Stanford University Law School - Securities Class Action Clearinghouse

 

MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH (68581)
ALAN SCHULMAN (128661)
600 West Broadway
Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058

BARRACK, RODOS & BACINE
STEPHEN R. BASSER (121590)
600 West Broadway
Suite 1700
San Diego, CA 92101
Telephone: 619/230-0800

BERNSTEIN LIEBHARD & LIFSHITZ
MEL E. LIFSHITZ
274 Madison Avenue
New York, NY 10016
Telephone: 212/779-1414

KAUFMAN, MALCHMAN, KIRBY
& SQUIRE, LLP
JEFFREY H. SQUIRE
LOUIS SANDLER
919 Third Avenue, 11th Floor
New York, NY 10022
Telephone: 212/371-6600

Attorneys for Plaintiffs

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

RICHARD GEFFEN and TAMMY
NEWMAN, On Behalf of Themselves
and All Others Similarly Situated,

                      Plaintiffs,

           vs.

VERSANT OBJECT TECHNOLOGY
CORP., DAVID BANKS, JAMES R.
LOCHRY, LAWRENCE J.
PULKOWNIK, GEORGE C. FRANZEN,
RONALD KOPECK, GARY RHEA and
LAWRENCE K. ORR,

                      Defendants.
___________________________________  

No. C-98-0440-MC
[filed Feb. 5, 1998]

CLASS ACTION

COMPLAINT FOR
VIOLATION OF THE
SECURITIES EXCHANGE
ACT OF1934

Plaintiffs Demand A
Trial By Jury

SUMMARY OF ACTION

1. This is a class action on behalf of all individuals who purchased or otherwise acquired the common stock of Versant Object Technology, Inc. ("Versant" or the "Company") between April 28, 1997 and January 13, 1998, inclusive (the "Class Period") seeking to remedy violations of §§10(b) and 20(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Securities and Exchange Commission ("SEC") Rule 10b-5.

2. This action arises out of defendants' fraudulent scheme and common course of conduct to artificially inflate and maintain Versant's stock price by making materially false and misleading statements and/or omissions concerning Versant's business and financial condition, the success of its products, its growth and earnings, its ability to sustain its growth and the financial benefits that would enure to Versant and its shareholders.

3. Versant is a provider of high-performance enterprise component management systems for commercial applications in distributed computer environments. Incorporated in August 1988, Versant began shipment of its principal product, the Versant ODBMS ("Object Database Management System") in 1991. During 1Q97, Versant stock was a poor performer, declining significantly amid investors' concern about the Company's business and prospects and negative earnings per share ("EPS") for 1Q97 following posting a disappointing 4Q96 EPS of $0.08. By the beginning of the Class Period, Versant's top insiders became determined to halt the decline in Versant stock and drive Versant stock to higher, artificially inflated levels so that they could capitalize on that price inflation by selling off large amounts of their shares of Versant stock which they owned to pocket huge profits in illegal insider trading and personally profit from their dishonest acts.

4. Defendants knew that Versant was encountering substantial problems with its business, which if disclosed, would result in its stock trading at a significantly lower price. Shortly before the commencement of the Class Period, Versant's stock had already declined to $4.50 per share by reason of its poor performance. Although defendants had convinced analysts that the fundamentals of the Company were stable and that Versant was in a state of growth, in truth, Versant was suffering from significant difficulties selling or licensing its product and was experiencing significantly increasing marketing expenses, declining margins and reduced profitability, seriously prejudicing its economic horizons. Significant problems such as poor product demand and resulting weak licensing revenue, heightened expenses caused by regional concentration of sales and heightening commission costs that were already negatively impacting Versant, would continue to have a material adverse impact on its business in the near term and would result in Versant's suffering a further and serious sharp erosion in its stock price in the event these adverse events became public.

5. In order to support an artificially inflated Versant stock price while they unloaded substantial amounts of their own stock, Versant's insiders not only failed to disclose the problems plaguing Versant, but also affirmatively misrepresented and induced the market to falsely believe, among other things, that demand for Versant's products and its business' momentum was "strong," that its performance was "on track," that Versant was "well positioned," its growth was "robust" and that it would be profitable in 4Q97. As a result of defendants' false statements, reassurances and forecasts, Versant's stock increased from as low as $4.50 at the beginning of the Class Period to $18.25 per share on or about October 21, 1997 -- a 300% increase in just approximately six months.

6. Versant's stock continued to trade at artificially inflated levels until the Company disclosed its dismal 4Q97 on January 13, 1998 (in which it suffered an EPS loss of $.23, despite leading the market to believe it would enjoy a profitable quarter) and the news of Versant's poor business condition was revealed. 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 huge volume of over 2.5 million shares -- a drop of 45% in just one day.

7. The revelation of Versant's poor business condition and performance stunned the market. One misled market analyst who had previously rated Versant a "strong buy" in October 1997 and only days before the January 13, 1998 unfavorable earnings announcement was assured by management that the Company was "on track" to meet EPS expectations of $.08, was shocked, labelling the results as the "Big 4Q Miss" and commenting that "management faces a serious credibility challenge."

8. However, before the startling public revelations about Versant's serious business problems and Versant's stock price collapse, Company insiders Franzen, Lochry, Orr and Pulkownik unloaded over 144,000 shares of their Versant stock at artificially inflated prices as high as $16 per share, pocketing over $1.8 million in illegal insider-trading proceeds, taking advantage of their knowledge of non-public adverse information about Versant's business and financial condition.

9. Each of the positive statements about Versant's business during the Class Period which were disseminated to the financial community by the defendants were false and misleading when issued and failed to disclose, inter alia, the following adverse information, which was then known only to defendants due to their access to internal Versant records, reports and data: (a) Versant was suffering from a material and dramatic decrease in its earnings due to licensing revenue shortfalls and weakening product demand; (b) the Company was experiencing extremely high expenses caused by a regional concentration of sales resulting in incredibly high commission costs and decreased earnings; (c) Versant was spending an excessive amount of income on its marketing programs in order to simply maintain market share, thus draining revenues and decreasing earnings; (d) the Company was spending money on fees associated with the recruiting of new Company personnel, primarily in its sales and marketing division, far in excess of plan, materially and adversely impacting profits; (e) Versant suffered from severe problems that were causing increased costs and material adverse effects on the Company's earnings; (f) 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) Versant had entered into less-than-profitable partnerships/projects in order to artificially increase its earnings; (h) the Company was plagued by internal inefficiencies in forecasting, financial control and execution which defendants knew rendered their ability to forecast Versant's financial progress wholly and completely unreliable; (i) Versant's forecasts of strong revenue and EPS growth for Versant in fiscal 1997 ("FY97") 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) as a result of all of the above, Versant was not on track to generate strong revenue and earnings growth in 4Q97 or FY97. In sum, defendants knew or recklessly disregarded that the Company could not fulfill the forecasts and earnings estimates defendants had led analysts -- and thus the financial community -- to believe or achieve the Company's professed revenue and earnings growth, all of which they publicly represented were attainable.

10. The chart below shows the price of Versant stock while defendants were issuing the false and misleading statements about the Company, defendants' sales of their Versant stock at inflated prices during that period and the subsequent collapse of Versant common stock as the previously concealed adverse facts began to be disclosed.

 

JURISDICTION AND VENUE

11. The claims asserted herein arise under §§10(b) and 20(a) of the Exchange Act, 15 U.S.C. §§78j(b) and 78t(a), and Rule 10b-5, 17 C.F.R. §240.10b-5.

12. Jurisdiction is conferred by §27 of the Exchange Act, 15 U.S.C. §78aa, and 28 U.S.C. §1331.

13. (a) Venue is proper in this District pursuant to §27 of the Exchange Act, and 28 U.S.C. §1391(b). Versant is headquartered in Fremont, California. The false and misleading statements were made or issued from Fremont, California. Most of the Individual Defendants live within this District. And, most of the acts and transactions giving rise to the violations of law complained of occurred in this District.

(b) Assignment of this action to the San Francisco Division is appropriate as a substantial part of the events or omissions identified herein occurred in Alameda County.

14. 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.

THE PARTIES

15. (a) Plaintiff Richard Geffen purchased 1,500 shares of Versant common stock on January 12, 1998 at $10.75 per share and has been damaged as a result of defendants' conduct.

(b) Plaintiff Tammy Newman purchased 1,000 shares of Versant common stock on November 12, 1997 at $15-7/8 per share and has been damaged as a result of defendants' conduct.

16. 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 8.9 million shares of its common stock issued, outstanding, and traded on the NASDAQ National Market System under the symbol "VSNT."

17. Defendant David Banks ("Banks") is, and at all times material hereto was, the Chief Executive Officer and President of the Company until his resignation on January 8, 1998. Banks remains a director of the Company and has been a member of the Company's Board of Directors during the Class Period. Because of his position with the Company, he had access to the adverse non-public information about its business, finances, products, markets and present and future business prospects via access to internal corporate documents (including the Company'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 him in connection therewith.

18. Defendant James R. Lochry ("Lochry") is, and at all times material hereto was, a Vice President of World Wide Sales for the Company. Because of his position with the Company, he had access to the adverse non-public information about its business, finances, products, markets and present and future business prospects via access to internal corporate documents (including the Company'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 meetings and via reports and other information provided to him in connection therewith.

19. Defendant Lawrence J. Pulkownik ("Pulkownik") is, and at all times material hereto was, a Vice President of Business Development for the Company. Because of his position with the Company, he had access to the adverse non-public information about its business, finances, products, markets and present and future business prospects via access to internal corporate documents (including the Company'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 meetings and via reports and other information provided to him in connection therewith.

20. Defendant George C. Franzen ("Franzen") is, and at all times material hereto was, the Vice President of Engineering for the Company. Because of his position with the Company, he had access to the adverse non-public information about its business, finances, products, markets and present and future business prospects via access to internal corporate documents (including the Company'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 meetings and via reports and other information provided to him in connection therewith.

21. Defendant Ronald Kopeck ("Kopeck") is, and at all times material hereto was, the Vice President of Marketing for the Company. Because of his position with the Company, he had access to the adverse non-public information about its business, finances, products, markets and present and future business prospects via access to internal corporate documents (including the Company'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 meetings and via reports and other information provided to him in connection therewith.

22. Defendant Gary Rhea ("Rhea") is, and at all times material hereto was, the Vice President of Finance and Administration, Chief Financial Officer, Treasurer and Secretary for the Company. Because of his position with the Company, he had access to the adverse non-public information about its business, finances, products, markets and present and future business prospects via access to internal corporate documents (including the Company'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 meetings and via reports and other information provided to him in connection therewith.

23. Defendant Lawrence K. Orr ("Orr") is, and at all times material hereto was, a director of the Company. Because of his position with the Company, he had access to the adverse non-public information about its business, finances, products, markets and present and future business prospects via access to internal corporate documents (including the Company'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 him in connection therewith.

24. The individuals named as defendants in ¶¶17-23 are referred to herein as the "Individual Defendants" and by reason of their stock ownership, management positions, and/or membership on Versant's Board, were controlling persons of Versant and had the power and influence, and exercised the same, to cause it to engage in the illegal conduct complained of herein. The Individual Defendants are liable for the false statements pleaded herein, as those statements were each "group-published" information, the result of the collective action of the Individual Defendants.

25. As officers, directors and/or controlling persons of a company registered with the SEC under the federal securities laws, whose common stock is registered with the SEC, traded on the NASDAQ, and governed by the provisions of the federal securities laws, the Individual Defendants each had a duty to disseminate promptly and accurately truthful information with respect to the Company's operations, products, markets, management, earnings and business prospects, to correct any previously issued statements that had become materially misleading or untrue, and to disclose any trends that would materially affect earnings and the financial results of Versant, so that the market price of the Company's publicly-traded securities would be based upon truthful and accurate information. Under rules and regulations promulgated by the SEC under the Exchange Act, specifically Item 303 of Regulation S-K, the Individual Defendants, and each of them, also had a duty to report all trends, demands or uncertainties that were likely to influence (a) Versant's liquidity; (b) Versant's net sales, revenues and/or income; and (c) previously reported financial information such that it would not be indicative of operating results. The Individual Defendants' representations during the Class Period violated these specific requirements and obligations.

26. The Individual Defendants, because of their positions with the Company, controlled and/or possessed the power and authority to control the contents of its quarterly and annual reports, press releases and presentations to securities analysts, which information was conveyed through the analysts to the investing public. Each defendant was provided with copies of the Company's reports and press releases alleged herein to be misleading prior to or shortly after their issuance and had the ability and opportunity to prevent their issuance or cause them to be corrected. Because of their positions and access to material non-public information available to them but not to the public, each of these defendants knew or recklessly disregarded that the adverse facts specified herein had not been disclosed to and were being concealed from the public and that the positive representations which were being made were then materially false and misleading. Despite their duty not to sell their Versant stock under such circumstances, defendants nonetheless did so.

DEFENDANTS' FRAUDULENT SCHEME
AND COURSE OF BUSINESS

27. Each Individual Defendant is liable as a participant in a fraudulent scheme and common course of conduct that operated as a fraud and deceit upon purchasers of Versant stock, by their dissemination of materially false and misleading statements and/or concealing material, adverse facts. The scheme: (a) deceived the investing public regarding Versant's business, its performance and performance trends and the intrinsic value of the Company's shares; (b) caused plaintiffs and all other purchasers of Versant common stock during the Class Period to purchase Versant stock at artificially inflated prices; and (c) permitted certain of the Individual Defendants to dispose of over 144,000 shares of their Versant stock, pocketing over $1.8 million in illegal insider-trading profits.

MOTIVE AND OPPORTUNITY

28. Each defendant had the opportunity to commit the acts alleged herein. Defendants, through their positions as officers and/or directors, controlled the dissemination of 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/or 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.

29. Defendants also had the motive to commit and participate in the fraud alleged herein. The aura 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/or 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 variety of ways from inflating the stock price of Versant stock and thereby had the motive to commit the acts and practices alleged herein.

VERSANT'S AND ITS INSIDERS' ACTUAL KNOWLEDGE
OR RECKLESS DISREGARD OF THE UNDISCLOSED
ADVERSE CONDITIONS IMPACTING VERSANT'S BUSINESS

30. As part of Versant's corporate planning and management process, it prepares a corporate business plan and budget for each fiscal year, typically referred to as the Fiscal Year Corporate Plan/Budget. The Fiscal Year Corporate Plan/Budget ("Plan/Budget") for a given fiscal year is prepared and revised during the last half of the preceding fiscal year and is completed by top management for Board review and approval near the end of the prior fiscal year. Thus, with respect to Versant's 1997 Plan/Budget, work began on the Plan/Budget in the last half of 1996, and the 1997 Plan/Budget was completed by top management for Board review and approval by the commencement of the Class Period. Versant's Plan/Budgets were very detailed presentations of the corporation's operations and included planned or forecasted revenues, expenses, net income and EPS for the fiscal year on an overall corporate basis. In addition, Versant's Plan/Budgets also included forecasted revenues by product line and geographic area. Versant's Plan/Budgets presented these forecasted or budgeted results on a monthly, quarterly and annual basis and contained narrative explanations as to the plans' key assumptions and how management proposed to achieve those results. Each Individual Defendant was aware of and received copies of Versant's 1997 Plan/Budget and each played a significant role in preparing, revising and/or approving the Plan/Budget.

31. In order to monitor Versant's corporate performance throughout the fiscal year, its top managers received monthly financial reports prepared by its financial department, headed by Versant's Chief Financial Officer ("CFO"), as well as other written and oral reports from members of management, including divisional managers. In order to effectively manage its business and control its cash flow, Versant's management information system was capable of generating reports on a daily basis showing orders received (by product), shipments (by product), expenses and costs as well as overall corporate revenue, cash balances, receivables, etc. Versant's management also received periodic reports regarding product research and development and regarding the technical and field performance of its products and services. As a result of this system of reporting, Versant's top managers were aware of the corporation's performance on a daily basis and were thus aware, virtually immediately, of any significant expense increase, demand for new and existing products, shipment or roll-out delays, diminished license revenue, marketing expenditures, sales commission escalation, etc.

32. In addition to this daily monitoring system, Versant's finance department generated monthly financial reports providing detailed data with respect to overall corporate revenue, net income and EPS, as well as sales or licenses by specific product lines and by geographic region -- all presented so as to compare performance for that month, that quarter and the year-to-date versus the Plan/Budget. These financial reports included a so-called "Flash" report prepared after the end of each month (and also throughout each month) and distributed immediately to top management, which provided summary product shipment, sales and income data. The monthly financial reports also included a so-called "Monthly Financial Statement/Package," which provided even more detailed information, including graphic comparisons of actual performance to forecasted performance and a narrative explanation of material variances of actual results compared to forecasted or budgeted results, which was completed within ten days after the end of the month and immediately provided to members of top management.

33. Thus, whenever expenses escalated or exceeded Versant's Plan/Budget, or license by revenue declined, the Individual Defendants were immediately advised of such developments and problems by the sales and finance personnel. Versant closely monitored the sale and licensing of its product in the distribution channel and received sell-through reports from its distributors, OEMs and other resellers via its sales personnel. Problems concerning or arising from the sale or licensing of its products or services were immediately a matter of major concern and discussion among Versant's top corporate managers, including the Individual Defendants. Moreover, when expenses, sales, license and/or related orders fell short of or exceeded internal projections throughout the Class Period, the Individual Defendants were immediately apprised.

34. Because of the foregoing, each of the Individual Defendants was aware of Versant's 1997 forecasts and budgets and of the internal reports detailing problems such as increasing expenses and revenue shortfalls and the financial reports comparing Versant's actual results to those budgeted and/or forecasted. Based on the negative internal reports specified earlier and reports of the Company's actual performance compared to that budgeted or forecasted, the Individual Defendants each knew Versant's business was not performing as well as publicly represented and further knew that its financial results were being negatively impacted by significantly increasing expenses coupled with weak licensing of its products, weak demand and declining revenue. Thus, the defendants knew that Versant's forward-looking public statements issued during the Class Period were false and misleading when made and actually knew or recklessly disregarded that its positive statements, including its claims of "strong" demand and momentum and that its performance was "on track," were false and misleading when made.

VERSANT'S GUIDANCE TO SECURITIES ANALYSTS,
USE OF THEM AS A CONDUIT TO FEED FALSE
INFORMATION TO THE SECURITIES MARKETS
AND ADOPTION OF THEIR REPORTS AS ITS OWN

35. Analysts employed by securities firms prepare written internal advisories and research reports about public companies such as Versant.

36. In writing their reports about Versant, these analysts relied in substantial part upon information provided to them by the Company and its senior-most officials, including the Individual Defendants named herein, and assurances by the Company that information in the analysts' reports was not at material variance with the Company's internal knowledge of its operations and prospects.

37. Because Versant was a rapidly expanding Company and its stock a "growth stock," Versant's growth and growth trends in its EPS were critical to the investment community. Versant and the Individual Defendants used its communications to analysts to assure them -- and by and through them, the investing public -- that Versant's relations with its key customers were secure, stable and predictable, that demand for Versant's products was strong and growing, that the markets for its products were large and expanding, and that it would achieve significant EPS growth for successive periods of time.

38. As part of the fraudulent scheme, Versant had certain of its senior officers communicate regularly with securities analysts, including Andrew Brosseau ("Brosseau") at Cowen & Co. and Bert Hochfeld ("Hochfeld") at Josephthal Lyons & Ross, Inc. The purpose of these communications was to disseminate favorable information concerning the Company's business and to provide detailed "guidance" and direction to these analysts reporting the Company's business and expected earnings in fiscal 1997 and beyond. These communications included telephone conference calls, meetings, and analyst briefings where they discussed many aspects of the Company's operations and future earning prospects. Versant's top officers had these communications with analysts to cause them to disseminate favorable information on Versant and used these communications to falsely present the business and prospects of Versant to the marketplace, thus artificially inflating the market price of Versant stock.

39. Versant copied and circulated certain of the securities analysts' reports as part of its "investors' relations package" which it distributed to members of the financial press, investors, and stockholders, thus endorsing them and adopting them as its own. The investment community, and in turn, investors, relied and acted upon the information communicated in these reports and advisories that recommended that investors purchase Versant stock. Many reports issued by the securities analysts were available to the market immediately through the "First Call" network, a computerized database of analysts' reports available to brokers and analysts. Copies of each of these reports were provided to Versant immediately upon issuance and were either approved by it or not objected to by it.

40. The securities analysts, and particularly Brosseau, thus became conduits by and through which Versant and the Individual Defendants provided false information to the marketplace in order to deceive investors and artificially inflate the price of Versant stock. Acting through or by means of these securities analysts, Versant and the Individual Defendants were able to manipulate the price of its stock and to deceive investors in contravention of applicable law, all as alleged in this Complaint.

BACKGROUND

41. 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 service, health care, energy and the emerging market for intranet and transactional Internet applications. Incorporated in August of 1988, Versant began shipment of its principal product, the Versant ODBMS in 1991.

42. Since its inception in 1991, substantially all of Versant's revenue has been derived from: (a) the sale of development and deployment licenses for the Versant ODBMS; (b) related maintenance and support, training, consulting and nonrecurring engineering fees (the "Associated Services"); and (c) the resale of licenses, maintenance training and consulting for third-party products that complement the Versant ODBMS ("Third-Party Products").

43. Although it briefly attained profitability in early 1996, during the end of 1996 and early 1997, Versant stumbled financially and released an unfavorable earnings report for the Company's 4Q96, ending December 31, 1996. The investing public did not react favorably to this news as Versant saw the price of its stock tumble and it became a topic of concern throughout the financial community. On or about January 30, 1997, a Reuters Financial Service release entitled "RESEARCH ALERT-VERSANT <VSNT.0> EPS FALLS SHORT" noted:

Versant's stock price fell $2-7/8 to close at $15-3/4.

44. In response to the market's dramatic reaction to this news, and cognizant of the fact that the financial community's perception of Versant would have to be rectified, defendants set out to convince the market that the Company was stable, healthy, strong and growing. 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:

45. These statements did not have a positive impact 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 released this forecast after the market closed. During trading hours, its shares subsequently traded as low as $5.125.

46. 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 blips rather than serious or long-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":

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

47. Defendants intensified their efforts to minimize the damage done by Versant's 1997 earnings release, as the need to convince the investing public that Versant was a successful company became more acute, as evidenced by the fact that the price of Versant's common stock had reached an all-time low. Trading as high as $27-5/8 per share in September 1996, the value of the Company's stock, including defendants' personal holdings, had plummeted to a dismal $4-1/2 per share by close of trading on April 3, 1997.

FALSE AND MISLEADING STATEMENTS
DURING THE CLASS PERIOD

48. Defendants took a significant step in furtherance of their scheme to deceive an 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 TWST, defendant Banks made the following statements, the pertinent portions of which are as follows:

49. 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 FY97 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 FY97, but, in fact, was suffering from declining revenue and EPS growth.

50. These false and misleading statements made pursuant to defendants' fraudulent scheme had their desired effect. The price of Versant's common stock increased from $4-1/2 on April 3, 1997 to $6-1/2 on May 12, 1997. Determined to increase the value of Versant's common stock and their own personal holdings even further, defendants continued to bombard the investing public with a myriad of positive statements regarding the current financial and business conditions of and prospects for the Company, including statements about its products and business relationships that purposely failed to disclose Versant's problems and adverse trends and were also designed to hide and camouflage them.

51. 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 stated:

52. Immediately thereafter, on or about May 19, 1997, in a Business Wire release entitled "Versant launches TeamVERSANT partner program; Innovative total solutions approach enables successful application development using the Versant ODBMS," defendants stated:

54. Defendants' statements made from May 13, 1997 through June 4, 1997, as alleged above, 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 FY97 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 FY97, but, in fact, was suffering from declining revenue and EPS growth.

55. 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:

56. Then, on or about July 17, 1997, through the Business Wire 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:

57. Defendants' June 13, 1997 and July 17, 1997 statements, as alleged above, were materially false 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 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 FY97 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 FY97, but, in fact, was suffering from declining revenue and EPS growth.

58. Defendants continued to misrepresent 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:

59. 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 announced:

60. On or about July 28, 1997, through the M2 Presswire, in an article entitled "NEXOR & Versant Partnership to Deliver Directory Server products," defendants stated:

61. 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":

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

63. Defendants' statements made from July 21, 1997 through July 31, 1997, as alleged above, 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 FY97 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 FY97, but, in fact, was suffering from declining revenue and EPS growth.

64. Defendants' scheme continued with the following press release entitled "Versant Object Technology Announces Succession Plan" disseminated to the financial community on August 19, 1997 via the Business Wire:

65. Again, defendants' false and misleading statements generated a positive market reaction. By early September 1997, Versant's common stock was trading at more than $13 per share. Still, instead of disclosing the true financial condition of the Company, defendants' continued to perpetrate their fraudulent scheme. On or about September 29, 1997, through the Business Wire, defendants made the following statements to the financial community 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":

66. 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:

67. On October 2, 1997, Cowen & Co. issued a report on Versant written by Brosseau which was based on and reported information provided to Brosseau in conversations with Versant senior management. Brosseau noted that Versant was experiencing an operating rebound with solid Q2 earnings prospects and a "healthy pipeline." Brosseau further reported that the Company "continues to see strong demand from its core telecom market and rising adoption from important new industries like financial services and overseas markets in Europe and Asia/Pacific." Based on these assurances and information from Versant management, Brosseau stated he was "encouraged" by Versant's "improving business momentum."

68. Then, continuing their false impression of stability and growth, defendants issued a press release on October 23, 1997, 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," and stating:

69. On October 24, 1997, Cowen & Co. issued a report on Versant written by Brosseau which was based on and reported information provided to Brosseau in conversations with Versant senior management. Brosseau stated that "the quarter was strong across the board." Based on Versant's presentations, Brosseau maintained 1997 estimates "following some fine tuning guidance by management" and sharply raised 1998 estimates to "reflect the strong growth and improving maturity and visibility in the business model." Brosseau reported estimated EPS for 4Q97 of $.08 cents per share and FY97 EPS of $.05 cents and raised 1998 revenue estimates on substantially increased license sales (+54%) and services fees (+49%), while lowering gross margin and keeping operating expense estimates unchanged. Brosseau continued to reiterate a "Strong Buy" rating for Versant as he remained "bullish about the operating and stock prospects" for the Company, noting it was "improving its operating controls providing robust growth, expanding margins and improving quarterly visibility."

70. Defendants' statements made from August 19, 1997 through October 25, 1997, as alleged above, were materially false and misleading in that 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 partnership/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 FY97 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 FY97, but, in fact, was suffering from declining revenue and EPS growth.

71. Meanwhile, Versant's common stock had dramatically increased in value to approximately $18 per share -- an approximately 300% gain compared to the $4-1/2 per share that the Company's stock had traded at just before the beginning of the Class Period, approximately six months earlier.

72. In an analyst's report dated and disseminated to the financial community on November 13, 1997, Brosseau once again reported favorably regarding Versant. Based on information provided to him in discussions and conference calls with Versant senior management, the report, entitled "Business Trends Remain Strong & Q4 Shaping Up On Track," stated:

73. Defendants continued to pump the market with false and deceptive statements. On or about December 11, 1997, through the M2 Presswire, in an article entitled "Lucent Technologies Chips Latest Version of Internet Directory Server (IDS)," defendants stated:

74. 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":

75. On December 18, 1997, Cowen & Co. issued a report on Versant written by Brosseau which was based on and repeated information provided to Brosseau in conference calls and conversations with Versant senior management. Brosseau reiterated his "Strong Buy" rating and a target price of $25, further stating that "revenues and earnings have come back strongly, with improving revenue and channel mix [and] rising quarterly visibility" and that Versant was experiencing "operating improvements, coupled with rapidly increasing demand for object technologies" which "should drive robust growth and margin expansion over the next several years" as "[b]usiness trends remain healthy, with Q4 shaping up on track with more diversified revenue stream." Noting "[r]ecent discussions with management," Brosseau reiterated management's position that Q4 is on track to meet estimates of $10.3 million (+83%) in revenues, and $.08 cents in EPS, further noting that "[w]hile there is still business to be closed, the company has a solid pipeline and does not appear to need any particularly large deals to make the numbers. Versant has no meaningful exposure to Asia/Pacific, eliminating the risk of any turmoil in that region."

76. On or about January 5, 1998, 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:

77. In response to the foregoing barrage of positive representations made by defendants regarding Versant's present and future and business condition and outlook, in January 1998, Josephthal Lyons & Ross, 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.

78. The following analyst report by Hochfeld of Josephthal Lyons & Ross, Inc., 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:

79. On or about January 8, 1998 - just days before the end of the Class Period -- defendants issued the following press release through the PR Newswire, entitled "Versant Announces New CEO; Nick Ordon, Formerly of Lotus, Will Lead Versant's Next Growth Phase," and stating:

80. Following immediately on the heels of the Company's favorable January 8, 1998 press release, Brosseau of Cowen & Co. disseminated yet another favorable analyst's report to the financial community regarding Versant. This report, dated January 8, 1998, entitled "New CEO On Board, Q4 Likely In Line With Low-End of Range," made the following statements based on information provided to Brosseau in conversations with Versant's senior management:

81. Defendants' statements made from November 13, 1997 through January 8, 1998, as alleged above, 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 FY97 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 FY97, but in fact, was suffering from declining revenue and EPS growth.

82. Suddenly, in a press release issued via the PR Newswire on January 13, 1998, defendants shocked the financial community by announcing that the Company expected to report 4Q97 and FY97 losses on increased revenues for both periods. Defendants' press release, 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," stated:

83. On or about January 14, 1998, in an article entitled "Loss Forecast on Expenses, Licensing-Revenue Picture," The Wall Street Journal reported:

84. Even Cowen & Co.'s securities analyst Brosseau -- who was in continuous dialogue with Versant senior management throughout the Class Period (particularly giving Cowen & Co.'s relationship as a "marketmaker" of Versant stock) -- was stunned. While trying desperately to place a positive spin on these developments and report as favorably as possible with regard to Versant's business condition and prospects, Brosseau characterized Versant's fourth quarter operating results as a "Big Q4 Miss." Despite his effort to spin Versant's 4Q97 financial results in a positive light, Brosseau observed that turmoil in Asia did have a material impact on revenues, that "Versant continues to struggle" with "accurately forecasting . . . license and overall revenue estimates" and that "management faces a serious creditability challenge" -- in short, analyst code for saying that the Company had no reasonable basis to believe its own forecasts and estimates which the analyst had disseminated to the financial community and that management had not provided the analyst with truthful or credible information about its business.

85. The surprising revelation of Versant's previously undisclosed serious problems 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 ove 2.5 million shares -- a one day drop of 45% and a huge 70% decline from the stock's high of $18-1/4 on October 21, 1997. On January 29, 1998, Versant disclosed a 4Q97 EPS loss of $.23 and a FY97 EPS loss of $.26, signifying the fact that its business had substantially declined as a result of serious problems.

DEFENDANTS' INSIDER TRADING

86. 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.

87. 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

George C. Franzen            08/18/97        1,677          $ 8.88       $ 14,892
                             11/21/97        5,000          $16.06       $ 80,300
                             11/28/97          100          $14.75        $ 1,475

                                             6,777                       $ 96,667

Lawrence K. Orr(2)           08/27/97       87,213          $11.62     $1,013,415

                                            87,213                     $1,013,415

James Lochry                 08/22/97        4,651          $ 9.88       $ 45,952
                             11/24/97       25,000          $15.25      $ 381,250

                                            29,651                      $ 427,202

Lawrence J. Pulkownik        08/06/97        1,029          $ 8.38        $ 8,623
                             11/25/97       10,000          $14.81      $ 148,100
                             11/26/97       20,000          $15.25      $ 152,500

                                            21,029                      $ 309,223

TOTAL                                      144,670                     $1,846,507

FRAUD ON THE MARKET DOCTRINE

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

STATUTORY SAFE HARBOR

89. The statutory safe harbor provided for forward-looking statements under certain circumstances does not apply to any of the false forward-looking statements pleaded in this Complaint because they were not sufficiently identified as a "forward-looking statement" when made and/or because meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statements did not 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.

COUNT I

Violation Of §10(b) Of The Exchange
Act And Rule 10b-5 Against All Defendants

90. Plaintiffs incorporate by reference and reallege ¶¶1-89 above, as though fully set forth herein.

91. This claim is asserted by plaintiffs and the Class against all defendants and is based upon §10(b) of the Exchange Act, 15 U.S.C. §78j(b), and Rule 10b-5 promulgated thereunder.

92. Each of the defendants: (a) knew the material, adverse, non-public information about Versant's financial results and then-existing business conditions, which was not disclosed; and (b) participated in drafting, reviewing, and/or approving the misleading statements, releases, reports, and other public representations of and about Versant.

93. During the Class Period, defendants disseminated or approved the false statements specified above, which they knew were misleading in that they contained misrepresentations and failed to disclose material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.

94. Defendants violated §10(b) of the Exchange Act and Rule 10b-5 in that they:

95. The undisclosed adverse information concealed by defendants during the Class Period is the type of information which, because of SEC regulations, regulations of the national stock exchanges and customary business practice, is expected by investors and securities analysts to be disclosed and is known by corporate officials and their legal and financial advisors to be the type of information which is expected to be and must be disclosed. For example:

96. Plaintiffs and the Class have suffered damages in that, in reliance on the integrity of the market, they paid artificially inflated prices for Versant stock. Plaintiffs and the Class would not have purchased Versant stock at the prices they paid, or at all, if they had been aware that the market prices had been artificially and falsely inflated by defendants' misleading statements.

COUNT II

Violation Of §20(a) Of The Exchange Act
Against Versant And The Individual Defendants

97. Plaintiffs incorporate by reference and reallege ¶¶1-96 above as though fully set forth herein.

98. This Count is asserted against Versant and the Individual Defendants and is based on §20(a) of the Exchange Act. The Individual Defendants acted as controlling persons of Versant, within the meaning of §20 of the Exchange Act. By reason of their positions as senior officers and directors of Versant, the Individual Defendants had the power and authority to cause or to prevent the wrongful conduct complained of herein. Versant controlled each of the Individual Defendants and all of its employees.

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

CLASS ACTION ALLEGATIONS

100. Plaintiffs bring this action as a class action pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3) on behalf of all persons who purchased Versant stock (the "Class") on the open market during the Class Period. Excluded from the Class are defendants herein, members of their immediate families, any entity in which a defendant has a controlling interest, and the legal representatives, heirs, successors-in-interest, or assigns of any excluded party.

101. The members of the Class are so numerous that joinder of all members is impracticable. The disposition of their claims in a class action will provide substantial benefits to the parties and the Court. During the Class Period, Versant had more than 8.9 million shares of stock outstanding, owned by hundreds of shareholders.

102. There is a well-defined commonality of interest in the questions of law and fact involved in this case. The questions of law and fact common to the members of the Class which predominate over questions which may affect individual Class members include the following:

103. Plaintiffs' claims are typical of those of the Class because plaintiffs and the Class sustained damages from defendants' wrongful conduct.

104. Plaintiffs will adequately protect the interests of the Class and have retained counsel who are experienced in class action securities litigation. Plaintiffs have no interests which conflict with those of the Class.

105. A class action is superior to other available methods for the fair and efficient adjudication of this controversy.

106. The prosecution of separate actions by individual Class members would create a risk of inconsistent and varying adjudications.

BASIS OF ALLEGATIONS

107. Plaintiffs have alleged the foregoing based upon the investigation of their counsel, which included a review of Versant's SEC filings, securities analysts' reports and advisories about the Company, press releases issued by the Company, media reports about the Company and discussions with consultants, and believe that substantial additional evidentiary support will exist for the allegations set forth herein at ¶¶2, 3, 9, 49, 54, 57, 63, 70, 81 after a reasonable opportunity for discovery and additional investigation.

PRAYER FOR RELIEF

WHEREFORE, plaintiffs pray for judgment as follows:

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

2. Awarding plaintiffs and the members of the Class compensatory damages, including rescissory damages, where applicable;

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

4. Awarding extraordinary, equitable, and/or injunctive relief as permitted by law, equity, and federal statutory provisions sued hereunder, including rescission, the imposition of a constructive trust upon the proceeds of defendants' insider trading, pursuant to Rules 64, 65, and any appropriate state law remedies; and

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

JURY DEMAND

Plaintiffs hereby demand a trial by jury.

DATED: February 4, 1998

MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH
ALAN SCHULMAN
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058

BARRACK, RODOS & BACINE
STEPHEN R. BASSER
600 West Broadway, Suite 1700
San Diego, CA 92101
Telephone: 619/230-0800

BERNSTEIN LIEBHARD & LIFSHITZ
MEL E. LIFSHITZ
274 Madison Avenue
New York, NY 10016
Telephone: 212/779-1414

KAUFMAN, MALCHMAN, KIRBY
& SQUIRE, LLP
JEFFREY H. SQUIRE
LOUIS SANDLER
919 Third Avenue, 11th Floor
New York, NY 10022
Telephone: 212/371-6600

Attorneys for Plaintiffs

COMPLNTS\VERSANT.CPT



1. Here, as elsewhere, emphasis added unless otherwise indicated.

2. Shares sold held by a family members.




6 Feb 1998
Source: Milberg Weiss website