<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Mastering, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock $.001 par value per share
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
18,622,229
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
$10.4375
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$194,369,516
-------------------------------------------------------------------------
(5) Total fee paid:
$57,340
-------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[X] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
$15,433
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
333-48965
-------------------------------------------------------------------------
(3) Filing Party:
Platinum technology, inc.
-------------------------------------------------------------------------
(4) Date Filed:
March 31, 1998
-------------------------------------------------------------------------
Notes:
<PAGE>
LOGO
9201 EAST MOUNTAIN VIEW ROAD
SCOTTSDALE, ARIZONA 85258
April 10, 1998
Dear Stockholder:
The Board of Directors of Mastering, Inc. ("Mastering") is pleased to
announce that Mastering and PLATINUM technology, inc. ("PLATINUM") have
amended the Merger Agreement dated as of February 18, 1998 (the "Merger
Agreement") to, among other things, change the number of shares of PLATINUM
common stock which holders of Mastering common stock will receive upon the
consummation of the merger (the "Merger") of a wholly-owned subsidiary of
PLATINUM with and into Mastering.
You should have previously received a Notice of Special Meeting of
Stockholders and Proxy Statement/Prospectus dated April 1, 1998 relating to a
proposal to approve the Merger Agreement and the Merger at a special meeting
of Mastering stockholders (the "Special Meeting"). The Special Meeting will be
held as originally scheduled on April 21, 1998.
The original Merger Agreement contemplated an exchange of 0.448 of a share
of PLATINUM common stock for each share of Mastering common stock. Under the
amended Merger Agreement, PLATINUM will issue to each Mastering stockholder a
portion of a share of PLATINUM common stock having a value (determined as
described below) of $12.50 for each share of Mastering common stock. However,
PLATINUM will issue a minimum of 0.448 of a share of PLATINUM common stock and
a maximum of 0.540 of a share of PLATINUM common stock for each share of
Mastering common stock. Consequently, if the value per share of the PLATINUM
common stock is $27.875 or more, the exchange ratio will be 0.448, and if the
value per share of the PLATINUM common stock is $23.125 or less, the exchange
ratio will be 0.540. For the purpose of these calculations, the value of the
PLATINUM common stock will be the average closing price per share of the
PLATINUM common stock, as reported on the Nasdaq National Market, for the six
trading days ending on the trading day immediately preceding the date of the
Special Meeting. If the value per share of the PLATINUM common stock were to
equal $24.0521, the average closing price of the PLATINUM common stock for the
six trading days ended April 7, 1998, the exchange ratio would be 0.5197.
BEGINNING ON APRIL 13, 1998, STOCKHOLDERS INTERESTED IN OBTAINING THE MOST
RECENT CLOSING PRICE OF THE PLATINUM COMMON STOCK, THE AVERAGE CLOSING PRICE
OF THE PLATINUM COMMON STOCK FOR THE SIX MOST RECENTLY COMPLETED TRADING DAYS,
AND THE EXCHANGE RATIO BASED ON THIS SIX-DAY AVERAGE CLOSING PRICE MAY CALL
(800) 655-9985 (TOLL FREE) OR, FOR CALLERS OUTSIDE THE UNITED STATES, (630)
691-9119. AFTER CALLING EITHER NUMBER, CALLERS SHOULD PRESS 6 WHEN PROMPTED.
Your Board of Directors (excluding certain directors who are also directors
of PLATINUM) has unanimously approved the amendment to the Merger Agreement.
In the materials accompanying this letter, you will find a Supplement to the
Proxy Statement/Prospectus and an additional form of proxy. The Supplement
explains more fully the amendments to the Merger Agreement and certain other
matters. You should be aware that four Mastering stockholders, holding
approximately 52% of the outstanding shares of Mastering common stock, have
agreed to vote in favor of the Merger Agreement and the Merger. The
affirmative vote of a majority of the issued and outstanding shares of
Mastering common stock is required to approve the Merger Agreement and the
Merger.
Please complete, sign, date and return your proxy (either the one included
with the enclosed Supplement or the one previously provided to you) in the
enclosed envelope or in the envelope previously provided. If you attend the
Special Meeting, you may revoke your proxy at the Special Meeting by voting in
person. If you have previously executed and delivered a proxy, you do not need
to execute a new proxy unless you wish to revoke your earlier executed proxy.
I look forward to seeing you at the Special Meeting. On behalf of the
management and directors of Mastering, I want to thank you again for your
support.
Sincerely,
LOGO
Marc Pinto
Executive Vice President, Chief
Financial Officer
and Corporate Secretary
Mastering Inc.
<PAGE>
LOGO
SUPPLEMENT TO PROXY STATEMENT
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 21, 1998
LOGO
SUPPLEMENT TO PROSPECTUS
This Supplement to the Proxy Statement/Prospectus dated April 1, 1998 (the
"Proxy Statement/Prospectus") is being furnished to the stockholders of
Mastering, Inc., a Delaware corporation ("Mastering"), in connection with the
solicitation of proxies by the Board of Directors of Mastering (the "Mastering
Board") for use at a special stockholders' meeting to be held on April 21,
1998 at 10:00 a.m. (local time) at The Chicago Club, 81 East Van Buren Street,
Chicago, Illinois 60605, and at any and all adjournments or postponements
thereof (the "Meeting"). At the Meeting, Mastering's stockholders are being
asked to consider and vote upon a proposal to approve and adopt (a) the
Agreement and Plan of Merger, dated as of February 18, 1998 (the "Merger
Agreement"), entered into among Mastering, PLATINUM technology, inc.
("PLATINUM") and PT Acquisition Corporation I, a newly-formed, wholly-owned
subsidiary of PLATINUM ("PT Acquisition"), and (b) the merger (the "Merger")
of PT Acquisition with and into Mastering, whereby, among other things,
Mastering will be the surviving corporation in the Merger and become a wholly-
owned subsidiary of PLATINUM. On April 7, 1998, Mastering and PLATINUM entered
into an amendment to the Merger Agreement (the "Amendment") to, among other
things, change the number of shares of PLATINUM common stock ("PLATINUM Common
Stock") which each holder of shares of Mastering common stock ("Common
Shares") would receive in the Merger. Capitalized terms not defined herein
have the meanings ascribed to them in the Proxy Statement/Prospectus.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 OF THE PROXY STATEMENT/PROSPECTUS
FOR A DESCRIPTION OF CERTAIN MATTERS THAT SHOULD BE CONSIDERED BY HOLDERS OF
MASTERING COMMON STOCK BEFORE VOTING ON THE PROPOSAL TO APPROVE THE MERGER
AGREEMENT AND THE MERGER.
This Supplement to the Proxy Statement/Prospectus also constitutes a
Supplement to the Prospectus of PLATINUM with respect to up to 10,056,005
shares of PLATINUM common stock issuable pursuant to the Merger (including the
issuance of shares of PLATINUM common stock issuable upon exercise of
Substitute Options). This Supplement and the accompanying form of proxy are
first being sent to Mastering stockholders on or about April 10, 1998.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS SUPPLEMENT OR THE PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS SUPPLEMENT IS APRIL 10, 1998.
<PAGE>
OVERVIEW
The original Merger Agreement contemplated an exchange of 0.448 of a share
of PLATINUM Common Stock for each Common Share. Under the amended Merger
Agreement, PLATINUM will issue to each Mastering stockholder a portion of a
share of PLATINUM Common Stock having a value (determined as described below)
of $12.50 for each Common Share. However, PLATINUM will issue a minimum of
0.448 of a share of PLATINUM Common Stock and a maximum of 0.540 of a share of
PLATINUM Common Stock for each Common Share. Consequently, if the value per
share of the PLATINUM Common Stock is $27.875 or more, the exchange ratio will
be 0.448 and PLATINUM will issue a total of 6,217,190 shares of PLATINUM
Common Stock to the stockholders of Mastering (based on the 13,877,656 Common
Shares outstanding as of March 27, 1998). If the value per share of the
PLATINUM Common Stock is $23.125 or less, the exchange ratio will be 0.540 and
PLATINUM will issue a total of 7,493,934 shares of PLATINUM Common Stock to
the stockholders of Mastering (based on the 13,877,656 Common Shares
outstanding as of March 27, 1998). For the purpose of these calculations, the
value of the PLATINUM Common Stock will be the average closing price per share
of the PLATINUM Common Stock, as reported on the Nasdaq National Market
("Nasdaq"), for the six trading days ending on the trading day immediately
preceding the date of the Meeting. If the value per share of the PLATINUM
Common Stock were to equal $24.0521, the average closing price of the PLATINUM
Common Stock for the six trading days ended April 7, 1998, the exchange ratio
would be 0.5197 and PLATINUM would issue a total of 7,212,218 shares of
PLATINUM Common Stock to the stockholders of Mastering (based on the
13,877,656 Common Shares outstanding as of March 27, 1998). BEGINNING ON APRIL
13, 1998, STOCKHOLDERS INTERESTED IN OBTAINING THE MOST RECENT CLOSING PRICE
OF THE PLATINUM COMMON STOCK, THE AVERAGE CLOSING PRICE OF THE PLATINUM COMMON
STOCK FOR THE SIX MOST RECENTLY COMPLETED TRADING DAYS, AND THE EXCHANGE RATIO
BASED ON THIS SIX-DAY AVERAGE CLOSING PRICE MAY CALL (800) 655-9985 (TOLL
FREE) OR, FOR CALLERS OUTSIDE THE UNITED STATES, (630) 691-9119. AFTER CALLING
EITHER NUMBER, CALLERS SHOULD PRESS 6 WHEN PROMPTED.
The following table sets forth the assumed dollar value of the PLATINUM
Common Stock to be issued in exchange for each Common Share, based upon
assumed whole dollar average stock prices ranging from $21.00 to $30.00 for
the six trading days ending on the trading day immediately preceding the date
of the Meeting:
<TABLE>
<CAPTION>
PLATINUM AVERAGE STOCK PRICE
---------------------------------------------------------------------
$21.00 $22.00 $23.00 $24.00 $25.00 $26.00 $27.00 $28.00 $29.00 $30.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assumed Dollar Value per
Common Share........... $11.34 $11.88 $12.42 $12.50 $12.50 $12.50 $12.50 $12.54 $12.99 $13.44
</TABLE>
Although upon consummation of the Merger each Mastering stockholder will
receive a number of shares of PLATINUM Common Stock determined using an
average closing price for six trading days, the actual fair market value of
the PLATINUM Common Stock received by any Mastering stockholder will depend on
the trading price of the PLATINUM Common Stock on and after the date the
Merger is consummated.
Even though the exchange ratio under the Merger Agreement, as amended, will
not exceed 0.540, regardless of the value (determined as described above) of
the PLATINUM Common Stock, Mastering has certain rights to terminate the
Merger Agreement in the event that the PLATINUM Common Stock trades below a
predetermined level. Specifically, if the average closing price for a share of
PLATINUM Common Stock, as reported on Nasdaq, for the twenty trading days
ending April 20, 1998 is less than $19.00, Mastering may terminate the Merger
Agreement.
In connection with the amendment to the Merger Agreement, four stockholders
of Mastering, holding approximately 52% of the outstanding shares of Mastering
common stock, have agreed with PLATINUM to vote such shares in favor of the
Merger Agreement and the Merger at the Meeting. The affirmative vote of a
majority of the issued and outstanding shares of Mastering common stock is
required to approve the Merger Agreement and the Merger. See "The Stockholder
Agreements."
2
<PAGE>
The Board of Directors of Mastering (excluding certain directors who are
also directors of PLATINUM (the "PLATINUM Directors")) has unanimously
approved the amendment to the Merger Agreement.
MASTERING STOCKHOLDERS SHOULD CAREFULLY CONSIDER THE INFORMATION CONTAINED
HEREIN, TOGETHER WITH THE INFORMATION CONTAINED IN THE PROXY
STATEMENT/PROSPECTUS, IN CONNECTION WITH VOTING ON THE MATTERS TO BE PRESENTED
AT THE MEETING. PLEASE CONTACT MARC PINTO AT MASTERING, 9201 EAST MOUNTAIN
VIEW ROAD, SUITE 200, SCOTTSDALE, ARIZONA 85285 (TELEPHONE NUMBER (602) 657-
4000), IF YOU WOULD LIKE TO RECEIVE AN ADDITIONAL COPY OF THE PROXY
STATEMENT/PROSPECTUS. THIS SUPPLEMENT IS BEING DELIVERED TO EACH MASTERING
STOCKHOLDER ENTITLED TO RECEIVE NOTICE OF AND TO VOTE AT THE MEETING.
This Supplement includes pro forma combined comparative per share data and
PLATINUM pro forma financial information reflecting the new exchange ratio, as
well as information regarding the market prices of the PLATINUM common stock
since March 27, 1998 and equivalent per share prices for the Mastering common
stock. Also included are (1) a discussion of developments with respect to the
Merger since the date of the Proxy Statement/Prospectus and factors considered
by the Mastering Board in approving the amendment to the Merger Agreement, (2)
a discussion regarding a new fairness opinion issued by Piper Jaffray Inc.,
Mastering's financial advisor (the "New Fairness Opinion"), (3) a description
of the amendment to the Merger Agreement, and (4) a description of the
stockholder agreements executed by four stockholders of Mastering. Attached as
appendices to this Supplement are copies of the Amendment and the New Fairness
Opinion.
3
<PAGE>
PRO FORMA COMBINED COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share data of PLATINUM
and Mastering and combined per share data on an unaudited pro forma basis
after giving effect to the Merger on a pooling-of-interests basis, as if the
Merger had been effective for all periods presented. The unaudited pro forma
per share data presented below will vary based upon the average closing price
of PLATINUM's Common Stock, as reported on Nasdaq, for the six trading days
ending the day before the Meeting. Pro forma net loss from continuing
operations per share and pro forma book value per share are computed using an
exchange ratio of 0.5197, based upon the average closing price of PLATINUM
Common Stock for the six trading days ended April 7, 1998, as discussed in
Note A of the Notes to the Unaudited Pro Forma Condensed Combining Financial
Statements.
This data should be read in conjunction with the selected financial data,
the Unaudited Pro Forma Condensed Combining Financial Statements and the
separate historical financial statements of PLATINUM and Mastering and notes
thereto, included elsewhere in this Supplement and the Proxy
Statement/Prospectus. The unaudited pro forma combined financial data are not
necessarily indicative of the operating results that would have been achieved
had the transactions been in effect as of the beginning of the periods
presented and should not be construed as representative of future operations.
<TABLE>
<CAPTION>
EQUIVALENT
MASTERING
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
PLATINUM MASTERING(2) COMBINED(3) COMBINED
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Net Income (Loss) from
Continuing Operations
Per Share
Years ended December 31:
1997................... $(1.90) $0.27 $(1.65)(4) $(0.86)(4)
1996................... (1.14) 0.04 (1.02)(4) (0.53)(4)
1995................... (2.50) 0.11(5) (2.35)(4) (1.22)(4)
Book Value Per Share:(1)
December 31, 1997........ 3.81 4.03 4.21 (6) 2.19 (6)
</TABLE>
- --------
(1) Book value per share reflects PLATINUM and Mastering at December 31, 1997
and is computed by dividing stockholders' equity by the number of shares
of common stock outstanding at the respective dates.
(2) Historical Mastering per share data reflect basic earnings per share from
continuing operations for each period. See Note B of the Notes to the
Unaudited Pro Forma Condensed Combining Financial Statements included in
this Supplement.
(3) Pro forma combined per share amounts reflect the Merger.
(4) Using the maximum exchange ratio of 0.540, pro forma combined net loss
from continuing operations per share would have been $(1.65), $(1.01) and
$(2.35) and the equivalent Mastering pro forma combined net loss from
continuing operations per share would have been $(0.89), $(0.55) and
$(1.27) for the years ended December 31, 1997, 1996 and 1995,
respectively. Using the minimum exchange ratio of 0.448, pro forma
combined net loss from continuing operations per share would have been
$(1.68), $(1.03) and $(2.37) and the equivalent Mastering pro forma
combined net loss from continuing operations per share would have been
$(0.75), $(0.46) and $(1.06) for the years ended December 31, 1997, 1996
and 1995, respectively.
(5) Although historical Mastering income from continuing operations per share
for 1995 is not presented in Mastering's consolidated financial
statements, as it is not considered relevant, net income per share for
Mastering for the year ended December 31, 1995 is presented here solely
for purposes of calculating pro forma combined net loss per share. See
Note B of the Notes to the Unaudited Pro Forma Condensed Combining
Financial Statements included in this Supplement.
(6) Using the maximum exchange ratio of 0.540, pro forma combined book value
per share would have been $4.19 and equivalent Mastering pro forma
combined book value per share would have been $2.26 as of December 31,
1997. Using the minimum exchange ratio of 0.448, pro forma combined book
value per share would have been $4.27 and equivalent Mastering pro forma
combined book value per share would have been $1.91 as of December 31,
1997.
4
<PAGE>
COMPARATIVE PER SHARE MARKET PRICE DATA
MASTERING
The principal trading market for the Common Shares is Nasdaq under the
symbol "MASC."
The table below sets forth, for the periods indicated, the reported high and
low sales prices for the Common Shares, as reported on Nasdaq.
<TABLE>
<CAPTION>
PRICE PER PRO FORMA PRICE
COMMON SHARE PER COMMON SHARE(1)
--------------- -------------------
FISCAL PERIOD HIGH LOW HIGH LOW
------------- ------- ------- -------------------
<S> <C> <C> <C> <C>
1996
Quarter ended March 31(2)............... $14.750 $13.000 $ 9.740 $ 5.847
Quarter ended June 30................... 22.125 13.125 9.744 6.626
Quarter ended September 30.............. 19.500 8.625 8.250 4.807
Quarter ended December 31............... 10.750 5.500 8.055 5.522
1997
Quarter ended March 31.................. 13.750 7.125 9.290 5.652
Quarter ended June 30................... 11.500 6.750 7.698 5.457
Quarter ended September 30.............. 11.250 7.250 12.993 6.561
Quarter ended December 31............... 10.750 8.000 16.013 10.459
1998
Quarter ended March 31.................. 12.000 8.500 16.176 11.498
Quarter beginning April 1 (through April
8, 1998)............................... 12.500 9.875 13.577 11.693
</TABLE>
- --------
(1) Determined by multiplying the applicable prices for PLATINUM Common Stock
by an exchange ratio of 0.5197, based upon the average closing price of
the PLATINUM Common Stock for the six trading days ended April 7, 1998. As
of February 18, 1998, the last trading day before the announcement of the
Merger, the closing price on Nasdaq for the Common Shares was $9.50 and
the pro forma price per Common Share would have been $14.097. On April 8,
1998, the latest practicable trading day before the printing of this
Supplement, the closing price on Nasdaq for the Common Shares was $12.063
and the pro forma price per Common Share would have been $12.765. Using
the 0.5197 exchange ratio and based on the closing price of PLATINUM
Common Stock on February 18, 1998 and April 8, 1998 and on the number of
Common Shares outstanding as of such dates, the aggregate market value of
the PLATINUM Common Stock to be issued in respect of all outstanding
Common Shares would be approximately $193.7 million and $177.2 million,
respectively.
(2) The Common Shares started trading on March 21, 1996.
As of March 27, 1998, there were approximately 175 record holders of Common
Shares. Mastering has not paid any cash dividends on its Common Shares in the
last two fiscal years and does not currently intend to pay any cash dividends
in the foreseeable future. Mastering currently intends to retain its earnings,
if any, for the continued growth of its business.
5
<PAGE>
PLATINUM
PLATINUM Common Stock is traded on Nasdaq under the symbol "PLAT." The table
below sets forth, for the periods indicated, the high and low sales prices for
the PLATINUM Common Stock, as reported on Nasdaq.
<TABLE>
<CAPTION>
FISCAL PERIOD HIGH LOW
------------- -------- --------
<S> <C> <C>
1996
Quarter ended March 31.................................... $18.7500 $11.2500
Quarter ended June 30..................................... 18.7500 12.7500
Quarter ended September 30................................ 15.8750 9.2500
Quarter ended December 31................................. 15.5000 10.6250
1997
Quarter ended March 31.................................... 17.8750 10.8750
Quarter ended June 30..................................... 14.8125 10.5000
Quarter ended September 30................................ 25.0000 12.6250
Quarter ended December 31................................. 30.8125 20.1250
1998
Quarter ended March 31.................................... 31.1250 22.1250
Quarter beginning April 1 (through April 8, 1998)......... 26.1250 22.5000
</TABLE>
As of February 18, 1998, the last trading day before the announcement of the
Merger, the last reported sales price on Nasdaq for the PLATINUM Common Stock
was $27.1250. On April 8, 1998, the latest practicable trading day before the
printing of this Supplement, the last reported sales price on Nasdaq for the
PLATINUM Common Stock was $24.5625.
As of April 8, 1998, there were approximately 917 record holders of PLATINUM
Common Stock. PLATINUM has not paid dividends on the PLATINUM Common Stock,
and the PLATINUM Board intends to continue a policy of retaining earnings to
finance its growth and for general corporate purposes. PLATINUM does not
anticipate paying any dividends in the foreseeable future.
ADDITIONAL INFORMATION ABOUT THE MERGER
ADDITIONAL INFORMATION REGARDING INTERESTS OF CERTAIN PERSONS IN THE MERGER
Andrew J. Filipowski, the Chairman of the Board, President and Chief
Executive Officer of PLATINUM, is also a director of Mastering and has certain
other ownership interests in Mastering. Mr. Filipowski participated in the
deliberations of PLATINUM's Board of Directors on the Amendment but excused
himself from the vote of PLATINUM's Board. James Cowie, who is a director of
both PLATINUM and Mastering, did not participate in the deliberations or vote
of PLATINUM's Board on the Amendment. Messrs. Filipowski and Cowie did not
participate in the deliberations or vote of the Mastering Board on the
Amendment. See "THE MERGER--Interests of Certain Persons in the Merger" in the
Proxy Statement/Prospectus.
ADDITIONAL BACKGROUND FOR THE MERGER
On April 1, 1998, Mr. Terence Graunke received an unsolicited telephone call
from the chief executive officer of the third party which had contacted
Mastering in mid-March 1998 (as described in the Proxy Statement/Prospectus).
He indicated an interest in proposing a stock-for-stock merger at a range of
values in excess of what had been proposed in the earlier contact (the "April
Third-Party Proposal"). During the period between April 1 and 5, 1998, Mr.
Terence Graunke had several conversations with such chief executive officer
and, separately, with Mr. Filipowski. Among other things, such chief executive
officer indicated an ability to move quickly and a desire to conduct due
diligence. At a meeting on the evening of April 5, 1998, the Mastering Board,
after receiving the advice of Piper Jaffray, determined that the April Third-
Party Proposal, if consummated, was likely to result in a Superior Proposal
(as defined in the Merger Agreement) when compared to the terms as set forth
in the original Merger Agreement. Accordingly, the Mastering Board resolved to
provide further notification to PLATINUM and to permit the third party to
conduct due diligence, all in accordance with the terms of the Merger
Agreement.
6
<PAGE>
On the evening of April 6, 1998 counsel to PLATINUM delivered to Mastering
drafts of the Amendment and Stockholder Agreements. Among other things, the
drafts contemplated amendments to the Exchange Ratio which would be favorable
to the Mastering stockholders. The terms of the April Third-Party Proposal
were still nominally higher than the amended Exchange Ratio.
On the morning of April 7, 1998, the Mastering Board met with its financial
and legal advisors and determined that if certain changes to the draft
agreements received from PLATINUM could be negotiated it was likely to
continue to support the transaction with PLATINUM. Accordingly, the Mastering
Board authorized management to defer due diligence by the third party and to
negotiate the draft agreements with PLATINUM and to report to the Mastering
Board at a meeting scheduled for later that day.
During the afternoon of April 7, 1998, the Amendment was negotiated between
counsel for PLATINUM and Mastering, and the Stockholder Agreements were
negotiated between counsel for PLATINUM and the stockholders signatory
thereto.
On the evening of April 7, 1998, the Mastering Board again met with its
financial and legal advisors and determined to approve the Amendment. (The
terms of the Amendment and of the Stockholders Agreements are described below
under "The Amendment to the Merger Agreement" and "The Stockholder
Agreements." The factors considered by the Mastering Board in approving the
Amendment are described below under "--Factors Considered in Approving the
Amendment.")
On April 7, 1998, the Amendment and the Stockholder Agreements were
executed. The parties promptly issued a related press release shortly
thereafter.
FACTORS CONSIDERED IN APPROVING THE AMENDMENT
In reaching its determination to approve the Amendment, the Mastering Board
(excluding the Platinum Directors) consulted with Mastering's management, as
well as its financial and legal advisors, and considered a number of factors,
including, but not limited to, the following:
(i) the increase in the value of the consideration to be received by
Mastering's stockholders under the Amendment compared to what would have
been received under the original Merger Agreement;
(ii) the oral confirmation by Piper Jaffray delivered to the Mastering
Board on April 7, 1998 that it would be in a position to render a favorable
written opinion that the amended Exchange Ratio was fair, from a financial
point of view, to the holders of Common Shares as of the date of such
opinion. (Such written opinion was delivered on April 7, 1998 and is
attached to this Supplement as Appendix B);
(iii) the uncertainty as to whether the April Third-Party Proposal would
ultimately lead to an offer or a definitive agreement and the timing with
respect thereto;
(iv) publicly-available information with respect to the third party,
including the price to earnings ratio of its stock;
(v) the indication of the three largest stockholders of Mastering that such
stockholders still support the proposed Merger, as the terms thereof were
to be amended by the Amendment, and that they were prepared to execute the
Stockholder Agreements;
(vi) the likely impact of the Stockholder Agreements and certain provisions
of the Amendment in discouraging the third party and others from proposing
alternative transactions, but the insistence by PLATINUM on such provisions
as a condition to increasing the value of the consideration by means of the
amendment; and
(vii) certain of the other factors described in the Proxy
Statement/Prospectus under "The Merger--Recommendations of the Mastering
Board; Reasons for the Merger."
7
<PAGE>
OPINION OF MASTERING'S FINANCIAL ADVISOR
On April 7, 1998, the Mastering Board met to evaluate the proposed
Amendment. During this meeting, Piper Jaffray discussed with the Mastering
Board the financial analysis and procedures conducted since February 18, 1998
in order to render an opinion as to the fairness, from a financial point of
view, of the exchange ratio contained in the Amendment. Piper Jaffray then
delivered to the Mastering Board its oral opinion, which opinion was
subsequently confirmed in writing (the "Piper Jaffray Opinion"), that as of
April 7, 1998, and based upon the matters described therein, the exchange
ratio was fair, from a financial point of view, to the holders of Common
Shares.
The full text of the Piper Jaffray Opinion, which sets forth, among other
things, assumptions made, matters considered and limitations on the review
undertaken, is attached hereto as Appendix B and is incorporated herein by
reference. Stockholders of Mastering are urged to read the Piper Jaffray
Opinion in its entirety. The Piper Jaffray Opinion was prepared for the
benefit and use of the Mastering Board in its consideration of the Amendment
and does not constitute a recommendation to stockholders of Mastering as to
how they should vote at the Meeting in connection with the Merger. The Piper
Jaffray Opinion does not address the relative merits of the Merger and any
other transaction or business strategies discussed by the Mastering Board as
alternatives to the Merger Agreement or, except with respect to the fairness
of the exchange ratio, from a financial point of view to the holders of Common
Shares, the underlying business decision of the Mastering Board to proceed
with or effect the Merger. The summary of the Piper Jaffray Opinion set forth
in this Supplement is qualified in its entirety by reference to the full text
of the Piper Jaffray Opinion and the discussion contained in the Proxy
Statement/Prospectus under the heading "--Opinion of Mastering's Financial
Advisor," which discussion is incorporated herein by reference. With respect
to the discussion under the heading "Pro Forma Earnings Analysis--Synergy
Adjustments," as a result of the revised exchange ratio, the results of the
pro forma earnings analysis suggested that the Merger could be dilutive to the
combined company's EPS in the calendar year 1998.
Pursuant to a letter agreement dated as of April 7, 1998, Mastering agreed
to pay Piper Jaffray a fee equal to $100,000 in connection with delivering the
Piper Jaffray Opinion (which constitutes part of Piper Jaffray's fee equal to
a percentage of the total sale price). See "THE MERGER--Opinion of Mastering's
Financial Advisor" contained in the Proxy Statement/Prospectus for a complete
description of the Piper Jaffray Engagement Letter.
THE AMENDMENT TO THE MERGER AGREEMENT
The following is a summary of certain provisions of the Amendment. The
summary does not purport to be complete and is qualified in its entirety by
reference to the Amendment, a copy of which is attached to this Supplement as
Appendix A and incorporated herein by reference. Statements in this Supplement
with respect to the terms of the Amendment are qualified in their entirety by
reference to the Amendment. Mastering stockholders are urged to read the full
text of the Amendment.
CONVERSION OF SHARES IN THE MERGER
At the Effective Time, by virtue of the Merger and without any further
action on the part of Mastering or PT Acquisition or any holder of any of the
following securities:
(i) each issued and outstanding share of Common Stock of PT Acquisition
will be converted into one Common Share of Mastering as the surviving
corporation;
(ii) all Common Shares owned by PLATINUM, PT Acquisition or Mastering or by
any direct or indirect subsidiary of PLATINUM or Mastering will be
canceled; and
(iii) each Common Share issued and outstanding immediately prior to the
Effective Time (other than shares to be canceled as described in
subparagraph (ii) above) will be converted automatically into a number of
shares ("Conversion Shares") of PLATINUM Common Stock determined by
multiplying each Common Share by a fraction, the numerator of which is
$12.50 and the denominator of which is the average closing
8
<PAGE>
(last) price for a share of PLATINUM Common Stock, as reported on the
Nasdaq National Market (as reported in The Wall Street Journal, Midwest
Edition), for the most recent six days that the shares of PLATINUM Common
Stock have traded ending on the trading day immediately prior to the day of
the Meeting; provided, however, that (i) if the ratio of Conversion Shares
per Common Share determined pursuant to the foregoing is greater than
0.540, then, notwithstanding the foregoing, each Common Share issued and
outstanding immediately prior to the Effective Time (other than shares to
be canceled as described in subparagraph (ii) above) will be converted
automatically into 0.540 shares of PLATINUM Common Stock and (ii) if the
ratio of Conversion Shares per Common Share determined pursuant to the
foregoing is less than 0.448, then, notwithstanding the foregoing, each
Common Share issued and outstanding immediately prior to the Effective Time
(other than shares to be canceled as described in subparagraph (ii) above)
will be converted automatically into 0.448 shares of PLATINUM Common Stock.
All Common Shares converted as provided in subparagraph (iii) of the
preceding paragraph will no longer be outstanding and will automatically be
canceled and retired; and each holder of a Mastering Certificate representing
immediately prior to the Effective Time any such Common Shares will cease to
have any rights with respect thereto, except the right to receive, as
hereinafter described: (i) certificates representing the number of whole
shares of PLATINUM Common Stock into which such Common Shares have been
converted, (ii) cash in lieu of any fractional share of PLATINUM Common Stock
and (iii) certain dividends and other distributions.
SUPERIOR PROPOSALS
The Amendment provides that in the event Mastering receives a Superior
Proposal (as defined in the Merger Agreement), nothing contained in the Merger
Agreement shall prevent the Mastering Board from accepting or approving such
Superior Proposal, and nothing contained in the Merger Agreement shall prevent
the Mastering Board and its directors, officers, employees, representatives,
investment bankers, agents or affiliates from recommending such Superior
Proposal to Mastering's stockholders, if the Mastering Board reasonably
determines in good faith, based upon the advice of Mastering's outside
corporate counsel, that the failure to take such action or actions would
constitute a breach of the fiduciary duties of the Mastering Board to
Mastering's stockholders under applicable law; in such case, the Mastering
Board may amend, withhold or withdraw its recommendation of the Merger,
decline to hold the Meeting or exercise its termination rights under the
Merger Agreement.
CONDITIONS TO THE MERGER
The Amendment eliminates certain conditions to Closing, including the
following: (i) if requested by PLATINUM, the requirement of Mastering to
deliver to PLATINUM agreements in form and substance reasonably acceptable to
PLATINUM and duly executed by the parties to such agreements, clarifying
certain non-competition covenants or agreements to which Mastering or one of
its subsidiaries is a party or by which it is bound and (ii) the requirement
that Mastering's consolidated revenue for the three-month period ended March
31, 1998 (as set forth in its earnings release for such period) equaled or
exceeded $10,640,000 (as determined in accordance with generally accepted
accounting principles (including principles of materiality)) applied on a
basis consistent with the principles applied in preparing Mastering's
financial statements for the year ended December 31, 1997.
TERMINATION
The Amendment modifies certain termination rights in the Merger Agreement.
The original Merger Agreement provided that Mastering could terminate the
Merger Agreement if the value of PLATINUM Common Stock (based on a ten-day
average) at any time from and after the date on which the Registration
Statement was declared effective and prior to the Meeting was less than
$22.50. The Amendment provides that Mastering may terminate the Merger
Agreement if the average closing (last) price for a share of PLATINUM Common
Stock, as reported on the Nasdaq National Market (as reported in The Wall
Street Journal, Midwest Edition), for the most recent 20 days that the shares
of PLATINUM Common Stock have traded ending on April 20, 1998 is less than
$19.00.
9
<PAGE>
THE STOCKHOLDER AGREEMENTS
As a condition to PLATINUM's execution of the Amendment, each of Terence M.
Graunke, Thomas R. Graunke, Marc Pinto and Frontenac VI Limited Partnership
(collectively, the "Stockholders") executed a Stockholder Agreement with
PLATINUM, pursuant to which the Stockholders have agreed that at any meeting
(whether annual or special and whether or not an adjourned or postponed
meeting) of the Mastering stockholders, however called, or in connection with
any written consent of the Mastering stockholders, each such Stockholder will
appear at the meeting or otherwise cause the Common Shares owned by such
Stockholder to be counted as present thereat for purposes of establishing a
quorum and vote or consent (or cause to be voted or consented) the Common
Shares owned by such Stockholder (A) in favor of the adoption of the Merger
Agreement and the approval of the other actions contemplated by the Merger
Agreement and the Stockholder Agreement and any actions required in
furtherance thereof; (B) against any action or agreement that would result in
a breach in any respect of any covenant, representation or warranty, or any
other obligation or agreement, of Mastering under the Merger Agreement or the
Stockholder Agreement; and (C) except as otherwise agreed to in writing in
advance by PLATINUM in its sole discretion, against the following actions
(other than the Merger and the transactions contemplated by the Merger
Agreement and the Stockholder Agreement): (1) any Acquisition Proposal, (2)
(u) any change in a majority of the individuals who constitute the Mastering
Board; (v) any material change in the present capitalization of Mastering,
including without limitation any proposal to sell a substantial equity
interest in Mastering or its subsidiaries or substantial assets of Mastering
or its subsidiaries; (w) any amendment of Mastering's Certificate of
Incorporation or By-laws; (x) any other material change in Mastering's
corporate structure or business; or (y) any other action which is intended, or
could reasonably be expected, to impede, interfere with, delay, postpone or
materially adversely affect the Merger and the transactions contemplated by
the Merger Agreement and the Stockholder Agreement.
In addition to the foregoing, each of the Stockholders has agreed that such
Stockholder and any representatives will not, directly or indirectly, (i)
solicit, initiate or encourage (including by way of furnishing information)
any inquiries or the making of any proposal with respect to any Acquisition
Proposal or (ii) negotiate or otherwise engage in discussions with any person
with respect to any Acquisition Proposal, or which may reasonably be expect to
lead to a proposal for any Acquisition Proposal, or enter into any agreement,
arrangement or understanding (including any letter of intent, agreement in
principle or similar agreement) with respect to any such Acquisition Proposal.
Moreover, the Stockholder Agreement provides that each Stockholder will not,
directly or indirectly, (i) offer for sale, sell, transfer, tender, pledge,
encumber, assign or otherwise dispose of, or enter into any contract, option
or other arrangement or understanding with respect to or consent to the offer
for sale, sell, transfer, tender, pledge, encumbrance, assignment or other
disposition of, any or all of the Common Shares owned by such Stockholder or
any interest therein, (ii) grant any proxies or powers of attorney, deposit
the Common Shares owned by such Stockholder into a voting trust or enter into
a voting agreement with respect to the Common Shares owned by such
Stockholder, or (iii) take any action that would make any representation or
warranty of such Stockholder contained in the Stockholder Agreement untrue or
incorrect or would result in a breach by such Stockholder of its obligations
under the Stockholder Agreement.
The Stockholder Agreements generally terminate upon (or within 30 days
after) the termination of the Merger Agreement. However, if the Merger
Agreement is terminated (i) by PLATINUM or Mastering if the Mastering
stockholders do not approve the Merger, (ii) by PLATINUM if the Mastering
Board changes its recommendation regarding the Merger, (iii) by PLATINUM or
Mastering if the Merger has not been consummated by July 31, 1998 and, in the
case of clause (i), (ii) or (iii), prior to such termination there shall have
been made a Superior Proposal or Acquisition Proposal or (iv) by PLATINUM or
Mastering if the Mastering Board accepts or recommends a Superior Proposal,
then for a period of 365 days after the date of the Stockholder Agreements,
the Stockholders will not vote in favor of such Superior Proposal or
Acquisition Proposal or any proposal made by the person or entity that made
such Superior Proposal or Acquisition Proposal or any affiliate of such person
or entity and will not sell the Stockholders' Common Shares (by means of a
tender or otherwise) to the person or entity making such Superior Proposal or
Acquisition Proposal or any affiliate of such person or entity.
The Stockholders held an aggregate of 7,217,428 Common Shares, or
approximately 52% of the outstanding Common Shares, on the Record Date.
10
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS
UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PLATINUM MASTERING
HISTORICAL HISTORICAL PRO FORMA
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, PRO FORMA DECEMBER 31,
1997 1997 ADJUSTMENTS 1997
------------ ------------ ----------- ------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues:
Software products......... $ 357,223 $ -- $-- $ 357,223
Maintenance............... 125,245 -- -- 125,245
Professional services..... 141,035 40,966 -- 182,001
--------- ------- ---- ---------
Total revenues.......... 623,503 40,966 -- 664,469
--------- ------- ---- ---------
Costs and expenses:
Professional services..... 127,499 37,149 -- 164,648
Product development and
support.................. 187,383 -- -- 187,383
Sales and marketing....... 228,387 -- -- 228,387
General and
administrative........... 61,876 -- -- 61,876
Restructuring charges..... 57,319 -- -- 57,319
Merger costs.............. 8,927 -- -- 8,927
Acquired in-process
technology............... 67,904 -- -- 67,904
--------- ------- ---- ---------
Total costs and ex-
penses................. 739,295 37,149 -- 776,444
--------- ------- ---- ---------
Operating income (loss)..... (115,792) 3,817 -- (111,975)
Other income, net........... 16,729 1,870 -- 18,599
--------- ------- ---- ---------
Income (loss) before income
taxes...................... (99,063) 5,687 -- (93,376)
Income taxes................ 18,721 2,081 -- 20,802
--------- ------- ---- ---------
Net income (loss) from
continuing operations...... $(117,784) $ 3,606 $-- $(114,178)
========= ======= ==== =========
Net income (loss) from
continuing operations per
share...................... $ (1.90) $ 0.27 $-- $ (1.65)
========= ======= ==== =========
Shares used in computing net
income (loss) from
continuing operations per
share...................... 62,042 13,535 69,076
</TABLE>
See accompanying notes to unaudited pro forma condensed combining financial
statements.
11
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PLATINUM MASTERING
HISTORICAL HISTORICAL PRO FORMA
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, PRO FORMA DECEMBER 31,
1996 1996 ADJUSTMENTS 1996
------------ ------------ ----------- ------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues:
Software products......... $243,938 $ -- $-- $243,938
Maintenance............... 102,364 -- -- 102,364
Professional services..... 121,763 21,018 -- 142,781
-------- ------- ---- --------
Total revenues.......... 468,065 21,018 -- 489,083
-------- ------- ---- --------
Costs and expenses:
Professional services..... 116,133 21,574 -- 137,707
Product development and
support.................. 155,277 -- -- 155,277
Sales and marketing....... 182,597 -- -- 182,597
General and
administrative........... 39,224 -- -- 39,224
Merger costs.............. 5,782 -- -- 5,782
Acquired in-process
technology............... 48,456 -- -- 48,456
-------- ------- ---- --------
Total costs and ex-
penses................. 547,469 21,574 -- 569,043
-------- ------- ---- --------
Operating loss.............. (79,404) (556) -- (79,960)
Other income, net........... 5,237 1,537 -- 6,774
-------- ------- ---- --------
Income (loss) before income
taxes...................... (74,167) 981 -- (73,186)
Income taxes................ (9,245) 461 -- (8,784)
-------- ------- ---- --------
Net income (loss) from
continuing operations...... $(64,922) $ 520 $-- $(64,402)
======== ======= ==== ========
Net income (loss) from
continuing operations per
share...................... $ (1.14) $ 0.04 $-- $ (1.02)
======== ======= ==== ========
Shares used in computing net
income (loss) from
continuing operations per
share...................... 56,968 12,286 63,353
</TABLE>
See accompanying notes to unaudited pro forma condensed combining financial
statements.
12
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
PLATINUM MASTERING
HISTORICAL HISTORICAL PRO FORMA
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, PRO FORMA DECEMBER 31,
1995 1995 ADJUSTMENTS 1995
------------ ------------ ----------- ------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues:
Software products......... $ 158,597 $ -- $-- $ 158,597
Maintenance............... 76,498 -- -- 76,498
Professional services..... 91,316 10,168 -- 101,484
--------- ------- ---- ---------
Total revenues.......... 326,411 10,168 -- 336,579
--------- ------- ---- ---------
Costs and expenses:
Professional services..... 92,374 9,720 -- 102,094
Product development and
support.................. 94,027 -- -- 94,027
Sales and marketing....... 113,978 -- -- 113,978
General and
administrative........... 34,097 -- -- 34,097
Merger costs.............. 30,819 -- -- 30,819
Acquired in-process
technology............... 88,493 -- -- 88,493
--------- ------- ---- ---------
Total costs and ex-
penses................. 453,788 9,720 -- 463,508
--------- ------- ---- ---------
Operating income (loss)..... (127,377) 448 -- (126,929)
Other income, net........... 4,130 70 -- 4,200
--------- ------- ---- ---------
Income (loss) before income
taxes...................... (123,247) 518 -- (122,729)
Income taxes................ (11,680) -- -- (11,680)
--------- ------- ---- ---------
Net income (loss) from
continuing operations...... $(111,567) $ 518 $-- $(111,049)
========= ======= ==== =========
Net income (loss) from
continuing operations per
share...................... $ (2.50) $ 0.11 $-- $ (2.35)
========= ======= ==== =========
Shares used in computing net
income (loss) from
continuing operations per
share...................... 44,671 4,807 47,169
</TABLE>
See accompanying notes to unaudited pro forma condensed combining financial
statements.
13
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS
NOTE A--DESCRIPTION OF MERGER
On February 18, 1998, PLATINUM signed a definitive agreement to acquire all
of the outstanding capital stock of Mastering. Under the Merger Agreement, as
amended, the ratio of PLATINUM Common Stock exchanged for each Common Share of
Mastering will vary based upon the average closing price of PLATINUM's Common
Stock as reported on Nasdaq for the six trading days ending the day before the
Meeting. Accordingly, the following table presents the effect of different
levels of exchange ratios ranging from the minimum exchange ratio to the
maximum exchange ratio. The current average is based on a PLATINUM six-day
average closing stock price of $24.0521 (for the six business days ended April
7, 1998), which is assumed for purposes of the pro forma financial statements.
Shares converted and options converted represent the number of PLATINUM shares
and options resulting from the indicated exchange ratio.
<TABLE>
<CAPTION>
MAXIMUM CURRENT AVERAGE MINIMUM
---------------- ---------------- ----------------
(AMOUNTS IN THOUSANDS, EXCEPT EXCHANGE RATIO DATA)
<S> <C> <C> <C>
Exchange Ratio............ .5400 .5197 .4480
Shares Converted.......... 7,494 7,212 6,217
Options Converted......... 2,562 2,466 2,126
</TABLE>
Mastering will become a wholly-owned subsidiary of PLATINUM. The closing of
the definitive merger agreement is subject to approval by the stockholders of
Mastering as well as the satisfaction of conditions customary in such
agreements. It is expected that the acquisition will qualify as a tax-free
reorganization and will be accounted for as a pooling of interests.
The unaudited pro forma combined financial data are not necessarily
indicative of the operating results that would have been achieved had the
transactions been in effect as of the beginning of the periods presented and
should not be construed as representative of future operations.
PLATINUM and Mastering estimate that they will incur merger-related expenses
of approximately $10,000,000, consisting primarily of transaction costs for
financial advisory fees, attorneys, accountants, financial printing and one-
time charges related to the transaction. These nonrecurring expenses will be
charged to operations in the fiscal quarter in which the merger is
consummated. Such charges have not been reflected in the pro forma financial
statements.
The following table summarizes the pro forma net loss from continuing
operations per share and the assumed average shares outstanding used in
computing pro forma net loss from continuing operations per share under the
three exchange ratio categories for the years ended December 31, 1997, 1996
and 1995:
<TABLE>
<CAPTION>
MAXIMUM CURRENT AVERAGE MINIMUM
--------------- --------------- ---------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Year ended December 31, 1997
Pro forma net loss from
continuing operations per
share........................ $ (1.65) $(1.65 ) $ (1.68)
============== ============== ===============
PLATINUM average shares
outstanding.................. 62,042 62,042 62,042
Mastering assumed average
shares outstanding........... 7,309 7,034 6,064
-------------- -------------- ---------------
Pro forma average shares
outstanding.................. 69,351 69,076 68,106
============== ============== ===============
Year ended December 31, 1996
Pro forma net loss from
continuing operations per
share........................ $ (1.01) $ (1.02) $ (1.03)
============== ============== ===============
PLATINUM average shares
outstanding.................. 56,968 56,968 56,968
Mastering assumed average
shares outstanding........... 6,634 6,385 5,504
-------------- -------------- ---------------
Pro forma average shares
outstanding.................. 63,602 63,353 62,472
============== ============== ===============
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
MAXIMUM CURRENT AVERAGE MINIMUM
--------------- --------------- ---------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Year ended December 31, 1995
Pro forma net loss from
continuing operations per
share...................... $ (2.35) $ (2.35) $ (2.37)
=============== =============== ===============
PLATINUM average shares
outstanding................ 44,671 44,671 44,671
Mastering assumed average
shares outstanding......... 2,596 2,498 2,153
--------------- --------------- ---------------
Pro forma average shares
outstanding................ 47,267 47,169 46,824
=============== =============== ===============
</TABLE>
NOTE B--EARNINGS PER SHARE
Share and per share amounts for 1996 and 1995 reflect actual shares of
Mastering outstanding for purposes of the unaudited pro forma statements of
operations. Due to the significant changes that occurred to Mastering's
capital structure upon its initial public offering in March 1996, Mastering
has not presented such share data except on a pro forma basis, as discussed in
Note 1 to Mastering's consolidated financial statements included in the Proxy
Statement/Prospectus.
NOTE C--RECLASSIFICATIONS
Certain historical amounts have been reclassified to conform to the pro
forma combined presentation.
NOTE D--SUBSEQUENT EVENTS
See Note 18 to PLATINUM's consolidated financial statements included in the
Proxy Statement/Prospectus which includes a discussion of the transactions
entered into by PLATINUM subsequent to December 31, 1997. Also included is a
summary of the pro forma effects of the proposed acquisitions of Learmonth and
Burchett Management Systems PLC, Mastering and Logic Works, Inc. on revenues
and net income (loss) for the years ended December 31, 1997, 1996 and 1995.
15
<PAGE>
APPENDIX A
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
THIS FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this "First
Amendment") is made as of this 7th day of April, 1998 among PLATINUM
technology, inc., a Delaware corporation ("Parent"), PT Acquisition
Corporation I, a Delaware corporation and wholly-owned subsidiary of the
Parent ("Merger Sub"), and Mastering, Inc. a Delaware corporation (the
"Company").
Parent, Merger Sub and the Company are parties to that certain Agreement and
Plan of Merger dated as of February 18, 1998 (the "Merger Agreement"). Except
as otherwise defined or modified herein, all capitalized terms used in this
First Amendment shall have the meaning set forth in the Merger Agreement.
In consideration of the mutual agreements contained in the Merger Agreement
and in this First Amendment and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. Amendments to Merger Agreement.
A. Amendment to Section 1.6(a) of the Merger Agreement. Section 1.6(a) of
the Merger Agreement is hereby amended to read in its entirety as follows:
"(a) Conversion of Company Capital Stock. Subject to the provisions of
subsections (d) and (e) of this Section 1.6, each share of Common Stock,
par value $.001 per share, of the Company (the "Company Capital Stock")
issued and outstanding immediately prior to the Effective Time (other than
any shares of Company Capital Stock to be canceled pursuant to Section
1.6(b)) will be converted automatically into a number of shares
("Conversion Shares") of Common Stock, par value $0.001 per share, of
Parent (the "Parent Common Stock") determined by multiplying each share of
Company Capital Stock by a fraction, the numerator of which is $12.50 and
the denominator of which is the average closing (last) price for a share of
Parent Common Stock, as reported on the Nasdaq National Market (as reported
in The Wall Street Journal, Midwest Edition), for the most recent six (6)
days that the shares of Parent Common Stock have traded ending on the
trading day immediately prior to the day of the Company Stockholders'
Meeting; provided however that (i) if the ratio of Conversion Shares per
share of Company Capital Stock determined pursuant to the foregoing is
greater than .54, then, notwithstanding the foregoing, each share of
Company Capital Stock issued and outstanding immediately prior to the
Effective Time (other than any shares of Company Capital Stock to be
cancelled pursuant to Section 1.6(b)) will be converted automatically into
.54 shares of Parent Common Stock and (ii) if the ratio of Conversion
Shares per share of Company Capital Stock determined pursuant to the
foregoing is less than .448, then, notwithstanding the foregoing, each
share of Company Capital Stock issued and outstanding immediately prior to
the Effective Time (other than any shares of Company Capital Stock to be
cancelled pursuant to Section 1.6(b)) will be converted automatically into
.448 shares of Parent Common Stock. All shares of Company Capital Stock,
when converted, shall no longer be outstanding and shall automatically be
cancelled and retired and each holder of a certificate representing any
such shares shall cease to have any rights with respect thereto, except the
right to receive (a) any dividends and other distributions in accordance
with Section 1.8(d), (b) certificates representing the shares of Parent
Common Stock into which such shares are converted and (c) any cash, without
interest, in lieu of fractional shares to be issued or paid in
consideration therefor upon the surrender of such certificates in
accordance with Section 1.6(e). The ratio of Conversion Shares per share of
Company Capital Stock determined pursuant to the first sentence of this
Section 1.6(a) is sometimes hereinafter referred to as the "Exchange
Ratio." "
B. Amendments to Section 5 of the Merger Agreement.
(I) The last sentence of Section 5.1 of the Merger Agreement is hereby
amended to read in its entirety as follows:
"The Proxy Statement shall also include the recommendation of the Board
of Directors of the Company in favor of the Merger which recommendation
shall not be withdrawn, modified or withheld
A-1
<PAGE>
unless the Company's Board is required to do so in order to comply with the
fiduciary duties of the Company's Board to the Company's stockholders under
applicable law."
(II) Section 5.2 of the Merger Agreement is hereby amended to read in its
entirety as follows:
"5.2 Meeting of Stockholders. Promptly after the date hereof, the Company
shall take all action necessary in accordance with the Delaware Law and its
Certificate of Incorporation and Bylaws to convene the Company
Stockholders' Meeting to be held as promptly as practicable for the purpose
of voting upon this Agreement and the Merger, unless the Company's Board is
required not to do so in order to comply with the fiduciary duties of the
Company's Board to the Company's stockholders under applicable law. Subject
to the rights of termination set forth in Section 7.1 hereof, each of the
parties to this Agreement shall use its reasonable commercial efforts to
have the Company hold the Company Stockholders' Meeting for the purpose of
voting upon this Agreement and the Merger on April 21, 1998."
(III) Section 5.4(c) of the Merger Agreement is hereby amended to read in
its entirety as follows:
"(c) In the event the Company receives a Superior Proposal, nothing
contained in this Agreement shall prevent the Board of Directors of the
Company from accepting or approving such Superior Proposal, and nothing
contained in this Agreement shall prevent the Board of Directors of the
Company and its directors, officers, employees, representatives, investment
bankers, agents or affiliates from recommending such Superior Proposal to
the Company's stockholders, if the Company's Board reasonably determines in
good faith, based upon the advice of the Company's outside corporate
counsel, that the failure to take such action or actions would constitute a
breach of the fiduciary duties of the Company's Board of Directors to the
Company's stockholders under applicable law; in such case, the Board may
amend, withhold or withdraw its recommendation of the Merger, decline to
hold the Company Stockholders' Meeting or exercise its termination rights
hereunder. Subject to the right of termination set forth in Section 7.1(f),
except to the extent expressly set forth in this Section 5.4, nothing shall
relieve the Company from complying with all other terms of this Agreement.
Nothing contained in this paragraph (c) shall affect Parent's right to
terminate this Agreement pursuant to Section 7.1 or the Company's
obligations under Sections 5.5(c) and 5.6."
C. Amendments to Section 6.3 of the Merger Agreement.
(I) Sections 6.3(k) and (l) of the Merger Agreement are hereby amended by
deleting such sections in their entirety and substituting the following in
lieu thereof: "This Section is intentionally omitted."
(II) Section 6.3(n) of the Merger Agreement is hereby amended by deleting
the name "Terence M. Graunke" set forth therein and substituting in lieu
thereof the name "Lake Creek Research L.L.C."
D. Amendment to Section 7.1 of the Merger Agreement.
(I) Section 7.1(c)(ii) of the Merger Agreement is hereby amended to read in
its entirety as follows:
"(ii) the average closing (last) price for a share of Parent Common
Stock, as reported on the Nasdaq National Market (as reported in The Wall
Street Journal, Midwest Edition), for the most recent twenty (20) days that
the shares of Parent Common Stock have traded ending on April 20, 1998 is
less than $19.00,"
(II) Section 7.1(f) of the Merger Agreement is hereby amended to read in its
entirety as follows:
"(f) by any party if the Board of Directors of the Company accepts or
approves a Superior Proposal, or recommends a Superior Proposal to the
stockholders of the Company, provided the Company's Board may only take
such action if it reasonably determines in good faith, based upon the
advice of the Company's outside corporate counsel, that the failure to take
such action or actions would constitute a breach of the fiduciary duties of
the Company's Board of Directors to the Company's stockholders under
applicable law; provided further that the Company shall provide the Parent
three (3) business days' prior written notice that the Company may accept
or approve a Superior Proposal."
A-2
<PAGE>
Section 2. Representations and Warranties.
A. Representations and Warranties of the Company. The Company represents and
warrants to Parent and Merger Sub as follows:
(1) Authority; No Conflicts.
a. The Company has all requisite corporate power and authority to
enter into this First Amendment and, subject to obtaining requisite
stockholder approval, to consummate the transactions contemplated by
the Merger Agreement, as amended hereby. The execution and delivery of
this First Amendment and the consummation of the transactions
contemplated by the Merger Agreement as amended hereby have been duly
authorized by all necessary corporate action on the part of the
Company, subject only to the approval of the Merger by the vote of the
holders of at least a majority of the Company Capital Stock voting
together as one class. This First Amendment has been duly executed and
delivered by the Company and constitutes the valid and binding
obligation of the Company, enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy and other similar
laws and general principles of equity.
b. Except as set forth in the Company Schedules, the execution and
delivery of this First Amendment by the Company does not, and the
consummation of the transactions contemplated by the Merger Agreement
as amended hereby will not, conflict with, or result in any violation
of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit under (i) any
provision of the Certificate of Incorporation, as amended, or Bylaws,
as amended, of the Company or similar governing instruments of any of
its subsidiaries or (ii) any mortgage, indenture, lease, contract or
other agreement to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or the assets
of the Company or any of its subsidiaries is bound, except for any such
conflict, violation, default, right or loss which could not reasonably
be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company, or (iii) any permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to the Company, any of its subsidiaries
or their respective properties or assets, except for any such conflict,
violation, default, right or loss which could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on the Company.
c. Except as set forth in the Company Schedules, no consent,
approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required by or with respect to
the Company or any of its subsidiaries in connection with the execution
and delivery of this First Amendment or the consummation of the
transactions contemplated hereby, except (i) in connection, or in
compliance, with the provisions of the Exchange Act, (ii) the filing of
the Certificate of Merger with the Delaware Secretary of State and
appropriate documents with the relevant authorities of other states in
which the Company or any of its subsidiaries is qualified to do
business, (iii) applicable requirements, if any, of The Nasdaq National
Market and (iv) such other consents, approvals, orders, authorizations,
registrations, declarations and filings, the failure of which to be
obtained or made could not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company.
(2) State "Anti-Takeover" Statutes. The Company's Board has taken all
actions necessary so that neither Section 203 of Delaware Law nor any other
"fair price" or "control share acquisition" statute or other similar
statute or regulation applies to the Merger or this First Amendment.
B. Representations and Warranties of Parent and Merger Sub. Parent and
Merger Sub represent and warrant to the Company as follows:
(1) Parent and Merger Sub have all requisite corporate power and
authority to enter into this First Amendment and to consummate the
transactions contemplated by the Merger Agreement as amended hereby. The
execution and delivery of this First Amendment and the consummation of the
transactions
A-3
<PAGE>
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Parent and Merger Sub. This First Amendment has been
duly executed and delivered by Parent and Merger Sub and constitutes the
valid and binding obligations of Parent and Merger Sub, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy and other similar laws and general principles of equity.
(2) The execution and delivery of this First Amendment does not, and the
consummation of the transactions contemplated by the Merger Agreement, as
amended hereby, will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both), or give
rise to a right of termination, cancellation or acceleration of any
obligation or loss of a benefit under (i) any provision of the Certificate
of Incorporation or Bylaws of Parent or Merger Sub or (ii) any mortgage,
indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent, any of its subsidiaries
or their respective properties or assets other than any such conflicts,
violations, defaults, terminations, cancellations or accelerations which
could not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Parent or materially impair the ability of
Parent to consummate the transactions contemplated hereby.
(3) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity, is required by or with
respect to Parent and Merger Sub and their respective subsidiaries in
connection with the execution and delivery of this First Amendment by
Parent and Merger Sub or the consummation by Parent and Merger Sub of the
transactions contemplated hereby, except for (i) the filing of the
Certificate of Merger with the Delaware Secretary of State, (ii) listing of
the shares on the Nasdaq National Market, and (iii) such other consents,
authorizations, filings, approvals and registrations which if not obtained
or made could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent or materially impair the
ability of Parent to consummate the transactions contemplated hereby.
Section 3. Conditions Precedent. The effectiveness of the amendments to the
Merger Agreement set forth in Section 1 hereof are subject to the condition
that on or prior to April 7, 1998 each of Terence M. Graunke, Thomas R.
Graunke, Marc Pinto and Frontenac VI Limited Partnership shall have executed
and delivered to Parent a Stockholder Agreement in the form of Exhibit A
hereto attached.
Section 4. Consent. Parent hereby consents to the release by the Company of
17,500 shares of Company Capital Stock that have been pledged to the Company
by Thomas R. Graunke pursuant to a Stock Pledge Agreement.
Section 5. Miscellaneous. Except as herein expressly modified, the terms and
provisions of the Merger Agreement shall remain as originally executed.
IN WITNESS WHEREOF, the parties have executed this First Amendment and
caused the same to be duly delivered on their behalf on the day and year first
hereinabove written.
PLATINUM technology, inc.
Larry S. Freedman
By: _________________________________
Senior Vice President
Its: ________________________________
PT ACQUISITION CORPORATION I
Larry S. Freedman
By: _________________________________
Senior Vice President
Its: ________________________________
MASTERING, INC.
Terence M. Graunke
By: _________________________________
President and Chief Executive
Officer
Its: ________________________________
A-4
<PAGE>
APPENDIX B
April 7, 1998
PERSONAL & CONFIDENTIAL
Board of Directors
Mastering, Inc.
9201 East Mountain View Road
Suite 200
Scottsdale, Arizona 85258
Members of the Board:
We understand that PLATINUM technology, inc., a Delaware corporation
("PLATINUM" or the "Acquiror"), PT Acquisition Corporation I, a Delaware
corporation ("Acquisition Sub"), and Mastering, Inc., a Delaware corporation
("Mastering" or the "Company") have entered into an Agreement and Plan of
Merger dated as of February 18, 1998 (the "Agreement") as amended by the First
Amendment to Agreement and Plan of Merger dated as of April 7, 1998 (the
"First Amendment") pursuant to which the Acquisition Sub will be merged with
and into the Company in a transaction (the "Transaction") in which each
outstanding share of the Company's common stock, $.001 par value per share
(the "Company Shares") will be converted into the right to receive a number of
shares of the common stock of PLATINUM, par value $0.001 per share (the
"Acquiror Shares") determined by multiplying each Company share by a fraction,
the numerator of which is $12.50 and the denominator of which is the average
closing price for a share of PLATINUM common stock for the most recent six
days that such shares have traded ending on the trading day immediately prior
to the day of the Company Stockholder's Meeting to approve the Transaction;
provided that (i) if such ratio determined pursuant to the foregoing is
greater than .54, then each Company Share shall be converted into .54 shares
of PLATINUM common stock and (ii) if such ratio determined pursuant to the
foregoing is less than .448, then each Company Share shall be converted into
.448 shares of PLATINUM common stock (the ratio of PLATINUM common stock per
Company Share as so determined is referred to herein as the "Exchange Ratio").
You have requested our opinion as to whether the Exchange Ratio is fair, from
a financial point of view, to the holders of Company Shares.
Piper Jaffray Inc. ("Piper Jaffray"), as a customary part of its investment
banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, underwritings and
secondary distributions of securities, private placements, and valuations for
estate, corporate and other purposes. For our services in rendering this
opinion, the Company will pay us a fee and indemnify us against certain
liabilities. In the ordinary course of its business, we and our affiliates may
actively trade securities of the Company and PLATINUM for our own account or
the accounts of our customers and, accordingly, may at any time hold a long or
short position in such securities.
In arriving at our opinion, we have undertaken such reviews, analyses and
inquiries as we deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. Reviewed the definitive Agreement and the First Amendment.
2. Reviewed the Report on Form 10-K for the Company for the two fiscal
years ended December 31, 1997.
3. Reviewed the Reports on Form 10-K for PLATINUM for the four fiscal years
ended December 31, 1997.
4. Reviewed financial forecasts prepared by Company management for the five
fiscal years ending December 31, 1998 through 2002 ("Five-Year Financial
Forecasts").
5. Visited the headquarters of the Company and conducted discussions with
members of senior management of the Company, including the Chief
Executive Officer, the President, the Executive Vice
B-1
<PAGE>
President and Chief Financial Officer and other members of senior
management. Topics discussed included, but were not limited to, the
background and rationale of the proposed Transaction, the financial
condition, operating performance and the balance sheet characteristics
of the Company and the prospects for the Company.
6. Conducted discussions with members of senior management of PLATINUM,
including the Chief Executive Officer and the Executive Vice President
and Chief Financial Officer. Topics discussed included, but were not
limited to, the background and rationale of the proposed Transaction,
the financial condition, operating performance and the balance sheet
characteristics of PLATINUM and the prospects for PLATINUM.
7. Conducted discussions with PLATINUM's auditors. Topics discussed
included, but were not limited to, PLATINUM's financial accounting
policies and procedures and other financial and accounting matters.
8. Reviewed the historical prices and trading activity for PLATINUM common
stock.
9. Performed discounted cash flow analysis on the Five-Year Financial
Forecasts.
10. Reviewed the financial terms, to the extent publicly available, of
certain comparable merger and acquisition transactions which we deemed
relevant.
11. Compared certain financial data of the Company and PLATINUM with
certain financial and securities data of companies deemed similar to
the Company and PLATINUM or representative of the business sectors in
which they operate.
12. Reviewed such other financial data, performed such other analyses and
considered such other information as we deemed necessary and
appropriate under the circumstances.
We have relied upon and assumed the accuracy and completeness of the
financial statements and other information provided by the Company and
PLATINUM or otherwise made available to us and have not assumed responsibility
independently to verify such information. We have further relied upon the
assurances of the Company's and PLATINUM's management that the information
provided has been prepared on a reasonable basis in accordance with industry
practice, and, with respect to financial planning data, reflects the best
currently available estimates and judgment of the Company's and PLATINUM's
management as to the expected future financial performance of the Company and
PLATINUM and that they are not aware of any information or facts that would
make the information provided to us incomplete or misleading. Without limiting
the generality of the foregoing, for the purpose of this opinion, we have
assumed that neither the Company nor PLATINUM are a party to any pending
transaction, including external financing, recapitalizations, acquisitions or
merger discussions, other than the Transaction or in the ordinary course of
business. We have also assumed that the Transaction will be free of Federal
tax to the Company, PLATINUM, and the holders of Company Shares and that the
Transaction will be accounted for as a pooling of interests under generally
accepted accounting principles. In arriving at our opinion, we have assumed
that all the necessary regulatory approvals and consents required for the
Transaction will be obtained in a manner that will not change the purchase
price for the Company. We also note that Mr. Filipowski, a director of the
Company, is the Chief Executive Officer of PLATINUM and that Mr. James Cowie,
a director of the Company is also a director of PLATINUM.
In arriving at our opinion, we have not performed any appraisals or
valuations of specific assets or liabilities of the Company or PLATINUM and
have not been furnished with any such appraisals or valuations. Without
limiting the generality of the foregoing, we have undertaken no independent
analysis of any pending or threatened litigation, possible unasserted claims
or other contingent liabilities, to which the Company, PLATINUM or any of
their respective affiliates is a party or may be subject and, at the Company's
direction and with its consent, our opinion makes no assumption concerning and
therefore does not consider, the possible assertion of claims, outcomes or
damages arising out of any such matters.
Our opinion is necessarily based upon information available to us, facts and
circumstances and economic, market and other conditions as they exist and are
subject to evaluation on the date hereof; events occurring after
B-2
<PAGE>
the date hereof could materially affect the assumptions used in preparing this
opinion. We have not undertaken to reaffirm or revise this opinion or
otherwise comment upon any events occurring after the date hereof and do not
have any obligation to update, revise or reaffirm this opinion. We are not
expressing any opinion herein as to the prices at which the Company Shares or
the Acquiror Shares will trade following the consummation of the Transaction
or the prices at which the Company Shares or the Acquiror Shares will trade
between the date hereof and the consummation of the Transaction. In addition,
we express no opinion or recommendation as to how the holders of Company
Shares should vote at the stockholders meeting to be held in connection with
the Transaction.
This opinion is for the benefit of the Board of Directors of the Company in
evaluating the Transaction and shall not be published or otherwise used, nor
shall any public references to Piper Jaffray be made without our prior written
consent. In connection with this opinion, we were not requested to opine as
to, and this opinion does not address (except to the extent expressly set
forth in the next paragraph), the underlying business decision to proceed with
or effect the Transaction.
Based upon and subject to the foregoing and based upon such other factors as
we consider relevant, it is our opinion that the Exchange Ratio is fair, from
a financial point of view, to the holders of Company Shares, as of the date
hereof.
Sincerely,
/s/ Piper Jaffray
PIPER JAFFRAY INC.
B-3
