b) and 3.1(c) above. An election to defer Compensation must be
filed on or before June 15 and will be effective for Compensation earned during
pay periods beginning after the following July 1.
3.2 Investment Elections.
(a) At the time of making the deferral elections
described in Section 3.1, the Participant shall designate, on a form provided by
the Committee, the types of investment funds the Participant's Account will be
deemed to be invested in for purposes of determining the amount of earnings to
be credited to that Account. In making the designation pursuant to this Section
3.2, the Participant may specify that all or any multiple of his Deferral
Account (equal to or greater than 10% in whole percentage increments) be deemed
to be invested in one or more of the types of investment funds listed above.
Effective as of the end of any calendar quarter, a Participant may change the
designation made under this Section 3.2 by filing an election, on a form
provided by the Committee, at least 30 days prior to the end of such quarter. If
a Participant fails to elect a type of fund under this Section 3.2, he or she
shall be deemed to have elected the Money Market type of investment fund.
(b) Although the Participant may designate the type of
investment funds in Section 3.2(a) above, the Committee shall not be bound by
such designation. The Committee shall select from time to time, in its sole
discretion, a commercially available investment fund of each of the types
described in Section 3.2(a) above to be the Funds. The Interest Rate of each
such commercially available investment fund shall be used to determine the
amount of earnings or losses to be credited to Participant's Account under
Article IV.
(c) Pursuant to the requirements of Section 2.1 that a
Participant complete a life insurance application before being eligible to
participate in this Plan, a Participant's Deferral Account will be used to pay
for the supplemental life insurance coverage. The life insurance death benefit
will be an amount equal to a multiple of the Participant's first-year deferral
as set forth in Section 6.1(c).
ARTICLE IV
DEFERRAL ACCOUNTS AND TRUST FUNDING
4.1 Deferral Accounts.
The Committee shall establish and maintain a Deferral Account
for each Participant under the Plan. Each Participant's Deferral Account shall
be further divided into separate subaccounts ("investment fund subaccounts"),
each of which corresponds to a investment fund or contract elected by the
Participant pursuant to Section 3.2(a). A Participant's Deferral Account shall
be credited as follows:
6
<PAGE> 10
(a) As of the last day of each month, the Committee shall
credit the investment fund subaccounts of the Participant's Deferral Account
with an amount equal to Compensation deferred by the Participant during each pay
period ending in that month in accordance with the Participant's election under
Section 3.2(a); that is, the portion of the Participant's deferred Compensation
that the Participant has elected to be deemed to be invested in a certain type
of investment fund shall be credited to the investment fund subaccount
corresponding to that investment fund;
(b) As of the last day of each month, each investment
fund subaccount of a Participant's Deferral Account shall be credited with
earnings or losses in an amount equal to that determined by multiplying the
balance credited to such investment fund subaccount as of the last day of the
preceding month by the Interest Rate for the corresponding fund selected by the
Company pursuant to Section 3.2(b).
(c) In the event that a Participant elects for a given
Plan Year's deferral of Compensation to have a Scheduled Withdrawal Date, all
amounts attributed to the deferral of Compensation for such Plan Year shall be
accounted for in a manner which allows separate accounting for the deferral of
Compensation and investment gains and losses associated with such Plan Year's
deferral of Compensation.
4.2 Company Discretionary Contribution Account.
The Committee shall establish and maintain a Company
Discretionary Contribution Account for each Participant under the Plan. Each
Participant's Company Discretionary Contribution Account shall be further
divided into separate investment fund subaccounts corresponding to the
investment fund elected by the Participant pursuant to Section 3.2(a). A
Participant's Company Discretionary Contribution Account shall be credited as
follows:
(a) As of the last day of each Plan Year, the Committee
shall credit the investment fund subaccounts of the Participant's Company
Discretionary Contribution Account with an amount equal to the Company
Discretionary Contribution Amount, if any, applicable to that Participant, that
is, the proportion of the Company Discretionary Contribution Amount, if any,
which the Participant elected to be deemed to be invested in a certain type of
investment fund shall be credited to the corresponding investment fund
subaccount; and
(b) As of the last day of each month, each investment
fund subaccount of a Participant's Company Discretionary Contribution Account
shall be credited with earnings or losses in an amount equal to that determined
by multiplying the balance credited to such investment fund subaccount as of the
last day of the preceding month by the Interest Rate for the corresponding Fund
selected by the Company pursuant to Section 3.2(b).
4.3 Trust Funding.
The Company has created a Trust with First American Trust
Company serving as initial trustee. The Company shall cause the Trust to be
funded each year. The Company
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<PAGE> 11
shall contribute to the Trust an amount equal to the amount deferred by each
Participant for the Plan Year. The Company shall contribute to the Trust an
amount equal to the Company Discretionary Contribution Amount for the Plan Year.
The Company may also contribute such additional amounts as it shall deem
necessary or appropriate if needed to pay for the insurance premiums on the
Policies needed to fund the death benefits pursuant to Section 6.1(c)(1) of the
Plan.
Although the principal of the Trust and any earnings thereon
shall be held separate and apart from other funds of Company and shall be used
exclusively for the uses and purposes of Plan Participants and beneficiaries as
set forth therein, neither the Participants nor their beneficiaries shall have
any preferred claim on, or any beneficial ownership in, any assets of the Trust
prior to the time such assets are paid to the Participants or beneficiaries as
benefits and all rights created under this Plan shall be unsecured contractual
rights of Plan Participants and beneficiaries against the Company. Any assets
held in the Trust will be subject to the claims of Company's general creditors
under federal and state law in the event of insolvency as defined in Section
4.2(a) of the Trust.
The assets of the Plan and Trust shall never inure to the
benefit of the Company and the same shall be held for the exclusive purpose of
providing benefits to Participants and their beneficiaries, deferring reasonable
expenses of administering the Plan and Trust. The sole exception to the
foregoing shall be if any amounts remain after payment to a Participant, such
amounts shall be transferred by the Trustee to the Company.
ARTICLE V
VESTING
5.1 Deferral Account.
A Participant's Deferral Account shall be 100% vested at all
times.
5.2 Company Discretionary Contribution Account.
A Company Discretionary Contribution Amount, if any, shall
vest and become nonforfeitable if the Participant is still in the employ of the
Company on the last day of the fifth Plan Year after a Company Discretionary
Contribution has been made with respect to a particular Plan Year.
ARTICLE VI
DISTRIBUTIONS
6.1 Distribution of Deferred Compensation and Discretionary
Company Contributions.
(a) Distribution Without Scheduled Withdrawal Date. In
the case of a
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<PAGE> 12
Participant who terminates employment with Company for a reason other than death
and who either (i) Retires, or (ii) terminates as a result of a long-term
disability (as defined in the Company's Long-Term Disability Income Plan for
executives), the Distributable Amount shall be paid to the Participant (and
after his or her death to his or her Beneficiary) from among the following
optional forms of benefit as elected by the Participant on the form provided by
Company during his or her Initial Election Period.
(1) A lump sum distribution beginning on the
Participant's Payment Date.
(2) Substantially equal quarterly installments
over five (5) years beginning on the Participant's Payment Date.
(3) Substantially equal quarterly installments
over ten (10) years beginning on the Participant's Payment Date.
In the event a Participant fails to elect an optional
form of benefit during his or her Initial Election Period, the Participant's
Distributable Amount will be distributed in substantially equal quarterly
installments over fifteen (15) years beginning on his or her Payment Date.
In the event a Participant's employment is
involuntarily terminated, such Participant will receive his or her Distributable
Amount in substantially equal quarterly installments over three (3) years,
unless such Participant has previously elected to receive his or her
Distributable Amount in a lump-sum distribution.
In the event of any other type of employment
termination, the Participant shall receive his Distributable Amount in a lump
sum beginning on the Payment Date.
The Participant's Accounts shall continue to be
credited with earnings pursuant to Section 4.1 of the Plan until all amounts
credited to his or her Accounts under the Plan have been distributed.
(b) Distribution With Scheduled Withdrawal Date. In the
case of a Participant who has elected a Scheduled Withdrawal Date for a
distribution while still in the employ of the Company, such Participant shall
receive his or her Distributable Amount, but only with respect to those
deferrals of Compensation and earnings on such deferrals of Compensation as
shall have been elected by the Participant to be subject to the Scheduled
Withdrawal Date in accordance with Section 1.2(bb) of the Plan. A Participant's
Scheduled Withdrawal Date with respect to amounts of Compensation deferred in a
given Plan Year can be no earlier than two years from the last day of the Plan
Year for which the deferrals of Compensation are made. A Participant may extend
the Scheduled Withdrawal Date for the deferral of Compensation for any Plan
Year, provided such extension occurs at least one year before the Scheduled
Withdrawal Date and is for a period of not less than two years from the
Scheduled Withdrawal Date. The Participant shall have the right to twice modify
any Scheduled Withdrawal Date. In the event a participant terminates employment
with Company prior to a Scheduled Withdrawal Date, the Participant's
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<PAGE> 13
entire Distributable Amount will be paid as follows:
(1) In the case of Retirement or a long-term
disability (as defined in the Company's Long-Term Disability Income
Plan for executives) in substantially equal quarterly installments over
fifteen (15) years beginning on the Participant's Payment Date, or with
the consent of the Company an optional form of benefit as set forth in
Sections 6.1(a)(1)(2)(3) may be chosen.
(2) In the event a Participant's termination of
employment with Company is involuntary, such Participant will receive
his or her Distributable Amount in substantially equal quarterly
installments over three (3) years beginning on the Payment Date.
(3) In the event of any other type of employment
termination, the Participant shall receive his Distributable Amount in
a lump sum beginning on the Payment Date.
(c) In the case of a Participant who dies while employed
by the Company, the following benefits shall be provided:
(1) that portion of the death benefit of any life
insurance policy purchased by the Company to insure the life of the Participant
and which is subject to a "Split-Dollar Life Insurance Agreement" (as described
therein) (the "Policy") which is equal to the following amounts:
(i) If a Participant elects during his
first twelve months of Plan Participation (whether such election occurs
during more than one Plan Year) to defer Base Salary only, such
Participant's death benefit shall equal his Base Salary deferrals
annualized over the first twelve months of Plan Participation
multiplied by twenty. This amount shall constitute the Participant's
death benefit for the remainder of his participation in the Plan.
(ii) If a Participant elects during his
first twelve months of Plan Participation to defer either bonuses
and/or commissions only, such Participant's death benefit during the
first twelve months of Plan Participation (whether such election occurs
during more than one Plan Year) shall be $100,000. At the end of the
initial twelve month period, the amount of the Participant's deferral
of Performance Bonuses and Commissions shall be aggregated and
multiplied by twenty, which amount shall constitute the Participant's
death benefit for the remainder of his or her participation in this
Plan.
(iii) In the event that a Participant
elects to defer Base Salary and Performance Bonuses and/or Commissions,
then the Participant's death benefit during his first twelve months of
Plan Participation (whether such election occurs during more than one
Plan Year) shall equal his Base Salary deferrals annualized over twelve
months multiplied by twenty. At the end of the initial twelve month
period, the
10
<PAGE> 14
Participant's death benefit shall equal the amount of Base Salary
deferrals annualized during the first twelve months multiplied by
twenty plus all deferrals of Performance Bonuses and Commissions
which occurred during the first twelve months shall be aggregated and
multiplied by twenty. This amount shall constitute the Participant's
death benefit for the remainder of his participation in the Plan.
Any such Policy shall be subject to certain conditions set forth in a
"split-dollar life insurance agreement" between the Participant, Trustee and the
Company, pursuant to which the Participant may designate a beneficiary with
respect to the portion of the Policy proceeds described in the preceding
sentence in the event the Participant dies prior to terminating employment with
the Company. The Participant shall have the right to designate and change such
beneficiary (which need not be his or her Beneficiary) at any time on a form
provided by and filed with the insurance company. If no such form is on file
with the insurance company, the insurance proceeds designated in this paragraph
(1) shall be paid to the Beneficiary. The benefit payable pursuant to this
paragraph (1) shall only be paid if the insurance company agrees that the
Participant is insurable and shall be subject to all conditions and exceptions
set forth in the applicable insurance policy. Notwithstanding the provision of
this Plan or any other document to the contrary, the Company shall not have any
obligation to pay the Participant or his or her beneficiary any amounts
described in Section 6.1(c)(1); all such amounts due pursuant to Section
6.1(c)(1) shall be payable solely from the proceeds of the Policy, if any.
Furthermore, the Company is not obligated to maintain the Policy; no death
benefit shall be payable hereunder if the Company has discontinued the Policy
for the Participant. In addition, no Policy shall be allocated to any Account.
(2) The Account Balance in a lump sum or
installments as previously elected by the Participant.
(d) In the event a Participant dies after he has retired
from the employ of the Company and still has a balance in his or her Account,
the balance shall continue to be paid in quarterly installments for the
remainder of the period as elected by the Participant.
(e) In the event of a Change in Control and the
Participant's employment is terminated for any reason (either voluntary or
involuntary) within two years of the Change in Control, the Participant's
Distributable Amount shall be paid in a lump sum on the Payment Date.
6.2 Early Distributions.
A Participant shall be permitted to elect an Early
Distribution from his or her Deferral Account and the vested portion of his or
her Company Discretionary Contribution Account prior to the Payment Date,
subject to the following restrictions:
(a) The election to take an Early Distribution shall be
made by filing a form provided by and filed with the Committee prior to the end
of any calendar month.
(b) The amount of the Early Distribution shall in all
cases equal 90% of the
11
<PAGE> 15
Deferral Account and 90% of the vested portion of his Company Discretionary
Contribution Account as of the end of the calendar month as of which the
distribution is to be made.
(c) The amount described in subsection (b) above shall be
paid in a single cash lump sum as soon as practicable after the end of the
calendar month in which the Early Distribution election is made.
(d) If a Participant receives an Early Distribution, the
remaining balance of his or her Deferral Account (10% of the Deferral Account)
and the remaining balance of his vested Company Discretionary Contribution
Account (10% of the vested Company Discretionary Contribution Account) shall be
permanently forfeited and the Company shall have no obligation to the
Participant or his Beneficiary with respect to such forfeited amount.
(e) If a Participant receives an Early Distribution, the
following rules will apply for the balance of the Plan Year and for the
following Plan Year: (i) the Participant will be ineligible to participate in
the Plan, and (ii) neither the Participant (nor his Beneficiary or
beneficiaries) shall be entitled to death benefits under Section 6.1(c)(1) or
(2).
6.3 Inability to Locate Participant.
In the event that the Committee is unable to locate a
Participant or Beneficiary within two years following the required Payment Date,
the amount allocated to the Participant's Deferral Account, shall be forfeited.
If, after such forfeiture, the Participant or Beneficiary later claims such
benefit, such benefit shall be reinstated without interest or earnings.
6.4 Payment of Policy Premiums.
So long as the Company maintains a Policy for a Participant,
the Company shall pay to the Trustee amounts necessary to pay premiums on the
Policy insuring the Participant's life from as soon as practical after the end
of each Plan Year (but no later than the tax return due date for the Company for
such year), in amounts equal to the amount deferred by the Participant for the
Plan Year and the Company discretionary contribution amount for the Participant
for the Plan Year. The Company shall also pay to the Trustee amounts necessary
to pay premiums in an amount equal to the "cost of insurance" (as defined in
Policy) needed to fund the death benefit described in Section 6.1(c)(1);
provided that such obligation shall not apply with respect to a Policy if (1)
the Committee has discontinued the Policy, (2) the Participant is no longer
employed by the Company, or (3) the Participant is not entitled to a death
benefit under the Policy because he or she has taken an early distribution as
described in Section 6.2 of the Plan.
ARTICLE VII
ADMINISTRATION
7.1 Committee.
A committee shall be appointed by, and serve at the pleasure
of, the Board of
12
<PAGE> 16
Directors. The number of members comprising the Committee shall be determined by
the Board which may from time to time vary the number of members. A member of
the Committee may resign by delivering a written notice of resignation to the
Board. The Board may remove any member by delivering a certified copy of its
resolution of removal to such member. Vacancies in the membership of the
Committee shall be filled promptly by the Board.
7.2 Committee Action.
The Committee shall act at meetings by affirmative vote of a
majority of the members of the Committee. Any action permitted to be taken at a
meeting may be taken without a meeting if, prior to such action, a written
consent to the action is signed by all members of the Committee and such written
consent is filed with the minutes of the proceedings of the Committee. A member
of the Committee shall not vote or act upon any matter which relates solely to
himself or herself as a Participant. The Chairman or any other member or members
of the Committee designated by the Chairman may execute any certificate or other
written direction on behalf of the Committee.
7.3 Powers and Duties of the Committee.
(a) The Committee, on behalf of the Participants and
their Beneficiaries, shall enforce the Plan in accordance with its terms, shall
be charged with the general administration of the Plan, and shall have all
powers necessary to accomplish its purposes, including, but not by way of
limitation, the following:
(1) To select the Funds in accordance with
Section 3.2(b) hereof;
(2) To construe and interpret the terms and
provisions of this Plan;
(3) To compute and certify to the amount and
kind of benefits payable to Participants and their Beneficiaries;
(4) To maintain all records that may be
necessary for the administration of the Plan;
(5) To provide for the disclosure of all
information and the filing or provision of all reports and statements to
Participants, Beneficiaries or governmental agencies as shall be required by
law;
(6) To make and publish such rules for the
regulation of the Plan and procedures for the administration of the Plan as are
not inconsistent with the terms hereof;
(7) To appoint a plan administrator or any other
agent, and to delegate to them such powers and duties in connection with the
administration of the Plan as the Committee may from time to time prescribe;
(8) To take all actions necessary for the
administration of the Plan, including determining whether to hold or discontinue
the Policies; and
13
<PAGE> 17
(9) If a Policy is discontinued or a Participant
has terminated employment with the Company for a reason other than death, (A) to
notify the insurance company that no death benefits are payable to the
beneficiaries of the applicable Participant under the Policy (and that neither
the Participant nor his or her beneficiary has any rights under the Policy or to
any benefits under the Policy) and (B) to file a new beneficiary designation
with the insurance company naming the Company as beneficiary or to cash in the
Policy.
7.4 Construction and Interpretation.
The Committee shall have full discretion to construe and
interpret the terms and provisions of this Plan, which interpretations or
construction shall be final and binding on all parties, including but not
limited to the Company and any Participant or Beneficiary. The Committee shall
administer such terms and provisions in a uniform and nondiscriminatory manner
and in full accordance with any and all laws applicable to the Plan.
7.5 Information.
To enable the Committee to perform its functions, the Company
shall supply full and timely information to the Committee on all matters
relating to the Compensation of all Participants, their death or other events
which cause termination of their participation in this Plan, and such other
pertinent facts as the Committee may require.
7.6 Compensation, Expenses and Indemnity.
(a) The members of the Committee shall serve without
compensation for their services hereunder.
(b) The Committee is authorized at the expense of the
Company to employ such legal counsel as it may deem advisable to assist in the
performance of its duties hereunder. Expenses and fees in connection with the
administration of the Plan shall be paid by the Company.
(c) To the extent permitted by applicable state law, the
Company shall indemnify and save harmless the Committee and each member thereof,
the Board of Directors and any delegate of the Committee who is an employee of
the Company against any and all expenses, liabilities and claims, including
legal fees to defend against such liabilities and claims arising out of their
discharge in good faith of responsibilities under or incident to the Plan, other
than expenses and liabilities arising out of willful misconduct. This indemnity
shall not preclude such further indemnities as may be available under insurance
purchased by the Company or provided by the Company under any bylaw, agreement
or otherwise, as such indemnities are permitted under state law.
7.7 Quarterly Statements.
Under procedures established by the Committee, a Participant
shall receive a statement with respect to such Participant's Accounts on a
quarterly basis as of each March 31,
14
<PAGE> 18
June 30, September 30 and December 31.
7.8 Disputes.
(a) Claim.
A person who believes that he or she is being denied
a benefit to which he or she is entitled under this Agreement (hereinafter
referred to as "Claimant") may file a written request for such benefit with the
Company, setting forth his or her claim. The request must be addressed to the
President of the Company at its then principal place of business.
(b) Claim Decision.
Upon receipt of a claim, the Company shall advise the
Claimant that a reply will be forthcoming within ninety (90) days and shall, in
fact, deliver such reply within such period. The Company may, however, extend
the reply period for an additional ninety (90) days for special circumstances.
If the claim is denied in whole or in part, the
Company shall inform the Claimant in writing, using language calculated to be
understood by the Claimant, setting forth: (A) the specified reason or reasons
for such denial; (B) the specific reference to pertinent provisions of this
Agreement on which such denial is based; (C) a description of any additional
material or information necessary for the Claimant to perfect his or her claim
and an explanation of why such material or such information is necessary; (D)
appropriate information as to the steps to be taken if the Claimant wishes to
submit the claim for review; and (E) the time limits for requesting a review
under subsection (c).
(c) Request For Review.
Within sixty (60) days after the receipt by the
Claimant of the written opinion described above, the Claimant may request in
writing that the Committee review the determination of the Company. Such request
must be addressed to the Secretary of the Company, at its then principal place
of business. The Claimant or his or her duly authorized representative may, but
need not, review the pertinent documents and submit issues and comments in
writing for consideration by the Committee. If the Claimant does not request a
review within such sixty (60) day period, he or she shall be barred and estopped
from challenging the Company's determination.
(d) Review of Decision.
Within sixty (60) days after the Committee's receipt
of a request for review, after considering all materials presented by the
Claimant, the Committee will inform the Participant in writing, in a manner
calculated to be understood by the Claimant, the decision setting forth the
specific reasons for the decision containing specific references to the
pertinent provisions of this Agreement on which the decision is based. If
special circumstances require that the sixty (60) day time period be extended,
the Committee will so notify the Claimant and
15
<PAGE> 19
will render the decision as soon as possible, but no later than one hundred
twenty (120) days after receipt of the request for review.
ARTICLE VIII
MISCELLANEOUS
8.1 Unsecured General Creditor.
Participants and their Beneficiaries, heirs, successors, and
assigns shall have no legal or equitable rights, claims, or interest in any
specific property or assets of the Company. No assets of the Company shall be
held in any way as collateral security for the fulfilling of the obligations of
the Company under this Plan. Any and all of the Company's assets shall be, and
remain, the general unpledged, unrestricted assets of the Company. The Company's
obligation under the Plan shall be merely that of an unfunded and unsecured
promise of the Company to pay money in the future, and the rights of the
Participants and Beneficiaries shall be no greater than those of unsecured
general creditors. It is the intention of the Company that this Plan be unfunded
for purposes of the Code and for purposes of Title 1 of ERISA.
8.2 Restriction Against Assignment.
The Company shall pay all amounts payable hereunder only to
the person or persons designated by the Plan and not to any other person or
corporation. No part of a Participant's Accounts shall be liable for the debts,
contracts, or engagements or any Participant, his or her Beneficiary, or
successors in interest, nor shall a Participant's Accounts be subject to
execution by levy, attachment, or garnishment or by any other legal or equitable
proceeding, nor shall any such person have any right to alienate, anticipate,
sell, transfer, commute, pledge, encumber, or assign any benefits or payments
hereunder in any manner whatsoever. if any Participant, Beneficiary or successor
in interest is adjudicated bankrupt or purports to anticipate, alienate, sell,
transfer, commute, assign, pledge, encumber or charge any distribution or
payment from the Plan, voluntarily or involuntarily, the Committee, in its
discretion, may cancel such distribution or payment (or any part thereof) to or
for the benefit of such Participant, Beneficiary or successor in interest in
such manner as the Committee shall direct.
8.3 Withholding.
There shall be deducted from each payment made under the Plan
or any other Compensation payable to the Participant (or Beneficiary) all taxes
which are required to be withheld by the Company in respect to such payment or
this Plan. The Company shall have the right to reduce any payment (or
compensation) by the amount of cash sufficient to provide the amount of said
taxes.
8.4 Amendment, Modification, Suspension or Termination.
The Chief Executive Officer of Company may amend, modify,
suspend or terminate the Plan in whole or in part, except that no amendment,
modification, suspension or
16
<PAGE> 20
termination shall have any retroactive effect to reduce any amounts allocated to
a Participant's Accounts (neither the Policies themselves, nor the death benefit
described in Section 6.1(c)(1) shall be treated as allocated to Accounts). In
addition, the Chief Executive Officer has the right to amend or terminate
Section 6.1(c)(1). In the event that this Plan is terminated, the amounts
allocated to a Participant's Accounts shall be distributed to the Participant
or, in the event of his or her death, his or her Beneficiary in a lump sum
within thirty (30) days following the date of termination.
8.5 Governing Law.
This Plan shall be construed, governed and administered in
accordance with the laws of the State of Delaware.
8.6 Receipt or Release.
Any payment to a Participant or the Participant's Beneficiary
in accordance with the provisions of the Plan shall, to the extent thereof, be
in full satisfaction of all claims against the Committee and the Company. The
Committee may require such Participant or Beneficiary, as a condition precedent
to such payment, to execute a receipt and release to such effect.
8.7 Payments on Behalf of Persons Under Incapacity.
In the event that any amount becomes payable under the Plan to
a person who, in the sole judgment of the Committee, is considered by reason of
physical or mental condition to be unable to give a valid receipt therefore, the
Committee may direct that such payment be made to any person found by the
Committee, in its sole judgment, to have assumed the care of such person. Any
payment made pursuant to such determination shall constitute a full release and
discharge of the Committee and the Company.
8.8 Limitation of Rights and Employment Relationship
Neither the establishment of the Plan and Trust nor any
modification thereof, nor the creating of any fund or account, nor the payment
of any benefits shall be construed as giving to any Participant or other person
any legal or equitable right against the Company or the trustee of the Trust
except as provided in the Plan and Trust; and in no event shall the terms of
employment of any Employee or Participant be modified or in any way be affected
by the provisions of the Plan and Trust.
8.9 Headings.
Headings and subheadings in this Plan are inserted for
convenience of reference only and are not to be considered in the construction
of the provisions hereof.
IN WITNESS WHEREOF, the Company has caused this document to be
executed by its duly authorized officer on this 13th day of August, 1997.
17
<PAGE> 21
VIASOFT, INC.
By /s/ Steven D. Whiteman
-------------------------------
By /s/ Catherine R. Hardwick
-------------------------------
18
<PAGE> 1
EXHIBIT 11
VIASOFT, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30
-------------------
1997 1996
------- -------
<S> <C> <C>
PRIMARY EARNINGS PER SHARE
Common Shares Outstanding, beginning of period 17,723 16,719
Effect of Weighting of Shares:
Warrants and employee stock options outstanding 797 856
Shares issued in secondary offering 143 --
Employee stock options exercised 59 93
------- -------
Weighted average number of common and common
share equivalents outstanding 18,722 17,668
======= =======
Net income $ 3,765 $ 1,556
======= =======
Earnings per common and common share equivalent $ 0.20 $ 0.09
======= =======
FULLY DILUTED EARNINGS PER SHARE
Common Shares Outstanding, beginning of period 17,723 16,719
Effect of Weighting of Shares:
Warrants and employee stock options outstanding 797 922
Shares issued in secondary offering 143 --
Employee stock options exercised 59 93
------- -------
Weighted average number of common and common
share equivalents outstanding 18,722 17,734
======= =======
Net income $ 3,765 $ 1,556
======= =======
Earnings per common and common share equivalent $ 0.20 $ 0.09
======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 83,456
<SECURITIES> 20,275
<RECEIVABLES> 21,333
<ALLOWANCES> 653
<INVENTORY> 0
<CURRENT-ASSETS> 128,301
<PP&E> 8,979
<DEPRECIATION> 4,040
<TOTAL-ASSETS> 145,626
<CURRENT-LIABILITIES> 36,574
<BONDS> 0
0
0
<COMMON> 19
<OTHER-SE> 108,657
<TOTAL-LIABILITY-AND-EQUITY> 145,626
<SALES> 26,021
<TOTAL-REVENUES> 26,062
<CGS> 6,542
<TOTAL-COSTS> 20,719
<OTHER-EXPENSES> 122
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (521)
<INCOME-PRETAX> 5,742
<INCOME-TAX> 1,977
<INCOME-CONTINUING> 3,765
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,765
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
