Kevin J. Yourman (147159)
Vahn Alexander (167373)
Weiss & Yourman
10940 Wilshire Blvd, 24th Floor
Los Angeles, California 90024
Phone: (310) 208-2800

Attorneys for Plaintiff

Plaintiff, through their attorneys, brings this action on behalf of himself and all others similarly situated, and on personal knowledge as to himself and his activities, and on information and belief as to all other matters, based on investigation conducted by counsel, hereby alleges as follows:

1. This action is being brought as a class action on behalf of all individuals who purchased or otherwise acquired the common stock of Versant Object Technology, Inc.¹ (the "Class") between April 28, 1997 and January 13, 1998, inclusive (the "Class Period"). As is more fully alleged throughout the Complaint, this action arises from damages incurred by the Class as a result of a scheme and common course of conduct by defendants which operated as a fraud and deceit on the Class during the Class Period. Defendants' scheme included rendering false and misleading statements and/or omissions concerning the present and future financial condition and business prospects of the Company, as well as the financial benefits that would enure to Versant and its shareholders.

2. Defendants made numerous positive representations throughout the Class Period regarding the current and future financial and business prospects of the Company, while either knowing or recklessly disregarding the following facts: (a) that the Company was suffering from a dramatic decrease in its earnings due to licensing revenue shortfalls; (b) that the Company was experiencing extremely high expenses caused by a regional concentration of sales which was resulting in incredibly high commission costs; (c) that the Company was spending an excessive amount of income on its marketing programs in order to simply maintain market share; (d) that the Company was spending an enormous amount of money on fees associated with the recruiting of new company personnel, primarily in its sales and marketing division; (e) that the Company was suffering from severe problems causing increased costs and material adverse effects on the Company's earnings; (f) that the Company was encountering significant problems and delays associated with various projects due to the complexity of the projects which were contributing to high costs and eroding revenue; (g) that the Company had entered into less than profitable partnerships/projects in order to artificially increase its earnings; (h) that the Company was plagued by internal inefficiencies in forecasting, financial control, and execution; (i) that the forecasts of strong revenue and EPS growth for Versant in fiscal 1997 were false and not genuinely believed by the defendants, as they were aware of the adverse information set forth above which contradicted these forecasts; and (j) that as a result of all of the above, Versant was not on track to generate strong revenue and earnings growth in fiscal 1997, but, in fact, was suffering from declining revenue and EPS growth. Thus defendants knew or recklessly disregarded that the Company could not fulfill analysts' earnings estimates or achieve the Company's earnings growth, all which they publicly represented were attainable.

3. Since the disclosure of these, and other, adverse facts would cause a severe collapse in the price of the Company's stock, defendants set out on a scheme to artificially inflate Versant's stock price so that they could maintain their lucrative positions and so that they could dispose of a portion of their own holdings at artificially inflated prices.

4. As a result of defendants' false statements, misrepresentations, and omissions, the price of Versant's common stock was artificially inflated during the Class Period. The Company's common stock closed at a high of $18 1/4 on or about October 21, 1997. Versant's stock was then maintained at an artificially inflated level until the Company disclosed the dismal financial condition of the Company on or about January 13, 1998. These disclosures caused the stock price of Versant to plummet from $9 3/8, on January 12, 1998, to $5 1/8 on January 13, 1998 on volume of 2,528,700 shares. A drop of 45% in one day and a drop of over 70% from the stock's high of $18 1/4 on October 21, 1997.

5. Due to defendants' deceptive and illegal conduct, plaintiff and the other class members purchased their Versant shares at grossly inflated prices. Had plaintiff and the other class members been aware of the truthful condition of the Company and the adverse impact that defendants' omissions were having on the Company, they would not have purchased their shares, or at least not at the artificially inflated prices at which they purchased those shares.

6. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §§1331 and 1337, and §27 of the Securities Exchange Act of 1934 (the "Exchange Act") (15 U.S.C. §78aa).

7. This action arises under §§10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder (17 C.F.R. §240.10b-5).

8. Venue is proper in this district pursuant to §27 of the Exchange Act and 28 U.S.C. 1391(b) because the acts charged herein, including the dissemination of materially false and misleading information, occurred in this district. Versant also has its headquarters in this district and throughout the Cass Period, Versant was listed as a publicly held corporation whose shares were traded on NASDAQ under the ticker symbol "VSNT."

9. In connection with the acts alleged in this complaint, defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including, but not limited to, the mails, interstate telephone communications and the facilities of the national securities markets.

10. Plaintiff Steve Wilkes ("Wilkes") purchased a total of 2,600 shares of Versant common stock on the following dates and at the prices listed: (a) on September 22, 1997, 500 shares at $14-1/16 per share; (b) on October 23, 1997, 500 shares at $18-3/8 per share; (c) on January 9, 1998, 300 shares at $12-3/8 per share; and (d) on January 13, 1998, 1,300 shares at $5-1/2 per share. Plaintiff has thereby been damaged as a result of defendants' deceptive and illegal conduct as set forth in the attached Certification which is incorporated herein by reference.

11. Defendant Versant is a California corporation with its principal executive offices located at 6539 Dumbarton Circle, Fremont, California, 94555. As of November 4, 1997, Versant had 8,969,049 shares of its common stock issued, outstanding, and traded on the NASDAQ National Market Quotation System under the symbol "VSNT."

12. Defendant David Banks ("Banks") was at all relevant times during the Class Period President and Chief Executive Officer of the Company up to the time of his resignation on or about January 8, 1998. Defendant Banks is currently a Director of the Company.

13. Defendant James R. Lochry ("Lochry") was at all relevant times during the Class Period the Vice President of Sales for the Company.

14. Defendant Lawrence J. Pulkownik ("Pulkownik") was at all relevant times during the Class Period a Vice President for the Company.

15. Defendant George C. Franzen ("Franzen") was at all relevant times during the Class Period the Vice President of Engineering for the Company.

16. Defendant Ronald Kopeck ("Kopeck"), beginning on or about June 4, 1997, was at all relevant times during the Class Period the Vice President of Marketing for the Company.

17. Defendant Gary Rhea ("Rhea") was at all relevant times during the Class Period the Vice President of Finance and Administration, Chief Financial Officer, Treasurer and Secretary for the Company.

18. Defendant Lawrence K. Orr ("Orr") was at all relevant times during the Class Period a Director of the Company.

19. Defendants Banks, Lochry, Pulkownik, Franzen, Kopeck, Rhea and Orr (collectively "Individual Defendants") were at all relevant times controlling persons of Versant within the meaning of §20(a) of the Exchange Act. Defendants had the power and influence, and exercised such power and influence, to cause Versant to engage in the unlawful practices complained of herein.

20. Defendants are also each liable as individual participants in a fraudulent scheme and course of conduct that operated as a fraud and/or deceit upon the Class. Because of their executive, managerial and/or directorial positions with the Company, each of the Individual Defendants had access to the adverse, non-public information about the business, finances and future business prospects of the Company as particularized herein and acted to misrepresent, misstate or conceal such information from plaintiff and the class.

21. It is also appropriate to treat all defendants as a group for pleading purposes under the federal securities laws and the Federal Rules of Civil Procedure and to presume that the false and misleading information complained of herein was disseminated through the collective actions of the defendants. Defendants were involved in the drafting, producing, reviewing, and/or disseminating of the false and misleading information detailed herein, knew or recklessly disregarded that such materially misleading statements were being issued by the Company, and/or approved or ratified these statements in violation of the federal securities laws. Defendants' false and misleading statements and omissions of fact consequently had the effect, both on their own and in the aggregate, of artificially inflating the price of the common stock of Versant at all times during the Class Period.

22. Each defendant had the opportunity to commit the acts alleged herein. Defendants, through their positions as officers and/or directors, controlled the dissemination of false and misleading information to the public through SEC filings, press releases and communications with analysts. By virtue of their positions with Versant, defendants had access to the adverse non-public information about Versant's business and finances via access to internal corporate documents (including Versant's operating plans, budgets and forecasts and reports of actual operations compared thereto), conversations and connections with other corporate officers and employees, attendance at management and Board of Directors' meetings and committees thereof and via reports and other information provided to them in connection therewith. Defendants therefore had the opportunity to commit the acts and practices alleged herein.

23. Defendants also had the motive to commit and participate in the fraud alleged herein. The air of accomplishment and success created as a result of defendants' material misrepresentations would have made Versant attractive to potential investors, customers, and lenders of financial resources as well as other sources of capital for operations, research and development. Defendants, as officers and directors of the Company, would also benefit from the public and industry-wide perception of their successful leadership and stood to gain substantial monetary benefits through Company perquisites and performance incentive plans from a heightened stock price. In addition, defendants clearly had the motive to inflate the price of Versant's common stock so that they could dispose of a portion of their personal holdings in the Company. In fact, defendants disposed of over $1.8 million worth of Versant stock during the Class Period. Thus, defendants stood to gain in a number of different respects from an inflated stock price and thereby had the motive to commit the acts and practices alleged herein.

24. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3) on behalf of a class consisting of all persons who purchased or otherwise acquired shares of Versant common stock from April 28, 1997 through January 13, 1997, inclusive, and who were damaged thereby. Excluded from the Class are the defendants, officers and directors of the Company, members of their immediate families and their legal representatives, heirs, successors or assigns and any entity in which defendants have or had a controlling interest.

25. The members of the Class are so numerous that joinder of all members is impracticable. While the exact number of Class members is unknown to plaintiff at this time and can only be ascertained through appropriate discovery, plaintiff believes that there are hundreds, if not thousands, of members of the Class. Versant has approximately 8.9 million shares of common stock outstanding and actively traded over the counter in an efficient market. Record owners and other members of the Class may be identified from records maintained by Versant or its transfer agent and may be notified of the pendency of this action by mail, using the form of notice similar to that customarily used in securities class actions.

26. Plaintiff's claims are typical of the claims of the members of the Class as all members of the Class are similarly affected by defendants' wrongful conduct in violation of the federal law that is complained of herein.

27. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class and securities litigation.

28. Common questions of law and fact exist as to all members of the Class and predominate over any questions affecting solely individual members of the Class. Among the questions of law and fact common to the Class are:

(a) Whether the federal securities laws were violated by defendants' acts as alleged herein;

(b) Whether defendants participated in and pursued the common course of conduct complained of herein;

(c) Whether documents, press releases and other statements disseminated to the investing public and the Company's shareholders during the Class Period misrepresented material facts about the business, management, products, markets, financial condition, and future business prospects of Versant;

(d) Whether statements made by defendants to the investing public during the Class Period misrepresented material facts about the business, finances and products of Versant;

(e) Whether defendants acted with scienter in omitting and/or misrepresenting material facts;

(f) Whether the market price of Versant common stock during the Class Period was artificially inflated due to the material misrepresentations and failure to correct the material misrepresentations complained of herein; and

(g) Whether the members of the Class have sustained damages and, if so, the proper measure of damages.

29. Plaintiff will rely, in part, upon the presumption of reliance established by the fraud-on-the-market doctrine in that:

(a) defendants made public misrepresentations or omitted material facts during the Class Period, as alleged herein;

(b) the misrepresentations and/or omissions were material;

(c) Versant's common stock was traded in an efficient market;

(d) the misrepresentations and/or omissions alleged tended to induce reasonable investors to misjudge the value of Versant shares; and

(e) plaintiff and members of the Class acquired their shares between the time defendants made the misrepresentations and/or omissions and the time the truth was revealed, without knowledge of the falsity of the misrepresentations.

30. Based upon the foregoing, plaintiff and the other members of the Class are entitled to a presumption of reliance upon the integrity of the market for, at least, the purposes of class certification, as well as for ultimate proof of the claims on their merit. Similarly, plaintiff and members of the Class are entitled to a presumption of reliance with respect to the omissions alleged herein.

31. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation make it impossible for members of the Class to individually redress the wrongs done to them. There will be no difficulty in the management of this class action.

32. Versant was incorporated in August of 1988 and began shipment of its principal product, the Versant ODBMS ("Object Database Management System"), in 1991. Versant is a major provider of high-performance, enterprise component management systems for commercial applications in distributed computing environments. Versant solutions are used across a broad range of industries including telecommunications, financial services, health care, energy and the emerging market for intranet and transactional Internet applications.

33. Since 1991, substantially all of the Company's revenue has been derived from: (i) sales of development and deployment licenses for the Versant ODMBS; (ii) related maintenance and support, training, consulting and nonrecurring engineering fees (the "Associated Services"); and (iii) the resale of licenses, maintenance training and consulting for third-party products that complement the Versant ODBMS ("Third Party Products").

34. During the end of 1996 and early 1997, Versant began to stumble financially. Specifically, Versant released a less than favorable earnings report for the Company's fourth quarter of 1996, ending December 31, 1996. Although defendants had convinced analysts that the fundamentals of the Company remained in tact, the investing public did not react favorably to this news. Versant saw the price of its stock tumble and became a topic of criticism throughout the financial community. On or about January 30, 1997, a Reuters Financial Service release entitled RESEARCH ALERT-VERSANT <VSNT.O> EPS FALLS SHORT noted:

-- Volpe Welty & Co said Versant Object Technology Inc's <VSNT.O> fourth quarter earnings fell short of its estimates due to higher than expected shares outstanding and higher sales and marketing expenses.

-- Versant posted fourth quarter earnings of $ 5.6 million or $ 0.07 a share, compared to Volpe Welty's earnings estimate of $ 5.4 million or $ 0.09 a share.

-- said remains pleased with Versant's fundamentals and reiterates the strong buy rating.

-- Versant lost 2-7/8 to 15-3/4.

35. Concerned with the market's dramatic reaction to this news, and aware that the financial community's perception of Versant would have to be rectified, defendants attempted to convince the market that the Company was not only stable but in a stage of growth. On March 31, 1997, through a press release issued on the Business Wire entitled Versant Appoints Walt Brown As Vice President of Customer Services; Newly-Created Position Reflects Company's Growth and Customer Successes, defendants made the following statements:

March 31, 1997--Versant Object Technology (NASDAQ: VSNT), a leader in database systems for the network computing infrastructure, today announced the appointment of Walt Brown as vice president of customer services, a newly-created position at the company.

Brown will focus on enhancing customer services and satisfaction with Versant's large installed customer base as well as the company's growing list of new clients.² Brown comes to Versant with 20 years of customer service experience with Fortune 500 accounts and international business, having developed and expanded worldwide customer service organizations at companies such as Sun Microsystems and Digital Equipment Corporation.

"Walt's extensive background in building customer service infrastructures and handling large, multi-national corporate accounts will prove invaluable to Versant as the company grows," said David Banks.

"Corporations are increasingly looking to object databases to meet today's growing computing demands, including more complex data processing and distributed operations. Walt will play a critical role as Versant's core customer base rapidly expands into mainstream network computing environments."

"I am delighted to accept this position with Versant at a time when the company is experiencing remarkable corporate momentum and customer wins," said Brown. "With its consistent focus on customer satisfaction and delivering solid technology, Versant is well-positioned for continued success in the database market."

36. Unfortunately for defendants, these statements would have little affect on the investing community's perception of Versant. On or about April 2, 1997, a Reuters Financial Service article entitled Versant <VSNT.O> Sees Q1 Shr Loss $ 0.11 To $ 0.15 stated:

Versant Object Technology Wednesday said it expects to post a loss of between 0.11 and $ 0.15 a share in the first quarter ended in March.

In a statement, the company said it also expects revenue to be approximately $3.5 million, up from $3.2 million in the year-ago quarter but below the company's expectations.

The company said estimated revenue for the quarter includes approximately $1 million of revenues from Versant Europe recognized after March 25, 1997, the date the company acquired Versant Europe.

The company said the revenue would have been recognized by Versant at the pre-acquisition royalty rate of approximately 40 percent had the acquisition not occurred.

"We believe that the revenue shortfall results principally from the timing and complexity of large-project opportunities rather than losses of business to competition," David Banks, president of Versant, said. "The company remains enthusiastic about the level of interest in Versant's products."

According to First Call, analysts had expected the company to report a profit of $ 0.02 a share, up from a loss up $ 0.06 a share in the year-ago period. Versant released this forecast after the market closed. During trading hours, its shares subsequently traded as low as $5.125.

37. Once again the financial community reacted as expected to the disclosure of such dismal news by the Company. Nevertheless, defendants assured analysts that these were simply short term problems and that the long term outlook for the Company remained strong. In response to defendants' representations, on or about April 3, 1997, Reuters Financial Service reported in an article entitled Research Alert - Versant Object <VSNT.O> Cut to Buy:

-- Volpe Brown Whelan & Co analyst Paul Bloom on Thursday cut his rating for Versant Object Technology Corp to buy from strong buy.

-- Bloom said in a report he downgraded the shares because Versant had announced its first quarter results would be below expectations.

-- "We would, however, recommend purchase for investors with a longer time-horizon who wish to participate in the emerging and very exciting object technology market."

-- He set a 12- to 18-month price target for the shares of $ 20.

38. Although defendants did what they could to minimize the damage done by this earnings release, it now became more important than ever to convince the investing public that Versant had a bright and prosperous future. The price of Versant's common stock had reached an all time low. Trading as high as $27 5/8 per share in September of 1996, the value of the Company's stock, including defendants' personal holdings, had plummeted to an all time low of $4 1/2 per share on April 3, 1997.

39. Defendants began to perpetrate their scheme on the unsuspecting investing public on or about April 28, 1997, when defendant Banks was interviewed by The Wall Street Transcript ("TWST"). In response to a number of questions by the TWST, defendant Banks made the following statements, the pertinent portions of which are as follows:

Growth Opportunities (A1)

TWST: Where do you expect the greatest opportunities for Versant then looking out over the next three to five years in terms of your core markets or emerging markets in telecommunications and Internet, I suppose.

*****

Mr. Banks: [T]elecom has been a great market for us thus far and it will continue to be going forward.

*****

The internet is finding its way into all sorts of businesses, so we believe it will provide substantial opportunity for the company.

*****

New Products (A1)

TWST: What are some of the new products or services that are under development? Are there any that you are particularly excited about?

Mr. Banks: We have a new release just announced called Release 5.0. This new release has a number of new features and functions. It is designed to run on symmetric multi processing computing architectures. It's a major release for us.

In addition to this, we have a Java interface. We have a Web interface for our product. All of these are in beta tests and will be shipping during the first half of 1997.

On the service side, we have been able to recruit a man named Walt Brown who formerly worked at Sunsoft. Walt helped set up their entire service and support organizations. We have an existing service and support business, but we have brought Walt in to increase the product offering there, in particularly, emphasizing training. We'll be creating new training offerings.

*****

Customer Mix (A1)

TWST: Could you describe the sort of changes you anticipate in your business or customer base over the next three to five years. What would you see as the ideal structure or ratio of this mix?

*****

Mr. Banks: The majority of our business right now is from large telecommunications companies: MCI, AT&T, Sprint, Lucent, Deutsche Telecom, Siemens. We see continuing projects and continuing business with these companies. They are investing a great deal to modernize their infrastructures. Also many of the telecommunication service providers are offering Internet services to companies and to homes and that's a new area of opportunity for us.

*****

So there are a lot of opportunities across a range of different industries. As different industries move to object-oriented software development, which has been proven to be easier faster and over the long haul, less expensive, the Versant database is a better fit than what's available now.

*****

Marketing Strategy (A1)

TWST: You have a direct sales force, a network of distributors, could you describe a little further your marketing and sales strategy, what sort of changes will be put into effect.

Mr. Banks: We have a very strong domestic sales organization that's headed up by Jim Lochry who came to us from Oracle via N-Cube. Jim has built a strong domestic organization and what we're investing in now is the international organization.

International staffing is growing and those regions are starting to get into some substantial opportunities now. We're eager to get our international channel built up.

We have recently put some senior people into Australia, selling to the Asia/Pacific Rim. So a substantial portion of our business will continue to derive from our direct channel. On the marketing side we have hired a senior manager from Tandem who has come over to run our partner programs for us. This executive is deeply experienced in establishing programs plus the sales organization will begin to develop value-added reseller relationships so that there are companies that build products around our database. VARs leverages our channel.

*****

Corporate Structure (A1)

TWST: Tell us what you foresee in terms of personnel needs, recruiting and training? Will you be making management changes?

Mr. Banks: We don't comment on that. We've had a very strong management team here. Relative to other activities I think we usually announce additions once they've occurred. From a staffing perspective, we finished 1996 with 103 people in the company and we are aggressively seeking to fill openings that we currently have. We will grow our population substantially in 1997.

*****

Financial Outlook (A1)

TWST: Could you describe for our readers the sort of financial goals and benchmarks that you have in place there for Versant?

Mr. Banks: We have operating plans and objectives and we work with the investors analysts who cover the company. We are a leader in a new part of the database market and therefore we want to grow as fast as we can profitably in order to gain market share. When you are participating in a new market like this, I believe it's the wrong thing to do to try to maximize profitability. I believe you should be investing in the business to keep your top line growing quickly. As the press release said, our 96 revenue growth over 95 was 55 percent and we would like to grow more aggressively this year because the opportunity is larger.

*****

Shareholder Valuation (A1)

TWST: The last area we'd like to look at, your shareholders and potential investors. How do you view shareholder valuation? Is this a priority for you?

Mr. Banks: No. Shareholder valuation is an important thing, but again, we're in the early stages, we're an emerging growth company. Our investors want us to grow fast and be a strong player. They would like us to be the next Oracle or the next Informix. Shareholder value is important in that share price and market capitalization are metrics that you get measured against. But we don't spend a lot of time worrying about or thinking about how we manage that aspect of our business right now. We're just growing our business.

*****

TWST: Do you think there's anything that the investment and financial community should know about Versant that they don't know currently? Is there any way they could improve their perception or understanding of your company.

*****

Mr. Banks: We are very bullish about our position in the market in the future, because the object database is the first totally new architecture in a very long time.

*****

Our premise is that we have a very large opportunity, because there's a huge need, because we're smack dab in the middle of the path of software evolution. I think that bodes well for our future.

*****

Key Strengths (A1)

TWST: In summary, why don't you describe for our readers what you see as the outstanding strengths and advantages of Versant as a possible investment opportunity?

*****

Mr. Banks: For those investors who are comfortable with some level of risk, this is a very large opportunity. There are only two public companies right now that are object database companies. I think this is the beginning of a new aspect of the database market, and for investors who are comfortable with technology and who understand enough about the risk equation, Versant is a great opportunity.

*****

TWST: Are there any specific company reports, documents, facts and figures or ratios that you think a potential or a new investor should look at? I believe you have some analysts following the company.

Mr. Banks: We have three companies following Versant -- Cowan & Company. Their analyst is Drew Brousseau. Volpe & Welte is the second company and their analyst is Paul Bloom. And Sound View Financial and their analyst is Jim Mendelson. These gentlemen represent our investment banking team, and the reason I chose them is because I've known two of these analysts for eight years, and the other one I know by reputation. Actually, I chose the banks because of the analysts. Since this is a new area I think it's important for investors to get information from analysts that understand the area and what it means. These are very, very strong analysts that understand Versant's great future.

40. The foregoing statements made by defendant Banks, which were repeated and reprinted in TWST, were materially false and misleading in that, at the time of such statements, defendant Banks either knew or recklessly disregarded: (a) that the company was suffering from a dramatic decrease in its earnings due to licensing revenue shortfalls; (b) that the Company was experiencing extremely high expenses caused by a regional concentration of sales which was resulting in incredibly high commission costs; (c) that the Company was spending an excessive amount of income on its marketing programs in order to simply maintain market share; (d) that the Company was spending an enormous amount of money on fees associated with the recruiting of new Company personnel, primarily in the sales and marketing division; (e) that the Company was suffering from severe problems causing increased costs and material adverse effects on the Company's earnings; (f) that the Company was encountering significant problems and delays associated with various projects due to the complexity of the projects which were contributing to high costs and eroding revenue; (g) that the Company had entered into less than profitable partnerships/projects in order to artificially increase its earnings; (h) that the Company was plagued by internal inefficiencies in forecasting, financial control, and execution; (i) that the forecasts of strong revenue and EPS growth for Versant in fiscal 1997 were false and not genuinely believed by the defendants, as they were aware of the adverse information set forth above which contradicted these forecasts; and (j) that as a result of all of the above, Versant was not on track to generate strong revenue and earnings growth in fiscal 1997, but, in fact, was suffering from declining revenue and EPS growth.

41. Defendants' plan took effect immediately. Defendants saw the value of Versant stock increase from $4 1/2 on April 3, 1997 to $6 1/2 on May 12, 1997. But defendants were determined to increase the value of Versant's common stock, and their own personal holdings, even further. As part of their scheme, defendants continued to bombard the investing public with a myriad of positive statements regarding the current and future financial and business prospects for the Company.

42. On or about May 13, 1997, in a Business Wire release entitled Versant Partner Thought Inc. to Deliver Cross-Database Connectivity over the Internet; Solution Enables Seamless Data Transfer Between Versant and Relational Databases, defendants made the following statements:

"Today's network computing environments require companies to handle abstract data, complex data relationships, distribution and dynamism, and thus companies are looking to object databases to meet these needs. Our partnership with Thought Inc. demonstrates our continued commitment to the development of a powerful enterprise database that works with a company's existing IT investments," said Jay Mellman, director of product marketing at Versant.

43. On or about May 19, 1997, in a Business Wire release entitled Versant Launches \ 'BGT5TeamVERSANT Partner Program; Innovative Total Solutions Approach Enables Successful Application Development Using the Versant ODBMS, defendants stated:

Versant Object Technology (NASDAQ:VSNT), a leader in database systems for the network computing infrastructure, today announced TeamVERSANT, a comprehensive set of programs and services for VARs, tool vendors, systems integrators, consultants, ISVs and hardware platform providers.

The TeamVERSANT Partner Program features a new service and support component, as well as a business planning process, co-marketing, training, and consulting services.

The TeamVERSANT program reflects Versant's commitment to provide the best tools, languages and class libraries, as well as superior services for integration, consulting and distribution through its partners to its customers. Designed to encourage new application development and deployment, it reflects Versant's leadership in offering a wide range of resources to companies committed to object oriented development.

*****

"Today, customers are demanding total solutions to solve business problems," said Dave Banks, president and CEO of Versant. "We are committed to developing strong partnerships with companies whose combined products and experience deliver end-to-end advanced object applications. With this partnering approach, our customers can more quickly and easily deploy commercial ODBMS solutions optimized for distributed computing environments."

Versant's partner strategy[.] Versant's strategy is to partner with a select group of companies that offer specialized expertise or complementary application solutions in targeted industries and geographic areas, and then deploy whole product solutions through the teaming of partners. Versant has more than 70 partners worldwide.

44. Then, on or about June 4, 1997, through the Business Wire, defendants made the following announcement in an article entitled Versant Names Ronald Kopeck Vice President of Marketing:

Kopeck will guide overall product management, product marketing, marketing communications and channel marketing efforts for the company. Kopeck comes to Versant with nearly 30 years of high-tech marketing and executive management experience within both large and small corporations. "Ron is a strategic addition to Versant's executive management team whose experience will prove invaluable to Versant as the company continues to grow," said David Banks, president and CEO of Versant. "More and more, companies are turning to object databases to provide critical business advantages. Ron's expertise in growing businesses will play an important role in helping Versant capture an increasing portion of the database market."

"Versant has outstanding products ideal for building network-centric applications for the Internet and corporate intranets," said Kopeck. "The company is poised for high growth and well positioned as a leader in database infrastructure for today's transaction-intensive network needs."

45. Defendants' foregoing statements were materially false and misleading in that, at the time of such statements defendants either knew or recklessly disregarded: (a) that the company was suffering from a dramatic decrease in its earnings due to licensing revenue shortfalls; (b) that the Company was experiencing extremely high expenses caused by a regional concentration of sales which was resulting in incredibly high commission costs; (c) that the Company was spending an excessive amount of income on its marketing programs in order to simply maintain market share; (d) that the Company was spending an enormous amount of money on fees associated with the recruiting of new company personnel, primarily in the sales and marketing division; (e) that the Company was suffering from severe problems causing increased costs and material adverse effects on the Company's earnings; (f) that the Company was encountering significant problems and delays associated with various projects due to the complexity of the projects which were contributing to high costs and eroding revenue; (g) that the Company had entered into less than profitable partnerships/projects in order to artificially increase its earnings; (h) that the Company was plagued by internal inefficiencies in forecasting, financial control, and execution; (i) that the forecasts of strong revenue and EPS growth for Versant in fiscal 1997 were false and not genuinely believed by the defendants, as they were aware of the adverse information set forth above which contradicted these forecasts; and (j) that as a result of all of the above, Versant was not on track to generate strong revenue and earnings growth in fiscal 1997, but, in fact, was suffering from declining revenue and EPS growth.

46. Defendants continued on with their plan to convince the public that Versant was stable, profitable, and in a stage of continued growth, by making the following announcement on or about June 13, 1997, in a Business Wire article entitled Versant Software Available for Trial From Corporate Web Site, even though the Company was in no financial condition to make such an offer:

Versant Object Technology (NASDAQ:VSNT), the leader in database systems for the network computing infrastructure, today announced it will begin making available 60-day trial versions of its object database management system (ODBMS).

Beginning Friday, June 20, users may download three products from Versant's corporate Website (www.versant.com), with additional products to follow. The first products available include the Versant ODBMS Version 5.0 for C++, the Versant ODBMS Version 4.0 for Java (currently in beta), as well as Version 1.1 of Versant Web/VIA (Versant Internet Adapter), Versant's solution for Web enabling client/server applications.

The products will be available for the Windows NT and Sun Solaris platforms. Trial versions are fully functional and include all documentation and free technical support via e-mail. CD-ROM and Tape versions are also available upon request.

The free trial software offers companies a low risk option for exploring the unique and powerful features of the Versant object database. Corporate developers and programmers can download products and test them in their own computing environments by developing prototypes or conducting commercial evaluations.

47. Then, on or about July 17, 1997, in a Business Wire release defendants issued the following press release entitled Versant Relocates and Expands Corporate Headquarters To Support Continued Growth; Knowledge Center to Enhance Customer Service and Training, which stated:

With today's move, along with the recent expansion of their European headquarters, Versant is supporting growing demand for its products as well as an increase in employee workforce. Versant's new address is: 6539 Dumbarton Circle, Fremont, CA 94555. Versant can be reached by phone at 510/789-1500 or by fax at 510/789-1515.

Comprising 55,000 square feet of space, the Fremont facility is more than three times larger than Versant's previous location. A key component of the new facility is Versant's Knowledge Center, a fully-functional, self-contained customer service and training area. The Knowledge Center hosts specialized training, product demonstrations and customer conferences, and allows Versant to enhance their customer service and support.

"The relocation and expansion of our domestic corporate offices, along with the recent expansion of our European headquarters, allows us to keep pace with the world-wide growth and demand for our object database solutions and the increased adoption of Versant products for application deployment within intranets and the Internet," said Dave Banks, president and CEO of Versant.

"With our new Knowledge Center, Versant offers a world-class facility to its employees with an emphasis on meeting the service, support and training needs of our customers."

Today, Versant employs over 150 people and this new facility will accommodate the overall growth of the company. Versant, which went public in July of 1996, had a revenue increase of 55 percent from 1995 to 1996.

48. Defendants' foregoing statements were materially false and misleading in that, at the time of such statements defendants either knew or recklessly disregarded: (a) that the company was suffering from a dramatic decrease in its earnings due to licensing revenue shortfalls; (b) that the Company was experiencing extremely high expenses caused by a regional concentration of sales which was resulting in incredibly high commission costs; (c) that the Company was spending an excessive amount of income on its marketing programs in order to simply maintain market share; (d) that the Company was spending an enormous amount of money on fees associated with the recruiting of new company personnel, primarily in the sales and marketing division; (e) that the Company was suffering from severe problems causing increased costs and material adverse effects on the Company's earnings; (f) that the Company was encountering significant problems and delays associated with various projects due to the complexity of the projects which were contributing to high costs and eroding revenue; (g) that the Company had entered into less than profitable partnerships/projects in order to artificially increase its earnings; (h) that the Company was plagued by internal inefficiencies in forecasting, financial control, and execution; (i) that the forecasts of strong revenue and EPS growth for Versant in fiscal 1997 were false and not genuinely believed by the defendants, as they were aware of the adverse information set forth above which contradicted these forecasts; and (j) that as a result of all of the above, Versant was not on track to generate strong revenue and earnings growth in fiscal 1997, but, in fact, was suffering from declining revenue and EPS growth.

49. Defendants continued to tout the Company's current state of affairs and future outlook by announcing numerous partnerships and licensing agreements in the upcoming months, despite their knowledge and/or reckless disregard of the myriad of problems plaguing the Company which would effect the execution of those agreements. On or about July 21, 1997, in a Business Wire release entitled Versant Teams with Industry Leader IONA Technologies to Deliver Enhanced Integration for Distributed Object Computing; New ODBMS/ORB Adapter Simplifies Development of Scalable CORBA Applications, defendants made the following announcement:

Versant Object Technology (NASDAQ:VSNT) and IONA Technologies (NASDAQ:IONAY) today announced commercial availability of the Orbix-Versant Adapter, an integration tool providing support for CORBA development between the companies' leading distributed object products, Versant Release 5.0 and Orbix., respectively.

*****

According to Ron Kopeck, vice president of marketing for Versant, companies are finding that object request brokers and object databases are complementary technologies for implementing enterprise applications. "OVA, when used with the Versant ODBMS and Orbix, offers customers an ideal environment for building and deploying commercial enterprise-class applications. Many of Versant's customers are adopting CORBA, and substantial numbers of potential customers want to use an object database in conjunction with CORBA. OVA helps to make product selection a much easier process."

50. On or about July 21, 1997, in a Business Wire article entitled Versant Enhances Distributed Object Application Performance With ObjectSpace Streaming "Toolkit" License Agreement, defendants made the following announcement:

Versant Object Technology (NASDAQ:VSNT) and ObjectSpace Inc. today announced a licensing agreement to integrate the ObjectSpace Streaming (Toolkit) with Versant's object database technology to dramatically enhance application performance.

*****

"Our joint development with ObjectSpace will empower developers using the Versant database with a set of features critical for solving a variety of common database problems," said Ron Kopeck, vice president of marketing for Versant. "This packaging will provide customers with an ability to transport and guarantee delivery of objects anywhere."

51. On or about July 28, 1997, through the M2 Presswire, in an article entitled NEXOR & Versant partnership to deliver Directory Server products HIGHLIGHT: New directory products will be capable of storing 20 million entries, defendants stated:

Directory technology will be taken to a new level of performance following the announcement of a partnership between NEXOR, an international electronic Messaging and directory specialist, and Versant Object Technology, a leader in database systems for the networking computing infrastructure.

This partnership will result in Versant's object database being incorporated into NEXOR's new generation of Directory Server products, in anticipation of the developing role of directories in the growing intranet/extranet environment. NEXOR's new server products will be capable of storing more than 20 million entries and will be available by the first quarter of 1998.

*****

"We are excited to be working on these new products with NEXOR, a company that has been at the forefront of directory technology for many years. Versant, itself, has become a premier provider of Internet infrastructure management solutions - as evidenced by our technology relationships with companies like Spyglass," said David Banks, Versant Chief Executive Officer. "Even though NEXOR Directory Server products already offer resilience and performance, they will now take advantage of the increased scalability, reliability and performance that our object database delivers for this infrastructure."

52. On or about July 30, 1997, through the Business Wire, defendants made the following statements in an article entitled Versant and Buzzeo Provide High Performance Solutions Over the Internet and Distributed Network Environments; Solution Enables Universities To Meet IT Demands for Complex Data, Scalability:

Versant Object Technology Corp. (NASDAQ:VSNT), the leader in database systems for the network computing infrastructure, and Buzzeo, Inc. today announced their partnership to provide high performance, scalable enterprise applications over the Internet, intranets and other large distributed network environments.

Buzzeo will embed the Versant object database (Versant ODBMS) into their ZEOLogix Framework, the core of a suite of comprehensive administrative software for higher education. The enhanced solution will enable colleges and universities to handle increasingly complex computing demands, such as the need to exchange complex data with end users distributed throughout the world and to scale applications to a large number of users.

"Today, colleges and universities face growing information demands that can only be solved by a network computing architecture. They need to send and receive complex forms of information with students and staff across the globe, unite disparate computer systems within a university or across several universities, and easily maintain and update these various information systems -- all within a leaner IT budget," said David Banks, president of Versant. "The Buzzeo and Versant solution, with features that allow for distributed computing, remote updating and scalability, is designed to meet their computing needs."

53. On or about July 31, 1997, through the Business Wire, defendants issued the following press release entitled Reports Q2 1997 Revenue Growth of 60% and $ .02 EPS:

Versant Object Technology (NASDAQ:VSNT) today reported total revenues of $ 7.4 million for the three months ended June 30, 1997, a 60% increase from $ 4.6 million for the same period last year.

Net income for the second quarter 1997 was $ 163,000 or $ .02 per share on 9.1 million average shares outstanding, compared to $ 474,000 or $ .07 per share on 6.9 million average shares outstanding for the same quarter of 1996. For the six-month period ended June 30, 1997, revenues grew 43% to $ 11.1 million, from $ 7.8 million reported for the same period of 1996. Net loss for the six months ended June 30, 1997 was $ .10 per share on 9 million average shares outstanding, compared to a profit of $ .02 per share on 6.5 million average shares outstanding for the same period of 1996.

"We were delighted that our revenue, which grew 95% from Q1 levels rebounded in the second quarter," said David Banks, Versant's President & CEO. "Our business showed strength in new account growth, increased sales in our expanded direct channel, and more balance geographically and across industry segments. Internet activity for Versant, in both customer acceptance as an infrastructure provider and in new product availability, was strong during Q2. The 86% growth in license revenues from a year ago reflected the benefits of a 97% increase in our sales force coupled with significant new product availability. Service revenues grew 10% in Q2 1997 compared to the prior year period."

"Versant's largest Q2 shipment was $ 3 million in product licenses to the US Government for use in a defense project," added Banks. New customers included: Bascom Global Internet Services, Bell Atlantic, C/Net, Chase Manhattan Bank, Kleinwort Benson, Raytheon, and Southwestern Bell Technology. Late in the quarter Versant booked its largest Internet order to date, $ 1.5 million from Buzzeo Software, a leading supplier of software, consulting and systems integration to higher education. The order shipped in July and will be recognized as revenue in Q3. Several new products were shipped and deployed by customers in the second quarter including: release 5.0 of the Versant database, the VersantWeb application development framework, Versant Internet Adapter for Internet browser database query, the Java Direct Language Interface and the Versant Web Propagation Facility. All of these new products are available in their entirety as downloads from the Versant www.versant.com Website. In order to accommodate company growth, in early July Versant relocated its headquarters to a newly constructed facility in Fremont, CA.

54. Defendants' foregoing statements were materially false and misleading in that, at the time of such statements defendants either knew or recklessly disregarded: (a) that the company was suffering from a dramatic decrease in its earnings due to licensing revenue shortfalls; (b) that the Company was experiencing extremely high expenses caused by a regional concentration of sales which was resulting in incredibly high commission costs; (c) that the Company was spending an excessive amount of income on its marketing programs in order to simply maintain market share; (d) that the Company was spending an enormous amount of money on fees associated with the recruiting of new company personnel, primarily in the sales and marketing division; (e) that the Company was suffering from severe problems causing increased costs and material adverse effects on the Company's earnings; (f) that the Company was encountering significant problems and delays associated with various projects due to the complexity of the projects which were contributing to high costs and eroding revenue; (g) that the Company had entered into less than profitable partnerships/projects in order to artificially increase its earnings; (h) that the Company was plagued by internal inefficiencies in forecasting, financial control, and execution; (i) that the forecasts of strong revenue and EPS growth for Versant in fiscal 1997 were false and not genuinely believed by the defendants, as they were aware of the adverse information set forth above which contradicted these forecasts; and (j) that as a result of all of the above, Versant was not on track to generate strong revenue and earnings growth in fiscal 1997, but, in fact, was suffering from declining revenue and EPS growth.

55. On or about August 5, 1997, in a Business Wire article entitled Primus and Versant Partner for Customer Support Applications, defendants made the following statements:

Technology alliance brings cost savings and customer satisfaction to technology support organizations Primus(TM), which develops and markets problem resolution software and services, and Versant Object Technology Corp. (NASDAQ:VSNT), the leader in database management systems for the network computer infrastructure, today announced a partnership to maximize cost savings and increase customer satisfaction for technology support organizations.

*****

"As packaged enterprise client/server applications incorporate the Internet and grow more complex overall, high performance becomes more challenging to maintain," said Ron Kopeck, vice president of marketing at Versant. "Those support organizations using distributed computing technologies such as Primus products integrated with Versant's object database can compete more effectively for valued customers. Through a distributed computing approach, companies can more easily adapt their systems to reflect new business scenarios, can scale to very large numbers of users, and can offer end users the performance levels required to satisfy valued customers."

56. Defendants continued to perpetrate their scheme with the following announcement made on or about August 19, 1997, through the Business Wire, in a press release entitled Versant Object Technology Announces Succession Plan:

Versant Object Technology Corporation (NASDAQ:VSNT) announced today that, as part of preparing for the next stage of the Company's development, it has commenced a search for a new Chief Executive Officer.

David Banks, the Company's current Chief Executive Officer, will continue as CEO until a new CEO is selected, and will remain a member of the Company's Board of Directors thereafter.

Mark Leslie, the Company's Chairman of the Board, stated, "Dave has done a great job at bringing Versant to its current level and we are all very appreciative of his efforts and success. Versant has commenced a search for a new CEO to take the Company to the next level in its growth. The Board has not established a time frame for appointing a successor, as we will be seeking an exceptional individual. Dave will participate in the selection of the new CEO, and will continue as CEO until his successor is appointed."

Mr. Banks stated, "I am very proud of Versant's accomplishments over the past four years, and believe that Versant will become the next major database company. I look forward to continuing as CEO of Versant until my successor has been selected, and to assist my successor in any way that I can."

57. The market reacted positively to defendants' numerous misrepresentations. By early September, 1997, Versant's common stock was trading at more than $13 per share. But instead of disclosing the true financial condition of the Company, defendants' continued to perpetrate their scheme upon the financial community. On or about September 29, 1997, through the Business Wire, defendants made the following statements in an article entitled Versant Taps Verity's Search Technology to Enhance Object Database with Multimedia Capabilities; Verity's SEARCH'97 to Enable Full-text Searching for Versant ODBMS Users:

Versant Object Technology (NASDAQ:VSNT), the leader in object database management systems for the network computing infrastructure, andVerity, Inc. (NASDAQ:VRTY), a leading provider of search and retrieval applications for the enterprise and the Internet, today announced Versant has licensed Verity's SEARCH'97 Information Server to integrate text search capabilities into its new Versant/VMA (Versant Multimedia Access) product, which just began shipping. The integration of Verity's technology will enable Versant customers to easily load, access, and incorporate text in a variety of formats as part of the Versant ODBMS.

*****

"Like many corporations today, our customers must contend with an incredible amount of diverse information, from raw text to audio and video files," said Ron Kopeck, vice president of marketing at Versant. "Verity's SEARCH'97 enables us to combine our industry-leading object database management system with Verity's advanced text search and retrieval technology to provide our customer base with an integrated solution for managing a wide variety of information, regardless of format."

58. On the same day, defendants also issued the following press release through the Business Wire entitled Versant Delivers Multimedia Solution for Corporate Intranets; Versant/VMA Enables Management of Complex Multimedia Files and Text Search Capabilities With Verity's SEARCH '97 Engine:

Versant Object Technology (NASDAQ:VSNT) the leader in object database management systems for the network computing infrastructure, today announced Versant Multimedia Access (VMA), a comprehensive database solution for companies that need rapid access and management of complex data within corporate intranets.

Versant/VMA includes an object oriented solution that allows for the storage and management of multimedia files and Verity Inc.'s SEARCH'97 enterprise engine for text search capabilities and rapid access to information stored in the Versant ODBMS.

"With the growth of the Internet, corporate intranets, multimedia and other emerging technologies, companies today need an easy way to manage and store complex data types," said Ronald Kopeck, vice president of marketing at Versant. "Versant/VMA, with the inclusion of the Verity search engine, enables corporate intranet users to easily load, access, and update data in a variety of formats. The new Versant solution enables easy management of multimedia content that would otherwise become overwhelmingly demanding on networks and other resources."

59. Then, on or about October 23, 1997, defendants issued the following press release through the PR Newswire entitled Versant Reports 89% Revenue Growth and $.07 E.P.S.; In Q3, 21 New Customers Were Added From Telecommunications, Finance, and Enterprise Network Arenas:

Versant Object Technology (Nasdaq: VSNT) today announced record revenue for the three and nine months ended September 30, 1997.

For the quarter ended September 30, 1997, the company reported total revenues of $9.4 million, a 89% increase from $4.9 million for the same period in 1996, and up from $7.4 million reported for the prior quarter ended June 30, 1997. Product license revenue grew 137% from the comparable quarter in 1996. The increase in revenues during the quarter primarily reflects an increase in customer demand for the company's products and services within the telecommunications market, an expansion into the finance market, and focus on Internet opportunities that require distributed object computing to enable e-commerce through extranet applications.

Net income for the third quarter of 1997 was $625,000 or $.07 per share on 9.3 million average shares outstanding, compared to $606,000 or $.07 per share on 8.8 million average shares outstanding for the same quarter of 1996. For the nine-month period ended September 30, 1997, revenues grew 61% to $20.5 million, from $12.7 million reported for the same period of 1996. Net loss for the nine months ended September 30, 1997 was $283,000 or ($.03) per share on 8.7 million average shares outstanding, compared to net income of $715,000 or $.10 per share on 7.3 million average shares outstanding for the same period of 1996.

Quarterly Highlights

"We believe these results show that Versant is supported by our end-users and partners," said David Banks, Versant's President and CEO. "Building on our efforts and business this past quarter, the company will increasingly solidify itself in the telecommunications market and aggressively expand into finance and the internet as an infrastructure provider for distributed object databases. The selection of Versant for the deployment of enterprise applications for the intranet and extranet is a testament to some of our unique capabilities such as distributed architecture, scaleable high performance, and our object locking. Versant intends to extend and improve its product portfolio and enhance the quality and breadth of its consulting and service organization."

"Versant added 21 new customers in the third quarter," added Banks. Indirect channel revenues grew to 22% of third quarter license revenue. Significant new customers included DSC, Ciena Corp, NEC America, National Australia Bank, SAIC, Phillips Public Telecom, Cap Gemini, Portugal Telecom, Italia Telecom, KPN Dutch Telecom and Electricite De France. Significant enterprise wide extranet applications are being developed by Dresdner Kleinwort Bensen, Banque Nationale de Paris, Intel, and Buzzeo."

During the quarter, Versant made available two new products related to its ODBMS and an additional platform. VMA, Versant Multimedia Access, based on Verity's Search'97 Information Server, enables automatic loading of multimedia files onto the Versant database for efficient document management. In keeping with Versant's commitment to Java and industry standards, Versant shipped to beta customers its ODMG compliant Java language interface. In addition, Versant became the industry's first database company to ship distributed object support for Microsoft Wolfpack, a high availability option for NT.

As of the date of this press release, Versant's common stock had dramatically increased in value to approximately $18 per share. A staggering gain in value when compared to the dismal price of $4 1/2 per share that the Company's stock had traded at only months earlier, on or about April 3, 1997.

60. However, defendants' foregoing statements were materially false and misleading in that, at the time of such statements defendants either knew or recklessly disregarded: (a) that the company was suffering from a dramatic decrease in its earnings due to licensing revenue shortfalls; (b) that the Company was experiencing extremely high expenses caused by a regional concentration of sales which was resulting in incredibly high commission costs; (c) that the Company was spending an excessive amount of income on its marketing programs in order to simply maintain market share; (d) that the Company was spending an enormous amount of money on fees associated with the recruiting of new company personnel, primarily in the sales and marketing division; (e) that the Company was suffering from severe problems causing increased costs and material adverse effects on the Company's earnings; (f) that the Company was encountering significant problems and delays associated with various projects due to the complexity of the projects which were contributing to high costs and eroding revenue; (g) that the Company had entered into less than profitable partnerships/projects in order to artificially increase its earnings; (h) that the Company was plagued by internal inefficiencies in forecasting, financial control, and execution; (i) that the forecasts of strong revenue and EPS growth for Versant in fiscal 1997 were false and not genuinely believed by the defendants, as they were aware of the adverse information set forth above which contradicted these forecasts; and (j) that as a result of all of the above, Versant was not on track to generate strong revenue and earnings growth in fiscal 1997, but, in fact, was suffering from declining revenue and EPS growth.

61. On or about December 11, 1997, through the PR Newswire, defendants made the following statements in an article entitled Lucent Technologies chips latest version of Internet Directory Server (IDS):

Lucent Technologies and Versant Object Technology Corp. announced today it will be easier for service providers to quickly build robust, low-cost directory services linking people to other people and information for such applications as electronic commerce, Internet telephony, and electronic yellow or white pages.

The companies announced this capability as part of Lucent's latest version of its Internet Directory Server (IDS), now shipping worldwide. Lucent is demonstrating Release 3.0 of IDS, which includes the Versant Object Database Management System (ODBMS), in Booth 2545 at Internet World, taking place in New York from Dec. 10-12.

*****

"ISPs need tools to help them quickly build new revenue-generating services," added Ron Kopeck, vice president of marketing at Versant. "Versant's scalability, support for distributed computing, and remote updating features, combined with Lucent's directory service expertise, provide the kinds of solutions required by ISPs to stay competitive."

62. On or about December 15, 1997, through the PR Newswire, defendants made the following statements in an article entitled Versant Introduces Easy-To-Use Java Interface to Versant ODBMS, Supporting N-Tier Deployment of Multi-User, Java-based Enterprise Applications; Versant Java Interface Offers Developers Performance Gains, Productivity And Flexibility Based on Standard Interface:

Versant Object Technology (Nasdaq: VSNT) announced today the availability of its ODMG 2.0 -compliant Versant Java Interface (VJI)(TM) in late Q4 1997. The Versant Java Interface delivers language interoperability, productivity, flexibility and ease of use in developing and deploying N-tier enterprise applications.

With VJI, Versant is providing 100% Java-persistent object storage, designed to support N-tier, large scale and distributed application development and deployment for thousands of endusers.

"Versant is embarking on a strategy of making the only fault-tolerant, high-performance ODBMS in the marketplace into a high-performance, Java-savvy ODBMS chosen by developers and businesses to reduce the time-to-market of enterprise applications," said Ron Kopeck, Vice President of Marketing at Versant.

In addition, because Versant Java applications can share objects written in most languages, businesses can reuse components written in most languages, while creating new applications in the language of the Internet - Java, Kopeck explained. "This is true language interoperability and means real savings in application development time and deployment."

63. On or about January 5, 1997, through the PR Newswire, defendants disseminated the following press release entitled Versant Joins Rational(R) Rose Link Partners Program to Integrate Rational Rose(R) With the Versant Enterprise Component Management System; Versant RoseLink Enables Developers to Use Rational Rose to Model Versant Applications which stated:

Rational(R) Software Corporation (Nasdaq: RATL) today announced that Versant Object Technology (Nasdaq: VSNT) has joined Rational Software Corporation's Rose Link Partners Program. Versant, a premier Rose Link Partner, offers a Rational Rose(R) interface to its Versant object database management system (ODBMS), which allows developers to use Rational Rose to model Versant applications. The Rational Rose Link Partners Program is designed to enable independent software vendors (ISVs) and third-party developers to integrate their products with Rational Rose for a cohesive integrated solution. The combination of Rational Rose and the Versant ODBMS will allow developers to model how an application can be constructed, thus improving development time, accuracy, program maintenance and lifecycle.

Versant RoseLink Solution

The Versant RoseLink allows developers to use Rational Rose to build Versant applications. The combination of the two products will support round-trip development, allowing object models defined in Rational Rose to generate Versant-enabled header files written in C++ and Java. Likewise, applications written in Versant can be brought into Rational Rose for analysis and design work.

*****

"Our partnership with Rational provides developers with 'best of breed' development tools to leverage the only fault-tolerant ODBMS in the marketplace. Both Versant and Rational are committed to supporting object-oriented and component-based software development for rapid deployment of enterprise applications that meet real-time customer needs," said Ron Kopeck, vice president of marketing at Versant. "Our customers will use Rose and RoseLink to visualize models of their solutions before they spend any time actually writing code," continued Kopeck. "This lets them fine tune their plans in advance and can save hours of test time."

64. In response to months of positive representations made by defendants regarding the present and future financial and business outlook for Versant, in January of 1998, Josepthal & Co. Inc. released the Focus List Review which is a monthly publication highlighting those "Buy-rated" stocks that various analysts believe will materially outperform the general market, on a short- to intermediate-term basis.

65. The following analyst report by Bert Hochfeld , which was based on and repeated information provided by defendants only days before the release of the report, was included in the January issue of the Focus List Review. The report stated:

VERSANT OBJECT TECHNOLOGY (VSNT)

We believe that Versant has completed another strong quarter to conclude 1997 with overall revenues growing in excess of 90% and license revenues continuing to expand at triple-digit rates. We believe that cash collections were strong during the quarter with a payment in excess of $1 million received from Spring (FON-NYSE-$58 5/8-NR), a major continuing customer of Versant. DSO, reflecting the typical seasonal pattern of 4Q97, probably finished at near 90 days, up from 79 in 3Q97, but hardly unusual for a company that does not use third party financing to finance its receivables. The company plans to announce its new CEO on January 7; we believe that its new leader has a strong and well recognized track record and should be successful in managing the company during the transition to new levels of revenues and profitability.

Perhaps of equal significance to the strong results of 4Q97 is the company's strong visibility with regard to 1Q98 revenues and EPS. We believe that the company is now confronting several major account opportunities that are likely to close in 1Q98. It is our belief that Versant did not need to impact its 1Q98 pipeline in order to achieve 4Q97 results; as a result we believe that the company is likely to record an exceptional year-over-year gain and will be in a position to increase its guidance on overall revenues and EPS for 1998. Overall, we believe that consensus estimates for 1998 are likely to settle in the range of $55 million and $0.55 in EPS after the company releases 4Q97 results on January 29. Such expectations relate to nearly triple digit revenue growth. In our view, the continuation of triple digit growth is likely to attract momentum type investors and to results in a strong relative performance for the company's P/E ratio. Overall, we believe that triple-digit growth is likely to command a 50x earnings multiple or a 5x revenue multiple during the course of the new year. This implies a price target of at least $25/share or close to 80% above current quotations. We continue to recommend purchase at current levels.

In our view, the three investment issues that confront investors in making a commitment in Versant shares relate to the following areas: 1) Is the object database market truly exploding as a results of a major paradigm switch from relation and from object relational technology?; 2) What is the company's relative competitive position within the object database market?; and 3) Will the company maintain its ability to execute satisfactorily as it continues to grow and needs to service demanding major account customers?

1) In our view, the marketplace is rapidly moving to embrace object technology products across a broad spectrum of application, and we believe that after 10 years of searching for a market that the object paradigm has developed a strong demand environment that is likely to persist indefinitely. We believe that Versant's announcement last quarter of its success in capturing Intel (INTC-OTC-$70 1/4-HOLD) as a major customer is likely to prove to be one of the important events marking the emergence of the object database paradigm. The specific application for which Intel has selected the Versant product relates to the construction of an extremely large and complex help desk product written in Java and being deployed on the Web. We believe that this is the kind of application, which requires an object database, will become increasingly accepts as part of a standard corporate IT infrastructure. Another interesting win this quarter relates to Lucent, a long time customer, who has developed an information service on the Web based on an object technology database, which is likely to be deployed by dozens of service providers. Although much more could be written regarding the emergence of the Object paradigm, out point is simply that the space is burgeoning in terms of broad market acceptance of this technology and this trend, if anything, is likely to accelerate based on the kinds of application users are deploying for the foreseeable future.

2) Versant is the leader for high performance, multi-user object database technology and is likely to retain this lead for several years. The company's principle competitor, Object Design, has an excellent technology for single-user applications and as such, it dominates the market for CAD/CAM/CAE applications that use object technology. While Object Design has a well regarded technology, it hasn't proved able to successfully scale in applications with thousands of users, and it has lost some significant mind share to Versant in the past 12 months. The new competitive entry is the Jasmine product currently being offered by Computer Associates (CA-NYSE-$53-HOLD). In many ways the emergence of Jasmine is more of a technology validation as opposed to a competitive threat for Versant. Jasmine is not anticipated to reach commercial production until the middle of this year, and the track record of Computer Associates in deploying technology outside of its specialist field of system tools and utilities is not one that is likely to strike fear into the hearts of investors. In our view, the most potent competitive threat would be the emergence of Oracle (ORCL-OTC-$22 5/16-BUY) as a player in this space. At this juncture, we do not see Oracle 8 as a product with much in the way of object capabilities, and we do not see the Oracle development organization as being capable of producing an object technology database product in the foreseeable future. In our view, Oracle is more likely to represent a potential acquisition as opposed to a Versant competitor.

3) Although Versant has already endured an initial stumble in 1997, we believe that the company is well poised to execute successfully on its major opportunities in 1Q98. It has taken significant steps to improve its visibility through its relatively new VP of marketing. It has recruited an end-user sales force, now over 40, which is a significant accomplishment. It is poised to diversify its geographical and distribution presencee during the curse of 1998. Its new CEO is likely to be an effective company spokesman who will be able to continue to provide effective strategic vision in conjunction with a track record in closing major account opportunities. While all of the smaller companies that we follow have a significant risk in terms of execution, we believe that Versant has taken the appropriate steps to minimize that risk and to deliver stable financial performance within the context of a rapidly changing technology environment.

66. Subsequently, on or about January 8, 1998, through the PR Newswire, defendants issued the following press release entitled Versant Announces New CEO; Nick Ordon, Formerly of Lotus, Will Lead Versant's Next Growth Phase which stated:

Versant Object Technology (Nasdaq: VSNT), the leader in enterprise component management systems for the network computing infrastructure, today announced that Nick Ordon has been named the corporation's chief executive officer. Ordon, most recently the vice president and general manager of Lotus Messaging at Lotus Development Corporation, assumed the Versant post beginning yesterday. His appointment culminates a six-month search for a new CEO to take the company to the next level in its growth.

Ordon brings experience and vision in both product development and marketing to Versant. As the VP and GM for Lotus Messaging, he was responsible for more than $600 million in annual revenue. Prior to Lotus, Ordon held the position of VP and GM at Lockheed Martin Corporation's Commercial Business Unit. Ordon, a former Air Force pilot, spent 13 years with Hewlett-Packard, leaving his position as the general manager of HP's NetWare Operation in 1994.

Ordon announced his acceptance of the CEO position saying, "Versant is well positioned to be the next big database company on the forefront of an exploding industry embracing the component and N-tier paradigm for enterprise application computing. Versant's products and customer base provide a strong foundation from which we can expand our products and services."

David Banks, Versant's outgoing CEO, will continue to serve on the Versant board of directors. Banks said, "We are excited about Nick and the experience and breadth he brings to Versant for our next growth phase. Nick has run the cc:Mail and Lotus Notes product lines at Lotus, a company that was a pioneer in distributed enterprise applications. He has experience in the industry categories most important to Versant, such as telecom, Internet and finance in the distributed enterprise software market, and fully understands the plans and requirements of global corporate IT managers."

67. Defendants' foregoing statements were materially false and misleading in that, at the time of such statements, defendants either knew or recklessly disregarded: (a) that the company was suffering from a dramatic decrease in its earnings due to licensing revenue shortfalls; (b) that the Company was experiencing extremely high expenses caused by a regional concentration of sales which was resulting in incredibly high commission costs; (c) that the Company was spending an excessive amount of income on its marketing programs in order to simply maintain market share; (d) that the Company was spending an enormous amount of money on fees associated with the recruiting of new company personnel, primarily in the sales and marketing division; (e) that the Company was suffering from severe problems causing increased costs and material adverse effects on the Company's earnings; (f) that the Company was encountering significant problems and delays associated with various projects due to the complexity of the projects which were contributing to high costs and eroding revenue; (g) that the Company had entered into less than profitable partnerships/projects in order to artificially increase its earnings; (h) that the Company was plagued by internal inefficiencies in forecasting, financial control, and execution; (i) that the forecasts of strong revenue and EPS growth for Versant in fiscal 1997 were false and not genuinely believed by the defendants, as they were aware of the adverse information set forth above which contradicted these forecasts; and (j) that as a result of all of the above, Versant was not on track to generate strong revenue and earnings growth in fiscal 1997, but, in fact, was suffering from declining revenue and EPS growth.

68. Then, on January 13, 1998, defendants shocked the financial community by announcing that the Company expects to report fourth quarter and year losses on increased revenues for both periods. Defendants issued the following press release through the PR Newswire entitled Versant Announces Preliminary Fourth Quarter Results Estimated Revenue Up 60% From Q4, 1996; Net Loss of $.12 To $.15 Per Share Expected for Q4, 1997:

Versant Object Technology Corp. (Nasdaq: VSNT) today announced that it expects total revenues for the fourth quarter ended December 31, 1997 to be approximately $8.8 million to $9.1 million as compared to $5.6 million reported for the fourth quarter of 1996. This represents an approximate increase of 60% over fourth quarter 1996 revenue. Based upon Q4 preliminary results, total revenue for 1997 will range from $29.4 million to $29.7 million, an increase of approximately 60% over 1996 total revenues of $18.4 million.

The company expects to report a net loss of between $.12 and $.15 per share for the fourth quarter of 1997 in comparison with a profit of $.07 per share in the fourth quarter of 1996. Total loss for 1997 is expected to range from $.15 to $.18 per share compared with a per share profit of $.18 for 1996.

The company attributes the decrease in earnings to a combination of a license revenue shortfall resulting principally from the timing and complexity of large project opportunities as well as higher sales and marketing expenses. The higher expenses were caused by unusual regional concentrations of sales which resulted in higher commission costs, higher than expected spending on marketing programs and higher than expected fees associated with the recruiting of new company personnel, primarily in the sales and marketing area.

69. On or about January 14, 1997, in an article entitled Loss Forecast on Expenses, Licensing-Revenue Picture, the Wall Street Journal further reported:

Versant Object Technology, Inc. said it would report a fourth-quarter loss due to growing expenses and a shortfall in licensing revenue. The Fremont, Calif., maker of object database systems said it expects to post a loss of 12 to 15 cents a share. In the year-earlier quarter, Versant earned seven cents a share. First Call analysts had projected the company's latest quarterly earnings at 10 cents a share. In Nasdaq Stock Market trading yesterday, Versant's shares plunged $4.25, or 45%, to $5.125 in heavy trading. The projected loss caught analysts off guard, especially because the company also said it expects revenue for the quarter to run about 60% ahead of the year-ago period. In addition to the licensing-revenue shortfall, the company said sales and marketing expenses had exceeded expectations.

70. These disclosures caused the stock price of Versant to plummet from $9 3/8, on January 12, 1998, to $5 1/8 on January 13, 1998 on volume of 2,528,700 shares. A drop of 45% in one day and a drop of over 70% from the stock's high of $18 1/4 on October 21, 1997!

71. While defendants were issuing the materially false and misleading statements alleged throughout the Complaint, certain insiders were taking advantage of their knowledge of the adverse facts which were not fully disclosed to the public until the end of the Class period. The extent of defendants' trades, the timing of their trades and the nature of their trading habits all establish that defendants had possession of the material adverse facts alleged herein. Specifically, the Individual Defendants sold more than 144,000 shares of the Versant stock they owned for proceeds of over $1.8 million dollars.

72. The Individual Defendants sold the following amounts of Versant shares at artificially inflated prices throughout the Class Period while in possession of material non-public information which was not disclosed to the investment community at the time of these transactions:

NAME                      DATE         SHARES     PRICE           PROCEEDS
----                      ----         ------     -----           --------

LAWRENCE J. PULKOWNIK     08/06/97      1,029     $ 8.38     $    8,623.02

GEORGE C. FRANZEN         08/18/97      1,677     $ 8.88     $   14,891.76

JAMES LOCHRY              08/22/97      4,651     $ 9.88     $   45,951.88

LAWRENCE K. ORR3          08/27/97     87,213     $11.62     $1,013,415.00

GEORGE C. FRANZEN         11/21-                                          
                          11/28/97      5,100     $15.404    $   78,540.00

JAMES LOCHRY              11/24/97     25,000     $15.25     $  381,250.00

LAWRENCE PULKOWNIK        11/25-                                          
                          11/26/97     20,000     $15.035    $  300,600.00
                                                             -------------

TOTAL                                                        $1,843,271.60

73. The market for Versant is an efficient market for the following reasons, among others:

(a) Versant stock satisfied the requirements for listing, and was listed, on the highly efficient NASDAQ stock exchange;

(b) As a regulated issuer, the Company filed periodic reports with the SEC; and

(c) The Company's trading volume in its stock was substantial, reflecting numerous trades, as high as 726,600 million shares in one day during the Class Period.

74. The statutory safe harbor providing for forward-looking statements under certain circumstances does not apply to any of the false forward-looking statements pleaded in this Complaint. None of the forward-looking statements pleaded herein were sufficiently identified as a "forward-looking statement" when made. Nor did meaningful cautionary statements identifying important factors that could cause actual results to differ materially from that in the forward-looking statements accompany those statements. To the extent that the statutory safe harbor does apply to any forward-looking statements pleaded, the defendants are liable for those false forward-looking statements because at the time each of those statements was made, the speaker actually knew the forward-looking statement was false and the forward-looking statement was authorized and/or approved by an executive officer of Versant who actually knew that those statements were false when made.

75. Plaintiff incorporates by reference all preceding paragraphs of the Complaint.

76. During the Class Period, defendants engaged in a course of conduct, described above, pursuant to which they knowingly or recklessly engaged in acts, transactions, practices, and a course of business which operated as a fraud upon plaintiff and the other members of the Class; made various untrue statements of material fact and omitted to state material facts necessary to make statements made, in light of the circumstances under which they were made, not misleading to plaintiff and the other Class members; and employed manipulative and deceptive devices and contrivances in connection with the purchase of Versant securities.

77. The purpose and effect of the defendants' plan, scheme, conspiracy and course of conduct was to artificially inflate the price of Versant common stock and then artificially maintain the market price of the stock in order to increase the value of their own Versant holdings, including their options to purchase Versant stock and right to compensation incentives if Versant stock exceeded certain levels, and maintain the perks of their offices.

78. The Individual Defendants, through their positions in the Company, at the time of the allegations herein, had actual knowledge of the material omissions and/or the falsity of the statements set forth in the foregoing paragraphs and intended to deceive plaintiff and the other members of the Class or, in the alternative, acted with reckless disregard for the truth when they failed or refused to ascertain and disclose in the aforementioned documents the full extent of the true facts to plaintiff and the other members of the Class.

79. As a result of the foregoing, the market price of Versant common stock was artificially inflated during the Class Period. In ignorance of the materially false and misleading nature of the misrepresentations, described above, made by defendants and the deceptive and manipulative devices and contrivances employed by the Individual Defendants, plaintiff and the other members of the Class relied, to their detriment, on the statements made by defendants and/or the integrity of the market price of the stock in purchasing Versant stock. Had plaintiff and the other members of the Class known of the material adverse information not disclosed by the defendants, they would not have purchased Versant stock at the artificially inflated prices that they did.

80. Plaintiff and the other members of the Class have suffered substantial damages as a result of the wrongs alleged herein.

81. By reason of the foregoing, defendants have violated, or aided and abetted violations, of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, in that they: (a) employed devices, schemes and artifices to defraud; (b) made untrue statements of material fact or omitted to state material facts necessary to make the statements made not misleading; and (c) engaged in acts, practices and a course of business which operated as a fraud or deceit upon plaintiff and the other members of the Class in connection their purchases of Versant common stock during the Class Period.

82. Plaintiff incorporates by reference all preceding paragraphs of the Complaint.

83. The Individual Defendants acted as controlling persons of Versant within the meaning of §20 of the Exchange Act. By reason of their respective positions, they had the power and authority to cause Versant to engage in the wrongful conduct complained of herein.

84. By reason of such wrongful conduct, defendants are liable pursuant to §20 (a) of the Exchange Act. As a direct and proximate result of the defendants' wrongful conduct, plaintiff and the other members of the Class suffered damages in connection with their purchases of Versant common stock during the Class Period.

WHEREFORE, plaintiff, and the Class, pray for judgment as follows:

1. Declaring this action to be a proper class action pursuant to Rules 23(a) and 23(b)(3) of the Federal Rules of Civil Procedure on behalf of the Class defined herein;

2. Awarding plaintiff and the members of the Class compensatory damages;

3. Awarding plaintiff and the members of the Class pre-judgment and post-judgment interest, as well as their reasonable attorneys fees, expert witness fees and other costs; and

4. Awarding such other relief as this Court may deem just and proper.

Plaintiff hereby demands a trial by jury.

¹ Hereinafter referred to as "Versant" or the "Company."

² Emphasis added unless otherwise indicated.

³ Shares sold held by a family member.

⁴ Average sale price.

⁵ Average sale price.