<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 4, 1997
REGISTRATION NO. 333-21461
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
VIASOFT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 94-2892506
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)
</TABLE>
------------------------
3033 NORTH 44TH STREET
PHOENIX, ARIZONA 85018
(602) 952-0050
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
STEVEN D. WHITEMAN, PRESIDENT
VIASOFT, INC.
3033 NORTH 44TH STREET
PHOENIX, ARIZONA 85018
(602) 952-0050/FAX (602) 840-9058
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
WILLIAM M. HARDIN, ESQ. JORGE DEL CALVO, ESQ.
CLARK M. PORTER, ESQ. KATHARINE A. MARTIN, ESQ.
ANDREW P. KELLY, ESQ. COURTNEY M. LYNCH, ESQ.
OSBORN MALEDON, P.A. PILLSBURY MADISON & SUTRO, LLP
2929 NORTH CENTRAL AVENUE 2700 SAND HILL ROAD
PHOENIX, ARIZONA 85012-2794 MENLO PARK, CALIFORNIA 94025-7020
(602) 207-1288 (415) 233-4500
FAX (602) 235-9444 FAX (415) 233-4545
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act"), other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 4, 1997
2,000,000 SHARES
LOGO
COMMON STOCK
(PAR VALUE $.001 PER SHARE)
------------------------
Of the 2,000,000 shares of Common Stock offered, 1,600,000 shares are being
offered hereby in the United States and 400,000 shares are being offered in a
concurrent international offering outside the United States. The initial public
offering price and the aggregate underwriting discount per share will be
identical for both offerings. See "Underwriting".
Of the 2,000,000 shares of Common Stock offered, 1,650,000 shares are being
sold by VIASOFT, Inc. and 350,000 shares are being sold by the Selling
Stockholders. See "Selling Stockholders". The Company will not receive any of
the proceeds from the sale of shares by the Selling Stockholders.
The Common Stock of the Company is traded on the Nasdaq National Market
under the symbol "VIAS". On March 3, 1997, the last reported sale price of the
Common Stock on the Nasdaq National Market was $33.63 per share. See "Price
Range of Common Stock".
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PROCEEDS TO
INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDERS
---------------- ---------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Per Share...................... $ $ $ $
Total(3)....................... $ $ $ $
</TABLE>
- ---------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting".
(2) Before deducting estimated expenses of $420,000, payable by the Company.
(3) The Company and the Selling Stockholders have granted the U.S. Underwriters
an option for 30 days to purchase up to an additional 240,000 shares of
Common Stock at the offering price per share, less the underwriting
discount, solely to cover over-allotments in the United States.
Additionally, the Company and the Selling Stockholders have granted the
International Underwriters a similar option with respect to an additional
60,000 shares as part of the concurrent international offering. If such
options are exercised in full, the total offering price, underwriting
discount, proceeds to Company and proceeds to Selling Stockholders will be
$ , $ , $ and $ , respectively. See
"Underwriting".
------------------------
The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York, on or about
, 1997 against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
WESSELS, ARNOLD & HENDERSON
SOUNDVIEW FINANCIAL GROUP, INC.
VOLPE, WELTY & COMPANY LLC
------------------------
The date of this Prospectus is , 1997.
<PAGE> 3
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZATION AND SHORT-COVERING TRANSACTIONS. IN
CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP MEMBERS,
IF ANY, MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE
SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING".
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by VIASOFT, INC. ("VIASOFT" or the "Company")
with the Securities and Exchange Commission (the "Commission") are hereby
incorporated by reference in this Prospectus:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1996 (File No. 0-25472);
(2) The Company's Quarterly Reports on Form 10-Q for the fiscal
quarters ended September 30, 1996 and December 31, 1996 (File No. 0-25472);
(3) The Company's Current Report on Form 8-K dated December 5, 1996
(File No. 0-25472), as amended by its Current Report on Form 8-K/A dated
February 12, 1997; and
(4) The description of the Common Stock to be registered hereunder set
forth under the caption "Description of Securities" in the Registrant's
Form S-1 Registration Statement No. 33-88366, filed pursuant to the
Securities Act of 1933, as amended (the "Securities Act").
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended
("the Exchange Act"), after the date of this Prospectus and prior to the
termination of the offering covered by this Prospectus shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in any
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide, without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any and all of the information that has been or may be incorporated by reference
in this Prospectus, other than exhibits to such documents (unless such exhibits
are specifically incorporated by reference into such documents). Such requests
should be directed to Catherine R. Hardwick, Secretary, VIASOFT, Inc., 3033
North 44th Street, Phoenix, Arizona 85018, telephone (602) 952-0050.
------------------------
VIASOFT(R), Analytical Engine(TM), Application Knowledge Repository(TM),
Existing Systems Workbench(R), ESW(R), VIA/Insight(R), Visual/Recap(TM),
VIA/SmartEdit(R), VIA/SmartTest(R), VIA/Renaissance(TM), VIA/SmartDoc(R),
VIA/Alliance(R), VIA/SmartAccess(R), VIASOFT's Insourcing(TM), US2000(TM),
VIASOFT's Enterprise 2000(TM), VIASOFT's Estimate 2000(TM), VIASOFT's Fast Path
2000(SM), VIASOFT's Impact 2000(SM), VIASOFT's Operation 2000(SM), VIASOFT's
Plan 2000(SM), ESW/PC(TM), VIASOFT's Legacy Transitions(SM), c.era(SM) and
Rochade(TM) are trademarks of the Company. This Prospectus also includes trade
names, trademarks and references to intellectual property owned by other
companies. Fortune 1000 is a trademark of Time, Inc.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Consolidated Financial Statements and Notes thereto appearing
elsewhere or incorporated by reference in this Prospectus. Prospective investors
should carefully consider the information set forth under the heading "Risk
Factors". Except as otherwise specified, all information in this Prospectus
assumes no exercise of the Underwriters' over-allotment options. See
"Underwriting".
The following summary contains forward-looking statements that involve
risks and uncertainties. Such forward-looking statements 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 could cause or contribute to such differences include,
but are not limited to, those discussed below in "Risk Factors", as well as
those discussed elsewhere in this Prospectus and in the documents incorporated
herein by reference. See "Special Note on Forward-Looking Statements".
THE COMPANY
VIASOFT provides enterprise application management solutions that help
large organizations worldwide understand, manage and evolve the large-scale
software applications that support their fundamental business processes. These
business solutions are provided through a highly integrated suite of software
products and specialized professional services. Organizations that rely on
mainframe systems must continuously modify, maintain and redevelop existing
software applications to address changing information requirements resulting
from the ongoing evolution of business practices. The Company's products and
services are designed to reduce substantially the cost of maintaining and
redeveloping existing mainframe applications, improve the quality and
maintainability of these applications and assist in implementing specialized or
complex redevelopment initiatives, such as the year 2000 century date
conversion.
The Company's principal business solutions are based on VIASOFT's
proprietary technology, the Existing Systems Workbench ("ESW"), an integrated
suite of software tools. ESW supports the IBM MVS operating system and includes
products that are available individually or as a complete suite. VIASOFT's
business solutions, which combine the Company's products and professional
services offerings, include (i) VIASOFT's Enterprise 2000 for addressing the
year 2000 problem, (ii) VIASOFT's Insourcing for reducing the costs and
improving the productivity of managing enterprise applications, and (iii)
VIASOFT's Legacy Transitions for reusing and evolving enterprise applications
for the implementation of distributed computing environments and packaged
software applications. As part of the Company's strategy to broaden its
enterprise application management solutions, the Company acquired Rottger &
Osterberg Software-Technik GmbH ("R&O") in December 1996 and is in the process
of integrating R&O's repository technology into VIASOFT's solution offerings.
The Company's objective is to enhance its position as a leading provider of
enterprise application management solutions for large organizations worldwide. A
key element of the Company's strategy is to provide integrated business
solutions for its customers. The Company believes that the integration of
services with its product offerings is an effective strategy for addressing the
complex maintenance and redevelopment requirements of large organizations and
will promote long-term relationships with the Company's installed base of
customers. The Company also intends to capitalize on the year 2000 century date
conversion opportunity through expanded product and service offerings,
cooperative marketing relationships with third parties and leveraging year 2000
customer relationships to sell other products and services. Additional key
elements of the Company's strategy include the ongoing enhancement of its
technological leadership position, the acquisition of businesses, products and
technologies that complement its existing products and services and the
expansion of its worldwide sales and distribution channels, both directly and
through third-party relationships.
3
<PAGE> 5
The Company markets its products and services primarily to Fortune 1000
companies and similarly sized business and governmental organizations worldwide.
The Company's marketing efforts are implemented through its domestic and
international direct sales forces, through a number of foreign independent
distributors located in Europe, the Far East, South Africa and Latin America and
through strategic relationships with third parties as part of its
Solution/Technology Provider program. Representative customers of the Company
include Abbott Laboratories, Citibank, N.A., France Telecom, Mastercard
International, Incorporated, Metropolitan Life Insurance Company, Motorola,
Inc., Phillips Petroleum Company and Union Pacific Railroad.
RECENT DEVELOPMENTS
On December 5, 1996, VIASOFT 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 develops, markets and supports repository software
tools through its Rochade product line, together with related repository-based
services and solutions. Rochade is based on an open repository software
technology that is designed to help businesses capture, manage, monitor,
disseminate, reuse and change their information technology assets in both
mainframe systems and distributed computing environments. R&O was founded in
1976, is headquartered in Munich, Germany and has operations in Europe and the
United States.
VIASOFT's strategy is to develop and enhance the Rochade repository
technology for integration with VIASOFT's product line and professional services
solutions. The Company believes that the Rochade repository technology will
provide significant additional benefits to customers as part of a suite of
integrated products and solutions, compared to repositories offered as
stand-alone products. VIASOFT believes that this open, enterprise-wide
repository will provide a foundation on which to develop and market new
integrated products and solutions. The R&O acquisition also presents an
opportunity for VIASOFT to market the enhanced Rochade product line to VIASOFT's
existing customer base and to market VIASOFT's products and services to R&O's
customer base.
VIASOFT 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 in the quarter ended December 31, 1996. The Company paid $10.8
million in cash and issued approximately 425,000 shares of restricted Common
Stock valued at $12.8 million to the selling stockholders of R&O. Additional
consideration of $2.0 million is payable on February 28, 1997. The Company has
also committed to pay additional cash consideration of $2.0 million (or, at each
former R&O stockholder's election, additional shares of Common Stock with an
equivalent market value) if certain financial performance criteria are met for
the period from January 1, 1997 through June 30, 1997. The Company also assumed
liabilities of approximately $9.4 million and recorded other direct costs of
approximately $3.8 million related to the acquisition. See "Management's
Discussion and Analysis of Consolidated Financial Condition and Results of
Operations".
4
<PAGE> 6
RISK FACTORS
For a discussion of considerations relevant to an investment in the Common
Stock, see "Risk Factors".
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by:
The Company................................ 1,650,000 shares
The Selling Stockholders................... 350,000 shares
Common Stock to be outstanding after the
Offering(1)................................ 19,048,075 shares
Use of Proceeds.............................. Enhancement and integration of the Rochade
product line, the addition of direct sales
and research and development personnel,
marketing initiatives, potential acquisitions
of businesses, products and technologies,
working capital and other general corporate
purposes.
Nasdaq National Market Symbol................ VIAS
</TABLE>
- ---------------
(1) Based on 17,398,075 shares outstanding as of December 31, 1996 and excludes
(a) 1,427,174 shares of Common Stock issuable upon exercise of outstanding
stock options, (b) 325,784 shares of Common Stock reserved for future
issuance under the 1994 Equity Incentive Plan, (c) 442,603 shares of Common
Stock reserved for future issuance under the Employee Stock Purchase Plan,
and (d) 340,000 shares of Common Stock reserved for future issuance under
the Outside Directors Stock Option Plan. Also excludes an undetermined
number of shares valued at $2.0 million issuable after June 30, 1997 at the
option of the former stockholders of R&O in connection with the acquisition
of R&O if certain performance criteria are met. See "-- Recent
Developments".
5
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31,
--------------------------------
(UNAUDITED)
FISCAL YEAR ENDED JUNE 30, PRO
------------------------------- FORMA
1994 1995 1996 1995 1996 1996(1)
------- ------- ------- ------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software license fees......................... $13,029 $14,311 $17,824 $ 8,275 $ 13,095 $15,530
Maintenance fees.............................. 10,041 12,059 14,305 6,879 8,900 11,047
Professional services fees.................... 2,715 4,387 11,307 3,475 11,675 12,924
Other......................................... 199 194 121 67 89 211
------- ------- ------- ------- -------- -------
Total revenues.......................... 25,984 30,951 43,557 18,696 33,759 39,712
------- ------- ------- ------- -------- -------
Operating expense:
Cost of software license and maintenance
fees(2)..................................... 1,544 2,661 2,788 1,457 1,577 2,703
Cost of professional services fees............ 2,522 4,052 8,025 2,978 8,470 9,683
Sales and marketing........................... 11,993 13,517 18,137 7,865 12,320 14,202
Research and development...................... 3,291 3,193 4,237 2,045 2,852 4,109
Write-off of purchased in-process research and
development(3).............................. -- -- -- -- 26,958 --
General and administrative(2)................. 2,480 2,643 3,567 1,525 2,620 3,430
------- ------- ------- ------- -------- -------
Total operating expenses................ 21,830 26,066 36,754 15,870 54,797 34,127
Income (loss) from operations................... 4,154 4,885 6,803 2,826 (21,038) 5,585
Total other income (expense).................... (22) 490 1,257 620 670 664
------- ------- ------- ------- -------- -------
Income (loss) before income taxes............... 4,132 5,375 8,060 3,446 (20,368) 6,249
Income tax provision............................ 487 183 1,843 865 2,260 2,139
------- ------- ------- ------- -------- -------
Net income (loss)............................... $ 3,645 $ 5,192 $ 6,217 $ 2,581 $(22,628) $ 4,110
======= ======= ======= ======= ======== =======
Net income (loss) per common share(4)........... $ 0.29 $ 0.36 $ 0.36 $ 0.15 $ (1.34) $ 0.23
======= ======= ======= ======= ======== =======
Weighted average number of common and common
share equivalents outstanding(4).............. 12,720 14,584 17,391 17,082 16,938 18,196
======= ======= ======= ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------
ACTUAL AS ADJUSTED(5)
------- --------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................. $ 9,074 $ 61,230
Working capital....................................................................... 9,109 61,265
Total assets.......................................................................... 56,121 108,277
Deferred revenue...................................................................... 20,334 20,334
Total stockholders' equity............................................................ 19,286 71,443
</TABLE>
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(1) Gives pro forma effect to the acquisition by the Company of all of the
outstanding capital stock of R&O as if the acquisition had occurred at the
beginning of the period presented. The pro forma results exclude the $27.0
million purchased in-process research and development charge. See "-- Recent
Developments", "Pro Forma Combined Financial Data", "Management's Discussion
and Analysis of Consolidated Financial Condition and Results of Operations",
and Note 2 to Consolidated Financial Statements set forth in the Company's
Form 10-Q for the quarter ended December 31, 1996.
(2) For the period from December 5, 1996, the date of the R&O acquisition,
through December 31, 1996, cost of software license and maintenance fees and
general and administrative expense include amortization of intangible assets
acquired in connection with the R&O acquisition of $33,000 and $44,000,
respectively.
(3) See Note 2 to Consolidated Financial Statements set forth in the Company's
Form 10-Q for the quarter ended December 31, 1996, and "Management's
Discussion and Analysis of Consolidated Financial Condition and Results of
Operations".
(4) Reflects the conversion of all issued and outstanding shares of preferred
stock into 8,847,814 shares of Common Stock upon the closing of the
Company's initial public offering on March 8, 1995. Also reflects the effect
of a two-for-one stock split that was payable on September 13, 1996 to
stockholders of record as of August 30, 1996.
(5) Adjusted to give effect to the receipt of estimated net proceeds from the
sale of 1,650,000 shares of Common Stock offered by the Company hereby at an
assumed public offering price of $33.63 per share, after deducting
underwriting discounts and estimated offering expenses. See "Use of
Proceeds" and "Capitalization".
6
<PAGE> 8
RISK FACTORS
Except for historical information contained herein, this Prospectus
contains forward-looking statements that involve risks and uncertainties. Such
forward-looking statements 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 cause or
contribute to such differences include, but are not limited to, those discussed
below as well as those discussed elsewhere in this Prospectus and in the
documents incorporated herein by reference.
The Common Stock offered hereby involves a high degree of risk. In addition
to the other information in this Prospectus, the following risk factors, among
others, should be considered carefully in evaluating the Company and its
business before purchasing the shares of Common Stock offered hereby.
DEPENDENCE ON YEAR 2000 MARKET
The growth in the Company's professional services fees in fiscal 1996 and
the first half of fiscal 1997 results primarily from increased demand for
VIASOFT's Enterprise 2000 services as awareness of the year 2000 century date
conversion problem has grown. In the fiscal year ended June 30, 1996 and the six
months ended December 31, 1996, VIASOFT's Enterprise 2000 services represented
74% and 82%, respectively, of the Company's professional services revenue. In
addition, this demand has also accounted for a significant portion of software
license revenue for the same periods as customers have acquired the Company's
software products to help address their year 2000 concerns. The Company has
experienced this growth in both the domestic and international markets, but the
majority of the increase has been in the domestic marketplace. Should the demand
for the Company's year 2000 solutions and products decline significantly as a
result of new technologies, competition or any other factors, the Company's
professional services fees and license revenues would be materially and
adversely affected. The Company anticipates that demand in the year 2000 market
will decline, perhaps rapidly, following the year 2000. It is the Company's
strategy to leverage customer relationships and knowledge of customer
application systems derived from its year 2000 services solutions to market
other products and services beyond the year 2000 market. However, there can be
no assurance that this strategy will be successful, and should the Company be
unable to market other products and services as demand in the year 2000 market
declines, whether as a result of competition, technological change or other
factors, the Company's business, results of operations and financial condition
will be materially and adversely affected.
VOLATILITY OF COMMON STOCK PRICE
The Company's stock price has been volatile since its initial public
offering. The Company believes that factors such as awareness of the year 2000
problem, quarterly fluctuations in results of operations, announcements of new
products and acquisitions by the Company or by its competitors, change in
revenue or earnings estimates by securities analysts, developments in litigation
affecting the Company, changes in accounting principles or their application and
other factors may cause the market price of the Company's stock to continue to
fluctuate, perhaps substantially. In addition, stock prices for many technology
companies fluctuate widely for reasons that may be unrelated to operating
results. Due to market and securities analysts' expectations of continued growth
and the higher price/earnings ratio at which the Company's stock may trade, any
shortfall in meeting such expectations may have a rapid and significant adverse
effect on the trading price of the Company's stock. These fluctuations, as well
as general economic, market and other conditions may adversely affect the market
price of the Company's stock in the future. Fluctuations in the market price of
the Company's stock may in turn adversely affect the Company's ability to
complete any targeted acquisitions, its access to capital and financing and its
ability to attract and retain qualified personnel.
7
<PAGE> 9
PRODUCT CONCENTRATION; DEPENDENCE ON MAINFRAME SYSTEMS
Substantially all of the Company's software license fee revenues and
maintenance fee revenues are derived from products in the Company's primary
product line, the Existing Systems Workbench. In addition, a substantial portion
of the Company's professional services fee revenues is derived from customers
that also license ESW products. If license sales, maintenance renewals or
pricing levels of ESW products were to decline materially, whether as a result
of technological change, competition or any other factors, the Company's
business, results of operations and financial condition would be materially and
adversely affected. The Company's principal software products and services are
designed for users of IBM and IBM-compatible mainframe computers utilizing IBM's
MVS/XA or MVS/ESA operating systems. Future revenues from sales of products and
services and recurring maintenance revenues are therefore dependent on continued
use of such mainframe computers and related operating system software. In
addition, because VIASOFT products require the use of IBM's MVS operating
systems, the Company will be required to adapt its products to any changes made
to these IBM operating systems in the future. The Company's inability to adapt
to future changes in the MVS operating systems, or delays in doing so, could
have a material adverse effect on the Company's business, results of operations
and financial condition. See "-- Ability to Respond to Technological Change".
All of the software license and maintenance revenues and all professional
services fees of R&O have been related to R&O's Rochade product line. See
"-- Ability to Assimilate Acquired Business".
ABILITY TO ASSIMILATE ACQUIRED BUSINESS
VIASOFT intends to integrate the Rochade repository technology acquired
from R&O into VIASOFT's software product and solution offerings, which is
expected to cost approximately $2.6 million. VIASOFT also plans to enhance and
market the Rochade product line to VIASOFT's customer base and to market its ESW
product line and professional service solutions to the customer base of R&O. In
addition, many of the operations of the Company and R&O are in the process of
being integrated in order to achieve planned cost savings and synergies. Costs
associated with these and other integration activities will be incurred by the
Company, including severance payments, closing of excess facilities and
disposition of excess equipment, product and service development costs and
additional marketing and sales costs, among others. These costs will increase
the Company's operating expenses in the periods in which they are incurred over
and above amounts already reserved. There may be substantial difficulties
associated with integrating the technology and operations of the Company and
R&O, and there can be no assurance that this integration will be accomplished
expeditiously or successfully or that the anticipated benefits from these
activities, such as improved product performance, cost savings, synergies, and
increased penetration of the two companies' respective customer bases, will be
realized. The integration of certain technology and operations will require the
dedication of management resources that may temporarily distract attention from
the day-to-day business of the Company. The business of the Company may also be
disrupted by employee uncertainty and lack of focus during this integration.
There can be no assurance that the Company will be able to retain key technical,
managerial and other employees. Failure to accomplish the integration of the
technology and operations of the Company and R&O on a timely basis and as
planned could have a material adverse effect on the Company's business,
financial condition and results of operations.
FLUCTUATING QUARTERLY RESULTS
The Company has experienced significant quarterly and other fluctuations in
revenues and operating results and expects these fluctuations to continue in the
future. The Company believes that these fluctuations have been attributable to
the budgeting and purchasing practices of its customers, the length of the
customer product evaluation process for the Company's products, the timing of
its customers' system conversions, and to a lesser extent, the Company's sales
commission practices, which are based partly on quarterly incentives and annual
quotas, and other
8
<PAGE> 10
factors. The Company's revenues and results of operations may also be affected
by seasonal trends which have resulted in higher revenues in the Company's
second and fourth fiscal quarters and lower revenues in its first and third
fiscal quarters. This seasonality is a result of many customers' annual
purchasing and budgetary practices, the Company's sales commission practices,
lower revenues in the summer months (particularly in Europe) when many
businesses make fewer purchases, and other factors. The Company's professional
services revenues tend to fluctuate due to the completion or commencement of
significant projects, which may continue over multiple quarters, the number of
working days in a quarter and the utilization rate of professional services
personnel. Future revenues and operating results may fluctuate as a result of
these and other factors, including the demand for the Company's products and
services, the timing and cost of new product and service introductions and
product enhancements, changes in the mix of products and services sold and in
the mix of sales by distribution channels, timing of any acquisitions and
associated costs, the size and timing of customer orders, changes in pricing
policies by the Company or its competitors, the timing of collection of accounts
receivable and related reported days' sales outstanding, changes in foreign
currency exchange rates, competitive conditions in the industry and general
economic conditions. Furthermore, as a result of these and other factors, it is
likely that in some future quarter the Company's revenues or operating results
will be below the expectations of securities analysts or investors, in which
case the price of the Common Stock could likely be materially and adversely
affected. See "Management's Discussion and Analysis of Consolidated Financial
Condition and Results of Operations".
Historically, the Company has had little or no backlog. Quarterly revenues
and operating results therefore depend primarily on the volume and timing of
orders received during the quarter, which are difficult to forecast. The Company
has often recognized a substantial portion of its license fees in the last month
of each quarter, frequently in the last week. A significant portion of the
Company's operating expenses is relatively fixed, since personnel levels and
other expenses are based upon anticipated revenues. Because a substantial
portion of the Company's revenues may not be generated until the end of each
quarter, the Company may not be able to reduce spending in response to sales
shortfalls or delays. These factors, many of which are not within the Company's
control, can cause significant variations in operating results from quarter to
quarter. Accordingly, the Company believes that quarter to quarter comparisons
of its financial results are not necessarily meaningful and should not be relied
upon as an indication of future performance. See "Management's Discussion and
Analysis of Consolidated Financial Condition and Results of Operations".
RISKS FROM INTERNATIONAL OPERATIONS
Approximately 25% and 29% of the Company's total revenues in the fiscal
year ended June 30, 1996, and the six months ended December 31, 1996,
respectively, were attributable to international sales. The Company believes
that international business will continue to account for a significant portion
of its revenues, due in part to continued expansion of its ESW product line
internationally and the recent acquisition of R&O. In R&O's fiscal year ended
December 31, 1995 and the nine-month period ended September 30, 1996,
approximately 73% and 60% of its total revenues were from sources outside North
America, respectively. International operations are subject to a number of
risks, including longer accounts receivable payment cycles, exchange rate
fluctuations, difficulty in enforcing agreements and collecting accounts
receivable, tariffs and other restrictions on foreign trade, U.S. export
requirements, withholding and other tax consequences, economic and political
instability, restrictions on repatriation of earnings and the burdens of
complying with a wide variety of foreign laws. The Company has experienced
longer payment cycles from some of its foreign distributors. Sales made through
the Company's foreign distributors are denominated in U.S. dollars except in
Italy, where they are denominated in lira. Sales by the Company's foreign
subsidiaries are principally denominated in the currencies of the countries
where sales are made. The Company has not to date sought to hedge the risks
associated with fluctuations in foreign exchange rates and does not currently
plan to do so. The Company's foreign operations are also affected by general
9
<PAGE> 11
economic conditions in its international markets. A prolonged economic downturn
in its foreign markets could have a material adverse effect on the Company's
business. In addition, the laws of certain countries do not protect the
Company's products and intellectual property rights to the same extent as do the
laws of the United States. There can be no assurance that the factors described
above will not have an adverse effect on the Company's future international
revenues and, consequently, on the Company's business, results of operations and
financial condition. See "Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations" and "Business -- Sales, Marketing
and Distribution".
In addition, approximately 9% and 5% of the Company's total revenues and
35% and 18% of international revenues were realized through the sales and
marketing efforts of its independent distributors in the fiscal year ended June
30, 1996 and the six months ended December 31, 1996, respectively. The efforts
expended and results achieved by independent distributors are less within the
control of the Company than its direct sales operations. A reduction in sales by
the Company's distributors or a termination of their relationships with the
Company could have a material adverse effect on the Company's international
revenues, its business, results of operations and financial condition.
ABILITY TO MANAGE CHANGE
The Company has experienced changes in its operations and in the software
industry in the last several fiscal years that have placed increased demands on
its managerial, operational and financial resources. The Company expects its
business and the industry as a whole to continue to undergo rapid change. The
Company's plans to continue expansion of its professional services offerings,
particularly in the year 2000 market, and to continue expansion of its
international operations, together with ongoing required product development and
future acquisition activity in response to changes in the industry and customer
needs, will require VIASOFT to manage effectively its operations in a rapidly
changing environment. The Company's future performance will depend in part on
its ability to manage change in both its domestic and international operations
and will require the Company to continue to hire additional management,
technical and professional services personnel, particularly in the professional
services and year 2000 areas. The failure of the Company's management team to
manage changing technological and business conditions as well as the growth of
its own business, should it occur, could have a material adverse impact on the
Company's business, results of operations and financial condition.
DEPENDENCE ON ACQUISITIONS
The Company expects to continue its strategy of identifying, acquiring and
developing businesses, products and technologies to enhance and expand its
software product line and solution offerings, including acquisitions that could
be material in size and scope. The Company believes that the continued success
of its existing businesses, as well as its future growth, depends, in part, upon
the success of this strategy. Acquisitions involve a number of special risks and
factors, including increasing competition for attractive acquisition candidates
in the Company's markets, the technological enhancement and incorporation of
acquired products into existing product lines and services, the assimilation of
the operations and personnel of the acquired companies, adverse short-term
effects on reported operating results, the amortization of acquired intangible
assets, the assumption of undisclosed liabilities of any acquired companies, the
failure to achieve anticipated benefits such as cost savings and synergies, as
well as the diversion of management's attention during the acquisition and
integration process. The Company does not have significant experience in the
identification and management of acquisitions and the success of its acquisition
strategy will depend on the effective management of the foregoing risks and its
ability to identify, complete and integrate strategic acquisitions on favorable
terms. See "-- Ability to Assimilate Acquired Business."
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<PAGE> 12
INTENSE COMPETITION
The market for the Company's software products is intensely competitive and
is characterized by rapid change in technology and user needs and the frequent
introduction of new products. The market for the type of professional services
provided by the Company is also highly competitive. With the growth of the year
2000 market, significant competition has emerged and is expected to increase in
the next few years. The professional services segment of the market is
characterized by low barriers to entry. The principal competitive factors
affecting the year 2000 market include functionality, performance and
reliability of technology and methodology, availability and productivity of
personnel, the ability to demonstrate achievement of results, depth of
experience in year 2000 projects, price and reputation. There are generally
three categories of competitors for VIASOFT in the year 2000 market: software
vendors, consulting organizations and system integrators and outsourcers.
Software vendors provide tools targeted for the year 2000 market. Competitive
factors include tools' compatibility with customers' platforms and languages,
vendors' ability to deliver training and ongoing support during customers'
implementation of the tools, and the value of the tools to an organization
beyond the year 2000. Consulting organizations that compete in the year 2000
market are generally small- to medium-sized consulting firms that have become
highly focused on the year 2000 problem. These companies provide supplemental
personnel and contract programming resources to customers and some have licensed
tools from software vendors to enhance their offerings. Large system integration
and outsourcing firms have also entered the year 2000 market to include year
2000 conversion services with the maintenance and data processing services they
already provide to their existing market and customer base. Some
integrators/outsourcers offer licensed tools from software vendors.
Most of the Company's competitors and potential competitors have
substantially greater financial, marketing, recruiting and technology resources
than the Company. Major competitors for software product license sales include
Computer Associates International, Inc.; Compuware Corporation; Intersolv, Inc.;
Micro Focus Group Public Limited Company and Platinum Technology, Inc. The
Company believes that the principal factors affecting competition in its product
markets include compatibility with customers' platforms and languages, product
functionality, quality of support, product performance and reliability, ability
to respond to changing customer needs, ease of use and price. Major competitors
of the Company's professional services business are primarily the consulting
organizations of the Big Six accounting firms. Other competitors of the
Company's professional services business include Data Dimensions, Inc.,
Electronic Data Systems Corporation and IBM's Integrated Systems Solutions Corp.
The principal competitive factors affecting the market for the Company's
professional services include responsiveness to customer needs, availability and
productivity of personnel, the ability to demonstrate achievement of results,
depth of technical skills, price and reputation.
The Company's ability to compete successfully in the sale of both its
products and services will depend in large part upon its ability to implement
successfully its strategy of selling products and services as a total solution
as well as its ability to attract new customers, sell new products and services,
deliver and support product enhancements to its existing customers and respond
effectively to continuing technological change by developing and acquiring new
products and services. There can be no assurance that the Company will be able
to compete successfully in the future, nor that future competition for product
sales and professional services will not have a material adverse effect on the
business, results of operations and financial condition of the Company. See
"Business -- Competition".
RISKS ASSOCIATED WITH PROFESSIONAL SERVICES
During the fiscal year ended June 30, 1996 and the six months ended
December 31, 1996, fees from the Company's professional services grew
significantly and constituted 26% and 35% of the Company's consolidated
revenues, respectively. With the growing percentage of revenue coming from
professional services, a lower margin business than software product licensing,
the Company
11
<PAGE> 13
will be subject to the risks associated with such service businesses, including
volatility of workload and dependence on the Company's ability to attract and
retain qualified technical personnel in an increasingly competitive market.
Management anticipates that as the year 2000 approaches, it will become
increasingly difficult to recruit and retain experienced programmers and
consultants, as industry sources generally estimate that there will not be a
sufficient number of such persons to fill the demand created by the year 2000
problem. In addition, a portion of the Company's professional services fees is
derived from fixed-price contracts, which are more difficult to manage
profitably due to greater risk of cost overruns, particularly in the relatively
new year 2000 market.
ABILITY TO RESPOND TO TECHNOLOGICAL CHANGE
The Company's future success will depend significantly on its ability to
enhance its current products and develop or acquire and market new products that
keep pace with technological developments and evolving industry standards as
well as respond to changes in customer needs. There can be no assurance that the
Company will be successful in developing or acquiring product enhancements or
new products to address changing technologies and customer requirements
adequately, that it can introduce such products on a timely basis, or that any
such products or enhancements will be successful in the marketplace. The
Company's delay or failure to develop or acquire technological improvements or
to adapt its products to technological change would have a material adverse
effect on the Company's business, results of operations and financial condition.
In addition, most of the Company's products and services are purchased by
customers using mainframe systems, and the Company's business is largely
dependent on its core product line designed for mainframe systems. The computing
needs of organizations worldwide increasingly include alternative computing
platforms, including client/server networks, LANs, mid-range computers,
workstations and PCs. A significant shift in the way the Company's customers use
computing platforms could have a material adverse effect on the Company's
business. See "-- Product Concentration; Dependence on Mainframe Systems".
RISKS ASSOCIATED WITH PRODUCTS CURRENTLY UNDER DEVELOPMENT
The Company is currently developing and enhancing certain products that are
unfinished, untested and unproven in the marketplace. These products include,
but are not limited to: certain acquired date bridging technology for the year
2000 market; products designed to extend certain language support for the
Company's products; and enhancements to integrate and complement the Rochade
line of products recently acquired by the Company in connection with its
acquisition of R&O. There can be no assurance that these products will be
completed and commercially introduced at the times scheduled by the Company, or
that if completed and introduced, that these products will function in
accordance with the Company's current expectations or be able to compete
successfully in the marketplace. See "Business -- Product Development".
DEPENDENCE ON KEY PERSONNEL
The Company's success will depend in part upon the retention of key senior
management and technical personnel. The Company does not have employment
agreements with most of its key personnel, nor does it maintain key man life
insurance on any of these persons. Several senior management personnel are
relatively new to the Company and the Company's success will depend in part on
the successful assimilation and performance of these individuals. The Company
believes that its future success will also depend upon its ability to attract
and retain additional highly skilled technical, professional services,
management and marketing personnel. The market for these individuals has
historically been, and the Company expects that it will continue to be,
intensely competitive, particularly with respect to professional services
personnel with experience in the year 2000 market. The loss of one or more of
its key employees or the Company's inability to attract and retain other
qualified employees could have a material adverse effect on the Company's
business.
12
<PAGE> 14
PRODUCT LIABILITY
The Company markets its products and services to customers for managing the
maintenance and redevelopment of mission-critical computer software systems. In
addition, a large and increasing portion of the Company's business is devoted to
addressing the year 2000 problem, which affects the performance and reliability
of many mission-critical systems. The Company's agreements with its customers
typically contain provisions designed to limit the Company's exposure to
potential product and service liability claims. It is possible, however, that
the limitation of liability provisions contained in the Company's customer
agreements may not be effective as a result of existing or future federal,
state, local or foreign laws or ordinances or unfavorable judicial decisions.
Although the Company has not experienced any product or service liability claims
to date, the sale and support of its products and services may entail the risk
of such claims, particularly in the year 2000 market, which could be substantial
in light of the use of its products and services in mission-critical
applications. A successful product or service liability claim brought against
the Company could have a material adverse effect upon the Company's business,
operating results and financial condition.
IMPORTANCE OF PROPRIETARY RIGHTS
The Company regards its software products and some of the methodology and
processes it uses in connection with performing professional services as
proprietary and attempts to protect them under a combination of copyright, trade
secret and trademark laws and contractual restrictions on employees and third
parties. Despite these precautions, it may be possible for unauthorized parties
to copy the Company's software or to reverse engineer or obtain and use
information the Company regards as proprietary. The Company has no patents and
existing trade secret and copyright laws provide only limited protection.
Certain provisions of the license and distribution agreements generally used by
the Company, including provisions protecting against unauthorized use, copying,
transfer and disclosure, may be unenforceable under the laws of certain
jurisdictions and the Company is required to negotiate limits on these
provisions from time to time. In addition, the laws of some foreign countries do
not protect the Company's proprietary rights to the same extent as do the laws
of the United States. There can be no assurance that the protections put in
place by the Company will be adequate.
The Company recently acquired certain date bridging technology that is the
subject of a patent application. The Company is currently evaluating the
technology and the patent application and anticipates that it will continue to
prosecute the patent application. However, there can be no assurance that a
patent will issue as a result of this application, nor as to the extent of the
protection any such patent might afford.
Significant and protracted litigation may be necessary to protect the
Company's intellectual property rights, to determine the scope of the
proprietary rights of others or to defend against claims of infringement.
Although the Company is not currently involved in any litigation with respect to
intellectual property rights, infringement claims against software developers
are likely to increase as the number of functionally similar products in the
market increases. There can be no assurance that third-party claims, with or
without merit, alleging infringement will not be asserted against the Company in
the future. Such assertions can be time-consuming and expensive to defend and
could require the Company to discontinue the use of certain software or
processes, to cease the manufacture, use and sale of infringing products and
services, to incur significant litigation costs and expenses and to develop or
acquire non-infringing technology or to obtain licenses to the alleged
infringing technology. There can be no assurance that the Company would be able
to develop or acquire alternative technologies or to obtain such licenses or, if
licenses were obtainable, that the terms would be commercially acceptable to the
Company. See "Business -- Intellectual Property".
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<PAGE> 15
SIGNIFICANT UNALLOCATED NET PROCEEDS
The Company intends to use the net proceeds of this offering for
enhancement and integration of the Rochade product line, the addition of direct
sales and research and development personnel, marketing initiatives, and
potential acquisitions of businesses, products and technologies complementary to
the Company's business. In addition, a portion of the net proceeds will be used
for general corporate purposes, including working capital. Although the Company
has from time to time engaged in discussions with respect to possible
acquisitions, it has no present understandings, commitments or agreements, nor
is it currently engaged in any negotiations, with respect to any such
transaction. Pending such uses, the Company intends to invest the net proceeds
from this offering in short-term, investment-grade, interest-bearing securities.
The Company has no other specific uses for the proceeds of this offering, and
the exact uses of such proceeds will be subject to the discretion of management.
See "Use of Proceeds".
DILUTION
Investors purchasing shares of Common Stock in this offering will incur
immediate and substantial dilution in the net tangible book value of the Common
Stock from the offering price and will incur additional dilution upon the
exercise of stock options and warrants.
ANTI-TAKEOVER EFFECT OF CHARTER AND BYLAWS
Certain provisions of the Company's Amended and Restated Bylaws impose
certain procedures and limitations applicable to stockholders' meetings,
proposals of business and nominations of directors that could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, control of the Company. These provisions
may limit the price that certain investors may be willing to pay in the future
for shares of the Company's Common Stock. These provisions may also reduce the
likelihood of an acquisition of the Company at a premium price by another person
or entity. In addition, under the Company's Restated Certificate of
Incorporation, the Board of Directors has the authority to fix the rights and
preferences of, and issue shares of, Preferred Stock without further action of
the stockholders. Therefore, Preferred Stock could be issued, without
stockholder approval, that could have voting, liquidation and dividend rights
superior to that of existing stockholders. The issuance of Preferred Stock could
adversely affect the voting power of holders of Common Stock and the likelihood
that such holders would receive dividend payments and payments on liquidation
and could have the effect of delaying, deferring or preventing a change in
control of the Company. The Company has no present plan to issue any shares of
Preferred Stock.
POTENTIAL FUTURE SALES OF COMMON STOCK
Sales of a substantial number of shares of Common Stock in the public
market, whether by purchasers in this offering, other stockholders of the
Company, including affiliates of the Company, or former stockholders of R&O,
could adversely affect the prevailing market price of the Common Stock, and
could impair the Company's future ability to raise capital through an offering
of its equity securities. Immediately after the completion of this offering
(assuming no exercise of the Underwriters' over-allotment option) there will be
19,048,075 shares of Common Stock outstanding (based on the shares outstanding
as of December 31, 1996), substantially all of which will be freely tradeable in
the public markets, subject in certain cases to the volume and other limitations
set forth in Rule 144 or 145 promulgated under the Securities Act. The Company
and directors and executive officers of the Company and the Selling
Stockholders, who together hold 1,191,318 shares of Common Stock (including
options exercisable within 60 days of December 31, 1996), have signed lockup
agreements with the representatives of the Underwriters and have agreed to be
subject to lockup restrictions ("Lockup"), unless released by Goldman, Sachs &
Co. See "Underwriting". Subject to certain exceptions, the Lockup prohibits the
disposition of any shares of Common Stock by the Company or by directors and
executive officers of the Company until the date 90 days after the date of this
Prospectus. Any shares subject to the Lockup may be released at any time with or
without notice to the public.
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<PAGE> 16
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, this Prospectus
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 cause or contribute to such differences include, but
are not limited to, those discussed above in "Risk Factors", as well as those
discussed elsewhere in this Prospectus and the documents incorporated herein by
reference. Although the Company believes that the assumptions underlying its
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the results
contemplated in such forward-looking statements will be realized. In addition,
as disclosed above under "Risk Factors", the business and operations of the
Company are subject to substantial risks which increase the uncertainties
inherent in the forward-looking statements included in this Prospectus. The
inclusion of such forward-looking information should not be regarded as a
representation by the Company or any other person that the future events, plans
or expectations contemplated by the Company will be achieved.
THE COMPANY
VIASOFT was formed under the name Software Renovation Technology as a
California corporation in 1983. In 1986, the Company changed its name to
VIASOFT, Inc. and reincorporated in Delaware. When used in this Prospectus,
unless the context requires otherwise, the terms "Company" and "VIASOFT" refer
to Software Renovation Technology and VIASOFT, Inc. and all of VIASOFT's
subsidiaries. The Company's executive offices are located at 3033 North 44th
Street, Phoenix, Arizona 85018, and its telephone number is (602) 952-0050.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,650,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$52,156,301 ($58,608,847 if the Underwriters' over-allotment option is exercised
in full), based on an assumed public offering price of $33.63 per share, after
deducting estimated underwriting discounts and offering expenses. The Company
will not receive any proceeds from the sale of Common Stock by the Selling
Stockholders.
The Company intends to use the net proceeds of this offering for
enhancement and integration of the Rochade product line, the addition of direct
sales and research and development personnel, marketing initiatives and
potential acquisitions of businesses, products and technologies. In addition, a
portion of the proceeds will be used for general corporate purposes, including
working capital. With respect to acquisitions, the Company will seek to acquire
businesses, products and technologies complementary to the Company's business.
Although the Company has from time to time engaged in discussions with respect
to possible acquisitions, it has no present understandings, commitments or
agreements, nor is it currently engaged in any negotiations, with respect to any
such transaction. Pending such uses, the Company intends to invest the net
proceeds from this offering in short-term, investment-grade, interest-bearing
securities.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its capital stock.
The Company currently anticipates that it will retain future earnings, if any,
to fund the development and growth of its business and does not anticipate
paying any cash dividends in the foreseeable future.
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<PAGE> 17
PRICE RANGE OF COMMON STOCK
The following table presents quarterly information on the price range of
the Common Stock (Nasdaq National Market symbol "VIAS") beginning at the
Company's initial public offering in fiscal 1995. The prices have been adjusted
to give retroactive effect to the Company's two-for-one stock split that was
payable on September 13, 1996 to stockholders of record as of August 30, 1996.
This information indicates the high and low reported sale prices on the Nasdaq
National Market.
<TABLE>
<CAPTION>
HIGH LOW
--- ---
<S> <C> <C>
FISCAL 1995:
Third quarter (beginning March 1, 1995)................ 4 7/8 3 7/8
Fourth quarter......................................... 7 1/2 4 1/4
FISCAL 1996:
First quarter.......................................... 8 1/2 4 15/16
Second quarter......................................... 7 13/16 5 3/4
Third quarter.......................................... 14 1/4 6 5/8
Fourth quarter......................................... 34 1/2 10 3/4
FISCAL 1997:
First quarter.......................................... 49 1/4 14 3/8
Second quarter......................................... 61 39 1/8
Third quarter (through March 3, 1997).................. 65 1/4 32 3/4
</TABLE>
As of January 31, 1997, there were approximately 316 holders of record of
the Common Stock. A recent last reported sale price on the Nasdaq National
Market for the Common Stock is set forth on the cover page of this Prospectus.
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<PAGE> 18
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1996, on an actual basis and as adjusted to give effect to the
receipt of the estimated net proceeds from the sale of 1,650,000 shares of
Common Stock offered hereby (based upon an assumed public offering price of
$33.63 per share). This table is qualified in its entirety by the more detailed
information and financial statements contained elsewhere or incorporated by
reference in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
LONG-TERM OBLIGATIONS:
Deferred revenue, recognized after one year....................... $ 295 $ 295
-------- --------
Obligations under capital leases, less current maturities......... 8 8
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, 2,000,000 authorized, 0 shares issued and
outstanding at December 31, 1996 and as adjusted............... -- --
Common Stock, 24,000,000 authorized, 17,398,075 and 19,048,075
issued and outstanding at December 31, 1996 and as adjusted,
respectively(1)................................................ 17 19
Capital in excess of par value.................................... 41,407 93,562
Common stock subscriptions receivable............................. (55) (55)
Accumulated deficit............................................... (22,122) (22,122)
Cumulative translation adjustment................................. 39 39
-------- --------
Total stockholders' equity................................ 19,286 71,443
-------- --------
Total capitalization...................................... $ 19,589 $ 71,746
======== ========
</TABLE>
- ---------------
(1) Does not include, as of December 31, 1996 (a) 1,427,174 shares of Common
Stock issuable upon exercise of outstanding stock options, (b) 325,784
shares of Common Stock reserved for future issuance under the 1994 Equity
Incentive Plan, (c) 442,603 shares of Common Stock reserved for future
issuance under the Employee Stock Purchase Plan, and (d) 340,000 shares of
Common Stock reserved for future issuance under the Outside Directors Stock
Option Plan. Also excludes an undetermined number of shares valued at $2.0
million issuable after June 30, 1997 at the option of the former
stockholders of R&O in connection with the acquisition of R&O if certain
performance criteria are met. See "Prospectus Summary -- Recent
Developments".
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<PAGE> 19
PRO FORMA COMBINED FINANCIAL DATA
The following pro forma financial data of the Company presents the
Company's unaudited pro forma combined statements of operations for the fiscal
year ended June 30, 1996, and the six months ended December 31, 1996.
On December 5, 1996, the Company acquired all of the capital stock of R&O.
The Company paid $10.8 million in cash and issued approximately 425,000 shares
of restricted Common Stock valued at $12.8 million to the selling stockholders
of R&O. Additional consideration of $2.0 million is payable on February 28,
1997. The Company has also committed to pay additional cash consideration of
$2.0 million (or, at each former R&O stockholder's election, additional shares
of Common Stock with an equivalent market value) if certain financial
performance criteria are met for the period from January 1, 1997 through June
30, 1997. The Company also assumed liabilities of approximately $9.4 million and
recorded other direct costs of approximately $3.8 million related to the
acquisition. The acquisition has been accounted for as a purchase in accordance
with Accounting Principles Board Opinion No. 16. See "Prospectus
Summary -- Recent Developments", "Management's Discussion and Analysis of
Consolidated Financial Condition and Results of Operations" and Note 2 to
Consolidated Financial Statements set forth in the Company's Form 10-Q for the
quarter ended December 31, 1996.
The unaudited pro forma combined statements of operations for the fiscal
year ended June 30, 1996 and the six months ended December 31, 1996 give effect
to the R&O acquisition as if it had been consummated as of the beginning of each
respective period.
18
<PAGE> 20
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1996
--------------------------------------------------------
BUSINESS PRO FORMA PRO FORMA
HISTORICAL ACQUIRED ADJUSTMENTS COMBINED
---------- ----------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Software license fees................. $ 17,824 $11,318 $ -- $29,142
Maintenance fees...................... 14,305 4,262 -- 18,567
Professional services fees............ 11,307 3,448 -- 14,755
Other................................. 121 169 -- 290
------- ------- ------- -------
Total revenues.................. 43,557 19,197 -- 62,754
------- ------- ------- -------
Operating expense:
Cost of software license and
maintenance fees.................... 2,788 1,787 400(1) 4,975
Cost of professional services fees.... 8,025 4,214 (221)(2) 12,018
Sales and marketing................... 18,137 6,022 (721)(2)(4) 23,438
Research and development.............. 4,237 4,077 (257)(2)(4) 8,057
General and administrative............ 3,567 2,598 (495)(1)(2)(4) 5,670
------- ------- ------- -------
Total operating expenses.............. 36,754 18,698 (1,294) 54,158
------- ------- ------- -------
Income (loss) from operations........... 6,803 499 1,294 8,596
Other income (expense).................. 1,257 (308) 227(6) 1,176
------- ------- ------- -------
Income (loss) before income taxes....... 8,060 191 1,521 9,772
Income tax provision.................... 1,843 -- 394(7) 2,237
------- ------- ------- -------
Net income (loss)....................... $ 6,217 $ 191 $ 1,127 $ 7,535
======= ======= ======= =======
Net income per common share............. $ 0.36 $ 0.42
======= =======
Weighted average number of common and
common share equivalents
outstanding........................... 17,391 425(8) 17,816
======= ======= =======
<CAPTION>
SIX MONTHS ENDED DECEMBER 31, 1996
----------------------------------------------------------------
BUSINESS PRO FORMA PRO FORMA
HISTORICAL ACQUIRED ADJUSTMENTS COMBINED
---------- ----------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Software license fees................. $ 13,095 $ 2,435 $ -- $15,530
Maintenance fees...................... 8,900 2,147 -- 11,047
Professional services fees............ 11,675 1,249 -- 12,924
Other................................. 89 122 -- 211
------- ------- ------- -------
Total revenues.................. 33,759 5,953 -- 39,712
------- ------- ------- -------
Operating expense:
Cost of software license and
maintenance fees.................... 1,577 959 167(1) 2,703
Cost of professional services fees.... 8,470 1,374 (161)(2)(3) 9,683
Sales and marketing................... 12,320 2,243 (361)(2)(4) 14,202
Research and development.............. 2,852(5) 1,511 (254)(2)(3)(4) 4,109
General and administrative............ 2,620 1,311 (501)(1)(2)(3)(4) 3,430
------- ------- ------- -------
Total operating expenses.............. 27,839 7,398 (1,110) 34,127
------- ------- ------- -------
Income (loss) from operations........... 5,920 (1,445) 1,110 5,585
Other income (expense).................. 670 (144) 138(6) 664
------- ------- ------- -------
Income (loss) before income taxes....... 6,590 (1,589) 1,248 6,249
Income tax provision.................... 2,260 -- (121)(7) 2,139
------- ------- ------- -------
Net income (loss)....................... $ 4,330 ($1,589) $ 1,369 $ 4,110
======= ======= ======= =======
Net income per common share............. $ 0.24 $ 0.23
======= =======
Weighted average number of common and
common share equivalents
outstanding........................... 17,831 365(8) 18,196
======= ======= =======
</TABLE>
- ---------------
(1) To adjust amortization expense to reflect amortization of the cost in excess
of the fair value of net assets acquired over a 5-year period and for
amortization of other identifiable intangible assets over the appropriate
periods.
(2) To adjust payroll and employee benefits for the savings related to the
reduction of duplicate or redundant positions identified by the Company as
part of the acquisition.
(3) To adjust other operating expenses to reflect the reduction in expense
associated with expenditures which would not have been incurred had the
acquisition of R&O occurred at the beginning of the respective periods.
(4) To reflect a reduction in expenses related to excess office space that would
not have been incurred by the Company had the acquisition occurred at the
beginning of the periods presented.
(5) Excludes a charge of approximately $27.0 million for write-off of purchased
in-process research and development.
(6) To adjust interest expense to reflect the payoff of R&O debt assumed in the
acquisition, as of the beginning of the periods presented.
(7) To adjust income taxes to reflect the tax effect of the adjustments
described above.
(8) To adjust weighted average number of common and common share equivalents
outstanding as if the Common Stock issued in connection with the acquisition
of R&O had been outstanding since the beginning of the periods presented.
19
<PAGE> 21
The foregoing unaudited pro forma combined financial data should be read in
conjunction with the Consolidated Financial Statements and Notes thereto of the
Company incorporated herein by reference. 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 represent a
forecast of the combined results of operations for any future period. No pro
forma adjustments have been included herein which reflect the potential effect
of (i) any efficiencies which may be obtained by combining the Company and R&O
operations or (ii) the costs of restructuring, integrating or consolidating
their operations. Certain statements in this Prospectus concerning the R&O
acquisition, including descriptions of the acquisition and pro forma financial
information, are forward-looking statements that involve risks and
uncertainties. There can be no assurance that the R&O acquisition will have the
desired benefits or that it will not have an adverse effect on the Company's
business, financial condition or results of operations. Actual results could
differ materially from those discussed herein. Factors that could cause or
contribute to such differences include, among others, those discussed herein
under "Risk Factors" and "Special Note on Forward-Looking Statements", as well
as those discussed elsewhere in this Prospectus and in the documents
incorporated herein by reference.
20
<PAGE> 22
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Consolidated Financial
Condition and Results of Operations" included elsewhere or incorporated by
reference in this Prospectus and the documents incorporated herein by reference.
The selected consolidated financial data presented below have been derived from
the Company's Consolidated Financial Statements as of June 30, 1995 and 1996 and
for each of the three years in the period ended June 30, 1996, which have been
audited by Arthur Andersen LLP, independent public accountants, whose report
thereon is incorporated herein by reference. The data presented for the
six-month periods ended December 31, 1995 and 1996 are derived from unaudited
financial statements and include, in the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the data for such periods. The results for the six-month period ended December
31, 1996 are not necessarily indicative of the results to be expected for the
full fiscal year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
------------------------------
FISCAL YEAR ENDED JUNE 30, PRO
----------------------------- FORMA
1994 1995 1996 1995 1996 1996(1)
------- ------- ------- ------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software license fees......................................... $13,029 $14,311 $17,824 $ 8,275 $ 13,095 $15,530
Maintenance fees.............................................. 10,041 12,059 14,305 6,879 8,900 11,047
Professional services fees.................................... 2,715 4,387 11,307 3,475 11,675 12,924
Other......................................................... 199 194 121 67 89 211
------- ------- ------- ------- -------- -------
Total revenues.......................................... 25,984 30,951 43,557 18,696 33,759 39,712
------- ------- ------- ------- -------- -------
Operating expense:
Cost of software license and maintenance fees(2).............. 1,544 2,661 2,788 1,457 1,577 2,703
Cost of professional services fees............................ 2,522 4,052 8,025 2,978 8,470 9,683
Sales and marketing........................................... 11,993 13,517 18,137 7,865 12,320 14,202
Research and development...................................... 3,291 3,193 4,237 2,045 2,852 4,109
Write-off of purchased in-process research and
development(3).............................................. -- -- -- -- 26,958 --
General and administrative(2)................................. 2,480 2,643 3,567 1,525 2,620 3,430
------- ------- ------- ------- -------- -------
Total operating expenses................................ 21,830 26,066 36,754 15,870 54,797 34,127
------- ------- ------- ------- -------- -------
Income (loss) from operations................................... 4,154 4,885 6,803 2,826 (21,038) 5,585
Total other income (expense).................................... (22) 490 1,257 620 670 664
------- ------- ------- ------- -------- -------
Income (loss) before income taxes............................... 4,132 5,375 8,060 3,446 (20,368) 6,249
Income tax provision............................................ 487 183 1,843 865 2,260 2,139
------- ------- ------- ------- -------- -------
Net income (loss)............................................... $ 3,645 $ 5,192 $ 6,217 $ 2,581 $(22,628) $4,110
======= ======= ======= ======= ======== =======
Net income (loss) per common share and common share
equivalent(4)................................................. $ 0.29 $ 0.36 $ 0.36 $ 0.15 $ (1.34) $ 0.23
======= ======= ======= ======= ======== =======
Weighted average number of common and common share equivalents
outstanding(4)................................................ 12,720 14,584 17,391 17,082 16,938 18,196
======= ======= ======= ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................................................... $ 5,009 $ 9,074
Working capital..................................................................................... 25,388 9,109
Total assets........................................................................................ 46,591 56,121
Deferred revenue.................................................................................... 10,283 20,334
Total stockholders' equity.......................................................................... 28,259 19,286
</TABLE>
- ---------------
(1) Gives pro forma effect to the acquisition by the Company of all of the
outstanding capital stock of R&O as if the acquisition had occurred at the
beginning of the period presented. The pro forma results exclude the $27.0
million purchased in-process research and development charge. See
"Prospectus Summary -- Recent Developments", "Pro Forma Combined Financial
Data", "Management's Discussion and Analysis of Consolidated Financial
Condition and Results of Operations" and Note 2 to Consolidated Financial
Statements set forth in the Company's Form 10-Q for the quarter ended
December 31, 1996.
(2) For the period from December 5, 1996, the date of the R&O acquisition,
through December 31, 1996, cost of software license and maintenance fees and
general and administrative expense include amortization of intangible assets
acquired in connection with the R&O acquisition of $33,000 and $44,000,
respectively.
(3) See Note 2 to Consolidated Financial Statements set forth in the Company's
Form 10-Q for the quarter ended December 31, 1996, and "Management's
Discussion and Analysis of Consolidated Financial Condition and Results of
Operations".
(4) Reflects the conversion of all issued and outstanding shares of preferred
stock into 8,847,814 shares of Common Stock upon the closing of the
Company's initial public offering on March 8, 1995. Also reflects effect of
a two-for-one stock split that was payable on September 13, 1996 to
stockholders of record as of August 30, 1996.
21
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except for historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. Such forward-looking statements include, but are not limited to,
statements regarding future events and the Company's plans and expectations. The
Company's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed above in "Risk Factors", as well as those discussed
elsewhere in this Prospectus or incorporated herein by reference. See "Special
Note on Forward-Looking Statements".
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 Fortune 1000 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 Latin
America, 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 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 develops, markets and supports repository software
tools through its Rochade product line, together with related repository based
services and solutions. Rochade is based on an open repository software
technology that is designed to help businesses capture, manage, monitor,
disseminate, reuse and change their information technology assets in both
mainframe systems and distributed computing environments. R&O was founded in
1976, is headquartered in Munich, Germany and has operations in Europe and the
United States.
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 in the fiscal quarter ended December 31, 1996. The Company paid $10.8
million in cash and issued approximately 425,000 shares of unregistered Common
Stock valued at $12.8 million to the selling stockholders of R&O pursuant to
Regulation S, subject to certain restrictions imposed under the stock purchase
agreement and applicable securities laws. Additional consideration of $2.0
million is payable to the former stockholders of R&O on February 28, 1997 based
on certain financial performance criteria, which were met in January 1997. The
Company has also committed to pay additional cash consideration of $2.0 million
(or, at each former R&O stockholder's election, additional shares of Common
Stock with an equivalent market value) if certain financial performance criteria
are met for the period from January 1, 1997 through June 30, 1997. Any
contingent consideration earned will be reflected as an adjustment to cost in
excess of net assets acquired when earned. The Company also assumed
approximately $9.4 million of liabilities and recorded purchase accounting
accruals for severance costs related to the elimination of certain positions,
costs of closing duplicate facilities and other direct costs of the acquisition.
These additional costs totaled approximately $3.8 million. See Note 2
22
<PAGE> 24
to Consolidated Financial Statements set forth in the Company's Form 10-Q for
the quarter ended December 31, 1996.
In accordance with the provisions of Accounting Principles Board Opinions
Nos. 16 and 17, all identifiable assets acquired, including identifiable
intangible assets, were identified and analyzed to determine their fair market
values. The Company received an appraisal of the intangible assets, which
indicated that approximately $27.0 million of the acquired intangible assets was
in-process research and development that had not yet reached technological
feasibility. Because there can be no assurance that the Company will be able to
successfully complete the development and integration of the in-process research
and development into its suite of software products and services or that the
acquired technology has any alternative future use, the acquired in-process
research and development was charged to expense by the Company in its quarter
ended December 31, 1996. In order to bring the in-process software products to
technological feasibility, the Company estimates that it will need to spend an
additional $2.6 million on product integration and performance improvements.
Identifiable intangible assets other than purchased research and
development consisted of an assembled workforce valued at $800,000 and a
customer list valued at $900,000. The assembled workforce and customer list will
be amortized on a straight-line basis over a seven- and eight-year period,
respectively. In addition, the Company recorded cost in excess of assets
acquired of $1,519,000, which will be amortized on a straight-line basis over a
five-year period.
The operating results of R&O from the December 5, 1996 acquisition date
through December 31, 1996 are included in the Company's results of operations.
Total revenues of R&O were $19.0 million, $11.8 million and $2.1 million for the
year ended December 31, 1995, the nine month period ended September 30, 1996 and
the period from the acquisition date to December 31, 1996, respectively. R&O's
operating income (loss) was $0.9 million, $(1.6) million and $0.1 million,
respectively, for the same periods.
23
<PAGE> 25
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of total revenues represented by certain expense and income items:
<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEAR ENDED JUNE ENDED
30, DECEMBER 31,
------------------------- ---------------
1994 1995 1996 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues:
Software license fees................. 50.1% 46.2% 40.9% 44.3% 38.8%
Maintenance fees...................... 38.6 39.0 32.8 36.8 26.4
Professional services fees............ 10.5 14.2 26.0 18.6 34.6
Other................................. 0.8 0.6 0.3 0.3 0.2
----- ----- ----- ----- -----
Total revenues................ 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Operating expenses:
Cost of software license and
maintenance fees................... 5.9 8.6 6.4 7.8 4.7
Cost of professional services fees.... 9.7 13.1 18.4 15.9 25.1
Sales and marketing................... 46.2 43.7 41.6 42.1 36.5
Research and development.............. 12.7 10.3 9.7 10.9 8.5
Write-off of purchased in-process
research and development........... -- -- -- -- 79.8
General and administrative............ 9.5 8.5 8.3 8.2 7.7
----- ----- ----- ----- -----
Total operating expenses...... 84.0 84.2 84.4 84.9 162.3
----- ----- ----- ----- -----
Income (loss) from operations........... 16.0 15.8 15.6 15.1 (62.3)
Total other income, net....... -- 1.6 2.9 3.3 2.0
----- ----- ----- ----- -----
Income before income taxes.............. 16.0 17.4 18.5 18.4 (60.3)
Provision for income taxes.............. 1.9 0.6 4.2 4.6 6.7
----- ----- ----- ----- -----
Net (loss) income............. 14.1% 16.8% 14.3% 13.8% (67.0)%
===== ===== ===== ===== =====
</TABLE>
COMPARISON OF SIX MONTHS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995
REVENUES
Total revenues were $33,759,000 for the six months ended December 31, 1996,
an increase of 80.6% from $18,696,000 for the six months ended December 31,
1995. Software license fees were $13,095,000 for the six months ended December
31, 1996, an increase of 58.2% from $8,275,000 for the six months ended December
31, 1995. Software license fees increased both domestically and internationally
in the second quarter of fiscal 1997 compared to the same period in fiscal 1996.
Domestic license fees continued to increase as a result of the demand for the
Company's tools to assist in addressing the year 2000 century date change
problem. The increase in international software license fees was attributable
primarily to a 129.4% improvement in license fees from the Company's direct
operations over the same period in the prior year, due primarily to sales of the
Company's year 2000 solutions in the United Kingdom. In addition, license fees
increased due to the acquisition of R&O, which contributed license fees of
$1,156,000. Maintenance fees were $8,900,000 for the first six months of fiscal
1997, an increase of 29.4% from $6,879,000 for the same period in fiscal 1996.
The increase was due in part to the R&O acquisition, which contributed $519,000
in maintenance revenue, with the remainder attributable to new software
licenses, customer system upgrades and increases in the fees charged for annual
maintenance. Professional services fees were $11,675,000 for the first half of
fiscal 1997, an increase of 236.0% from $3,475,000 for the same period in fiscal
1996 as the Company continued to expand its professional
24
<PAGE> 26
services business to continue to meet the increasing demand for its solution
offerings, principally VIASOFT's Enterprise 2000, and to a lesser extent the
addition of R&O, which contributed $468,000 in service fees during the period.
VIASOFT's Enterprise 2000 solution offerings comprised 81.6% of the Company's
professional services revenues in the first six months of fiscal 1997.
In order to broaden its distribution channels, the Company established its
Solution/Technology Provider program in fiscal 1996. Under this program, the
Company licenses one or more of its service solutions, principally VIASOFT's
Enterprise 2000 solution offering, to third-party Solution/Technology Providers
for use in service engagements with their own customers in exchange for license
fees and/or royalties. In conjunction with certain services engagements, the
Company leases or licenses certain of its products directly to the customer of
the Solution/Technology Provider. During the first six months of fiscal 1997,
$2.3 million or 17.6% of software license fees was generated through this
program, representing approximately 6.8% of total revenues during the period.
Royalty revenues generated by this program were immaterial.
COST OF REVENUES
Cost of software license and maintenance fees, which includes royalties,
cost of customer support and product packaging and documentation, was $1,577,000
for the six months ended December 31, 1996, an increase of 8.2% from $1,457,000
during the six months ended December 31, 1995. The increase was primarily due to
additional R&O expenses of $286,000, as a result of the acquisition. Without the
R&O costs, these expenses would have decreased to $1,291,000. Gross margins on
software license and maintenance fees improved to 92.8% for the first six months
of fiscal 1997 from 90.4% for the same period in fiscal 1996. The margin
improvement and expense reduction is primarily due to lower sales through a
government market reseller, which reduced external sales commissions expense in
fiscal 1997 compared to fiscal 1996, offset by increased personnel and general
salary increases in customer support.
The cost of professional services fees consists principally of personnel
costs, third-party subcontracting fees and other costs related to the
professional services business. The cost of professional services fees was
$8,470,000 for the six months ended December 31, 1996, an increase of
approximately 184.4% from $2,978,000 for the six months ended December 31, 1995.
The increase in expenses is a result of additional personnel hired and their
related costs as well as third-party costs to deliver the Company's solutions in
response to increased customer demand, both domestically and internationally
and, to a lesser extent, additional expenses incurred by R&O of $417,000. The
gross margin on professional services fees improved to 27.5% during the first
six months of fiscal 1997 compared to 14.3% for the same period in fiscal 1996.
This margin improvement reflects the Company's continued focus on improving the
management and delivery of its solution offerings, as well as the increase in
professional services fee revenue. The Company expects a decrease in
professional services margins as it integrates the R&O professional services
organization with its own operations.
SALES AND MARKETING
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 $12,320,000 in the first
half of fiscal 1997, an increase of 56.6% from $7,865,000 in the same period of
fiscal 1996. Of this increase, R&O expenses accounted for $685,000. Excluding
these expenses, the increase is attributable primarily to increased personnel,
higher salaries, increased commissions as a result of increased sales, higher
travel costs and bonuses primarily related to the increase in personnel,
increased marketing costs, and an increase in bad debt expense due to the
absolute dollar increase in accounts receivable. Sales and marketing expenses as
a percentage of total revenues declined to 36.5% in the first six months of
fiscal 1997, compared to 42.1% in the first six months of fiscal 1996, due
primarily to the increase in revenues.
25
<PAGE> 27
RESEARCH AND DEVELOPMENT
Research and development expenditures consist primarily of personnel costs
of the research and development staff, third-party development costs, and the
facilities, computing, benefits and other administrative costs allocated to the
research and development staff. The Company continues to invest resources in
updating its existing and acquired products through enhancements and new
releases, developing new products, and adding to its product offerings through
acquisition of new products and computer language functionality. Total
expenditures for research and development were $2,852,000 for the six months
ended December 31, 1996, excluding an approximate $27.0 million charge for
purchased in-process research and development in connection with the R&O
acquisition, an increase of 39.5% from $2,045,000 for the six months ended
December 31, 1995. The increase in expenses is a result of costs associated with
R&O's research and development, as well as general salary increases and the
addition of personnel. As a percentage of total revenues, research and
development costs were 8.5% for the six months ended December 31, 1996
(excluding the purchased in-process research and development charge discussed
above), compared to 10.9% for the same period in fiscal 1996.
GENERAL AND ADMINISTRATIVE
General and administrative expenses include the costs of finance and
accounting, human resources, legal services, corporate information systems and
other administrative functions of the Company. General and administrative
expenses were $2,620,000 in the six months ended December 31, 1996, representing
an increase of 71.8% compared to $1,525,000 in the six months ended December 31,
1995. The increase was primarily due to additional legal fees and administrative
personnel and their related costs, general salary increases, increased external
consulting costs and additional bonuses, as well as to additional costs from R&O
of $268,000. As a percentage of total revenues, general and administrative
expenses remained constant at 7.7% for the first six months of fiscal 1997
compared to the same period in fiscal 1996.
OTHER INCOME (EXPENSE)
Interest income in the six months ended December 31, 1996 was $730,000,
compared to $628,000 in the six months ended December 31, 1995. This increase
was due primarily to an increase in funds available for short term investment as
a result of cash generated from operations.
PROVISION FOR INCOME TAXES
The provision for income taxes was $2,260,000 and $865,000 for the six
months ended December 1996 and 1995, respectively. The Company's effective tax
rate was 34.2% in the first six months of fiscal 1997, excluding the effect of
the non-deductible purchased in-process research and development charge,
compared to 25.1% in the first six months of fiscal 1996. The Company's
effective tax rate was affected by the availability of net operating loss
carryforwards, which were fully utilized in fiscal 1996, and certain tax credit
carryforwards, which were mostly utilized in fiscal 1996.
COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1996 AND JUNE 30, 1995
REVENUES
Total revenues were $43,557,000 for fiscal 1996, an increase of 40.7% from
$30,951,000 for fiscal 1995. Software license fees were $17,824,000 for fiscal
1996, an increase of 24.5% from $14,311,000 for fiscal 1995. Domestic license
revenues increased 30.7% in fiscal 1996 as compared to fiscal 1995, primarily as
a result of heightened awareness of the year 2000 date change problem in the
domestic marketplace and demand for the Company's tools to assist in the
solution to this problem. Internationally, in fiscal 1996, the Company's
software license fees increased by 9.9% as compared to 1995, a slower growth
than experienced domestically. The Company believes the
26
<PAGE> 28
slower international growth is primarily attributable to the international
market awareness of the year 2000 problem lagging behind the domestic
marketplace.
In order to broaden its distribution channels, the Company established its
Solution/Technology Provider program in fiscal 1996. VIASOFT's
Solution/Technology Provider program licenses VIASOFT's Enterprise 2000 solution
offering (consisting of VIASOFT's Impact 2000, VIASOFT's Plan 2000, and
VIASOFT's Operation 2000) to third-party Solution/Technology Providers,
generally consulting services companies, in exchange for license fees and/or
royalties. In conjunction with a services engagement, VIASOFT will lease or
license certain of its products to the customer or Solution/Technology Provider
in order to provide a total solution to the customer. This program generated
both software license and royalty revenue in fiscal 1996. Domestic software
license revenue generated through this program was approximately $1.6 million.
Royalty revenue is included in professional services fees and is immaterial. As
of June 30, 1996, the Company had 19 Solution/Technology Providers worldwide.
Maintenance fees were $14,305,000 in fiscal 1996, an increase of 18.6% from
$12,059,000 in fiscal 1995. This increase is primarily a result of new software
licenses, and, to a lesser extent, customer system upgrades and increases in the
fees charged for annual maintenance.
Professional services fees were $11,307,000 in fiscal 1996, an increase of
157.7% from $4,387,000 in fiscal 1995. The Company continued to expand its
professional services business to meet the growing demand for VIASOFT's
Enterprise 2000 solution offerings created by the year 2000 date change problem.
Enterprise 2000 solution offerings comprised approximately 73.6% of the
Company's professional services fees in fiscal 1996. Additionally, revenue from
the Company's education services continued to grow in fiscal 1996, improving
55.1% to $1,393,000 from $898,000 in fiscal 1995, primarily as a result of a
renewed focus on the sale of education services and increased license sales.
COST OF REVENUES
Cost of software license and maintenance fees was $2,788,000 in fiscal
1996, an increase of 4.8% from $2,661,000 in fiscal 1995. The increase was
primarily attributable to an increase in the average number of personnel devoted
to customer support and increased product documentation costs related to new
product releases, offset by savings in royalties. See Note 8 of Notes to
Consolidated Financial Statements incorporated by reference herein.
The cost of professional services fees was $8,025,000 in fiscal 1996, an
increase of 98.1% from $4,052,000 in fiscal 1995. The increase is a result of
the additional personnel hired and their related costs as well as third-party
costs to deliver the Company's solutions in response to increased customer
demand, both domestically and internationally. The gross margin on professional
services fees improved to 29.0% in fiscal 1996 compared to 7.6% in fiscal 1995.
This margin improvement reflects the significant increase in professional
service fee income, together with the Company's focus on improving the
management and delivery of its solution offerings.
SALES AND MARKETING
Sales and marketing expenses were $18,137,000 in fiscal 1996, an increase
of approximately 34.2% from $13,517,000 in fiscal 1995. This increase is
attributable primarily to increased personnel, higher salaries, increased travel
expenses primarily related to the increase in personnel, increased sales
incentive costs, and additional marketing expenditures. These increases were
offset by a decrease in bad debt expense. Bad debt expense in fiscal 1995
included a third quarter $200,000 increase in the reserve to provide for a
specific account which was subsequently resolved for an amount that was less
than the established reserve. In management's opinion, there was no need for any
bad debt expense in fiscal 1996. Sales and marketing expenses as a percentage of
total revenues declined to 41.6% in fiscal 1996 compared to 43.7% in fiscal 1995
due primarily to the increase in revenues.
27
<PAGE> 29
RESEARCH AND DEVELOPMENT
Total expenditures for research and development were $4,237,000 for fiscal
1996, an increase of 32.7% from $3,193,000 for fiscal 1995. This increase was
due to the hiring of additional personnel and their related costs, as well as
increased third-party development costs. As a percentage of sales, research and
development costs remained relatively constant at 9.7% for fiscal 1996 and 10.3%
for fiscal 1995.
GENERAL AND ADMINISTRATIVE
General and administrative expenses were $3,567,000 in fiscal 1996,
representing an increase of 34.9%, as compared to $2,643,000 in fiscal 1995. In
the third quarter of fiscal 1996, the Company incurred approximately $350,000 in
one time charges, consisting primarily of severance and relocation costs,
related to a change in the Chief Financial Officer position. Without these one
time costs, general and administrative expenses would have increased 21.7%.
Excluding the one time charge, the increases were due to general salary
increases, additional personnel and the related costs associated with those
personnel, and external professional service consulting costs. As a percentage
of total revenues, general and administrative expenses were constant at 8.3% and
8.5%, respectively, for fiscal 1996 and 1995.
OTHER INCOME (EXPENSE)
Other income was $1,257,000 in fiscal 1996 as compared to $490,000 in
fiscal 1995. The increase is primarily due to interest income which was
$1,350,000 in fiscal 1996 compared to $508,000 in fiscal 1995. This increase was
due primarily to an increase in funds available for short term investment as a
result of the Company's initial public offering and from cash generated from
operations. Foreign currency gains and losses were negligible in fiscal 1996 and
1995.
PROVISION FOR INCOME TAXES
The provision for income taxes was $1,843,000 and $183,000, resulting in
effective tax rates of 22.9% and 3.4%, in fiscal 1996 and 1995, respectively.
The Company's effective tax rates were affected by the availability of net
operating loss carryforwards and certain tax credit carryforwards, which reduced
the Company's federal tax liability for fiscal 1996 and eliminated the Company's
federal tax liability in fiscal 1995. See Note 5 to Consolidated Financial
Statements set forth in the Company's Form 10-K for the fiscal year ended June
30, 1996.
COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1995 AND JUNE 30, 1994
REVENUES
Total revenues were $30,951,000 in fiscal 1995, an increase of 19.1% from
$25,984,000 in fiscal 1994. Software license fees were $14,311,000 in fiscal
1995, an increase of 9.8% from $13,029,000 in fiscal 1994. This increase was
attributable primarily to an increase in international software license revenues
of 33.6% due to increases in sales by most of the Company's international
distributors as well as the Company's direct international operations. Domestic
software license revenues were substantially unchanged for fiscal 1995 compared
to fiscal 1994. Maintenance fees were $12,059,000 in fiscal 1995, an increase of
20.1% from $10,041,000 in fiscal 1994, as a result of new software licenses,
customer system upgrades and increases in the fees charged for annual
maintenance. Professional services fees were $4,387,000 in fiscal 1995, an
increase of 61.6% from $2,715,000 in fiscal 1994 as the Company continued to
expand its professional services business in response to the demand for its
Insourcing and Enterprise 2000 services offerings. Other revenues remained
unchanged in fiscal 1995 as compared to fiscal 1994.
28
<PAGE> 30
COST OF REVENUES
Cost of software license and maintenance fees was $2,661,000 in fiscal
1995, an increase of 72.3% from $1,544,000 in fiscal 1994. Cost of software
license and maintenance fees as a percentage of total revenues increased to 8.6%
in fiscal 1995 from 5.9% in fiscal 1994. These increases were attributable
primarily to a $530,000 increase in royalty expense under the Company's license
agreement for its ESW/PC product and to a lesser extent additional product
documentation costs, general salary increases and an increase in the number of
personnel devoted to customer support. ESW/PC is licensed from SEEC, Inc., a
privately held software company, and marketed under the VIASOFT label pursuant
to an agreement that provides for certain minimum prepaid royalties. During the
quarter ended December 31, 1994, the Company evaluated the remaining balance of
the prepaid royalty under the ESW/PC agreement in light of the actual license
and maintenance revenues to date as well as estimated license and maintenance
revenues, and determined that an adjustment of approximately $250,000 was
necessary to state the prepaid royalties at their estimated net realizable value
at December 31, 1994. In addition, commencing in the second quarter of fiscal
1995, the Company began amortizing prepaid royalties under the agreement based
on the greater of the amount determined on a straight-line basis over the 26
months remaining in the initial 3-year contract term, or actual royalties
incurred on license and maintenance revenues. See Note 8 to Consolidated
Financial Statements set forth in the Company's Form 10-K for the fiscal year
ended June 30, 1996. Cost of professional services fees consists principally of
personnel costs and other costs related to the services business to meet demand
for its Enterprise 2000 and Insourcing services offerings. The cost of
professional services fees was $4,052,000 in fiscal 1995, an increase of 60.7%
from $2,522,000 in fiscal 1994, as the Company increased personnel and other
resources to continue the expansion of the Company's professional services
business to meet the demand for its Enterprise 2000 and Insourcing services
offerings. The cost of professional services fees as a percentage of
professional services revenues declined to 92.4% in fiscal 1995, as compared to
92.9% in fiscal 1994, as a result of an increase in professional service fee
revenue.
SALES AND MARKETING
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 $13,517,000 in fiscal
1995, an increase of approximately 12.7% from $11,993,000 in fiscal 1994. This
increase is attributable primarily to increased personnel, higher salaries,
increased marketing and promotional materials costs, and a $200,000 increase in
the bad debt reserve. Sales and marketing expenses as a percentage of total
revenues were 43.7% in fiscal 1995 compared to 46.2% in fiscal 1994 due
primarily to the increase in revenues.
RESEARCH AND DEVELOPMENT
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. Total expenditures for
research and development were $3,193,000 in fiscal 1995, a decrease of 3.0% from
$3,291,000 in fiscal 1994. This decrease was due to decreases in various
operating costs and in the average number of research and development personnel
in fiscal 1995 as compared to fiscal 1994.
GENERAL AND ADMINISTRATIVE
General and administrative expenses include the costs of finance and
accounting, human resources, corporate information systems and other
administrative functions of the Company. General and administrative expenses
were $2,643,000 in fiscal 1995, an increase of 6.6% from $2,480,000 in fiscal
1994. These increases were due to general salary increases, increases in
contract administration and other personnel, and increased insurance fees offset
by savings in
29
<PAGE> 31
certain professional fees. As a percentage of total revenues, general and
administrative expenses decreased to 8.5% in fiscal 1995 compared to 9.5% in
fiscal 1994.
OTHER INCOME (EXPENSE)
Interest expense was $27,000 in fiscal 1995, a decrease of 59.1% from
$66,000 in fiscal 1994, due to repayment in January 1994 of borrowings from
certain major stockholders. Interest income in fiscal 1995 was $508,000,
compared to interest income of $73,000 in fiscal 1994. This increase was due
primarily to an increase in funds available for short term investment as a
result of the Company's initial public offering and cash generated from
operations. In fiscal 1995, the Company experienced a gain of $10,000 due to
foreign currency fluctuations compared to a loss of $12,000 in fiscal 1994
primarily due to fluctuations in the Italian lira.
PROVISION FOR INCOME TAXES
The provision for income taxes was $183,000 and $487,000 in fiscal 1995 and
1994, respectively, consisting of state and foreign taxes. The availability of
net operating loss carryforwards and certain tax credits effectively eliminated
the Company's liability for federal taxes in both years. Net operating loss
carryforwards for federal tax purposes totaled approximately $1,096,000 at June
30, 1995, expiring between 2006 and 2008. The Company also has other federal tax
credit carry forwards of $1,168,000 available to offset federal taxes, expiring
between 2000 and 2004. See Note 5 to Consolidated Financial Statements set forth
in the Company's Form 10-K for the fiscal year ended June 30, 1996. In addition,
in fiscal 1995, the Company received notification from the Australian tax
authorities of refunds of Australian withholding taxes remitted in previous
years. This amounted to a credit to tax expense of approximately $125,000 in
fiscal 1995.
30
<PAGE> 32
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited consolidated quarterly
results of operations for each of the six quarters ended December 31, 1996. In
the opinion of management, this quarterly information has been prepared on the
same basis as the Company's annual audited Consolidated Financial Statements and
includes all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the information for the periods presented when read
in conjunction with the Consolidated Financial Statements of the Company and
Notes thereto. The operating results for any quarter are not necessarily
indicative of the results of the full year or any future quarter.
<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------------------
FISCAL 1996 FISCAL 1997
------------------------------------ ------------------
SEPT. DEC. MARCH SEPT. DEC.
30 31 31 JUNE 30 30 31
------ ------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software license fees.................................... $3,602 $ 4,674 $ 3,977 $ 5,571 $ 4,714 $ 8,381
Maintenance fees......................................... 3,312 3,567 3,608 3,818 4,047 4,853
Professional services fees............................... 1,491 1,984 2,748 5,084 5,177 6,498
Other.................................................... 35 32 28 26 38 51
------ ------- ------- ------- ------- -------
Total revenues..................................... 8,440 10,257 10,361 14,499 13,976 19,783
------ ------- ------- ------- ------- -------
Operating expenses:
Cost of software license and maintenance fees............ 659 799 683 647 624 953
Cost of professional services fees....................... 1,464 1,514 1,833 3,214 3,921 4,549
Sales and marketing...................................... 3,664 4,201 4,271 6,001 5,168 7,152
Research and development................................. 936 1,109 1,030 1,162 1,127 1,725
Write-off of purchased in-process research and
development............................................ -- -- -- -- -- 26,958
General and administrative............................... 763 762 1,174 868 1,115 1,505
------ ------- ------- ------- ------- -------
Total operating expenses........................... 7,486 8,385 8,991 11,892 11,955 42,842
------ ------- ------- ------- ------- -------
Income (loss) from operations.............................. 954 1,872 1,370 2,607 2,021 (23,059)
Total other income......................................... 301 319 332 305 389 281
------ ------- ------- ------- ------- -------
Income (loss) before income taxes.......................... 1,255 2,191 1,702 2,912 2,410 (22,778)
Provision for income taxes................................. 314 551 432 546 854 1,406
------ ------- ------- ------- ------- -------
Net income (loss).......................................... $ 941 $ 1,640 $ 1,270 $ 2,366 $ 1,556 $(24,184)
====== ======= ======= ======= ======= =======
Earnings (loss) per common and common share equivalent..... $ 0.06 $ 0.10 $ 0.07 $ 0.13 $ 0.09 $ (1.42)
====== ======= ======= ======= ======= =======
Weighted average number of common and common share
equivalents outstanding.................................. 17,040 17,092 17,278 17,558 17,668 17,045
====== ======= ======= ======= ======= =======
</TABLE>
The Company's revenues and operating results are subject to quarterly and
other fluctuations resulting from a variety of factors, including the effect of
budgeting and purchasing practices of its customers, the length of the customer
evaluation process for Company products, the timing of customer system
conversions, and, to a lesser extent, the Company's sales commission practices,
which are based partly on quarterly incentives and annual quotas, and other
factors. The Company's revenues and results of operations may also be affected
by seasonal trends, which have resulted in higher revenues in the Company's
second and fourth fiscal quarters and lower revenues in its first and third
fiscal quarters. This seasonality is a result of many customers' annual
purchasing and budgetary practices, the Company's sales commission practices,
lower revenues in the summer months (particularly in Europe) when many
businesses make fewer purchases, and other factors. The Company's professional
services revenues tend to fluctuate due to the completion or commencement of
significant projects, which may continue over several quarters, the number of
working days in a quarter and the utilization rate of professional services
personnel. The Company has little or no backlog. Therefore, quarterly revenues
and operating results depend primarily on the volume and timing of orders
received during the quarter, which are difficult to forecast. The
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<PAGE> 33
Company has often recognized a substantial portion of its license fees in the
last month of the quarter, frequently in the last week. A significant portion of
the Company's operating expenses is relatively fixed, since personnel levels and
other expenses are based upon anticipated revenues. Because a substantial
portion of these revenues may not be generated until the end of each quarter,
the Company may not be able to reduce spending in response to sales shortfalls
or delays. These factors, many of which are not within the Company's control,
can cause significant variations in operating results from quarter to quarter.
The Company believes that quarter to quarter comparisons of its financial
results are not necessarily meaningful and should not be relied upon as an
indication of future performance. See "Risk Factors -- Fluctuating Quarterly
Results; Volatility of Common Stock Prices".
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996 the Company had cash, cash equivalents and investments
of $17,852,000, representing a decrease of $10,952,000 from the total of
$28,804,000 at June 30, 1996. This decrease was a result of $10.8 million in
cash payments for the cost of the R&O acquisition as well as payments of R&O
debt of approximately $4.1 million.
For the six months ended December 31, 1996, the Company generated cash from
operations of $3,540,000. Net cash generated was composed primarily of net
income excluding non-cash charges for the write-off of purchased in-process
research and development, depreciation and amortization and loss on disposal of
fixed assets. This was offset by a decrease in working capital.
The Company's investing activities for the first six months of fiscal 1997
provided cash of $3,790,000 as a result of sales or maturities of investments
exceeding the cash used for the purchase of R&O, net of the cash acquired, and
the purchase of investments and furniture, fixtures and equipment. The Company
believes that its current investments will be held to maturity.
The Company's financing activities for the first six months of fiscal 1997
used cash of $3,276,000. The cash was used for payment of R&O debt acquired,
offset in part by cash provided from the issuance of common stock upon the
exercise of options.
In January 1996 the Company entered into an agreement with a third party to
provide subcontracting services in support of the Company's professional
services engagements. The agreement sets forth minimum payment commitments of
$1,640,000 for the period January 1, 1996 through December 31, 1996 and $464,000
for the period January 1, 1997 through March 31, 1997. The Company makes monthly
payments over the term of the agreement, based upon the number of billable days
worked by the subcontracted consultants at an agreed upon daily rate. The
agreement was amended in November 1996 to allow the Company to carry over any
minimum requirements not met by December 31, 1996 until March 31, 1997, after
which the Company is required to pay any remaining shortfall. Management expects
that the minimum payment requirement will be met.
Anticipated capital expenditures for the remainder of the fiscal year are
approximately $2.5 million, including anticipated capital expenditures relating
to the Company's integration of R&O and continued purchases of equipment to
support internal growth. The expenditures are anticipated primarily for
investment in new communication and computer systems as well as additional
computer hardware and software and for furniture, fixtures and equipment.
The Company agreed to make certain contingent payments in connection with
the R&O acquisition if certain financial performance criteria were met. The
first of these criteria was met in January 1997, and payment of $2.0 million is
due by February 28, 1997. A second and last payment of $2.0 million, if earned,
is payable in August 1997 in cash or, at each of the former R&O stockholder's
election, additional shares of Common Stock with an equivalent market value.
The Company expects that the proceeds of this offering and existing working
capital, together with cash flow from operations, will be sufficient for at
least the next 12 months to meet its capital and liquidity needs for existing
operations and general corporate purposes, as well as enhancement
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<PAGE> 34
and integration of the Rochade product line, the addition of direct sales and
research 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 foreign currency
fluctuations. Sales made through the Company's foreign distributors are
denominated in U.S. dollars except in Italy, where they are denominated in lira.
Sales by the Company's foreign subsidiaries are principally denominated in the
currencies of the countries where sales are made. The Company has not to date
sought to hedge the risks associated with fluctuations in foreign exchange rates
and does not currently plan to do so. Gains or 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.
33
<PAGE> 35
BUSINESS
Except for historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. Such forward-looking statements include, but are not limited to,
statements regarding future events and the Company's plans and expectations. The
Company's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed above in "Risk Factors", as well as those discussed
elsewhere in this Prospectus or incorporated herein by reference. See "Special
Note on Forward-Looking Statements".
GENERAL
VIASOFT provides enterprise application management solutions that help
large organizations worldwide understand, manage and evolve the large-scale
software applications that support their fundamental business processes. These
business solutions are provided through a highly integrated suite of software
products and specialized professional consulting services. The Company's
products and services are designed to reduce substantially the cost of
maintaining and redeveloping existing mainframe applications, improve the
quality and maintainability of these applications and assist in implementing
specialized or complex redevelopment initiatives, such as the year 2000 century
date conversion.
The Company's principal business solutions are based on VIASOFT's
proprietary technology, the Existing Systems Workbench, an integrated suite of
software development tools. ESW, which is also the Company's primary software
product line, supports the IBM MVS operating system and includes products that
are available individually or as a complete suite. VIASOFT's business solutions,
which combine the Company's products and professional services offerings,
include (i) VIASOFT's Enterprise 2000 for addressing the year 2000 problem, (ii)
VIASOFT's Insourcing for reducing the costs and improving the productivity of
managing enterprise applications and (iii) VIASOFT's Legacy Transitions for
reusing and evolving enterprise applications for the implementation of
distributed computing environments and packaged software applications. As part
of the Company's strategy to broaden its enterprise application management
solutions, the Company acquired R&O in December 1996 and is in the process of
integrating R&O's repository technology into VIASOFT's solutions offerings.
The Company markets its products and services to Fortune 1000 companies and
similarly sized business and governmental organizations worldwide. As of
December 31, 1996, the Company had approximately 900 customers with licenses to
the Company's products and current maintenance contracts. Representative
customers of the Company include Abbott Laboratories, Citibank, N.A., France
Telecom, Mastercard International, Incorporated, Metropolitan Life Insurance
Company, Motorola, Inc., Phillips Petroleum Company and Union Pacific Railroad.
INDUSTRY BACKGROUND
Worldwide, large business and governmental organizations rely on
large-scale computer applications to help manage their businesses. These
applications, many of which are mission-critical, contain the core knowledge and
processes that support the major operations of these organizations. Examples of
such applications include insurance claims processing systems, on-line banking
systems, manufacturing systems and utility and telephone billing systems.
Mission-critical applications are primarily run on large, mainframe
computers using programs written in COBOL and a variety of other mainframe
programming languages. According to industry estimates, there are over 13,000
IBM and IBM-compatible MVS mainframe sites worldwide. Organizations that rely on
mainframe systems must continuously modify, maintain and redevelop existing
software applications to address changing information requirements resulting
from the ongoing evolution of business practices. The cost of these efforts is
enormous.
34
<PAGE> 36
In addition to ongoing maintenance and redevelopment requirements,
organizations periodically have a need to implement specialized, complex
application redevelopment initiatives to accommodate changed circumstances or
business requirements. In recent years, many large businesses and governmental
organizations have begun to address the year 2000 century date conversion
problem, which is a large-scale redevelopment requirement. Many existing
software applications employ date representations limited to the last two digits
of the year. For example, the year 1997 is typically stored as "97". These
two-digit representations create problems for existing systems that perform
calculations using dates after 1999. For example, "00" may be interpreted as
"1900", rather than "2000". These existing applications must be modified to
implement date representations that identify the correct century.
Large organizations are also seeking to leverage investments in existing
systems by integrating their mainframe systems with distributed computing
environments. The Company believes that this integration will continue to be
gradual, especially as it relates to mission-critical applications, because
mainframes have the demonstrated capability to run complex applications with
speed, security and reliability. Organizations have made large investments in
mainframe systems and the personnel to maintain and redevelop these systems, and
much of the core business knowledge of large organizations is already embedded
in existing mainframe applications. As a result, the Company expects many large
organizations will continue to pursue a strategy to retain many key
mission-critical applications on the mainframe, migrate all or part of other
existing applications to distributed computing environments and pursue new
application development in both mainframe and distributed computing
environments. In addition, the Company believes that organizations will seek to
reuse existing mainframe applications in distributed computing environments to
leverage longstanding existing systems investments.
Industry estimates suggest that many large organizations dedicate between
40% and 60% of their application development resources to maintenance and
redevelopment of existing applications. The use of such a large proportion of
organizations' resources in maintenance and redevelopment limits the resources
available for other tasks, such as developing new applications and addressing
specialized initiatives. Consequently, many large organizations are seeking to
improve the maintenance and redevelopment process in order to reduce costs and
improve productivity and return on their information systems investment. This
has resulted in an increasing demand for automated software tools. In addition,
many organizations are also seeking to improve maintenance and redevelopment
methodologies and train personnel to take full advantage of available
technology.
The limited functionality of many existing processes and tools, together
with the inability of some organizations to fully utilize available technology,
has created increasing demand for integrated software development tools and
professional services to help organizations fully utilize available technology
and improve their own maintenance and redevelopment processes. In addition, the
growing awareness of the size and complexity of the year 2000 problem has
created demand for technology and professional services that provide integrated
solutions. The Company believes that many organizations will be unable to
address their year 2000 conversion requirements in a timely manner using
internal resources alone and that demand for integrated solutions from outside
professionals, such as those provided by VIASOFT, will continue to grow.
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<PAGE> 37
COMPANY STRATEGY
VIASOFT's objective is to enhance its position as a leading provider of
enterprise application management solutions for large organizations worldwide.
To achieve its business objective, the Company is pursuing the following
strategies:
PROVIDE INTEGRATED BUSINESS SOLUTIONS
VIASOFT markets its products and professional services together to provide
comprehensive business solutions for its customers. The Company believes that
the integration of its products with its services offerings is an effective
strategy for addressing the complex maintenance and redevelopment requirements
of large organizations. This strategy is also designed to create long-term
relationships with the Company's installed base of customers, through which
VIASOFT strives to develop subsequent opportunities to market new products and
services.
CAPITALIZE ON THE YEAR 2000 OPPORTUNITY
The Company intends to continue to expand its product and service offerings
to meet the year 2000 century date conversion requirements of its customers. For
example, in August 1996 VIASOFT acquired a date bridging product to enable
organizations to change applications to accommodate the century date change
without making simultaneous changes to data files. The Company also plans to
increase its utilization of third-party strategic relationships with
professional services, consulting and other organizations to expand the
distribution of its year 2000 solutions and respond to anticipated demand.
Further, VIASOFT intends to leverage the customer relationships and knowledge of
customer application systems developed through its year 2000 services solutions
to market other products and services to assist in maintenance and redevelopment
of those systems.
ENHANCE TECHNOLOGY LEADERSHIP
The Company believes that it is the technology leader in its markets. The
Company intends to continue to expand the functionality of its products by
internally developing new products and enhancements that build on both its core
technology and its experience with maintenance and redevelopment processes. The
Company plans to pursue additional opportunities for acquisitions of, or
investments in, businesses, products and technology that complement its existing
product line or allow expansion into new product and service areas, such as the
acquisition of R&O. Management believes that opportunities exist to capitalize
on the Company's development expertise to enhance and integrate acquired
businesses, products and technologies into the Company's product and service
solutions.
ENHANCE AND INTEGRATE ROCHADE TECHNOLOGY
VIASOFT's strategy is to develop and enhance the Rochade repository
technology for integration with VIASOFT's ESW product line and professional
services solutions. The Company believes that the Rochade repository technology
will provide significant additional benefits to customers as part of a suite of
integrated products and solutions, compared to repositories offered as
stand-alone products. VIASOFT believes that this open, enterprise-wide
repository will create a working model of its customers' information assets,
providing a foundation on which to develop and market new integrated products
and solutions. The R&O acquisition also presents an opportunity for VIASOFT to
market the enhanced Rochade product line to VIASOFT's existing customer base and
to market VIASOFT's products and services to R&O's customer base.
EXPAND EXISTING WORLDWIDE SALES AND DISTRIBUTION CHANNELS
The Company intends to target new and existing customers, both domestically
and internationally, by expanding its direct sales organization and through
increased relationships with distributors and other third parties. The Company
has established its Solution/Technology Provider
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<PAGE> 38
program pursuant to which approximately 20 professional organizations are
authorized to use VIASOFT technology and/or methodology in engagements with
their customers.
VIASOFT CUSTOMERS
The Company's products and services are used by information technology
departments of Fortune 1000 companies and similarly sized business and
governmental organizations worldwide. At December 31, 1996, the Company had
approximately 900 customers with licenses to the Company's products and current
maintenance contracts. The Company believes that the following customers, each
of which accounted for at least $100,000 in revenue during the 12 months ended
December 31, 1996, are representative of the organizations that make up the
Company's domestic and international customer base.
BANKING
- ------------------------------------
ABN/AMRO Bank*
Bank of Ireland
Citibank, N.A.
Commerzbank AG*
Deutsche Bank AG*
The Governor and
Company of the Bank
of Scotland
National Australia Bank
Limited
NationsBanc Securities,
Inc.
PNC Bank National
Association
TELECOMMUNICATIONS
- ------------------------------------
Ameritech Corp.
BellSouth Telecommunications,
Inc.
France Telecom
Telstra Corporation Ltd.
INSURANCE
- ------------------------------------
American General Life
Insurance Co.
Lincoln National
Corporation
Metropolitan Life
Insurance Company
Munich American
Reinsurance Co.
Zurich American
Insurance Group
MANUFACTURING
- ------------------------------------
AlliedSignal, Inc.
Motorola, Inc.
Nissan Motor
North America, Inc.
Siemens AG*
GOVERNMENT
- ------------------------------------
State of Arkansas
State of New Jersey
State of Tennessee
County of Riverside
County of Sacramento
OTHER
- ------------------------------------
Abbott Laboratories*
ADP Corp.
Burlington Industries, Inc.
Burlington Resources
Oil & Gas Co.*
Consolidated Rail
Corporation (Conrail)
Hoffman - La Roche Inc.*
Mastercard International,
Incorporated
Phillips Petroleum
Company
Union Pacific Railroad
- ---------------
* R&O Customer
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<PAGE> 39
VIASOFT PRODUCTS
VIASOFT offers a range of products that enable organizations to understand,
manage and evolve their existing mission-critical enterprise applications. The
Company's primary product line is the Existing Systems Workbench, which to date
has accounted for substantially all of the Company's software license revenue.
THE EXISTING SYSTEMS WORKBENCH
ESW is an integrated suite of software tools built around the Company's
core technology, the Analytical Engine and the Application Knowledge Repository.
ESW products are available as a complete suite or as individual products that
address each phase of the existing applications maintenance and redevelopment
life-cycle.
[DESCRIPTION OF GRAPHIC MATERIAL]
A diagram illustrating The Existing Systems Workbench
suite of products, showing the Application Knowledge
Repository and the Analytical Engine in the center,
surrounded by the ESW products and their functions:
VIA/Smart Edit (Code Change), VIA/Smart Test (Testing),
VIA/SmartDoc (Program Documentation), VIA/Renaissance
(Program Re-engineering), VIA/Alliance (Application
Understanding), Visual Recap (Portfolio Analysis), and
VIA/Insight (Program Understanding).
The Analytical Engine extracts and builds comprehensive information on
programs and applications, including overall structure, logic, data and control
flow, data definitions and usage, cross references, interface information,
standards exceptions, system metrics and business functions. This information is
automatically stored in the Application Knowledge Repository, which makes the
information immediately available for use with all ESW products.
The Analytical Engine and Application Knowledge Repository support an
integrated suite of products with a common look and feel that enables management
of multi-task projects without interruption and eliminates the need to switch
between different vendors' products for separate tasks. The Analytical Engine
and Application Knowledge Repository technology were designed to
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<PAGE> 40
promote integration and extensibility. The Company believes these features
enable it to develop new ESW capabilities, features and technologies more
efficiently and effectively than competitors with non-integrated product lines.
The Company plans to continue to build on the core ESW technology to address
customers' existing applications requirements as they evolve.
Each component product of ESW is described briefly below:
VIA/ALLIANCE: APPLICATION UNDERSTANDING. VIA/Alliance is designed to
determine the scope of an application and the number of changes required to
deliver a specified enhancement by analyzing different components of an
application and revealing the interrelationships between these components.
VIA/Alliance is also used to plan and estimate maintenance, enhancement and
redevelopment projects and to facilitate projects involving file or database
conversions, enabling and populating repositories, or integrating new
applications and packaged software.
VISUAL/RECAP: PORTFOLIO ANALYSIS AND REPORTING. Visual/Recap is the
decision support component of ESW. Visual/Recap allows information systems
managers to measure and gauge objectively the quality, complexity and business
value of applications and programs by providing industry-accepted measurements
and standards, including automation of the counting of function points.
VIA/INSIGHT: PROGRAM UNDERSTANDING. VIA/Insight automates the process of
analyzing and understanding complex COBOL logic. VIA/Insight is designed to
enable users to automate routine maintenance tasks and allow programmers to
assess the impact of changes, estimate the time changes will take and determine
the level of difficulty involved in making proposed changes.
VIA/SMARTEDIT: CODE CHANGE. VIA/SmartEdit is designed to provide
automated, COBOL-intelligent change facilities and automatic syntax checking in
the MVS operating system's editing environment. VIA/SmartEdit automatically
identifies program components directly and indirectly related to a proposed
program change.
VIA/SMARTTEST: CODE TESTING. VIA/SmartTest is designed to promote speed
and accuracy in code testing and debugging. VIA/SmartTest is designed to analyze
a program's structure, data relationships and execution paths and reveals both
the locations and the underlying causes of bugs and structural problems in
program code. VIA/SmartTest is also designed to allow programmers to monitor and
change program logic, data values and memory interactively from within the test
session, and automatically apply COBOL changes to the source code without
recompiling.
VIA/SMARTDOC: PROGRAM DOCUMENTATION. VIA/SmartDoc is designed to synthesize
com-
prehensive program information directly from the source code and organize it
into convenient reports, graphical charts and listings. VIA/SmartDoc provides
advanced source listings, program structure charts, enhanced data
cross-reference reports, control flow and data flow information and a variety of
industry-accepted software metrics concerning complexity, architecture and
software quality.
VIA/RENAISSANCE: PROGRAM RE-ENGINEERING. VIA/Renaissance is designed to
isolate and extract specific business functions from a program such as reports,
calculations, computational variables, input/output definitions and transactions
and generate compilable, executable programs or modules. The results provided by
VIA/Renaissance assist in reuse of existing COBOL code, enabling customers to
build libraries of reusable and shared code for new development, modularization
or redevelopment projects. In addition, re-engineered programs or modules can be
transferred to different platforms as part of a system conversion or
client/server implementation.
VIASOFT also offers ESW/PC and VIA/SmartAccess to incorporate PCs and
workstations operating on the Windows platform into the maintenance and
redevelopment of their existing COBOL applications. To date, licenses of the
Company's Windows products have not been material to the Company's results of
operations and the Company does not expect significant sales in the future.
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<PAGE> 41
ROCHADE
Through the Company's December 1996 acquisition of R&O, VIASOFT acquired
R&O's Rochade technology and product line. Rochade is based on an open,
enterprise-wide repository software technology that is designed to help
businesses better capture, manage, monitor, disseminate, reuse and change their
information technology for both mainframe computers and distributed computing
environments. Rochade provides a unified, open method for viewing and sharing
information about systems, tools, techniques and processes across platforms that
is easily accessible to a broad range of users, allowing users to search, query
and report on business data as they need it.
The Company believes that an enterprise-wide repository is necessary to
fully manage cross-application dependencies, plan and execute large-scale
conversion projects, and extend information models to accommodate new
application components, languages, and execution environments. The Company
believes that its acquisition of Rochade will enhance the Company's repository
technology by permitting the storage of greater volumes of information at the
enterprise level. Rochade is designed to allow more efficient access to, and
understanding and management of, customers' applications and data utilizing a
variety of computer languages, operating systems and non-VIASOFT products.
VIASOFT is enhancing the Rochade repository technology for integration with
VIASOFT's product line and professional services solutions. The Company believes
that the Rochade repository technology will provide significant additional
benefits to customers as part of a suite of integrated products and solutions,
compared to repositories offered as stand-alone products. VIASOFT also believes
Rochade will permit greater flexibility to create repository information models
to accommodate data warehousing, process management, project tracking and
similar initiatives. In addition, Rochade, an open enterprise-wide repository,
will provide a foundation on which to develop and market new integrated products
and solutions.
VIASOFT'S ESTIMATE 2000
VIASOFT's Estimate 2000 is a separately available software product and a
component of VIASOFT's Enterprise 2000 solution. Estimate 2000 is a tool for
analyzing and assessing the size of the programming effort required for year
2000 date conversions. Estimate 2000 is designed to evaluate year 2000
conversion projects in the IBM MVS COBOL, Assembler and PL/I mainframe
environments, and also provides comprehensive reports for both management and
technical levels. Estimate 2000 is also capable of analyzing the impact of
programming projects unrelated to the year 2000 market that require location of
specified numerical or other fields.
PRODUCT DEVELOPMENT
In August 1996, VIASOFT acquired certain proprietary date bridging
technology designed to help reduce the time, complexity and cost of adapting
large interrelated applications to accommodate year 2000 century date conversion
requirements, by enabling organizations to make changes to their applications
without making changes to the data files at the same time. The Company also
believes that this technology will be useful to enable customers to access
historical and archival data beyond the year 2000 without conversion of the data
files and to help coordinate transfer of date-sensitive information within and
among organizations. The Company is in the process of developing and enhancing
the acquired date bridging technology for integration in its year 2000 service
solutions and currently plans to introduce the technology in late calendar 1997.
The Company also intends to further develop the date bridging technology for
introduction as a commercially available software product.
In addition, the Company continues to acquire, develop and enhance
technology for its existing ESW product line. For example, VIASOFT entered into
licensing arrangements with several vendors to provide additional language
support for its ESW products. The Company is in the process of
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<PAGE> 42
developing and enhancing the licensed technology to provide ESW functionality
for customer applications utilizing PL/I, Assembler, Natural and a variety of
COBOL dialects. The Company currently expects to begin introduction of this
additional language capability in its ESW product line in the fourth quarter of
fiscal 1997. See "Risk Factors -- Risks Associated with Products Currently Under
Development".
VIASOFT SERVICES
The Company's specialized professional services provide processes,
technology and expertise to address the complex, large-scale maintenance and
redevelopment requirements of large organizations. VIASOFT's service offerings
have grown significantly, representing 14%, 26% and 35% of total revenues in the
fiscal years ended June 30, 1995 and 1996, and the six months ended December 31,
1996, respectively.
VIASOFT'S ENTERPRISE 2000
VIASOFT's Enterprise 2000 is a combination of professional services, the
Company's ESW technology, other Company technology and third-party resources,
designed to help customers address the year 2000 century date conversion
requirements for existing applications. VIASOFT's Enterprise 2000 accounted for
15%, 74% and 82% of total professional services revenue during the fiscal years
ended June 30, 1995 and 1996 and the six months ended December 31, 1996,
respectively.
VIASOFT's Enterprise 2000 offering employs a three-phase process designed
to assess the impact of the century date transition on existing applications,
prepare a comprehensive conversion strategy and then implement the necessary
changes. These three phases, Impact 2000, Plan 2000 and Operation 2000, are
offered individually or as a complete program. Through Impact 2000, VIASOFT
determines the scope, size and level of effort needed to implement the year 2000
changes. The Company's Plan 2000 offering identifies the project goals, prepares
a detailed work plan and executes a pilot project. Through Operation 2000,
VIASOFT manages the implementation and testing of the required changes.
VIASOFT's Enterprise 2000 is designed to address year 2000 date conversion
requirements at the enterprise level of an organization. The Company also offers
VIASOFT's Fast Path 2000 services that implement the functions of VIASOFT's
Enterprise 2000 at the application level to respond to customer demand for
prompt action on year 2000 projects.
VIASOFT'S INSOURCING
To assist organizations that desire to increase productivity in their
maintenance and redevelopment activities while avoiding the loss of control over
their systems associated with outsourcing, the Company has developed a solution
known as VIASOFT's Insourcing. VIASOFT's Insourcing combines VIASOFT's ESW
technology with onsite professional services to enable customers to successfully
implement enhanced, repeatable processes for maintenance and redevelopment of
existing applications. The Company believes that the combination of its
expertise, technology and professional services can free significant existing
customer programming resources for redeployment by increasing productivity and
reducing the costs, time and effort required to maintain existing applications.
VIASOFT'S LEGACY TRANSITIONS
Many organizations have implemented a transition from exclusive reliance on
mainframe computers to the use of the mainframe together with distributed
computing environments for certain applications. VIASOFT has developed services
and technology designed to enable organizations to reuse existing mainframe
applications in new computing architectures, including distributed computing
environments, and to integrate existing mainframe applications with these
architectures. The Company believes that use of its technology and services
should improve customers' ability to leverage their existing mainframe
applications by increasing flexibility to integrate mission-critical
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<PAGE> 43
applications with new architectures and systems, or by migrating and reusing
existing mainframe code in these new environments.
CUSTOMER SUPPORT AND TRAINING
The Company offers maintenance for each of its products, entitling the
customer to receive technical support and advice, including problem resolution
services, installation assistance, error corrections and any product
enhancements released during the maintenance period. Under the Company's
standard license agreement for mainframe products, maintenance is provided
without charge for the first year, is renewable on an annual basis, and is
generally priced at a percentage of the then current list price. In the fiscal
years ended June 30, 1995 and 1996, and the six months ended December 31, 1996,
maintenance fees represented approximately 39%, 33% and 26%, respectively, of
the Company's total revenues. Maintenance and support services are provided
primarily by telephone from VIASOFT's Phoenix, Arizona, headquarters and R&O's
Westford, Massachusetts and German locations, as well as certain offices of the
Company's international subsidiaries and distributors.
The Company provides a variety of training services designed to enable
customers to utilize fully the Company's technology solutions. These training
offerings are generally conducted at the customer's site by specialists, and
range from introductory courses in using the Company's products to advanced
techniques courses. The Company also offers customized training for specific
customers and instructs customer personnel to conduct ongoing training of their
information systems staff.
SALES, MARKETING AND DISTRIBUTION
VIASOFT markets its products and services principally to Fortune 1000 and
similarly sized business and governmental organizations worldwide. The Company's
marketing efforts are implemented through its domestic and international direct
sales organizations, through a number of foreign independent distributors,
located in Europe, the Far East, South Africa, and Latin America, and through
strategic relationships with third parties as part of its Solution/Technology
Provider program.
DIRECT SALES
The Company sells and supports its products and services in North and South
America from its Phoenix, Arizona, headquarters and 5 primary field offices in
the United States. As of December 31, 1996, the Company had 53 salespersons
worldwide, including 33 located at the Company's headquarters and the United
States field offices. These offices cover the territories of Canada, the United
States, Mexico, Central America and all of South America, with the exception of
Brazil, where the Company utilizes a distributor. Internationally, the Company
has direct operations in the United Kingdom, Germany, Australia, the
Netherlands, Belgium, Luxembourg and Japan.
INTERNATIONAL DISTRIBUTORS
VIASOFT markets its products to international customers both directly and
through independent distributors. Distributors are authorized by VIASOFT to
license the Company's software products to end-users. In addition to its
subsidiary offices, the Company markets Rochade and/or the ESW product line
internationally in 37 countries through 19 independent distributors. To date,
the Company has not offered significant professional services through its
distributors, although in fiscal 1996 some distributors became
Solution/Technology Providers.
SOLUTION/TECHNOLOGY PROVIDERS
The Company utilizes third-party relationships to broaden the distribution
of its products and services in certain markets. During fiscal 1996, the Company
established a program which provides
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<PAGE> 44
for non-exclusive relationships with professional services and consulting
organizations, computer and software integration companies and hardware and
software vendors ("Solution/Technology Providers") who are authorized to use
VIASOFT technology and/or methodology, principally VIASOFT's Enterprise 2000, in
connection with services they perform for their customers. Generally, the
Solution/Technology Providers pay an initial license fee for the transfer and
use of VIASOFT's service solutions and training in VIASOFT products and
solutions. In addition, customers of certain Solution/Technology Providers that
have not previously licensed the Company's products pay lease fees or license
fees for the use of VIASOFT products in each engagement with a
Solution/Technology Provider. These relationships are intended to augment
VIASOFT's own distribution channels to expand the reach of its business
solutions and obtain new customers for VIASOFT products. VIASOFT continues to
invest resources in training and supporting these providers. The Company
currently has Solution/Technology Provider relationships with approximately 20
companies, although to date most of the revenues from this distribution channel
have been derived through four or five of these companies, including Keane,
Inc., Andersen Consulting LLP, and KPMG Peat Marwick LLP. During the fiscal year
ended June 30, 1996 and the six months ended December 31, 1996, approximately
11% and 18%, respectively, of the Company's software license fees were
attributable to its Solution/Technology Provider relationships. The Company
intends to continue to devote resources to expand this distribution channel.
NEW MARKETING INITIATIVES
In January 1997, VIASOFT announced a new industry initiative called "c.
era" (an abbreviation for "cooperative era") to cooperatively market year 2000
solutions with other leading vendors that provide technology and services
complementary to VIASOFT's Enterprise 2000, such as "code change factories" and
consulting organizations. There can be no assurance, however, that this
marketing initiative will attract the participation of other vendors, or if they
participate, that the initiative will be successful.
In February 1997, the Company announced a new marketing initiative focused
on the federal government. To assist agencies of the federal government in their
year 2000 projects, VIASOFT is offering US2000, a solution comprising ESW and
certain process management and year 2000 methodologies. Licenses of this
solution will be offered to agencies of the federal government in one-year,
renewable contracts at a significantly reduced license fee. US2000 was recently
announced and there can be no assurance that this marketing initiative will
generate any revenue or as to the timing or magnitude of any revenue that may be
generated.
COMPETITION
PRODUCTS
The market for the Company's software products is intensely competitive and
is characterized by rapid change in technology and user needs and the frequent
introduction of new products. Most of the Company's competitors and many
potential competitors have substantially greater financial, marketing and
technology resources than the Company. Major competitors for software product
license sales include Computer Associates International, Inc.; Compuware
Corporation; Intersolv, Inc.; Micro Focus Group Public Limited Company; and
Platinum Technology, Inc. The Company believes that the principal factors
affecting competition in its product markets include compatibility with
customers' platforms and languages, product functionality, quality of support,
product performance and reliability, ability to respond to changing customer
needs, ease of use and price.
CONSULTING SERVICES
The market for the type of professional services provided by the Company is
also highly competitive. Major competitors of the Company's services business
are primarily the consulting organizations of the Big Six accounting firms.
Other competitors of the Company's services
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<PAGE> 45
business include Data Dimensions, Inc., Electronic Data Systems Corporation, and
IBM's Integrated Systems Solutions Corp. Other system integrators and
application outsourcers also compete to perform professional services
competitive to VIASOFT's Insourcing and VIASOFT's Legacy Transitions solutions.
These companies position themselves as long-term business partners, able to
lower an organization's staff and maintenance costs and improve control of
information systems functions with well-established work practices. Many smaller
local or regional organizations also compete in the services market, which is
fragmented and characterized by low barriers to entry. The Company's principal
competitors and many potential competitors have significantly greater financial,
marketing, recruiting and technological resources than the Company. The
principal competitive factors affecting the market for the Company's
professional services include responsiveness to customer needs, availability and
productivity of personnel, the ability to demonstrate achievement of results,
depth of technical skills, price and reputation.
THE YEAR 2000 MARKET
With the growth of the year 2000 market, significant competition has
emerged and is expected to increase in the next few years. The consulting
services segment of the market is characterized by low barriers to entry. The
principal competitive factors affecting this market include functionality,
performance and reliability of technology and methodology, availability and
productivity of personnel, the ability to demonstrate achievement of results,
depth of experience in year 2000 projects, price and reputation. There are
generally three categories of competitors for VIASOFT in the year 2000 market,
each focusing on a different market segment.
SOFTWARE VENDORS. Software vendors provide tools targeted for the year
2000 market. Many of these products focus on a particular phase of a year 2000
project, such as inventory and assessment, scanning, parsing, conversion,
testing and documentation. Competitive factors include the tool's compatibility
with customers' platforms and languages, the vendor's ability to deliver
training and ongoing support during the customers' implementation of the tools,
and the value of the tool to an organization beyond the year 2000. Primary
competitors in this category include Computer Associates International, Inc.;
Data Dimensions, Inc.; Intersolv, Inc.; Micro Focus Group Public Limited
Company; and Platinum Technology, Inc. through its affiliation with ADPAC Corp.
CONSULTING ORGANIZATIONS. Competitors in this category are generally
small- to medium-sized consulting firms that have become highly focused on the
year 2000 problem. These companies provide supplemental personnel and contract
programming resources to customers and some have licensed tools from software
vendors to enhance their offering. These companies are often selected by
customers based on the skills, experience and process that each firm uses.
Competitors in this category include CIBER, Inc.; Computer Horizons, Corp.;
Computer Task Group, Inc.; and Data Dimensions, Inc.
SYSTEMS INTEGRATORS AND APPLICATION OUTSOURCERS. Large consulting and
outsourcing firms have also entered the year 2000 market. These are companies
that may already have relationships with customers and are able to include year
2000 conversion services with the maintenance and data processing services they
already provide. They provide a customer with an alternative to managing the
year 2000 conversion project themselves by outsourcing the whole project to an
organization with an established relationship and a working knowledge of the
customer's systems. Some integrators/outsourcers offer licensed tools from
software vendors. Competitors in this category include CapGemini; Computer
Sciences Corp.; Electronic Data Systems Corporation; IBM's Integrated Systems
Solutions Corp. and most Big Six accounting firms.
RESEARCH AND DEVELOPMENT
Historically, VIASOFT's development of new products has been accomplished
primarily with in-house development personnel and resources. As of December 31,
1996, the Company had 104 employees engaged in product development, including 36
employees at R&O. Of the Company's
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<PAGE> 46
research and development personnel, 54 were software developers with the balance
divided between customer support, documentation, and quality assurance. All but
two of these employees are located at either the Company's Phoenix, Arizona,
headquarters or the R&O research and development facilities in Germany. In
addition to developing new products, the Company continually updates its
existing products through enhancements and new releases. The Company also
continues to develop new products and technologies to facilitate its service
solutions.
Beginning in fiscal 1996 and continuing in the current year, VIASOFT has
expanded its strategy to acquire and/or license new products and technologies to
complement, expand and enhance its existing products and services. The Company
expects to increase its reliance on this strategy and plans to continue to
devote research and development resources to the enhancement and integration of
acquired and licensed technologies. See "Business -- Product Development".
During the fiscal year ended June 30, 1996, and the six months ended
December 31, 1996, research and development expenditures were $4,237,000 and
$2,852,000, respectively, excluding a one-time charge of $26,958,000 in the six
months ended December 31, 1996 related to the purchase of in-process technology
from R&O. The Company anticipates that it will continue to commit substantial
resources to research and development in the future.
INTELLECTUAL PROPERTY
VIASOFT relies on a combination of copyright, trade secret and trademark
laws, and contractual provisions to establish and protect its rights in its
software products and proprietary technology. The Company protects the source
code version of its products as a trade secret and as an unpublished copyrighted
work. Despite these precautions, it may be possible for unauthorized parties to
copy certain portions of the Company's products or reverse engineer or obtain
and use information that the Company regards as proprietary. The Company has no
patents and existing copyright and trade secret laws offer only limited
protection. Certain provisions of the license and distribution agreements
generally used by the Company, including provisions protecting against
unauthorized use, copying, transfer and disclosure, may be unenforceable under
the laws of certain jurisdictions and the Company is required to negotiate
limits on these provisions from time to time. In addition, the laws of some
foreign countries do not protect the Company's proprietary rights to the same
extent as do the laws of the United States. The Company has been and may be
required from time to time to enter into source code escrow agreements with
certain customers and distributors, providing for release of source code in the
event the Company breaches its support and maintenance obligations, files
bankruptcy or ceases to continue doing business.
The Company recently acquired certain date bridging technology that is the
subject of a patent application. The Company is currently evaluating the
technology and the patent application and anticipates that it will continue to
prosecute the patent application. However, there can be no assurance that a
patent will issue as a result of such application, nor as to the extent of the
protection, if any, such patent might afford.
The Company's competitive position may be affected by its ability to
protect its proprietary information. However, because the software industry is
characterized by rapid technological change, the Company believes that patent,
trademark, copyright, trade secret and other legal protections are less
significant to the Company's success than other factors such as the knowledge,
ability and experience of the Company's personnel, new product and service
development, frequent product enhancements, customer service and ongoing product
support.
While the Company has no knowledge that it is infringing the proprietary
rights of any third party, there can be no assurance that such claims will not
be asserted in the future with respect to existing or future products. Any such
assertion by a third party could require the Company to pay royalties, to
participate in costly litigation and defend licensees in any such suit pursuant
to indemnification agreements, or to refrain from selling an alleged infringing
product or service. See "Risk Factors -- Importance of Proprietary Rights".
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EMPLOYEES
The Company had 408 full-time employees as of December 31, 1996, including
150 in sales and marketing, 104 in research, development and support, 102 in
professional services and 52 in corporate operations and administration. The
future success of the Company will depend in large part upon its continued
ability to attract and retain highly skilled and qualified personnel.
Competition for such personnel is intense in the computer software industry,
particularly for talented software developers, service consultants and sales and
marketing personnel. Management anticipates that as the year 2000 approaches, it
will become more and more difficult to recruit and retain experienced
programmers and consultants, as industry sources generally estimate that there
will not be a sufficient number of such persons to fill the demand created by
the year 2000 problem. None of the Company's employees is represented by a
collective bargaining agreement. The Company believes that its relations with
its employees are good.
PROPERTIES
The Company's principal administrative, research and development, customer
support and marketing facilities are located in approximately 42,000 square feet
of space in Phoenix, Arizona. The Company occupies these premises under a lease
agreement expiring on December 31, 1999, subject to certain renewal options. In
addition, the Company executed a lease in December 1996, commencing March 1,
1997, for approximately 24,000 additional square feet of space in Phoenix,
Arizona. The lease expires May 31, 2001.
In addition, the Company maintains field offices and executive suite sales
offices within the United States and Canada located in leased space aggregating
approximately 24,000 square feet as of December 31, 1996. The Company also
leased an aggregate of approximately 35,000 square feet of space as of December
31, 1996 in Argentina, Australia, Belgium, Germany, Japan, the Netherlands and
the United Kingdom for operations of its international branch offices and
subsidiaries.
The Company believes that its facilities are adequate for its current needs
and that suitable additional space will be available as needed.
LEGAL PROCEEDINGS
VIASOFT is subject to certain legal proceedings and claims that arise in
the conduct of its business. In the opinion of management, the amount of
liability, if any, as a result of these claims and proceedings is not likely to
have a material effect on the financial condition or results of operations of
the Company.
In addition, the Company recently settled a lawsuit in United States
District Court, Phoenix, Arizona, against its former Chief Financial Officer,
Alvin E. Holland, Jr. Mr. Holland was employed by the Company from January 1996
through April 8, 1996, when he was dismissed. In connection with the settlement,
the Company agreed to make a cash payment to Mr. Holland and forgive certain
indebtedness in amounts that the Company was advised by counsel were
considerably less than the amount of anticipated litigation costs. The Company
and Mr. Holland released each other from all outstanding claims in connection
with the settlement. The Company accrued all amounts related to the settlement
in the quarter ended December 31, 1996.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's directors and executive officers and their ages as of January
31, 1997 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- --- ------------------------------------------------
<S> <C> <C>
A. Leroy Ellison..................... 60 Chairman of the Board and Director
Steven D. Whiteman................... 46 Chief Executive Officer, President and Director
Michael A. Wolf...................... 44 Executive Vice President, Chief Technology
Officer and Director
Mark R. Schonau...................... 40 Vice President, Finance & Administration, Chief
Financial Officer and Treasurer
Catherine R. Hardwick................ 37 General Counsel and Secretary
Kevin M. Hickey...................... 38 Senior Vice President, Americas Operations
Colin J. Reardon..................... 43 Vice President, International Operations
Jean-Luc G. Valente.................. 36 Vice President, Marketing
John J. Barry, III................... 56 Director
Alexander S. Kuli.................... 51 Director
J. David Parrish..................... 54 Director
Arthur C. Patterson.................. 53 Director
</TABLE>
A. Leroy Ellison has served as a director of the Company since March 1984
and has been Chairman of the Board since June 1984. Mr. Ellison served as
President for the period October 1990 to May 1993 and Chief Executive Officer of
the Company for the period October 1990 to January 1994. Prior to his employment
with VIASOFT, Mr. Ellison was a consultant from August 1989 through September
1990 and served as interim chief executive officer of three different companies
from 1984 to 1987. Mr. Ellison is also a director of Syntellect, Inc., an
interactive voice response systems company, and several privately held
companies.
Steven D. Whiteman has served as President of the Company since May 1993
and as Chief Executive Officer and a director since January 1994. Prior to
holding these offices, Mr. Whiteman served as Vice President of Sales and
Marketing of the Company from December 1990. Before joining VIASOFT, Mr.
Whiteman served as Senior Vice President, Sales and International Operations of
Systems Center, Inc., a developer and marketer of network and systems management
software, from January 1989 to October 1990.
Michael A. Wolf has served as Chief Technology Officer of the Company since
October 1993, Executive Vice President since May 1993 and a director since
January 1994. Mr. Wolf served as Vice President of Development of the Company
from November 1984 to May 1993, and Secretary from March 1986 to April 1994.
Mark R. Schonau was appointed as Vice President, Finance & Administration,
Chief Financial Officer and Treasurer of the Company on September 25, 1996. He
had consulted with the Company for a short period of time prior to his
employment. Before joining VIASOFT, Mr. Schonau served as Chief Financial
Officer, Corporate Secretary and Treasurer of CyCare Systems, Inc., a healthcare
software company, from October 1989 to August 1996.
Catherine R. Hardwick has served as Secretary and General Counsel of the
Company since January 24, 1996. Prior to holding these offices, Ms. Hardwick
served as Corporate Counsel for the Company from February 1995. Before joining
the Company, Ms. Hardwick practiced law with the law firm of Meyer, Hendricks,
Victor, Osborn & Maledon, P.A. in the areas of corporate and securities law and
intellectual property licensing.
47
<PAGE> 49
Kevin M. Hickey has served as Senior Vice President, Americas Operations of
the Company since January 1994. Mr. Hickey joined VIASOFT in February 1993 to
manage the domestic sales organization of the Company. Prior to joining VIASOFT,
Mr. Hickey had been employed by International Business Machines Corporation as a
Business Unit Executive in the Phoenix office from January 1991 through January
1993; as an Administrative Assistant from November 1989 to December 1990; and as
Marketing Manager from January 1988 through October 1989.
Colin J. Reardon has served as Vice President, International Operations of
the Company since August 1994. Prior to joining VIASOFT, Mr. Reardon served as
Vice President of International Marketing of Sterling Software, Inc., a systems
management software and services company, from July 1993 through July 1994. Mr.
Reardon was previously employed by Systems Center, Inc., a developer and
marketer of network and systems management software, where Mr. Reardon served as
Vice President of European Operations from November 1992 through June 1993 and
Managing Director of its United Kingdom operations from July 1988 through
October 1992.
John J. Barry, III has served as a director of the Company since August
1991. Mr. Barry presently provides strategic and management consulting services
to senior management in the information technology and other industries. From
May 1, 1991 through December 31, 1996 Mr. Barry served as the Chairman,
President and CEO of Petroleum Information Corporation, an energy industry
information solutions company in Houston, Texas. From January 1989 through June
1990, Mr. Barry served as President and Chief Operating Officer of Systems
Center, Inc., a developer and marketer of network and systems management
software. From 1985 through 1988, Mr. Barry served as President and Chief
Executive Officer of The Systems Center, Inc., a software data transfer company.
Mr. Barry serves on the boards of directors of several privately held companies.
Alexander S. Kuli has served as a director of the Company since January
1994. Mr. Kuli is currently Vice President, Worldwide Sales for Tivoli Systems,
Inc., a vendor of distributed software products, a position held since January
1993. Prior to joining Tivoli, Mr. Kuli served as Vice President, Worldwide
Sales for Candle Corporation, a vendor of mainframe systems performance
management software, from October 1985 through December 1992.
J. David Parrish has served as a director of the Company since January
1994. Mr. Parrish is currently the Senior Vice President, Professional Services
and Customer Support for Walker Interactive Systems, Inc., a financial
application software company. Prior to joining Walker Interactive Systems in
November 1989, Mr. Parrish was a partner with Price Waterhouse with
responsibility for its Western Region package implementation consulting
practice.
Arthur C. Patterson has served as a director of the Company since September
1984. He served as President of the Company from October 1984 to June 1985. Mr.
Patterson is a founder and General Partner of Accel Partners, a venture capital
firm. Mr. Patterson also serves on the board of directors of The Santa Cruz
Operation, Inc., Synercom Technology, Inc., G. T. Global Group of Investment
Companies, and PageMart, Inc., as well as several other privately held
technology companies.
48
<PAGE> 50
SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of Common Stock as of January 31, 1997, and as adjusted to reflect the
sale of the Common Stock being offered hereby, by the Company and the Selling
Stockholders:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING(1) NUMBER OF AFTER OFFERING(1)(2)
----------------------- SHARES BEING -----------------------
SELLING STOCKHOLDERS NUMBER PERCENT OFFERED(2) NUMBER PERCENT
- --------------------------------- -------- ------- ------------ -------- -------
<S> <C> <C> <C> <C> <C>
John J. Barry, III............... 56,412 * 20,000 36,412 *
Director
A. LeRoy Ellison(3).............. 612,564 3.5 % 150,000 462,564 2.4%
Director
Kevin M. Hickey(4)............... 43,327 * 11,000 32,327 *
Officer
J. David Parrish(5).............. 27,336 * 13,000 14,336 *
Director
Colin J. Reardon(6).............. 28,335 * 10,000 18,335 *
Officer
Silverman Heller Associates(7)... 20,000 * 20,000 0 *
Steven D. Whiteman(8)............ 338,760 1.9 35,000 303,760 1.6
Director and Officer
Michael A. Wolf(9)............... 268,500 1.5 91,000 177,500 *
Director and Officer
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1%
(1) Except as otherwise noted, and subject to community property laws where
applicable, each person named in the table has sole voting and investment
power with respect to all shares shown as beneficially owned by him.
(2) Assumes no exercise of the Underwriters' over-allotment option to purchase
up to an aggregate of 300,000 shares of Common Stock. Of the 300,000 shares
covered by the Underwriters' over-allotment option, 202,500 shares are
offered by the Company and the remaining 97,500 are offered by the Selling
Stockholders.
(3) These shares are held by the Allen Leroy Ellison Family Trust of which Mr.
Ellison is trustee and a beneficiary.
(4) Includes 37,415 shares that Mr. Hickey may acquire upon the exercise of
options exercisable within 60 days of January 31, 1997.
(5) Includes 26,668 shares that Mr. Parrish may acquire upon the exercise of
options exercisable within 60 days of January 31, 1997.
(6) Represents 28,335 shares that Mr. Reardon may acquire upon the exercise of
options exercisable within 60 days of January 31, 1997.
(7) Includes 16,000 shares that Silverman Heller Associates, an investor
relations consultant to the Company, may acquire upon the exercise of
options exercisable within 60 days of January 31, 1997.
(8) Includes 80,000 shares held by a trust for the benefit of Steven D. and
Beverly C. Whiteman, of which Mr. Whiteman is trustee, and 65,002 shares
that Mr. Whiteman may acquire upon the exercise of options exercisable
within 60 days of January 31, 1997.
(9) Includes shares held by a trust of which Mr. Wolf is trustee and a
beneficiary and 158,164 shares held by a limited partnership, of which Mr.
Wolf is the general partner. Also includes 50,002 shares that Mr. Wolf may
acquire upon the exercise of options exercisable within 60 days of January
31, 1997.
49
<PAGE> 51
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered by the
Company and the Selling Stockholders will be passed upon by Osborn Maledon,
P.A., Phoenix, Arizona. Pillsbury Madison & Sutro LLP, Menlo Park, California,
is acting as counsel for the Underwriters in connection with certain legal
matters relating to the shares of Common Stock offered hereby.
EXPERTS
The Consolidated Financial Statements and schedules of VIASOFT, Inc. at
June 30, 1995 and 1996, and for each of the three years in the period ended June
30, 1996, and the Consolidated Financial Statements of Rottger & Osterberg
Software-Technik GmbH and subsidiaries for the years ended December 31, 1994 and
1995 and the nine months ended September 30, 1996, incorporated by reference in
this Prospectus and the related Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of such firm as experts in accounting and auditing in giving said
reports.
AVAILABLE INFORMATION
VIASOFT is subject to the informational requirements of the Exchange Act
and in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company may be inspected and copied at the public
reference facilities of the Commission located at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices located at 7
World Trade Center, Suite 1300, New York, New York 10048, and at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
also be obtained at prescribed rates from the Public Reference Section of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. Such
materials and other information concerning the Company are also filed
electronically with the Commission and are accessible via the World Wide Web at
http://www.sec.gov. The Common Stock is traded on the Nasdaq National Market.
The Company has filed with the Commission a registration statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act, with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. Statements contained in this
Prospectus as to the contents of any contract or other document referred to are
not necessarily complete and, in each instance, reference is made to the copy of
such contract or other document filed as an exhibit or incorporated by reference
to the Registration Statement of which this Prospectus forms a part, each such
statement being qualified in all respects by such reference. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement and the exhibits and schedules
thereto. Copies of the Registration Statement and the exhibits and schedules
thereto may be inspected, without charge, at the offices of the Commission, or
obtained at prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549.
50
<PAGE> 52
UNDERWRITING
Subject to the terms and conditions of an underwriting agreement, (the
"Underwriting Agreement"), the Company and the Selling Stockholders have agreed
to sell to each of the underwriters named below (the "U.S. Underwriters"), and
each of such U.S. Underwriters, for whom Goldman, Sachs & Co., Wessels, Arnold
and Henderson, L.L.C., SoundView Financial Group, Inc. and Volpe, Welty &
Company L.L.C. are acting as representatives, has severally agreed to purchase
from the Company and the Selling Stockholders, the respective number of shares
of Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
- ---------------------------------------------------------------------------- ----------------
<S> <C>
Goldman, Sachs & Co. .......................................................
Wessels, Arnold and Henderson, L.L.C. ......................................
SoundView Financial Group, Inc. ............................................
Volpe, Welty & Company L.L.C................................................
---------
Total............................................................. 1,600,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $ per share. The U.S. Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the representatives.
The Company and the Selling Stockholders have entered into an underwriting
agreement (the "International Underwriting Agreement") with the underwriters of
the international offering (the "International Underwriters" and, collectively
with the U.S. Underwriters, the "Underwriters") providing for the concurrent
offer and sale of 400,000 shares of Common Stock in an offering outside the
United States. The offering price and aggregate underwriting discounts and
commissions per share for the two offerings are identical. The closing of the
offering made hereby is a condition to the closing of the international
offering, and vice versa. The representatives of the International Underwriters
are Goldman, Sachs International, Wessels, Arnold and Henderson, L.L.C.,
SoundView Financial Group, Inc. and Volpe, Welty & Company L.L.C.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution of
the shares offered hereby and subject to certain exceptions, it will offer, sell
or deliver the shares of Common Stock, directly or indirectly, only in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") and to U.S. persons, which term shall mean, for purposes
of this paragraph: (a) any individual who is a resident of the United States or
(b) any corporation, partnership or other entity organized in or under the laws
of the United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States. Each of the
International Underwriters has agreed pursuant to the Agreement Between that, as
a part of the distribution of the shares offered as a part of the international
offering, and subject to certain exceptions, it will (i) not, directly or
indirectly, offer, sell or deliver shares of Common Stock (a) in the United
States or to any U.S. persons or (b) to any person who it believes intends to
reoffer, resell or deliver the shares in the United States or to any U.S.
persons, and (ii) cause any dealer to whom it may sell such shares at any
concession to agree to observe a similar restriction.
U-1
<PAGE> 53
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
The Company and the Selling Stockholders have granted the U.S. Underwriters
an option exercisable for 30 days after the date of this Prospectus to purchase
up to an aggregate of 240,000 additional shares of Common Stock solely to cover
over-allotments, if any. If the U.S. Underwriters exercise their over-allotment
option, the U.S. Underwriters have severally agreed, subject to certain
conditions, to purchase approximately the same percentage thereof that the
number of shares to be purchased by each of them, as shown in the foregoing
table, bears to the 1,600,000 shares of Common Stock offered. The Company and
Selling Stockholders have granted the International Underwriters a similar
option to purchase up to an aggregate of 60,000 additional shares of Common
Stock.
The Company and the Selling Stockholders have agreed that, during the
period beginning from the date of this Prospectus and continuing to and
including the date 90 days after the date of the Prospectus, they will not
offer, sell, contract to sell or otherwise dispose of any securities of the
Company (other than pursuant to employee stock option plans existing, or on the
conversion or exchange of convertible or exchangeable securities outstanding, on
the date of this Prospectus) which are substantially similar to the shares of
Common Stock or which are convertible into or exchangeable for securities which
are substantially similar to the shares of Common Stock without the prior
written consent of Goldman, Sachs & Co., except for the shares of Common Stock
offered in connection with the concurrent U.S. and international offerings.
The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares of
Common Stock offered by them.
Pursuant to regulations promulgated by the Commission, market makers in the
Common Stock who are Underwriters or prospective underwriters ("passive market
makers") may, subject to certain limitations, make bids for or purchases of
shares of Common Stock until the time, if any, at which a stabilizing bid for
such shares is made. In general, prior to the time, if any, at which a
stabilizing bid for such shares is made (1) such market maker's net daily
purchases of the Common Stock may not exceed 30% of the market maker's average
daily trading volume in such stock for the two full consecutive calendar months
immediately preceding the filing date of the Registration Statement of which
this Prospectus forms a part, (2) such market maker may not effect transactions
in, or display bids for, the Common Stock at a price that exceeds the highest
independent bid for the Common Stock by persons who are not passive market
makers and (3) bids made by passive market makers must be identified as such.
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act.
This Prospectus may be used by Underwriters and dealers in connection with
offers and sales of the Common Stock, including shares initially sold in the
international offering, to persons located in the United States.
U-2
<PAGE> 54
- -------------------------------------------------------
- -------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IN CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by
Reference................................. 2
Prospectus Summary.......................... 3
Summary Consolidated Financial
Information............................... 6
Risk Factors................................ 7
Special Note on Forward-Looking
Statements................................ 15
The Company................................. 15
Use of Proceeds............................. 15
Dividend Policy............................. 15
Price Range of Common Stock................. 16
Capitalization.............................. 17
Pro Forma Combined Financial Data........... 18
Selected Consolidated Financial Data........ 21
Management's Discussion and Analysis of
Consolidated Financial Condition and
Results of Operations..................... 22
Business.................................... 34
Management.................................. 47
Selling Stockholders........................ 49
Legal Matters............................... 50
Experts..................................... 50
Available Information....................... 50
Underwriting................................ U-1
</TABLE>
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
2,000,000 SHARES
VIASOFT, INC.
COMMON STOCK
(PAR VALUE $.001 PER SHARE)
------------------
[LOGO]
------------------
GOLDMAN, SACHS & CO.
WESSELS, ARNOLD &
HENDERSON
SOUNDVIEW FINANCIAL
GROUP, INC.
VOLPE, WELTY & COMPANY LLC
REPRESENTATIVES OF THE UNDERWRITERS
- -------------------------------------------------------
- -------------------------------------------------------
<PAGE> 55
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated costs and expenses in
connection with the offering described in the Registration Statement, other than
underwriting commissions and discounts. All of such costs and expenses will be
borne by the Company.
<TABLE>
<S> <C>
Registration Fee................................................................. $ 31,280
NASD Fee......................................................................... 10,822
Nasdaq National Market Listing Fee............................................... 17,500
Accounting Fees and Expenses..................................................... 45,000
Legal Fees and Expenses.......................................................... 110,000
Printing Expenses................................................................ 135,000
Blue Sky Fees and Expenses....................................................... 10,000
Miscellaneous.................................................................... 60,398
--------
Total.................................................................. $420,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article IX of the Company's Restated Certificate of Incorporation provides
that the Company shall indemnify directors, officers, and their legal
representatives to the fullest extent permitted by the Delaware General
Corporate Law ("DGCL"). The DGCL contains an extensive indemnification provision
which permits a corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. In
suits by or in the right of a corporation, only expenses and not judgments,
fines, and amounts paid in settlement may be indemnified against. In addition,
if the director or officer has been adjudged to be liable to the corporation in
such a suit, indemnification of expenses must be approved by a court. Article IX
of the Restated Certificate of Incorporation also provides that the Company may,
in its discretion, indemnify employees and agents in circumstances where
indemnification is not required by law.
Article VII of the Company's Restated Certificate of Incorporation provides
that directors of the Company shall not be personally liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty. However,
this provision does not eliminate or limit the liability of a director for
breach of the director's duty of loyalty to the Company or its stockholders, for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, for the payment of dividends or distributions or the
redemption or purchase of the Company's shares of stock in violation of the
DGCL, or for any transaction from which the director derives an improper
personal benefit. This provision does not affect any liability of a director or
officer under the federal securities laws.
The Company currently maintains and expects to continue to carry directors'
and officers' liability insurance ("D&O Insurance") with a policy limit of
$10,000,000. Under this policy, the Company pays a deductible amount of up to
$250,000 per claim. In addition, the Company has
II-1
<PAGE> 56
entered into an indemnification agreement with each of its directors
("Indemnification Agreement") under which the Company has indemnified each of
them against expenses and losses incurred for claims brought against them to the
extent that either the Company does not have D&O Insurance in place at the time
or the claim is not covered by the Company's D&O Insurance policy. Under the
Indemnification Agreements, the Company is not obligated to indemnify the
director for expenses or losses in connection with claims ("Excluded Claims")
which have been determined by final adjudication to be: (i) based on the
director gaining any unentitled personal profit or advantage, (ii) for the
return of illegal remuneration, (iii) for an accounting of profits made from the
director's purchase or sale of the Company's securities within the meaning of
Section 16 of the Exchange Act or similar state laws, (iv) resulting from the
director's knowingly fraudulent, dishonest, or willful misconduct, (v) based on
a payment which is not permitted by applicable law, (vi) claims as to which the
director shall have been adjudged liable to the Company, unless the court
determines that the director is fairly and reasonably entitled to
indemnification, or (vii) claims, the payment of which would exceed the maximum
amount permitted by law to be paid as indemnification. Under the Indemnification
Agreements, the directors each agree to reimburse the Company for amounts paid
to them in the event that a final adjudication determines that the claim is
either an Excluded Claim or the director is not otherwise entitled to payment
under the Indemnification Agreement.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------- -----------------------------------------------------------------------------
<S> <C>
* 1 Form of Underwriting Agreement
* 5 Opinion of Osborn Maledon, P.A.
* 23(a) Consent of Arthur Andersen LLP
* 23(b) Consent of Osborn Maledon, P.A. (included in its opinion filed as Exhibit 5)
** 24 Powers of Attorney
</TABLE>
- ---------------
* Filed herewith
** Previously filed
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE> 57
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 58
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Phoenix, State of Arizona, on the 4th day of
March, 1997.
VIASOFT, Inc.
By: /s/ STEVEN D. WHITEMAN
------------------------------------
Steven D. Whiteman
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ----------------------------- ------------------
<S> <C> <C>
/s/ STEVEN D. WHITEMAN Chief Executive Officer; March 4, 1997
- ------------------------------------------ Director
Steven D. Whiteman
/s/ MARK R. SCHONAU Chief Financial Officer; March 4, 1997
- ------------------------------------------ Chief Accounting Officer
Mark R. Schonau
/s/ JOHN J. BARRY, III* Director March 4, 1997
- ------------------------------------------
John J. Barry, III
/s/ A. LEROY ELLISON* Director March 4, 1997
- ------------------------------------------
A. Leroy Ellison
/s/ ALEXANDER S. KULI* Director March 4, 1997
- ------------------------------------------
Alexander S. Kuli
/s/ J. DAVID PARRISH* Director March 4, 1997
- ------------------------------------------
J. David Parrish
/s/ ARTHUR C. PATTERSON* Director March 4, 1997
- ------------------------------------------
Arthur C. Patterson
/s/ MICHAEL A. WOLF Director March 4, 1997
- ------------------------------------------
Michael A. Wolf
*By: /s/ STEVEN D. WHITEMAN Attorney-in-fact
- ------------------------------------------
Steven D. Whiteman
</TABLE>
II-4
<PAGE> 59
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ---------------------------------------------------------------------------------
<C> <S>
* 1 Form of Underwriting Agreement
* 5 Opinion of Osborn Maledon, P.A.
* 23(a) Consent of Arthur Andersen LLP
* 23(b) Consent of Osborn Maledon, P.A. (included in its opinion filed as
Exhibit 5)
** 24 Powers of Attorney
</TABLE>
- ---------------
* Filed herewith
** Previously filed
<PAGE> 1
EXHIBIT 1
VIASOFT, INC.
COMMON STOCK
Underwriting Agreement
(U.S. Version)
______________, 1997
Goldman, Sachs & Co.
Wessels, Arnold & Henderson, L.L.C.
SoundView Financial Group, Inc.
Volpe, Welty & Company, L.L.C.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
VIASOFT, Inc. a Delaware corporation (the "Company"), proposes, subject
to the terms and conditions stated herein, to issue and sell to the Underwriters
named in Schedule I hereto (the "Underwriters") an aggregate of ........ shares
and, at the election of the Underwriters, up to ........ additional shares of
Common Stock ("Stock") of the Company and the stockholders of the Company named
in Schedule II hereto (the "Selling Stockholders") propose, subject to the terms
and conditions stated herein, to sell to the Underwriters an aggregate of
........ shares and, at the election of the Underwriters, up to ........
additional shares of Stock. The aggregate of ........ shares to be sold by the
Company and the Selling Stockholders is herein called the "Firm Shares" and the
aggregate of ........ additional shares to be sold by the Company and the
Selling Stockholders is herein called the "Optional Shares". The Firm Shares and
the Optional Shares that the Underwriters elect to purchase pursuant to Section
2 hereof are herein collectively called the "Shares".
It is understood and agreed to by all parties that the Company and the
Selling Stockholders are concurrently entering into an agreement (the
"International Underwriting Agreement") providing for the sale by the Company
and the Selling Stockholders of up to a total of ....... shares of Stock (the
"International Shares"), including the overallotment option thereunder, through
arrangements with certain underwriters outside the United States (the
"International Underwriters"), for whom Goldman Sachs International is acting as
lead manager. Anything herein or therein to the contrary notwithstanding, the
respective closings under this Agreement and the International Underwriting
Agreement are hereby expressly made conditional on one another. The Underwriters
hereunder and the International Underwriters are simultaneously entering into an
Agreement between U.S. and International Underwriting Syndicates (the "Agreement
between Syndicates") which provides, among other things, for the transfer of
shares of Stock between the two syndicates. Two forms of prospectus are to be
used in connection with the offering and sale of shares of Stock contemplated by
the foregoing, one relating to the Shares hereunder and the other relating to
the International Shares. The latter form of prospectus will be identical to the
former except for certain substitute pages as included
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<PAGE> 2
in the registration statement and amendments thereto as mentioned below. Except
as used in Sections 2, 3, 4, 9 and 11 herein, and except as the context may
otherwise require, references hereinafter to the Shares shall include all the
shares of Stock which may be sold pursuant to either this Agreement or the
International Underwriting Agreement, and references herein to any prospectus
whether in preliminary or final form, and whether as amended or supplemented,
shall include both the U.S. and the international versions thereof.
1.(a) The Company and certain Selling Stockholders named in Schedule
III hereto (the "Inside Selling Stockholders") represent and warrant to, and
agree with, each of the Underwriters that:
(i) A registration statement on Form S-3 (File No. 333-21461)
in respect of the Shares has been filed with the Securities and
Exchange Commission (the "Commission"); such registration statement and
any post-effective amendment thereto, each in the form heretofore
delivered to you, and, excluding exhibits thereto but including all
documents incorporated by reference in the prospectus contained
therein, in the form heretofore delivered to you for each of the other
Underwriters, have been declared effective by the Commission in such
form; no other document with respect to such registration statement or
document incorporated by reference therein has heretofore been filed
with the Commission; and no stop order suspending the effectiveness of
such registration statement has been issued and no proceeding for that
purpose has been initiated or threatened by the Commission; (any
preliminary prospectus included in such registration statement or filed
with the Commission pursuant to Rule 424(a) of the rules and
regulations of the Commission under the Securities Act of 1933, as
amended (the "Act"), is hereinafter called a "Preliminary Prospectus";
the various parts of such registration statement, including all
exhibits thereto and including (i) the information contained in the
form of final prospectus filed with the Commission pursuant to Rule
424(b) under the Act in accordance with Section 5(a) hereof and deemed
by virtue of Rule 430A under the Act to be part of the registration
statement at the time it was declared effective and (ii) the documents
incorporated by reference in the prospectus contained in the
registration statement at the time such part of the registration
statement became effective, each as amended at the time such part of
the registration statement became effective, are hereinafter
collectively called the "Registration Statement"; and such final
prospectus, in the form first filed pursuant to Rule 424(b) under the
Act, is hereinafter called the "Prospectus"; and any reference herein
to any Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Act, as of the date of such
Preliminary Prospectus or Prospectus, as the case may be; any reference
to any amendment or supplement to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include any documents filed
after the date of such Preliminary Prospectus or Prospectus, as the
case may be, under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and incorporated by reference in such Preliminary
Prospectus or Prospectus, as the case may be; and any reference to any
amendment to the Registration Statement shall be deemed to refer to and
include any annual report of the Company filed pursuant to Section
13(a) or 15(d)
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<PAGE> 3
of the Exchange Act after the effective date of the Registration Statement that
is incorporated by reference in the Registration Statement;
(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary Prospectus,
at the time of filing thereof, conformed in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein or by a
Selling Stockholder expressly for use therein;
(iii) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may be,
conformed in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the Commission
thereunder, and none of such documents contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; and any further documents so filed and
incorporated by reference in the Prospectus or any further amendment or
supplement thereto, when such documents become effective or are filed with the
Commission, as the case may be, will conform in all material respects to the
requirements of the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through Goldman, Sachs & Co. expressly
for use therein;
(iv) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of the Act
and the rules and regulations of the Commission thereunder and do not and will
not, as of the applicable effective date as to the Registration Statement and
any amendment thereto and as of the applicable filing date as to the Prospectus
and any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein (A) in the case of the Registration
Statement, not misleading, or (B) in the case of the Prospectus, in light of the
circumstances under which they were made, not misleading; provided, however,
that this
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<PAGE> 4
representation and warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished in writing to the
Company by an Underwriter through Goldman, Sachs & Co. expressly for use therein
or by a Selling Stockholder expressly for use in the preparation of the answers
therein to Item 7 of Form S-3;
(v) Neither the Company nor any of its subsidiaries has sustained since
the date of the latest audited financial statements included or incorporated by
reference in the Prospectus any material loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, otherwise than as set forth or contemplated in the Prospectus; and,
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the capital stock
of the Company (other than upon exercise of options disclosed in the Prospectus)
or any material change in long-term debt of the Company or any of its
subsidiaries or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general affairs,
management, financial position, stock or results of operations of the Company
and its subsidiaries, otherwise than as set forth or contemplated in the
Prospectus;
(vi) The Company and its subsidiaries have good and marketable title in
fee simple to all real property and good and marketable title to all personal
property owned by them, in each case free and clear of all liens, encumbrances
and defects except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries;
(vii) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware, with
power and authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus, and has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases properties
or conducts any business so as to require such qualification, or is subject to
no material liability or disability by reason of the failure to be so qualified
in any such jurisdiction; and each subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation;
(viii) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company have
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<PAGE> 5
been duly and validly authorized and issued, and are fully paid and
non-assessable and conform to the description of the Stock contained or
incorporated by reference in the Prospectus; and all of the issued shares of
capital stock of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and (except for
directors' qualifying shares) are owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities or claims;
(ix) The unissued Shares to be issued and sold by the Company to the
Underwriters hereunder and under the International Underwriting Agreement have
been duly and validly authorized and, when issued and delivered against payment
therefor as provided herein, will be duly and validly issued and fully paid and
non-assessable and will conform to the description of the Stock contained or
incorporated by reference in the Prospectus;
(x) The issue and sale of the Shares to be sold by the Company
hereunder and under the International Underwriting Agreement and the compliance
by the Company with all of the provisions of this Agreement and the
International Underwriting Agreement and the consummation of the transactions
herein and therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is subject, nor
will such action result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries or any of their properties; and no
consent, approval, authorization, order, registration or qualification of or
with any such court or governmental agency or body is required for the issue and
sale of the Shares or the consummation by the Company of the transactions
contemplated by this Agreement and the International Underwriting Agreement,
except the registration under the Act of the Shares and such consents,
approvals, authorizations, registrations or qualifications as may be required
under state or foreign securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the Underwriters and the
International Underwriters;
(xi) Neither the Company nor any of its subsidiaries is in violation of
its Certificate of Incorporation or By-laws or in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement lease or
other agreement or instrument to which it is a party or by which it or any of
its properties may be bound;
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<PAGE> 6
(xii) The statements contained or incorporated by reference in
the Prospectus under the caption "Description of Capital Stock",
insofar as they purport to constitute a summary of the terms of the
Stock, are accurate, complete and fair;
(xiii) Other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property of the Company
or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, would individually
or in the aggregate have a material adverse effect on the current or
future consolidated financial position, stockholders' equity or results
of operations of the Company and its subsidiaries; and, to the best of
the Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(xiv) The Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company" or
an entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(xv) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida
Statutes; and
(xvi) Arthur Andersen LLP, who have certified certain
financial statements of the Company and its subsidiaries, are
independent public accountants as required by the Act and the rules and
regulations of the Commission thereunder.
(b) Each of the Selling Stockholders severally represents and warrants
to, and agrees with, each of the Underwriters and the Company that:
(i) All consents, approvals, authorizations and orders
necessary for the execution and delivery by such Selling Stockholder of
this Agreement, the International Underwriting Agreement, the Power of
Attorney and the Custody Agreement hereinafter referred to, and for the
sale and delivery of the Shares to be sold by such Selling Stockholder
hereunder and under the International Underwriting Agreement, have been
obtained; and such Selling Stockholder has full right, power and
authority to enter into this Agreement, the International Underwriting
Agreement, the Power of Attorney and the Custody Agreement and to sell,
assign, transfer and deliver the Shares to be sold by such Selling
Stockholder hereunder and under the International Underwriting
Agreement;
(ii) The sale of the Shares to be sold by such Selling
Stockholder hereunder and under the International Underwriting
Agreement and the compliance
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<PAGE> 7
by such Selling Stockholder with all of the provisions of this
Agreement, the International Underwriting Agreement, the Power of
Attorney and the Custody Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any statute, indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which such
Selling Stockholder is a party or by which such Selling Stockholder is
bound, or to which any of the property or assets of such Selling
Stockholder is subject, nor will such action result in any violation of
the provisions of the Certificate of Incorporation or By-laws of such
Selling Stockholder if such Selling Stockholder is a corporation, the
Partnership Agreement of such Selling Stockholder if such Selling
Stockholder is a partnership or any statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over such Selling Stockholder or the property of such
Selling Stockholder;
(iii) Such Selling Stockholder has, and immediately prior to
each Time of Delivery (as defined in Section 4 hereof) such Selling
Stockholder will have, good and valid title to the Shares to be sold by
such Selling Stockholder hereunder and under the International
Underwriting Agreement, free and clear of all liens, encumbrances,
equities or claims; and, upon delivery of such Shares and payment
therefor pursuant hereto and thereto, good and valid title to such
Shares, free and clear of all liens, encumbrances, equities or claims,
will pass to the several Underwriters or the International
Underwriters, as the case may be;
(iv) During the period beginning from the date hereof and
continuing to and including the date 90 days after the date of the
Prospectus, such Selling Stockholder will not offer, sell, contract
to sell or otherwise dispose of, except as provided hereunder or under
the International Underwriting Agreement, any securities of the Company
that are substantially similar to the Shares, including but not limited
to any securities that are convertible into or exchangeable for, or
that represent the right to receive, Stock or any such substantially
similar securities (other than pursuant to employee stock option and
employee stock purchase plans existing on, or upon the exercise,
conversion or exchange of options or convertible or exchangeable
securities outstanding as of, the date of this Agreement), without the
prior written consent of Goldman, Sachs & Co.; provided, however, that
the foregoing shall not apply to a bona fide gift or gifts, provided
that such Selling Stockholder provides prior written notice thereof to
Goldman, Sachs & Co. and the donee(s) agrees to be bound by the terms
of this subparagraph (iv);
(v) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares;
(vi) To the extent that any statements or omissions made in
the Registration Statement, any Preliminary Prospectus, the Prospectus
or any
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<PAGE> 8
amendment or supplement thereto are made in reliance upon and in
conformity with written information furnished to the Company by such
Selling Stockholder expressly for use therein, such Preliminary
Prospectus and the Registration Statement did, and the Prospectus and
any further amendments or supplements to the Registration Statement and
the Prospectus, when they become effective or are filed with the
Commission, as the case may be, will, conform in all material respects
to the requirements of the Act and the rules and regulations of the
Commission thereunder and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein (A) in the case of
the Registration Statement, not misleading or (B) in the case of the
Preliminary Prospectus or Prospectus, in light of the circumstances
under which they were made, not misleading; such Selling Stockholder is
not aware of any facts or circumstances that cause or would cause any
of the representations or warranties of the Company set forth in
Section 1 above to be untrue or inaccurate in any material respect;
(vii) In order to document the Underwriters' compliance with
the reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Selling Stockholder will deliver to you prior to or
at the First Time of Delivery (as hereinafter defined) a properly
completed and executed United States Treasury Department Form W-9 (or
other applicable form or statement specified by Treasury Department
regulations in lieu thereof);
(viii) Certificates in negotiable form representing all of the
Shares to be sold by such Selling Stockholder hereunder and under the
International Underwriting Agreement (or irrevocable written elections
to exercise options with respect to all or part of such Shares) have
been placed in custody under a Custody Agreement, in the form
heretofore furnished to you (the "Custody Agreement"), duly executed
and delivered by such Selling Stockholder to Harris Trust and Savings
Bank, as custodian (the "Custodian"), and such Selling Stockholder has
duly executed and delivered a Power of Attorney, in the form heretofore
furnished to you (the "Power of Attorney"), appointing the persons
indicated in Schedule II hereto, and each of them, as such Selling
Stockholder's attorneys-in-fact (the "Attorneys-in-Fact") with
authority to execute and deliver this Agreement and the International
Underwriting Agreement on behalf of such Selling Stockholder, to
determine the purchase price to be paid by the Underwriters and the
International Underwriters to the Selling Stockholders as provided in
Section 2 hereof, to authorize the delivery of the Shares to be sold by
such Selling Stockholder hereunder and otherwise to act on behalf of
such Selling Stockholder in connection with the transactions
contemplated by this Agreement, the International Underwriting
Agreement and the Custody Agreement; and
(ix) The Shares represented by the certificates held in
custody for such Selling Stockholder under the Custody Agreement are
subject to the interests of the Underwriters hereunder and the
International Underwriters under the International Underwriting
Agreement; the arrangements made by such Selling Stockholder for such
custody, and the appointment by such Selling Stockholder of
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<PAGE> 9
the Attorneys-in-Fact by the Power of Attorney, are to that extent
irrevocable; the obligations of the Selling Stockholders hereunder
shall not be terminated by operation of law, whether by the death or
incapacity of any individual Selling Stockholder or, in the case of an
estate or trust, by the death or incapacity of any executor or trustee
or the termination of such estate or trust, or in the case of a
partnership or corporation, by the dissolution of such partnership or
corporation, or by the occurrence of any other event; if any individual
Selling Stockholder or any such executor or trustee should die or
become incapacitated, or if any such estate or trust should be
terminated, or if any such partnership or corporation should be
dissolved, or if any other such event should occur, before the delivery
of the Shares hereunder, certificates representing the Shares shall be
delivered by or on behalf of the Selling Stockholders in accordance
with the terms and conditions of this Agreement, of the International
Underwriting Agreement and of the Custody Agreements; and actions taken
by the Attorneys-in-Fact pursuant to the Powers of Attorney shall be as
valid as if such death, incapacity, termination, dissolution or other
event had not occurred, regardless of whether or not the Custodian, the
Attorneys-in-Fact, or any of them, shall have received notice of such
death, incapacity, termination, dissolution or other event.
2. Subject to the terms and conditions herein set forth, (a) the
Company and each of the Selling Stockholders agree, severally and not jointly,
to sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company and each of the Selling
Stockholders, at a purchase price per share of $.................., the number
of Firm Shares (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying the aggregate number of Firm Shares to be sold by the
Company and each of the Selling Stockholders as set forth opposite their
respective names in Schedule II hereto by a fraction, the numerator of which is
the aggregate number of Firm Shares to be purchased by such Underwriter as set
forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the aggregate number of Firm Shares to be purchased by
all of the Underwriters from the Company and all of the Selling Stockholders
hereunder and (b) in the event and to the extent that the Underwriters shall
exercise the election to purchase Optional Shares as provided below, the Company
and each of the Selling Stockholders agree, severally and not jointly to sell to
each of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company and each of the Selling Stockholders, at
the purchase price per share set forth in clause (a) of this Section 2, that
portion of the number of Optional Shares as to which such election shall have
been exercised (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying such number of Optional Shares by a fraction the
numerator of which is the maximum number of Optional Shares which such
Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of Optional Shares that all of the Underwriters are entitled to purchase
hereunder.
The Company and the Selling Stockholders, as and to the extent
indicated in Schedule II hereto, hereby grant, severally and not jointly, to the
Underwriters the right to purchase at their election up to .......... Optional
Shares, at the purchase price per share set forth in the paragraph above, for
the sole purpose of covering overallotments in the sale of the Firm Shares. Any
such election to purchase Optional Shares shall be made in proportion to the
maximum number of Optional Shares to be sold by the Company and each Selling
Stockholder as set forth in
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<PAGE> 10
Schedule II hereto initially with respect to the Optional Shares to be sold by
the Company and then among the Selling Stockholders in proportion to the maximum
number of Optional Shares to be sold by each Selling Stockholder as set forth in
Schedule II hereto. Any such election to purchase Optional Shares may be
exercised only by written notice from you to the Company, given within a period
of 30 calendar days after the date of this Agreement and setting forth the
aggregate number of Optional Shares to be purchased and the date on which such
Optional Shares are to be delivered, as determined by you but in no event
earlier than the First Time of Delivery (as defined in Section 4 hereof) or,
unless you and the Company and the Attorneys-in-Fact otherwise agree in
writing, earlier than two or later than ten business days after the date of such
notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4.(a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company and the Selling Stockholders shall be delivered by or on
behalf of the Company and the Selling Stockholders to Goldman, Sachs & Co.,
through the facilities of The Depository Trust Company ("DTC"), for the account
of such Underwriter, against payment by or on behalf of such Underwriter of the
purchase price therefor, payable to the order of the Company and each of the
Selling Stockholders, as their interests may appear, in New York Clearing House
(same day) funds. The Company will cause the certificates representing the
Shares to be made available for checking and packaging at least twenty-four
hours prior to the Time of Delivery (as defined below) with respect thereto at
the office of DTC or its designated custodian) (the "Designated Office"). The
time and date of such delivery and payment shall be, with respect to the Firm
Shares, 9:30 a.m., New York City time, on ............., 1997 or such other time
and date as Goldman, Sachs & Co., the Company and the Selling Stockholders may
agree upon in writing, and, with respect to the Optional Shares, 9:30 a.m., New
York City time, on the date specified by Goldman, Sachs & Co. in the written
notice given by Goldman, Sachs & Co. of the Underwriters' election to purchase
such Optional Shares, or such other time and date as Goldman, Sachs & Co., the
Company and the Selling Stockholders may agree upon in writing. Such time and
date for delivery of the Firm Shares is herein called the "First Time of
Delivery", such time and date for delivery of the Optional Shares, if not the
First Time of Delivery, is herein called the "Second Time of Delivery", and each
such time and date for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 7(k) hereof, will be delivered at the offices
of Pillsbury Madison & Sutro LLP, 2700 Sand Hill Road, Menlo Park, California
94025 (the "Closing Location"), and the Shares will be delivered at the
Designated Office, all at each Time of Delivery. A meeting will be held at the
Closing Location at ...... p.m., California time, on the California Business Day
next preceding each Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. For the purposes of this Section 4,
"California Business Day" shall mean
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each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in California are generally authorized or obligated by law
or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on the second business day
following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Act; to make no further amendment or any supplement to the
Registration Statement or Prospectus prior to the last Time of Delivery
which shall be disapproved by you promptly after reasonable notice
thereof; to advise you, promptly after it receives notice thereof, of
the time when any amendment to the Registration Statement has been
filed or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed and to furnish you copies thereof; to
file promptly all reports and any definitive proxy or information
statements required to be filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of the Prospectus and for so long as the
delivery of a prospectus is required in connection with the offering or
sale of the Shares; to advise you, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or
Prospectus, of the suspension of the qualification of the Shares for
offering or sale in any jurisdiction, of the initiation or threatening
of any proceeding for any such purpose, or of any request by the
Commission for the amending or supplementing of the Registration
Statement or Prospectus or for additional information; and, in the
event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or Prospectus or
suspending any such qualification, promptly to use its best efforts to
obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under
the securities laws of such jurisdictions as you may request and to
comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary
to complete the distribution of the Shares, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction;
(c) To furnish the Underwriters with copies of the Prospectus
in such quantities as you may from time to time reasonably request,
and, if the delivery of a prospectus is required at any time prior to
the expiration of nine months after the time of issue of the Prospectus
in connection with the offering or sale of the Shares and if at such
time any events shall have occurred as a result of which the Prospectus
as then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the
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<PAGE> 12
statements therein, in the light of the circumstances under which they
were made when such Prospectus is delivered, not misleading, or, if for
any other reason it shall be necessary during such period to amend or
supplement the Prospectus or to file under the Exchange Act any
document incorporated by reference in the Prospectus in order to comply
with the Act or the Exchange Act, to notify you and upon your request
to file such document and to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as you may
from time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or
omission or effect such compliance, and in case any Underwriter is
required to deliver a prospectus in connection with sales of any of the
Shares at any time nine months or more after the time of issue of the
Prospectus, upon your request but at the expense of such Underwriter,
to prepare and deliver to such Underwriter as many copies as you may
request of an amended or supplemented Prospectus complying with Section
10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon
as practicable, but in any event not later than eighteen months after
the effective date of the Registration Statement (as defined in Rule
158(c) under the Act), an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a)
of the Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and
continuing to and including the date 90 days after the date of the
Prospectus, not to offer, sell, contract to sell or otherwise dispose
of, except as provided hereunder and under the International
Underwriting Agreement, any securities of the Company that are
substantially similar to the Shares, including but not limited to any
securities that are convertible into or exchangeable for, or that
represent the right to receive, Stock or any such substantially similar
securities (other than shares issuable to the former stockholders of
Rottger & Osterberg Software-Technik GmbH ("R&O") as described in the
Prospectus, and pursuant to employee stock option and employee stock
purchase plans existing on, or upon the conversion or exchange of
options, or convertible or exchangeable securities outstanding as of,
the date of this Agreement), without the prior written consent of
Goldman, Sachs & Co.;
(f) To furnish to its stockholders as soon as practicable
after the end of each fiscal year an annual report (including a balance
sheet and statements of income, stockholders' equity and cash flows of
the Company and its consolidated subsidiaries certified by independent
public accountants);
(g) During a period of five years from the effective date of
the Registration Statement, to furnish to you copies of all reports or
other communications (financial or other) furnished to stockholders,
and to deliver to you (i) promptly as they are available, copies of any
reports and financial statements furnished to or filed with the
Commission or any national securities exchange on which any class of
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<PAGE> 13
securities of the Company is listed; and (ii) such additional
information concerning the business and financial condition of the
Company as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of
the Company and its subsidiaries are consolidated in reports furnished
to its stockholders generally or to the Commission);
(h) To use the net proceeds received by it from the sale of
the Shares pursuant to this Agreement and the International
Underwriting Agreement in the manner specified in the Prospectus under
the caption "Use of Proceeds"; and
(i) To use its best efforts to list for quotation the Shares
on the National Association of Securities Dealers Automated Quotations
National Market System
("NASDAQ").
6. The Company and each of the Selling Stockholders, jointly and
severally, covenant and agree with one another and with the several Underwriters
that (a) the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants and counsel
for the Selling Stockholders, in connection with the registration of the Shares
under the Act and all other expenses in connection with the preparation,
printing and filing of the Registration Statement, any Preliminary Prospectus
and the Prospectus and amendments and supplements thereto and the mailing and
delivering of copies thereof to the Underwriters and dealers; (ii) the cost of
printing or producing any Agreement among Underwriters, this Agreement, the
International Underwriting Agreement, the Agreement between Syndicates, the
Selling Agreements, the Blue Sky Memorandum, closing documents (including any
compilations thereof) and any other documents in connection with the offering,
purchase, sale and delivery of the Shares; (iii) all expenses in connection with
the qualification of the Shares for offering and sale under state securities
laws as provided in Section 5(b) hereof, including the fees and disbursements of
counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky surveys; (iv) all fees and expenses in connection
with listing the Shares on the NASDAQ; (v) the filing fees incident to, and the
fees and disbursements of counsel for the Underwriters in connection with,
securing any required review by the National Association of Securities Dealers,
Inc. of the terms of the sale of the Shares; (vi) the cost of preparing stock
certificates; (vii) the cost and charges of any transfer agent or registrar; and
(viii) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
Section; and (b) such Selling Stockholder will pay or cause to be paid all costs
and expenses incident to the performance of such Selling Stockholder's
obligations hereunder which are not otherwise specifically provided for in this
Section , including all expenses and taxes incident to the sale and delivery of
the Shares to be sold by such Selling Stockholder to the Underwriters hereunder.
In connection with Clause (b)(ii) of the preceding sentence, Goldman, Sachs &
Co. agrees to pay New York State stock transfer tax, and the Selling Stockholder
agrees to reimburse Goldman, Sachs & Co. for associated carrying costs if such
tax payment is not rebated on the day of payment and for any portion of such tax
payment not rebated. It is understood, however, that the Company shall bear, and
the Selling Stockholders shall not be required to pay or to reimburse the
Company for, the cost of any other matters not directly relating to the sale and
purchase of the Shares pursuant to this Agreement, and that, except as provided
in this Section , and Sections 8 and 11 hereof, the Underwriters will pay all of
their own costs and expenses, including the fees of their counsel, stock
transfer taxes on resale
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<PAGE> 14
of any of the Shares by them, and any advertising expenses connected with any
offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to
be delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and of the Selling Stockholders herein are, at and as of such Time
of Delivery, true and correct, the condition that the Company and the Selling
Stockholders shall have performed all of its and their obligations hereunder
theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Act and in
accordance with Section 5(a) hereof; no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall
have been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Pillsbury Madison & Sutro LLP, counsel for the
Underwriters, shall have furnished to you such opinion or opinions,
dated such Time of Delivery, with respect to the matters covered in
paragraphs (i), (ii), (vii), (xi), (xiii) and (xiv) of subsection (c)
below as well as such other related matters as you may reasonably
request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon
such matters;
(c) Osborn Maledon, PA, counsel for the Company, shall have
furnished to you their written opinion, dated such Time of Delivery, in
form and substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Delaware, with corporate power and
authority to own its properties and conduct its business as
described in the Prospectus;
(ii) The Company has an authorized capitalization as
set forth or incorporated by reference in the Prospectus, and
all of the issued shares of capital stock of the Company
(including the Shares being delivered at such Time of
Delivery) have been duly and validly authorized and issued and
are fully paid and non-assessable; and the Shares conform to
the description of the Stock contained or incorporated by
reference in the Prospectus;
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<PAGE> 15
(iii) The Company has been duly qualified as a
foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in
which it owns or leases properties or conducts any business so
as to require such qualification, or is subject to no material
liability or disability by reason of failure to be so
qualified in any such jurisdiction (such counsel being
entitled to rely in respect of the opinion in this clause upon
opinions of local counsel and in respect of matters of fact
upon certificates of officers of the Company, provided that
such counsel shall state that they believe that both you and
they are justified in relying upon such opinions and
certificates);
(iv) Each subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation;
and all of the issued shares of capital stock of each such
subsidiary have been duly and validly authorized and issued,
are fully paid and non-assessable, and (except for directors'
qualifying shares and except as otherwise set forth in the
Prospectus) to the knowledge of such counsel are owned
directly or indirectly by the Company, free and clear of all
liens, encumbrances, equities or claims (such counsel being
entitled to rely in respect of the opinion in this clause upon
opinions of local counsel and in respect of matters of fact
upon certificates of officers of the Company or its
subsidiaries, provided that such counsel shall state that they
believe that both you and they are justified in relying upon
such opinions and certificates);
(v) The Company and its subsidiaries have good and
marketable title in fee simple to all real property owned by
them, if any, in each case free and clear of all liens,
encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of
such property and do not interfere with the use made and
proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under
lease by the Company and its subsidiaries are held by them
under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and
buildings by the Company and its subsidiaries (in giving the
opinion in this clause, such counsel may state that no
examination of record titles for the purpose of such opinion
has been made, and that they are relying upon a general review
of the titles of the Company and its subsidiaries, upon
opinions of local counsel and abstracts, reports and policies
of title companies rendered or issued at or subsequent to the
time of acquisition of such property by the Company or its
subsidiaries, upon opinions of counsel to the lessors of such
property and, in respect of matters of fact, upon certificates
of officers of the Company or its subsidiaries, provided that
such counsel shall state that they believe that both you and
they are justified in relying upon such opinions, abstracts,
reports, policies and certificates and such counsel may assume
that the laws of any jurisdiction other than Arizona
applicable to any such lease are identical to the laws of
Arizona);
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<PAGE> 16
(vi) To the best of such counsel's knowledge and
other than as set forth in the Prospectus, there are no legal
or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any property of
the Company or any of its subsidiaries is the subject which,
if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a
material adverse effect on the current or future consolidated
financial position, stockholders' equity or results of
operations of the Company and its subsidiaries; and, to the
best of such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or
threatened by others;
(vii) This Agreement and the International
Underwriting Agreement have been duly authorized, executed and
delivered by the Company;
(viii) The issue and sale of the Shares being
delivered at such Time of Delivery to be sold by the Company
and the compliance by the Company with all of the provisions
of this Agreement and the International Underwriting Agreement
and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a material
breach or violation of any of the terms or provisions of, or
constitute a material default under, any indenture, mortgage,
deed of trust, loan agreement or other material agreement or
instrument known to such counsel to which the Company or any
of its subsidiaries is a party or by which the Company or any
of its subsidiaries is bound or to which any of the property
or assets of the Company or any of its subsidiaries is
subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of
the Company or any material violation of any statute or any
order, rule or regulation known to such counsel of any court
or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties;
(ix) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale
of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement and the
International Underwriting Agreement, except the registration
under the Act of the Shares, and such consents, approvals,
authorizations, registrations or qualifications as may be
required under state or foreign securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by
the Underwriters and the International Underwriters;
(x) Neither the Company nor any of its subsidiaries
is in violation of its Certificate of Incorporation or By-laws
or to such counsel's knowledge, or in default in the
performance or observance of any material obligation,
agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other
agreement or
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<PAGE> 17
instrument to which it is a party or by which it or any of its
properties may be bound;
(xi) The statements contained or incorporated by
reference in the Prospectus under the caption "Description of
Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock, are accurate, complete and
fair;
(xii) The Company is not an "investment company" or
an entity "controlled" by an "investment company", as such
terms are defined in the Investment Company Act; and
(xiii) The documents incorporated by reference in the
Prospectus or any further amendment or supplement thereto made
by the Company prior to such Time of Delivery (other than the
financial statements, including the notes thereto, and other
financial and accounting data and schedules therein, as to
which such counsel need express no opinion), when they became
effective or were filed with the Commission, as the case may
be, complied as to form in all material respects with the
requirements of the Act or the Exchange Act, as applicable,
and the rules and regulations of the Commission thereunder;
and although they are not passing on, and do not assume any
responsibility for the accuracy, completeness or fairness of
the statements contained in such documents, except for those
referred to in the opinion in subsection (xi) of this Section
7(c), they have no reason to believe that any of such
documents, when such documents became effective or were so
filed, as the case may be, contained, in the case of a
registration statement which became effective under the Act,
an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading, or, in the case of
other documents which were filed under the Exchange Act with
the Commission, an untrue statement of a material fact or
omitted to state a material fact necessary in order to make
the statements therein, in the light of the circumstances
under which they were made when such documents were so filed,
not misleading; and
(xiv) The Registration Statement and the Prospectus
and any further amendments and supplements thereto made by the
Company prior to such Time of Delivery (other than the
financial statements and other financial and accounting data
and schedules therein, as to which such counsel need express
no opinion) comply as to form in all material respects with
the requirements of the Act and the rules and regulations
thereunder; although they are not passing on and do not assume
any responsibility for the accuracy, completeness or fairness
of the statements contained in the Registration Statement or
the Prospectus, except for those referred to in the opinion in
subsection (xi) of this Section 7(c), they have
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<PAGE> 18
no reason to believe that, as of its effective date, the
Registration Statement or any further amendment thereto made
by the Company prior to such Time of Delivery (other than the
financial statements and other financial and accounting data
and schedules therein, as to which such counsel need express
no opinion) contained an untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading or that, as of its date, the Prospectus or any
further amendment or supplement thereto made by the Company
prior to such Time of Delivery (other than the financial
statements and other financial, and accounting data and
schedules therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading or that, as of such Time
of Delivery, either the Registration Statement or the
Prospectus or any further amendment or supplement thereto made
by the Company prior to such Time of Delivery (other than the
financial statements and other financial and accounting data
and schedules therein, as to which such counsel need express
no opinion) contains an untrue statement of a material fact or
omits to state a material fact necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading; and they do not know of any
amendment to the Registration Statement required to be filed
or of any contracts or other documents of a character required
to be filed as an exhibit to the Registration Statement or
required to be incorporated by reference into the Prospectus
or required to be described in the Registration Statement or
the Prospectus which are not filed or incorporated by
reference or described as required.
(xv) The shares of Common Stock issued to the former
shareholders of R&O (the "R&O Shares") were issued in
compliance with Regulation S under the Securities Act of 1933,
as amended, and the appropriate legend required by Regulation
S was placed on certificates evidencing such shares of Common
Stock.
In rendering such opinion, such counsel may state that they
express no opinion as to the laws of any jurisdiction outside the
United States and such counsel may rely on (i) an opinion or opinions
of other counsel retained by them or the Company as to the laws of any
jurisdiction other than the State of Arizona and the General
Corporation Law of the State of Delaware, provided that (A) each such
other counsel is reasonably acceptable to you, (B) such reliance and
reliance by you is expressly authorized by each opinion so relied upon
and (C) each such opinion is in form and substance reasonably
satisfactory to you and your counsel and (ii) as to matters of fact,
certificates of officers of the Company and of government officials and
the representations and warranties of the former shareholders of R&O to
the Company in connection with the issuance of the R&O Shares. In each
such case such counsel shall state that they are so doing and that they
believe that they and the Underwriters are justified in relying on such
opinions or certificates;
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<PAGE> 19
(d) The respective counsel for each of the Selling
Stockholders, as indicated in Schedule II hereto, each shall have
furnished to you their written opinion with respect to each of the
Selling Stockholders for whom they are acting as counsel, dated such
Time of Delivery, in form and substance satisfactory to you, to the
effect that:
(i) A Power of Attorney and a Custody Agreement have
been duly executed and delivered by such Selling Stockholder
and constitute valid and binding agreements of such Selling
Stockholder in accordance with their terms;
(ii) This Agreement and the International
Underwriting Agreement have been duly executed and delivered
by or on behalf of such Selling Stockholder; and the sale of
the Shares to be sold by such Selling Stockholder hereunder
and thereunder and the compliance by such Selling Stockholder
with all of the provisions of this Agreement and the
International Underwriting Agreement, the Power of Attorney
and the Custody Agreement and the consummation of the
transactions herein and therein contemplated will not conflict
with or result in a material breach or violation of any terms
or provisions of, or constitute a material default under, any
statute, indenture, mortgage, deed of trust, loan agreement or
other material agreement or instrument known to such counsel
to which such Selling Stockholder is a party or by which such
Selling Stockholder is bound, or to which any of the property
or assets of such Selling Stockholder is subject, nor will
such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of such Selling
Stockholder if such Selling Stockholder is a corporation, the
Partnership Agreement of such Selling Stockholder if such
Selling Stockholder is a partnership or any material violation
of any order, rule or regulation known to such counsel of any
court or governmental agency or body having jurisdiction over
such Selling Stockholder or the property of such Selling
Stockholder;
(iii) No consent, approval, authorization or order of
any court or governmental agency or body is required for the
consummation of the transactions contemplated by this
Agreement and the International Underwriting Agreement in
connection with the Shares to be sold by such Selling
Stockholder hereunder or thereunder, except such as are in
full force and effect, such as have been obtained under the
Act and such as may be required under state or foreign
securities or Blue Sky laws in connection with the purchase
and distribution of such Shares by the Underwriters or the
International Underwriters;
(iv) Immediately prior to such Time of Delivery such
Selling Stockholder had good and valid title to the Shares to
be sold at such Time of Delivery by such Selling Stockholder
under this Agreement and the
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<PAGE> 20
International Underwriting Agreement, free and clear of all
liens, encumbrances, equities or claims known to such counsel,
and full right, power and authority to sell, assign, transfer
and deliver the Shares to be sold by such Selling Stockholder
hereunder and thereunder; and
(v) Good and valid title to such Shares, free and
clear of all liens, encumbrances, equities or claims known to
such counsel, has been transferred to each of the several
Underwriters or International Underwriters, as the case may
be, who have purchased such Shares in good faith and without
notice of any such lien, encumbrance, equity or claim or any
other adverse claim within the meaning of the Uniform
Commercial Code.
In rendering such opinion, such counsel may state that they
express no opinion as to the laws of any jurisdiction outside the
United States and such counsel may rely on (i) an opinion or opinions
of other counsel retained by them or by a Selling Stockholder as to the
law of any jurisdiction other than the State of Arizona and the General
Corporation Law of the State of Delaware, or as to other matters
covered by such opinions, provided that (A) each such other counsel is
reasonably acceptable to you, (B) such reliance and reliance by you is
expressly authorized by each opinion so relied upon and (C) each such
opinion is in form and substance reasonably satisfactory to you and
your counsel and (ii) as to matters of fact, certificates of the
Selling Stockholders and of government officials. In each such case
such counsel shall state that they are so doing and that they believe
that they and the Underwriters are justified in relying upon such
opinions or certificates.
(e) On the date of the Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., San Francisco time, on the
effective date of any post-effective amendment to the Registration
Statement filed subsequent to the date of this Agreement and also at
each Time of Delivery, Arthur Andersen LLP shall have furnished to you
a letter or letters, dated the respective dates of delivery thereof, in
form and substance satisfactory to you, to the effect set forth in
Annex I hereto;
(f)(i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial
statements included or incorporated by reference in the Prospectus any
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus, and (ii) since the
respective dates as of which information is given in the Prospectus
there shall not have been any change in the capital stock of the
Company (other than upon exercise of options disclosed in the
Prospectus) or long-term debt of the Company or any of its subsidiaries
or any change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than
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<PAGE> 21
as set forth or contemplated in the Prospectus, the effect of which, in
any such case described in Clause (i) or (ii), is in the judgment of
the Representatives so material and adverse as to make it impracticable
or inadvisable to proceed with the public offering or the delivery of
the Shares being delivered at such Time of Delivery on the terms and in
the manner contemplated in the Prospectus;
(g) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities, if any,
by any "nationally recognized statistical rating organization", as that
term is defined by the Commission for purposes of Rule 436(g)(2) under
the Act, and (ii) no such organization shall have publicly announced
that it has under surveillance or review, with possible negative
implications, its rating of any of the Company's debt securities, if
any;
(h) On or after the date hereof there shall not have occurred
any of the following: (i) a suspension or material limitation in
trading in securities generally on the New York Stock Exchange or on
NASDAQ; (ii) a suspension or material limitation in trading in the
Company's securities on NASDAQ; (iii) a general moratorium on
commercial banking activities declared by either Federal or New York or
California State authorities; or (iv) the outbreak or escalation of
hostilities involving the United States or the declaration by the
United States of a national emergency or war, if the effect of any such
event specified in this Clause (iv) in the judgment of the
Representatives makes it impracticable or inadvisable to proceed with
the public offering or the delivery of the Shares being delivered at
such Time of Delivery on the terms and in the manner contemplated in
the Prospectus;
(i) The Shares to be sold by the Company and the Selling
Stockholders at such Time of Delivery shall have been duly listed for
quotation on NASDAQ; and
(j) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from each officer and director of the
Company to the effect set forth in Subsection 1(b)(iv) hereof in form
and substance satisfactory to you; and
(k) The Company and the Selling Stockholders shall have
furnished or caused to be furnished to you at such Time of Delivery
certificates of officers of the Company and of the Selling
Stockholders, respectively, satisfactory to you as to the accuracy in
all material respects of the representations and warranties of the
Company and the Selling Stockholders, respectively, herein at and as of
such Time of Delivery, as to the performance in all material respects
by the Company and the Selling Stockholders, respectively, of all of
their respective obligations hereunder to be performed at or prior to
such Time of Delivery, and as to such other matters as you may
reasonably request, and the Company shall have furnished or caused to
be furnished certificates as to the matters set forth in
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<PAGE> 22
subsections (a) and (f) of this Section, and as to such other matters
as you may reasonably request.
8.(a) The Company and each of the Inside Selling Stockholders, jointly
and severally, will indemnify and hold harmless each Underwriter against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact or a breach of the representations and warranties of the Company
or Inside Selling Stockholders contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Company and the Inside
Selling Stockholders shall not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Goldman, Sachs &
Co. expressly for use therein; and provided further, however, that an Inside
Selling Stockholder's liability pursuant to this Section 8(a) shall be limited
to such Inside Selling Stockholder's net proceeds received (after deducting
Underwriters' commissions and discounts) from the sale of the Shares being sold
by such Inside Selling Stockholder.
(b) Each Selling Stockholder who is not an Inside Selling Stockholder
(the "Outside Selling Stockholders"), severally and not jointly will indemnify
and hold harmless each Underwriter, to the same extent as the foregoing
indemnity from the Company and the Inside Selling Stockholders to each
Underwriter, but only insofar as losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance on and in conformity with information relating to such Selling
Stockholder furnished in writing to the Company by or on behalf of such Selling
Stockholder specifically for use in the preparation of the documents referred to
in the foregoing indemnity or (ii) a breach of any representation and warranty
of such Outside Selling Stockholder in any of the documents referred to in the
foregoing indemnity. Notwithstanding anything to the contrary contained in this
Section 8, the liability of each Outside Selling Stockholder to the Underwriters
shall not exceed an amount equal to the net proceeds received (after deducting
Underwriters' commissions and discounts) from the sale of the Shares being sold
by such Selling Stockholder. The Company and the Outside Selling Stockholders
may otherwise agree, as among themselves and without limiting the rights of the
Underwriters under this Agreement, as to respective amounts of such liability
for which they each shall be responsible. Each of the Underwriters acknowledges
that the statements set forth under the heading "Selling Stockholders" in any
Preliminary Prospectus and the Prospectus constitute the only information
relating to any Outside Selling Stockholder furnished in writing to the Company
by such Outside Selling Stockholder expressly for inclusion in the Registration
Statement, the Prospectus or Preliminary Prospectus.
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<PAGE> 23
(c) Each Underwriter will indemnify and hold harmless the Company and
each Selling Stockholder against any losses, claims, damages or liabilities to
which the Company or such Selling Stockholder may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through Goldman, Sachs & Co.
expressly for use therein; and will reimburse the Company and each Selling
Stockholder for any legal or other expenses reasonably incurred by the Company
or such Selling Stockholder in connection with investigating or defending any
such action or claim as such expenses are incurred.
(d) Promptly after receipt by an indemnified party under subsection
(a), (b) or (c) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (which shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(e) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Selling Stockholders on the
one hand and the Underwriters on the other from the offering of the
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<PAGE> 24
Shares. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law or if the indemnified party failed
to give the notice required under subsection (d) above, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company and the Selling Stockholders on the
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering of the
Shares purchased under this Agreement (after deducting Underwriters' commissions
and discounts and before deducting expenses) received by the Company and the
Selling Stockholders bear to the total underwriting discounts and commissions
received by the Underwriters with respect to the Shares purchased under this
Agreement, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Selling Stockholders on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, each of the Selling Stockholders and the Underwriters agree that it
would not be just and equitable if contributions pursuant to this subsection (e)
were determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (e). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (e) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (e), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission and no Selling Stockholder shall be required to
contribute in excess of the amount of the net proceeds received (after deducting
Underwriters' discounts and commissions) by such Selling Stockholder from the
sale of Shares being sold by such Selling Stockholder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(e) to contribute are several in proportion to their respective underwriting
obligations and not joint. The Selling Stockholders' obligations in this
subsection (e) to contribute are several in proportion to their net proceeds
received hereunder (after deducting Underwriters' commissions and discounts).
(f) The obligations of the Company and the Selling Stockholders under
this Section 8 shall be in addition to any liability which the Company and the
respective Selling Stockholders may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; provided, that the Underwriters hereby agree that
any such liability which each Selling Stockholder may otherwise have to the
Underwriters and such persons shall not exceed an amount equal to the net
proceeds received (after deducting Underwriters' commissions and discounts) by
such Selling Stockholder from the sale of Shares being sold by such Selling
Stockholder and the obligations of the Underwriters under this Section 8 shall
be in addition to any liability which the respective Underwriters may otherwise
have and shall extend, upon the same terms and conditions, to each officer and
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<PAGE> 25
director of the Company (including any person who, with his or her consent, is
named in the Registration Statement as about to become a director of the
Company) and any Selling Stockholder and to each person, if any, who controls
the Company or any Selling Stockholder within the meaning of the Act.
9.(a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company and the Selling Stockholders shall be entitled to
a further period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Company and
the Selling Stockholders that you have so arranged for the purchase of such
Shares, or the Company and the Selling Stockholders notify you that they have so
arranged for the purchase of such Shares, you or the Company and the Selling
Stockholders shall have the right to postpone such Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all of the Shares to be purchased at such Time of
Delivery, then the Company and the Selling Stockholders shall have the right to
require each non-defaulting Underwriter to purchase the number of Shares which
such Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all of the Shares to be purchased at such Time of Delivery,
or if the Company and the Selling Stockholders shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of the Company and the Selling Stockholders to sell
the Optional Shares) shall thereupon terminate, without liability on the part of
any non-defaulting Underwriter or the Company or the Selling Stockholders,
except for the expenses to be borne by the Company and the Selling Stockholders
and the Underwriters as
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<PAGE> 26
provided in Section 6 hereof and the indemnity and contribution agreements in
Section 8 hereof; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company, or any of the Selling Stockholders, or any officer
or director or controlling person of the Company, or any controlling person of
any Selling Stockholder, and shall survive delivery of and payment for the
Shares.
Anything herein to the contrary notwithstanding, the indemnity
agreement of the Company in subsection (a) of Section 8 hereof, the
representations and warranties in subsections (a)(ii), (a)(iii) and (a)(iv) of
Section 1 hereof and any representation or warranty as to the accuracy of the
Registration Statement or the Prospectus contained in any certificate furnished
by the Company pursuant to Section 7 hereof, insofar as they may constitute a
basis for indemnification for liabilities (other than payment by the Company of
expenses incurred or paid in the successful defense of any action, suit or
proceeding) arising under the Act, shall not extend to the extent of any
interest therein of a controlling person or partner of an Underwriter who is a
director, officer or controlling person of the Company when the Registration
Statement has become effective or who, with his or her consent, is named in the
Registration Statement as about to become a director of the Company, except in
each case to the extent that an interest of such character shall have been
determined by a court of appropriate jurisdiction as not against public policy
as expressed in the Act. Unless in the opinion of counsel for the Company the
matter has been settled by controlling precedent, the Company will, if a claim
for such indemnification is asserted, submit to a court of appropriate
jurisdiction the question of whether such interest is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof; but,
if for any other reason any Shares are not delivered by or on behalf of the
Company and the Selling Stockholders as provided herein, the Company and each of
the Selling Stockholders pro rata (based on the number of Shares to be sold by
the Company and such Selling Stockholder hereunder) will reimburse the
Underwriters through you for all out-of-pocket expenses approved in writing by
you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Shares not so delivered, but the Company and the Selling Stockholders shall then
be under no further liability to any Underwriter in respect of the Shares not so
delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives; and in all dealings with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
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<PAGE> 27
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; if to any Selling Stockholder shall be delivered or sent by mail,
telex or facsimile transmission to counsel for such Selling Stockholder at its
address set forth in Schedule II hereto; and if to the Company shall be
delivered or sent by mail, telex or facsimile transmission to the address of the
Company set forth in the Registration Statement, Attention: Secretary; provided,
however, that any notice to an Underwriter pursuant to Section 8(d) hereof shall
be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its Underwriters' Questionnaire or telex
constituting such Questionnaire, which address will be supplied to the Company
or the Selling Stockholders by you upon request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and the Selling Stockholders and, to
the extent provided in Sections 8 and 10 hereof, the officers and directors of
the Company and any Selling Stockholder and each person who controls the
Company, any Selling Stockholder or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Shares from any Underwriter shall be deemed a successor or assign by
reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign
and return to us one for the Company and for each of the Representatives plus
one for each counsel and the Custodian, if any counterparts hereof, and upon the
acceptance hereof by you, on behalf of each of the Underwriters, this letter and
such acceptance hereof shall constitute a binding agreement among each of the
Underwriters, the Company and each of the Selling Stockholders. It is understood
that your acceptance of this letter on behalf of each of the Underwriters is
pursuant to the authority set forth in a form of Agreement among Underwriters
(U.S. Version), the form of
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<PAGE> 28
which shall be submitted to the Company and the Selling Stockholders for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Any person executing and delivering this Agreement as Attorney-in-Fact
for a Selling Stockholder represents by so doing that he has been duly appointed
as Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing
and binding Power of Attorney which authorizes such Attorney-in-Fact to take
such action.
Very truly yours,
VIASOFT, INC.
By______________________________________
Steven D. Whiteman
President
[Names of Selling Stockholders]
By______________________________________
Name:
Title:
As Attorney-in-Fact acting on behalf of each of the Selling Stockholders named
in Schedule II to this Agreement.
Accepted as of the date hereof
By:__________________________________
(Goldman, Sachs & Co.)
ON BEHALF OF EACH OF THE UNDERWRITERS
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<PAGE> 29
SCHEDULE I
<TABLE>
<CAPTION>
Number of Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised
<S> <C> <C>
Goldman, Sachs & Co........................
Wessels, Arnold & Henderson, L.L.C.........
SoundView Financial Group, Inc.............
Volpe, Welty & Company, L.L.C..............
[Names of other Underwriters]..............
Total............................
</TABLE>
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<PAGE> 30
SCHEDULE II
<TABLE>
<CAPTION>
Number of Optional
Shares to be
Total Number of Sold if
Firm Shares Maximum Option
to be Sold Exercised
<S> <C> <C>
The Company........................................
The Selling Stockholder(s):........................
[Name of Selling Stockholder](a)...........
[Name of Selling Stockholder](b)...........
[Name of Selling Stockholder](c)...........
[Name of Selling Stockholder](d)...........
[Name of Selling Stockholder](e)...........
Total......................................
</TABLE>
(a) This Selling Stockholder is represented by [Name and Address of
Counsel] and has appointed [Names of Attorneys-in-Fact (not less than two)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(b) This Selling Stockholder is represented by [Name and Address of
Counsel] and has appointed [Names of Attorneys-in-Fact (not less than two)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(c) This Selling Stockholder is represented by [Name and Address of
Counsel] and has appointed [Names of Attorneys-in-Fact (not less than two)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(d) This Selling Stockholder is represented by [Name and Address of
Counsel] and has appointed [Names of Attorneys-in-Fact (not less than two)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(e) This Selling Stockholder is represented by [Name and Address of
Counsel] and has appointed [Names of Attorneys-in-Fact (not less than two)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
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<PAGE> 31
SCHEDULE III
Inside Selling Stockholders
Kevin M. Hickey
Colin J. Reardon
Steven D. Whiteman
Michael A. Wolf
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<PAGE> 32
ANNEX I
FORM OF COMFORT LETTER
Pursuant to Section 7(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters and the Company to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included or incorporated by reference in the Registration
Statement or the Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act or the Exchange
Act, as applicable, and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance
with standards established by the American Institute of Certified
Public Accountants of the consolidated interim financial statements,
selected financial data, pro forma financial information, financial
forecasts and/or condensed financial statements derived from audited
financial statements of the Company for the periods specified in such
letter, as indicated in their reports thereon, copies of which have
been separately furnished to the representatives of the Underwriters
(the "Representatives") and are attached hereto;
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus and/or included in the Company's Quarterly
Report on Form 10-Q incorporated by reference into the Prospectus as
indicated in their reports thereon copies of which are attached hereto;
and on the basis of specified procedures including inquiries of
officials of the Company who have responsibility for financial and
accounting matters regarding whether the unaudited condensed
consolidated financial statements referred to in paragraph (vi)(A)(i)
below comply as to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and the related
published rules and regulations, nothing came to their attention that
caused them to believe that the unaudited condensed consolidated
financial statements do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the Exchange
Act and the related published rules and regulations;
(iv) The unaudited selected financial information with respect
to the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the
Prospectus and included or incorporated by reference in Item 6 of the
Company's Annual Report on Form 10-K for the most recent fiscal year
agrees with the corresponding amounts (after restatement where
applicable) in the audited consolidated financial statements
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<PAGE> 33
for such five fiscal years which were included or incorporated by
reference in the Company's Annual Reports on Form 10-K for such fiscal
years;
(v) They have compared the information included or
incorporated by reference in the Prospectus under selected captions
with the disclosure requirements of Regulation S-K and on the basis of
limited procedures specified in such letter nothing came to their
attention as a result of the foregoing procedures that caused them to
believe that this information does not conform in all material respects
with the disclosure requirements of Items 301, 302, 402 and 503(d),
respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus, inquiries of officials of
the Company and its subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused
them to believe that:
(A)(i) the unaudited condensed consolidated
statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the
Prospectus and/or included or incorporated by reference in the
Company's Quarterly Reports on Form 10-Q incorporated by
reference in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements
of the Exchange Act and the related published rules and
regulations, or (ii) any material modifications should be made
to the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of
cash flows included in the Prospectus or included in the
Company's Quarterly Reports on Form 10-Q incorporated by
reference in the Prospectus, for them to be in conformity with
generally accepted accounting principles;
(B) any other unaudited income statement data and
balance sheet items included in the Prospectus do not agree
with the corresponding items in the unaudited consolidated
financial statements from which such data and items were
derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis
for the corresponding amounts in the audited consolidated
financial statements included or incorporated by reference in
the Company's Annual Report on Form 10-K for the most recent
fiscal year;
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived the
unaudited condensed financial statements referred to in Clause
(A) and any unaudited income statement data and balance sheet
items included in the Prospectus and referred to in Clause (B)
were not determined on a basis substantially
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<PAGE> 34
consistent with the basis for the audited financial statements
included or incorporated by reference in the Company's Annual
Report on Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed
financial statements included or incorporated by reference in
the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the
Act and the published rules and regulations thereunder or the
pro forma adjustments have not been properly applied to the
historical amounts in the compilation of those statements;
(E) as of a specified date not more than five days
prior to the date of such letter, there have been any changes
in the consolidated capital stock (other than issuances of
capital stock upon exercise of options and stock appreciation
rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case which were
outstanding on the date of the latest balance sheet included
or incorporated by reference in the Prospectus) or any
increase in the consolidated long-term debt of the Company and
its subsidiaries, or any decreases in consolidated net current
assets or stockholders' equity or other items specified by the
Representatives, or any increases in any items specified by
the Representatives, in each case as compared with amounts
shown in the latest balance sheet included or incorporated by
reference in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter;
and
(F) for the period from the date of the latest
financial statements included or incorporated by reference in
the Prospectus to the specified date referred to in Clause (E)
there were any decreases in consolidated net revenues or
operating profit or the total or per share amounts of
consolidated net income or other items specified by the
Representatives, or any increases in any items specified by
the Representatives, in each case as compared with the
comparable period of the preceding year and with any other
period of corresponding length specified by the
Representatives, except in each case for increases or
decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(vii) In addition to the examination referred to in their
report(s) included or incorporated by reference in the Prospectus and
the limited procedures, inspection of minute books, inquiries and other
procedures referred to in paragraphs (iii) and (vi) above, they have
carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by the Representatives which are derived from the general
accounting records of the Company and its subsidiaries, which appear in
the Prospectus (excluding documents incorporated by reference) or in
Part II of, or in exhibits and schedules to, the Registration Statement
specified by the
I-3
<PAGE> 35
Representatives or in documents incorporated by reference in the
Prospectus specified by the Representatives, and have compared certain
of such amounts, percentages and financial information with the
accounting records of the Company and its subsidiaries and have found
them to be in agreement.
I-4
<PAGE> 1
EXHIBIT 5
March 4, 1997
VIASOFT, INC.
3033 North 44th Street
Suite 101
Phoenix, Arizona 85018
Re: VIASOFT, Inc.
Form S-3 Registration Statement No. 333-21461
Ladies and Gentlemen:
We have acted as counsel to VIASOFT, Inc., a Delaware corporation (the
"Company"), in connection with its Registration Statement on Form S-3,No.
333-21461, under the Securities Act of 1933 (the "Registration Statement"),
relating to the registration of 2,300,000 shares of its Common Stock, $.001
par value (the "Shares"). In connection with this representation, we have
examined such documents, corporate records and other instruments as we have
deemed necessary or appropriate for purposes of this opinion.
Based upon the foregoing, we are of the opinion that the Shares, when
issued by the Company, will be duly and validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the Registration Statement.
Very truly yours,
OSBORN MALEDON, P.A.
By: /s/ William M. Hardin
---------------------------------
William M. Hardin
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated August 1, 1996
(except with respect to the stock split discussed in Note 1 and the agreement
with Tadiran Information Systems Ltd. discussed in Note 8 as to which the date
is August 30, 1996) included in VIASOFT, Inc.'s Form 10-K for the year ended
June 30, 1996; and our report dated December 5, 1996 on the consolidated
financial statements of Rottger & Osterberg Software-Technik GmbH and
subsidiaries for the years ended December 31, 1994 and 1995, respectively, and
the nine months ended September 30, 1996, and to all references to our firm
included in this registration statement.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
March 4, 1997
