SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to __________________
COMMISSION FILE NUMBER 0-25472
VIASOFT, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 94-2892506
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3033 NORTH 44TH STREET, PHOENIX, ARIZONA 85018
(Address of principal executive offices) (Zip Code)
(602) 952-0050
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of January 31, 1999, there were outstanding 18,148,376 shares of Common
Stock, par value $.001 per share, of Viasoft, Inc.
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VIASOFT, INC. AND SUBSIDIARIES
INDEX
Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1998
and June 30, 1998 3
Consolidated Statements of Operations for the three
and six months ended December 31, 1998 and 1997 4
Consolidated Statements of Cash Flows for the six
months ended December 31, 1998 and 1997 5
Consolidated Statements of Comprehensive Income
for the three and six months ended December 31, 1998 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 4. Submission of Matter to a Vote of Security Holders 21
Item 6. Exhibits and Reports on Form 8-K 22
2
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VIASOFT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 31, June 30,
1998 1998
--------- ---------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 25,289 $ 37,809
Investments, at amortized cost 53,982 63,294
Accounts receivable (less allowance for
doubtful accounts of $942 and $815, respectively) 34,039 33,227
Prepaid expenses and other 4,322 7,774
--------- ---------
Total current assets 117,632 142,104
--------- ---------
Furniture and equipment, net 8,374 7,609
Other assets:
Investments, at amortized cost -- 2,502
Intangible assets, net 7,563 6,751
Other 5,440 3,411
--------- ---------
Total other assets 13,003 12,664
--------- ---------
Total assets $ 139,009 $ 162,377
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,126 $ 1,733
Accrued compensation 3,331 4,390
Accrued income taxes payable 1,525 5,113
Other accrued expenses 16,093 13,768
Deferred revenue 17,011 20,843
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Total current liabilities 39,086 45,847
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Deferred revenue, recognized after one year 413 542
--------- ---------
Other long term liabilities 124 130
--------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 2,000,000 shares
authorized, no shares issued or outstanding -- --
Common stock, $.001 par value, 24,000,000 shares
authorized, 19,456,133 shares issued at both
December 31, and June 30, 1998, respectively 19 19
Capital in excess of par value 123,774 125,626
Common stock subscriptions receivable (31) (31)
Accumulated deficit (12,616) (6,995)
Cumulative translation adjustment (179) (580)
Treasury stock, at cost, 1,311,081 and
135,000 shares at December 31, and
June 30, 1998, respectively (11,581) (2,181)
--------- ---------
Total stockholders' equity 99,386 115,858
--------- ---------
Total liabilities and stockholders' equity $ 139,009 $ 162,377
========= =========
The accompanying notes are an integral part of these consolidated statements.
3
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VIASOFT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
----------------- ------------------
1998 1997 1998 1997
------- ------- -------- --------
Revenue:
Software license fees $13,738 $16,690 $ 23,473 $ 30,208
Maintenance fees 8,849 7,103 17,142 13,987
Professional services fees 7,091 4,343 14,379 9,962
Other 9 38 16 79
------- ------- -------- --------
Total revenues 29,687 28,174 55,010 54,236
------- ------- -------- --------
Operating expenses:
Cost of software license and
maintenance fees 4,606 2,746 8,355 4,522
Cost of professional services fees 6,107 4,327 12,099 9,092
Sales and marketing 11,239 9,866 22,344 19,187
Write-off of purchased in-process
research and development -- -- 5,013 --
Research and development 3,768 3,285 8,222 6,103
General and administrative 2,477 1,864 5,139 3,902
Restructuring charge -- -- 4,790 --
------- ------- -------- -------
Total operating expenses 28,197 22,088 65,962 42,806
------- ------- -------- -------
Income (loss) from operations 1,490 6,086 (10,952) 11,430
------- ------- -------- -------
Other income (expense):
Interest income 1,049 1,530 2,418 2,051
Interest expense (2) (1) (2) (1)
Other income (expense), net (310) 42 (103) (80)
------- ------- -------- -------
Total other income (expense) 737 1,571 2,313 1,970
------- ------- -------- -------
Income (loss) before income taxes 2,227 7,657 (8,639) 13,400
Income tax (benefit)/provision 780 2,622 (3,019) 4,599
------- ------- -------- -------
Net income (loss) $ 1,447 $ 5,035 $ (5,620) $ 8,801
======= ======= ======== =======
Basic earnings (loss) per common share $ 0.08 $ 0.26 $ (0.30) $ 0.47
======= ======= ======== =======
Weighted average number of common
shares outstanding 18,311 19,342 18,633 18,632
======= ======= ======== =======
Diluted earnings (loss) per common
and common share equivalent $ 0.08 $ 0.25 $ (0.30) $ 0.45
======= ======= ======== =======
Weighted average number of common and
common share equivalents outstanding 18,481 20,005 18,633 19,370
======= ======= ======== =======
The accompanying notes are an integral part of these consolidated statements.
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VIASOFT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
December 31,
----------------------
1998 1997
-------- --------
Operating activities:
Net income (loss) $ (5,620) $ 8,801
-------- --------
Adjustments to reconcile net income (loss)
to net cash provided by operating activities -
Write-off of purchased in-process research
and development 5,013 --
Restructuring charge 4,780 --
Depreciation and amortization 2,783 1,582
Changes in operating assets and liabilities
net of effect of business acquired:
Increase in accounts receivable (812) (8,596)
(Increase) decrease in prepaid expenses and other 3,701 (1,325)
(Increase) decrease in other assets (2,929) 679
Increase (decrease) in accrued income taxes (3,588) 3,353
Decrease in accounts payable and other accrued
expenses (2,844) (29)
Increase (decrease) in accrued compensation (1,059) 18
Increase (decrease) in deferred revenue (3,968) 350
-------- --------
Total adjustments 1,077 (3,968)
-------- --------
Net cash (used in) provided by
operating activities (4,543) 4,833
-------- --------
INVESTING ACTIVITIES:
Capital expenditures (2,691) (2,705)
Cash paid for business, net of cash acquired (6,000) (530)
Purchase of investments (48,273) (67,651)
Investment maturities 59,838 11,057
-------- --------
Net cash provided by (used in)
investing activities 2,874 (59,829)
-------- --------
FINANCING ACTIVITIES:
Purchase of treasury stock (12,074) --
Sale of treasury stock 822 --
Payments received on common stock
subscriptions receivable -- 24
Proceeds from issuance of common stock -- 77,799
Payments for offering costs -- (747)
-------- --------
Net cash (used in) provided by
financing activities (11,252) 77,076
-------- --------
Effect of exchange rate changes on cash 401 109
-------- --------
Net increase (decrease) in cash and cash
equivalents (12,520) 22,189
Cash and cash equivalents, beginning period 37,809 8,501
-------- --------
Cash and cash equivalents, end of period $ 25,289 $ 30,690
======== ========
Supplemental cash flow information:
Income taxes paid $ 2,894 $ 1,245
Disqualifying dispositions -- 2,696
The accompanying notes are an integral part of these consolidated statements.
5
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VIASOFT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
Three Months Ended Six Months Ended
December 31, 1998 December 31, 1998
----------------- -----------------
Net Income (loss) $ 1,447 $ (5,620)
Other comprehensive income, net of tax
Foreign currency translation adjustments 65 261
------- --------
Comprehensive income (loss) $ 1,512 $ (5,359)
======= ========
The accompanying notes are an integral part of these consolidated statements.
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VIASOFT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1998
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Viasoft, Inc.
and its wholly-owned subsidiaries ("Viasoft" or the "Company") after elimination
of all significant intercompany balances and transactions. The accompanying
unaudited consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and the instructions to Form 10-Q. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
("GAAP") for complete financial statements. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary for a
fair presentation of the results for the interim periods presented have been
made. The results for the three and six month periods ended December 31, 1998
may not necessarily be indicative of the results for the entire year. These
financial statements should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended June 30, 1998.
EARNINGS PER COMMON SHARE AND COMMON SHARE EQUIVALENT
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share," which supersedes Accounting Principles Board Opinion
No. 15, the existing authoritative guidance. SFAS No. 128 is effective for
financial statements for periods ending after December 15, 1997 and requires
restatement of all prior-period earnings per share data presented. The new
statement modifies the calculations of primary and fully diluted earnings per
share and replaces them with basic and diluted earnings per share. The earnings
per share calculation for the three and six months ended December 31, 1997,
assumes the Company had adopted SFAS No. 128 on July 1, 1997. Shares issuable
upon the exercise of employee stock options that are considered anti-dilutive
are not included in the weighted average number of common and common share
equivalents outstanding.
2. ACQUISITIONS AND LICENSING AGREEMENTS
In July 1998, the Company acquired exclusive worldwide marketing and
development rights to SHL TRANSFORM, a knowledge-driven process management and
productivity software toolset and its integrated process management
methodologies, from the Online Knowledge Group (OKG) of Canadian-based SHL
Systemhouse Co. ("Systemhouse"). As part of the agreement, the Company had the
option to hire certain employees of Systemhouse in October 1998, had the option
to purchase certain furniture and equipment used by the Systemhouse development
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employees and has the exclusive right to remarket the licensed software to
Systemhouse's existing customers. As a result, the agreement was accounted for
as a purchase in accordance with Accounting Principles Board Opinion Nos.
16 and 17.
The transaction was structured as a worldwide perpetual source code license
and is exclusive, subject to Systemhouse's retained right to use the technology
for its own internal use and in its consulting business. Viasoft will also pay
certain royalties to Systemhouse based on sales of methodology and training
components.
In connection with the acquisition of SHL, the Company allocated $5.0
million of the purchase price to in-process research and development projects,
$1.2 million to developed technology and $700,000 to other intangible assets.
This allocation to in-process research and development represents the estimated
fair value based on risk-adjusted cash flows related to incomplete projects. A
discount range of 37.5% to 42.5% was used for valuing the in-process research
and development projects. Other intangible assets consisted of assembled
workforce and cost in excess of net assets acquired. The purchased software,
assembled workforce and cost in excess of net assets acquired are being
amortized on a straight-line basis over five, six and five years, respectively.
The Company plans to integrate the technology and methodology into its
entire product and service lines to deliver repeatable, defined business
solutions to its customers. The first of two projects was to migrate all of the
Company's existing business solution processes to the process management
toolset. This project was estimated to cost $500,000. The integration of the
Company's existing business solution processes is substantially complete as of
December 31, 1998 and did cost approximately $500,000. The second project was
the re-design, development and testing necessary to migrate the underlying
process management tool from 16-bit architecture to 32-bit architecture in order
to integrate the tool with the Company's existing and planned products. This
project was estimated to cost approximately $2.6 million and to be complete at
the end of calendar 1999. Due to additional requirements identified, it is
estimated that the project will now be completed in the Company's first fiscal
quarter of 2001 and is estimated to cost approximately $4.1 million. The project
is estimated to be approximately 15% complete at December 31, 1998.
There is risk associated with the completion of any research and
development project, however, management believes that there is a reasonable
chance of completing these in-process projects. The Company cannot be assured
that either of the in-process projects will meet with technological or
commercial success. Operating results are subject to uncertain market events and
risks, which are beyond the Company's control, such as trends in technology,
government regulations, market size and growth, and product introduction or
other actions by competitors. Thus there can be no assurance that the underlying
assumptions used to estimate expected project sales, development costs or
profitability, or the events associated with such projects, will transpire as
estimated (see also Special Note on Forward-Looking Statements).
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If the research and development projects are not completed as planned, the
sales and profitability of the Company may be adversely affected in future
periods. The failure of any particular individual in-process project would not
materially impact the Company's financial condition, results of operations or
cash flows.
The aggregate cost of the acquisition consisted of the following (in
thousands):
Cash............................................... $ 6,000
Assumption of liabilities and acquisition costs.... 885
-------
Total....................................... $ 6,885
=======
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
OVERVIEW
The Company derives its revenues primarily from software license fees,
software maintenance fees and professional services fees. The Company's software
is licensed primarily to Global 5000 companies and similarly-sized business and
governmental organizations worldwide. Professional services are provided in
conjunction with software products and are also provided separately to similar
large organizations. The Company's products and services are marketed through
its 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 a new reseller channel established during the
third quarter of fiscal 1998 primarily to sell the OnMark 2000 product line.
Revenue is recognized in accordance with Statement of Position 97-2,
"Software Revenue Recognition." Accordingly, revenue from software licenses is
recognized when delivery of the software has occurred, a signed non-cancelable
license agreement has been received from the customer or a purchase order from a
reseller after receipt of an executed reseller agreement and any remaining
obligations under the license agreement are insignificant. Revenue from software
license fees related to the Company's obligation to provide certain
post-contract customer support without charge for the second year of the license
is unbundled from the license fee at its fair value and is deferred and
recognized straight-line over the contract support period. Revenue from annual
or other renewals of maintenance contracts (including long-term contracts) is
deferred and recognized straight-line over the term of the contracts. Revenues
from professional services fees are recognized generally as related services are
provided. Professional services do not involve significant customization,
modification or production of the licensed software.
In the first quarter of fiscal 1999, the Company established and began
implementing a restructuring program designed to refocus the Company on its core
business and to reduce its operating expenses. The Company recorded a pre-tax
restructuring charge of $4.8 million in the first quarter of fiscal 1999. This
restructuring charge covered $3.1 million for severance and related costs for a
reduction in workforce of approximately 10% of the Company's 550 employees
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worldwide; $800,000 for office consolidation costs including leasehold
termination payments and other facility exit costs for certain offices worldwide
which were unrelated to the Company's core business; and $900,000 for the write
down of intangible assets which had become impaired as determined by a net
realizable value test based on future forecasted revenues. The Company expects
the restructuring program to be complete within 12 months.
As of December 31, 1998, approximately 67 employees were separated from the
Company and $1,127,000 in severance and related costs had been paid out or
incurred.
The discussion of results of operations for the six months ended December
31, 1998 below excludes the effect of this restructuring charge and a purchased
in-process research and development charge of approximately $5.0 million pre-tax
(See Note 2 of Notes to Consolidated Financial Statements) recorded in the first
quarter of fiscal 1999. Excluding these special charges, net income for the
first six months of fiscal 1999 was $752,000, or $.04 per share, compared to net
income of $8,801,000 or $0.45 per share diluted, in the same quarter a year ago.
Including these charges, the loss for the first six months of fiscal 1999 was
$5,620,000, or $.30 per share.
COMPARISON OF THREE MONTHS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
REVENUES
Total revenues were $29,687,000 for the second quarter of fiscal 1999, an
increase of 5% from $28,174,000 for the second quarter of fiscal 1998. Software
license fees were $13,738,000 in the second quarter of fiscal 1999, a decrease
of 18% from $16,690,000 in the second quarter of fiscal 1998. Software license
fees decreased both domestically and internationally primarily as a result of
the slow down in the demand for the Company's year 2000 mainframe software
tools. However, the decline in mainframe license fees was partially offset by
desktop license revenues from OnMark 2000, which were a significant portion of
the Company's license revenue during the second quarter of fiscal 1999. There
were no desktop license revenues in the second quarter of fiscal 1998, as OnMark
2000 was not released until the third quarter of fiscal 1998. The Company
anticipates that desktop license revenues will continue to be a significant
percentage of license revenues in the near term and, as a result, mainframe
license revenues may continue to decrease year over year. The Company has
announced its intention to refocus its efforts on its core business, which is
assisting its customers with maintaining and modernizing their mission-critical
applications.
Maintenance fees were $8,849,000 in the second quarter of fiscal 1999, an
increase of 25% from $7,103,000 in the second quarter of fiscal 1998. The
increase was due to new software licenses, customer system upgrades and
increases in the fees charged for annual maintenance. With the Company's entry
into the desktop software market with the OnMark 2000 product line, it has
experienced that a large number of OnMark customers do not purchase maintenance
services. As a result, there could be some erosion in maintenance revenue growth
to the extent that license sales of OnMark 2000 continue to grow as a percentage
of revenues.
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Professional services fees were $7,091,000 in the second quarter of fiscal
1999, an increase of 63% from $4,343,000 in the second quarter of fiscal 1998.
In late fiscal 1998, the Company refocused its efforts in the services area and
began to offer a broad range of solutions. In addition to continuing to provide
enablement services designed to assist customers to perform projects in-house,
the Company refocused the services business to target large consulting projects
and make its project management expertise available to customers to manage large
application conversion or re-engineering projects. Management believes it is
beginning to see the results of these efforts, with the increase in services
revenue year over year. A significant portion of the Company's services fee
revenue comes from year 2000 related projects, but with the Company's renewed
focus on providing a broader range of solutions, management believes it is well
positioned to assist customers in post year 2000 projects, such as application
modernization. The Company is still in the process of implementing its refocused
services strategy and there can be no assurance that these initial trends of
services revenue increases will continue. The Company will continue to closely
monitor its progress in this area from both a revenue generation and
profitability standpoint.
COST OF REVENUES
Cost of software license and maintenance fees, which includes royalties,
cost of customer support and packaging and product documentation, was $4,606,000
in the second quarter of fiscal 1999, an increase of 68% from $2,746,000 in the
second quarter of fiscal 1998. Gross margins on software license and maintenance
fees decreased to 80% in the second quarter of fiscal 1999 compared to 88% in
the second quarter of fiscal 1998. Management anticipates that the cost of
license and maintenance fees will continue to increase and the gross margin will
continue to decrease year over year due to increased sales of products requiring
royalties to third parties. Royalty expenses increased 118% in the second
quarter of fiscal 1999 compared to the same quarter in fiscal 1998. The increase
in royalty expense is primarily due to sales of the OnMark 2000 product line,
representing a significant portion of the second quarter of fiscal 1999 license
sales, which require payments of royalties to third parties. Other factors
contributing to the increase in cost of software license and maintenance fees
and decline in margins included increases in the number of customer support
personnel and their related costs, increased salaries and outside consultant
costs, and amortization of the purchased research and development from the
January 1998 EraSoft Technologies, Inc. acquisition and the July 1998
Systemhouse product acquisition (See Note 2 of Notes to Consolidated Financial
Statements).
Cost of professional services fees, which consists principally of personnel
costs, third party subcontracting costs, and other costs related to the
professional services business, was $6,107,000 in the second quarter of fiscal
1999, an increase of 41% from $4,327,000 in the second quarter of fiscal 1998.
The gross margin for professional services was 14% in the second quarter of
fiscal 1999 compared to breakeven in the second quarter of fiscal 1998. The
increase in expenses was primarily a result of additional subcontractor costs to
support the increase in revenues, primarily from large consulting projects.
Management expects that the use of subcontractors will continue in order to
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staff large projects. The cost increase was offset in part by lower salaries and
related costs as internal services headcount declined year over year. Internal
consulting services staff decreased during fiscal 1998, when the Company used
the enablement services model, which required less internal staff. However, the
Company's new services strategy requires additional investment in internal
headcount during the remainder of fiscal 1999. The increase in margins is
primarily the result of increased focus on profitability and the changes in the
services business model.
SALES AND MARKETING
Sales and marketing expenses, which consist primarily of salaries,
commissions and related benefits and administrative costs allocated to the
Company's sales and marketing personnel, were $11,239,000 in the second quarter
of fiscal 1999, an increase of 14% from $9,866,000 in the second quarter of
fiscal 1998. This increase is attributable primarily to an increase in personnel
and the associated costs, higher salaries and commissions, increased marketing
and promotion costs. Sales and marketing expenses as a percentage of total
revenues was 38% in the second quarter of fiscal 1999 and 35% in the second
quarter of 1998. This increase is due primarily to the decline in revenues year
over year and the increase in marketing costs.
RESEARCH AND DEVELOPMENT
Research and development expenditures consist primarily of personnel costs
of the research and development staff and the facilities, computing, benefits
and other administrative costs allocated to such personnel and third-party
development costs. Research and development expenditures were $3,768,000 in the
second quarter of fiscal 1999, compared to $3,285,000 in the second quarter of
fiscal 1998. Research and development expenses increased 15% year over year.
Research and development expenses included approximately $480,000 in charges for
third-party development during the second quarter of fiscal 1999. No third-party
development costs were incurred in the second quarter for fiscal 1998. Excluding
these charges, research and development charges are flat year over year
primarily due to the decrease in personnel as a result of the reduction in force
announced in the first quarter of fiscal 1999. This reduction lowered research
and development salaries and wages and third-party consultant costs down to
fiscal 1998 levels. However, lower recruiting and relocation costs were offset
by higher costs of mainframe usage and increased depreciation expense related to
new hardware and software purchased for development. As a percentage of total
revenues, research and development costs were 13% in the second quarter of
fiscal 1999 compared to 12% for the same period in fiscal 1998. The increase in
research and development cost as a percentage of revenue is primarily due to the
third-party development costs.
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GENERAL AND ADMINISTRATIVE
General and administrative expenses include the costs of finance and
accounting, legal, human resources, corporate information systems and other
administrative functions of the Company. General and administrative expenses
were $2,477,000 in the second quarter of fiscal 1999, compared to $1,864,000 in
the second quarter of fiscal 1998. General and administrative expenses increased
33% year over year. This increase is a result of additional administrative
personnel and their related costs, general salary increases and amortization of
intangibles related to the EraSoft and Systemhouse acquisitions. As a percentage
of total revenues, general and administrative expenses were 8% in the second
quarter of fiscal 1999 compared to 7% in the second quarter of fiscal 1998. This
increase is primarily due to the overall increase in administrative personnel.
INCOME TAX BENEFIT/PROVISION
The Company's effective tax rate was 35% in the second quarter of fiscal
1999, compared to 34%, for the same period in fiscal 1998.
COMPARISON OF SIX MONTHS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
REVENUES
Total revenues were $55,010,000 for the first six months of fiscal 1999, an
increase of 1% from $54,236,000 for the first six months of fiscal 1998.
Software license fees were $23,473,000 in the first six months of fiscal 1999, a
decrease of 22% from $30,208,000 in the first six months of fiscal 1998.
Software license fees decreased both domestically and internationally primarily
as a result of the slow down in the demand for the Company's year 2000 mainframe
software tools in addition to slow desktop license revenues from OnMark 2000
sales in the first quarter of fiscal 1999. There were no desktop license
revenues in the first six months of fiscal 1998, as OnMark 2000 was not released
until the third quarter of fiscal 1998. The Company anticipates that desktop
license revenues will continue to be a significant percentage of license
revenues in the near term and, as a result, mainframe license revenues may
continue to decrease year over year.
Maintenance fees were $17,142,000 in the first six months of fiscal 1999,
an increase of 23% from $13,987,000 in the first six months of fiscal 1998. The
increase was due to new software licenses, customer system upgrades and
increases in the fees charged for annual maintenance. With the Company's entry
into the desktop software market with the OnMark 2000 product line, it has
experienced that a large number of OnMark customers do not purchase maintenance
services. As a result, there could be some erosion in maintenance revenue growth
to the extent that license sales of OnMark 2000 continue to grow as a percentage
of revenues.
Professional services fees were $14,379,000 in the first six months of
fiscal 1999, an increase of 44% from $9,962,000 in the first six months of
fiscal 1998. Management believes it is beginning to see the results of its
refocus on the services business and broader services offerings, with the
increase in services revenue year over year. A significant portion of the
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Company's services fee revenue comes from year 2000 related projects, but with
the Company's renewed focus on providing a broader range of solutions,
management believes it is well positioned to assist customers in post year 2000
projects, such as application modernization. The Company is still in the process
of implementing its refocused services strategy and there can be no assurance
that these initial trends of increased services revenue will continue. The
Company will continue to closely monitor its progress in this area from both a
revenue generation and profitability standpoint.
COST OF REVENUES
Cost of software license and maintenance fees was $8,355,000 in the first
six months of fiscal 1999, an increase of 85% from $4,522,000 in the first six
months of fiscal 1998. Gross margins on software license and maintenance fees
decreased to 79% in the first six months of fiscal 1999 compared to 90% in the
first six months of fiscal 1998. Management anticipates that the cost of license
and maintenance fees will continue to increase and the gross margin will
continue to decrease year over year due to increased sales of products requiring
royalties to third parties. Royalty expenses increased 140% in the first six
months of fiscal 1999 compared to the same quarter in fiscal 1998. The increase
in royalty expense is primarily due to sales of the OnMark 2000 product line,
representing a significant portion of the first six months of fiscal 1999
license fees, which require payments of royalties to third parties. Other
factors contributing to the increase in cost of software license and maintenance
fees and decline in margins, included increases in the number of customer
support personnel and their related costs, increased salaries, amortization of
the purchased research and development from the January 1998 EraSoft
Technologies, Inc. acquisition and the July 1998 Systemhouse product acquisition
(See Note 2 of Notes to Consolidated Financial Statements) and increased OnMark
2000 related costs, including outside consultants to provide customer support
and product documentation and packaging.
Cost of professional services fees was $12,099,000 in the first six months
of fiscal 1999, an increase of 33% from $9,092,000 in the first six months of
fiscal 1998. The gross margin for professional services was 16% in the first six
months of fiscal 1999 compared to 9% in the first six months of fiscal 1998. The
increase in expenses was primarily a result of additional subcontractor costs to
support the increase in revenues, primarily from large consulting projects.
Management expects that the use of subcontractors will continue in order to
staff large projects. The cost increase was offset in part by lower salaries and
related costs as internal services headcount declined year over year. Internal
consulting services staff decreased during fiscal 1998, when the Company used
the enablement services model, which required less internal staff. However, the
Company's new services strategy requires additional investment in internal
headcount during the remainder of fiscal 1999. The margin improvement is
primarily the result of increased focus on profitability and the changes in the
services business model.
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SALES AND MARKETING
Sales and marketing expenses were $22,344,000 in the first six months of
fiscal 1999, an increase of 16% from $19,187,000 in the first six months of
fiscal 1998. This increase is attributable primarily to an increase in personnel
and the associated costs, higher salaries, increased travel, marketing and
promotion costs and a $1.0 million bad debt provision. These increases were
offset in part by decreases in commissions and bonuses due to the decrease in
license revenues. Sales and marketing expenses as a percentage of total revenues
was 41% in the first six months of fiscal 1999 and 35% in the first six months
of 1998. This increase is due primarily to the decline in total revenues year
over year.
RESEARCH AND DEVELOPMENT
Research and development expenditures were $8,222,000 in the first six
months of fiscal 1999, compared to $6,103,000 in the first six months of fiscal
1998. Research and development expenses increased 35% year over year. Research
and development expenses included approximately $1,474,000 in charges for
third-party development of certain technologies acquired during the first six
months of fiscal 1999 (See Note 2 of Notes to Consolidated Financial
Statements). This increase also was due to the increase in research and
development personnel and salary increases prior to the reduction in force
announced in the first quarter of fiscal 1999. This reduction lowered research
and development salaries and wages and third-party consultant costs down to
fiscal 1998 levels. As a percentage of total revenues, research and development
costs were 15% in the first six months of fiscal 1999 compared to 11% for the
same period in fiscal 1998. The increase in research and development cost as a
percentage of revenue is primarily due to the overall decrease in revenues year
over year and the third-party development costs.
GENERAL AND ADMINISTRATIVE
General and administrative expenses were $5,139,000 in the first six months
of fiscal 1999, compared to $3,902,000 in the first six months of fiscal 1998.
General and administrative expenses increased 32% year over year. This increase
is a result of additional administrative personnel and their related costs,
general salary increases and amortization of intangibles related to the EraSoft
and Systemhouse acquisitions, offset by lower legal and consulting fees. As a
percentage of total revenues, general and administrative expenses were 9% in the
first six months of fiscal 1999 compared to 7% in the first six months of fiscal
1998. This increase is primarily due to the overall decrease in revenues year
over year and the additional personnel costs.
INCOME TAX BENEFIT/PROVISION
The Company's effective tax rate was 35% in the first six months of fiscal
1999, compared to 34%, for the same period in fiscal 1998.
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LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1998, the Company had cash and cash equivalents and
investments of $79,271,000, representing a decrease of $24,334,000 from
$103,605,000 at June 30, 1998. The decrease is primarily a result of the cost of
the Systemhouse acquisition (See Note 2 of Notes to Consolidated Financial
Statements), cash used in operations and the share purchases under the Company's
stock repurchase program.
The Company's net cash used in operating activities for the first six
months of fiscal 1999 was $4,543,000 compared to cash provided by operations of
$4,833,000 for the first six months of fiscal 1998. Net cash used in operations
for the first six months of fiscal 1999 was composed primarily of the net loss
and a net decrease in working capital offset by non-cash charges for the
purchased in-process research and development charge, the restructuring charge
and depreciation and amortization. For the first six months of fiscal 1998, net
cash provided from operations was comprised primarily of net income and non-cash
adjustments and a net increase in working capital.
The Company's investing activities provided cash of $2,874,000 and used
cash of $59,829,000, in the first six months of fiscal 1999 and 1998,
respectively. In fiscal 1999, cash was provided by investment maturities offset
by the purchase of investments, the Systemhouse acquisition and the purchase of
furniture, fixtures and equipment. In fiscal 1998, the primary use of cash was
for investment purchases.
The Company's financing activities used cash of $11,252,000 and provided
cash of $77,076,000 in the first six months of fiscal 1999 and 1998,
respectively. In fiscal 1999, cash was used for the purchase of 1,356,500 shares
of treasury stock through the Company's stock repurchase program. In fiscal
1998, cash was primarily provided by the completion of the Company's public
offering of common stock net of payments for offering costs.
As of December 31, 1998, the Company did not have any material commitments
for capital expenditures. For the remainder of fiscal 1999, the Company
anticipates capital expenditures of approximately $3.1 million, of which $1.0
million is estimated to be spent for completion of two internal software systems
projects and the remainder is for computer hardware and software to continue to
update the Company's network infrastructure. As of December 31, 1998, the
Company had repurchased 1,491,500 shares of its common stock of the 1,500,000
shares authorized by the Board of the Directors. In January 1999, the Board of
Directors authorized the purchase of an additional 1,000,000 shares, subject to
a continuing evaluation of market conditions.
The Company expects that its existing working capital will be sufficient
for the foreseeable future to meet its capital and liquidity needs for existing
operations and general corporate purposes, as well as the addition of direct
sales and services personnel, strategic marketing initiatives, and potential
acquisitions of products, technologies and businesses.
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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 and Spain, where they are
denominated in lira and pesetas, respectively. Sales by the Company's foreign
subsidiaries are principally denominated in the currencies of the countries
where sales are made. The Company experienced losses of approximately $122,000
from foreign currency fluctuations in the six months ended December 31, 1998.
The Company has not to date sought to hedge the risks associated with
fluctuations in foreign exchange rates. The Company continues to evaluate the
relative costs and benefits of hedging and may seek to hedge these risks in the
future, if appropriate. Gains and losses relating to translation of the
financial statements of the Company's foreign subsidiaries are included as a
separate component of stockholders' equity in the Company's Consolidated
Financial Statements.
YEAR 2000 CONSIDERATIONS
The Company is aware of the problems associated with the year 2000 date
change and has established and continues to evaluate and update its program to
address any potential year 2000 compliance issues relating to its (i) internal
operating systems, (ii) vendors, facilities and other third parties, and (iii)
software products that it licenses to customers.
INTERNAL OPERATING SYSTEMS
The Company has completed its assessment of all of its major internal
operating systems (including non-IT assets) and is continuing to monitor any new
additions to its internal operating systems for year 2000 compliance. As a
result of such assessment and because of changing business requirements as well,
the Company is currently installing new enterprise-wide systems relating to the
Company's accounting and customer relationship management needs, each of which
has been warranted by the vendor to be year 2000 compliant. To date, the Company
has incurred approximately $3.0 million in costs of the $6.5 million budgeted by
the Company for these two projects. The customer support and order processing
portions of the customer relationship management system are currently up and
operational, on a worldwide basis, as of December 31, 1998. Work on this project
continues, with plans to add new functionality and integration between
components within the system, but the previous non-year 2000 compliant customer
relationship management systems have already been replaced. The business needs
of the Company required that the installation of the new accounting system be
implemented in several phases. The Company expects the first phase, which will
include the installation of an upgraded and year 2000 compliant system, to be
completed by June 30, 1999. The Company is also reviewing its desktop year 2000
concerns, which include software packages and PC hardware. The Company is using
its own product suite, OnMark 2000, to assess its desktop concerns. The Company
expects this assessment to be completed by June 30, 1999, and anticipates that
17
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all required remediation and testing of its internal operating systems for year
2000 compliance will be completed by October 31, 1999. If the Company's major
internal operating systems are not year 2000 compliant in a timely manner, the
Company's business operations would be materially and adversely affected and the
Company may be required to incur unanticipated expenses to remedy any problems
not addressed by these compliance efforts.
VENDORS, FACILITIES AND OTHER THIRD PARTIES
The Company continues to evaluate the year 2000 readiness of its material
vendors, facilities and distributors and resellers with respect to IT, as well
as non-IT, assets. The Company has forwarded questionnaires to many of its
material vendors, distributors and resellers, is checking information made
publicly available by these parties and is evaluating responses on a
case-by-case basis. The Company will place the emphasis of its vendor review on
its primary vendors, such as payroll services, computer services and phone
systems. The Company has also started to assess the year 2000 readiness of each
of its facilities. As part of this assessment, the Company is contacting each of
the landlords of its primary office locations to determine (i) the status of
year 2000 compliance at each property, (ii) contingency plans at each property
in the event that the year 2000 compliance issues are not resolved on a timely
basis and (iii) associated costs of year 2000 compliance that may affect the
Company. In the event that the Company's distributors and resellers are not year
2000 compliant in a timely manner, the Company could experience material adverse
consequences with respect to the marketing and sale of its products and, as a
result, the Company's business, results of operations and financial condition
would be materially and adversely affected. If the Company's major vendors or
facilities are not year 2000 compliant in a timely manner, the Company's
business operations would be materially and adversely affected and the Company
may be required to incur unanticipated expenses to remedy any problems.
PRODUCTS
The Company's development of products and technology is accomplished
through (i) in-house development, and (ii) acquisition or license from third
parties. The Company has completed and continues to evaluate and update its
assessment of all of its internally developed and third-party developed products
for year 2000 readiness, and believes that all of such products have been
designed to satisfy the Company's year 2000 specifications. The Company now
provides information on its Web page to update customers and other interested
parties on the year 2000 status of its software products. As part of its ongoing
evaluation, the Company has developed an internal project plan that contemplates
the re-testing of its software products pursuant to a methodology designed
specifically for the purpose of detecting year 2000 errors. Actual testing is
scheduled to begin in February and is currently estimated to be completed in
July. The Company will continue to monitor and test newly developed or acquired
products for year 2000 compliance. In the event that any of the Company's
developed or acquired products are not year 2000 compliant in a timely manner,
the Company's sales may decline materially, customers and those with whom they
do business may assert product liability and other claims, and the
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Company's business, results of operations and financial condition would be
materially and adversely affected.
CONTINGENCY PLANS
To date, the Company has not completed its contingency plans in the event
that its internal operating systems, vendors, facilities, distributors,
resellers or products, or any other components of its business operations, fail
to operate in compliance with the year 2000 century date change. The Company
expects to develop its contingency plans by June 30, 1999.
BUDGET FOR YEAR 2000 COMPLIANCE PROJECT
The Company has budgeted approximately $7.6 million for its year 2000
compliance program and has incurred approximately $3.2 of these expenses to
date. These costs include internal staff to the extent they are dedicated to the
project, a portion of which are expensed in the Company's general and
administrative expenses line item and the remainder are expensed in its research
and development expenses line item. The Company started incurring these expenses
in 1995, when the Company first began the assessment and remediation of
internally developed products, and expenses are expected to continue through
fiscal year 2000. A very large portion of this budget, $6.5 million of the $7.6
million budgeted, represents the cost of designing and implementing both the new
customer relationship management and accounting systems. The Company decided to
replace these systems several years ago primarily because of business
requirements, but the replacement also served the purpose of eliminating two
major systems that would otherwise have had to be remediated and tested to
become year 2000 compliant. As a result, the costs of these new systems has been
included in the year 2000 compliance budget for purposes of this disclosure. The
estimated costs of the Company's year 2000 compliance program have not had and
are not expected to have a material effect on the Company's financial position,
results of operations or liquidity. However, there can be no assurance that the
Company will not experience material adverse consequences in the event that the
Company's year 2000 compliance program is not successful or its vendors,
facilities, distributors or resellers are unable to resolve their year 2000
compliance issues in a timely manner.
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, this Form 10-Q contains
express or implied forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, and the Company intends that such
forward-looking statements be subject to the safe harbors created thereby.
Included in such forward-looking statements are those statements in "Year 2000
Considerations" regarding the Company's plans and expectations relating to the
Company's year 2000 compliance. Additional written or oral forward-looking
statements may be made by the Company from time to time in filings with the
Securities and Exchange Commission, in its press releases, quarterly conference
calls or otherwise. The words "believes", "expects", "anticipates", "intends",
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"forecasts", "projects", "plans", "estimates" and similar expressions identify
forward-looking statements. Such statements reflect the Company's current views
with respect to future events and financial performance or operations and speak
only as of the date the statements are made. Such forward-looking statements
involve risks and uncertainties and readers are cautioned not to place undue
reliance on forward-looking statements. 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, the Company's dependence on the
year 2000 century date conversion market, both mainframe and desktop, and
dependence on its ESW primary product line, the volatility of the Company's
common stock price, fluctuations in revenues and operating results, fluctuations
in market demand and product mix, the Company's ability to manage changes in its
professional services business and risks associated with a professional services
business, including volatility of workload, ability to successfully manage
consulting projects, proper allocation of resources and hiring, training and
retaining qualified personnel, risks associated with international operations
including longer payment cycles and exchange rate fluctuations, the Company's
ability to manage rapid change in its business and industry, the Company's
ability to enhance existing products and develop or acquire new products and
technology to keep pace with technological developments and evolving industry
standards and to respond to changes in customer needs, the Company's ability to
identify, complete, manage and integrate acquisitions of businesses, products
and technologies, charges, costs and uncertainties related to acquisitions,
intense competition in the Company's markets, the performance of the Company's
distributors, resellers and solution providers, the Company's dependence on key
management and technical personnel and increasing competition to attract skilled
personnel, the adequacy of the Company's program to address year 2000 compliance
issues and general economic and business conditions, as well as factors
discussed elsewhere in this Form 10-Q, in "Factors That May Affect Future
Results" in the Company's Form 10-K for the year ended June 30, 1998 and other
risks detailed from time to time in the Company's filings with the Securities
and Exchange Commission.
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. 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 undertakes no
obligation to publicly update, review or revise any forward-looking statements
to reflect any change in the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any such statements is
based.
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PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on November 18, 1998.
The stockholders of the Company voted on and approved the following proposals:
1. Election of directors:
The election of five directors, each to serve until the next Annual Meeting
of Stockholders and until his successor has been elected and qualified.
NAME FOR AGAINST
---- --- -------
John J. Barry III 15,416,637 1,695,122
Alexander S. Kuli 15,422,017 1,689,742
J. David Parrish 15,421,642 1,690,117
Arthur C. Patterson 15,425,498 1,686,261
Steven D. Whiteman 15,405,123 1,706,636
2. Approval of amendments to the Viasoft, Inc. 1997 Equity Incentive Plan
to increase the number of shares that may be issued pursuant to future
grants of awards under the 1997 Plan by 850,000 shares.
FOR AGAINST WITHHELD NON-VOTE
--- ------- -------- --------
5,112,803 4,061,731 62,510 7,874,715
3. Approval of an amendment to Viasoft, Inc.'s Employee Stock Purchase
Plan to increase the number of shares that may be issued under the
Purchase Plan by an additional 400,000 shares.
FOR AGAINST WITHHELD NON-VOTE
--- ------- -------- --------
6,436,681 2,742,178 58,185 7,874,715
4. Ratification of the selection of Arthur Andersen LLP as independent
auditors of the Company for its fiscal year ending June 30, 1999.
FOR AGAINST WITHHELD
--- ------- --------
16,435,214 615,605 60,940
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
NUMBER DESCRIPTION
10.1(1)(2) Form of Outside Director Stock Option Agreement between
Viasoft, Inc. and each of its outside directors.
10.2(1)(2) Confidential Severance Agreement between Viasoft, Inc. and
Robert K. Young.
10.3(1)(2) Confidential Severance Agreement between Viasoft, Inc. and
Abbott H. Ezrilov.
10.4(1)(2) Confidential Severance Agreement between Viasoft, Inc. and
Jean-Luc Guy Valente.
10.5(1)(2) Confidential Severance and Consulting Agreement between
Viasoft, Inc. and Kevin M. Hickey.
11(1) Computation of Earnings Per Share for the three and six
month periods ended December 31, 1998 and 1997.
27(1) Financial Data Schedule
(b) REPORTS ON FORM 8-K
None
(1) Filed herewith.
(2) Management contract or compensation plan or arrangement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Viasoft, Inc.
Date: February 12, 1999 By /s/ Steven D. Whiteman
-----------------------------
Steven D. Whiteman
President
Date: February 12, 1999 By /s/ Mark R. Schonau
-----------------------------
Mark R. Schonau
Chief Financial Officer
23
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF,
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND APPLICABLE STATE SECURITIES LAWS.
NON-QUALIFIED STOCK OPTION AGREEMENT
VIASOFT, INC.
Viasoft, Inc., a Delaware corporation (the "Company"), hereby grants to
________________________ (the "Optionee") an Option to purchase a total of 6,000
shares of Common Stock of the Company, at the price specified herein.
I. NATURE OF THE OPTION. This Option is a Non-Qualified Stock Option and
is not intended to qualify as an Incentive Stock Option as defined in
Section 422 of the Internal Revenue Code.
II. EXERCISE PRICE. The exercise price is 6.75 for each share of Common
Stock.
III. EXERCISE OF OPTION. This Option shall be exercisable during its term as
follows:
A. TERM OF OPTION. Notwithstanding any other provision to the
contrary, this Option may not be exercised more than five (5)
years from the date of grant of this Option, shall expire
automatically at the close of business of the Company on the
fifth anniversary of such date of grant and may be exercised
during such term only in accordance with the terms of this
Option.
B. VESTING. Subject to the terms and conditions of this
Agreement, this Option shall vest in three (3) equal annual
installments commencing on the date twelve months after the
Date of Grant of the Option.
C. TERMINATION. Notwithstanding any other provision of this
Agreement to the contrary, this Option shall be subject to the
following provisions:
(1) In the event the Optionee ceases to be a member of
the Board for any reason other than death or
disability, any then unexercised Options granted to
Optionee, to the extent not then exercisable pursuant
to Section III(B) above, shall be immediately
terminated and become void, and any Options which are
then exercisable but have not been exercised at the
time the Optionee ceases to be a member of the Board
may be exercised, but only to the extent they are
then exercisable, by the Optionee within a period of
three months following the time the Optionee so
ceases to be a member of the Board.
(2) In the event the Optionee ceases to be a member of
the Board by reason of disability or death, any then
unexercised Options granted to Optionee, to the
extent not then exercisable pursuant to Section
III(B) above, shall be immediately terminated and
become void, and any Options which are then
exercisable but have not been exercised at the time
the Optionee ceases to be a member of the Board may
be exercised, but only to the extent they are then
exercisable, by the Optionee (or by the Optionee's
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<PAGE>
personal representative, heir or legatee, in the
event of death) during the period ending on the
earlier of (i) six (6) months from the date the
Optionee so ceases to be a member of the Board or
(ii) the expiration date of the Option.
(3) This Option shall terminate to the extent not
exercised in accordance with (1) and (2) of this
Section III(D), if applicable.
D. NO FRACTIONAL SHARES. This Option may not be exercised for a
fraction of a share.
E. METHOD OF EXERCISE. This Option shall be exercisable by
written notice which shall state the election to exercise the
Option and the number of shares in respect of which the Option
is being exercised. Such written notice shall be made together
with payment of the full exercise price in the manner provided
herein and in accordance with the terms hereof, shall be
signed by Optionee and shall be delivered in person or by
certified mail to the Secretary of the Company. No shares will
be issued pursuant to the exercise of any Option unless such
issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock market or
exchange upon which the shares may then be traded or listed.
IV. OPTIONEE'S REPRESENTATIONS. By receipt of this Option, by its
execution, and by its exercise in whole or in part, Optionee represents
to the Company that:
(i) Optionee understands that both this Option and any
shares purchased upon its exercise are securities,
the issuance by the Company of which requires
compliance with federal and state securities laws;
and that these securities are made available to
Optionee only on the condition the Optionee makes the
representations contained in this Section IV to the
Company;
(ii) Optionee has made a reasonable investigation of the
affairs of the Company sufficient to be well informed
as to the rights and value of these securities;
(iii) Optionee understands that the securities have not
been registered under the Securities Act of 1933, as
amended (the "Act"), or the securities laws of any
state; that the securities have not been registered
under the Act in reliance upon a specific exemption
contained in the Act which depends upon Optionee's
bona fide investment intention in acquiring these
securities; that Optionee's intention is to hold
these securities for Optionee's own benefit for an
indefinite period; that Optionee has no present
intention of selling or transferring any part thereof
(recognizing that the Option is not transferable
except as provided for in this Agreement) and that
there may be certain restrictions on transfer of the
shares subject to the Option;
(iv) Optionee understands that Optionee has no rights to
require that the securities be registered under the
Act or applicable state securities laws; and
(v) Optionee understands that the certificate
representing the shares will bear a legend
prohibiting their transfer in the absence of their
registration or the opinion of counsel for the
Company that registration is not required.
V. METHOD OF PAYMENT. Payment of the exercise price shall be made (i) by
cash or by bank-certified, cashier's or personal check, (ii) by
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<PAGE>
delivery to the Company of shares of Common Stock having a fair market
value equal to the option exercise price at the time of such exercise,
(iii) by delivery of instructions to the Company to withhold from the
option shares that would otherwise be issued on the exercise that
number of option shares having a fair market value equal to the option
exercise price at the time of such exercise, (iv) or by some
combination of the above; provided, however, that the purchase price
and/or withholding tax may not be paid, in whole or in part, by the
delivery of shares of Common Stock more frequently than once every six
months.
VI. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of such shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any
applicable federal or state securities or other law or regulation. As a
condition to the exercise of this Option, the Company may require
Optionee to make any representation and warranty to the Company as may
be required by any applicable law or regulation.
VII. TRANSFERABILITY OF OPTION. This Option may be transferred only in
accordance with the terms of this Agreement. This Option may be
transferred by will or by the laws of descent and distribution. In
addition, this Option may be transferred by Optionee to a Permitted
Transferee. It shall be a condition precedent to any transfer permitted
under the preceding sentence that the Permitted Transferee execute and
deliver to the Company an agreement acceptable to the Company
acknowledging that this Option remains subject to all provisions of
this Agreement, including without limitation the vesting and
termination provisions of Section 3, which shall continue to be applied
as if Optionee had not transferred this Option. A "Permitted
Transferee" means (A) any member of Optionee's Immediate Family,
including any child of a deceased or living spouse of Optionee or the
child or children of such child, or (B) any trust created for the
benefit of Optionee and/or any of his or her Immediate Family, or (C)
any corporation, partnership or other entity of which all the equity
owners are Optionee and/or members of his or her Immediate Family. A
Permitted Transferee may transfer this Option to another Permitted
Transferee of the Optionee, only with the prior written consent of the
Company. "Immediate Family" has the meaning given such term in the
regulations promulgated under Section 16 of the Securities Exchange Act
of 1934, as amended.
VIII. TAXATION UPON EXERCISE OF OPTION. The Company shall have the authority
and the right to deduct or withhold, or require Optionee to remit to
the Company, an amount sufficient to satisfy federal, state and local
taxes required by law to be withheld with respect to any taxable event
arising as a result of this Option. Optionee may elect, by irrevocable
written notice delivered to the Committee six (6) months prior to the
date of exercise, subject to any rules or policies of the Committee and
any restrictions under applicable law, to satisfy the withholding
requirement, in whole or in part, by having the Company withhold shares
of Common Stock having a fair market value on the date of withholding
equal to the amount to be withheld for tax purposes.
IX. NOT AN AGREEMENT TO CONTINUE SERVICE. Nothing in this Agreement shall
imply or be construed to confer any right to continue in the service of
the Company, nor shall it affect any right of the Company, its Board or
shareholders to terminate the service of Optionee with or without
cause.
X. GOVERNING LAW. This Agreement and the Option granted hereunder are
governed by, and shall be interpreted according to, the laws of the
State of Delaware.
XI. ELIGIBILITY. By acceptance of this Option, Optionee certifies to the
Company that the receipt of this Option is not contrary to any policy
or agreement of Optionee's employer.
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XII. ADJUSTMENT. The number of shares subject to this Option and the
exercise price of such Option are subject to appropriate adjustment by
the Board for stock splits, recapitalization and other similar
transactions affecting the Company's Common Stock.
XIII. ACCEPTANCE OF OPTION. By acceptance of this Option, Optionee (A)
represents that Optionee is familiar with the terms and provisions of
this Agreement, (B) agrees that this Agreement represents a binding
agreement between Optionee and the Company and accepts this Option
subject to all of the terms and provisions of this Agreement, (C)
agrees to accept as binding, conclusive and final all decisions or
interpretations of the Company upon any questions arising with respect
to this Option, and (D) acknowledges Optionee's representations as set
forth in Section IV of this Agreement.
DATE OF GRANT: December 4, 1998
VIASOFT, INC. ACCEPTED:
- ------------------------------------- ------------------------------------
Steven D. Whiteman, President
Page 4
<PAGE>
CONSENT OF SPOUSE
I, the undersigned spouse of have read and approve the foregoing Stock
Option Agreement. In consideration of the granting of the right to my spouse to
purchase shares of Viasoft, Inc., as set forth in the Agreement, I hereby
appoint my spouse as my attorney-in-fact with respect to the exercise of any
rights under the Agreement and agree to be bound by the provisions of the
Agreement (including the Company's right of first refusal therein) insofar as I
may have any rights in said Agreement or any shares issued pursuant thereto
under the community property laws of the State of Arizona or similar laws
relating to marital property in effect in the state of our residence as of the
date of the signing of the foregoing Agreement or otherwise.
Dated as of .
----------------------
(Officers form)
Page 5
<PAGE>
SCHEDULE A TO EXHIBIT 10.1
Identical Stock Option Agreements under the same terms and conditions were
entered into as of December 4, 1998, with the following Outside Directors:
John J. Barry III
Alexander S. Kuli
J. David Parrish
Arthur C. Patterson
Page 6
CONFIDENTIAL SEVERANCE AGREEMENT
This Confidential Severance Agreement ("Agreement") is made in the
State of Arizona by and between Robert K. Young ("Employee"), and Viasoft, Inc.,
a Delaware corporation, its direct and indirect subsidiaries and affiliates, and
its and their respective businesses (the "Company").
RECITALS
WHEREAS, Employee is employed by the Company; and
WHEREAS, the parties have mutually agreed that Employee will resign as
an officer and employee of the Company; and
WHEREAS, the parties desire to express in a written agreement their
mutual agreements, covenants, promises, and understanding with respect to the
termination of Employee's employment relationship.
AGREEMENT
NOW THEREFORE, in consideration of the premises and the mutual
agreements, covenants, and provisions contained in this Agreement, the parties
agree and declare as follows:
1. TERMINATION OF EMPLOYMENT. Employee shall deliver his resignation as
an employee and officer of the Company to be effective as of November 20, 1998
(the "Termination Date"), and the Company shall accept such resignation. The
Company shall pay Employee on or before November 30, 1998, for (a) his regular
existing salary through November 20, 1998, (b) a bonus of $26,100 accrued for
performance in the quarter ended September 30, 1998, and (c) his accrued but
unused vacation time, all net of applicable withholding taxes. Employee
acknowledges that following payment of the amounts set forth in the previous
sentence, the Company will have paid Employee all wages and compensation to
which he was entitled as an employee of the Company. The Company agrees not to
make any claim for or otherwise set off the signing bonus previously paid to
Employee. The parties acknowledge and agree that Employee shall not be an
employee of the Company after the Termination Date, notwithstanding Employee's
continued receipt of certain sums as described in this Agreement.
2. SEVERANCE BENEFITS.
a. SEVERANCE PAY. The Company will: (1) continue paying
Employee his existing salary, net of applicable withholding, through February
20, 1999, on the Company's regular pay days; and (2) continue Employee's group
health plan coverage through February 20, 1999, with Employee's portion of the
premium for such coverage deducted from the severance payments described above.
The Company also shall reimburse Employee for any valid business expenses he
incurred on or prior to November 20, 1998, in accordance with the Company's
Travel and Expense policy, provided the expenses are submitted to the Company on
<PAGE>
or before December 15, 1998. The Company also shall reimburse Employee for
amounts, if any, for which Employee is entitled to reimbursement under the
Company's Employee Stock Purchase Plan through and including the Termination
Date. The Company will not require reimbursement by Employee of any relocation
expenses.
b. CONSIDERATION. Employee acknowledges that it is not the
Company's usual policy to provide all of the severance benefits and other
consideration set forth in this Agreement, and that he would not be entitled to
those benefits and consideration if he were not releasing his Claims under this
Agreement.
3. WAIVER AND RELEASE OF CLAIMS. Employee covenants not to sue for, and
waives and releases all of his existing rights to, any relief of any kind from
the Company, its insurers, affiliates, divisions, directors, officers,
shareholders, employees, agents, successors, assigns, and members ("the
Employer"), including without limitation all claims that arise out of or that
relate to his employment or the termination of his employment with the Company,
all claims that arise out of or that relate to the statements or actions of the
Employer or any contract or agreement with the Employer, all claims that arise
under the Civil Rights Act of 1964, the Age Discrimination in Employment Act,
the Arizona Employment Protection Act, the Americans with Disabilities Act, and
the Arizona Civil Rights Act, all claims for relief or other benefits under any
federal, state, or local statute, ordinance, regulation, or rule of decision,
all claims that Employer engaged in conduct prohibited on any basis under any
federal, state, or local statute, ordinance, regulation, or rule of decision,
and all claims for attorneys' fees, liquidated damages, punitive damages, costs,
and disbursements ("Claims"). If Employee breaches the covenant not to sue
described in this paragraph, Employee agrees to indemnify, hold harmless, and
reimburse the Employer for attorneys' fees and costs the Employer incurs
defending Employee's action.
4. INDEMNIFICATION. Notwithstanding any other provision of this
Agreement, the Company agrees to indemnify Employee in accord with Article IX of
the Company's Restated Certificate of Incorporation dated February 23, 1995 as
the same may be amended from time to time.
5. MUTUAL CONFIDENTIALITY.
a. GENERAL STANDARD. The parties intend that the terms and
conditions upon which this matter has been settled, including the provisions of
this Agreement ("Confidential Information"), will be forever treated as
confidential. Employee and the Company will not disclose Confidential
Information to any person or entity at any time, except as provided herein.
b. EXCEPTIONS.
(1) It will not be a violation of this Agreement for
Employee to disclose Confidential Information to his attorneys.
(2) It will not be a violation of this Agreement for
Employee to disclose Confidential Information to his spouse, to his accountants
or to his tax planners, provided that if Employee discloses Confidential
2
<PAGE>
Information to any such person, he must simultaneously inform that person that
the information is considered confidential, and that the person cannot disclose
the information to any other person without the advance written consent of
Employee and the Company. Any disclosure of Confidential Information by any such
person will be considered a disclosure by Employee.
(3) It will not be a violation of this Agreement for
the Company to disclosure Confidential Information to its attorneys, to its
auditors, to its insurers, to its accountants, to its tax planners, to the
Securities and Exchange Commission, National Association of Securities' Dealers,
or other governmental entities or self-regulatory organizations, to its
affiliates, divisions, directors, officers, shareholders, employees,
representatives, or other agents who have a legitimate reason to obtain the
Confidential Information in the course of performing their duties or
responsibilities for the Company, or as necessary or advisable in compliance
with its disclosure obligations under applicable law or accounting rules.
(4) It will not be a violation of this Agreement for
either party to give truthful testimony in response to direct questions asked
pursuant to an enforceable court order obtained after providing notice to the
other party, which order pays due regard to the concerns for confidentiality
expressed by the parties herein.
6. NON-DISPARAGEMENT. Employee will not disparage, defame, or besmirch
the reputation, character, image, or services of the Company, its affiliates,
divisions, directors, officers, shareholders, employees, or agents.
7. CLAIMS INVOLVING THE COMPANY. Employee will not recommend or suggest
to any potential claimants or plaintiffs or their attorneys or agents that they
initiate claims or lawsuits against the Company or any of its affiliates,
divisions, directors, officers, shareholders, employees, agents, successors, or
assigns, nor will Employee voluntarily aid, assist, or cooperate with any such
claims or lawsuits; provided, however, that this paragraph will not be construed
to prevent Employee from giving truthful testimony in response to direct
questions asked pursuant to a lawful subpoena during any future legal
proceedings.
8. TIME TO CONSIDER AGREEMENT. Employee understands that the Company's
offer as set forth in this Agreement shall expire on December 4, 1998 at 5:00
p.m. unless Employee executes the Agreement and the Company receives it prior to
that time.
9. RETURN OF COMPANY PROPERTY. Employee agrees to promptly return to
the Company all property that belongs to the Company, including without
limitation all equipment, supplies, documents, files, computer disks, and
Employee agrees to remove from any person computer all data files containing
Company information.
10. CONFIDENTIALITY AGREEMENT. Employee acknowledges and reaffirms his
obligations under the Company's Employment Confidentiality and Proprietary
Information Agreement dated June 1, 1998, except as noted in Section 14.
3
<PAGE>
11. FULL COMPENSATION. The payments made and other consideration
provided under this Agreement constitute full compensation for and extinguish
all Employee's Claims, including, but not limited to, all Claims for attorneys'
fees, costs, and disbursements, and all Claims for any type of legal or
equitable relief.
12. AGREEMENT NOT TO SOLICIT CUSTOMERS. Employee agrees that for a
period of six (6) months after the Termination Date, he will not, either
directly or indirectly, on his own behalf or in the service or on behalf of
others, solicit, divert or appropriate, or attempt to solicit, divert or
appropriate, to any competing business (a) any person or entity whose account
with the Company was sold or serviced (including maintenance) by the Company
during the twelve (12) months preceding the Termination Date, or (b) any person
or entity whose account with the Company has been directly solicited at least
twice by the Company within the twelve (12) month period prior to the
Termination Date.
13. AGREEMENT NOT TO SOLICIT EMPLOYEES AND CONTRACTORS. Employee agrees
that for a period of six (6) months after the Termination Date, he will not,
either directly or indirectly, on his own behalf or in the service or on behalf
of others, solicit, divert or hire away, or attempt to solicit, divert or hire
away, any person then employed by the Company or then serving as a consultant,
sales representative or distributor or reseller of the Company.
14. SUPERSEDES PRIOR OBLIGATIONS. The parties agree that Sections 12
and 13 specifically supersede the obligations of Employee under Section 2(c) of
his Employment Confidentiality and Proprietary Information Agreement.
15. EMPLOYEE COOPERATION. Employee agrees to cooperate in all
reasonable requests of the Company, in connection with any litigation,
administrative proceeding or any other claim of a third party against the
Company relating to acts or omissions of Employee or of which Employee would
have personal knowledge or other information, including, without limitation,
providing information, deposition testimony, appearing in court, etc. The
Company agrees to pay Employee all reasonable out-of-pocket expenses in
connection with such assistance.
16. NO ADMISSION OF WRONGDOING. This Agreement does not constitute an
admission that any person or entity violated any local, state, or federal
ordinance, regulation, ruling, statute, rule of decision, or principle of common
law, or that any person or entity engaged in any improper or unlawful conduct or
wrongdoing. Employee will not characterize this Agreement or the payment of any
money or other consideration in accord with this Agreement as an admission or
indication that any person or entity engaged in any improper or unlawful conduct
or wrongdoing.
17. LEGAL REPRESENTATION. Employee acknowledges that the Company has
advised him to consult a lawyer regarding this Agreement before signing it.
Employee acknowledges that he has had a full opportunity to consider this
Agreement, that he has had a full opportunity to ask any questions that he may
have concerning this Agreement, and that in deciding whether to sign this
Agreement he has not relied upon any statements made by the Company or its
4
<PAGE>
attorneys, other than the statements made in this Agreement. Employee further
acknowledges that he has read and understands the contents to this Agreement and
that he executes this Agreement knowingly and voluntarily and based upon and
with the opportunity to obtain independent legal advice of his own choosing.
18. AUTHORITY. Employee represents and warrants that he has the
authority to enter into this Agreement, and that he has not assigned any Claims
to any person or entity.
19. INVALIDITY. In the event that a court of competent jurisdiction
determines that any provision of this Agreement is invalid, illegal, or
unenforceable in any respect, such a determination will not affect the validity,
legality, or enforceability of the remaining provisions of this Agreement, and
the remaining provisions of this Agreement will continue to be valid and
enforceable.
20. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and
inure to the benefit of the parties and their respective heirs, representatives,
successors, and assigns.
21. ENTIRE AGREEMENT. This Agreement and the other agreements
referenced herein are intended to and do define the full extent of the legally
enforceable undertakings of the parties, and no promises or representations,
written or oral, that are not set forth explicitly in this Agreement are
intended by any party to be legally binding, and all other agreements and
understandings between Employee and the Company relating to Employee's
employment with the Company are hereby superseded. No provision of this
Agreement shall be amended, waived, or modified except by an instrument in
writing, signed by all parties hereto.
22. HEADINGS. The descriptive headings of the paragraphs and
subparagraphs of this Agreement are intended for convenience only, and do not
constitute parts of this Agreement.
23. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
24. GOVERNING LAW. This Agreement will be construed in accord with, and
any dispute or controversy arising from any breach or asserted breach of this
Agreement will be governed by, the laws of the State of Arizona.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
dates indicated below.
DATED this 3RD day of December, 1998.
/s/ Robert K. Young
-----------------------------------------
Robert K. Young
5
<PAGE>
DATED this 3RD day of December, 1998.
Viasoft, Inc.
By: /s/ Steven D. Whiteman
-------------------------------------
Steven D. Whiteman
Chairman, President and CEO
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 3RD day of
December, 1998, by STEVEN D. WHIEMAN.
/s/ Joni K. Summers
-----------------------------------------
Notary Public
My Commission Expires:
MARCH 30, 2000
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 3RD day of
December, 1998, by BOB YOUNG .
/s/ Joni K. Summers
-----------------------------------------
Notary Public
My Commission Expires:
MARCH 30, 2000
Hand Delivered
October 20, 1998 (Revised)
Abbott Ezrilov
11458 E. Bella Vista
Scottsdale, AZ 85259
Dear Abbott:
This letter confirms the revised agreement we have reached with you regarding
separation of your employment with Viasoft, Inc. ("Viasoft" or the "Company")
effective November 2, 1998. The Company is offering severance payments to you
and other employees who are departing the Company at the same time as you in the
"October Reduction in Force." You acknowledge receipt of the attached "October
1998 Reduction in Force," which provides additional information about the
reduction in force, including a list of job titles and ages of Company employees
who were and were not selected for termination.
The Company will (1) pay you the amount of $65,000, less applicable withholding
(federal tax, state tax, FICA, etc.) within 5 business days after November 2 and
(2) provide outplacement assistance to help you prepare for other, provided you
have signed this letter and returned it to Human Resources-Phoenix after the
expiration of the seven-day revocation period described below. Your final
payroll will include compensation for any vacation you have accrued and not
used. Any health and dental, life insurance or other benefit plans you currently
participate in will end in accordance with your current policies. Continuation
rights of group health coverages under COBRA regulations will be explained in a
separate letter. Any valid business expenses you may have incurred but have not
yet submitted the request for reimbursement shall be reimbursed provided the
expenses are submitted to the Company within 45 days of your last day of active
employment and are reimbursable according to Company policy.
In exchange for what the Company has agreed to do as identified above, you agree
to (1) return all company materials and equipment, including keys, credit cards,
files, etc. currently in your possession, (2) assist with the orderly transition
of work in progress until November 2, 1998, and (3) waive and release the
Company, its affiliates, divisions, officers, directors, shareholders, agents
and employees from all claims, demands, and liabilities, whether known or
unknown, past or present, suspected or unsuspected, including, without
limitation: (a) all claims that arise out of or that relate to your employment
or the termination of your employment with the Company, (b) all claims that
arise out of or that relate to the statements or actions of the Company or any
contract or agreement with the Company, (c) all claims that arise under the
Civil Rights Act of 1964, the Age Discrimination in Employment Act, the
Americans with Disabilities Act, and the Arizona Civil Rights Act, (d) all
claims for relief or other benefits under any federal, state, or local statute,
ordinance, regulation, or rule of decision, (e) all claims that the Company
engaged in conduct prohibited on any basis under any federal, state, or local
statute, ordinance, regulation, or rule of decision, and (f) all claims for
attorneys' fees, liquidated damages, punitive damages, costs, and disbursements.
You represent that you have not assigned any of these claims to any person or
entity.
You further agree that you will forever keep the terms and conditions of this
separation agreement ("Confidential Information") confidential. You will not
disclose Confidential Information to any person or entity except your attorneys,
<PAGE>
Page 2
spouse, accountant, or tax planner, and if you disclose Confidential Information
to these individuals, you must inform them that the information is to be kept in
strict confidence and may not be disclosed to other parties without the written
permission of you and Viasoft. You also may provide truthful testimony regarding
Confidential Information in response to direct questions asked pursuant to an
enforceable court order or subpoena, after you notify Viasoft of the order or
subpoena and cooperate with Viasoft in responding to the order or subpoena.
You also agree not to disparage, defame or besmirch the reputation, character,
image or services of the Company, its affiliates, divisions, directors,
officers, shareholders, employees or agents.
You agree that you will not recommend or suggest to any potential claimants or
plaintiffs or their attorneys or agents that they initiate claims or lawsuits
against Viasoft or any of its affiliates, divisions, directors, officers,
shareholders, employees or agents, successors, or assigns, and you further agree
that you will not voluntarily aid, assist or cooperate with any such claims or
lawsuits. Again, this does not prevent you from giving truthful testimony in
response to direct questions asked pursuant to a lawful subpoena during any
future legal proceedings, after you notify Viasoft of the order or subpoena and
cooperate with Viasoft in responding to the order or subpoena.
You reaffirm your obligations under any confidentiality agreement you signed
during your employment with Viasoft.
The matters discussed in this letter are legally binding and this letter
supersedes all other agreements and understandings between you and the Company
related to your employment, except for any confidentiality agreement you signed
during your employment with Viasoft. The terms of this letter cannot be changed
or amended except in a written document, signed by both you and Viasoft. Nothing
in this letter constitutes an admission that any person or entity violated any
local, state, or federal ordinance, regulation, ruling, statute, rule of
decision, or principal of common law, or that any person or entity engaged in
any improper or unlawful conduct or wrongdoing. Any disputes or controversy
arising from any breach or asserted breach of this Agreement will be governed by
the laws of the State of Arizona, and any lawsuit between you and Viasoft must
be brought only in Maricopa County Superior Court or the United States District
Court for the District of Arizona.
You may take up to 45 (forty-five) calendar days to decide whether to sign this
letter, and you are advised to consult with your own attorney prior to signing
the letter. The Company's offer as outlined in this letter will expire on
December 4, 1998 at 5:00 p.m. MST. If the contents of this letter are agreeable
to you, please sign in the presence of a notary and return this letter to Nancy
Mattson, Viasoft, 3033 N. 44th Street, Suite 101, Phoenix, AZ 85018 by December
4, 1998, thereby noting your knowing and voluntary acceptance of the terms and
conditions in this letter. You will then have 7 (seven) days from the date of
your signature to revoke your acceptance of this letter. If you do not revoke
your acceptance, please send us a letter AFTER this seven-day period has
expired, confirming your decision not to revoke your acceptance of this letter
(see sample enclosed).
Viasoft will then process your severance pay.
Sincerely,
/s/ Kevin M. Hickey
Kevin M. Hickey
President and Chief Operating Officer
Enclosure
<PAGE>
Page 3
EMPLOYEE ACKNOWLEDGEMENT AND AGREEMENT
I acknowledge that I have been advised to consult with an attorney prior to
executing this agreement and that I have had a full opportunity to consider this
Agreement and ask any questions concerning this Agreement. I have not relied
upon any statements made by the Company or its attorney other than the
statements in this Agreement. I have read and understand the contents of this
Agreement and execute this Agreement knowingly and voluntarily, of my own free
will and choice.
/s/ Abbott Ezrilov Date: 10/21/98
- ---------------------------------- --------------------
Abbott Ezrilov
The foregoing instrument was acknowledged before me this 21ST day of OCTOBER,
1998, by Abbott Ezrilov.
Notary Public Joni K. Summers
---------------------------
My commission expires March 30, 2000
-------------------
RECEIPT AND ACKNOWLEDGEMENT BY VIASOFT, Inc.
/s/ Kevin M. Hickey Date: 10/29/98
- ---------------------------------- --------------------
Kevin M. Hickey
President and Chief Operating Officer
The foregoing instrument was acknowledged before me this 29TH day of OCTOBER,
1998, by Kevin M. Hickey.
Notary Public Joni K. Summers
---------------------------
My commission expires March 30, 2000
-------------------
CONFIDENTIAL SEVERANCE AGREEMENT
This Confidential Severance Agreement ("Agreement") is made in the
State of Arizona by and between Jean-Luc Guy Valente ("Employee"), and Viasoft,
Inc., a Delaware corporation, its direct and indirect subsidiaries and
affiliates, and its and their respective businesses (the "Company").
RECITALS
WHEREAS, Employee is employed by the Company; and
WHEREAS, the parties have mutually agreed that Employee will resign as
an officer and employee of the Company; and
WHEREAS, the parties desire to express in a written agreement their
mutual agreements, covenants, promises, and understanding with respect to the
termination of Employee's employment relationship.
AGREEMENT
NOW THEREFORE, in consideration of the premises and the mutual
agreements, covenants, and provisions contained in this Agreement, the parties
agree and declare as follows:
1. TERMINATION OF EMPLOYMENT. Employee shall deliver his resignation as
an employee and officer of the Company to be effective as of September 30, 1998
(the "Termination Date"), and the Company shall accept such resignation. The
Company shall pay Employee on or before September 30, 1998, for his regular
existing salary through September 30, 1998 and his accrued but unused vacation
time, all net of applicable withholding taxes. Employee acknowledges that
following payment of the amounts set forth in the previous sentence, the Company
will have paid Employee all wages and compensation to which he was entitled as
an employee of the Company. The parties acknowledge and agree that Employee
shall not be an employee of the Company after the Termination Date,
notwithstanding Employee's continued receipt of certain sums as described in
this Agreement.
2. SEVERANCE BENEFITS.
a. SEVERANCE PAY. The Company will: (1) continue paying
Employee his existing salary, net of applicable withholding, through March 31,
1999, on the Company's regular pay days; and (2) continue Employee's group
health plan coverage through March 31, 1999, with Employee's portion of the
premium for such coverage deducted from the severance payments described above.
The Company's payment of the employer portion of group health plan coverage
during this severance period shall not affect Employee's rights to eighteen
months of COBRA insurance after March 31, 1998, upon payment of appropriate
amounts and on terms and conditions set forth under the laws and regulations
governing COBRA insurance benefits. The Company also shall reimburse Employee
for any valid business expenses he incurred on or prior to September 30, 1998,
<PAGE>
in accordance with the Company's Travel and Expense policy, provided the
expenses are submitted to the Company on or before October 15, 1998. The Company
also shall reimburse Employee for amounts, if any, for which Employee is
entitled to reimbursement under the Company's Employee Stock Purchase Plan
through and including the Termination Date.
b. CONSIDERATION. Employee acknowledges that it is not the
Company's usual policy to provide all of the severance benefits and other
consideration set forth in this Agreement, and that he would not be entitled to
those benefits and consideration if he were not releasing his Claims under this
Agreement.
3. WAIVER AND RELEASE OF CLAIMS. Employee covenants not to sue for, and
waives and releases all of his existing rights to, any relief of any kind from
the Company, its insurers, affiliates, divisions, directors, officers,
shareholders, employees, agents, successors, assigns, and members ("the
Employer"), including without limitation all claims that arise out of or that
relate to his employment or the termination of his employment with the Company,
all claims that arise out of or that relate to the statements or actions of the
Employer or any contract or agreement with the Employer, all claims that arise
under the Civil Rights Act of 1964, the Age Discrimination in Employment Act,
the Americans with Disabilities Act, and the Arizona Civil Rights Act, all
claims for relief or other benefits under any federal, state, or local statute,
ordinance, regulation, or rule of decision, all claims that Employer engaged in
conduct prohibited on any basis under any federal, state, or local statute,
ordinance, regulation, or rule of decision, and all claims for attorneys' fees,
liquidated damages, punitive damages, costs, and disbursements ("Claims");
provided, however, that this release does not apply to any rights of Employee
accrued through and including the Termination Date under the Employee's stock
option agreements. If Employee breaches the covenant not to sue described in
this paragraph, Employee agrees to indemnify, hold harmless, and reimburse the
Employer for attorneys' fees and costs the Employer incurs defending Employee's
action.
4. INDEMNIFICATION. Notwithstanding any other provision of this
Agreement, the Company agrees to indemnify Employee in accord with Article IX of
the Company's Restated Certificate of Incorporation dated February 23, 1995.
5. MUTUAL CONFIDENTIALITY.
a. GENERAL STANDARD. The parties intend that the terms and
conditions upon which this matter has been settled, including the provisions of
this Agreement ("Confidential Information"), will be forever treated as
confidential. Employee and the Company will not disclose Confidential
Information to any person or entity at any time, except as provided herein.
b. EXCEPTIONS.
(1) It will not be a violation of this Agreement for
Employee to disclose Confidential Information to his attorneys.
2
<PAGE>
(2) It will not be a violation of this Agreement for
Employee to disclose Confidential Information to his spouse, to his accountants
or to his tax planners, provided that if Employee discloses Confidential
Information to any such person, he must simultaneously inform that person that
the information is considered confidential, and that the person cannot disclose
the information to any other person without the advance written consent of
Employee and the Company. Any disclosure of Confidential Information by any such
person will be considered a disclosure by Employee.
(3) It will not be a violation of this Agreement for
the Company to disclosure Confidential Information to its attorneys, to its
auditors, to its insurers, to its accountants, to its tax planners, to the
Securities and Exchange Commission, National Association of Securities' Dealers,
or other governmental entities or self-regulatory organizations, to its
affiliates, divisions, directors, officers, shareholders, employees,
representatives, or other agents who have a legitimate reason to obtain the
Confidential Information in the course of performing their duties or
responsibilities for the Company, or as necessary or advisable in compliance
with its disclosure obligations under applicable law or accounting rules.
(4) It will not be a violation of this Agreement for
either party to give truthful testimony in response to direct questions asked
pursuant to an enforceable court order obtained after providing notice to the
other party, which order pays due regard to the concerns for confidentiality
expressed by the parties herein.
6. NON-DISPARAGEMENT. Employee will not disparage, defame, or besmirch
the reputation, character, image, or services of the Company, its affiliates,
divisions, directors, officers, shareholders, employees, or agents.
7. CLAIMS INVOLVING THE COMPANY. Employee will not recommend or suggest
to any potential claimants or plaintiffs or their attorneys or agents that they
initiate claims or lawsuits against the Company or any of its affiliates,
divisions, directors, officers, shareholders, employees, agents, successors, or
assigns, nor will Employee voluntarily aid, assist, or cooperate with any such
claims or lawsuits; provided, however, that this paragraph will not be construed
to prevent Employee from giving truthful testimony in response to direct
questions asked pursuant to a lawful subpoena during any future legal
proceedings.
8. TIME TO CONSIDER AGREEMENT. Employee understands that the Company's
offer as set forth in this Agreement shall expire on September 18, 1998 at 5:00
p.m. unless Employee executes the Agreement and the Company receives it prior to
that time.
9. RETURN OF COMPANY PROPERTY. Employee agrees to promptly return to
the Company all property that belongs to the Company, including without
limitation all equipment, supplies, documents, files, computer disks, and
Employee agrees to remove from any person computer all data files containing
Company information.
3
<PAGE>
10. CONFIDENTIALITY AGREEMENT. Employee acknowledges and reaffirms his
obligations under the Company's Employment Confidentiality and Proprietary
Information Agreement dated April 11, 1996.
11. AGREEMENT NOT TO SOLICIT CUSTOMERS. Employee agrees that for a
period of twelve (12) months after the Termination Date, he will not, either
directly or indirectly, on his own behalf or in the service or on behalf of
others, solicit, divert or appropriate, or attempt to solicit, divert or
appropriate, to any competing business (a) any person or entity whose account
with the Company was sold or serviced (including maintenance) by the Company
during the twelve (12) months preceding the Termination Date, or (b) any person
or entity whose account with the Company has been directly solicited at least
twice by the Company within the twelve (12) month period prior to the
Termination Date.
12. AGREEMENT NOT TO SOLICIT EMPLOYEES AND CONTRACTORS. Employee agrees
that for a period of twelve (12) months after the Termination Date, he will not,
either directly or indirectly, on his own behalf or in the service or on behalf
of others, solicit, divert or hire away, or attempt to solicit, divert or hire
away, any person then employed by the Company or then serving as a consultant,
sales representative or distributor or reseller of the Company.
13. FULL COMPENSATION. The payments made and other consideration
provided under this Agreement constitute full compensation for and extinguish
all Employee's Claims, including, but not limited to, all Claims for attorneys'
fees, costs, and disbursements, and all Claims for any type of legal or
equitable relief.
14. EMPLOYEE COOPERATION. Employee agrees to cooperate in all
reasonable requests of the Company, in connection with any litigation,
administrative proceeding or any other claim of a third party against the
Company relating to acts or omissions of Employee or of which Employee would
have personal knowledge or other information, including, without limitation,
providing information, deposition testimony, appearing in court, etc. The
Company agrees to pay Employee all reasonable out-of-pocket expenses in
connection with such assistance.
15. NO ADMISSION OF WRONGDOING. This Agreement does not constitute an
admission that any person or entity violated any local, state, or federal
ordinance, regulation, ruling, statute, rule of decision, or principle of common
law, or that any person or entity engaged in any improper or unlawful conduct or
wrongdoing. Employee will not characterize this Agreement or the payment of any
money or other consideration in accord with this Agreement as an admission or
indication that any person or entity engaged in any improper or unlawful conduct
or wrongdoing.
16. LEGAL REPRESENTATION. Employee acknowledges that he has retained
and consulted with his own attorneys prior to executing this Agreement. Employee
acknowledges that he has had a full opportunity to consider this Agreement, that
he has had a full opportunity to ask any questions that he may have concerning
this Agreement, and that in deciding whether to sign this Agreement he has not
relied upon any statements made by the Company or its attorneys, other than the
statements made in this Agreement. Employee further acknowledges that he has
4
<PAGE>
read and understands the contents to this Agreement and that he executes this
Agreement knowingly and voluntarily and based upon and with the opportunity to
obtain independent legal advice of his own choosing.
17. AUTHORITY. Employee represents and warrants that he has the
authority to enter into this Agreement, and that he has not assigned any Claims
to any person or entity.
18. INVALIDITY. In the event that a court of competent jurisdiction
determines that any provision of this Agreement is invalid, illegal, or
unenforceable in any respect, such a determination will not affect the validity,
legality, or enforceability of the remaining provisions of this Agreement, and
the remaining provisions of this Agreement will continue to be valid and
enforceable.
19. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and
inure to the benefit of the parties and their respective heirs, representatives,
successors, and assigns.
20. ENTIRE AGREEMENT. This Agreement and the other agreements
referenced herein are intended to and do define the full extent of the legally
enforceable undertakings of the parties, and no promises or representations,
written or oral, that are not set forth explicitly in this Agreement are
intended by any party to be legally binding, and all other agreements and
understandings between Employee and the Company relating to Employee's
employment with the Company are hereby superseded. No provision of this
Agreement shall be amended, waived, or modified except by an instrument in
writing, signed by all parties hereto.
21. HEADINGS. The descriptive headings of the paragraphs and
subparagraphs of this Agreement are intended for convenience only, and do not
constitute parts of this Agreement.
22. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
23. GOVERNING LAW. This Agreement will be construed in accord with, and
any dispute or controversy arising from any breach or asserted breach of this
Agreement will be governed by, the laws of the State of Arizona.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
dates indicated below.
DATED this 17TH day of September, 1998.
/s/ Jean-Luc Guy Valente
-------------------------------------
Jean-Luc Guy Valente
5
<PAGE>
DATED this 17TH day of September, 1998.
Viasoft, Inc.
By: /s/ Kevin M. Hickey
-------------------------------------
Kevin M. Hickey
President and Chief Operating Officer
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 17TH day of
September, 1998, by JEAN-LUC GUY VALENTE.
/s/ Joni K. Summers
-------------------------------------
Notary Public
My Commission Expires:
MARCH 30, 2000
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 17TH day of
September, 1998, by KEVIN M. HICKEY.
/s/ Denene A. Till
-------------------------------------
Notary Public
My Commission Expires:
DECEMBER 31, 2001
6
CONFIDENTIAL SEVERANCE AND CONSULTING AGREEMENT
This Confidential Severance and Consulting Agreement ("Agreement") is
entered into as of the 2nd day of November, 1998 (the "Termination Date") in the
State of Arizona by and between Kevin M. Hickey ("Employee"), and Viasoft, Inc.,
a Delaware corporation, (the "Company").
RECITALS
WHEREAS, Employee is currently employed by the Company as President and
Chief Operating Officer; and
WHEREAS, Employee desires, as of the Termination Date, to resign as an
officer and employee of the Company; and
WHEREAS, the Company is willing to accept such resignations but
desires, commencing on the Termination Date, to retain the services of Employee
to provide for a smooth transition of the duties of his office and for the
purpose of providing consulting advice in the areas of general operations and
strategic partnerships; and
WHEREAS, the parties desire to express in a written agreement their
mutual agreements, covenants, promises, and understandings with respect to the
termination of Employee's employment relationship and the terms of the
consulting relationship.
AGREEMENT
NOW THEREFORE, in consideration of the premises and the mutual
agreements, covenants, and provisions contained in this Agreement, the parties
agree and declare as follows:
1. TERMINATION OF EMPLOYMENT. Employee hereby resigns as an employee
and officer of the Company, effective as of November 2, 1998, and the Company
accepts such resignation. Employee acknowledges that the Company paid Employee
on or before October 31, 1998, for his regular existing salary through October
31, 1998 and his accrued but unused vacation time, all net of applicable
withholding taxes. Employee acknowledges that the Company has paid Employee all
wages and compensation to which he was entitled as an employee of the Company.
The parties acknowledge and agree that Employee shall not be an employee of the
Company after the Termination Date, notwithstanding Employee's continued receipt
of certain sums as described in this Agreement.
2. SEVERANCE BENEFITS.
a. SEVERANCE PAY. The Company will: (1) continue paying
Employee his existing salary, net of applicable withholding, through April 30,
1999, on the Company's regular pay days; and (2) continue Employee's group
health plan coverage through April 30, 1999, with Employee's portion of the
<PAGE>
premium for such coverage deducted from the severance payments described above.
The Company also shall reimburse Employee for any valid business expenses he
incurred on or prior to October 31, 1998, in accordance with the Company's
Travel and Expense policy, provided the expenses are submitted to the Company on
or before November 30, 1998. The Company also shall reimburse Employee for
amounts, if any, for which Employee is entitled to reimbursement under the
Company's Employee Stock Purchase Plan through and including the Termination
Date.
b. CONDITIONS. Employee will be entitled to receive the
severance benefits and other consideration set forth in this Agreement provided
that:
(1) Employee has not revoked this Agreement within
the applicable revocation period described in Section 9 below; and
(2) The Company has received written confirmation
from Employee, in the form attached hereto as Exhibit A, dated not earlier than
the day after the expiration of the applicable revocation period described in
Section 9 below, that Employee has not revoked and will not revoke this
Agreement; and
(3) Employee fulfills his obligations as a
consultant, as reasonably requested by the Company, as set forth in Section 4
below.
c. CONSIDERATION. Employee acknowledges that it is not the
Company's usual policy to provide all of the severance benefits and other
consideration set forth in this Agreement, and that he would not be entitled to
those benefits and consideration if he were not releasing his Claims under this
Agreement.
3. WAIVER AND RELEASE OF CLAIMS. Employee covenants not to sue for, and
waives and releases all of his existing rights to, any relief of any kind from
the Company, its insurers, affiliates, divisions, directors, officers,
shareholders, employees, agents, successors, assigns, and members ("the
Employer"), including without limitation all claims that arise out of or that
relate to his employment or the termination of his employment with the Company,
all claims that arise out of or that relate to the statements or actions of the
Employer or any oral or written contract or agreement with the Employer, all
claims that arise under the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Arizona Employment Protection Act, the Americans with
Disabilities Act, and the Arizona Civil Rights Act, all claims for relief or
other benefits under any federal, state, or local statute, ordinance,
regulation, or rule of decision, all claims that Employer engaged in conduct
prohibited on any basis under any federal, state, or local statute, ordinance,
regulation, or rule of decision, and all claims for stock options or other
rights with respect to the Company's equity securities, attorneys' fees,
liquidated damages, punitive damages, costs, and disbursements ("Claims");
provided, however, that this release does not apply to any rights of Employee
accrued through and including the Termination Date under the Employee's stock
option agreements listed in Exhibit C. If Employee breaches the covenant not to
sue described in this paragraph, Employee agrees to indemnify, hold harmless,
and reimburse the Employer for attorneys' fees and costs the Employer incurs
defending Employee's action.
2
<PAGE>
4. CONSULTING SERVICES.
a. ENGAGEMENT AS A CONSULTANT. Employee agrees to provide the
consulting services described on Exhibit B during the period commencing on the
Termination Date and ending on April 30, 1999 (the "Consulting Term"). Employee
shall devote such time, attention and energies to the business of the Company as
is reasonably necessary in order to provide the services described herein.
b. EXPENSES. During the Consulting Term, the Company shall
reimburse Employee for all reasonable out-of-pocket business expenses incurred
in performing the consulting services as documented in accordance with Company
policies. Single item expenses over $300 shall be approved by the Company prior
to Employee incurring those charges.
c. AMENDMENT OF EXISTING STOCK RIGHTS. Employee agrees, and
the Company hereby confirms, that as of immediately prior to the Termination
Date, all of Employee's vested and unvested rights to acquire stock or other
equity securities of the Company are accurately and completely set forth on
Exhibit C hereto. After this Agreement becomes effective in accordance with
Section 9 hereof, each stock option agreement described on Exhibit C, and
attached to Exhibit C, is hereby amended to provide that during the Consulting
Term, the options thereunder shall continue to vest and shall continue to be
exercisable, in accordance with the terms and conditions thereof, as if
Employee's employment with the Company had not terminated, except as set forth
in Section 4(e) below. Termination or expiration of this Agreement or the
Consulting Term shall be treated in the same manner as termination of employment
under such stock option agreements. Employee acknowledges and agrees that as a
result of the foregoing amendments, any incentive stock options described on
Exhibit C shall hereafter be treated as non-qualified stock options.
d. NATURE OF RELATIONSHIP. Employee acknowledges and agrees
that he is an independent contractor and will not act as an agent of the Company
nor be deemed an employee of the company for any purpose, including without
limitation for the purposes of any employee benefit programs, income tax
withholding, F.I.C.A. taxes, unemployment benefits, or otherwise. Employee shall
not enter into any agreement or incur any obligations on behalf of the Company,
or commit the Company in any manner without the Company's prior written consent.
Employee agrees to timely pay any and all taxes that may be owed to state and
federal taxing authorities related to the payments and other consideration paid
by the Company during the Consulting Term. In the event any person or entity,
including, without limitation, any governmental entity or any taxing authority,
challenges the characterization of the payments made by the Company under the
Consulting Term or the treatment of those items for tax purposes, or if it is
alleged or determined by any of the foregoing persons or entities that
withholding or other taxes are due and owing with respect to the payments made
by the Company under the Consulting Term, Employee agrees to indemnify, hold
harmless, and defend the Company on demand for, from, and against all liability,
loss, damage, or other allegations directly or indirectly arising from or
related to any such challenge, determination, or allegation, including without
limitation any and all state and federal taxes, interest, penalties, attorneys'
fees, and costs. The parties further agree that they will not challenge the
3
<PAGE>
characterization of any payments and withholding treatment made by the Company
under the Consulting Term.
e. TERMINATION.
(1) TERMINATION BY EMPLOYEE FOR BREACH. The
Consulting Term may be terminated by Employee if the Company commits a material
breach of the terms and conditions of this Agreement and the Company fails to
cure such breach within thirty (30) days after delivery of Employee to the
Company of a written notice setting forth the nature and extent of such breach.
If the Consulting Term is terminated for Company breach, the Company shall
accelerate the vesting of all options that would have otherwise vested during
the Consulting Term in accordance with Section 4(c) above and shall reimburse
Employee in accordance with Section 4(b) above for all expenses reimbursable
thereunder incurred by Employee through the date of termination.
(2) TERMINATION BY COMPANY FOR BREACH. The Consulting
Term may be terminated by the Company if the Employee commits a material breach
of the terms and conditions of this Agreement or habitually neglects his duties
hereunder and the Employee fails to cure such breach within ten (10) days after
delivery of Company to the Employee of a written notice setting forth the nature
and extent of such breach. If the Consulting Term is terminated for Employee
breach, the Company shall continue to pay to Employee all severance and
insurance benefits hereunder through April 30, 1999, but all vesting of stock
options hereunder shall cease as of the date of the termination of the
Consulting Term.
f. EXCLUSIVE REMEDY. Except as expressly provided in this
Section 4, upon the expiration or termination of the Consulting Term, the
Company shall not have any liability or obligation of any kind or character to
Employee under the terms of this Agreement or in connection with the expiration
or termination hereof.
5. INDEMNIFICATION. Notwithstanding any other provision of this
Agreement, the Company agrees to indemnify Employee in accord with Article IX of
the Company's Restated Certificate of Incorporation dated February 23, 1995 as
the same may be amended from time to time.
6. MUTUAL CONFIDENTIALITY.
a. GENERAL STANDARD. The parties intend that the terms and
conditions upon which this matter has been settled, including the provisions of
this Agreement ("Confidential Information"), will be forever treated as
confidential. Employee and the Company will not disclose Confidential
Information to any person or entity at any time, except as provided herein.
4
<PAGE>
b. EXCEPTIONS.
(1) It will not be a violation of this Agreement for
Employee to disclose Confidential Information to his attorneys.
(2) It will not be a violation of this Agreement for
Employee to disclose Confidential Information to his spouse, to his accountants
or to his tax planners, provided that if Employee discloses Confidential
Information to any such person, he must simultaneously inform that person that
the information is considered confidential, and that the person cannot disclose
the information to any other person without the advance written consent of
Employee and the Company. Any disclosure of Confidential Information by any such
person will be considered a disclosure by Employee.
(3) It will not be a violation of this Agreement for
the Company to disclosure Confidential Information to its attorneys, to its
auditors, to its insurers, to its accountants, to its tax planners, to the
Securities and Exchange Commission, National Association of Securities' Dealers,
or other governmental entities or self-regulatory organizations, to its
affiliates, divisions, directors, officers, shareholders, employees,
representatives, or other agents who have a legitimate reason to obtain the
Confidential Information in the course of performing their duties or
responsibilities for the Company, or as necessary or advisable in compliance
with its disclosure obligations under applicable law or accounting rules.
(4) It will not be a violation of this Agreement for
either party to give truthful testimony in response to direct questions asked
pursuant to an enforceable court order obtained after providing notice to the
other party, which order pays due regard to the concerns for confidentiality
expressed by the parties herein.
7. NON-DISPARAGEMENT. Employee will not disparage, defame, or besmirch
the reputation, character, image, or services of the Company, its affiliates,
divisions, directors, officers, shareholders, employees, or agents.
8. CLAIMS INVOLVING THE COMPANY. Employee will not recommend or suggest
to any potential claimants or plaintiffs or their attorneys or agents that they
initiate claims or lawsuits against the Company or any of its affiliates,
divisions, directors, officers, shareholders, employees, agents, successors, or
assigns, nor will Employee voluntarily aid, assist, or cooperate with any such
claims or lawsuits; provided, however, that this paragraph will not be construed
to prevent Employee from giving truthful testimony in response to direct
questions asked pursuant to a lawful subpoena during any future legal
proceedings.
9. TIME TO CONSIDER AGREEMENT AND RIGHT TO REVOKE.
a. TIME TO CONSIDER AGREEMENT. Employee understands that he
may take at least 21 (twenty-one) calendar days to decide whether to sign this
Agreement, provided, however, that Employee has requested and the Company has
5
<PAGE>
agreed that Employee may execute this Agreement before the expiration of that
period if he so chooses. Employee further understands that the Company's offer
as set forth in this Agreement shall expire on December 4, 1998 at 5:00 p.m.
unless Employee executes the Agreement and the Company receives it prior to that
time.
b. RIGHT TO REVOKE. Employee understands that he has the right
to revoke this Agreement for any reason within 7 (seven) calendar days after he
signs it by signing and delivering to the Company within this 7 (seven) day
period a letter indicating his intention to revoke this Agreement. Employee
understands that this Agreement will not become effective or enforceable unless
and until he has not revoked it and the applicable revocation period has
expired.
10. RETURN OF COMPANY PROPERTY. Employee agrees to promptly return to
the Company all property that belongs to the Company, including without
limitation all equipment, supplies, documents, files, computer disks, and
Employee agrees to remove from any personal computer all data files containing
Company information.
11. CONFIDENTIALITY AGREEMENT. Employee acknowledges and reaffirms his
obligations under the Company's Employment Confidentiality and Proprietary
Information Agreement dated January 18, 1993, a copy of which is attached as
Exhibit D hereto, and such obligations shall continue to apply during the
Consulting Term, and shall survive the consulting relationship, except as noted
in Section 12(f) below.
12. NON-COMPETITION AND SOLICITATION OF CUSTOMERS AND EMPLOYEES
a. NON-COMPETITION. Employee agrees that for a period of
twelve (12) months after the Termination Date, he shall not, alone or with
others, directly or indirectly, own, manage, operate, control, participate in,
or be connected in any way whatsoever (including without limitation as an
officer, agent, representative, consultant, employee, service provider, partner,
creditor, or guarantor) with any person or entity that is engaged or about to
become engaged in the business of providing any product or service which is then
competitive with, or substantially similar to, a product or service provided by
the Company anywhere in the world (a "Competing Business"). Ownership by
Employee, as a passive investment, of less than 1% of the outstanding shares of
capital stock of any corporation listed on a national securities exchange or
publicly traded in the over-the-counter market shall not constitute a breach of
this Section 12. Employee further agrees that for a period of twelve (12) months
from the Termination Date, he will not, directly or indirectly, assist or
encourage any other person in carrying out, directly or indirectly, any activity
that would be prohibited by this Section 12 if such activity were carried out by
Employee.
b. AGREEMENT NOT TO SOLICIT CUSTOMERS. Employee agrees that
for a period of twelve (12) months after the Termination Date, he will not,
either directly or indirectly, on his own behalf or in the service or on behalf
of others, solicit, divert or appropriate, or attempt to solicit, divert or
appropriate, to any Competing Business (a) any person or entity whose account
with the Company was sold or serviced (including maintenance) by the Company
6
<PAGE>
during the twelve (12) months preceding the Termination Date, or (b) any person
or entity whose account with the Company has been directly solicited at least
twice by the Company within the twelve (12) month period prior to the
Termination Date.
c. AGREEMENT NOT TO SOLICIT EMPLOYEES AND CONTRACTORS.
Employee agrees that for a period of twelve (12) months after the Termination
Date, he will not, either directly or indirectly, on his own behalf or in the
service or on behalf of others, solicit, divert or hire away, or attempt to
solicit, divert or hire away, any person then employed by the Company or then
serving as a consultant, sales representative or distributor or reseller of the
Company. This Section 12(c) shall not prohibit Employee from hiring Charlotte
Klein only.
d. REFORMATION. In the event that any provision in this
Section 12 is held to be over broad as written, such provision shall be deemed
amended to narrow its application to the extent necessary to make the provision
enforceable to the fullest extent allowable. Employee and the Company hereby
agree that such amendment shall be accomplished as follows:
(1) In the case of duration, the length of the
covenant or provision shall be reduced in increments of one (1) month each until
it is of the greatest duration as may be enforceable under applicable law; and
(2) In the case of geographic scope, the geographic
scope of the covenant or provision shall be reduced until it is of the greatest
geographic scope as may be enforceable under applicable law, which reduction
shall be effected by eliminating in the following order, one by one, countries
outside the United States, beginning with the country in which the Company
received the least volume of gross revenue over the prior six (6) months, and
continuing in the inverse order ranked by the Company's gross revenue over the
prior six (6) months within each country until such scope is enforceable, and
then, if necessary, by eliminating in the following order, one by one,
individual States within the United States, beginning with the State in which
the Company received the least volume of gross revenue over the prior six (6)
months, and continuing in the inverse order ranked by the Company's gross
revenue over the prior six (6) months within each State until such scope is
enforceable, and then, if necessary and applicable, by eliminating in the
following order the counties in the State of Arizona, beginning with the county
in which the Company received the least gross revenue over the prior six (6)
months, and continuing in the inverse order ranked by the Company's gross
revenue over the prior six (6) months within each county in Arizona until such
scope is enforceable.
e. REASONABLENESS. Employee and the Company agree that the
covenants set forth in this Section 12 are appropriate and reasonable when
considered in light of the nature and extent of the Company's business and the
scope of Employee's responsibilities while employed by the Company. Employee
acknowledges that: (i) the Company has a legitimate interest in protecting the
Company's business activities; (ii) the covenants set forth herein are not
oppressive to Employee and contain reasonable limitations as to time, scope,
geographical area and activity; (iii) the covenants do not harm in any manner
whatsoever the public interest; (iv) Employee can earn a livelihood without
violating any of the covenants set forth herein; and (v) Employee has received
7
<PAGE>
and will receive substantial consideration for agreeing to such covenants,
including without limitation the consideration received and to be received by
Employee under this Agreement.
f. SUPERSEDES PRIOR OBLIGATIONS. The parties agree that the
provisions of this Section 12 specifically supersede the obligations of Employee
under Section 2(c) of his Employment Confidentiality and Proprietary Information
Agreement, which is attached hereto as Exhibit D.
13. FULL COMPENSATION. The payments made and other consideration
provided under this Agreement constitute full compensation for and extinguish
all Employee's Claims, including, but not limited to, all Claims for attorneys'
fees, costs, and disbursements, and all Claims for any type of legal or
equitable relief. Without limiting the foregoing, termination of the Consulting
Term in accordance with Section 4(e) above shall not reinstate any extinguished
Claims.
14. EMPLOYEE COOPERATION. Employee agrees to cooperate in all
reasonable requests of the Company, in connection with any litigation,
administrative proceeding or any other claim of a third party against the
Company relating to acts or omissions of Employee or of which Employee would
have personal knowledge or other information, including, without limitation,
providing information, deposition testimony, appearing in court, etc. The
Company agrees to pay Employee all reasonable out-of-pocket expenses in
connection with such assistance.
15. NO ADMISSION OF WRONGDOING. This Agreement does not constitute an
admission that any person or entity violated any local, state, or federal
ordinance, regulation, ruling, statute, rule of decision, or principle of common
law, or that any person or entity engaged in any improper or unlawful conduct or
wrongdoing. Employee will not characterize this Agreement or the payment of any
money or other consideration in accord with this Agreement as an admission or
indication that any person or entity engaged in any improper or unlawful conduct
or wrongdoing.
16. LEGAL REPRESENTATION. Employee acknowledges that the Company has
advised him to consult a lawyer regarding this Agreement before signing it, and
that Employee has retained and consulted with his own attorneys prior to
executing this Agreement. Employee acknowledges that he has had a full
opportunity to consider this Agreement, that he has had a full opportunity to
ask any questions that he may have concerning this Agreement, and that in
deciding whether to sign this Agreement he has not relied upon any statements
made by the Company or its attorneys, other than the statements made in this
Agreement. Employee further acknowledges that he has read and understands the
contents to this Agreement and that he executes this Agreement knowingly and
voluntarily and based upon and with the opportunity to obtain independent legal
advice of his own choosing. The parties acknowledge and agree that each party
has participated in the drafting of this Agreement and that this document has
been reviewed by the respective legal counsel for the parties hereto, or have
had the opportunity for such counsel to review this Agreement, and that the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be applied to the interpretation
8
<PAGE>
of this Agreement. No inference in favor of, or against, any party shall be
drawn from the fact that one party has drafted any portion hereof.
17. AUTHORITY. Employee represents and warrants that he has the
authority to enter into this Agreement, and that he has not assigned any Claims
to any person or entity.
18. INVALIDITY. In the event that a court of competent jurisdiction
determines that any provision of this Agreement is invalid, illegal, or
unenforceable in any respect, such a determination will not affect the validity,
legality, or enforceability of the remaining provisions of this Agreement, and
the remaining provisions of this Agreement will continue to be valid and
enforceable.
19. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and
inure to the benefit of the parties and their respective heirs, representatives,
successors, and assigns.
20. ENTIRE AGREEMENT. This Agreement and the other agreements
referenced herein are intended to and do define the full extent of the legally
enforceable undertakings of the parties, and no promises or representations,
written or oral, that are not set forth explicitly in this Agreement are
intended by any party to be legally binding, and all other agreements and
understandings between Employee and the Company relating to Employee's
employment with the Company are hereby superseded. No provision of this
Agreement shall be amended, waived, or modified except by an instrument in
writing, signed by all parties hereto.
21. HEADINGS. The descriptive headings of the Sections and paragraphs
of this Agreement are intended for convenience only, and do not constitute parts
of this Agreement.
22. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
23. GOVERNING LAW. This Agreement will be construed in accord with, and
any dispute or controversy arising from any breach or asserted breach of this
Agreement will be governed by, the laws of the State of Arizona.
24. DISPUTE RESOLUTION. If there shall be any dispute between the
Company and Employee whatsoever, the dispute shall be resolved in accordance
with the dispute resolution procedures set forth in Exhibit E hereto, the
provisions of which are incorporated as a part hereof, and the parties hereto
agree that such dispute resolution procedures shall be the exclusive method for
resolution of disputes under this Agreement. Notwithstanding anything herein to
the contrary, nothing in this Section 24 or Exhibit E shall preclude either
party from seeking interim or provisional relief, in the form of a temporary
restraining order, preliminary injunction or other interim equitable relief
concerning a dispute, either prior to or during any of the negotiations or
proceedings provided for herein, if deemed necessary by the party, in its
discretion, to protect its interests. Further, this Section 24 shall be
specifically enforceable. IT IS EXPRESSLY UNDERSTOOD THAT BY SIGNING THIS
9
<PAGE>
AGREEMENT, WHICH INCORPORATES BINDING ARBITRATION, THE COMPANY AND EMPLOYEE
AGREE TO WAIVE COURT OR JURY TRIAL AND TO WAIVE PUNITIVE, STATUTORY,
CONSEQUENTIAL AND ANY DAMAGES, OTHER THAN COMPENSATORY DAMAGES, TO THE FULLEST
EXTENT ALLOWED BY LAW.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
dates indicated below.
DATED this 28th day of December, 1998.
/s/ Kevin M. Hickey
----------------------------------------
Kevin M. Hickey
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 28TH day of
DECEMBER, 1998, by KEVIN M. HICKEY .
/s/ Joni K. Summers
----------------------------------------
Notary Public
My Commission Expires:
MARCH 30, 2000
DATED this 5th day of February, 1999.
Viasoft, Inc.
By: /s/ Steven D. Whiteman
------------------------------------
Steven D. Whiteman
Chairman and Chief Executive Officer
10
<PAGE>
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 5TH day of
February,1999, by STEVEN D. WHITEMAN.
/s/ Joni K. Summers
---------------------------------------
Notary Public
My Commission Expires:
MARCH 30, 2000
11
<PAGE>
List of Exhibits
Exhibit A Form of Non-Revocation Letter
Exhibit B Description of Consulting Services
Exhibit C Existing Stock Rights
Exhibit D Employee Proprietary Rights Agreement
Exhibit E Dispute Resolution Procedures
12
VIASOFT, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS(LOSS) PER SHARE
Exhibit 11
(in thousands, except per share data)
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------ ----------------
1998 1997 1998 1997
---- ---- ---- ----
BASIC EARNINGS (LOSS) PER SHARE
Common Shares Outstanding,
beginning of period 18,463 19,318 19,321 17,723
Effect of Weighting of Shares:
Employee stock options exercised 5 19 47 96
Shares issued in secondary offering -- -- -- 804
Shares purchased 66 5 33 9
Treasury shares (223) -- (768) --
------- ------- ------- -------
Weighted average number of common
shares outstanding 18,311 19,342 18,633 18,632
======= ======= ======= =======
Net income (loss) $ 1,447 $ 5,035 $(5,620) $ 8,801
======= ======= ======= =======
Earnings (loss) per common share $ 0.08 $ 0.26 $ (0.30) $ 0.47
======= ======= ======= =======
DILUTED EARNINGS (LOSS) PER SHARE
Common Shares Outstanding,
beginning of period 18,463 19,318 19,321 17,723
Effect of Weighting of Shares:
Warrants and employee stock
options outstanding 170 663 -- 738
Employee stock options exercised 5 19 47 96
Shares issued in secondary offering -- -- -- 804
Shares purchased 66 5 33 9
Treasury shares (223) -- (768) --
------- ------- ------- -------
Weighted average number of common
and common share equivalents outstanding 18,481 20,005 18,633 19,370
======= ======= ======= =======
Net income (loss) $ 1,447 $ 5,035 $(5,620) $ 8,801
======= ======= ======= =======
Earnings (loss) per common and
common share equivalent $ 0.08 $ 0.25 $ (0.30) $ 0.45
======= ======= ======= =======
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF THE COMPANY AND ITS SUBSIDIARIES AS OF DECEMBER
31, 1998 AND THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX
MONTHS ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 25,289
<SECURITIES> 53,982
<RECEIVABLES> 34,039
<ALLOWANCES> 942
<INVENTORY> 0
<CURRENT-ASSETS> 117,632
<PP&E> 15,125
<DEPRECIATION> 6,751
<TOTAL-ASSETS> 139,009
<CURRENT-LIABILITIES> 39,086
<BONDS> 0
0
0
<COMMON> 19
<OTHER-SE> 99,367
<TOTAL-LIABILITY-AND-EQUITY> 139,009
<SALES> 54,994
<TOTAL-REVENUES> 55,010
<CGS> 20,454
<TOTAL-COSTS> 65,962
<OTHER-EXPENSES> 103
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (2,416)
<INCOME-PRETAX> (8,639)
<INCOME-TAX> (3,019)
<INCOME-CONTINUING> (5,620)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,620)
<EPS-PRIMARY> (0.30)
<EPS-DILUTED> (0.30)
</TABLE>
