0000912057-95-006445.txt : 19950815 0000912057-95-006445.hdr.sgml : 19950815 ACCESSION NUMBER: 0000912057-95-006445 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NETWORK GENERAL CORPORATION CENTRAL INDEX KEY: 0000844643 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 770115204 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17431 FILM NUMBER: 95562644 BUSINESS ADDRESS: STREET 1: 4200 BOHANNON DRIVE CITY: MENLO PARK STATE: CA ZIP: 94025 BUSINESS PHONE: 4156882700 MAIL ADDRESS: STREET 2: 4200 BOHANNON DRIVE CITY: MENLO PARK STATE: CA ZIP: 94025 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended...June 30, 1995 -------------- 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 0-17431 NETWORK GENERAL CORPORATION --------------------------- (Exact name of registrant as specified in its charter) Delaware 77-0115204 -------------------------------------------------------------------------------- (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) 4200 Bohannon Drive, Menlo Park, California 94025 -------------------------------------------------------------------------------- (address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code) (415) 473-2000 -------------- Indicate by check 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 August 1, 1995, there were outstanding 21,825,252 shares of the Registrant's Common Stock (par value $0.01 per share). This report, including exhibits, consists of 22 pages. The exhibit index begins on page fifteen. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements NETWORK GENERAL CORPORATION CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited) The Condensed Consolidated Interim Financial Statements of Network General Corporation (the "Company") have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The Company believes the disclosures included in the Condensed Consolidated Interim Financial Statements, when read in conjunction with the Company's consolidated financial statements as of March 31, 1995 and the notes thereto included in the Company's 1995 Annual Report, are adequate to make the information presented not misleading. The Condensed Consolidated Interim Financial Statements reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to summarize fairly the financial position, results of operations and cash flows for such periods. The results of operations for the three month period ended June 30, 1995 are not necessarily indicative of the results that may be expected for the entire fiscal year ending March 31, 1996. 2 CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
(dollars in thousands) June 30, 1995 March 31, 1995 ------------- -------------- (Unaudited) ASSETS Current Assets: Cash and cash equivalents $10,846 $18,950 Marketable securities 92,961 73,964 Accounts receivable, net 20,692 18,800 Inventories 3,489 4,226 Prepaid expenses and deferred tax assets 12,185 13,974 ------------ ------------ Total current assets 140,173 129,914 ------------ ------------ Property and Equipment at cost: Demonstration and rental equipment 6,357 6,147 Office and development equipment 23,681 20,486 Leasehold improvements 1,827 1,816 ------------ ----------- 31,865 28,449 Less - accumulated depreciation and amortization (17,132) (15,425) ------------ ------------ Net property and equipment 14,733 13,024 ------------ ----------- Long-Term Investments 45,460 52,410 ------------ ----------- Other Assets 875 842 ------------ ----------- $201,241 $196,190 ------------ ----------- ------------ ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $4,667 $4,186 Accrued liabilities 10,855 9,817 Deferred revenue 15,765 14,375 ----------- ----------- Total current liabilities 31,287 28,378 ----------- ----------- Long-Term Deferred Revenue and Taxes 2,367 2,225 Stockholders' Equity: Common stock - - $.01 par value Authorized - - 50,000,000 shares Issued - - 22,307,171 shares at June 30, 1995 and 22,225,207 shares at March 31, 1995 223 222 Additional paid-in-capital 110,676 109,746 Retained earnings 71,565 64,374 Less Treasury Stock, at cost - 645,000 shares at June 30, 1995 (14,877) (8,755) ------------ ----------- Total stockholders' equity 167,587 165,587 $201,241 $196,190 ------------ ----------- ------------ -----------
The accompanying notes are an integral part of these condensed consolidated interim financial statements. 3 CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME
(in thousands, except per share amounts) Three Months Ended June 30, 1995 1994 -------------- -------------- (Unaudited) Revenues: Product $31,830 $23,843 Service 7,910 6,207 -------------- --------------- Total Revenues 39,740 30,050 -------------- --------------- Cost of Revenues: Product 6,904 4,807 Service 2,217 1,948 -------------- --------------- Total Cost of Revenues 9,121 6,755 -------------- --------------- Gross Profit 30,619 23,295 -------------- --------------- Operating Expenses: Sales and marketing 13,596 11,040 Research and development 5,791 4,523 General and administrative 2,631 2,160 ------------- --------------- Total Operating Expenses 22,018 17,723 ------------- --------------- Income from operations 8,601 5,572 Interest Income, net 1,746 1,093 ------------- --------------- Income before provision for income taxes 10,347 6,665 Provision for Income Taxes 3,156 2,099 ------------- --------------- Net income $7,191 $4,566 ------------- ---------------- ------------- ---------------- Earnings Per Share $.32 $.21 ------------- ---------------- Weighted Average Common and Common Equivalent Shares Outstanding 22,707 21,937 ------------- ----------------
The accompanying notes are an integral part of these condensed consolidated interim financial statements. 4 CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands) For the three Months ended June 30, 1995 1994 ----------- ----------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net income $7,191 $4,566 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,754 1,621 Deferred taxes, net 1,839 351 (Increase) decrease in assets: Accounts receivable (1,892) 487 Inventories 737 (925) Prepaid expenses 132 (1,160) Other assets (33) 50 Increase in liabilities: Accounts payable and accrued liabilities 694 1,724 Income taxes payable 825 1,246 Deferred revenue 1,350 1,776 ----------- ----------- Net cash provided by operating activities 12,597 9,736 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of held-to maturity investments (38,105) (27,223) Proceeds from maturities of held-to-maturity investments 26,058 30,927 Purchase of property and equipment (3,463) (1,497) ----------- ------------ Net cash (used in) provided by investing activities (15,510) 2,207 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of common stock, net of issuance costs 931 1,320 Repurchase of common stock (6,122) (713) ----------- ------------ Net cash (used in) provided by financing activities (5,191) 607 ----------- ----------- Net (decrease) increase in cash and cash equivalents (8,104) 12,550 Cash and cash equivalents at beginning of period 18,950 4,286 ----------- ----------- Cash and cash equivalents at end of period $10,846 $16,836 ----------- ----------- ----------- ----------- Supplemental Disclosures Cash paid during the period for: Interest $--- $--- Income taxes $148 $191
The accompanying notes are an integral part of these consolidated financial statements. 5 NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited) June 30, 1995 A. FINANCIAL STATEMENT PRESENTATION Certain amounts included in the condensed consolidated interim statements of income and the condensed consolidated interim balance sheets have been reclassified from amounts previously reported. Such reclassifications are not considered to be significant. B. CASH AND CASH EQUIVALENTS, MARKETABLE DEBT SECURITIES, AND LONG-TERM INVESTMENTS For purposes of the consolidated statements of cash flows, the Company considers certificates of deposits, commercial paper and money market funds with an original maturity date of three months or less to be cash equivalents. Marketable securities consist of municipal notes and U.S. Treasury notes with average maturities of less than one year. Long-term investments that will be held to maturity are carried at cost. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 115. The Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities" in the first quarter of fiscal year 1995, and the affect on its financial statements was not significant. In accordance with SFAS No. 115, the Company has classified all marketable debt securities and long-term debt investments as Held-to-Maturity, and has accounted for these investments at amortized cost. Accordingly, no adjustment for unrealized holding gains or losses have been reflected in the Company's financial statements. At June 30, 1995 the amortized cost basis, aggregate fair value and gross unrealized holding gains by major security type were as follows:
(In thousands) Amortized Aggregate Unrealized Cost Fair Value Gains --------- ---------- ---------- Debt securities issued by the U.S. Treasury and other U.S. government agencies $ 47,791 $ 47,808 17 Debt securities issued by states of the United States and political subdivisions of the state 90,630 90,861 231 --------- ---------- ---------- $138,421 $138,669 $248 --------- ---------- ---------- --------- ---------- ----------
C. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market and include material, labor and related manufacturing overhead. Inventories consist of:
(In thousands) June 30, 1995 March 31, 1995 ------------- -------------- Purchased parts $1,304 $1,496 Finished goods 2,185 2,730 ------ ------ $3,489 $4,226 ------ ------ ------ ------
D. EARNINGS PER SHARE Earnings per share is computed using the weighted average number of shares of common and common equivalent shares resulting from outstanding options. Fully diluted earnings per share is the same as primary earnings per share. 6 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS REVENUES Revenues for the first fiscal quarter ended June 30, 1995 were $39,740,000, an increase of 32% over revenues of $30,050,000 reported for the quarter ended June 30, 1994. Both domestic and international revenues increased in the first quarter of fiscal year 1996 when compared to the first quarter of fiscal year 1995. Domestic revenues increased 32% to $31,769,000 for the quarter ended June 30, 1995, compared to $24,071,000 for the quarter ended June 30, 1994. International revenues increased by 33% for the first quarter of fiscal 1996 compared to the first fiscal quarter of 1995, growing from $5,979,000 to $7,971,000, lead by strong sales of tool products in Asia which were offset by a decrease in sales in Europe. Although the Company is in the process of revisiting its distribution strategy for Europe to include a combination of third party distributors and direct sales, continued weakness in European sales is expected to persist until such new strategy is fully implemented. International revenues represented 20% of total revenues for each of the quarters ended June 30, 1995 and 1994. The following table presents the Company's revenues for each of its product lines in absolute dollars and as a percentage of revenues for each of the periods shown below.
(Dollars in Thousands) Three Months Ended June 30, SOURCES OF REVENUE 1995 Change 1994 ----------- ---- Tool Products (1) $20,424 29% $15,865 System Products (2) 11,406 43% 7,978 ------ ----- Subtotal Product Revenue 31,830 33% 23,843 Services (3) 7,910 27% 6,207 ------- ------- Total Revenues $39,740 32% $30,050 ------- ------- ------- ------- PERCENTAGES OF REVENUE 1995 1994 ---- ---- Tool Products 51% 53% System Products 29% 26% ---- ---- Subtotal Product Revenue 80% 79% Services 20% 21% ---- ---- Total Revenues 100% 100% ---- ---- ---- ----
The Company's tool products revenues increased 29% to $20,424,000 in the quarter ended June 30, 1995, as compared to $15,865,000 for the quarter ended June 30, 1994. Sniffer Network Analyzer products accounted for substantially all of the Company's tool products revenues in each of the periods shown above and are responsible for the increase in tool products revenues from the first quarter of fiscal year 1995 to the first quarter of fiscal year 1996. Tool products revenues represented approximately 51% of Network General's revenues for the first fiscal quarter ended June 30, 1995, as compared to 53% for the same period in fiscal 1995. Tool products revenues declined as a percentage of total revenues due to faster growth in system products revenues during this period relative to tool and service revenues. Revenues for the first fiscal quarter ended June 30, 1995 included $11,406,000 in system products revenues, a 43% increase over the $7,978,000 in system products revenues reported for the quarter ended June 30, 1994. The Distributed Sniffer System (DSS) analysis products accounted for a majority of the Company's system products ------------------------------ (1) Tool Products include revenues from the Sniffer-Registered Trademark- Network Analyzer products,the PCI line of Wide Area Network (WAN) Analysis products, the Watchdog-TM- Network Monitor products, product rentals and roylaties from the license agreements. (2) System Products consist of revenues from the Distributed Sniffer System -Registered Trademark- analysis products and from the Distributed Sniffer System Monitoring products (formerly ProTools Network Control Series). (3) Service revenues include first-year warranty revenue as defined by SOP 91-1 and revenues from software support and maintenance contracts, training and consulting services. 7 revenues in each of the periods shown above. System product revenues represented approximately 29% of Network General's revenues for the first quarter of fiscal 1996, as compared to 26% for the same quarter in fiscal 1995. Service revenues include revenues from software support and maintenance contracts, training, and consulting services, as well as those revenues from the first year warranty period of customer support which had been deferred in accordance with Statement of Position ("SOP") 91-1, "Software Revenue Recognition." For the quarter ended June 30, 1995, service revenues, increased 27% to $7,910,000 from $6,207,000 for the quarter ended June 30, 1994. The increase in service revenues was due to increases in support and maintenance contracts, training, and first year warranty support revenues. As a percent of total revenues, service revenues decreased from 21% in the first quarter of fiscal year 1995 to 20% in the first quarter of fiscal year 1996. GROSS MARGIN Cost of revenues consists of manufacturing costs, cost of services and warranty expenses. Gross profit as a percent of revenues was 77% for the quarter ended June 30, 1995 and 78% for the quarter ended June 30, 1994. Gross profit and gross profit percent may vary as a result of a number of factors, including the mix between Tool Products, System Products and Services, third party computer platforms, which have lower margins than the Company's own products, and the mix of international and domestic sales. SALES AND MARKETING EXPENSES Sales and marketing expenses were $13,596,000 in the first quarter of fiscal year 1996, an increase of 23% compared to $11,040,000 of sales and marketing expenses in the first quarter of fiscal 1995. The increase was primarily due to increased domestic sales expense for increased staffing, commission expense and promotional activity needed to support increased sales. As a percent of revenues, sales and marketing expenses were 34% and 37% for the quarters ended June 30, 1995 and 1994, respectively. Sales and marketing expenses have decreased as a percent of total revenues as a result of faster growth in revenues than in the related selling expenses. RESEARCH AND DEVELOPMENT EXPENSES Research and development expenses were $5,791,000 in the first quarter of fiscal year 1996, as compared to $4,523,000 in the first quarter of fiscal year 1995. Increased expenses were due to increased staffing to support development efforts. The Company believes that continued commitment to research and development is required to remain competitive. Research and development expenses were 15% of total revenues for each of the three month periods ended June 30, 1995 and 1994. Research and development expenses are accounted for in accordance with Statement of Financial Accounting Standards No. 86, under which the Company is required to capitalize software development costs after technological feasibility is established. Capitalizable software development costs incurred to date have not been significant and, thus, the Company has charged all software development costs to research and development expenses in the consolidated statements of income. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses were $2,631,000 for the quarter ended June 30, 1995 and were $2,160,000 for the quarter ended June 30, 1994. Increases to general and administrative expenses were primarily due to increases in staffing to support expanding operations. General and administrative expenses were 7% of total revenues for each of the three month periods ended June 30, 1995 and 1994. INTEREST INCOME, NET Interest income, net increased 60% to $1,746,000 in the first quarter of fiscalyear 1996 as compared to $1,093,000 in the first quarter of fiscal year 1995. The increase in interest income earned in the first quarter of fiscal year 1996 as compared to the first quarter of fiscal year 1995 reflects a combination of higher balances of cash, cash equivalents and marketable securities available for investment, as well as higher returns on investments during the first quarter of fiscal year 1996. PROVISION FOR INCOME TAXES 8 The provision for income taxes was 30.5% of pretax income for the quarter ended June 30, 1995, as compared to 31.5% for the quarter ended June 30, 1994. The effective tax rate for the first quarter of fiscal year 1996 decreased from the first quarter of fiscal year 1995 primarily due to increased utilization of ProTools operating losses, and to a lesser extent, a lower effective state tax rate between years. EARNINGS PER SHARE Earnings per share for the quarter ended June 30, 1995, were $0.32, an increase of 52% compared to the $0.21 per share earned in the quarter ended June 30, 1994. The primary cause of the increase in earnings per share was the increase in revenues. The number of common share equivalents increased 4% from 21,937,000 in the first quarter of fiscal 1995 to 22,707,000 in the first quarter of fiscal 1996. LIQUIDITY AND CAPITAL RESOURCES Cash, cash equivalents and marketable securities increased $10,893,000 from March 31, 1995 to June 30, 1995. The primary source of these funds was cash provided from operating activities, partially offset by purchases of property and equipment. The increase in cash, cash equivalents and marketable securities in the first quarter of fiscal 1996 was also partially offset by $6,122,000 used to repurchase common stock. Net cash provided by operating activities was $12,597,000 for the three months ended June 30, 1995, and $9,736,000 for the three months ended June 30, 1994. The primary source of these funds was net income for both periods shown. The net increase in the first quarter of fiscal 1996 also reflects reductions in deferred tax assets and increases to deferred revenue, partially offset by increases to accounts receivable. Cash provided by operating activities in the first quarter of fiscal 1995 reflects increases to deferred revenue, and accounts payable and accrued liabilities, partially offset by increases in prepaid expenses. Net cash used in investing activities was $15,510,000 in the quarter ended June 30, 1995, as compared to cash provided by investing activities of $2,207,000 in the quarter ended June 30, 1994. Net cash used in investing activities in the first quarter of fiscal 1996 reflects increased balances in marketable securities and purchases of property and equipment, partially offset by decreased balances in long-term investments. Cash provided by investing activities in the first quarter of fiscal 1995 includes decreases in marketable securities and long-term investments, partially offset by purchases of property and equipment. The Company used $5,191,000 in the quarter ended June 30, 1995 relating to financing activities. Repurchase of common stock totaling approximately $6,122,000 was partially offset by proceeds from the issuance of common stock. Net cash provided by financing activities was $607,000 in the quarter ended June 30, 1994. As of June 30, 1995, the Company's principal sources of liquidity included cash, cash investments, marketable securities and long-term investments totaling $149,267,000, including $45,460,000 of long-term investments. Included in the Company's marketable securities as of June 30, 1995 are approximately $2,000,000 of Orange County, California Tax and Revenue Anticipation Notes. The principal and accrued interest was paid in full on July 28, 1995. The Company currently has no outstanding bank borrowings and has no established lines of credit. The Company believes that cash generated from operations, together with existing cash and investment balances will be sufficient to satisfy operating cash and capital expenditure requirements through at least the next twelve months. 9 BUSINESS RISKS The Company's future operating results may be affected by certain factors and trends of its market which are beyond its control. The market for Network General's products is characterized by rapidly changing technology and evolving industry standards. Included in such changes is the development of asynchronous transfer mode ("ATM") for the transmission of data along local area and wide area networks, as well as other switching technologies. Network General believes that its future success will depend, in part, on its ability to continue to develop, introduce and sell new products. The Company is committed to continued investments in research and development; however, there is no assurance that these efforts will result in the development, timely release or market acceptance of new products. In addition, the Company's results may be adversely affected by the actions of existing or future competitors including established and emerging computer, communications, intelligent network wiring, network management and test instrument companies. There can be no assurance that Network General will be able to compete successfully in the future with existing or future competitors. Network General does not carry a significant level of backlog. The majority of the Company's revenues in each quarter are a result of orders booked in that quarter. Expense levels are based on expectations of future revenues. Expense levels would be disproportionately high in the event of a decrease in near-term demand for the Company's products and would therefore have an adverse affect on the Company's operating results. For certain critical components of its products, Network General relies on a limited number of suppliers. In addition, some of the Company's products are designed around specific computer platforms which are only available from certain manufacturers. As a result of product transitions by these computer platform manufacturers, the Company has found it increasingly necessary to purchase and inventory computer platforms for resale to its customers. Any significant shortage of computer platforms or other critical components for the Company's products could lead to cancellations or delays of purchases of the Company's products which would materially and adversely affect the Company's operating results. If purchases of computer platforms or other components exceed demand, the Company would incur expenses for disposing of the excess inventory, which would also adversely affect the Company's operating results. Network General products may be considered by certain customers to be capital purchases. An adverse change in general economic conditions could cause certain of the Company's customers to reduce their capital spending, which may adversely affect the Company's operating results. 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings: From time to time the Company has been, or may become, involved in litigation proceedings incidental to the conduct of its business. The Company does not believe that any such proceedings presently pending will have a material adverse affect on the Company's financial position or its results of operations. Item 2. Changes in Securities: Not Applicable. Item 3. Defaults upon Senior Securities: Not Applicable. Item 4. Submission of Matters to a Vote of Security Holders: None. Item 5. Other Information: None. Item 6. Exhibits and Reports on Form 8-K: 1) Exhibits Exhibit Number Exhibit Title ------ ------------- 3.1 Certificate of Incorporation, as amended and restated, of Network General Corporation, a Delaware corporation, which is incorporated by reference to Exhibit 3.1 of the Company's Registration Statement No. 33-26107 on Form S-1, which became effective February 2, 1989 (the "Form S-1"). 3.2 Certificate of Amendment of Certificate of Incorporation of Network General Corporation, which is incorporated by reference to Exhibit 3.1 to the Form 8-K filed with the Securities and Exchange Commission on January 4, 1991. 3.3 Amended and Restated Bylaws of Network General Corporation, which are incorporated by reference to exhibit 3.3 of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 (the "June 1994 Form 10-Q"). 4.1 Registration Rights Agreement between the Company and certain investors dated December 31, 1987, which is incorporated by reference to Exhibit 4.2 of the Form S- 1. 4.2 Rights Agreement between the Company and Chemical Trust Company of California dated June 26, 1992, as amended, which is incorporated by reference to Exhibit 4.2 of the Company's Annual Report on Form 10-K for the year ended March 31, 1993. ("1993 Form 10-K"). 10.1 Standard Business Lease (Net) for the Company's principal facility dated June 18, 1991, between the Company and Menlo Oaks Partners, L.P., which is incorporated by reference to Exhibit 10.3 of the 1991 Form 10-K. 10.2 First Amendment to Lease dated June 10, 1992, between the Company and Menlo Oaks Partners, L.P., which is incorporated by reference to Exhibit 10.3 of the Company's Annual Report on Form 10-K for the year ended March 31, 1992 ("1992 Form 10-K"). 11 10.3 Standard Business Lease (Net) for the Company's principal facility dated March 11, 1992, between the Company and Menlo Oaks Partners, L.P., which is incorporated by reference to Exhibit 10.4 of the 1992 Form 10-K. 10.4 First Amendment to Lease dated June 18, 1992, between the Company and Menlo Oaks Partners, L.P., which is incorporated by reference to Exhibit 10.5 of the 1992 Form 10-K. 10.5 Lease dated March 31, 1992, between the Company and Equitable Life Assurance Society of the United States, which is incorporated by reference to Exhibit 10.4 of the 1992 Form 10-K. 10.6 Lease dated March 31, 1992, between the Company and Equitable Life Assurance Society of the United States, which is incorporated by reference to Exhibit 10.4 of the 1992 Form 10-K 10.7 Description of Company's Cash Bonus Plan, which is incorporated by reference to Exhibit 10.6 of the Form S-1. 10.8 Form of Director and Officer Indemnification Agreement, which is incorporated by reference to Exhibit 10.7 of the Form S-1. 10.9 1989 Employee Stock Purchase Plan, which is incorporated by reference to Exhibit 10.10 of the Company's Annual Report on Form 10-K for the year ended March 31, 1989 ("1989 Form 10-K"). 10.10 Form of Stock Purchase Agreement used in conjunction with the 1989 Employee Stock Purchase Plan, which is incorporated by reference to Exhibit 10.11 to the Company's 1989 Form 10-K. 10.11 Amended and Restated 1989 Employee Stock Option Plan, which is incorporated by reference to Exhibit 10.12 of the 1992 Form 10-K. 10.12 Forms of Stock Option Agreement used in conjunction with the 1989 Employee Stock Option Plan, which are incorporated by reference to Exhibit 10.13 of the Company's 1989 Form 10-K. 10.13 Amended and Restated 1989 Outside Directors Stock Option Plan, which is incorporated by reference to Exhibit 10.12 of the 1992 Form 10-K. 10.14 Forms of Stock Option Agreement used in conjunction with the 1989 Outside Directors Stock Option Plan, which are incorporated by reference to Exhibit 10.15 of the Company's 1989 Form 10-K. 10.15 OEM Agreement dated August 3, 1990 between the Company and NCR Corporation which is incorporated by reference to Exhibit 10.18 of the Company's Registration Statement No. 33-45580 on Form S-3 which became effective on April 6, 1992 12 10.16 Resignation Agreement between the Company and Roger Ferguson dated June 21, 1993 which is incorporated by reference to Exhibit 10.17 of the 1993 Form 10-K. 10.17 Standard Business lease (Net) for the Company's Beaverton, Oregon facility dated February 4, 1994 between the Company and Hartford Underwriters Insurance Company. 10.18 Agreement dated April 8, 1994 between the Company and PNJ Engineering providing for a lump sum settlement of a royalty obligation between the Company and PNJ engineering. 10.19 Non-competition agreement dated January 6, 1994 between the Company and J. Edward Snyder. 10.20 Employment agreement dated April 6, 1994 between the Company and Leslie Denend, which is incorporated by reference to Exhibit 10.21 of the June 1994 Form 10-Q. 10.21 Employment agreement dated April 6, 1994 between the Company and James T. Richardson, which is incorporated by reference to Exhibit 10.22 of the June 1994 Form 10- Q. 10.22 Employment agreement dated April 6, 1994 between the Company and Richard Lewis, which is incorporated by reference to Exhibit 10.23 of the June 1994 Form 10-Q. 10.23 Resignation Agreement between the Company and Riley Willcox dated March 31, 1994, which is incorporated by reference to Exhibit 10.24 of the June 1994 Form 10-Q. 10.24 Resignation Agreement between the Company and James Pante dated April 30, 1994, which is incorporated by reference to Exhibit 10.25 of the June 1994 Form 10-Q. 10.25 Second Amendment to Lease dated February 1, 1995 between the Company and Menlo Oaks Partners, L.P., which is incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1994 ("December 1994 Form 10-Q") 10.26 Third Amendment to Lease dated February 1, 1995 between the Company and Menlo Oaks Partners, L.P., which is incorporated by reference to Exhibit 10.23 of the December 1994 Form 10-Q. 10.27 Fourth Amendment to Lease dated February 1, 1995 between the Company and Menlo Oaks Partners, L.P. 10.28 Fifth Amendment to Lease dated February 1, 1995 between the Company and Menlo Oaks Partners, L.P. 2) Form 8-K None. 13 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Network General Corporation DATE August 10, 1995 by S/JAMES T. RICHARDSON --------------- ------------------------- James T. Richardson Senior Vice President, Corporate Operations and Chief Financial Officer (authorized officer) DATE August 10, 1995 by S/BERNARD J. WHITNEY --------------- ---------------------- Bernard J. Whitney Controller and Chief Accounting Officer (authorized officer) 14 EX-10.27 2 EXHIBIT 10.27 EXHIBIT 10.27 FOURTH AMENDMENT TO LEASE THIS FOURTH AMENDMENT TO LEASE (this "Amendment") is made as of May 31, 1995, between MENLO OAKS PARTNERS, L.P., a Delaware limited partnership ("Landlord"), and NETWORK GENERAL CORPORATION, a Delaware corporation ("Tenant"). THE PARTIES ENTER INTO THIS AMENDMENT based upon the following facts, understandings and intentions: Landlord and Tenant previously entered into that certain Menlo Oaks Corporate Center Standard Business Lease dated as of March 11, 1992, as amended by (i) that certain First Amendment to Lease dated as of June 18, 1992, (ii) that certain Second Amendment to Lease dated as of March 18, 1993 and (iii) that certain Third Amendment to Lease (the "Third Amendment") dated as of February 1, 1995 (as amended, the "Lease"), pursuant to which Landlord leased to Tenant approximately 52,722 rentable square feet of space (the "Existing Premises") in Landlord's building (the "4500 Bohannon Building") located at 4500 Bohannon Drive, Menlo Park, California, as more particularly described in the Lease. The capitalized terms used in this Amendment and not otherwise defined herein shall have the same meanings given to such terms in the Lease. Pursuant to the Third Amendment, Landlord granted to Tenant a Right of First Offer to lease certain additional space located on the second floor of the 4500 Bohannon Building, which additional space includes the Expansion Space (defined below). Tenant exercised its Right of First Offer to lease the Expansion Space and, in connection therewith, Landlord and Tenant are further amending the Lease to, among other things, expand the size of the Existing Premises, increase the Base Rent due under the Lease and increase Tenant's Share of Operating Expenses and Impositions. NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and promises of the parties, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. EXPANSION OF EXISTING PREMISES. As of June 1, 1995 (the "Expansion Date"), the Existing Premises shall be increased in size to include approximately 3,944 square feet of additional space (the "Expansion Space") located on the second floor of the 4500 Bohannon Building as more particularly shown on EXHIBIT A attached hereto. From and after the Expansion Date, the term "Premises" shall include both the Existing Premises and the Expansion Space for all purposes under the Lease. 2. BASE RENT. As of the Expansion Date, the monthly Base Rent due under the Lease shall be increased by Eight Thousand Three Hundred Twenty-One and 84/100 Dollars ($8,321.84), as set forth below.
PERIOD MONTHLY BASE RENT ------ ----------------- April 1, 1995 $109,259.84 through May 31, 1995 June 1, 1995 $117,581.68 through June 30, 1997
3. TENANT'S SHARE. As of the Expansion Date, Tenant's Share of Operating Expenses and Impositions shall be increased to ninety percent (90%). 4. SECURITY DEPOSIT. Upon execution of this Amendment by Tenant, Tenant shall deliver to Landlord the amount of Six Thousand Two Hundred Thirty- One and 52/100 Dollars ($6,231.52) as an additional security deposit (the "Additional Security Deposit") to secure Tenant's obligations under the Lease. Landlord's use, retention and return of the Additional Security Deposit shall be governed by Article 4.6 of the Lease. 5. ENTIRE AGREEMENT. This Amendment represents the entire understanding between Landlord and Tenant concerning the subject matter hereof, and there are no understandings or agreements between them relating to the Lease, the Existing Premises or the Expansion Space not set forth in writing and signed by the parties hereto. No party hereto has relied upon any representation, warranty or understanding not set forth herein, either oral or written, as an inducement to enter into this Amendment. 6. CONTINUING OBLIGATIONS. Except as expressly set forth to the contrary in this Amendment, the Lease remains unmodified and in full force and effect. To the extent of any conflict between the terms of this Amendment and the terms of the Lease, the terms of this Amendment shall control. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written. "LANDLORD" MENLO OAKS PARTNERS, L.P., a Delaware limited partnership By: AM LIMITED PARTNERS, a California limited partnership, as a General Partner By: AMAROK MENLO, INC., a California corporation, as a General Partner By: /s/ J. Marty Brill, Jr. ------------------------ J. Marty Brill, Jr., President "TENANT" NETWORK GENERAL CORPORATION, a Delaware corporation By: /s/ James T. Richardson ---------------------------- Name: James T. Richardson ---------------------------- Its: Senior Vice President/Chief Financial Officer --------------------------------------------- By: /s/ Leslie G. Denend ---------------------- Name: Leslie G. Denend ---------------------- Its: President ---------------------- EXHIBIT A EXPANSION SPACE [To be attached] EX-10.28 3 EXHIBIT 10.28 EXHIBIT 10.28 FIFTH AMENDMENT TO LEASE THIS FIFTH AMENDMENT TO LEASE (the "Amendment") is made as of June 13, 1995, between MENLO OAKS PARTNERS, L.P., a Delaware limited partnership ("Landlord"), and NETWORK GENERAL CORPORATION, a Delaware corporation ("Tenant"). THE PARTIES ENTER INTO THIS AMENDMENT based upon the following facts, understandings and intentions: A. Landlord and Tenant previously entered into that certain Menlo Oaks Corporate Center Standard Business Lease dated as of March 11, 1992, as amended by (i) that certain First Amendment to Lease dated as of June 18, 1992, (ii) that certain Second Amendment to Lease dated as of March 18, 1993, (iii) that certain Third Amendment to Lease (the "Third Amendment") dated as of February 1, 1995, and (iv) that certain Fourth Amendment to Lease (the "Fourth Amendment") dated as of May 31, 195 (as amended, the "Lease"), pursuant to which Landlord leased to Tenant approximately 56,666 rentable square feet of space (the "Existing Premises") in landlord's building (the "4500 Bohannon Building") located at 4500 Bohannon Drive, Menlo Park, California, as more particularly described in the Lease. The capitalized term s used in this Amendment and not otherwise defined herein shall have the same meanings given to such terms in the Lease. B. Pursuant to the Third Amendment, Landlord granted to Tenant a Right of First Offer to lease certain additional space located on the second floor of the 4500 Bohannon Building, which additional space includes the Expansion Space (defined below). C. Tenant exercised its Right of First Offer to lease the Expansion Space and, in connection therewith, landlord and Tenant are further amending the lease to, among other things, expand the size of the Existing Premises, increase the Base Rent due under the Lease and increase Tenant's Share of Operating Expenses and Impositions. NOW, THEREFORE, IN CONSIDERATION of the mutual convenants and promises of the parties, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. EXPANSION OF EXISTING PREMISES. As of June 15, 1995 (the "Expansion Date"), the Existing Premises shall be increased in size to include approximately 6,254 square feet of additional space (the "Expansion Space") located on the second floor of the 4500 Bohannon Building as more particularly shown EXHIBIT A attached hereto. From and after the Expansion date, the term "Premises" shall include both the Existing Premises and the Expansion Space for all purposes under the Lease. 1 2. BASE RENT. As of the Expansion Date, the monthly Base Rent due under the Lease shall be increased by Thirteen Thousand One Hundred Ninety-Five and 94/100 Dollars ($13,195.94), as set forth below. PERIOD MONTHLY BASE RENT June 15, 1995 through June 30, 1997 $130,777.62 3. TENANT'S SHARE. As of the Expansion Date, Tenant's Share of Operating Expenses and Impositions shall be increased to one hundred percent (100%). 4. SECURITY DEPOSIT. Upon execution of this Amendment by Tenant, Tenant shall deliver to Landlord the amount of Nine Thousand Eight Hundred Eighty-One and 32/100 Dollars ($9,881.32) as an additional security deposit (the "Additional Security Deposit") to secure Tenant's obligations under the Lease. Landlord's use, retention and return of the Additional Security Deposit shall be governed by Article 4.6 of the Lease. 5. ENTIRE AGREEMENT. This Amendment represents the entire understanding between Landlord and Tenant concerning the subject matter hereof, and there are no understandings or agreements between relating to the Lease, the Existing Premises or the parties hereto. No party hereto has relied upon any representation, warranty or understanding not set forth herein, either oral or written, as an inducement to enter into this Amendment. 6. CONTINUING OBLIGATIONS. Except as expressly set forth to the contrary in this Amendment, the Lease remains unmodified and in full force and effect. To extent of any conflict between the terms of this Amendment and the Terms of the Lease, the terms of this Amendment shall control. 2 IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written. "Landlord" MENLO OAKS PARTNERS, L.P., a Delaware limited partnership By: AM LIMITED PARTNERS, a California limited partnership, as a General Partners By: AMAROK MENLO, INC., a California corporation, as a General Partner By: /s/ J. Marty Brill, Jr. ----------------------- J. Marty Brill Jr. President "Tenant" NETWORK GENERAL CORPORATION, a Delaware corporation By: /s/ James T. Richardson ------------------------ Name: James T. Richardson ------------------- Its: Senior Vice President/Chief Financial Officer --------------------------------------------- By: /s/ Leslie G. Denend -------------------- Name: Leslie G. Denend ---------------- Its: President --------- 3 EXHIBIT A Floor Plan EX-27 4 EXHIBIT 27
5 1,000 3-MOS MAR-31-1996 APR-01-1995 JUN-30-1995 10,846 92,961 22,218 (1,526) 3,489 140,173 31,865 (17,132) 201,241 31,287 0 223 0 0 167,364 201,241 31,830 39,740 6,904 9,121 21,962 56 (1,746) 10,347 3,156 7,191 0 0 0 7,191 .32 .32