<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 6, 1996
REGISTRATION NO. 333-15421
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PLATINUM TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3509662
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1815 SOUTH MEYERS ROAD, OAKBROOK TERRACE, ILLINOIS 60181, (630) 620-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MICHAEL C. WYATT, ESQ., 1815 SOUTH MEYERS ROAD,
OAKBROOK TERRACE, ILLINOIS 60181, (630) 620-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
MATTHEW S. BROWN, ESQ. DOUGLAS R. NEWKIRK, ESQ.
MARK D. WOOD, ESQ. MISTY S. GRUBER, ESQ.
KATTEN MUCHIN & ZAVIS SACHNOFF & WEAVER, LTD.
525 WEST MONROE STREET, SUITE 1600 30 SOUTH WACKER DRIVE, SUITE 2900
CHICAGO, ILLINOIS 60661 CHICAGO, ILLINOIS 60606
(312) 902-5200 (312) 207-1000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED NOVEMBER 6, 1996
PROSPECTUS
, 1996
$85,000,000
LOGO
% CONVERTIBLE SUBORDINATED NOTES DUE 2001
The Convertible Subordinated Notes (the "Notes") to be issued by PLATINUM
technology, inc. (the "Company") will be convertible at the option of the
holder into shares of Common Stock, $.001 par value per share (including
preferred stock purchase rights), of the Company (the "Common Stock"), at any
time prior to maturity, unless previously redeemed, at a conversion price of
$ per share (equivalent to a conversion rate of shares per $1,000
principal amount of Notes), subject to adjustment under certain circumstances.
Interest on the Notes is payable semi-annually on and of
each year, commencing , 1997.
The Notes will be redeemable, in whole or in part, at the option of the
Company, for cash at any time on or after , 1999 at the redemption
prices set forth herein, plus accrued and unpaid interest, if any, to the date
of redemption. The Company will be required to offer to purchase the Notes in
the event of a Change of Control (as defined herein) at 100% of the principal
amount thereof, plus accrued and unpaid interest to the date of purchase. The
Notes will mature on , 2001. See "Description of the Notes."
The Notes are unsecured general obligations of the Company, subordinated in
right of payment to all existing and future Senior Indebtedness (as defined
herein) of the Company. In addition, the Notes are effectively subordinated to
all liabilities (including trade payables) of the Company's Subsidiaries (as
defined herein). The Indenture (as defined herein) does not restrict the
incurrence of Senior Indebtedness or other indebtedness by the Company or its
Subsidiaries. As of September 30, 1996, the Company had approximately
$19,805,000 of Senior Indebtedness and the Company's Subsidiaries had
approximately $24,670,000 of trade payables and accrued liabilities. See "Use
of Proceeds" and "Description of the Notes."
On November 5, 1996, the last reported sale price of the Common Stock on the
Nasdaq National Market (where it is traded under the symbol "PLAT") was $12 7/8
per share. The Company has applied for listing of the Notes on The Nasdaq
SmallCap Market.
FOR A DISCUSSION OF CERTAIN RISKS AND OTHER FACTORS THAT SHOULD BE CONSIDERED
BY PROSPECTIVE PURCHASERS OF THE NOTES, SEE "RISK FACTORS" COMMENCING ON PAGE
7.
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 PROSPECTUS.ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
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<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC(1) COMMISSIONS(2) COMPANY(3)
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Per Note......................... % % %
Total (4)........................ $ $ $
- ----------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any from the date of issuance.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company, estimated at $450,000.
(4) The Company has granted to the Underwriters an option, exercisable within
30 days hereof, to purchase up to an additional $12,750,000 aggregate
principal amount of Notes, on the same terms and conditions as set forth
above, solely to cover over-allotments, if any. If the Underwriters
exercise such option in full, the total price to the public, underwriting
discounts and commissions and proceeds to the Company will be $ , $
and $ , respectively. See "Underwriting."
The Notes are being offered by the several Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters, and
subject to certain other conditions. The Underwriters reserve their right to
withdraw, cancel or modify the offering and to reject orders in whole or in
part. It is expected that delivery of the Notes will be made in New York, New
York on or about , 1996 to investors in book-entry form through the
facilities of The Depository Trust Company against payment therefor in
immediately available funds.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
HAMBRECHT & QUIST
ROBERTSON, STEPHENS & COMPANY
<PAGE>
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES, THE
COMPANY'S COMMON STOCK, OR BOTH, AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ
SMALLCAP MARKET, THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNT OR FOR
THE ACCOUNTS OF OTHERS IN THE COMMON STOCK PURSUANT TO EXEMPTIONS FROM RULES
10B-6, 10B-7 AND 10B-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
----------------
This Prospectus includes product names and other trade names and trademarks
of the Company and its Subsidiaries and of other companies.
----------------
The Notes will be available initially in book-entry form and the Company
expects that the Notes sold pursuant hereto will be issued in the form of a
Global Note (as defined herein), which will be deposited with, or on behalf
of, The Depository Trust Company (the "Depositary") and registered in the name
of Cede & Co., its nominee. Beneficial interests in the Global Note
representing the Notes will be shown on, and transfers thereof will be
effected through, records maintained by the Depositary and its participants.
After the initial issuance of the Global Note, Notes in certified form will be
issued in exchange for the Global Note on the terms set forth in the Indenture
(as defined herein). See "Description of the Notes--Book-Entry, Delivery and
Form."
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus or incorporated by reference herein. As used in
this Prospectus, except where the context clearly requires otherwise,
references made to "PLATINUM" and the "Company" shall mean PLATINUM technology,
inc. and its Subsidiaries. Except as otherwise noted, all information in this
Prospectus assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting." Prospective investors should carefully consider the information
set forth under the heading "Risk Factors."
THE COMPANY
The Company develops, markets and supports enterprise infrastructure software
products, and provides related professional services, for administering the
prevailing complex, heterogeneous computing environment known as the open
enterprise environment (the "OEE"). These products and services increase the
performance and interoperability of computing systems and databases in the OEE
and provide users, primarily in large and data intensive organizations, with
more efficient and productive access to and use of critical information. The
Company's products typically perform fundamental, mission-critical functions,
such as maintenance of data integrity, systems security, systems scheduling and
project and process management. The Company offers enterprise infrastructure
software products through five business units: systems management, database
management, application lifecycle, business intelligence and data warehouse.
Addressing businesses' increasing demand for simplified vendor relationships
and complete solutions to information technology ("IT") problems, the Company's
goal is to become the leading provider of enterprise infrastructure solutions
by offering a comprehensive set of "best of breed" point products, fully
integrated product suites and a wide array of professional services, including
consulting, systems integration and educational programs.
To achieve its goal, the Company identified enterprise infrastructure systems
technologies and skill sets, and, through a combination of an aggressive
acquisition program and vigorous internal product development efforts, the
Company has assembled the competencies to create complete enterprise
infrastructure solutions. Since mid-1994, the Company has acquired 32
businesses and 22 technologies. The Company is now leveraging the breadth of
its product lines and its professional service capabilities, and is devoting
substantial resources to integrating its products and technologies, to provide
complete, customized solutions for enterprise infrastructure problems. These
solutions range from single products to sets of integrated products from
multiple business units bundled into a product suite, along with design and
implementation services provided by the Company's professional services staff.
These solutions also include ongoing product upgrades, maintenance and support,
sometimes pursuant to multi-year contracts. Evidencing the increasing demand of
the Company's customers for comprehensive solutions, the Company executed 32
transactions of over $1 million each during the first nine months of 1996, as
compared to only one such transaction during the first nine months of 1995. The
Company's total revenues and software products revenue increased 43% and 50%,
respectively, for the first nine months of 1996 as compared to the same period
in 1995.
During 1996, the Company's software developers have focused on product
integration and the bundling of products to satisfy critical customer needs,
along with continued expansion and enhancement of the Company's product line.
The Company has also been enabling its products and suites for application with
intranets, the Internet and the World Wide Web. The cornerstone of the
Company's integration efforts is the PLATINUM Open Enterprise Management
Solution ("POEMS"), an architecture designed to give the Company's products a
common look and feel, common installation and distribution and common
communication, data and events handling. The Company is creating solutions for
general business needs, as well as the needs of specific industries. For
example, the Company recently released PLATINUM RiskAdvisor, a data warehouse
decision support application developed specifically for the insurance industry.
The Company has also released its "Netcessities" product suite for building,
testing and deploying intranet applications, and has developed a comprehensive
solution for the Year 2000 problem. In addition, the Company intends to use a
number of its current products and technologies as the foundation for a new,
integrated product offering designed to enable companies to simultaneously
manage, maintain and deploy multiple Web sites.
3
<PAGE>
THE OFFERING
Securities Offered........ $85,000,000 principal amount of % Convertible
Subordinated Notes due , 2001.
Payment of Interest....... and , commencing ,
1997.
Conversion Rights......... The Notes will be convertible, at the holder's
option, into shares of Common Stock, at any time at
or prior to maturity, unless previously redeemed,
at a conversion price of $ per share, subject to
adjustment under certain circumstances as described
herein (the "Conversion Price"). Accordingly, each
$1,000 principal amount of Notes is initially
convertible into shares of Common Stock,
subject to adjustment, for an aggregate of
shares for all the Notes. See "Capitalization."
Optional Redemption.......
The Notes will be redeemable, in whole or in part,
at the option of the Company, at any time on or
after , 1999, at the redemption prices
set forth herein, plus accrued and unpaid interest,
if any, to the date of redemption.
Change of Control......... If a Change of Control (as defined herein) occurs,
each holder of Notes will have the right to require
the Company to purchase all or any part of such
holder's Notes at 100% of the principal amount
thereof, plus accrued and unpaid interest to the
date of purchase.
Subordination.............
The Notes will be unsecured obligations of the
Company, subordinated in right of payment to all
existing and future Senior Indebtedness (as defined
herein) of the Company. In addition, the Notes are
effectively subordinated to all liabilities
(including trade payables) of the Company's
Subsidiaries. As of September 30, 1996, the Company
had approximately $19,805,000 of Senior
Indebtedness, and the Company's Subsidiaries had
approximately $24,670,000 of trade payables and
accrued liabilities. The indenture governing the
Notes (the "Indenture") will not include any
covenants limiting or restricting the ability of
the Company or its Subsidiaries to incur Senior
Indebtedness or any other indebtedness.
Maturity.................. , 2001
Use of Proceeds...........
The net proceeds from the sale of the Notes will be
used for general corporate purposes, including
working capital and possible future acquisitions of
businesses, products or technologies complementary
to the Company's business. See "Use of Proceeds."
Trading................... The Company has applied for listing of the Notes on
The Nasdaq SmallCap Market. The Common Stock is
traded on the Nasdaq National Market under the
symbol "PLAT."
4
<PAGE>
SUMMARY FINANCIAL INFORMATION(1)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------------- -------------------------
1991 1992 1993 1994 1995 1995 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues.......... $123,177 $141,964 $175,380 $225,439 $304,676 $206,643 $296,386
Operating income (loss). (6,011) 3,012 (2) 3,336(3) (2,223)(4) (128,162)(5) (59,056)(6) (53,082)(7)
Net income (loss)....... (11,231) (2,433)(2) 625(3) (2,644)(4) (111,933)(5) (45,061)(6) (37,988)(7)
Net income (loss) per
share.................. $ (0.32) $ (0.06)(2) $ 0.02(3) $ (0.07)(4) $ (2.59)(5) $ (1.09)(6) $ (0.69)(7)
Shares used in per share
calculation............ 37,671 35,507 37,971 39,890 43,267 41,212 55,271
OTHER OPERATING DATA:
Adjusted EBITDA(8)(9)... $ (946) $ 17,470 $ 25,196 $ 34,589 $ 12,134 $ 5,569 $(10,406)
Depreciation and
amortization expense... 5,065 6,585 8,466 12,218 20,984 14,408 25,799
Operating income (loss),
exclusive of pre-tax
charges for acquired
in-process technology,
merger costs and
restructuring
costs(9)(10)........... (6,011) 10,885 16,730 22,371 (8,850) (8,839) (36,205)
Ratio of earnings to
fixed charges(11)...... -- (12) 8.38 (2) 13.40(3) 4.01(4) -- (5)(12) -- (6)(12) -- (7)(12)
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
--------------------------------
ACTUAL AS ADJUSTED(13)
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and investments........ $ 56,508 $ 138,296
Working capital............................... 82,058 163,846
Total assets.................................. 414,584 499,584
Long term obligations and acquisition-related
payables, less current portion............... 8,957 93,957
Total stockholders' equity.................... 263,011 263,011
Ratio of total debt to total capitalization... 0.07 0.29
</TABLE>
- --------------------
(1) The Summary Financial Information presented in this table is derived from
the Selected Consolidated Financial Data and the Consolidated Financial
Statements included elsewhere in this Prospectus and gives retroactive
effect to the acquisitions of Prodea Software Corporation ("Prodea") as of
February 8, 1996, Paradigm Systems Corporation ("Paradigm") as of March
26, 1996, and Axis Systems International, Inc. ("Axis") as of March 29,
1996, each of which has been accounted for as a pooling of interests for
financial reporting purposes. As a result, the financial position and
results of operations are presented as if the combining companies had been
consolidated for all periods presented. The statement of operations data
for the years ended December 31, 1991 and 1992 and for the nine months
ended September 30, 1995 and 1996, as well as the balance sheet data as of
September 30, 1996 are derived from unaudited consolidated financial
statements and include, in the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary to present
fairly the data for the periods and as of the dates presented. The Summary
Financial Information should be read in conjunction with the Selected
Consolidated Financial Data, the Consolidated Financial Statements and the
other financial information included in this Prospectus.
(2) Reflects a pre-tax charge of $7,873,000 relating to Trinzic Corporation
("Trinzic") restructuring costs.
(3) Reflects a pre-tax charge for acquired in-process technology of $8,735,000
relating primarily to the Company's acquisition of the stock of Datura
Corporation ("Datura") and a pre-tax charge of $4,659,000 relating to
Trinzic and Locus Computing Corporation ("Locus") restructuring costs.
(4) Reflects a pre-tax charge for acquired in-process technology of
$24,594,000 relating primarily to the Company's acquisitions of the stock
of Dimeric Development, Inc. ("Dimeric") and the net assets of Aston
Brooke Software, Inc. ("Aston Brooke") and AutoSystems Corporation
("AutoSystems").
(5) Reflects a pre-tax charge for acquired in-process technology of
$88,493,000 relating primarily to the Company's acquisitions of the stock
of Advanced Software Concepts, Inc. ("ASC"), SQL Software Corporation
("SQL"), Reltech Group, Inc. ("Reltech"), Protellicess Software, Inc.
("Protellicess"), AIB Software Corporation ("AIB") and BMS Computer, Inc.
("BMS") and the net assets of ViaTech Development, Inc. ("ViaTech"),
BrownStone Solutions, Inc. ("BrownStone") and ProtoSoft, Inc.
("ProtoSoft") and to certain product acquisitions, and a pre-tax charge
for merger costs of $30,819,000 relating to acquisitions accounted for as
poolings of interests.
5
<PAGE>
(6) Reflects a pre-tax charge for acquired in-process technology of
$25,453,000 relating primarily to the Company's acquisitions of the stock
of SQL, Reltech and ASC, the net assets of Viatech and BrownStone, and the
purchase of certain product technologies. Also reflects a pre-tax charge
for merger costs of $24,764,000 relating to acquisitions accounted for as
poolings of interest.
(7) Reflects a pre-tax charge for acquired in-process technology of
$11,095,000 relating to the Company's acquisitions of the stock of
Advanced Systems Technologies, Inc. ("AST"), Software Alternatives, Inc.
(d/b/a System Software Alternatives) ("Software Alternatives") and
Grateful Data, Inc. (d/b/a TransCentury Data Systems) ("Grateful Data"),
and the purchase of certain product technologies. Also reflects a pre-tax
charge for merger costs of $5,782,000 relating to acquisitions accounted
for as poolings of interests.
(8) Adjusted EBITDA (earnings before interest, taxes, depreciation and
amortization) excludes pre-tax charges for acquired in-process technology
of $0, $0, $8,735,000, $24,594,000, $88,493,000, $25,453,000 and
$11,095,000, merger costs of $0, $0, $0, $0, $30,819,000, $24,764,000 and
$5,782,000, and restructuring costs of $0, $7,873,000, $4,659,000, $0, $0,
$0 and $0 for the years ended December 31, 1991, 1992, 1993, 1994 and 1995
and the nine months ended September 30, 1995 and 1996, respectively.
(9) Adjusted EBITDA and operating income (loss), exclusive of pre-tax charges
for acquired in-process technology, merger costs and restructuring costs,
are presented because the Company believes they allow for a more complete
analysis of the Company's results of operations. This information should
not be considered as an alternative to, nor is there any implication that
this information is more meaningful than, any measure of performance or
liquidity as promulgated under generally accepted accounting principles
(such as operating income (loss), net income (loss) or cash provided by or
used in operating, investing and financing activities). This information
should not be considered as an indicator of the Company's overall
financial performance.
(10) Excludes pre-tax charges for acquired in-process technology of $0, $0,
$8,735,000, $24,594,000, $88,493,000, $25,453,000 and $11,095,000, merger
costs of $0, $0, $0, $0, $30,819,000, $24,764,000 and $5,782,000, and
restructuring costs of $0, $7,873,000, $4,659,000, $0, $0, $0 and $0 for
the years ended December 31, 1991, 1992, 1993, 1994 and 1995 and the nine
months ended September 30, 1995 and 1996, respectively.
(11) The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (earnings before income taxes plus
fixed charges less capitalized interest) by fixed charges (interest
expense plus capitalized interest and the portion of rental expense which
represents interest).
(12) Earnings available for fixed charges of $(2,792,000), $(123,136,000),
$(55,506,000) and $(49,859,000) were inadequate to cover fixed charges of
$366,000, $745,000, $559,000 and $657,000 for the years ended December 31,
1991 and 1995 and the nine months ended September 30, 1995 and 1996,
respectively.
(13) Adjusted to reflect the issuance and sale of the Notes and the application
of the estimated net proceeds therefrom, after deducting estimated
underwriting discounts and commissions and expenses of the Offering.
The Company was incorporated in Delaware on April 16, 1987. Its principal
executive offices are at 1815 South Meyers Road, Oakbrook Terrace, Illinois
60181, its telephone number is (630) 620-5000 and its Internet address is
http://www.platinum.com. The Company's Web site is not part of this Prospectus.
6
<PAGE>
RISK FACTORS
This Prospectus contains, and incorporates by reference, certain forward-
looking statements (as such term is defined in the rules promulgated pursuant
to the Securities Act of 1933, as amended (the "Securities Act")) that are
based on the beliefs of the Company's management, as well as assumptions made
by and information currently available to the Company's management. Such
forward-looking statements are subject to the safe harbor created by the
Private Securities Litigation Reform Act of 1995. When used in this document
and in the documents incorporated herein by reference, the words "anticipate,"
"believe," "estimate," "expect" and similar expressions, as they relate to the
Company or its management, are intended to identify such forward-looking
statements. Such statements reflect the current views of the Company or its
management with respect to future events and are subject to certain risks,
uncertainties and assumptions, including the factors set forth in the following
Risk Factors. Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, the Company's actual results,
performance or achievements in 1996, 1997 and beyond could differ materially
from those expressed in, or implied by, any such forward-looking statements.
The Company undertakes no obligation to release publicly any revisions to any
such forward-looking statements that may reflect events or circumstances after
the date of this Prospectus or to reflect the occurrence of unanticipated
events.
In addition to the other information in this Prospectus, prospective
investors should carefully consider the following Risk Factors before
purchasing any of the Notes offered hereby.
NET LOSSES; UNCERTAINTY OF FUTURE RESULTS AND ABILITY TO SATISFY DEBT
OBLIGATIONS
The Company's ability to pay the interest on, and repay the principal of, the
Notes and the Company's Senior Indebtedness is dependent upon the Company's
future operating results. The Company has experienced operating and net losses
in 1994, 1995 and the first nine months of 1996. In addition, during 1995 and
the first nine months of 1996, the Company's earnings available for fixed
charges (earnings before income taxes plus fixed charges less capitalized
interest) were insufficient to satisfy its fixed charges (interest expense plus
capitalized interest and the portion of rental expense which represents
interest). See "Selected Consolidated Financial Data," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements included in this Prospectus. The Company
anticipates that it will report an operating and net loss for the full year
ending December 31, 1996 and that 1996 earnings available for fixed charges
will not be sufficient to cover fixed charges. There can be no assurance that
the Company will not continue to incur operating and net losses or that future
earnings available for fixed charges will be sufficient to cover fixed charges.
The Company's future operating results will depend upon a number of business
factors, including other factors discussed in these "Risk Factors," as well as
general economic conditions. Furthermore, prior to a given year or other fiscal
period, the Company hires sales and product development personnel and makes
other decisions which will result in increased expenses in such year or other
period, based upon anticipated revenues for such year or other period. Due to
the seasonality and concentration of the Company's revenues at the end of
fiscal periods, particularly the fourth quarter, the Company's lack of backlog
and the Company's cost structure, if revenue targets are not met, the Company's
operating results would be materially adversely affected. See "--Seasonality
and Variability of Quarterly Operating Results." The Company has already made
many of its hiring and other decisions with respect to expenditures for 1997.
No assurances can be given that any of the Company's revenue expectations will
be fulfilled, and the Company's business, results of operations and financial
condition will be materially adversely affected if these expectations are not
fulfilled. If anticipated revenues and income are not achieved, the Company's
ability to pay interest on, or ultimately repay the principal amount of, its
indebtedness, including the Notes and the Company's Senior Indebtedness, could
become impaired. If the Company is unable to generate cash flow sufficient to
service its obligations in respect of the Notes and the Company's Senior
Indebtedness, the market value and marketability of the Notes could be
significantly, adversely affected.
DEPENDENCE ON SUCCESS OF ENTERPRISE INFRASTRUCTURE STRATEGY
The Company's business substantially depends on the success of the Company's
strategy of providing complete enterprise infrastructure solutions, including
integrated product suites. This enterprise infrastructure
7
<PAGE>
strategy is a relatively new and untested initiative for the Company, which
involves a significant investment of resources and upon which the Company's
future success is substantially dependent. No assurances can be given that
this strategy will succeed or that the market for the Company's new products
will develop as expected. The failure of this strategy would have a material
adverse effect on the Company's results of operations and financial condition.
See "Business--Business Strategy."
RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW PRODUCTS AND MARKETS
The Company expects that the market for IT software products will continue
to be subject to frequent and rapid changes in technology and customer
preferences. The introduction of products embodying new technologies and the
emergence of new industry standards can render existing products obsolete and
unmarketable. For example, there has been a substantial change in customer
preferences to open enterprise systems rather than exclusively mainframe
technologies. The Company's growth and future financial performance will
depend upon its ability to develop and introduce new products and enhancements
of existing products that accommodate the latest technological advances and
customer requirements. Moreover, the Company has a relatively limited history
of developing and marketing products for the expanding enterprise
infrastructure market. Most of the Company's enterprise infrastructure
software products were recently acquired. There can be no assurance that
additional new products will be successfully developed or marketed by the
Company, that any new products will achieve market acceptance, or that other
software vendors will not develop and market products which are superior to
the Company's products or that such products will not achieve greater market
acceptance. Furthermore, customers may delay purchases in anticipation of
technological changes. The Company's ability to develop and market enterprise
infrastructure software products and other new products depends upon its
ability to attract and retain qualified employees. Any failure by the Company
to anticipate or respond adequately to the changes in technology and customer
preferences, to develop and introduce new products in a timely fashion, or to
attract and retain qualified employees, could materially adversely affect the
Company's business, results of operations and financial condition. See
"Business--Product Development."
DEPENDENCE ON DB2
A significant portion of the Company's revenues will continue to be derived
from products that enhance the performance and functionality of IBM's DB2
relational database management software, which operates on IBM and compatible
mainframe computer systems running the MVS operating system. A decline or a
perceived decline in IBM's commitment to DB2 or a decline in the market's
acceptance and utilization of DB2 would have an adverse effect on the Company,
and such adverse effect could be material. Also, if IBM were to enhance DB2 or
its DB2 utilities so as to render the Company's products obsolete or
unnecessary, or devote more resources to developing and marketing IBM's own
DB2 tools and utilities, the Company's business could be materially adversely
affected.
DEPENDENCE ON RELATIONSHIPS WITH RELATIONAL DATABASE VENDORS
The Company believes that in order to provide solutions for the OEE,
including enterprise infrastructure technologies, the Company must develop,
maintain and enhance close associations with, and obtain access to the
technical personnel of, leading relational database vendors. This may become
increasingly difficult due to competition among such vendors. The Company has
entered into alliances with Oracle Systems Corporation ("Oracle"), Sybase,
Inc. ("Sybase") and Informix Software, Inc. ("Informix"). There can be no
assurance that
the Company will be able to maintain existing relationships or enter into new
relationships with such vendors. The Company's failure to do so would have an
adverse effect on its business, results of operations and financial condition,
and such adverse effect could be material.
SUBORDINATION; COMPANY STRUCTURE; SUBSIDIARY CASH FLOW
The Notes are general, unsecured obligations of the Company, subordinated in
right of payment to all existing and future Senior Indebtedness of the
Company. Although, to date, the Company has not incurred a
8
<PAGE>
substantial amount of Senior Indebtedness, the Indenture does not restrict the
incurrence of Senior Indebtedness or other indebtedness by the Company or its
Subsidiaries. Under the Indenture, generally, the Company will not be permitted
to pay the principal of, or premium, if any, or interest on the Notes or
repurchase, redeem or otherwise retire any Notes in the event of a default in
the payment of any principal of, premium, if any, or interest on any Senior
Indebtedness when it becomes due and payable, whether at maturity or at a date
fixed for prepayment or by acceleration or otherwise, unless and until such
payment default has been cured or waived, or in the event of certain other
defaults with respect to Senior Indebtedness. In addition, the Notes are
effectively subordinated to all liabilities of the Company's Subsidiaries,
including trade payables. Certain of the Company's principal assets, including
the rights to a significant portion of the Company's proprietary software
technology, are owned by the Company's Subsidiaries. If the Company were to
default on any of its payment obligations in respect to the Notes, trade
creditors of such Subsidiaries would have a senior claim to such assets as
compared to Holders (as defined herein) of the Notes. As of September 30, 1996,
the Company had approximately $19,805,000 of Senior Indebtedness, and the
Company's Subsidiaries had approximately $24,670,000 of trade payables and
accrued liabilities.
The Company conducts a significant portion of its operations through its
foreign Subsidiaries. Accordingly, the Company may be dependent, from time to
time, in whole or in part, on its ability to obtain funds from such foreign
Subsidiaries in order to service its indebtedness, including the Notes. The
Company's foreign Subsidiaries may, from time to time, face governmentally
imposed and other restrictions on their ability to transfer funds to the
Company and may incur costs in connection with any such transfers.
RISKS OF COMPLETED ACQUISITIONS
As an integral part of PLATINUM's growth strategy, the Company has
consummated a number of significant acquisitions. The anticipated benefits of
these acquisitions may not be achieved, and the Company's enterprise
infrastructure strategy will not be fully realized, unless the Company
successfully integrates and markets its acquired products and services in a
timely manner. The difficulties of such integration may initially be increased
by the necessity of integrating personnel with disparate business backgrounds
and corporate cultures. Management's focus on the integration of acquired
companies and the implementation of the Company's strategy has caused, and may
continue to cause, interruption, or loss of momentum, in the ongoing activities
of the Company, which has had, and could in the future have, a material adverse
effect on the Company's business, results of operations and financial
condition.
In order to realize the increases in revenues expected as a result of these
acquisitions, the Company has recently hired, and may need to continue hiring,
a substantial number of additional sales representatives, and the Company must
train both existing and new sales representatives in the Company's complete
range of product offerings and successfully motivate them to sell the Company's
entire range of point products, integrated software suites and services. There
are no assurances that the Company will be able to successfully integrate
acquired products or services into the Company's sales, marketing or
distribution channels or that any expectations with respect to product or
service revenues will be fulfilled. Failure to fulfill these expectations could
have a material adverse effect on the Company's business, results of operations
and financial condition. See "Business--Sales and Marketing."
RELIANCE ON AND RISK OF ACQUISITION STRATEGY
The Company expects to continue its strategy of identifying, acquiring and
developing enterprise infrastructure products, services and technologies
through the acquisition of specific products and of businesses which have
developed such products, services and technologies, including acquisitions
which could be material in size and scope. The Company believes that its future
growth depends, in part, upon the success of this strategy. There can be no
assurance that the Company will successfully identify, acquire on favorable
terms or integrate such businesses, products, services or technologies. The
Company may in the future face increased competition for acquisition
opportunities, which may inhibit the Company's ability to consummate suitable
acquisitions and increase the costs of such acquisitions. See "Business--
Product Development."
9
<PAGE>
Acquisitions involve a number of special risks and challenges, including the
diversion of management's attention, assimilation of the operations and
personnel of acquired companies, incorporation of acquired products into
existing product lines, adverse short-term effects on reported operating
results, amortization of acquired intangible assets, assumption of the
liabilities of acquired companies, possible loss of key employees and
difficulty of presenting a unified corporate image. No assurance can be given
that any potential acquisition by the Company will or will not occur, or that,
if an acquisition does occur, it will not ultimately have a material adverse
effect on the Company or that any such acquisition will succeed in enhancing
the Company's business.
The Company has recorded charges for acquired in-process technology and
merger costs in connection with certain of its past acquisitions, which
materially reduced operating and net income for the periods in which the
acquisitions were recorded. The Company expects to continue to incur such
charges in connection with future acquisitions, which could materially reduce
operating and net income in the periods in which such acquisitions are
consummated. See "Management's Discussion and Analysis of Financial Conditions
and Results of Operations."
HIGHLY COMPETITIVE MARKETS
The market for the Company's products is highly competitive, and the Company
expects competition to intensify. The Company expects to encounter increased
competition and new competitors as it continues to penetrate the enterprise
infrastructure software market, including competition from relational database
vendors and systems software companies. Many of the Company's current and
prospective competitors have significantly greater financial, technical and
marketing resources than the Company. Competitive pressures could cause the
Company's products to lose market acceptance or result in significant price
erosion, with a material adverse effect upon the Company's results of
operations. See "Business--Competition."
A variety of external and internal factors could adversely affect the
Company's ability to compete in the enterprise infrastructure software market.
Such factors include the following: relative functionality, integration,
performance and reliability of the products offered by the Company and its
competitors; the success and timing of new product development efforts; changes
affecting the hardware, operating systems or database systems which the Company
supports; the level of demonstrable economic benefits for users relative to
cost; relative quality of customer support and user documentation; ease of
installation; vendor reputation, experience and financial stability; and price.
The Company also encounters competition from a broad range of firms in the
market for professional services. Many of the Company's current and prospective
competitors in the professional services market have significantly greater
financial, technical and marketing resources than the Company. The competitive
factors affecting the market for the Company's professional services include
the following: breadth and quality of services offered, vendor reputation and
the ability to retain qualified technical personnel.
SUSCEPTIBILITY TO GENERAL ECONOMIC CONDITIONS
The Company's revenues and results of operations will be subject to
fluctuations based upon general economic conditions. If there were a general
economic downturn or a recession in the United States or certain other markets,
the Company believes that certain of its customers might reduce or delay their
purchases of the Company's products or services, leading to a reduction in the
Company's revenues. The factors that might influence current and prospective
customers to reduce their IT budgets under these circumstances are beyond the
Company's control. In the event of an economic downturn, the Company's
business, results of operations and financial condition could be materially
adversely affected. There can be no assurance that growth in the markets for
the Company's products and services will occur or that such growth will result
in increased demand for the Company's products and services. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business."
10
<PAGE>
SEASONALITY AND VARIABILITY OF QUARTERLY OPERATING RESULTS
The Company has experienced a seasonal pattern in its operating results,
with the fourth quarter typically having the highest total revenues and
operating income. Further, revenues for the Company's fourth quarters have
historically been higher than those for the first quarters of the following
years. Since operating expenses continued to increase in the first quarters of
those years, the Company realized substantially lower operating margins and
net income (excluding the effect of charges for acquired in-process technology
and merger costs) for such quarters. The Company expects this pattern to
continue for the foreseeable future. The Company believes the seasonality of
its revenues results primarily from the budgeting cycles of its software
product customers and the structure of the Company's sales commission and
bonus programs.
The Company operates with relatively little order backlog, and substantially
all of its software product revenue in each quarter results from sales made in
that quarter. Consequently, if near term demand for the Company's products
weakens or if sales do not close in any quarter as anticipated, the Company's
results of operations for that quarter would be adversely, and perhaps
materially, affected. In addition, the timing and amount of the Company's
revenues are subject to a number of factors that make estimation of operating
results prior to the end of a quarter extremely uncertain. Historically, a
substantial majority of the Company's quarterly software products revenue has
been recorded in the third month of any given quarter, with a concentration of
such revenues in the last week of that third month.
The Company's operating results may vary significantly from quarter to
quarter depending on other factors such as the size and timing of customer
orders, price and other competitive conditions in the industry, the timing of
new product announcements and releases by the Company and its competitors, the
ability of the Company to develop, introduce and market new and enhanced
versions of the Company's products on a timely basis, changes in the Company's
level of operating expenses, changes in the Company's sales incentive plans,
budgeting cycles of its customers, customer order deferrals in anticipation of
enhancements or new products, the cancellation of licenses during the warranty
period or nonrenewal of maintenance agreements, product life cycles, software
bugs and other risks discussed in these "Risk Factors." See "--Rapid
Technological Change; Dependence on New Products and Markets," "--Highly
Competitive Markets" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
RISKS OF INTERNATIONAL SALES
Approximately 24% and 23% of the Company's revenues in 1995 and the first
nine months of 1996, respectively, were attributable to international sales
and were made at prices based either on U.S. dollars or foreign currencies.
The risks inherent in conducting international business generally include
exposure to currency fluctuations, longer payment cycles, greater difficulties
in accounts receivable collection and the burdens of complying with a wide
variety of foreign laws. Exchange rate fluctuations can have a material
adverse effect on the total level of foreign sales and the profitability of
those sales. During the past several years, the Company has changed the
primary means of international distribution of its products from a network of
independent distributors to wholly-owned PLATINUM Subsidiaries. The Company
may encounter difficulties in integrating and managing these new overseas
Subsidiaries.
RISKS OF CONSULTING SERVICES BUSINESS
The Company has rapidly expanded its consulting services group, which is
part of the Company's professional services business unit, through several
acquisitions. Although the acquired professional services companies had
substantial experience in providing consulting services, this is a relatively
new, lower-margin business area for the Company. There can be no assurance
that the consulting services business will be successfully integrated with the
Company's software product licensing and educational programs businesses or
that the Company will be able to effectively compete in this market. See "--
Risks of Completed Acquisitions" and "--Highly Competitive Markets." In
addition, the Company is subject to the risks associated with a consulting
services business, including dependence on its reputation with existing
customers, volatility of
11
<PAGE>
workload and dependence on its ability to attract and retain qualified
technical personnel. Also, a substantial portion of the Company's consulting
services revenue may be derived from the performance of services under fixed-
price contracts. There can be no assurance that the Company can consistently
perform in a profitable manner under these contracts, especially in the field
of software development, where cost overruns are commonplace. See "Business--
Professional Services."
DEPENDENCE ON PROPRIETARY TECHNOLOGY
The Company's success is heavily dependent upon its proprietary software
technology. See "--Dependence on Success of Enterprise Infrastructure
Strategy." The Company relies on a combination of contractual rights,
trademarks, trade secrets, patents and copyright laws to establish or protect
its proprietary rights in its products. There can be no assurance that the
steps taken by the Company in this regard will be adequate to deter
misappropriation of its proprietary rights or independent third party
development of functionally equivalent technologies. Additionally, although
the Company's license agreements restrict a customer's use of the Company's
software and prohibit disclosure to third persons, it may be possible for
unauthorized persons to obtain copies of the Company's software products.
Although the Company does not believe that it is materially infringing on the
intellectual property rights of others, there can be no assurance that such a
claim will not be successfully asserted against the Company in the future or
that any attempt to protect its technology will not be challenged. See
"Business--Intellectual Property Rights."
DEPENDENCE ON KEY PERSONNEL
Competition for qualified personnel in the software industry is intense, and
there can be no assurance that the Company will be able to attract and retain
a sufficient number of qualified employees. The Company's success depends to a
significant degree upon the continued contributions of its key management,
marketing, product development, professional services and operational
personnel, including key personnel of acquired companies. As the business of
the Company grows, it may become increasingly difficult for it to hire, train
and assimilate the number of new employees required. In addition, it is
possible that the business changes or uncertainty brought about by
acquisitions may cause key employees to leave the Company, and certain key
members of the management of acquired companies may not continue with the
Company. Any difficulty in attracting and retaining key employees could have a
material adverse effect on the Company's business, results of operations and
financial condition.
The Company's success to date has depended in large part on the skills and
efforts of Andrew J. Filipowski, the Company's President and Chief Executive
Officer, and Paul L. Humenansky, the Company's Executive Vice President--
Product Development and Chief Operations Officer. The Company has not entered
into non-competition agreements with Messrs. Filipowski or Humenansky or any
of its other key personnel, nor does the Company have "key man" life insurance
policies covering these individuals.
VOLATILITY OF THE COMPANY'S STOCK PRICE
The Company's stock price has historically been volatile. The Company
believes factors such as quarterly fluctuations in results of operations,
announcements of new products and acquisitions by the Company or by its
competitors, changes in earnings estimates by analysts, changes in accounting
treatments or principles and other factors may cause the market price of the
Common Stock and the Notes to fluctuate, perhaps substantially. The market
price of the Common Stock and the Notes also may be affected by the Company's
ability to meet analysts' expectations, and any failure to meet such
expectations, even if minor, could have a material adverse effect on the
market price of the Common Stock and the Notes. In addition, securities prices
for many technology companies fluctuate widely for reasons which may be
unrelated to operating results of such companies. These fluctuations, as well
as general economic, political and market conditions may adversely affect the
market price of the Common Stock and the Notes in the future. In the past,
following periods of volatility in the market price of a company's securities,
class action litigation has often been instituted against such company. Any
such litigation instigated against the Company could result in substantial
costs and a diversion of management's attention and resources, which could
have a material adverse effect on the Company's business, results of
operations and financial condition. See "Price Range of Common Stock."
12
<PAGE>
RISK OF INABILITY TO SATISFY CHANGE OF CONTROL REPURCHASE OFFER
Upon the occurrence of a Change of Control (as defined under the Indenture),
each Holder of Notes will have the right to require the Company to repurchase
all or any part of any part of such Holder's Notes at 100% of the principal
amount thereof, plus accrued and unpaid interest, if any, thereon to the date
of purchase. There can be no assurance that the Company will have the funds
necessary to effect such a purchase if such an event were to occur. In the
event a Change of Control occurs at time when the Company is unable to
purchase the Notes, the Company could seek to refinance the Notes. If the
Company was unsuccessful in refinancing the Notes, the Company's failure to
purchase tendered Notes would constitute an Event of Default under the
Indenture. See "Description of Notes--Repurchase of Notes at the Option of the
Holder upon a Change of Control."
ABSENCE OF PRIOR PUBLIC MARKET FOR THE NOTES
Prior to this offering of the Notes (the "Offering"), there has been no
public market for the Notes. Although application has been made to list the
Notes on The Nasdaq SmallCap Market, there can be no assurance that such
listing will be approved. In addition, even if the Notes are so approved for
listing, there can be no assurance as to the liquidity of the trading market
for the Notes or that an active trading market for the Notes will develop or
be sustained.
ANTITAKEOVER EFFECT OF RIGHTS AGREEMENT, CHARTER AND STATUTORY PROVISIONS
The Company has entered into a rights agreement (the "Rights Agreement")
which provides that, in the event that 15% or more of the outstanding shares
of Common Stock are acquired by a person or group of persons, the holder of
each outstanding share of Common Stock other than such acquiring person(s),
shall have the right to purchase from the Company additional shares of Common
Stock having a market value equal to two times the exercise price of such
right. In addition, the Company's Restated Certificate of Incorporation, as
amended, provides that the Board of Directors shall be classified with respect
to the terms for which its members shall hold office by dividing the members
into three classes. The Company is also subject to Section 203 of the Delaware
General Corporation Law which, in general, imposes restrictions upon acquirors
of 15% or more of the Company's Common Stock. The Rights Agreement and these
other provisions may have the effect of delaying, deferring or preventing a
change of control of the Company, even if such event would be beneficial to
stockholders. In addition, the Change in Control repurchase feature of the
Notes may make more difficult or discourage a takeover of the Company. See
"Description of Capital Stock" and "Description of the Notes--Repurchase of
Notes at the Option of the Holder upon a Change of Control."
ABSENCE OF DIVIDENDS
The Company has never declared any cash dividends or distributions on its
capital stock. The Company currently intends to retain its earnings to finance
future growth and therefore does not anticipate paying any cash dividends in
the foreseeable future. See "Dividend Policy."
13
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes offered hereby,
after deducting estimated underwriting discounts and commissions and expenses
of this Offering, are estimated to be approximately $81,788,000 (approximately
$94,123,000 if the Underwriters' over-allotment option is exercised in full).
The Company anticipates that its net proceeds, including interest thereon,
will be used for general corporate purposes, including working capital and
possible future acquisitions of businesses, products or technologies
complementary to the Company's business. From time to time, the Company is
involved in the evaluation of, and discussions with, potential acquisition
candidates, but the Company currently has no agreements, commitments or
understandings with respect to any material future acquisitions. The Company
expects that the net proceeds from the Offering will enable the Company to
reduce its reliance on the sale of receivables as a source of liquidity. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." Pending any of the above-
described uses, the Company plans to invest its net proceeds in short-term
investment grade, interest bearing securities.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "PLAT." The following table sets forth, for the quarters indicated, the
range of high and low closing sale prices for the Common Stock on the Nasdaq
National Market.
<TABLE>
<CAPTION>
PRICE RANGE
OF COMMON STOCK
----------------
HIGH LOW
<S> <C> <C>
Year Ended December 31, 1994:
1st Quarter.............................................. $14 3/4 $10
2nd Quarter.............................................. 14 1/4 11 1/2
3rd Quarter.............................................. 21 12 1/2
4th Quarter.............................................. 23 1/4 18 5/8
Year Ended December 31, 1995:
1st Quarter.............................................. $25 $19
2nd Quarter.............................................. 20 1/4 15
3rd Quarter.............................................. 25 1/4 18 1/8
4th Quarter.............................................. 20 5/8 14 1/2
Year Ended December 31, 1996:
1st Quarter.............................................. $18 3/8 $11 7/8
2nd Quarter.............................................. 18 3/16 12 7/8
3rd Quarter.............................................. 15 1/4 9 3/4
4th Quarter (through November 5, 1996)................... 14 7/8 12 3/8
</TABLE>
On November 5, 1996, the reported last sale price for the Common Stock was
$12 7/8, and the Common Stock was held by 1,155 holders of record.
DIVIDEND POLICY
The Company has not paid dividends on its Common Stock, and the Board of
Directors intends to continue a policy of retaining earnings to finance its
growth and for general corporate purposes. The Company does not anticipate
paying any dividends in the foreseeable future.
14
<PAGE>
CAPITALIZATION
The following table sets forth the Company's cash, cash equivalents and
investments, short-term debt and capitalization (long-term debt plus
stockholders' equity) as of September 30, 1996, and as adjusted to reflect the
issuance and sale of the Notes and the application of the estimated net
proceeds therefrom (after deducting estimated underwriting discounts and
commissions and expenses of the Offering) as described herein under "Use of
Proceeds."
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
1996
---------------------
(IN THOUSANDS)
ACTUAL AS ADJUSTED
<S> <C> <C>
Cash, cash equivalents and investments................... $ 56,508 $138,296
======== ========
Short-term debt and current maturities of long-term debt. $ 10,848 $ 10,848
======== ========
Long-term debt:
Long-term obligations and acquisition-related payables,
net of current portion................................ $ 8,957 $ 93,957
Stockholders' equity:
Class II preferred stock, $.01 par value; 10,000,000
shares authorized; no shares issued or outstanding.... -- --
Common stock, $.001 par value; 180,000,000 shares
authorized; 55,954,000 shares issued and outstanding.. 56 56
Paid-in capital........................................ 446,265 446,265
Notes receivable....................................... (315) (315)
Accumulated deficit.................................... (182,605) (182,605)
Foreign currency translation adjustment................ (390) (390)
-------- --------
Total stockholders' equity........................... 263,011 263,011
-------- --------
Total capitalization..................................... $271,968 $356,968
======== ========
</TABLE>
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA(1)
The selected consolidated financial data set forth below have been derived
from the historical financial statements of the Company. The historical
consolidated financial statements of the Company as of December 31, 1994 and
1995 and for the years ended December 31, 1993, 1994 and 1995 have been
audited by KPMG Peat Marwick LLP, independent certified public accountants,
whose report thereon appears elsewhere herein. The selected consolidated
financial data set forth below as of December 31, 1991, 1992 and 1993, and
September 30, 1996, and for the years ended December 31, 1991 and 1992, and
for the nine-month periods ended September 30, 1995 and 1996, have been
derived from the Company's unaudited internal financial statements and reflect
all adjustments which management considers necessary for a fair and consistent
presentation of the results of operations for those periods. These selected
consolidated financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and related notes thereto contained
elsewhere herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------------- -------------------------
1991 1992 1993 1994 1995 1995 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Total revenues.......... $123,177 $141,964 $175,380 $225,439 $304,676 $206,643 $296,386
Operating income (loss). (6,011) 3,012 (2) 3,336(3) (2,223)(4) (128,162)(5) (59,056)(6) (53,082)(7)
Net income (loss)....... (11,231) (2,433)(2) 625(3) (2,644)(4) (111,933)(5) (45,061)(6) (37,988)(7)
Net income (loss) per
share.................. $ (0.32) $ (0.06)(2) $ 0.02(3) $ (0.07)(4) $ (2.59)(5) $ (1.09)(6) $ (0.69)(7)
Shares used in per share
calculation............ 37,671 35,507 37,971 39,890 43,267 41,212 55,271
OTHER OPERATING DATA:
Adjusted EBITDA(8)(9)... $ (946) $ 17,470 $ 25,196 $ 34,589 $ 12,134 $ 5,569 $(10,406)
Depreciation and
amortization expense... 5,065 6,585 8,466 12,218 20,984 14,408 25,799
Operating income (loss),
exclusive of pre-tax
charges for acquired
in-process technology,
merger costs and
restructuring costs
(9)(10)................ (6,011) 10,885 16,730 22,371 (8,850) (8,839) (36,205)
Ratio of earnings to
fixed charges(11)...... -- (12) 8.38(2) 13.40(3) 4.01(4) -- (5)(12) -- (6)(12) -- (7)(12)
</TABLE>
<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, SEPTEMBER 30,
----------------------------------------- -------------
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA: (IN THOUSANDS)
Cash, cash equivalents
and investments........ $54,125 $60,054 $69,554 $124,563 $132,775 $56,508
Working capital......... 49,504 40,530 43,607 89,651 126,679 82,058
Total assets............ 118,825 136,307 169,882 262,760 438,188 414,584
Long-term obligations
and acquisition-related
payables, less current
portion................ 191 181 3,416 9,075 11,342 8,957
Total stockholders'
equity................. 75,667 82,963 92,944 158,837 288,452 263,011
</TABLE>
- -------------------
(1) The Selected Consolidated Financial Data give retroactive effect to the
acquisitions of Prodea as of February 8, 1996, Paradigm as of March 26,
1996, and Axis as of March 29, 1996, each of which has been accounted for
as a pooling of interests for financial reporting purposes. As a result,
the financial position and results of operations are presented as if the
combining companies had been consolidated for all periods presented. The
Selected Consolidated Financial Data should be read in conjunction with
the other financial information included in this Prospectus.
(2) Reflects a pre-tax charge of $7,873,000 relating to Trinzic restructuring
costs.
(3) Reflects a pre-tax charge for acquired in-process technology of $8,735,000
relating primarily to the Company's acquisition of the stock of Datura and
a pre-tax charge of $4,659,000 relating to Trinzic and Locus restructuring
costs.
(4) Reflects a pre-tax charge for acquired in-process technology of
$24,594,000 relating primarily to the Company's acquisitions of the stock
of Dimeric and the net assets of Aston Brooke and AutoSystems.
(5) Reflects a pre-tax charge for acquired in-process technology of
$88,493,000 relating primarily to the Company's acquisitions of the stock
of ASC, SQL, Reltech, Protellicess, AIB and BMS, the net assets of
ViaTech, BrownStone and Protosoft and certain product technologies, and a
pre-tax charge for merger costs of $30,819,000 relating to acquisitions
accounted for as poolings of interests.
(6) Reflects a pre-tax charge for acquired in-process technology of
$25,453,000 relating primarily to the Company's acquisitions of the stock
of SQL, Reltech and ASC, the net assets of Viatech and BrownStone, and the
purchase of certain product technologies. Also reflects a pre-tax charge
of $24,764,000 relating to merger costs for acquisitions accounted for as
poolings of interests.
(7) Reflects a pre-tax charge for acquired in-process technology of
$11,095,000 relating to the Company's acquisitions of the stock of AST,
Software Alternatives and Grateful Data, and the purchase of certain
product technologies. Also reflects a pre-tax charge for merger costs of
$5,782,000 relating to acquisitions accounted for as poolings of
interests.
(8) Adjusted EBITDA (earnings before interest, taxes, depreciation and
amortization) excludes pre-tax charges for acquired in-process technology
of $0, $0, $8,735,000, $24,594,000, $88,493,000, $25,453,000 and
$11,095,000, merger costs of $0, $0, $0, $0, $30,819,000, $24,764,000 and
$5,782,000, and restructuring costs of $0, $7,873,000, $4,659,000, $0, $0,
$0 and $0 for the years ended December 31, 1991, 1992, 1993, 1994 and 1995
and the nine months ended September 30, 1995 and 1996, respectively.
(9) Adjusted EBITDA and operating income (loss), exclusive of pre-tax charges
for acquired in-process technology, merger costs and restructuring costs,
are presented because the Company believes they allow for a more complete
analysis of the Company's results of operations. This information should
not be considered as an alternative to, nor is there any implication that
this information is more meaningful than, any measure of performance or
liquidity as promulgated under generally accepted accounting principles
(such as operating income (loss), net income (loss) or cash provided by or
used in operating, investing and financing activities). This information
should not be considered as an indicator of the Company's overall
financial performance.
(10) Excludes pre-tax charges for acquired in-process technology of $0, $0,
$8,735,000, $24,594,000, $88,493,000, $25,453,000 and $11,095,000, merger
costs of $0, $0, $0, $0, $30,819,000, $24,764,000 and $5,782,000, and
restructuring costs of $0, $7,873,000, $4,659,000, $0, $0, $0 and $0 for
the years ended December 31, 1991, 1992, 1993, 1994 and 1995 and the nine
months ended September 30, 1995 and 1996, respectively.
(11) The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (earnings before income taxes plus
fixed charges less capitalized interest) by fixed charges (interest
expense plus capitalized interest and the portion of rental expense which
represents interest).
(12) Earnings available for fixed charges of $(2,792,000), $(123,136,000),
$(55,506,000) and $(49,859,000) were inadequate to cover fixed charges of
$366,000, $745,000, $559,000 and $657,000 for the years ended December
31, 1991 and 1995 and the nine months ended September 30, 1995 and 1996,
respectively.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion below contains certain forward-looking statements (as such
term is defined in the rules promulgated pursuant to the Securities Act) that
are based on the beliefs of the Company's management, as well as assumptions
made by, and information currently available to, the Company's management. The
Company's actual results, performance or achievements in 1996, 1997 and beyond
could differ materially from those expressed in, or implied by, any such
forward-looking statements. See "Risk Factors" for a discussion of factors
that could cause or contribute to such material differences.
GENERAL
The Company develops, markets and supports enterprise infrastructure
software products, and provides related professional services, for
administering the prevailing complex, heterogenous computing environment known
as the OEE. The Company's products and services increase the performance and
interoperability of computing systems and databases in the OEE and provide
users, primarily in large and data intensive organizations, with more
efficient and productive access to and use of critical information. As an
integral part of the Company's growth strategy, it has consummated a number of
significant business acquisitions, including acquisitions of Software
Interfaces, Inc., Locus, Answer Systems, Inc., Altai, Inc., Trinzic, Softool
Corporation, Prodea, Paradigm and Axis, each of which has been accounted for
using the pooling-of-interests method. As a result, the Company's consolidated
financial statements are presented as if the Company and such acquired
companies had been consolidated for all periods presented. Consequently,
information regarding the Company in this Management's Discussion and Analysis
of Financial Condition and Results of Operations ("MD&A") gives retroactive
effect to these acquisitions. See Note 2 of the Notes to the Company's
Consolidated Financial Statements for a more detailed discussion of these
acquisitions.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated (i) the statement
of operations items expressed as a percentage of revenues, and (ii) the
percentage change in each line item from the prior period.
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL REVENUES
------------------------------------
NINE MONTHS
YEARS ENDED ENDED
DECEMBER 31, SEPTEMBER 30, PERIOD-TO-PERIOD PERCENTAGE CHANGES
----------------- ---------------- -----------------------------------
NINE MONTHS ENDED
1994 1995 SEPTEMBER 30,
COMPARED COMPARED 1996 COMPARED TO
1993 1994 1995 1995 1996 TO 1993 TO 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Software products...... 50% 51% 52% 49% 51% 29% 39% 50%
Maintenance............ 27 26 25 27 25 26 30 36
Professional services.. 23 23 23 24 24 31 32 39
--- --- --- ------ ------
Total revenues....... 100 100 100 100 100 29 35 43
--- --- --- ------ ------
Costs and expenses:
Professional services.. 18 19 19 23 20 35 41 25
Product development
and support........... 25 23 31 30 39 19 82 87
Sales and marketing.... 34 34 39 40 44 27 55 58
General and
administrative........ 13 14 14 11 9 38 27 13
Restructuring costs.... 3 -- -- -- -- * -- --
Merger costs........... -- -- 10 12 2 -- * (77)
Acquired in-process
technology............ 5 11 29 12 4 182 260 (56)
--- --- --- ------ ------
Total costs and
expenses............ 98 101 142 128 118 32 90 32
--- --- --- ------ ------
Operating income (loss). 2 (1) (42) (28) (18) (167) * 10
Other income............ 1 1 1 1 1 48 40 (14)
--- --- --- ------ ------
Income (loss) before
income taxes........... 3 0 (41) (27) (17) (85) * 10
Income taxes............ 3 1 (4) (5) (4) (27) * *
--- --- --- ------ ------
Net income (loss)....... 0% (1)% (37)% (22)% (13)% *% *% 16%
=== === === ====== ======
</TABLE>
- ---------------------
*Not meaningful.
17
<PAGE>
REVENUES
The Company's revenues are currently derived from three sources: (i) license
fees for licensing the Company's proprietary software products; (ii)
maintenance fees for maintaining, supporting, and providing current upgrades
of the Company's software products; and (iii) revenues from professional
services, which consist of consulting services and education programs. Total
revenues for the first nine months of 1996 were $296,386,000, an increase of
$89,743,000, or 43%, over total revenues of $206,643,000 for the comparable
prior-year period. Total revenues from all sources for fiscal 1995 were
$304,676,000, an increase of $79,237,000, or 35%, from 1994 total revenues of
$225,439,000. Total revenues in 1994 increased $50,059,000, or 29%, over 1993
revenues of $175,380,000.
Revenue from customers in North America represented 84%, 82%, 76% and 77% of
the Company's total revenues in 1993, 1994, 1995 and the first nine months of
1996, respectively. Revenue from international customers represented 16%, 18%,
24% and 23% of the Company's total revenues in 1993, 1994, 1995 and the first
nine months of 1996, respectively. The increased proportion of international
revenue to total revenue was the result of significant investment in the
global marketplace. International revenue is now generated almost entirely by
the Company's international subsidiaries. For the first nine months of 1996,
less than 3% of the Company's international revenue was provided by the
Company's international affiliates, which were independent businesses through
which the Company previously generated a substantial portion of the Company's
international product and service revenue.
Software Products. Software products revenue represented 50%, 51%, 52%, 49%
and 51% of total revenues in 1993, 1994, 1995, the first nine months of 1995
and the first nine months of 1996, respectively. For the first nine months of
1996, software products revenue increased 50% to $152,074,000 from
$101,578,000 for the comparable prior-year period as a result of increases of
66%, 44%, 60%, 47% and 9%, respectively, experienced by the Company's database
management, systems management, application lifecycle, business intelligence
and data warehouse business units. In 1995, software products revenue was
$158,597,000, a 39% increase over 1994. From 1993 to 1994, software products
revenue increased 29% from $88,063,000 to $113,749,000. The Company believes
the growth in software products revenue over the past two years and the first
nine months of 1996 has resulted from the continued marketplace acceptance of
the Company's products and the Company's aggressive expansion of its sales and
marketing efforts, as well as new product offerings. During the first nine
months of 1996, the Company has expanded its customer base, increased sales of
integrated product suites and executed larger sales transactions. The
Company's database management, systems management, application lifecycle,
business intelligence and data warehouse business units represented 47%, 24%,
12%, 11% and 6%, respectively, of total software products revenue in 1994;
38%, 29%, 11%, 9% and 13%, respectively, of total software products revenue in
1995; and 41%, 29%, 11%, 10% and 9%, respectively, of total software products
revenue for the first nine months of 1996.
Maintenance. Maintenance revenue for the first nine months of 1996 increased
36% to $74,694,000 from $54,872,000 for the comparable prior-year period.
Maintenance revenue in 1995 increased 30% over 1994 to $76,498,000, and 1994
maintenance revenue of $58,837,000 represented an increase of 26% over 1993
maintenance revenue of $46,856,000. Maintenance revenue is derived from
recurring fees charged to perpetual license customers and the implicit first
year maintenance fees bundled in software product sales. The Company provides
maintenance customers with technical support and product enhancements.
Maintenance revenue is deferred and recognized ratably over the term of the
agreement. The increases during 1994, 1995 and the first nine months of 1996
were primarily attributable to expansion of the Company's installed customer
base, which supports recurring fees for maintenance and, to a lesser extent,
to increased revenues associated with maintenance fees implicit in certain
software product sales. Management believes that maintenance revenue should
continue to increase in absolute terms as the installed base of the Company's
software products increases and matures.
Professional Services. Professional services revenue is associated with the
Company's consulting services business and educational programs. Professional
services revenue for the first nine months of 1996 increased 39% to
$69,618,000 from $50,193,000 for the comparable prior-year period. In 1995,
professional services revenue was $69,581,000, a 32% increase over 1994. From
1993 to 1994, professional services revenue increased
18
<PAGE>
31% from $40,461,000 to $52,853,000. The growth in revenue was due primarily
to the addition of established consulting practices through various
acquisitions during 1995 and 1996. The Company expects its professional
services business to continue to grow as it focuses on providing support for
its full range of products, as well as comprehensive enterprise infrastructure
solutions.
COSTS AND EXPENSES
Total expenses for the first nine months of 1996, excluding merger costs and
acquired in-process technology charges, were $332,591,000, an increase of
$117,109,000, or 54%, compared to $215,482,000 for the comparable prior-year
period. Total expenses for 1995, excluding merger costs and acquired in-
process technology charges, were $313,526,000, an increase of $110,458,000, or
54%, compared to $203,068,000 for 1994. Total expenses for 1994, excluding
acquired in-process technology charges, increased 28%, compared to 1993 total
expenses, excluding acquired in-process technology charges and restructuring
costs, of $158,650,000. During 1995 and the first nine months of 1996, the
Company incurred significant costs in supporting its development laboratories
and in building the infrastructure to support the significantly larger
combined Company that is the result of recent acquisitions. These costs were
primarily associated with the hiring of product developers, technical writers,
and in-house and field technical support personnel; expanding the inside and
outside sales forces; informing customers of the Company's technical strategy;
training all personnel in enterprise infrastructure systems issues and new
products; accelerated hiring of key management personnel; and augmenting
internal support systems. Management believes that such investments have been,
and continue to be, necessary to fully exploit the market opportunity for the
newly acquired products and to adequately manage the significantly larger
enterprise.
Professional Services. For the first nine months of 1996, costs of
professional services increased to $59,012,000 from $47,213,000 for the
comparable prior-year period. Costs of professional services increased to
$60,341,000 in 1995, from $42,858,000 in 1994 and $31,855,000 in 1993. Costs
of professional services as a percentage of professional services revenue were
79%, 81%, 87%, 94% and 85% in 1993, 1994, 1995, the first nine months of 1995
and the first nine months of 1996, respectively. The increase in these
expenses in 1994, 1995 and the first nine months of 1996 was related to
salaries and other direct employment expenses as a result of the Company's
rapid hiring to support this business and the addition of established
consulting practices through various acquisitions. The increase in these
expenses as a percentage of professional services revenue in 1994 and 1995 was
primarily attributable to investments in the North American professional
services business. The decrease in these expenses as a percentage of
professional services revenue in the first nine months of 1996, as compared to
the first nine months of 1995, was primarily attributable to the streamlining
of the professional services workforce and better containment of occupancy and
overhead costs.
Product Development and Support. For the first nine months of 1996, product
development and support expenses increased to $117,480,000 from $62,952,000
for the comparable prior-year period. Product development and support expenses
increased to $94,027,000 in 1995, from $51,781,000 in 1994 and $43,467,000 in
1993. The increases in these expenses in 1994, 1995 and the first nine months
of 1996 were primarily attributable to the hiring of additional product
developers, in-house as well as field technical support personnel, and
technical writers; increased allocated charges for office space and overhead;
and increased hardware and software costs related to the product development
effort. Also contributing to the increase in 1994, 1995 and the first nine
months of 1996 were higher bonus and royalty expenses associated with
increased software products revenue. The costs of producing software
documentation for an expanding product line and growing customer base also
contributed to the increases in 1994, 1995 and the first nine months of 1996.
The Company has invested heavily in the development of infrastructure
software products for enterprise-wide information systems that integrate
mainframes, minicomputers, workstations, PCs, client/server networks and
intranets. As a result, through the second quarter of 1996, the Company hired
a significant number of product development and support personnel. The Company
believes that these actions were required in order to strengthen its
competitive position in the enterprise infrastructure marketplace, enhance
existing products and satisfactorily support the Company's growing customer
base. Although these costs will continue to be a significant component of
annual operating expenses, the Company anticipates that these expenses will
decrease as a percentage of total revenues as hiring is tempered and the
Company's infrastructure is solidified.
19
<PAGE>
In 1993, 1994, 1995 and the first nine months of 1996, the Company
capitalized $4,790,000, $5,987,000, $13,591,000 and $18,494,000, respectively,
of internal software development costs, net of related amortization expense,
in accordance with Statement of Financial Accounting Standards (SFAS) No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed." Product development and support costs plus capitalized
internal software development costs, net of related amortization expense, were
$48,257,000 in 1993, $57,768,000 in 1994, $107,618,000 in 1995 and
$135,974,000 in the first nine months of 1996, which amounted to 36%, 33%, 46%
and 60%, respectively, of software product and maintenance revenue during
those periods.
Sales and Marketing. For the first nine months of 1996, sales and marketing
expenses increased to $130,063,000 from $82,275,000 for the comparable prior-
year period. Sales and marketing expenses increased to $117,906,000 in 1995,
from $75,885,000 in 1994 and $59,802,000 in 1993. Sales and marketing expenses
as a percentage of total revenues were 34%, 34%, 39%, 40% and 44% in 1993,
1994, 1995, the first nine months of 1995 and the first nine months of 1996,
respectively. The increase in these expenses as a percentage of total revenues
in 1995, as compared to 1994 and 1993, and in the first nine months of 1996,
as compared to the first nine months of 1995, was primarily attributable to
costs associated with the significant expansion of the outside sales force and
telemarketing organizations in the U.S. and in international subsidiaries.
Also contributing to the increase were higher commission expenses associated
with the increase in software products revenue, increased product marketing
costs associated with an expanded product line, higher costs for sponsorship
of seminars and user groups, and increased allocated charges for office space
and overhead. The Company believes the large investment in sales and marketing
made during 1995 and the first nine months of 1996 was necessary in order to
build the sales organization required to distribute the Company's expanded
product line and exploit new market opportunities. The Company expects that
sales and marketing expenses will decrease as a percentage of revenues as the
sales force gains tenure and as the Company continues to focus on
consolidating marketing resources for its global marketing strategy.
General and Administrative. For the first nine months of 1996, general and
administrative expenses increased to $26,036,000 from $23,042,000 for the
comparable prior-year period. General and administrative expenses increased to
$41,252,000 in 1995, from $32,544,000 in 1994 and $23,526,000 in 1993. General
and administrative expenses as a percentage of total revenues were 13%, 14%,
14%, 11% and 9% in 1993, 1994, 1995, the first nine months of 1995 and the
first nine months of 1996, respectively. The increase in these expenses from
1993 to 1995 was primarily related to salaries and other direct employment
expenses attributable to an expanded administrative staff in both the U.S and
international subsidiaries, amortization of cost in excess of net assets
acquired related to the Company's acquisitions accounted for as purchases and
increased professional fees. During the first nine months of 1996, a concerted
effort to consolidate redundant administrative functions at the Company's
various domestic locations resulted in a significant reduction in these
expenses as a percentage of total revenue.
Restructuring Costs. In 1993, total restructuring costs of $4,659,000 were
incurred by Trinzic and Locus. In connection with its stabilization of its
KBMS software product, Trinzic recorded restructuring costs of $2,844,000,
consisting of $1,509,000 for the write-off of capitalized software development
costs and $1,335,000 for the closing of the data center used for development
activities and for employee severance payments. In connection with a reduction
of its presence in Europe and its work force in the U.S., Locus recorded a
$1,815,000 charge to income for repositioning operations. The charge was
primarily composed of amounts needed for reductions in work force and a loss
on subleasing the unused portion of its corporate facility.
Merger Costs. For the first nine months of 1996, merger costs were
$5,782,000 as compared to $24,764,000 for the comparable prior-year period.
Merger costs were $30,819,000, $0 and $0 in 1995, 1994 and 1993, respectively.
Merger costs relate to acquisitions accounted for as poolings of interests and
include investment banking and other professional fees, employee severance
payments, costs of closing excess office facilities and various other
expenses. The Company expects to incur similar costs and expenses in
connection with future acquisitions accounted for as poolings of interests.
These costs will be expensed in the periods in which the transactions are
consummated.
20
<PAGE>
Acquired In-Process Technology. For the first nine months of 1996, acquired
in-process technology charges were $11,095,000 as compared to $25,453,000 for
the comparable prior-year period. During the first nine months of 1996, the
Company made a small number of strategic acquisitions, each of which makes a
significant and specific contribution to the Company's market position.
However, the acquisition volume has decreased significantly from the 1995
activity. Acquired in-process technology charges were $88,493,000, $24,594,000
and $8,735,000, in 1995, 1994 and 1993, respectively. These charges relate to
numerous acquisitions of software companies and product technologies made in
support of the Company's goal to become the leading provider of enterprise
infrastructure software products and services. These acquisitions were
accounted for under the purchase method and portions of the purchase prices
were allocated to acquired in-process technology. See Note 2 of the Notes to
Company's Consolidated Financial Statements for a more detailed discussion of
these acquisitions.
Prior to completing these acquisitions, in order to determine the fair market
value of the organizations and technologies to be acquired, the Company
conducted reviews, which included an evaluation of existing products, research
and development in process (projects that had reached technological feasibility
and had no alternative future use), customers and financial and other matters.
These acquisitions were made primarily for the research and development in
process and were based upon the expected cash flows in future periods. The
acquired in-process research and development represent unique and emerging
technologies, the application of which is limited to the Company's enterprise
infrastructure strategy. Accordingly, these acquired technologies have no
alternative future use. The Company believes it has budgeted adequate research
and development resources to complete the contemplated projects over time
periods ranging from six months to 18 months from the dates of acquisition. The
Company expects to continue to incur charges for acquired in-process technology
in connection with future acquisitions, which will reduce operating and net
income for the periods in which the acquisitions are consummated.
OTHER INCOME
For the first nine months of 1996, other income was $2,566,000 as compared to
$2,991,000 for the comparable prior-year period. Other income was $4,281,000 in
1995 as compared to $3,052,000 in 1994 and $2,057,000 in 1993. The increase in
1995 over 1994 and 1994 over 1993 was primarily attributable to interest earned
on higher cash and investment balances maintained during the respective year as
compared to the prior year. The decrease in other income for the first nine
months of 1996 as compared to the same period in 1995 is primarily attributable
to interest income earned on lower cash and investment balances in the first
nine months of 1996 as compared to the prior-year period.
INCOME TAXES
For the nine-month period ended September 30, 1996, the Company recognized an
income tax benefit of $12,528,000 as compared to $11,004,000 for the comparable
prior-year period. The Company recognized an income tax benefit of $11,948,000
in 1995 and income tax expense of $3,473,000 in 1994, and $4,768,000 in 1993.
The exercise of certain stock options results in income tax benefits to the
Company. The benefit is equal to the difference between the market price at the
date of exercise and the option price at the applicable tax rate. The benefit
does not flow through the statement of operations, but is credited directly to
paid-in capital. As a result of stock option exercises during 1993, 1994, 1995
and the first nine months of 1996, $3,705,000, $108,000, $0 and, $0,
respectively, were credited to paid-in capital. The Company has available
approximately $131,800,000 of net operating loss carryforwards and $7,500,000
of tax credit carryforwards for Federal income tax purposes expiring through
the year 2010. Some of the Company's tax carryforwards are subject to
limitations as to the amounts which may be used in future years.
In order to take advantage of U.S. income tax rates on income derived from
export transactions, the Company utilizes PLATINUM TECHNOLOGY International,
Inc. as a Foreign Sales Corporation. The Foreign Sales Corporation reduced the
Company's effective tax rate by 10.8%, 10.3%, 0.2% and 0% in 1993, 1994, 1995
21
<PAGE>
and the first nine months of 1996, respectively. The lesser reductions in 1995
and the first nine months of 1996 resulted primarily from the net losses in
1995 and the first nine months of 1996 and the impact of terminating
distribution agreements with PLATINUM affiliates and establishing foreign
subsidiaries in their place.
INFLATION
To date, inflation has not had a material impact on the Company's revenues
or income.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents and investments were $56,508,000 as of
September 30, 1996 as compared to $132,775,000 as of December 31, 1995,
$124,563,000 as of December 31, 1994 and $69,554,000 as of December 31, 1993.
See "--Cash Flows."
The Company had trade and installment accounts receivable, net of
allowances, of $133,758,000, $126,539,000, $74,017,000 and $55,299,000 as of
September 30, 1996 and December 31, 1995, 1994 and 1993, respectively. The
Company sells software products and services to customers in diversified
industries and geographic regions and, therefore, has no significant
concentration of credit risk. Historically, a substantial amount of the
Company's revenues have been recorded in the third month of any given quarter,
with a concentration of such revenues in the last week of the third month.
This trend results in a high balance of accounts receivable relative to
reported revenues at the end of any quarterly reporting period.
The Company had long-term acquisition-related payables of $8,026,000,
$9,756,000 and $8,450,000 and other long-term obligations of $931,000,
$1,586,000 and $625,000 as of September 30, 1996 and December 31, 1995 and
1994, respectively. The Company currently has an unsecured bank line of credit
of $25,000,000, under which borrowings bear interest at rates ranging from
approximately LIBOR plus 1% to the bank's prime rate. As of October 31, 1996,
the Company had no outstanding borrowings under this line of credit. The
Company had approximately $1,407,000 of short-term borrowings outstanding
under this line of credit as of December 31, 1995. The Company is in the
process of increasing its line of credit.
The Company's sources of liquidity have traditionally been cash generated
from operations and funds from capital markets, including bank facilities.
During 1996, the sale of receivables has become a significant source of
liquidity. The Company believes the funding available to it from these sources
will be sufficient to satisfy its working capital requirements for the
foreseeable future. The Company's capital requirements are dependent on
management's business plan regarding the levels and timing of investments in
existing and newly-acquired businesses and technologies. These plans and the
related capital requirements may change, based upon various factors, such as
the Company's strategic opportunities, developments in the Company's markets,
the timing of closing and integrating acquisitions and the conditions of
financial markets.
The Company sells a significant portion of its installment accounts
receivables to third parties. Proceeds from the sale of receivables for the
first nine months of 1996 were $85,776,000. Sales of installment receivables
for the same period in 1995 were minimal. In 1996, a portion of the
receivables were sold with recourse. As of September 30, 1996, the Company's
maximum exposure under the recourse provisions was $32,422,000. The Company
has assessed the exposure related to these recourse provisions and determined
the potential liability to be minimal.
The installment accounts receivable are recorded net of unamortized
discounts and maintenance fees. When these receivables are sold, the Company
reduces the related receivable balance and records the deferred maintenance as
an obligation. This obligation is recognized into income ratably over the term
of the maintenance agreement.
CASH FLOWS
Cash used in operating activities was $99,249,000 for the first nine months
of 1996 compared to $12,724,000 used in operating activities for the same
period in 1995. A number of factors resulted in this utilization of cash. The
Company incurred a loss before income taxes of $50,516,000 (net loss of
$37,988,000 grossed up for $12,528,000 of non-cash deferred tax benefits),
which was substantially offset by non-cash expenditures including $25,799,000
of depreciation and amortization and $11,095,000 in the write-off of acquired
in-process technology. The most significant utilization of cash was due to an
increase in trade and installment receivables (prior to financing) of
$85,127,000, which increase resulted primarily from the concentration of sales
volume near the end of the third quarter of 1996. This was partially offset by
cash provided by an increase in deferred revenue of $19,272,000. Other changes
in cash resulted from fluctuations in various working capital accounts, the
most significant being a reduction of $9,096,000 of accrued liabilities. Full
year cash flows from operating activities were $20,323,000 provided in 1993,
$32,331,000 provided in 1994 and $27,570,000 used in 1995.
22
<PAGE>
Cash used in investing activities was $52,828,000 for the first nine months
of 1996 compared to $55,320,000 for the same period in 1995. The cash
utilization was primarily due to $25,546,000 in purchases of property and
equipment, $27,269,000 in capitalized software development costs and
$12,819,000 in payments for acquisitions. In the first nine months of 1995,
payments for acquisitions were significantly higher at $43,203,000. The
acquisitions in 1995 were primarily financed through the sale and maturities
of $37,546,000 of investment securities. Full year cash flows from investing
activities were $21,362,000 used in 1993, $51,076,000 used in 1994 and
$136,095,000 used in 1995. Certain proceeds from the Company's October 1995
public offering of 10,840,155 shares of Common Stock were used to fund
$103,085,000 in payments relating to acquisitions and approximately
$38,780,000 in capital expenditures.
Cash provided by financing activities was $90,772,000 for the first nine
months of 1996 compared to $18,311,000 for the same period in 1995. The
primary source of cash was an $85,776,000 sale of receivables. Full year cash
flows from financing activities were $8,145,000 provided in 1993, $67,506,000
provided in 1994 and $199,257,000 provided in 1995. The Company received
aggregate proceeds, net of issuance costs, of approximately $194,420,000 in
connection with its October 1995 public offering.
QUARTERLY COMPARISONS
The following tables set forth an unaudited summary of certain quarterly
financial data. This quarterly information has been prepared on the same basis
as the annual consolidated financial statements and, in management's opinion,
reflects all adjustments necessary for a fair presentation of the information
for the periods presented. The operating results for any quarter are not
necessarily indicative of results for any future period.
The Company has experienced a seasonal pattern in its operating results,
with the fourth quarter typically having the highest total revenues and
operating income. For example, 31% and 32% of the Company's total revenues in
1994 and 1995, respectively, were generated in the fourth quarter. Further,
revenues for the fourth quarter of 1994 were higher than for the first quarter
for 1995 and revenues for the fourth quarter of 1995 were higher than revenues
for the first quarter of 1996. Since operating expenses continued to increase
in the first quarter, the Company realized substantially lower operating
margins and net income for this period. The Company expects this pattern to
continue for the foreseeable future. The Company believes the seasonality of
its revenue results primarily from the budgeting cycles of its software
product customers and the structure of the Company's sales commission and
bonus programs. In addition, the Company's software products revenue may vary
significantly from quarter to quarter depending upon other factors such as the
timing of new product announcements and releases by the Company and its
competitors. The Company operates with relatively little backlog and
substantially all of its software products revenue in each quarter results
from sales made in that quarter.
<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1994 1994 1994 1994 1995 1995 1995 1995 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues,
as previously
reported....... $39,686 $48,266 $50,855 $63,660 $ 55,481 $64,573 $ 64,641 $ 91,226
Adjustments(1).. 5,466 5,698 5,754 6,024 7,579 7,223 7,146 6,807
Total revenues.. 45,152 53,964 56,639 69,684 63,060 71,796 71,787 98,033 $ 82,471
Operating income
(loss), as
previously
reported....... 1,544 5,334 (8,096)(2) 2,596(3) (17,688)(4) (4,002)(5) (38,401)(6) (68,865)(7)
Adjustments(1).. 166 (1,069) (1,211) (1,487) 370 398 267 (241)
Operating income
(loss)......... 1,710 4,265 (9,307)(2) 1,109(3) (17,318)(4) (3,604)(5) (38,134)(6) (69,106)(7) (32,327)(8)
Net income
(loss), as
previously
reported....... 1,290 3,966 (7,445)(2) 2,804(3) (14,438)(4) (2,559)(5) (28,900)(6) (66,577)(7)
Adjustments(1).. 165 (1,033) (1,165) (1,226) 432 248 156 (295)
Net income
(loss)......... 1,455 2,933 (8,610)(2) 1,578(3) (14,006)(4) (2,311)(5) (28,744)(6) (66,872)(7) (24,504(8)
Net income
(loss) per
share, as
previously
reported....... $ 0.04 $ 0.11 $ (0.22)(2) $ 0.07(3) $ (0.38)(4) $ (0.07)(5) $ (0.76)(6) $ (1.40)(8)
Net income
(loss) per
share.......... 0.04 0.07 (0.23)(2) 0.04(3) (0.34)(4) (0.06)(5) (0.69)(6) (1.31)(8) $ (0.45(8)
Shares used in
computing net
income (loss)
per share, as
previously
reported....... 35,827 35,995 33,521 38,175 37,520 37,902 38,117 47,697
Shares used in
computing net
income (loss)
per share...... 39,045 39,213 36,739 41,385 40,738 41,283 41,460 51,032 54,915
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------
JUNE 30, SEPT. 30,
1996 1996
<S> <C> <C>
Total revenues,
as previously
reported.......
Adjustments(1)..
Total revenues.. $100,485 $113,430
Operating income
(loss), as
previously
reported.......
Adjustments(1)..
Operating income
(loss)......... (10,072) (10,636)(9)
Net income
(loss), as
previously
reported.......
Adjustments(1)..
Net income
(loss)......... (5,791) (7,693)(9)
Net income
(loss) per
share, as
previously
reported.......
Net income
(loss) per
share.......... $ (0.10) $ (0.14)(9)
Shares used in
computing net
income (loss)
per share, as
previously
reported.......
Shares used in
computing net
income (loss)
per share...... 55,214 55,678
</TABLE>
23
<PAGE>
- ---------------------
(1) Adjustments reflect the effect of acquisitions accounted for as poolings
of interests on the amounts previously reported in the Company's Annual
Report on Form 10-K. See Note 2 of the Notes to the Consolidated Financial
Statements for a more detailed discussion of these transactions.
(2) Reflects a pre-tax charge for acquired in-process technology of
$14,564,000 relating to the Company's acquisition of the outstanding stock
of Dimeric, and the net assets of Aston Brooke.
(3) Reflects a pre-tax charge for acquired in-process technology of
$10,030,000 relating to the Company's acquisition of the net assets of
AutoSystems.
(4) Reflects a pre-tax charge for acquired in-process technology of
$18,799,000 relating primarily to the Company's acquisition of the stock
of SQL, Viatech, BrownStone and Reltech.
(5) Reflects a pre-tax charge for acquired in-process technology of $1,354,000
relating to the purchase of certain product technologies. Also reflects a
pre-tax charge for merger costs of $2,152,000 relating to acquisitions
accounted for as poolings of interests.
(6) Reflects a pre-tax charge for acquired in-process technology of $5,300,000
relating to the acquisition of ASC. Also reflects a pre-tax charge for
merger costs of $22,612,000 relating to acquisitions accounted for as
poolings of interests.
(7) Reflects a pre-tax charge for acquired in-process technology of
$63,040,000 relating primarily to the acquisitions of the stock of
ProtoSoft, BMS, AIB and Protellicess. Also reflects a pre-tax charge for
merger costs of $6,055,000 relating to acquisitions accounted for as
poolings of interests.
(8) Reflects a pre-tax charge for acquired in-process technology of $7,005,000
relating to the Company's acquisition of the stock of AST and the purchase
of certain product technologies. Also reflects a pre-tax charge for merger
costs of $5,782,000 relating to acquisitions accounted for as poolings of
interests.
(9) Reflects a pre-tax charge for acquired in-process technology of $4,090,000
relating to the Company's acquisition of Software Alternatives and
Grateful Data.
24
<PAGE>
BUSINESS
The discussion below contains certain forward-looking statements (as such
term is defined in the rules promulgated pursuant to the Securities Act) that
are based on the beliefs of the Company's management, as well as assumptions
made by, and information currently available to, the Company's management. The
Company's actual results, performance or achievements in 1996, 1997 and beyond
could differ materially from those expressed in, or implied by, any such
forward-looking statements. See "Risk Factors" for a discussion of factors
that could cause or contribute to such material differences.
The Company develops, markets and supports enterprise infrastructure
software products, and provides related professional services, for
administering the prevailing complex, heterogeneous computing environment
known as the open enterprise environment (the "OEE"). These products and
services increase the performance and interoperability of computing systems
and databases in the OEE and provide users, primarily in large and data
intensive organizations, with more efficient and productive access to and use
of critical information. The Company's products typically perform fundamental,
mission-critical functions, such as maintenance of data integrity, systems
security, systems scheduling and project and process management. The Company
offers enterprise infrastructure software products through five business
units: systems management, database management, application lifecycle,
business intelligence and data warehouse. Addressing businesses' increasing
demand for simplified vendor relationships and complete solutions to
information technology ("IT") problems, the Company's goal is to become the
leading provider of enterprise infrastructure solutions by offering a
comprehensive set of "best of breed" point products, fully integrated product
suites and a wide array of professional services, including consulting,
systems integration and educational programs.
To achieve its goal, the Company identified key enterprise infrastructure
technologies and skill sets, and through a combination of an aggressive
acquisition program and vigorous internal product development efforts, the
Company has assembled the competencies to create complete enterprise
infrastructure solutions. Since mid-1994, the Company has acquired 32
businesses and 22 technologies. The Company is now leveraging the breadth of
its product lines and its professional service capabilities, and is devoting
substantial resources to integrating its products and technologies, to provide
complete, customized solutions for enterprise infrastructure problems. These
solutions range from single products to sets of integrated products from
multiple business units bundled into a product suite, along with design and
implementation services provided by the Company's professional services staff.
These solutions also include ongoing product upgrades, maintenance and
support, sometimes pursuant to multi-year contracts. Evidencing the increasing
demand of the Company's customers for comprehensive solutions, the Company
executed 32 transactions of over $1 million during the first nine months of
1996, as compared to only one such transaction during the first nine months of
1995. The Company's total revenues and software products revenue increased 43%
and 50%, respectively, for the first nine months of 1996 as compared to the
same period in 1995.
During 1996, the Company's software developers have focused on product
integration and the bundling of products to satisfy critical customer needs,
along with continued expansion and enhancement of the Company's product line.
The Company has also been enabling its products and suites for application
with intranets, the Internet and the World Wide Web (the "Web"). The
cornerstone of the Company's integration efforts is the PLATINUM Open
Enterprise Management Solution ("POEMS"), an architecture designed to give the
Company's products a common look and feel, common installation and
distribution and common communication, data and events handling. The Company
is creating solutions for general business needs, as well as the needs of
specific industries. For example, the Company recently released PLATINUM
RiskAdvisor, a data warehouse decision support application developed
specifically for the insurance industry. The Company has also released its
"Netcessities" product suite for building, testing and deploying intranet
applications, and has developed a comprehensive solution for the Year 2000
problem. In addition, the Company intends to use a number of its current
products and technologies as the foundation for a new, integrated product
offering designed to enable companies to simultaneously manage, maintain and
deploy multiple Web sites.
25
<PAGE>
MARKET OVERVIEW
The deployment, management, maintenance and productive use of IT has become
increasingly complex as organizations have moved from centralized host-based
computing systems to networked, open enterprise environments. These modern
computing environments frequently service multiple end-users spread across
numerous locations and are heterogeneous, consisting of various computing
platforms (including mainframes, minicomputers, workstations and desktop
PCs/LANs), relational database management systems ("RDBMS"), operating systems
(including UNIX, Windows, Windows NT, OS/400, OS/2, MVS and VMS) and
applications, and often also including intranets, the Internet and/or the Web.
These open environments are also dynamic; users as well as hardware and
software resources are frequently added, removed or changed and new, mission-
critical applications are continually being developed and deployed.
The Internet, a global web linking thousands of computer networks, has
emerged as an important medium for communications in these complex IT
environments. Much of the recent growth in the use of the Internet is
attributable to the rapid expansion of the network of graphical servers and
information known as the Web. As organizations become familiar with the Web,
they are increasingly using Internet data formats and communications
protocols, Web client and server software and, in some cases, the Internet's
communication facilities as the backbone for private networks ("intranets")
that connect these organizations' various local area networks.
While open enterprise computing environments can provide price-performance
advantages and the potential for greater functionality than host-based
systems, organizations have found that traditional mainframe systems
administration tools and utilities are unable to address the complex
requirements of these environments. As a result, a market need has arisen for
comprehensive, easy to use, high-performance and cost-effective infrastructure
solutions that offer the functionality traditionally associated with mainframe
solutions, but are designed for open enterprise environments. The Company
believes that, due to the complexities of these new computing environments,
persons who are responsible for the administration of these systems are
increasingly seeking to purchase IT products and services from a smaller
number of vendors that can offer, design and implement complete, integrated
infrastructure solutions.
BUSINESS STRATEGY
To capitalize on these market opportunities, the Company's business strategy
is to:
. Offer a Comprehensive Enterprise Infrastructure Software Product Line--
The Company offers a comprehensive set of point products to address each
of five principal enterprise infrastructure software disciplines: systems
management, database management, application lifecycle, business
intelligence and data warehouse. The Company continues to enhance and
expand its product portfolio by internal development and the acquisition
of products in each of these areas. Through its research and development
and field support personnel, the Company works closely with its customers
to determine their requirements and to develop solutions which address
their needs.
. Integrate Products--The Company is devoting substantial financial and
software development resources to enhancing its products' common
functionality and their interoperability with each other and the products
of other vendors and to combining its products within and across business
units into integrated product suites designed to solve customer problems.
The Company is employing its POEMS architecture to give products a common
look and feel, common installation and distribution and common
communication, data and events handling. The Company is then bundling
these products into suites designed to address general or industry
specific needs. The Company is positioning itself as a vendor that can
solve all of a business' enterprise infrastructure problems.
. Develop Complete Solutions for Targeted Vertical Markets--The Company is
designing customized product suites to address the needs of targeted
vertical markets. The Company is engaging the services of individuals
with substantial experience and expertise in particular industries, such
as the insurance,
26
<PAGE>
telecommunications and pharmaceuticals industries, to provide the
Company's software developers with an understanding of how IT systems
function within those industries. The Company can then develop suites of
products tailored to meet such systems' specific needs, with user
interfaces appropriate for each industry. For example, the Company
recently released PLATINUM RiskAdvisor, a data warehouse decision-support
application developed specifically for the insurance industry. The Company
expects to expand its presence in the vertical applications marketplace.
. Offer a Wide Range of Professional Services--In furtherance of the
Company's strategy to offer comprehensive solutions, the Company provides
a wide range of professional services, including consulting, systems
integration and educational programs. The Company can provide complete
solutions to customers' enterprise infrastructure problems, from design
to full implementation and installation of products. The Company believes
this ability to provide end-to-end solutions, including both products and
services, enables the Company to satisfy customer desires for single-
source solutions, strengthening the Company's position in the marketplace
for enterprise infrastructure products. Additionally, the Company is
beginning to package professional services as a standard feature of its
product sales, and the Company believes that solutions developed by its
professional services group will lead to sales of the Company's products
as part of such solutions. The Company continues to enhance its
professional service capabilities.
. Build Strong Customer Relationships--The Company focuses significant
efforts on building strong, lasting relationships with its customers. The
Company's direct sales approach, with each customer dealing with only one
salesman for the Company's entire product line, is the foundation of
these efforts. Additionally, the Company provides comprehensive customer
service and technical support as integral components of its product
offerings, which the Company believes is essential to creating customer
satisfaction and building long-term relationships.
PRODUCTS
The Company provides tools and technologies that help organizations
efficiently operate and manage their complex OEEs, which contain multiple
platforms and multiple operating systems. These tools increase the efficiency
of individual computing systems and databases, as well as the interoperability
of these systems and databases in distributed environments of any size. The
Company's solutions support platforms and operating systems that span
mainframe, midrange and PC/LAN computing environments, including MVS, UNIX,
OS/2, OS/400, Windows and Windows NT. They also support multiple heterogeneous
databases, such as the DB2 family, Oracle, Sybase, Microsoft SQL Server and
Informix. Software products revenue constituted 50%, 51%, 52% and 51% of total
revenues of the Company for each of 1993, 1994, 1995 and the nine-month period
ended September 30, 1996, respectively.
The Company now offers approximately 140 robust and adaptable point products
through five business units:
Systems Management Products--The Company offers products that enable
organizations to manage resources and events to optimize and centralize
different platforms, whether local or remote, so that applications can scale to
large numbers of machines and reside where they are most cost-efficient; to
automate routine systems maintenance tasks and processes, thereby streamlining
enterprise management, enhancing system reliability and reducing costs; and to
simplify the management of disparate systems and applications enterprise-wide
and increase end-use productivity. Included in these product offerings are
solutions for systems management spanning several related disciplines,
including job and process management, enterprise automation, storage
management, output management, problem resolution, security management,
distribution management, asset management, change and configuration management,
performance management, finance and resource
27
<PAGE>
management, capacity planning, and networking and connectivity. The Company
offers over 20 products developed to provide the functionality required by
businesses, while scaling across multiple platforms that include UNIX,
Windows, Windows NT, OS/400, OS/2, MVS and VMS. Principal systems management
products include the following:
. AutoSys--a reliable batch job scheduler, AutoSys simplifies the task of
managing and monitoring multiple jobs in distributed UNIX environments.
It provides centralized control of job execution across heterogeneous
platforms and offers flexible features, such as self-correcting job
control and automated restart and recovery capabilities.
. DBVision--a scaleable, UNIX-based tool for continuous monitoring and
centralized management of Oracle, Sybase, Microsoft SQL Server and
Informix databases in any size network. DBVision collects and displays
performance measurements in real time or retrospect. It automatically
detects and corrects performance problems and predicts space shortages.
. TransTracker--a distributed systems measurement tool that enables
application developers, infrastructure architects and operations
managers to analyze detailed metrics to improve client/server
application performance.
. WireTap--a tool that monitors and measures network packet traffic and
can yield details on network utilization by protocol and application. It
also provides statistics on response times and occurrences of
client/server requests.
. AutoSecure--a tool that provides mainframe-caliber security for UNIX
hosts, AutoSecure makes administration consistent across UNIX platforms.
It protects LOGINs to the system, password quality, execution of
privileged programs, file access, user ID substitutions and network
connections.
Database Management Products--The Company provides a leading set of tools
and utilities for centralized or distributed administration, analysis and
monitoring of heterogeneous databases. The Company's solutions for DB2 give
users the power and flexibility that they require for applications
development, database administration, performance analysis and utilities. By
automating administrative and maintenance tasks, these software solutions
enable users to achieve the highest performance levels possible, increase data
availability, automate arduous administrative tasks, dramatically reduce
completion time and deliver new products or enhancements to end-users faster
and with more flexibility. Principal database management products include the
following:
. Database Analyzer--a DB2 DASD and database monitoring, analysis,
validation, forecasting and tuning tool. It provides extensive
statistical reporting capabilities, automated maintenance and auditing of
internal structures and a DB2 page editor.
. Plan Analyzer--a tool that provides advanced analyses for monitoring and
maintaining the SQL in DB2 plans and packages. Its reporting options
provide full details on access path choices, SQL syntax and plan or
package problems so that businesses can maximize application efficiency.
. RC Migrator--a tool that automates DB2 object and data migrations and
alterations, while maintaining object dependencies and preserving data
security. Migrations may be performed on a one-to-one or one-to-many
basis.
. RC Update--a complete object and data management tool for DB2 that
creates, drops and alters DB2 objects. It also provides object
restoration capabilities as well as facilities for comparing, copying and
editing data.
. TS Reorg--a powerful tablespace reorganization tool for Oracle, Informix
and Sybase databases of any size. TS Reorg delivers fast reorganizations
of entire tablespaces, individual tables and indexes. It also provides
efficient fragmentation of used and free space and automatic data
partitioning. TS Reorg can run on UNIX, VMS or Windows NT-based server
systems.
28
<PAGE>
Application Lifecycle Products--The Company offers products that enable
organizations to streamline the entire application lifecycle, from estimation
to deployment and maintenance. These products also facilitate the development
of sophisticated, high-performance systems that can adapt to changes in
evolving, open environments. Business processes are automated through
solutions for project and process management, analysis and design,
construction, testing, distribution, change and configuration management and
help desk support. Principal application lifecycle products include the
following:
. AionDS--a complete application development solution that combines rule-
based technology and object-oriented programming. Developers can use its
powerful language to build applications that automate complex business
policies and process logic.
. CCC/Harvest--a tool that provides software change and configuration
management, integrated problem tracking and software process automation
in open, client/server environments through a consistent interface. It
integrates with other tools and monitors the development process for
individual developers, development teams and application managers.
. Paradigm Plus--a powerful, object-oriented analysis and design tool that
supports Enterprise Component Modeling (ECM), code generation and
reverse engineering. Using ECM, companies can identify business
requirements, model and build reusable application components and manage
long-term information systems.
Business Intelligence Products --The Company offers an integrated tool set
that enables organizations to better leverage their corporate data
investments. These products enable end-users to derive value and insight from
corporate information by facilitating the access, analysis, reporting and
delivery of enterprise data. Powerful point products can be used separately to
meet specific needs, or as part of an integrated business intelligence
solution. By bringing database and warehouse information to enterprise
desktops, users can effectively identify business trends, analyze complex
information, create timely reports and make informed decisions. Principal
business intelligence products include the following:
. Forest & Trees--a data analysis and reporting tool for sophisticated
business intelligence and decision support systems. It enables end-users
and developers to collect, combine, monitor and analyze information from
a variety of sources, including PC spreadsheets and databases, database
servers, mainframe systems and Lotus Notes.
. InfoBeacon--a next-generation decision support solution that contains an
analytical processing engine to handle user requests for multi-
dimensional views of data stored in relational database management
systems and to perform standard and custom calculations. Based on a
three-tier client/server architecture, InfoBeacon brings rapid response
and enterprise scalability to the data warehouse analysis environment.
. InfoReports--an advanced reporting tool that lets end-users create ad
hoc and production reports using a familiar Windows interface. Users can
build multiple-query reports that combine data from different databases.
These reports can be executed on any client or server while retaining
identical formatting attributes.
. Report Facility--a versatile reporting tool for DB2, VSAM, QSAM and
other data sources, Report Facility executes online or in batch and
features a variety of report types, including those from InfoReports. It
optimizes resource consumption by user or environment.
Data Warehouse Products--The Company offers an integrated set of solutions
for all major warehousing functions, including data extraction and refinement,
data distribution, and data access and analysis. This comprehensive solution
set helps organizations build, manage and maintain data warehouses. A data
warehouse is a data store that gives end-users full access to periodically
consolidated, historical data for making business decisions and analyzing
trends without jeopardizing the performance of mission-critical operations.
Warehousing tools can capture data in many forms on numerous platforms,
transfer it to multiple database platforms and provide users with the means to
access and manage such information. Repository tools play a key role in data
warehouses as places for centralized control and collection points for status
information concerning the warehouses and their activities. Principal data
warehouse products include the following:
29
<PAGE>
. InfoPump--a bi-directional client/server middleware tool, InfoPump
automates the process of replicating, transferring and integrating data
in heterogeneous environments on a scheduled or event-driven basis.
. InfoHub--a tool that enables end users to transparently access and
update a variety of host-based relational and nonrelational legacy
databases using PC-based applications or front-end query and reporting
tools.
. Repository--a metadata source that links warehouse resources, targets
and end-user query tools, enterprise-wide. Repository stores the
information necessary to define a migration environment and for the
mapping of sources to targets, as well as translation requirements,
business rules and selection criteria for building a warehouse.
. InfoTransport--a reliable, high-speed tool for transferring data
extracted from DB2, IMS, VSAM and sequential files to DB2 for OS/2, DB2
for AIX, Oracle7, Sybase, Microsoft SQL Server and Informix.
In the past, businesses licensed products on a stand-alone basis to address
each of their enterprise infrastructure needs as they arose, including
management performance, systems security, object design and quality assurance.
By combining tools and technologies within and across its business units, the
Company now provides product suites that feature a variety of functions which
present complete solutions to businesses' enterprise infrastructure problems.
These integrated product offerings allow businesses to experience
comprehensive benefits without having to deal with multiple products or
multiple vendors. The Company has designed product suites that address
enterprise infrastructure problems that are shared by businesses from various
industries, as well as product suites that target enterprise infrastructure
problems that are unique to specific industries. The following provides a
brief description of some of the Company's recent product suite offerings:
SystemVision 2000--this product suite, developed through a combination of
tools and technologies made available through internal development,
acquisitions and marketing agreements, provides an end-to-end solution to
the problem created by the century date change, commonly known as the Year
2000 problem. It enables businesses to analyze, plan, implement and test
century date changes in an integrated manner. As a result, businesses can
minimize exposure, more effectively plan resources and reduce costs and
time associated with the Year 2000 problem.
Netcessities--this product suite, which is the result of integration
between, and enhancements to, the Company's application lifecycle solution
products, enables professional developers to analyze, construct, test and
deploy enterprise-wide intranet applications. It offers a complete solution
for delivering mission-critical applications to businesses' intranets,
emphasizing object-oriented technologies and sophisticated database access.
RiskAdvisor--this product suite, which provides a comprehensive strategic
solution for analyzing large amounts of stored business data, was designed
specifically for the insurance industry. It provides multiple analytical
facilities, all keyed to insurance business indicators. This allows
companies to proactively manage their businesses by identifying loss
activity trends, reducing operating costs in policy issuance and claims
control and understanding claim caseload activity.
PRODUCT LICENSES
The Company provides its software products to customers under non-exclusive,
non-transferable license agreements (including standard shrink-wrap licenses
for certain products). As is customary in the software industry, in order to
protect its intellectual property rights, the Company does not sell or
transfer title to its software products to customers. Under the Company's
current standard form license agreement, licensed software may be used solely
for the customers' internal operations and only on designated hardware at
specified sites, which may be comprised of a stand-alone computer, a single
network server with multiple terminals or multiple network servers with
multiple terminals.
Licenses for the Company's software are almost exclusively perpetual,
although annual and monthly licenses are also offered. License fees may be due
upon execution by the customer of the applicable product
30
<PAGE>
agreement or may be payable over time for contracts involving multi-year
commitments for maintenance and product upgrades. List prices are based upon
the size of the processor, number of servers and/or number of users, depending
upon the type of license and product being licensed. The Company's published
list price includes discounts for suite, enterprise and multi-site licenses.
Licenses generally include more than one product. Under the Company's current
standard form license agreement, maintenance is renewed on an annual basis by
the customer paying the current maintenance fee. Customers may also commit for
maintenance and product support over extended periods of time. See "Technical
Support and Maintenance."
PRODUCT DEVELOPMENT
The Company is pursuing its strategy by continuing its emphasis on
developing new software products and enhancements in-house, acquiring
products, technologies and businesses complementary to the Company's existing
product line and forming alliances with leading technology companies. The
Company has formed separate in-house development teams to efficiently
integrate acquired products and technologies into existing product lines.
During 1993, 1994, 1995 and the nine-month period ended September 30, 1996,
product development and support expenses of the Company were $43,467,000,
$51,781,000, $94,027,000 and $117,480,000, respectively. As of October 31,
1996, the Company employed approximately 1,650 persons in product development
and support.
Internal Development--The Company will continue to rely to a large extent on
the internal development of products to expand its product lines. The Company
believes its RDBMS expertise and experience give it a competitive advantage in
developing products that address increasingly complex environments and that
meet evolving customer needs. In order to fully exploit acquired software
development personnel, and to access new sources of talent, the Company has
established approximately 32 independent development laboratories, generally
at the locations of newly-acquired companies. These development laboratories
are interconnected via video conferencing, e-mail, Lotus Notes and other
communication technologies and use various hardware, operating systems and
database systems which give the Company the ability to simulate the open
enterprise environments of its customers. Laboratories have responsibility for
their product lines and receive guidance from POEMS teams to foster
interoperability.
Acquisitions--The Company continually reviews acquisition candidates with
leading-edge products and technologies that could enhance the Company's
product portfolio. The Company has particularly emphasized this approach to
accelerate the Company's expansion beyond the relational database management
market. The technologies associated with the products of the acquired
businesses are being incorporated into the Company's existing internally
developed products and are being used in developing new enterprise
infrastructure products. In addition to providing the Company with new
products and technologies, these acquisitions have provided the Company with
experienced teams of product developers who now staff the Company's
independent development laboratories. The Company plans to continue to pursue
acquisition opportunities, because it believes that acquisitions are an
essential part of the Company's strategy to compete effectively in its rapidly
evolving marketplace.
Technology Relationships--To reinforce its commitment to providing solutions
for the open enterprise environment, the Company has implemented its PLATINUM
Partner Program, whereby the Company has established strategic and technology
relationship with several hardware, software and database vendors. The Company
believes that in order to provide solutions for heterogeneous computing
environments, it will need to continue to establish and maintain key
relationships with leading technology companies, such as IBM/Tivoli, Hewlett-
Packard, Oracle, Sybase, Informix and Microsoft. These technical and marketing
alliances provide the Company early access to product information and pre-
release software.
PROFESSIONAL SERVICES
As part of its strategy to provide complete solutions for the OEE, the
Company offers a range of professional services, including consulting services
and educational programs. These services help businesses
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construct and manage infrastructures in which complex software products can be
used. These services can improve and accelerate customization, implementation
and deployment of the Company's software products. The Company believes that
more rapid and effective implementation of its software products will lead to
increased customer satisfaction and greater follow-on sales. For these
reasons, the Company is beginning to package its professional services as a
standard feature of its product sales.
Consulting Services--The Company is focusing significant effort on
developing and expanding its consulting services group. Primarily developed
through recent acquisitions of consulting services companies, this group
provides consulting services to end-user customers of computer systems,
including those that desire to migrate from information systems that use
proprietary environments to open system environments. Other services provided
include (i) technology selection, strategy and infrastructure, (ii) large
scale systems design, implementation and management, (iii) data warehouse
design and implementation, (iv) systems troubleshooting and (v) rapid
prototyping of open systems to ascertain feasibility. Customers for these
services include original equipment manufacturers, the Company's product
customers, system integrators and business end-users.
Educational Programs--The Company believes that its education services play
an important role in increasing market awareness of its software products
among IT personnel, including application developers, database administrators
and end-users. Offering a comprehensive curriculum that supports leading
technologies, the Company conducts a set of training courses designed to deal
with the critical issue of skills management. These courses cover several key
technology areas of the open enterprise environment and are held at various
training centers in the U.S. and throughout the Company's international
operations. The Company also offers on-site computer-based training courses
and self-led Internet-based training courses that users may complete in their
own offices or homes. The Company believes that this capability has further
strengthened the Company's position in the education market.
The Company continually reviews acquisition candidates that are leading-edge
service providers that could enhance the Company's service offerings. The
Company is also expanding its professional services through internal growth.
SALES AND MARKETING
The Company employs a multi-faceted sales strategy. For software products,
the Company utilizes telemarketers, an inside sales force, an outside sales
force, product seminars, user group participation, direct mail and print
advertising. The Company also utilizes certain indirect sales channels, such
as distributors, VARs and OEM relationships for selected products.
North American Software Sales--The Company's North American direct sales
force is currently organized in territories covering the United States and
Canada. To support the rapid expansion of the Company's product line, the
Company, during 1995 and 1996, accelerated its sales force hiring and training
process. The Company now has approximately 240 individuals in its North
American direct sales force.
Generally, for North American software product licenses, the Company's
telemarketing specialists call prospective customers to identify and qualify
leads. Once a lead has been qualified, the prospective client is turned over
to an inside sales person to arrange a short-term, free product evaluation of
the Company's products, to the extent appropriate. Once a product evaluation
has been arranged, a direct sales person and a technical field support person
call on the prospective customer to assist it with trials, demonstrate product
features and close sales. The evaluation process allows a user to test the
products' overall effectiveness, performance and competitive capabilities
before entering into a license agreement. The Company also licenses certain
software products for which trials are not appropriate through the use of a
telemarketing sales force and shipment of such products under shrink-wrap or
other license. During 1995, the Company invested heavily in call center
technology for the Company's telemarketers and in sales force automation tools
for tracking, forecasting and reporting across the various sales teams.
International Software Sales--The Company generally markets its products
overseas through a network of wholly-owned subsidiaries. Generally, these
subsidiaries use an approach similar to that used by the Company in
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North America, utilizing an international direct sales force of approximately
145 individuals. As of October 1996, the Company had subsidiaries in
Australia, Austria, Belgium, Brazil, Denmark, Finland, France, Germany, Hong
Kong, Indonesia, Italy, Japan, Korea, Malaysia, the Netherlands, Norway,
Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand and the
United Kingdom. The Company expects that it will establish other foreign
subsidiaries in the future to meet its strategic objectives. In a few
countries, primarily in South America and the Middle East, the Company markets
its products through independent distributors.
Global Accounts--The Company has recently begun to designate large,
geographically disbursed entities as "global accounts." Each of these accounts
is managed, on a worldwide basis, by a single executive who focuses his or her
attention on the diverse needs of the enterprise.
Professional Services--The Company's consulting services and educational
programs are marketed by separate direct sales forces.
User Group Leadership--The Company believes that its sales and marketing
efforts have also been greatly enhanced by participation in domestic and
international user groups. The Company plays a major role in the activities of
International DB2 Users Group, the International Oracle Users Group, the
International Sybase Users Group, and other smaller user groups, and expects
to continue to do so in the future.
CUSTOMERS
The Company's customers primarily consist of Fortune 1000 companies and
similarly sized organizations worldwide that operate in industrial,
healthcare, technology, government, finance, consumer products and other
business sectors. A large majority of the Company's customers have purchased
multiple products from the Company.
No single customer accounted for 10% or more of the Company's revenues in
1993, 1994, 1995 or the nine-month period ended September 30, 1996. The
Company does not believe that the loss of any single customer would have a
material adverse effect on the Company's business.
TECHNICAL SUPPORT AND MAINTENANCE
The Company's in-house technical support group, situated at various
locations throughout the U.S., provides pre-sale, installation and post-sale
support, including toll-free telephone support during regular business hours,
to current users and potential customers evaluating the Company's products.
The technical support group also offers seven-day, 24-hour toll-free telephone
service for an additional fee. The Company believes that effective technical
support during product evaluation substantially contributes to product
acceptance, and that post-sale support has been a substantial factor in
customer satisfaction to date and will continue to be so in the future.
The Company offers a maintenance program for its software products, which
consists of product enhancements, updated products and technical support.
Maintenance is typically provided without additional charge during the
warranty period defined in the license agreements. Under the Company's
standard form license agreement, customers renew maintenance and support on an
annual basis by paying the current maintenance fee. Customers may also commit
for maintenance and product support over extended periods of time. Revenue
from first year and recurring maintenance charges is recognized ratably over
the period the maintenance and support services are to be provided.
COMPETITION
The Company operates in highly competitive markets and expects competition
to increase. The Company has encountered substantially enhanced competition
and many new competitors, including relational database vendors and systems
software companies, and substantially enhanced competition as it has moved
from the relational database tool market to the much larger enterprise
infrastructure software market and as it has entered
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<PAGE>
the consulting services business. Many of the Company's current and prospective
competitors have significantly greater financial, technical and marketing
resources than the Company. In addition, many prospective customers may have
the internal capability to implement solutions to their problems.
The competitive factors affecting the market for the Company's software
products include the following: product functionality, integration, performance
and reliability; demonstrable economic benefits for users relative to cost;
quality of customer support and user documentation and ease of installation;
vendor reputation, experience and financial stability; and price.
The Company believes that it has competed effectively to date. The Company's
ability to remain competitive will depend, to a great extent, upon its ongoing
performance in the areas of product development and customer support. To be
successful in the future, the Company must respond promptly and effectively to
the challenges of technological change and its competitors' innovations by
continually enhancing its own product offerings. Performance in these areas
will, in turn, depend upon the Company's ability to attract and retain highly
qualified technical personnel in a competitive market for experienced and
talented software developers. The Company also expects to continue its strategy
of identifying, acquiring and developing enterprise infrastructure products and
technology through the acquisition of specific products and of businesses which
have developed such products and technologies.
In addition, the Company encounters competition from a broader range of firms
in the market for professional services. Many of the Company's current and
prospective competitors have significantly greater financial, technical and
marketing resources than the Company. The competitive factors affecting the
market for the Company's professional services include the following: breadth
and quality of services offered, vendor reputation and the ability to retain
qualified technical personnel.
INTELLECTUAL PROPERTY RIGHTS
The Company has historically relied upon a combination of contractual rights,
trademarks, trade secrets, and copyright laws to establish and protect its
proprietary rights in its products. The Company also holds some patents and
believes that patents may become increasingly important to the software
industry. Consequently, the Company is taking actions to further protect its
proprietary rights through software patents. The Company's license agreements
restrict a customer's use of the Company's software and prohibit disclosure to
third persons. Notwithstanding those restrictions, it may be possible for
unauthorized persons to obtain copies of the Company's software products. The
Company believes that because of the rapid pace of technological change in the
computer software industry, the legal protections for its products are less
significant factors in the Company's success than the knowledge, ability and
experience of the Company's employees, the frequency of product enhancements
and the timeliness and quality of support services provided by the Company. The
Company registers its product names and other trademarks in the United States
and certain foreign countries.
EMPLOYEES
As of October 31, 1996, the Company employed approximately 3,675 persons,
including 1,065 in sales, marketing and related activities, 1,650 in product
development and support, 660 in professional services and 300 in management,
administration and finance. The Company's success is highly dependent on its
ability to attract and retain qualified employees. Competition for employees is
intense in the software industry. None of the Company's employees is
represented by a labor union or is the subject of a collective bargaining
agreement. The Company has never experienced a work stoppage and believes that
its employee relations are good.
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DESCRIPTION OF THE NOTES
Set forth below is a summary of certain provisions of the Notes. The Notes
will be issued pursuant to an indenture (the "Indenture") to be dated as of
, 1996, by and between the Company and American National Bank and
Trust Company of Chicago, as trustee (the "Trustee"), a form of which is filed
as an exhibit to the Registration Statement of which this Prospectus is a
part. The terms of the Indenture are also governed by certain provisions
contained in the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). The following summary of the Notes and the Indenture does not purport
to be complete and is subject to, and is qualified in its entirety by,
reference to all of the provisions of the Indenture, including the definitions
therein of certain terms which are not otherwise defined in this Prospectus
and those terms made a part of the Indenture by reference to the Trust
Indenture Act as in effect on the date of the Indenture. Capitalized terms
used herein without definition have the meanings ascribed to them in the
Indenture. As used in this section "Description of the Notes," the "Company"
refers to PLATINUM technology, inc., exclusive of its Subsidiaries. Wherever
particular provisions of the Indenture are referred to in this summary, such
provisions are incorporated by reference as a part of the statements made and
such statements are qualified in their entirety by such reference.
GENERAL
The Notes will be unsecured, subordinated, general obligations of the
Company, limited in aggregate principal amount to $85,000,000 ($97,750,000 if
the Underwriters' over-allotment option is exercised in full). The Notes will
be subordinated in right of payment to all Senior Indebtedness of the Company,
as described below under "--Subordination." The Notes will be issued only in
fully registered form, without coupons, in denominations of $1,000 and
integral multiples thereof.
The Notes will mature on , 2001. The Notes will bear interest at
the rate per annum stated on the cover page of this Prospectus from the date
of issuance or from the most recent Interest Payment Date to which interest
has been paid or provided for, payable semi-annually on the day of
and of each year, commencing , 1997, to the
persons in whose names such Notes are registered at the close of business on
or , immediately preceding such Interest Payment Date.
Interest will be calculated on the basis of a 360-day year consisting of
twelve 30-day months.
The Company shall maintain an office or agency where Notes may be presented
for payment (the "Paying Agent"), registration (the "Registrar"), or
conversion. The Company initially designates First Chicago Trust Company of
New York ("First Chicago of New York"), presently located at 14 Wall Street,
New York, New York 10005, to serve as its agent for such purposes.
At the option of the Company, payment of interest may be made by check
mailed to the holders of the Notes (individually, a "Holder" and,
collectively, the "Holders") at the addresses set forth upon the registry
books of the Registrar. No service charge will be made for any registration of
transfer or exchange of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
CONVERSION RIGHTS
The Holder of any Notes will have the right, at the Holder's option, to
convert any portion of the principal amount thereof that is an integral
multiple of $1,000 into shares of Common Stock, at any time prior to the close
of business on the Stated Maturity of the Notes (unless earlier redeemed or
repurchased) at the Conversion Price set forth on the cover page of this
Prospectus (subject to adjustment as described below). The right to convert a
Note called for redemption or delivered for repurchase will terminate at the
close of business on the Business Day prior to the Redemption Date or
Repurchase Date for such Note, unless the Company subsequently fails to pay
the applicable Redemption Price or Repurchase Price, as the case may be.
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<PAGE>
In the case of any Note that has been converted after any Record Date, but
on or before the next Interest Payment Date, interest the stated due date of
which is on such Interest Payment Date shall be payable on such Interest
Payment Date notwithstanding such conversion, and such interest shall be paid
to the Holder of such Note who is a Holder on such Record Date. Any Note so
converted must be accompanied by payment of an amount equal to the interest
payable on such Interest Payment Date on the principal amount of Notes being
surrendered for conversion (unless such Note shall have been called for
redemption, in which case no such payment shall be required). In all cases,
the Holders will receive the interest payment due on , 1999, even if
they surrender Notes for conversion as a result of the Company's exercise of
its right to redeem Notes on or after , 1999. No fractional shares
will be issued upon conversion but, in lieu thereof, an appropriate amount
will be paid in cash by the Company based on the market price of the Common
Stock (as determined in accordance with the Indenture) at the close of
business on the day of conversion.
The Conversion Price will be subject to adjustment upon the occurrence of
certain events, including: (a) any payment of a dividend (or other
distribution) payable in Common Stock on any class of Capital Stock of the
Company, (b) any issuance to all holders of Common Stock of rights, options or
warrants entitling then to subscribe for or purchase Common Stock at less than
the then current market price (as determined in accordance with the Indenture)
of Common Stock; provided, however, that if such options or warrants are only
exercisable upon the occurrence of certain triggering events, then the
Conversion Price will not be adjusted until such triggering events occur, (c)
any subdivision, combination or reclassification of Common Stock, (d) any
distribution to all holders of Common Stock of evidences of indebtedness,
shares of Capital Stock other than Common Stock, cash or other assets
(including securities, but excluding those dividends, rights, options,
warrants and distributions referred to above and excluding dividends and
distributions paid exclusively in cash), (e) any distribution consisting
exclusively of cash (excluding any cash portion of distributions referred to
in (d) above, or cash distributed upon a merger or consolidation to which the
last paragraph of this section "--Conversion Rights" applies) to all holders
of Common Stock in an aggregate amount that, combined together with (i) all
other such all-cash distributions made within the then preceding 12 months in
respect of which no adjustment has been made and (ii) any cash and the fair
market value of other consideration paid or payable in respect of any tender
offer by the Company or any of its Subsidiaries for Common Stock concluded
within the preceding 12 months in respect of which no adjustment has been
made, exceeds 10% of the Company's market capitalization (defined as being the
product of the then current market price of the Common Stock times the number
of shares of Common Stock then outstanding) on the record date of such
distribution, and (f) the completion of a tender or exchange offer made by the
Company of any of its Subsidiaries for Common Stock that involves an aggregate
consideration that, together with (i) any cash and other consideration payable
in a tender or exchange offer by the Company or any of its Subsidiaries for
Common Stock expiring within the 12 months preceding the expiration of such
tender or exchange offer in respect of which no adjustment has been made and
(ii) the aggregate amount of any such all-cash distributions referred to in
(e) above to all holders of Common Stock within the 12 months preceding the
expiration of such tender or exchange offer in respect of which no adjustments
have been made, exceeds 10% of the Company's market capitalization on the
expiration of such tender offer. No adjustment of the Conversion Price will be
required to be made until the cumulative adjustments amount to 1.0% or more of
the Conversion Price as last adjusted.
The Company reserves the right to make such reductions in the Conversion
Price in addition to those required in the foregoing provisions as it
considers to be advisable. In the event the Company elects to make such a
reduction in the conversion price, the Company will comply with the
requirements of Rule 14e-1 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and any other securities laws and regulations
thereunder if and to the extent that such laws and regulations are applicable
in connection with the reduction of the Conversion Price.
In the event that the Company distributes rights or warrants (other than
those referred to in (b) in the second paragraph above) pro rata to holders of
Common Stock, so long as any such rights or warrants have not expired or been
redeemed by the Company, the Holder of any Note surrendered for conversion
will be entitled to receive upon such conversion, in addition to the shares of
Common Stock issuable upon such conversion (the "Conversion Shares"), a number
of rights or warrants to be determined as follows: (i) if such conversion
occurs
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<PAGE>
on or prior to the date for the distribution to the holders of rights or
warrants of separate certificates evidencing such rights or warrants (the
"Distribution Date"), the same number of rights or warrants to which a holder
of a number of shares of Common Stock equal to the number of Conversion Shares
is entitled to at the time of such conversion in accordance with the terms and
provisions of an applicable to the rights or warrants, and (ii) if such
conversion occurs after such Distribution Date, the same number of rights or
warrants to which a holder of the number of shares of Common Stock into which
such Note was convertible immediately prior to such Distribution Date would
have been entitled on such Distribution Date in accordance with the terms and
provisions of and applicable to the rights or warrants. The Conversion Price
of the Notes will not be subject to adjustment on account of any declaration,
distribution or exercise of such rights or warrants.
In case of any reclassification, consolidation or merger of the Company with
or into another person or any merger of another person with or into the
Company (with certain exceptions), or in case of any sale, transfer or
conveyance of all or substantially all of the assets of the Company (computed
on a consolidated basis), each Note then outstanding will, without the consent
of any Holder of Notes, become convertible only into the kind and amount of
securities, cash and other property receivable upon such reclassification,
consolidation, merger, sale, transfer or conveyance by a holder of the number
of shares of Common Stock into which such Note was convertible immediately
prior thereto, after giving effect to any adjustment event, assuming such
holder of Common Stock failed to exercise any rights of election and received
per share the kind and amount received per share by a plurality of non-
electing shares.
SUBORDINATION
The Notes will be general, unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior
Indebtedness of the Company. At September 30, 1996, as adjusted to give effect
to the issuance and sale of the Notes and the application of the net proceeds
therefrom, the Company would have had approximately $19,805,000 of Senior
Indebtedness outstanding. The Notes are structurally subordinated in right of
payment to all liabilities (including trade payables) of the Company's
Subsidiaries. The Company's Subsidiaries had approximately $24,670,000 million
of trade payables and accrued liabilities outstanding at September 30, 1996.
The Indenture will not restrict the incurrence of Senior Indebtedness or other
indebtedness by the Company or its Subsidiaries.
The Indenture will provide that no payment may be made by the Company on
account of the principal of, premium, if any, and interest on the Notes, or to
acquire any of the Notes (including repurchases of Notes at the option of the
Holder) for cash or property (other than Junior Securities), or on account of
the redemption provisions of the Notes, (i) upon the maturity of any Senior
Indebtedness of the Company by lapse of time, acceleration (unless waived) or
otherwise, unless and until all principal of, premium, if any, and interest on
such Senior Indebtedness are first paid in full (or such payment is duly
provided for), or (ii) in the event of default in the payment of any principal
of, premium, if any, or interest on any Senior Indebtedness of the Company
when it becomes due and payable, whether at maturity or at a date fixed for
prepayment or by declaration or otherwise (a "Payment Default"), unless and
until such Payment Default has been cured or waived or otherwise has ceased to
exist.
Upon (i) the happening of an event of default (other than a Payment Default)
that permits the holders of Senior Indebtedness or their representative
immediately to accelerate its maturity and (ii) written notice of such event
of default given to the Company and the Trustee by the holders of an aggregate
of at least $5,000,000 principal amount outstanding of such Senior
Indebtedness or their representative (a "Payment Notice"), then, unless and
until such event of default has been cured or waived or otherwise has ceased
to exist, no payment (by setoff or otherwise) may be made by or on behalf of
the Company on account of the principal of, premium, if any, or interest on
the Notes, or to acquire or repurchase any of the Notes for cash or property,
or on account of the redemption provisions of the Notes, in any such case
other than payments made with Junior Securities of the Company.
Notwithstanding the foregoing, unless (i) the Senior Indebtedness in respect
of which such event of default exists has been declared due and payable in its
entirety within 179 days after the Payment Notice is
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delivered as set forth above (the "Payment Blockage Period"), and (ii) such
declaration has not been rescinded or waived, at the end of the Payment
Blockage Period, the Company shall be required to pay all sums not paid to the
Holders of the Notes during the Payment Blockage Period due to the foregoing
prohibitions and to resume all other payments as and when due on the Notes.
Any number of Payment Notices may be given; provided, however, that (i) not
more than one Payment Notice shall be given within a period of any 360
consecutive days, and (ii) no default that existed upon the date of such
Payment Notice or the commencement of such Payment Blockage Period (whether or
not such event of default is on the same issue of Senior Indebtedness) shall
be made the basis for the commencement of any other Payment Blockage Period.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company (other than Junior Securities) shall be
received by the Trustee or the Holders at a time when such payment or
distribution is prohibited by the foregoing provisions, such payment or
distribution shall be held in trust for the benefit of the holders of Senior
Indebtedness of the Company, and shall be paid or delivered by the Trustee or
such Holders, as the case may be, to the holders of the Senior Indebtedness of
the Company remaining unpaid or unprovided for or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Senior Indebtedness of the
Company may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness of the Company held or
represented by each, for application to the payment of all Senior Indebtedness
of the Company remaining unpaid, to the extent necessary to pay or to provide
for the payment of all such Senior Indebtedness in full after giving effect to
any concurrent payment or distribution to the holders of such Senior
Indebtedness.
Upon any distribution of assets of the Company upon any dissolution, winding
up, total or partial liquidation or reorganization of the Company, whether
voluntary or involuntary, in bankruptcy, insolvency, receivership or a similar
proceeding or upon assignment for the benefit of creditors or any marshaling
of assets or liabilities, (i) the holders of all Senior Indebtedness of the
Company will first be entitled to receive payment in full (or have such
payment duly provided for) before the Holders are entitled to receive any
payment on account of the principal of, premium, if any, interest on, with
respect to, the Notes (other than Junior Securities) and (ii) any payment or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities (other than Junior Securities) to which the
Holders or the Trustee on behalf of the Holders would be entitled (by setoff
or otherwise), except for the subordination provisions contained in the
Indenture, will be paid by the liquidating trustee or agent or other person
making such a payment or distribution directly to the holders of Senior
Indebtedness of the Company or their representative to the extent necessary to
make payment in full of all such Senior Indebtedness remaining unpaid, after
giving effect to any concurrent payment or distribution to the holders of such
Senior Indebtedness.
No provision contained in the Indenture or the Notes will affect the
obligation of the Company, which is absolute and unconditional, to pay, when
due, principal of, premium, if any, and interest on the Notes. The
subordination provisions of the Indenture and the Notes will not prevent the
occurrence of any Default or Event of Default under the Indenture or limit the
rights of the Trustee or any Holder, subject to the two preceding previous
paragraphs, to pursue any other rights or remedies with respect to the Notes.
The Company conducts certain of its operations through its Subsidiaries.
Accordingly, the Company's ability to meet its cash obligations is dependent
upon the ability of its Subsidiaries to make cash distributions to the
Company. The ability of its Subsidiaries to make distributions to the Company
is and will continue to be restricted by, among other limitations, applicable
provisions of the laws of national and state governments and contractual
provisions. The Indenture will not limit the ability of the Company's
Subsidiaries to incur such restrictions in the future. The right of the
Company to participate in the assets of any Subsidiary (and thus the ability
of Holders of the Notes to benefit indirectly from such assets) is generally
subject to the prior claims of creditors, including trade creditors, of that
Subsidiary except to the extent that the Company is recognized as a creditor
of such Subsidiary, in which case the Company's claims would still be subject
to any security interest of other creditors of such Subsidiary. The Notes,
therefore, will be structurally subordinated to creditors, including trade
creditors, of Subsidiaries of the Company with respect to the assets of the
Subsidiaries against which such creditors have a claim.
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As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceeding or an assignment for the benefit of the creditors of the Company or
any of its Subsidiaries or a marshaling of assets or liabilities of the
Company and its Subsidiaries, Holders of the Notes may receive ratably less
than other creditors. See "Risk Factors--Subordination; Company Structure;
Subsidiary Cash Flow."
REDEMPTION AT THE COMPANY'S OPTION
The Notes will not be subject to redemption prior to , 1999.
Thereafter, the Notes will be redeemable at the option of the Company, in
whole or in part, at any time on or after , 1999 upon not less than
30 nor more than 60 days' notice to each Holder of the Notes, at the following
redemption prices (expressed as percentages of the principal amount) if
redeemed during the 12-month period commencing of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
1999.......................... %
2000 and thereafter........... %
</TABLE>
in each case (subject to the right of Holders of record on a Record Date to
receive interest due on an Interest Payment Date that is on or prior to such
Redemption Date) together with accrued and unpaid interest, if any, to the
Redemption Date.
In the case of a partial redemption, the Trustee shall promptly redeem the
Notes or portions thereof which are to be redeemed on a pro rata basis or in
such other manner it deems appropriate and fair and in such manner as complies
with any applicable depositary, legal and stock exchange requirements. The
Notes may be redeemed in part in integral multiples of $1,000 only.
The Notes will not have the benefit of any sinking fund.
Notice of any redemption will be sent, by first-class mail, at least 30 days
and not more than 60 days prior to the date fixed for redemption, to the
Trustee and each Holder of Notes to be redeemed to such Holder's last address
as then shown upon the registry books of the Registrar. The notice of
redemption must state the Redemption Date, the Redemption Price, the amount of
accrued interest to be paid and that the Notes called for redemption may not
be converted after the fifth Business Day prior to the Redemption Date. Any
notice that relates to a Note to be redeemed in part only must state the
portion of the principal amount to be redeemed and must state that on and
after the Redemption Date, upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion thereof will be issued. On
and after the Redemption Date, interest will cease to accrue on the Notes or
portions thereof called for redemption, unless the Company defaults in its
obligations with respect thereto.
REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL
The Indenture will provide that in the event that a Change of Control (as
defined herein) has occurred, each Holder of Notes will have the right, at
such Holder's option, pursuant to an irrevocable and unconditional offer by
the Company (the "Repurchase Offer"), to require the Company to repurchase all
or any part of such Holder's Notes (provided, that the principal amount of
such Notes must be $1,000 or an integral multiple thereof) on the date
determined by the Company (the "Repurchase Date") that is no later than 45
Business Days after the occurrence of such Change of Control at a cash price
(the "Repurchase Price") equal to 100% of the principal amount thereof,
together with accrued and unpaid interest to the Repurchase Date. The
Repurchase Offer shall be made within 30 Business Days following a Change of
Control event and remain open for 15 Business Days following its commencement
(the "Repurchase Offer Period"). Upon expiration of the Repurchase Offer
Period, the Company shall purchase all Notes tendered in response to the
Repurchase Offer. If required by applicable law, the Repurchase Date and the
Repurchase Offer Period may be extended as so required; however, if so
extended, it shall nevertheless constitute an Event of Default if the
Repurchase Date does not occur within 45 Business Days of the Change of
Control.
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The Indenture will provide that a "Change of Control" occurs upon the
occurrence of any of the following events: (i) upon any merger or
consolidation of the Company with or into any person or any sale, transfer or
other conveyance, whether direct or indirect, of all or substantially all of
the assets of the Company, on a consolidated basis, in one transaction or a
series of related transactions, if, immediately after giving effect to such
transaction, any "person" or "group" other than the Company is or becomes the
"beneficial owner," directly or indirectly, of more than 50% of the voting
power in the aggregate normally entitled to vote in the election of directors,
managers, or trustees, as applicable, of the transferee or surviving entity,
(ii) when any "person" or "group" is or becomes the "beneficial owner,"
directly or indirectly, of more than 50% of the voting power in the aggregate
normally entitled to vote in the election of directors of the Company, (iii)
when, during any period of 12 consecutive months after the Issue Date,
individuals who at the beginning of any such 12-month period constituted the
Board of Directors of the Company (together with any new directors whose
election by such Board or whose nomination for election by the stockholders of
the Company was approved by a vote of a majority of the directors then still
in office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the Company then
in office, or (iv) the pro rata distribution by the Company to its
stockholders of substantially all of its assets.
For purposes of this definition, (i) the terms "person" and "group" shall
have the meaning used for purposes of Rules 13d-3 and 13d-5 under the Exchange
Act as in effect on the Issue Date, whether or not applicable; and (ii) the
terms "beneficial owner" shall have the meaning used in Rules 13d-3 and 13d-5
under the Exchange Act as in effect on the Issue Date, whether or not
applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time or upon the occurrence of certain events.
On or before the Repurchase Date, the Company will (i) accept for payment
Notes or portions thereof properly tendered pursuant to the Repurchase Offer,
(ii) deposit with the Paying Agent cash sufficient to pay the Repurchase Price
(together with accrued and unpaid interest) of all Notes so tendered and (iii)
deliver to the Trustee Notes so accepted, together with an Officers'
Certificate listing the Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to the Holders of Notes so
accepted payment in an amount equal to the Repurchase Price (together with
accrued and unpaid interest), and the Trustee will promptly authenticate and
mail or deliver to such Holders a new Note or Notes equal in principal amount
to any unredeemed portion of the Notes surrendered. Any Notes not so accepted
will be promptly mailed or delivered by the Company to the Holder thereof. The
Company will publicly announce the results of the Repurchase Offer on or as
soon as practicable after the Repurchase Date.
The phrase "all or substantially all" of the assets of the Company is likely
to be interpreted by reference to applicable state law at the relevant time,
and will be dependent on the facts and circumstances existing at such time. As
a result, there may be some degree of uncertainty in ascertaining whether a
sale or transfer of "all or substantially all" of the assets of the Company
has occurred.
The Change of Control repurchase feature of the Notes may make more
difficult or discourage a takeover of the Company, and, thus, the removal of
incumbent management. The Change of Control purchase feature resulted from
negotiations between the Company and the Underwriters.
The provisions of the Indenture relating to a Change of Control may not
afford the Holders protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger, spin-off or similar transaction that
may adversely affect Holders, if such transaction does not constitute a Change
of Control, as set forth above. Further, the right to require the Company to
repurchase Notes as a result of the occurrence of a Change of Control could
create an event of default under Senior Indebtedness as a result of which any
repurchase could, absent a waiver, be blocked by the subordination provisions
of the Notes. In addition, the Company may not have sufficient financial
resources available to fulfill its obligation to repurchase the Notes upon a
Change of Control or to repurchase other debt securities of the Company or its
Subsidiaries providing similar rights to the Holders thereof.
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To the extent applicable, the Company will comply with Section 14 of the
Exchange Act and the provisions of Regulation 14E and any other tender offer
rules under the Exchange Act and any other securities laws, rules and
regulations that may then be applicable to any offer by the Company to
purchase the Notes at the option of Holders upon a Change of Control.
LIMITATION OF MERGER, SALE OR CONSOLIDATION
The Indenture will provide that the Company may not, directly or indirectly,
consolidate with or merge with or into another person or sell, lease, convey
or transfer all or substantially all of its assets (computed on a consolidated
basis), whether in a single transaction or a series of related transactions,
to another person or group of affiliated persons, unless (i) either (a) in the
case of a merger or consolidation, the Company is the surviving entity or (b)
the resulting, surviving or transferee entity is a corporation organized under
the laws of the United States, any state thereof or the District of Columbia
and expressly assumes by supplemental indenture all of the obligations of the
Company in connection with the Notes and the Indenture; (ii) no Default or
Event of Default shall exist or shall occur immediately before or after giving
effect on a pro forma basis to such transaction; (iii) the Company has
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and, if a
supplemental indenture is required, such supplemental indenture comply with
the Indenture and that all conditions precedent relating to such transactions
have been satisfied; and (iv) the resulting, surviving or transferee entity,
unless it is a Subsidiary (as defined in the Indenture), immediately
thereafter has a consolidated net worth not less than that of the Company
immediately prior thereto.
Upon any consolidation or merger or any transfer of all or substantially all
of the assets of the Company in accordance with the foregoing, the successor
corporation formed by such consolidation or into which the Company is merged
or to which such transfer is made (the "Successor Corporation") shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under the Indenture with the same effect as if such successor
corporation had been named therein as the Company, and the Company will be
released from its obligations under the Indenture and the Notes, except as to
any obligations that arise from or as a result of such transaction; provided,
however, that if the Successor Corporation is a Subsidiary, the consolidated
net worth of which is less than that of the Company immediately prior to such
merger, consolidation, sale, lease, conveyance or transfer, the Company shall
not be released from such obligations but shall remain jointly and severally
liable therefor with the Successor Corporation.
REPORTS
Whether or not the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
Trustee and to each Holder, within 30 days after it is or would have been
required to file such with the Securities and Exchange Commission (the
"Commission"), annual and quarterly consolidated financial statements
substantially equivalent to financial statements that would have been included
in reports filed with the Commission if the Company was subject to the
requirements of Section 13 or 15(d) of the Exchange Act, including, with
respect to annual information only, a report thereon by the Company's
certified independent public accountants as such would be required in such
reports to the Commission and, in each case, together with a management's
discussion and analysis of results of operations and financial condition as
such would be so required.
EVENTS OF DEFAULT AND REMEDIES
The Indenture will define an Event of Default as (i) the failure by the
Company to pay any installment of interest on the Notes as and when due and
payable and the continuance of any such failure for 30 days, (ii) the failure
by the Company to pay all or any part of the principal of, or premium, if any,
on the Notes when and as the same become due and payable at maturity,
redemption, by acceleration or otherwise, including, without limitation,
pursuant to any Repurchase Offer or otherwise, (iii) the failure of the
Company to perform any conversion of any Notes required under the Indenture
and the continuance of any such failure for 30 days, (iv) the failure by the
Company to observe or perform any other covenant or agreement contained in the
Notes or the Indenture and, subject to certain exceptions, the continuance of
such failure for a period of 60 days after written notice is given to the
Company by the Trustee or to the Company and the Trustee by the Holders of at
least 25% in aggregate principal amount of the Notes outstanding, (v) certain
events of bankruptcy, insolvency or reorganization in respect of the Company
or any of its Significant Subsidiaries, (vi) a default in the payment of
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principal at maturity, or an acceleration for any other reason of the maturity
of any Indebtedness of the Company or any of its Subsidiaries with an
aggregate principal amount in excess of $5,000,000, and (vii) final
unsatisfied judgments not covered by insurance aggregating in excess of
$5,000,000, at any one time rendered against the Company or any of its
Subsidiaries and not stayed, bonded or discharged within 30 days. The
Indenture will provide that if a Default occurs and is continuing, the Trustee
must, within 90 days after the occurrence of such Default, give to the Holders
notice of such Default.
The Indenture will provide that if an Event of Default occurs and is
continuing (other than an Event of Default specified in clause (v) above),
then in every such case, unless the principal of all of the Notes shall have
already become due and payable, either the Trustee or the Holders of 25% in
aggregate principal amount of the Notes then outstanding, by notice in writing
to the Company (and to the Trustee if given by Holders) (an "Acceleration
Notice"), may declare all principal and accrued interest thereon to be due and
payable immediately. If an Event of Default specified in clause (v) above
occurs, all principal and accrued interest thereon will be immediately due and
payable on all outstanding Notes without any declaration or other act on the
part of the Trustee or the Holders. The Holders of not less than a majority in
aggregate principal amount of Notes generally are authorized to rescind such
acceleration if all existing Events of Default, other than the nonpayment of
the principal of, premium, if any, and interest on, the Notes that have become
due solely by such acceleration, have been cured or waived.
Prior to the declaration of acceleration of the maturity of the Notes, the
Holders of a majority in aggregate principal amount of the Notes at the time
outstanding may waive on behalf of all the Holders any Default, except a
default in the payment of principal of, premium, if any, or interest on any
Note not yet cured, or a default with respect to any covenant or provision
that cannot be modified or amended without the consent of the Holder of each
outstanding Note affected. Subject to the provisions of the Indenture relating
to the duties of the Trustee, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request, order
or direction of any of the Holders, unless such Holders have offered to the
Trustee reasonable security or indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the Notes at the time outstanding will have the right to direct the
time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred on the Trustee.
AMENDMENTS AND SUPPLEMENTS
The Indenture will contain provisions permitting the Company and the Trustee
to enter into a supplemental indenture for certain limited purposes without
the consent of the Holders. With the consent of the Holders of not less than a
majority in aggregate principal amount of the Notes at the time outstanding,
the Company and the Trustee are permitted to amend or supplement the Indenture
or any supplemental indenture or modify the rights of the holders; provided,
further, that no such modification may, without the consent of each Holder
affected thereby: (i) change the Stated Maturity of any Note or reduce the
principal amount thereof or the rate (or extend the time for payment) of
interest therein or any premium payable upon the redemption thereof, or change
the place of payment where, or the coin or currency in which, any Note or any
premium or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment or the conversion of any Note on
or after the due date thereof (including, in the case of redemption, on or
after the Redemption Date), or reduce the Repurchase Price, or alter the
change of control provisions or redemption provisions in a manner adverse to
the Holders; (ii) reduce the percentage in principal amount of the outstanding
Notes, the consent of whose Holders is required for any such amendment,
supplemental indenture or waiver provided for in the Indenture; (iii)
adversely affect the right of such Holder to convert Notes; or (iv) modify any
of the waiver provisions, except to increase any required percentage or to
provide that certain other provisions of the Indenture cannot be modified or
waived without the consent of the Holder of each outstanding Note affected
thereby.
NO PERSONAL LIABILITY OF STOCKHOLDERS, OFFICERS, DIRECTORS AND EMPLOYEES
The Indenture will provide that no stockholder, employee, officer or
director, as such, past, present or future of the Company or any successor
corporation shall have any personal liability in respect of the obligations of
the Company under the Indenture or the Notes by reason of his or its status as
such stockholder, employee, officer or director.
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TRANSFER AND EXCHANGE
A Holder may transfer or exchange the Notes in accordance with the
Indenture. The Company may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents, and to pay any taxes and fees
required by law or permitted by the Indenture. The Company is not required to
transfer or exchange any Notes selected for redemption. Also, the Company is
not required to transfer or exchange any Notes for a period of 15 days before
a selection of Notes to be redeemed.
The registered Holder of a Note may be treated as the owner of it for all
purposes.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the Notes will initially be issued in the form of
one or more registered Notes in global form (the "Global Notes"). Each Global
Note will be deposited on the date of the closing of the sale of the Notes
(the "Closing Date") with, or on behalf of, The Depository Trust Company (the
"Depositary") and registered in the name of Cede & Co., as nominee of the
Depositary.
The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depositary holds securities that its participants ("Participants")
deposit with the Depositary. The Depositary also facilitates the settlement
among Participants of securities transactions, such as transfers and pledges,
in deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations ("Direct Participants"). The Depositary is owned by a number of
its Direct Participants and by the New York Stock Exchange, the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the Depositary system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or maintain
a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable to the Depositary
and its Participants are on file with the Commission.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Notes, the Depositary will credit
the accounts of Participants designated by the Underwriters with an interest
in the Global Notes and (ii) ownership of the Notes evidenced by the Global
Notes will be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by the Depositary (with respect to the
interests of Participants), the Participants and the Indirect Participants.
The laws of some states require that certain persons take physical delivery in
definitive form of securities that they own and that security interests in
negotiable instruments can only be perfected by delivery of certificates
representing the instruments. Consequently, the ability to transfer Notes
evidenced by the Global Note will be limited to such extent.
So long as the Depositary or its nominee is the registered owner of a Global
Note, the Depositary or such nominee, as the case may be, will be considered
the sole owner or holder of the Notes represented by such Global Note for all
purposes under the Indenture. Except as provided below, owners of beneficial
interests in a Global Note will not be entitled to have Notes represented by
such Global Note registered in their names, will not receive or be entitled to
receive physical delivery of certificated Notes, and will not be considered
the owners or Holders thereof under the Indenture for any purpose, including
with respect to the giving of any directions, instructions or approvals to the
Trustee thereunder. As a result, the ability of a person having a beneficial
interest in Notes represented by a Global Note to pledge such interest to
persons or entities that do not participate in the Depositary's system, or to
otherwise take actions with respect to such interest, may be affected by the
lack of a physical certificate evidencing such interest. The Company
understands that under existing industry practices, if the Company requests
any action of Holders or an owner of a beneficial interest in such Global Note
desires to
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give any notice or take any action a Holder is entitled to give or take under
the Indenture, the Depositary would authorize the Participants to give such
notice or take such action, and Participants would authorize beneficial owners
owning through such Participants to give such notice or take such action or
would otherwise act upon the instructions of beneficial owners owning through
them.
Payments with respect to the principal of, premium, if any, or interest on,
any Note represented by a Global Note registered in the name of the Depositary
or its nominee on the applicable record date will be payable by the Trustee to
or at the direction of the Depositary or its nominee in its capacity as the
registered Holder of the Global Note representing such Notes under the
Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the Persons in whose names the Notes, including the Global Notes, are
registered as the owners thereof for the purpose of receiving such payments and
for any and all other purposes whatsoever. Consequently, neither the Company
nor the Trustee has or will have any responsibility or liability for the
payment of such amounts to beneficial owners of Notes (including principal,
premium, if any or interest), or to immediately credit the accounts of the
relevant Participants with such payment, in amounts proportionate to their
respective holdings in principal amount of beneficial interests in the Global
Note as shown on the records of the Depositary. Payments by the Participants
and the Indirect Participants to the beneficial owners of Notes will be
governed by standing instructions and customary practice and will be the
responsibility of the Participants or the Indirect Participants.
CERTIFICATED NOTES
If (i) the Company notifies the Trustee in writing that the Depositary is no
longer willing or able to act as a Depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes
in definitive form under the Indenture, then, upon surrender by the Depositary
of the Global Notes, certificated Notes will be issued to each person that the
Depositary identifies as the beneficial owner of the Notes represented by
Global Notes. In addition, subject to certain conditions, any person having a
beneficial interest in a Global Note may, upon request to the Trustee, exchange
such beneficial interest for Notes in the form of certificated Notes. Upon any
such issuance, the Trustee is required to register such certificated Notes in
the name of such person or persons (or the nominee of any thereof), and cause
the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary or any Participant or Indirect Participant in identifying the
beneficial owners of the Notes, and the Company and the Trustee may
conclusively rely on, and shall be protected in relying on, instructions from
the Depositary for all purposes (including with respect to the registration and
delivery, and the respective principal amounts, of the Notes to be issued).
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
believes to be reliable. The Company will have no responsibility for the
performance by the Depositary or its Participants of their respective
obligations as described hereunder or under the rules and procedures governing
their respective operations.
SAME-DAY FUNDS SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect to the Notes represented
by the Global Notes (including principal, premium, if any, and interest) be
made by wire transfer of immediately available funds to the accounts specified
by the Depositary. With respect to Notes represented by Certificated Notes, the
Company will make all payments of principal, premium, if any, and interest, by
mailing a check to each such Holder's registered address. The Notes will trade
in the Depositary's Same-Day Funds Settlement System until maturity, or until
the Notes are issued in certificated form, and secondary market trading
activity in the Notes will therefore be required by the Depositary to settle in
immediately available funds. No assurance can be given as to the effect, if
any, of settlement in immediately available funds on trading activity in the
Notes.
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CERTAIN DEFINITIONS
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"Capital Stock" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
Indebtedness), warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that corporation.
"Indebtedness" of any person means, without duplication, (a) all liabilities
and obligations, contingent or otherwise, of any such person, (i) in respect of
borrowed money (whether or not the recourse of the lender is to the whole of
the assets of such person or only to a portion thereof), (ii) evidenced by
bonds, notes, debentures or similar instruments, (iii) representing the balance
deferred and unpaid of the purchase price of any property or services, except
such as would constitute trade payables to trade creditors in the ordinary
course of business, (iv) evidenced by bankers' acceptances or similar
instruments issued or accepted by banks, (v) for the payment of money relating
to a Capitalized Lease Obligation, or (vi) evidenced by a letter of credit or a
reimbursement obligation of such person with respect to any letter of credit;
(b) all net obligations of such person under Interest Swap and Hedging
Obligations; (c) all liabilities of others of the kind described in the
preceding clauses (a) or (b) that such person has guaranteed or that is
otherwise its legal liability and all obligations to purchase, redeem or
acquire any Capital Stock; and (d) any and all deferrals, renewals, extensions,
refinancings and refundings (whether direct or indirect) of any liability of
the kind described in any of the preceding clauses (a), (b) or (c), or this
clause (d), whether or not between or among the same parties.
"Issue Date" means the date of first issuance of the Notes under the
Indenture.
"Junior Securities" of any person means any Qualified Capital Stock and any
Indebtedness of such person that is subordinated in right of payment to the
Notes and has no scheduled installment of principal due, by redemption, sinking
fund payment or otherwise, on or prior to the Stated Maturity of the Notes.
"Senior Indebtedness" means any Indebtedness of the Company, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed, guaranteed or in effect guaranteed by the Company, unless the
instrument creating or evidencing such Indebtedness provides that such
Indebtedness is not senior or superior in right of payment to the Notes or to
other Indebtedness which is pari passu with, or subordinated to, the Notes;
provided that in no event shall Senior Indebtedness include (a) Indebtedness of
the Company owed or owing to any Subsidiary of the Company or any officer,
director or employee of the Company or any Subsidiary of the Company, (b)
Indebtedness to trade creditors or (c) any liability for taxes owed or owing by
the Company.
"Stated Maturity" when used with respect to any Note means , 2001.
"Significant Subsidiary" means any Subsidiary which is a "significant
subsidiary" of the Company within the meaning of Rule 1.02(w) of Regulation S-X
promulgated by the Commission as in effect as of the date of the Indenture.
"Subsidiary," with respect to any person, means (i) a corporation a majority
of whose Capital Stock with voting power normally entitled to vote in the
election of directors is at the time, directly or indirectly, owned by such
person, by such person and one or more Subsidiaries of such person or by one or
more Subsidiaries of such person, (ii) a partnership in which such person or a
Subsidiary of such person is, at the time, a general partner and owns alone or
together with one or more Subsidiaries of such person a majority of the
partnership interests, or (iii) any other person (other than a corporation) in
which such person, one or more Subsidiaries of such person, or such person and
one or more Subsidiaries of such person, directly or indirectly, at the date of
determination thereof, has at least a majority ownership interest.
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RELATIONSHIP WITH TRUSTEE
The Company has an unsecured line of credit of $25,000,000 with the Trustee
pursuant to a Loan and Security Agreement dated as of December 31, 1995 (the
"Loan Agreement"). As of October 31, 1996, the Company had no outstanding
borrowings under this line of credit. The Trustee also issues letters of credit
to the Company pursuant to the Loan Agreement. As of October 31, 1996, there
were outstanding an aggregate of approximately $1,178,000 in unsecured standby
letters of credit issued by the Trustee to the Company. The Company maintains
its principal checking account at the Trustee, which also serves as the
Company's primary depositary. The Trustee also provides miscellaneous other
banking and related services to the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 180,000,000 shares
of Common Stock, $.001 par value per share, and 10,000,000 shares of Class II
Preferred Stock, $.01 par value per share (the "Preferred Stock"). As of
October 31, 1996, 55,967,719 shares of Common Stock were issued and
outstanding and none of the Preferred Stock was outstanding. The following
description is a summary and is qualified in its entirety by reference to the
provisions of the Company's Restated Certificate of Incorporation, as amended
(the "Certificate"), and its Bylaws (the "Bylaws"), which are hereby
incorporated herein by reference as exhibits to the Registration Statement of
which this Prospectus forms a part.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Holders of a
majority of the shares of Common Stock represented at a meeting can elect all
of the directors to be elected at that meeting. Holders of Common Stock are
not permitted to act by written consent. Subject to preferences that may be
applicable to any then outstanding Preferred Stock, holders of Common Stock
are entitled to receive ratably such dividends as may be declared by the Board
of Directors out of funds legally available therefor. See "Dividend Policy."
In the event of a liquidation, dissolution, or winding up of the Company,
holders of the Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preference of any
then outstanding Preferred Stock. Holders of Common Stock have no preemptive
rights and have no right to convert their Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to
the Common Stock. All outstanding shares of Common Stock are, and any shares
of Common Stock which are issued upon conversion of the Notes when so issued
will be, fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors has the authority, without further action by the
stockholders, to issue up to 10,000,000 shares of Preferred Stock in one or
more series and to fix the voting powers, designations, preferences, and
relative, participating, optional, or other special rights, and
qualifications, limitations, and restrictions thereof, including dividend
rights, conversion rights, voting rights, terms of redemption, liquidation
preferences and the number of shares constituting any series. Because the
Board of Directors has the power to establish the preferences and rights of
the shares of any such series of Preferred Stock, it may afford holders of any
Preferred Stock preferences, powers, and rights (including voting rights)
senior to the rights of holders of Common Stock, which could adversely affect
the rights of holders of Common Stock and could have the effect of delaying,
deferring or preventing a change in control of the Company. Other than as
described below, the Company has no present plan to issue any shares of
Preferred Stock.
PREFERRED STOCK PURCHASE RIGHTS
The registered holders of Common Stock have the right (a "Right") to
purchase from the Company, for each share of Common Stock owned, one-hundredth
of a share of Class II Series A Junior Participating Preferred Stock, par
value $.01 per share (the "Preferred Rights Shares"), of the Company at a
price of $125.00 per one-hundredth of a Preferred Rights Share (the "Rights
Purchase Price"), subject to adjustment. Each one-hundredth of a Preferred
Rights Share is entitled to one vote, a dividend equal to the dividend per
share paid on the Common Stock, and a liquidation payment equal to the
liquidation payment per share paid on the Common Stock. The description and
terms of the Rights are set forth in a Rights Agreement (the "Rights
Agreement") between the Company and Harris Trust and Savings Bank, as Rights
Agent (the "Rights Agent").
The Rights are not exercisable until the earlier of (i) the close of
business on the tenth business day after the first public announcement that a
person or group of affiliated or associated persons have acquired beneficial
ownership of 15% or more of the outstanding shares of Common Stock (an
"Acquiring Person"), or (ii) the close of business on the tenth business day
(or such later date as may be determined by action of the Board of Directors
prior to such time as any person becomes an Acquiring Person) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer, the consummation of which would result in the beneficial
ownership by such person or group of 15% or more of the outstanding shares of
Common Stock (the earlier of such dates being called the "Distribution Date").
Until the Distribution Date, the Rights will be evidenced by the certificates
for the Common Stock, will be transferable only by the transfer of the shares
of
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Common Stock associated with such Rights and any transfer of the shares of
Common Stock (including a transfer to the Company) will constitute a transfer
of the Rights. As described below, after a person or group becomes an
Acquiring Person, the Rights may not be redeemed or amended. The Rights will
expire on January 5, 2006 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are redeemed earlier by the
Company, in each case, as described below. Until a Right is exercised, the
holder thereof, as such, will have no rights as a stockholder of the Company
as a result of the ownership of the Right, including, without limitation, the
right to vote or to receive dividends.
Until the Distribution Date (or earlier redemption or expiration of the
Rights), certificates for the Common Stock issued upon the transfer or new
issuance of shares of Common Stock will contain a legend incorporating the
Rights Agreement by reference. Until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for transfer of any
certificates for shares of Common Stock will also constitute the transfer of
Rights associated with the shares of Common Stock represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Rights Certificates") will be mailed to
the holders of record of shares of Common Stock as of the close of business on
the Distribution Date and such separate Rights Certificates alone will
evidence the Rights.
At any time after the Distribution Date, each holder of a Right (other than
those described in the next sentence) will thereafter have the right to
receive, upon exercise and in lieu of Preferred Rights Shares, shares of
Common Stock (or, in certain circumstances, cash, property or other securities
of the Company) having a value equal to two times the Rights Purchase Price.
All Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will be void.
At any time after the first date of public announcement by the Company or an
Acquiring Person that an Acquiring Person has become such (a "Shares
Acquisition Date"), if (i) the Company is the surviving corporation in a
merger with any other company or entity, (ii) the Company is acquired in a
merger or other business combination transaction, or (iii) 50% or more of the
Company's consolidated assets or earning power are sold, each holder of a
Right (other than those whose Rights have become void) will thereafter have
the right to receive, upon the exercise thereof at the then current Rights
Purchase Price and in lieu of Preferred Rights Shares, that number of shares
of common stock of the surviving or acquiring company which at the time of
such transaction will have a market value of two times the exercise price of
such Right.
At any time after a person or group becomes an Acquiring Person and prior to
the acquisition by such person or group of 50% or more of the outstanding
shares of Common Stock, the Board of Directors may cause the Company to
exchange the Rights (other than Rights owned by such person or group which
have become void), in whole or in part, without any additional payment, for
shares of Common Stock at an exchange ratio equal to one share of Common Stock
(or a share of a class or series of the Company's preferred shares having
equivalent rights, preferences and privileges) per Right, subject to
adjustment.
With certain exceptions, no adjustment in the Rights Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Rights Purchase Price. No fractional Rights Preferred Shares will be
issued (other than fractions which are integral multiples of one-hundredth of
a Rights Preferred Share, which may, at the election of the Company, be
evidenced by depositary receipts) and, in lieu thereof, an adjustment in cash
will be made based on the market price of the Rights Preferred Shares on the
last trading day prior to the date of exercise.
At any time prior to the Shares Acquisition Date, the Board of Directors may
cause the Company to redeem all, but not less than all, of the Rights at a
price of $.01 per Right (the "Redemption Price"). The redemption of the Rights
may be made effective at such time, on such basis and with such conditions as
the Board of Directors in its sole discretion may establish. Immediately upon
any redemption of the Rights, the right to exercise the Rights will terminate
and the only right of the holders of Rights will be to receive the Redemption
Price.
Any provisions of the Rights may be amended by the Board of Directors of the
Company prior to the Shares Acquisition Date. After the Shares Acquisition
Date, the provisions of the Rights Agreement may be amended by the Board of
Directors of the Company in order to cure any ambiguity or to make changes
which do not adversely affect the interests of holders of Rights (excluding
the interests of any Acquiring Person).
A copy of the Rights Agreement is incorporated by reference as an exhibit to
the Registration Statement of which this Prospectus forms a part. A copy of
the Rights Agreement is available free of charge from the Company. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement.
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<PAGE>
The Rights have certain anti-takeover effects. The Rights should not
interfere with any merger or business combination approved by the Board of
Directors of the Company because the Rights may be redeemed by the Company at
the Redemption Price prior to the time that a person or group has acquired
beneficial ownership of 15% or more of the outstanding shares of Common Stock.
However, by causing substantial dilution to a person or group that attempts to
acquire the Company on terms not approved by the Company's Board of Directors,
the Rights may interfere with certain acquisitions, including acquisitions
that may offer a premium over market price to some or all of the Company's
stockholders. The Board of Directors has stated that the Rights are not
intended to prevent an acquisition of the Company on terms that are favorable
and fair to all stockholders.
CERTAIN CERTIFICATE AND BYLAWS PROVISIONS
The Company's Certificate and Bylaws contain a number of provisions relating
to corporate governance and to the rights of stockholders. Certain of these
provisions relate to corporate governance and to the rights of stockholders.
Certain of these provisions may be deemed to have a potential "anti-takeover"
effect in that such provisions may delay, defer or prevent a change of control
of the Company. These provisions include: (i) the classification of the Board
of Directors into three classes, each class serving for staggered three year
terms; (ii) restrictions on the removal of directors; (iii) a requirement that
special meetings of stockholders may be called only by the Board of Directors
and that stockholder action may be taken only at stockholder meetings and not
by written consent; (iv) the authority of the Board to issue series of
Preferred Stock with such voting rights and other powers as the Board of
Directors may determine; (v) a requirement that the affirmative vote of
greater than 80% of the voting power of shares entitled to vote generally for
the election of directors is required to amend provisions of the Certificate
relating to (a) the classification of the Board, (b) removal of directors, and
(c) the inability of stockholders to call special meetings and to take action
by written consent; (vi) a requirement that the Bylaws may only be amended
(other than by the Board of Directors) by the vote of the holders of 66 2/3%
of the shares entitled to vote generally for the election of directors; and
(vii) notice requirements in the Bylaws relating to nominations to the Board
of Directors and to the raising of business matters at stockholder meetings.
DELAWARE GENERAL CORPORATION LAW
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). Pursuant to Section 203, with certain
exceptions, a Delaware corporation may not engage in any of a broad range of
business combinations, such as mergers, consolidations, and sales of assets,
with an "interested stockholder" for a period of three years from the date
that such person became an interested stockholder unless (i) the transaction
that results in the person becoming an interested stockholder, or the business
combination, is approved by the board of directors of the corporation before
the person becomes an interested stockholder, (ii) upon consummation of the
transaction which results in the stockholder becoming an interested
stockholder, the interested stockholder owns 85% or more of the voting stock
of the corporation outstanding at the time the transaction commenced (other
than certain excluded shares), or (iii) on or after the date the person
becomes an interested stockholder, the business combination is approved by the
corporation's board of directors and by holders of at least two-thirds of the
corporation's outstanding voting stock, excluding shares owned by the
interested stockholder, at a meeting of stockholders. Under Section 203, an
"interested stockholder" is defined as any person, other than the corporation
and any direct or indirect majority-owned subsidiaries of the corporation,
that is (i) the owner of 15% or more of the outstanding voting stock of the
corporation or (ii) an affiliate or associate of the corporation and the owner
of 15% or more of the outstanding voting stock of the corporation at any
period immediately prior to the date on which it is sought to be determined
whether such person is an interested stockholder.
Under certain circumstances, Section 203 makes it more difficult for a
person who would be an "interested stockholder" to effect various business
combinations with a corporation for a three-year. The provisions of Section
203 may encourage persons interested in acquiring the Company to negotiate in
advance with the Company's Board of Directors because the stockholder approval
requirement would be avoided if directors then in office approve either the
business combination or the transaction which results in the person becoming
an interested stockholder. Such provisions also may have the effect of
preventing changes in management of the Company. It is possible that such
provisions could make it more difficult to accomplish transactions that
stockholders may otherwise deem to be in their best interests.
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is Harris Trust and
Savings Bank Chicago, Illinois.
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<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain United States Federal
income tax considerations relevant to holders of the Notes. This discussion is
based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service ("IRS") rulings and judicial decisions
now in effect, all of which are subject to change (possibly with retroactive
effect) or different interpretations. This discussion does not purport to deal
with all aspects of federal income taxation that may be relevant to a
particular investor's decision to purchase the Notes, and it is not intended
to be wholly applicable to all categories of investors, some of which, such as
dealers in securities, banks, insurance companies, tax-exempt organizations
and non-United States persons, may be subject to special rules. In addition,
this discussion is limited to persons that purchase the Notes in this offering
and hold the Notes as a "capital asset" within the meaning of Section 1221 of
the Code.
PROSPECTIVE PURCHASERS OF THE NOTES ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES AND THE COMMON STOCK.
CONVERSION OF NOTES INTO COMMON STOCK
In general, no gain or loss will be recognized for income tax purposes on a
conversion of the Notes into shares of Common Stock. However, cash paid in
lieu of a fractional share of Common Stock will result in taxable gain (or
loss), which will be capital gain (or loss) to the extent that the amount of
such cash exceeds (or is exceeded by) the portion of the adjusted basis of the
Notes allocable to such fractional share. The adjusted basis of shares of
Common Stock received on conversion will equal the adjusted basis of the Notes
converted, reduced by the portion of adjusted basis allocated to any
fractional share of Common Stock exchanged for cash. The holding period of an
investor in the Common Stock received on conversion will include the period
during which the converted Notes were held.
The conversion price of the Notes is subject to adjustment under certain
circumstances. See "Description of the Notes--Conversion Rights." Section 305
of the Code and the Treasury Regulations issued thereunder may treat the
holders of the Notes as having received a constructive distribution, resulting
in ordinary income to the extent of the Company's current earnings and profits
if and to the extent that certain adjustments in the conversion price that may
occur in limited circumstances (particularly an adjustment to reflect a
taxable dividend to holders of Common Stock) increase the proportionate
interest of a holder of Notes in the fully diluted Common Stock, whether or
not such holder ever exercises its conversion privilege. Moreover, if there is
not a full adjustment to the conversion price of the Notes to reflect a stock
dividend or other event increasing the proportionate interest of the holders
of outstanding Common Stock in the assets or earnings and profits of the
Company, then such increase in the proportionate interest of the holders of
the Common Stock generally will be treated as a distribution to such holders,
taxable as ordinary income to the extent of the Company's earnings and
profits.
MARKET DISCOUNT
Investors acquiring Notes pursuant to this Prospectus should note that the
resale of those Notes may be adversely affected by the market discount
provisions of sections 1276 through 1278 of the Code. Under the market
discount rules, if a holder of a Note purchases it at market discount (i.e.,
at a price below its stated redemption price at maturity) in excess of a
statutorily-defined de minimis amount and thereafter recognizes gain upon a
disposition or retirement of the Note, then the lesser of the gain recognized
or the portion of the market discount that accrued on a ratable basis (or, if
elected, on a constant interest rate basis) generally will be treated as
ordinary income at the time of the disposition. Moreover, any market discount
on a Note may be taxable to an investor to the extent of appreciation at the
time of certain otherwise non-taxable transactions (e.g., gifts). Under
Treasury Regulations to be prescribed, any accrued market discount not
previously taken into income prior to a conversion of a Note, however, could
carry over to the Common Stock received on conversion and be treated as
ordinary income upon a subsequent disposition of such Common Stock to the
extent of any gain recognized on
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<PAGE>
such disposition. In addition, absent an election to include market discount
in income as it accrues, a holder of a market discount debt instrument may be
required to defer a portion of any interest expense that otherwise may be
deductible on any indebtedness incurred or maintained to purchase or carry
such debt instrument until the holder disposes of the debt instrument in a
taxable transaction.
SALE, EXCHANGE OR RETIREMENT OF NOTES
Each holder of Notes generally will recognize gain or loss upon the sale,
exchange, redemption, repurchase, retirement, or other disposition of those
Notes measured by the difference (if any) between (i) the amount of cash and
the fair market value of any property received (except to the extent that such
cash or other property is attributable to the payment of accrued interest not
previously included in income, which amount will be taxable as ordinary
income) and (ii) the holder's adjusted tax basis in those Notes (including any
market discount previously included in income by the holder). Each holder of
Common Stock into which the Notes are converted, in general, will recognize
gain or loss upon the sale, exchange, or other disposition of the Common Stock
measured under rules similar to those described in the preceding sentence for
the Notes. Any such gain or loss recognized on the sale, exchange, repurchase,
retirement, or other disposition of a Note or share of Common Stock should be
capital gain or loss (except as discussed under "--Market Discount" above),
and would be long-term capital gain or loss if the Note or the Common Stock
had been held for more than one year at the time of the sale or exchange. An
investor's initial basis in a Note will be the cash price paid therefor.
BACKUP WITHHOLDING
A holder of Notes or Common Stock may be subject to "backup withholding" at
a rate of 31% with respect to certain "reportable payments," including
interest payments, dividend payments and, under certain circumstances,
principal payments on the Notes. These backup withholding rules apply if the
holder, among other things, (i) fails to furnish a social security number or
other taxpayer identification number ("TIN") certified under penalties of
perjury within a reasonable time after the request therefor, (ii) furnishes an
incorrect TIN, (iii) fails to report properly interest or dividends, or (iv)
under certain circumstances, fails to provide a certified statement, signed
under penalties of perjury, that the TIN furnished is the correct number and
that such holder is not subject to backup withholding. A holder who does not
provide the Company with its correct TIN also may be subject to penalties
imposed by the IRS. Any amount withheld from a payment to a holder under the
backup withholding rules is creditable against the holder's federal income tax
liability, provided the required information is furnished to the IRS. Backup
withholding will not apply, however, with respect to payments made to certain
holders, including corporations, tax-exempt organizations and certain foreign
persons, provided their exemption from backup withholding is properly
established.
The Company will report to the holders of Notes and Common Stock and to the
IRS the amount of any "reportable payments" for each calendar year and the
amount of tax withheld, if any, with respect to such payments.
CERTAIN UNITED STATES TAX CONSEQUENCES TO A NON-UNITED STATES HOLDER
General. The following is a general discussion of certain United States
Federal income and estate tax consequences of the acquisition, ownership and
disposition of Notes by a "Non-United States Holder" and does not deal with
tax consequences arising under the laws of any foreign, state or local
jurisdiction. As used herein, a "Non-United States Holder" is a person or
entity that, for United States Federal income tax purposes, is not a citizen
or resident of the United States, a corporation, partnership or other entity
created or organized under the laws of the United States or a political
subdivision thereof, or an estate or trust, the income of which is subject to
United States Federal income taxation regardless of its source. The tax
treatment of the holders of the Notes may vary depending upon their particular
situations. Certain holders (including insurance companies, tax exempt
organizations, financial institutions and broker-dealers) may be subject to
special rules not discussed below. Prospective investors who are Non-United
States Holders are urged to consult their tax advisors regarding the United
States Federal tax consequences of acquiring, holding and disposing of Notes,
as well as any tax consequences that may arise under the laws of any foreign,
state, local or other taxing jurisdiction.
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Interest on Notes. Interest paid by the Company to a Non-United States
Holder will not be subject to United States Federal income or withholding tax
if such interest is not effectively connected with the conduct of a trade or
business within the United States by such Non-United States Holder and (i) the
Non-United States Holder does not actually or constructively own 10% or more
of the total voting power of all voting stock of the Company and is not a
controlled foreign corporation with respect to which the Company is a "related
person" within the meaning of the Code and (ii) the beneficial owner of the
Notes certifies, under penalties of perjury, that the beneficial owner is not
a United States person and provides the beneficial owner's name and address.
Gain on Disposition of Notes or Common Stock. A Non-United States Holder
generally will not be subject to United States Federal income tax on any gain
recognized on a sale, redemption or other disposition of a Note or on a sale
or other disposition of a share of Common Stock unless (i) the gain is
effectively connected with the conduct of a trade or business within the
United States of the Non-United States Holder and, if a tax treaty applies,
attributable to a permanent establishment maintained by the Non-United States
Holder, or (ii) the Non-United States Holder is an individual who holds the
Note or the share of Common Stock as a capital asset and is present in the
United States for 183 days or more in the taxable year of the disposition and
certain other requirements are met. If an individual Non-United States Holder
falls under clause (i) above, he or she will be taxed on his or her net gain
derived from the sale under regular United States Federal income tax rates. If
the individual Non-United States Holder falls under clause (ii) above, he or
she will be subject to a flat 30% tax on the gain derived from the sale which
may be offset by United States capital losses (notwithstanding the fact that
he or she is not considered a resident of the United States). If a Non-United
States Holder that is a foreign corporation falls under clause (i) above, it
will be taxed on its gain under regular graduated United States Federal income
tax rates and, in addition, will under certain circumstances be subject to the
branch profits tax.
Dividends on Common Stock. Dividends paid on shares of Common Stock, except
as described below, will be subject to withholding of United States Federal
income tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty, unless the dividends are effectively connected
with the conduct of a trade or business of the Non-United States Holder within
the United States. If the dividend is effectively connected with the conduct
of a trade or business of the Non-United States Holder within the United
States, the dividend would be subject to United States Federal income tax on a
net income basis at applicable graduated individual or corporate rates and
would be exempt from the 30% withholding tax described above. Any such
effectively connected dividends received by a foreign corporation may, under
certain circumstances, be subject to an additional "branch profits tax" at a
30% rate or such lower rate as may be specified by an applicable income tax
treaty.
Under current United States Treasury Regulations, dividends paid to an
address outside the United States are presumed to be paid to a resident of
such country for purposes of the withholding discussed above, and, under the
current interpretation of United States Treasury Regulations, for purposes of
determining the applicability of a tax treaty rate. Under proposed United
States Treasury Regulations, not currently in effect, however, a Non-United
States Holder of Common Stock who wishes to claim the benefit of an applicable
treaty rate would be required to satisfy applicable certification and other
requirements. Certain certification and disclosure requirements must be
complied with in order to be exempt from withholding under the effectively
connected income exemption discussed above.
A Non-United States Holder of Common Stock that is eligible for a reduced
rate of United States withholding tax pursuant to a tax treaty may obtain a
refund of any excess amounts currently withheld by filing an appropriate claim
for refund with the United States IRS.
Federal Estate Taxes. If interest on the Notes is exempt from withholding of
United States Federal income tax under the rules described above, the Notes
will not be included in the estate of a deceased non-resident alien individual
holder for United States Federal estate tax purposes. Common Stock owned, or
treated as owned, by a non-resident alien individual (as specifically
determined for United States Federal estate tax purposes) at the time of death
will be included in such holder's gross estate for United States Federal
estate tax purposes, unless an applicable estate tax treaty provides
otherwise.
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Information Reporting and Backup Withholding. The Company must report
annually to the IRS and to each Non-United States Holder the amount of
interest and dividends paid to such holder and the amount of any tax withheld.
These information reporting requirements apply regardless of whether
withholding is required. Copies of the information returns reporting such
interest and dividends and withholding may also be made available to the tax
authorities in the country in which the Non-United States Holder resides under
the provisions of an applicable income tax treaty.
In the case of payments of interest to Non-United States Holders, temporary
Treasury Regulations provide that the 31% backup withholding tax and certain
information reporting will not apply to such payments with respect to which
either the requisite certification, as described above, has been received or
an exemption has otherwise been established; provided that neither the Company
nor its payment agent has actual knowledge that the holder is a United States
person or that the conditions of any other exemption are not in fact
satisfied. Under temporary Treasury Regulations, these information reporting
and backup withholding requirements will apply, however, to the gross proceeds
paid to a Non-United States Holder on the disposition of the Notes by or
through a United States office of a United States or foreign broker, unless
the holder certifies to the broker under penalties of perjury as to its name,
address and status as a foreign person or the holder otherwise establishes an
exemption. Information reporting requirements, but not backup withholding,
will also apply to a payment of the proceeds of a disposition of the Notes by
or through a foreign office of a United States broker or foreign brokers with
certain types of relationships to the United States. Neither information
reporting nor backup withholding generally will apply to a payment of the
proceeds of a disposition of the Notes by or through a foreign office of a
foreign broker not subject to the preceding sentence.
United States backup withholding tax generally will not apply to (i) the
payment of dividends paid on Common Stock to a Non-United States Holder at an
address outside the United States or (ii) the payment of the proceeds of the
sale of Common Stock to or through the foreign office of a broker. In the case
of the payment of proceeds from such a sale of Common Stock through a foreign
office of a broker that is a United States person or a foreign person with
certain relationships to the United States, however, information reporting
(but not backup withholding) is required with respect to the payment unless
the broker has documentary evidence in its files that the owner is a Non-
United States Holder and certain other requirements are met or the holder
otherwise establishes an exemption. The payment of the proceeds of a sale of
shares of Common Stock to or through a United States office of a broker is
subject to information reporting and possible backup withholding unless the
owner certifies its non-United States status under penalties of perjury or
otherwise establishes an exemption.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the Non-United
States Holder's United States Federal income tax liability, provided that the
required information is furnished to the IRS.
These information and backup withholding rules are under review by the
United States Treasury and their application to the Notes could be changed by
future regulations. On April 15, 1996, the IRS issued proposed Treasury
Regulations concerning the withholding of tax and reporting for certain
amounts paid to non-resident individuals and foreign corporations. The
proposed regulations would, among other changes, eliminate the presumption
under current regulations with respect to dividends paid to addresses outside
the United States. See "--Dividends on Common Stock." The proposed Treasury
Regulations, if adopted in their present form, would be effective for payments
made after December 31, 1997. Prospective Note purchasers should consult their
tax advisors concerning the potential adoption of such Treasury Regulations
and the potential effect on the Notes and the Common Stock.
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UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), Hambrecht & Quist
LLC and Robertson, Stephens & Company LLC, as representatives of the
Underwriters listed below (collectively, the "Underwriters"), have severally
agreed to purchase from the Company and the Company has agreed to sell to each
of the Underwriters, the respective principal amounts of Notes set forth
opposite their names below, at the public offering price set forth on the
cover page of this Prospectus, less the underwriting discounts and
commissions.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITER NOTES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation................
Hambrecht & Quist LLC..............................................
Robertson, Stephens & Company LLC..................................
-----------
Total............................................................. $85,000,000
===========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to certain conditions precedent including
the delivery of certain legal opinions by their counsel. The Company has
agreed in the Underwriting Agreement to indemnify the Underwriters and their
controlling persons against certain liabilities in connection with the offer
and sale of the Notes, including liabilities under the Securities Act, and to
contribute to payments that the Underwriters may be required to make in
respect thereof. The nature of the Underwriters' obligations is such that the
Underwriters are committed to purchase all of the Notes if any of the Notes
are purchased by them.
The Underwriters have advised the Company that they propose to offer the
Notes directly to the public initially at the public offering price set forth
on the cover page of this Prospectus and to certain dealers at such offering
price less a concession not to exceed % of the principal amount of the
Notes. The Underwriters may reallow discounts not in excess of % of the
principal amount of the Notes to certain other dealers. After the initial
public offering of the Notes, the offering price and other selling terms may
be changed by the Underwriters.
Pursuant to the Underwriting Agreement, the Company has granted to the
Underwriters an option, exercisable for 30 days, to purchase an additional
$12,750,000 aggregate principal amount of Notes, on the same terms and
conditions as are set forth on the cover page hereof. The Underwriters may
exercise such option to purchase additional Notes solely for the purpose of
covering over-allotments, if any, made in connection with the sale of the
Notes offered hereby. To the extent that the Underwriters exercise such
option, the Underwriters will be committed, subject to certain conditions, to
purchase the principal amounts of Notes proportionate to such Underwriter's
initial commitments as indicated in the preceding table.
The Company has applied for listing of the Notes on The Nasdaq SmallCap
Market. Nevertheless, the Notes are new issues of securities, have no
established trading market and may not be widely distributed. The Company has
been advised by the Underwriters that, following the completion of this
Offering, the Underwriters presently intend to make a market in the Notes as
permitted by applicable laws and regulations. The Underwriters, however, are
under no obligation to do so and may discontinue any market-making activities
at any time at the sole discretion of the Underwriters. No assurance can be
given as to the liquidity of any trading market for the Notes.
The Company and the executive officers and directors of the Company, who
collectively were the beneficial owners of an aggregate of 5,360,905 shares of
Common Stock as of October 31, 1996, have agreed with the Underwriters,
subject to certain exceptions, not to, directly or indirectly, offer, sell,
contract to sell, grant any option to purchase or otherwise dispose of,
without the prior written consent of DLJ, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for, or warrants,
options or rights to purchase or acquire, Common Stock, or enter into any
agreement to do any of the foregoing, for a period of 90 days after the date
of this Prospectus.
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In connection with the offering, certain Underwriters and selling group
members may engage in passive market making transactions in the Common Stock on
the Nasdaq National Market immediately prior to the commencement of sales, in
accordance with Rule 10b-6A under the Exchange Act. Passive market making
consists of, among other things, displaying bids on the Nasdaq National Market
limited by the bid prices of independent market makers and purchases limited by
such prices and effected in response to order flow. Net purchases by a passive
market maker on each day are limited to a specified percentage of the passive
market maker's average daily trading volume in the Common Stock during a
specified prior period, and all passive market making activity must be
discontinued when such limit is reached. Passive market making may stabilize
the market price of the Common Stock at a level above that which might
otherwise prevail and, if commenced, may be discontinued at any time.
55
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission
under the Exchange Act and are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K, and amendments thereto, for
the fiscal year ended December 31, 1995;
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996;
3. The Company's Current Reports on Form 8-K, and amendments thereto,
dated March 31, 1995 (acquisition of Reltech Group, Inc.), November 17,
1995 (acquisition of ProtoSoft, Inc.) and February 8, 1996 (acquisition of
Prodea Software Corporation); and
4. The Company's Report on Form 10-C dated March 18, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the Offering shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated herein by reference shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained in any subsequently filed document which is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of such person, a
copy of any or all of the documents incorporated herein by reference (other
than exhibits thereto, unless such exhibits are specifically incorporated by
reference into the information that this Prospectus incorporates). Written or
telephone request for such copies should be directed to the Company's
principal office: PLATINUM technology, inc., 1815 South Meyers Road, Oakbrook
Terrace, Illinois 60181, Attention: Secretary (telephone: (630) 620-5000).
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company may be inspected and copied at the public
reference facilities maintained by the Commission at the Commission's Public
Reference Room, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549, and at the Commission's Regional Offices at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549 at prescribed rates.
Copies of reports, proxy and information statements and other information
regarding registrants that file electronically are available on the
Commission's Web site at http://www.sec.gov. The Company's Common Stock is
listed on the Nasdaq National Market, and the Company has applied for listing
of the Notes on The Nasdaq SmallCap Market, and such reports, proxy statements
and other information can also be inspected at the offices of The Nasdaq Stock
Market, 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act, with respect to
the Notes offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. Any statements contained
herein concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission are not
necessarily complete and, in each
56
<PAGE>
instance, reference is made to the copy of such document so filed. Each such
statement is qualified in its entirety by such reference. The Registration
Statement, including the exhibits and schedules thereto, may be inspected
without charge at the Commission's principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and copies thereof may be obtained from such office,
upon payment of the fees prescribed by the Commission. The Registration
Statement, including the exhibits and schedules thereto, is also available on
the Commission's Web site at http://www.sec.gov.
LEGAL MATTERS
Certain legal matters relating to the issuance and sale of the Notes and the
validity of the Common Stock issuable upon conversion of the Notes will be
passed upon for the Company by Katten Muchin & Zavis, Chicago, Illinois.
Certain legal matters relating to the Offering will be passed upon for the
Underwriters by Sachnoff & Weaver, Ltd., Chicago, Illinois.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1995
and 1994 and for each of the years in the three years ended December 31, 1995,
appearing in this Prospectus and the Registration Statement relating to this
Prospectus have been audited by KPMG Peat Marwick LLP, independent certified
public accountants, as set forth in their report thereon appearing elsewhere
herein and in the Registration Statement, and which is based in part on the
reports of Deloitte & Touche LLP, Coopers & Lybrand L.L.P., Arthur Andersen
LLP, and Ernst & Young LLP, independent auditors. Such consolidated financial
statements are included herein in reliance on such reports given on the
authority of such firms as experts in auditing and accounting.
The consolidated financial statements of ProtoSoft, Inc. as of December 31,
1994 and 1993 and for the year ended December 31, 1994, the ten months ended
December 31, 1993, and the year ended February 28, 1993, incorporated by
reference herein and elsewhere in the Registration Statement from the
Company's Current Report on Form 8-K dated November 17, 1995, as amended, have
been audited by KPMG Peat Marwick LLP, independent certified public
accountants, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance on such report, given on the
authority of such firm as experts in auditing and accounting.
The consolidated financial statements of Prodea Software Corporation as of
December 31, 1995, 1994 and 1993 and for each of the three years in the period
ended December 31, 1995, incorporated by reference herein and elsewhere in the
Registration Statement from the Company's Current Report on Form 8-K dated
February 8, 1996, as amended, have been audited by KPMG Peat Marwick LLP,
independent certified public accountants, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance on such
report, given on the authority of such firm as experts in auditing and
accounting.
The financial statements of Reltech Group, Inc. as of December 31, 1994 and
1993 and for each of the three years in the period ended December 31, 1994,
incorporated by reference herein and elsewhere in the Registration Statement
from the Company's Current Report on Form 8-K dated March 31, 1995, as
amended, have been so included in reliance upon the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts
in auditing and accounting.
With respect to the Company's unaudited interim financial information for
the periods ended September 30, 1995 and 1996, included herein, the
independent certified public accountants have reported that they applied
limited procedures in accordance with professional standards for a review of
such information. However, their separate report included in the Company's
Form 10-Q for the quarter ended September 30, 1996, as incorporated by
reference herein, states that they did not audit and they do not express an
opinion on that interim financial information. Accordingly, the degree of
reliance on their report on such information should be restricted in light of
the limited nature of the review procedures applied. The accountants are not
subject to the liability provisions of Section 11 of the Securities Act for
their report on the unaudited interim financial information because that
report is not a "report" or a "part" of the Registration Statement prepared or
certified by the accountants within the meaning of Sections 7 and 11 of the
Securities Act.
57
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE(S)
<S> <C>
PLATINUM technology, inc.
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1995 and September 30,
1996 (unaudited)...................................................... F-2
Consolidated Statements of Operations for the nine months ended
September 30, 1995 (unaudited) and 1996 (unaudited)................... F-3
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1995 (unaudited) and 1996 (unaudited)................... F-4
Notes to Consolidated Financial Statements (unaudited)................. F-5
Report of KPMG Peat Marwick LLP........................................ F-6
Consolidated Balance Sheets as of December 31, 1994 and 1995........... F-7
Consolidated Statements of Operations for the years ended December 31,
1993, 1994 and 1995................................................... F-8
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1993, 1994 and 1995...................................... F-9
Consolidated Statements of Cash Flows for the years ended December 31,
1993, 1994 and 1995................................................... F-10
Notes to Consolidated Financial Statements for the three years ended
December 31, 1993, 1994 and 1995...................................... F-11
through
F-24
</TABLE>
F-1
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
ASSETS 1995 1996
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents................. $111,847 $ 50,542
Short-term investment securities.......... 7,802 2,000
Trade accounts receivable, net of
allowances of $2,695 and $2,245.......... 115,876 118,630
Installment accounts receivable........... 6,058 8,355
Accrued interest and other current
expenses................................. 10,545 9,346
Refundable income taxes................... 355 308
-------- --------
Total current assets.................... 252,483 189,181
Non-current investment securities........... 13,126 3,966
Property and equipment...................... 51,004 66,526
Purchased and developed software............ 52,268 70,335
Excess of cost over net assets acquired, net
of accumulated amortization of $5,100 and
$9,189..................................... 35,494 34,825
Other assets................................ 33,813 49,751
-------- --------
Total assets............................ $438,188 $414,584
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Acquisition-related payables.............. $ 12,518 $ 7,412
Income taxes payable...................... 1,068 --
Accounts payable.......................... 16,001 11,991
Accrued commissions and bonuses........... 8,598 8,922
Accrued royalties......................... 1,637 2,458
Other accrued liabilities................. 27,700 19,759
Current maturities of long-term
obligations.............................. 1,313 3,436
Deferred maintenance...................... 56,969 53,145
-------- --------
Total current liabilities............... 125,804 107,123
Acquisition-related payables................ 9,756 8,026
Deferred maintenance........................ 3,795 27,763
Deferred rent............................... 8,795 7,730
Long-term obligations, net of current
maturities................................. 1,586 931
-------- --------
Total liabilities....................... 149,736 151,573
Stockholders' equity:
Class II preferred stock, $.01 par value;
authorized 10,000, none issued and
outstanding.............................. -- --
Common stock, $.001 par value; authorized
180,000, issued and outstanding 53,194
and 55,954............................... 53 56
Paid-in capital........................... 433,103 446,265
Notes receivable.......................... (515) (315)
Accumulated deficit....................... (144,662) (182,605)
Foreign currency translation adjustment... 473 (390)
-------- --------
Total stockholders' equity.............. 288,452 263,011
-------- --------
Total liabilities and stockholders'
equity............................... $438,188 $414,584
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1995 1996
<S> <C> <C>
Revenues:
Software products........................................ $101,578 $152,074
Maintenance.............................................. 54,872 74,694
Professional services.................................... 50,193 69,618
-------- --------
Total revenues......................................... 206,643 296,386
Costs and expenses:
Professional services.................................... 47,213 59,012
Product development and support.......................... 62,952 117,480
Sales and marketing...................................... 82,275 130,063
General and administrative............................... 23,042 26,036
Merger costs............................................. 24,764 5,782
Acquired in-process technology........................... 25,453 11,095
-------- --------
Total costs and expenses............................... 265,699 349,468
-------- --------
Operating loss............................................. (59,056) (53,082)
Other income............................................... 2,991 2,566
-------- --------
Loss before income taxes................................... (56,065) (50,516)
Income taxes............................................... (11,004) (12,528)
-------- --------
Net loss................................................... $(45,061) $(37,988)
======== ========
Net loss per share......................................... $ (1.09) $ (0.69)
======== ========
Shares used in computing per share amounts................. 41,212 55,271
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1995 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(45,061) $(37,988)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization........................... 14,408 25,799
Acquired in-process technology.......................... 25,453 11,095
Changes in assets and liabilities, net of acquisitions:
Trade and installment receivables..................... (11,147) (85,127)
Deferred income taxes................................. (7,160) (16,908)
Accrued interest and other current assets............. (5,570) 1,415
Accounts payable...................................... 3,952 (4,272)
Accrued liabilities................................... 8,303 (9,096)
Deferred maintenance.................................. 5,000 19,272
Income taxes payable.................................. (79) (1,106)
Other................................................. (823) (2,333)
-------- --------
Net cash used in operating activities..................... (12,724) (99,249)
-------- --------
Cash flows from investing activities:
Purchases of investment securities...................... (17,484) (17,765)
Sales of investment securities.......................... 47,503 18,779
Maturities of investment securities..................... 7,527 13,948
Purchases of property and equipment..................... (22,233) (25,546)
Capitalized software development costs.................. (13,844) (27,269)
Payments for acquisitions............................... (43,203) (12,819)
Other assets............................................ (13,586) (2,156)
-------- --------
Net cash used in investing activities..................... (55,320) (52,828)
-------- --------
Cash flows from financing activities:
Proceeds from exercise of stock options................. 4,336 3,392
Proceeds from the sale of receivables................... -- 85,776
Borrowings under line of credit......................... 12,500 --
Long-term borrowings, net............................... 1,475 1,604
-------- --------
Net cash provided by financing activities................. 18,311 90,772
-------- --------
Adjustment to conform fiscal years of pooled businesses... (1,139) --
-------- --------
Net decrease in cash and cash equivalents................. (50,872) (61,305)
Cash and cash equivalents at beginning of period.......... 78,458 111,847
-------- --------
Cash and cash equivalents at end of period................ $ 27,586 $50,542
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements reflect
all adjustments which, in the opinion of management, are necessary for a fair
presentation of the results of the interim periods presented. All such
adjustments are of a normal recurring nature. Because the Company's
acquisitions of Prodea Software Corporation (Prodea), Paradigm Systems
Corporation (Paradigm), and Axis Systems International, Inc. (Axis) during the
first quarter of 1996 are being treated as poolings of interests for
accounting purposes, all consolidated financial statements for the periods
prior to the acquisitions have been restated to include the assets,
liabilities and operating results of these companies. All intercompany
accounts and transactions have been eliminated.
These consolidated financial statements should be read in conjunction with
the Company's audited consolidated financial statements and notes thereto for
the year ended December 31, 1995, included elsewhere herein.
2. ACQUISITIONS
On July 3, 1996, the Company purchased all of the outstanding shares of
Software Alternatives, Inc. (d/b/a System Software Alternatives), a leading
provider of production scheduling software, for approximately $1,900,000. The
acquisition was accounted for under the purchase method, and a significant
portion of the purchase price was charged to acquired in-process technology in
the third quarter of 1996.
On July 29, 1996, the Company acquired all of the outstanding shares of
Grateful Data, Inc. (d/b/a Transcentury Data Systems), a Year 2000 solution
provider, for $100,000 in cash plus 333,333 shares of the Company's common
stock, which had a market value (based upon the trading price on the Nasdaq
National Market) of approximately $4,000,000 at the time of the acquisition.
This acquisition was accounted for under the purchase method, and a
significant portion of the purchase price was charged to acquired in-process
technology in the third quarter of 1996.
For the acquisitions accounted for as purchases, the pro forma operating
results (as if the companies had been combined at the beginning of the period)
are not material to the accompanying consolidated financial statements.
F-5
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
PLATINUM technology, inc.:
We have audited the accompanying consolidated balance sheets of PLATINUM
technology, inc. and subsidiaries as of December 31, 1994 and 1995, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1995.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We did not audit the
financial statements of Trinzic Corporation, Altai, Inc., Answer Systems,
Inc., Locus Computing Corporation, and Softool Corporation, wholly-owned
subsidiaries, which statements reflect total assets constituting 20 percent in
1994, and total revenues constituting 55 percent and 36 percent in 1993 and
1994, respectively, of the related consolidated totals. Those statements were
audited by other auditors whose reports have been furnished to us and our
opinion, in so far as it relates to the amounts for Trinzic Corporation,
Altai, Inc., Answer Systems, Inc., Locus Computing Corporation, and Softool
Corporation, is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the reports of the
other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of PLATINUM technology, inc. and
subsidiaries as of December 31, 1994 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Chicago, Illinois
March 29, 1996
F-6
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
------------------
1994 1995
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents..................................... $ 78,458 $111,847
Short-term investment securities.............................. 15,279 7,802
Trade accounts receivable, net of allowances of $1,522 and
$2,695....................................................... 68,700 115,876
Installment accounts receivable............................... 1,251 6,058
Accrued interest and other current assets..................... 6,543 10,545
Refundable income taxes....................................... 3,000 355
-------- --------
Total current assets........................................ 173,231 252,483
Non-current investment securities............................... 30,826 13,126
Property and equipment.......................................... 21,732 51,004
Purchased and developed software................................ 22,872 52,268
Excess of cost over net assets acquired, net of accumulated
amortization of $1,678 and $5,100.............................. 10,651 35,494
Other assets.................................................... 3,448 33,813
-------- --------
Total assets................................................ $262,760 $438,188
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Acquisition-related payables.................................. $ 10,963 $ 12,518
Income taxes payable.......................................... 1,427 1,068
Accounts payable.............................................. 9,826 16,001
Accrued commissions and bonuses............................... 7,002 8,598
Accrued royalties............................................. 761 1,637
Other accrued liabilities..................................... 13,548 27,700
Current maturities of long-term obligations................... 475 1,313
Deferred revenue.............................................. 39,578 56,969
-------- --------
Total current liabilities................................... 83,580 125,804
Acquisition-related payables.................................... 8,450 9,756
Deferred income taxes........................................... 2,933 --
Deferred revenue................................................ 1,475 3,795
Deferred rent................................................... 6,860 8,795
Long-term obligations, net of current maturities................ 625 1,586
-------- --------
Total liabilities........................................... 103,923 149,736
Stockholders' equity:
Class II preferred stock, $.01 par value; authorized 10,000,
none issued and outstanding.................................. -- --
Common stock, $.001 par value; authorized 120,000, issued and
outstanding 38,266 and 53,194................................ 38 53
Paid-in capital............................................... 190,441 433,103
Notes receivable.............................................. (333) (515)
Accumulated deficit........................................... (31,523) (144,662)
Foreign currency translation adjustment....................... 214 473
-------- --------
Total stockholders' equity.................................. 158,837 288,452
-------- --------
Total liabilities and stockholders' equity................ $262,760 $438,188
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1993 1994 1995
<S> <C> <C> <C>
Revenues:
Software products............................... $88,063 $113,749 $ 158,597
Maintenance..................................... 46,856 58,837 76,498
Professional services........................... 40,461 52,853 69,581
------- -------- ---------
Total revenues................................ 175,380 225,439 304,676
Costs and expenses:
Professional services........................... 31,855 42,858 60,341
Product development and support................. 43,467 51,781 94,027
Sales and marketing............................. 59,802 75,885 117,906
General and administrative...................... 23,526 32,544 41,252
Restructuring costs............................. 4,659 -- --
Merger costs.................................... -- -- 30,819
Acquired in-process technology.................. 8,735 24,594 88,493
------- -------- ---------
Total costs and expenses...................... 172,044 227,662 432,838
------- -------- ---------
Operating income (loss)........................... 3,336 (2,223) (128,162)
Other income...................................... 2,057 3,052 4,281
------- -------- ---------
Income (loss) before income taxes................. 5,393 829 (123,881)
Income taxes...................................... 4,768 3,473 (11,948)
------- -------- ---------
Net income (loss)................................. $ 625 $ (2,644) $(111,933)
======= ======== =========
Net income (loss) per share....................... $ 0.02 $ (0.07) $ (2.59)
======= ======== =========
Shares used in computing per share amounts........ 37,971 39,890 43,267
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1993 1994 1995
---------------- ---------------- ----------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C>
Common stock:
Balance at beginning of
year.................. 32,705 $ 33 33,552 $ 33 38,266 $ 38
Exercise of stock
options............... 426 -- 1,186 1 803 1
Issuance of common
stock................. 439 -- 3,629 4 14,125 14
Repurchase of common
stock................. (18) -- (100) -- -- --
Adjustment to conform
fiscal years of pooled
businesses............ -- -- (1) -- -- --
------ -------- ------ -------- ------ ---------
Balance at end of year. 33,552 33 38,266 38 53,194 53
------ -------- ------ -------- ------ ---------
Paid in capital:
Balance at beginning of
year.................. 112,818 121,729 190,440
Exercise of stock
options............... 1,362 5,083 4,754
Income tax benefit
related to stock
options............... 3,705 108 --
Issuance of common
stock................. 3,844 64,923 237,907
Repurchase of common
stock................. -- (1,400) --
Adjustment to conform
fiscal years of pooled
businesses............ -- (2) 2
-------- -------- ---------
Balance at end of year. 121,729 190,441 433,103
-------- -------- ---------
Notes receivable:
Balance at beginning of
year.................. (209) (247) (333)
Exercise of stock
options............... (38) (7) --
Issuance of notes
receivable............ -- (79) (200)
Repayment of note
receivable............ -- -- 18
-------- -------- ---------
Balance at end of year. (247) (333) (515)
-------- -------- ---------
Accumulated deficit:
Balance at beginning of
year.................. (28,874) (28,255) (31,523)
Net income (loss)...... 625 (2,644) (111,933)
Stock dividend on
common stock.......... (2) -- --
Repurchase of stock
options............... (4) -- --
Other.................. -- 1 18
Adjustment to conform
fiscal years of pooled
businesses............ -- (625) (1,224)
-------- -------- ---------
Balance at end of year. (28,255) (31,523) (144,662)
-------- -------- ---------
Foreign currency
translation adjustment:
Balance at beginning of
year.................. (197) (316) 214
Translation adjustment. (119) 507 259
Adjustment to conform
fiscal years of pooled
businesses............ -- 23 --
-------- -------- ---------
Balance at end of year. (316) 214 473
-------- -------- ---------
Total stockholders'
equity................ $ 92,944 $158,837 $ 288,452
======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1993 1994 1995
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................... $ 625 $ (2,644) $(111,933)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization................. 8,466 12,218 20,984
Acquired in-process technology................ 8,735 24,594 88,493
Write-off of capitalized software and goodwill
in connection with product stabilization and
mergers...................................... 1,509 -- 942
Noncash compensation.......................... -- 186 78
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable......................... (11,581) (18,718) (52,522)
Deferred income taxes....................... (1,201) 1,335 (12,986)
Refundable income taxes..................... (211) (2,234) 2,615
Accrued interest and other current assets... (235) (1,641) (3,313)
Accounts payable............................ 868 3,285 5,656
Deferred revenue............................ 7,127 9,492 18,342
Other....................................... 6,221 6,458 16,074
-------- -------- ---------
Net cash provided by (used in) operating
activities..................................... 20,323 32,331 (27,570)
-------- -------- ---------
Cash flows from investing activities:
Purchases of investment securities............ (17,815) (24,389) (60,763)
Sales of investment securities................ -- -- 75,187
Maturities of investment securities........... 15,271 18,910 10,753
Purchases of property and equipment........... (7,714) (13,492) (38,780)
Capitalized software development costs........ (8,507) (10,898) (18,925)
Payments for acquisitions..................... (1,308) (22,756) (103,085)
Other assets.................................. (1,217) 1,549 (482)
-------- -------- ---------
Net cash used in investing activities........... (21,362) (51,076) (136,095)
-------- -------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock, net of
issuance costs............................... 4,477 65,909 194,420
Repurchase of common stock.................... (4) (1,400) (2)
Proceeds from exercise of stock options....... 690 3,826 4,144
Income tax benefit from stock option
exercises.................................... 3,705 108 --
Short-term borrowings......................... 1,220 1,675 8,205
Payments on borrowings........................ (2,035) (1,675) (7,296)
Other......................................... 92 (937) (214)
-------- -------- ---------
Net cash provided by financing activities....... 8,145 67,506 199,257
-------- -------- ---------
Adjustment to conform fiscal years of pooled
businesses..................................... -- 276 (2,203)
-------- -------- ---------
Net increase in cash and cash equivalents....... 7,106 49,037 33,389
Cash and cash equivalents at beginning of year.. 22,315 29,421 78,458
-------- -------- ---------
Cash and cash equivalents at end of year........ $ 29,421 $ 78,458 $ 111,847
======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-10
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
PLATINUM technology, inc. and its subsidiaries (collectively, the Company or
PLATINUM) develop, market and support software products, and offer related
consulting services and educational programs, for administering the prevailing
complex, heterogeneous computing environment in today's data intensive
organizations. PLATINUM offers software solutions in five primary categories:
systems management, data warehousing, business intelligence, application
lifecycle, and database management. The Company markets and supports it
products and services principally through its own sales organization, as well
as a network of independent organizations (the affiliates).
Use of Estimates
In preparing the consolidated financial statements, the Company's management
makes estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of PLATINUM
technology, inc. and its subsidiaries. All intercompany accounts and
transactions have been eliminated in consolidation.
Revenue Recognition
Revenue from software product sales of perpetual and fixed-term license
agreements is recognized upon product delivery and customer acceptance.
Software product sales under extended payment terms are discounted to present
value using implicit interest rates. Revenue from maintenance fees implicit in
software product sales or separately priced maintenance agreements is
recognized on a straight-line basis over the maintenance period.
Professional services revenues are derived from the Company's consulting
services business and educational programs. These revenues are comprised of
both time and material contracts and fixed-price contracts. Time and material
contracts revenue is recognized as services are performed. Fixed-price
contracts revenue is recognized based on the percentage-of-completion method.
Cash Equivalents and Investment Securities
Cash equivalents are comprised of certain highly liquid investments with
original maturities of less than three months. Investment securities generally
consist of U.S. Treasury notes and municipal bonds with original maturities
generally ranging from two to five years. The Company adopted the provisions
of Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," on January 1, 1994. Under
SFAS No. 115, the Company classifies its investment securities as available-
for-sale.
Available-for-sale securities are reported at fair value, with unrealized
gains and losses excluded from earnings and reported in a separate component
of stockholders' equity. Interest income is recognized when earned. At
December 31, 1995, the amortized cost of these investments closely
approximated fair market value and accordingly, unrealized gains and losses
were not material.
F-11
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method based on the estimated useful lives, generally five
to eight years, of the various classes of property and equipment. Amortization
of leasehold improvements is computed over the shorter of the lease term or
estimated useful life of the asset.
Purchased and Developed Software
Software development costs are accounted for in accordance with SFAS No. 86,
"Accounting for the Costs of Computer Software to Be Sold, Leased, or
Otherwise Marketed." Costs associated with the planning and designing phase of
software development, including coding and testing activities necessary to
establish technological feasibility, are classified as product development and
expensed as incurred. Once technological feasibility has been determined,
additional costs incurred in development, including coding, testing, and
documentation writing, are capitalized.
Amortization of purchased and developed software is provided on a product-
by-product basis over the estimated economic life of the software, generally
four to five years, using the straight-line method. This method results in
greater amortization than the method based on the ratio of current year gross
product revenue to current and anticipated future gross product revenue.
Amortization commences when a product is available for general release to
customers. Unamortized capitalized costs determined to be in excess of the net
realizable value of a product are expensed at the date of such determination.
Excess of Cost Over Net Assets Acquired
Excess of cost over net assets acquired is amortized on a straight-line
basis over the expected period to be benefited, generally seven to ten years.
Adjustments to the carrying value of excess over net assets acquired are made
if the sum of expected future net cash flows from the business acquired is
less than book value.
Income Taxes
Income taxes are accounted for in accordance with SFAS No. 109 "Accounting
for Income Taxes." Under the asset and liability method of SFAS No. 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under SFAS No.
109, the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period of enactment.
Fair Value of Financial Instruments
The fair values of financial instruments were not materially different from
their carrying values.
Earnings Per Share
Net income per share is based on the weighted average number of shares
outstanding and includes the dilutive effect of unexercised stock options
using the treasury stock method. Net loss per share is based on the weighted
average number of shares outstanding and does not include the effect of
unexercised stock options.
F-12
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Foreign Currency Translation
The financial position and results of operations of the Company's foreign
subsidiaries are measured using the local currency as the functional currency.
Accordingly, assets and liabilities are translated into U.S. dollars using
current exchange rates as of the balance sheet date. Revenues and expenses are
translated at average exchange rates prevailing during the year. Translation
adjustments arising from differences in exchange rates are included as a
separate component of stockholders' equity.
Supplemental Cash Flow Disclosure
Net income tax refunds received by the Company amounted to $(46,000),
$(72,000), and $(933,000) in 1993, 1994 and 1995, respectively. Cash paid for
income taxes in 1993, 1994 and 1995 was $707,000 and $3,914,000, and $615,000,
respectively. Cash paid for interest in 1993, 1994, and 1995 was $403,000,
$272,000 and $784,000, respectively.
Reclassifications
Certain prior year balance sheet items have been reclassified to conform to
the 1995 presentation. In addition, certain prior years' costs and expenses
have been reclassified to conform to the 1995 presentation.
2. ACQUISITIONS
On June 15, 1995, the Company acquired all of the outstanding capital stock
of Software Interfaces, Inc. (SII), a leading provider of data access,
reporting, and data conversion utilities for relational and non-relational
database management systems. The Company issued 1,085,450 shares of its common
stock for all the outstanding shares of SII common stock. In addition, the
Company assumed stock options which converted into options to purchase 14,377
shares of common stock.
On August 9, 1995, the Company acquired all of the outstanding capital stock
and warrants of Answer Systems, Inc. (Answer), a pioneer in client/server help
desk solutions, in exchange for 1,567,946 shares of common stock. In addition,
the Company assumed stock options which converted into options to purchase
42,176 shares of common stock.
On August 16, 1995, the Company acquired all of the outstanding capital
stock of Locus Computing Corporation (Locus), a leading provider of consulting
services for information technology users and suppliers, in exchange for
1,452,445 shares of common stock. In addition, the Company assumed stock
options which converted into options to purchase 231,095 shares of common
stock.
On August 23, 1995, the Company acquired all of the outstanding capital
stock of Altai, Inc. (Altai), a vendor of integrated automated operations
software for open computing, in exchange for 1,098,295 shares of common stock.
In addition, the Company assumed stock options which converted into options to
purchase 52,696 shares of common stock.
On August 25, 1995, the Company acquired all of the outstanding capital
stock of Trinzic Corporation (Trinzic), a major provider of data warehousing
and open systems tools and services, in exchange for 6,654,484 shares of
common stock. In addition, the Company assumed stock options which converted
into options to purchase 620,948 shares of common stock.
On November 17, 1995, the Company acquired all of the outstanding capital
stock of Softool Corporation (Softool), a leading provider of software change
and configuration management technology, in exchange for 1,452,708 shares of
common stock.
F-13
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On February 8, 1996, the Company acquired all of the outstanding capital
stock of Prodea Software Corporation (Prodea), a leading provider of data
warehousing and business intelligence tools, in exchange for 2,126,913 shares
of common stock.
On March 26, 1996, the Company acquired all of the outstanding capital stock
of Paradigm Systems Corporation (Paradigm), a leading provider of professional
services, in exchange for 762,503 shares of common stock. In addition, the
Company assumed stock options which converted into options to purchase 55,228
shares of common stock.
On March 29, 1996, the Company acquired all of the outstanding capital stock
of Axis Systems International, Inc. (Axis), a leading provider of professional
services, in exchange for 319,926 shares of common stock. In addition, the
Company assumed stock options which converted into options to purchase 59,986
shares of common stock.
Each of the aforementioned transactions was accounted for as a pooling of
interests and, accordingly, the consolidated financial statements have been
restated as if the combining companies had been combined for all periods
presented. Merger costs relating to the acquisitions consummated in 1995
amounted to $30,819,000, of which $7,341,000 were included in other accrued
liabilities at December 31, 1995. These costs included investment banking and
other professional fees, write downs of certain assets, employee severance
payments, costs of closing excess of facilities, and various other expenses.
The following information reconciles total revenues and net income (loss) of
PLATINUM technology, inc. as previously reported with the amounts presented in
the accompanying consolidated statements of operations for the three years
ended December 31, 1993, 1994 and 1995 (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
--------------------------------------------------
NET NET NET
INCOME INCOME INCOME
REVENUES (LOSS) REVENUES (LOSS) REVENUES (LOSS)
<S> <C> <C> <C> <C> <C> <C>
PLATINUM (1)........ $ 62,165 $ 3,002 $ 95,749 $(3,200) $275,921 $(112,474)
SII................. 3,397 59 3,716 303 -- --
Answer.............. 6,414 700 7,122 314 -- --
Locus............... 24,248 (2,647) 29,148 1,817 -- --
Altai............... 13,485 566 14,556 732 -- --
Trinzic............. 44,248 3,154 45,428 895 -- --
Softool............. 6,807 1,111 6,778 (696) -- --
Prodea.............. 4,446 (139) 2,868 (3,657) 5,804 159
Paradigm............ 4,659 27 13,224 93 15,218 1
Axis................ 5,511 147 6,850 305 7,733 381
Adjustments......... -- (5,355) -- 450 -- --
-------- ------- -------- ------- -------- ---------
Total........... $175,380 $ 625 $225,439 $(2,644) $304,676 $(111,933)
======== ======= ======== ======= ======== =========
</TABLE>
- ---------------------
(1) Represents the historical results of PLATINUM technology, inc. without
considering the effect of the poolings of interests transactions. All
merger costs and acquired in-process technology charges are reflected in
PLATINUM.
F-14
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following information sets forth the 1995 results of the acquired
companies during the periods preceding their acquisition. The 1995 results
presented for SII, Answer, Locus, Altai, and Trinzic are for the six months
ended June 30, 1995. The 1995 Softool results are for the nine months ended
September 30, 1995. The 1995 Prodea, Paradigm and Axis results are for the
year ended December 31, 1995.
<TABLE>
<CAPTION>
NET INCOME
REVENUES (LOSS)
(IN THOUSANDS)
<S> <C> <C>
SII................................................... $ 1,318 $ (453)
Answer................................................ 4,840 346
Locus................................................. 15,469 231
Altai................................................. 10,306 913
Trinzic............................................... 22,585 (1,283)
Softool............................................... 5,868 (509)
Prodea................................................ 5,804 159
Paradigm.............................................. 15,218 1
Axis.................................................. 7,733 381
</TABLE>
The consolidated statement of operations for the year ended December 31,
1995 reflects the impact of Trinzic's operating results for the quarter ended
March 31, 1995, which are also included in the year ended December 31, 1994
statement of operations due to differences in reporting periods relative to
PLATINUM. The revenues and net income of Trinzic included more than once were
$12,553,000 and $215,000, respectively.
The consolidated statement of operations for the year ended December 31,
1995 reflects the impact of certain operating results included more than once,
due to the differences in reporting periods of Altai and Locus relative to
that of PLATINUM. The revenues and net income of Altai include more than once
were $2,514,000 and $441,000, respectively. The revenues and net income of
Locus included more than once were $3,197,000 and $568,000, respectively.
The consolidated statement of operations for the year ended December 31,
1994 reflects the impact of certain operating results also included in the
year ended December 31, 1993 statement of operations due to the differences in
reporting periods of certain companies relative to that of PLATINUM. The
following summarizes each company, the period included more than once, and
revenues and net income included in the statements of operations for both the
years ended December 31, 1994 and 1993:
<TABLE>
<CAPTION>
SIX MONTHS ENDED REVENUES NET INCOME
(IN THOUSANDS)
<S> <C> <C> <C>
Altai................................ July 31, 1994 $ 7,143 $267
Answer............................... June 30, 1994 3,126 257
SII.................................. June 30, 1994 1,517 101
------- ----
Total................................ $11,786 $625
======= ====
</TABLE>
The Company has also made a number of acquisitions that have been accounted
for under the purchase method. Accordingly, purchase prices have been
allocated to identifiable tangible and intangible assets acquired and
liabilities assumed based on their estimated fair values and amounts allocated
to acquired in-process technology have been expensed at the time of
acquisition. Excess of cost over net assets acquired is amortized on a
straight-line basis over the expected period to be benefited, generally seven
to ten years. The accompanying consolidated statements of operations reflect
the results of operations of the acquired companies since the dates the
acquisitions were completed.
To determine the fair market value of the acquired in-process technology,
the Company considered the three traditional approaches of value: the cost
approach, the market approach, and the income approach. The Company
F-15
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
relied primarily on the income approach, whereupon fair market value is a
function of the future revenues expected to be generated by an asset, net of
all allocable expenses and a charge for the use of any contributory assets,
and discounted to present value based on the specific level of risk in
achieving the forecasted asset earnings. The income approach focuses on the
income producing capability of the acquired assets and best represents the
present value of the future economic benefits expected to be derived from
these assets.
Technological feasibility for the acquired in-process technologies had not
been reached based on design and development activities in place requiring
further refinement and testing. The development activities required to
complete the acquired in-process technologies include additional coding,
cross-platform porting and validation, quality assurance procedures, and
customer beta test.
The acquired technologies represent unique and emerging technologies, the
application of which is limited to the Company's open enterprise systems
software strategy. Accordingly, these acquired technologies have no
alternative future use.
Effective December 1993, the Company acquired all of the outstanding shares
of Datura Corporation, a developer of database management tools, for
approximately $6,000,000. Effective August 1994, the Company acquired all of
the outstanding shares of Dimeric Development, Inc., a developer of database
tools, for approximately $7,600,000. Effective September 1994, the Company
acquired the net assets of Aston Brooke Corporation, a developer of
performance management tools, for approximately $6,500,000.
Effective December 1994, the Company acquired the net assets of AutoSystems
Corporation for approximately $10,000,000. The Company may be required to make
additional payments of up to $8,000,000 over a period of six years, contingent
upon the results of AutoSystems' operations over the course of that period.
These additional payments will be charged to compensation expense in the
periods in which they are earned.
During 1994, the Company also acquired certain software technologies with an
aggregate purchase price of approximately $1,900,000.
The Company also terminated its agreements with three of its former European
affiliates and established wholly-owned subsidiaries for these operations
during 1994. Prior to their termination, these affiliates were independent
organizations that contracted with the Company to support and promote the
Company's software products and educational services. The aggregate amount
paid in these transactions was approximately $10,000,000.
Effective March 1995, the Company acquired the stock of SQL Software
Corporation, a provider of Windows-based development tools for managing
multiple relational databases, the assets of Viatech Development, Inc., a
provider of electronic distribution tools, and the assets of BrownStone
Solutions Inc., a vendor of repository technology. The aggregate purchase
price for these acquisitions was approximately $13,600,000. Also effective
March 1995, the Company acquired all of the capital stock of Reltech Group,
Inc., a vendor of repository technology, for approximately $17,300,000 (50% in
cash and 50% in common stock of the Company).
Effective July 1995, the Company purchased all the outstanding shares of
Advanced Software Concepts, Inc. (ASC), a leading provider of distributed
storage network management solutions for heterogeneous environments. The
aggregate purchase price was approximately $7,000,000. The Company may be
required to make additional payments of up to $3,000,000 contingent upon the
results of ASC's operations. These additional payments will be charged to
compensation expense in the periods in which they are earned.
Effective November 1995, the Company purchased substantially all of the
assets of ProtoSoft, Inc., a pioneer in portable, object-oriented analysis and
design software for building enterprise-wide applications and
F-16
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the developer of Paradigm Plus, for approximately $41,000,000, (75% in cash
and 25% in common stock of the company).
Effective December 1995, the Company purchased all of the outstanding shares
of AIB Software Corporation, a leader in multi-platform application
development and testing tools, for approximately $11,200,000 (80% in common
stock and 20% in cash); Protellicess Software, Inc., a leader in enterprise
project and process management software, in exchange for approximately
$15,000,000 of common stock; and BMS Computer, Inc., a leader in integrated
chargeback systems that provide job accounting, chargeback, cost analysis, and
resource reporting for heterogeneous environments, for an aggregate purchase
price of approximately $6,900,000.
During 1995, the Company also acquired certain software technologies with an
aggregate purchase price of approximately $10,227,000.
Internationally, during 1995, the Company acquired Echo-Soft Technologies
Sarl, a software sales and consulting firm located in France, Krystal Software
SA, an international affiliate of the Company in France, and Sequel UK Ltd.,
an international affiliate of the Company in the United Kingdom. The Company
also terminated its agreements with four other international affiliates and
established wholly-owned subsidiaries for these operations. The aggregate
price for these transactions was approximately $11,563,000.
The following unaudited pro forma summary presents the Company's results of
operations as if the acquisitions accounted for as purchases had occurred at
the beginning of each period. This summary is provided for information
purposes only. It does not necessarily reflect the actual results that would
have occurred had the acquisitions been made as of those dates or of results
that may occur in the future.
<TABLE>
<CAPTION>
1994 1995
(IN THOUSANDS ,
EXCEPT PER SHARE
DATA)
<S> <C> <C>
Revenues............................................. $239,831 $ 326,686
Net loss............................................. (4,453) (110,356)
Net loss per share................................... (0.11) (2.55)
</TABLE>
The aggregate payments for acquisition-related payables in connection with
the acquisitions described above for each of the next five years subsequent to
December 31, 1995 are estimated to be as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1996....................................................... $12,518
1997....................................................... 6,921
1998....................................................... 1,990
1999....................................................... 820
2000 and thereafter........................................ 25
-------
$22,274
=======
</TABLE>
3. INVESTMENT SECURITIES
The amortized cost, gross unrealized holding gains, gross unrealized holding
losses and aggregate fair value of investment securities at December 31, 1995
were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED
AMORTIZED HOLDING HOLDING FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Available-for-sale:
Current......................... $ 7,802 $ 6 $(20) $ 7,788
Due after one year.............. 13,126 86 (22) 13,190
------- --- ---- -------
$20,928 $92 $(42) $20,978
======= === ==== =======
</TABLE>
F-17
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The scheduled maturities for investment securities at December 31, 1995 were
as follows:
<TABLE>
<CAPTION>
LESS THAN MORE THAN
1 YEAR 1-5 YEARS 5 YEARS TOTAL
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Government bonds.............. $2,015 $ -- $ 116 $ 2,131
State and municipal bonds.......... 5,276 1,490 5,620 12,386
Other.............................. 511 1,100 4,800 6,411
------ ------ ------- -------
$7,802 $2,590 $10,536 $20,928
====== ====== ======= =======
</TABLE>
Under the specific identification method, the gross realized gains and
losses on the sale of investment securities available-for-sale were
approximately $467,000 and $(135,000), respectively, for the year ended
December 31, 1995.
The Company had historically reported its investment securities as held-to-
maturity. On July 1, 1995, the Company changed its classification of
investments from held-to-maturity to available-for-sale. The Company
determined that in order to pursue its acquisition strategy, certain of its
investments would be sold to meet cash requirements, and, as a result, sold
certain of its investments prior to their maturity. The impact of the change
in classification was not material to the consolidated financial statements as
the amortized cost approximated the fair value.
4. PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
1994 1995
(IN THOUSANDS)
<S> <C> <C>
Furniture and fixtures.................................... $ 9,537 $19,861
Computers and software.................................... 26,494 37,497
Transportation............................................ 73 8,034
Leasehold improvements.................................... 6,272 13,889
------- -------
42,376 79,291
Less accumulated depreciation and amortization............ 20,644 28,287
------- -------
$21,732 $51,004
======= =======
</TABLE>
5. PURCHASED AND DEVELOPED SOFTWARE
Purchased and developed software consists of the following:
<TABLE>
<CAPTION>
1994 1995
(IN THOUSANDS)
<S> <C> <C>
Purchased software........................................ $ 5,002 $24,809
Software development costs................................ 32,574 51,499
------- -------
37,576 76,308
Less accumulated amortization............................. 14,704 24,040
------- -------
$22,872 $52,268
======= =======
</TABLE>
During the years ended December 31, 1993, 1994, and 1995 $8,507,000,
$10,898,000, and $19,867,000, respectively, of software development costs were
capitalized. The Company recognized amortization expense
F-18
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
applicable to internally developed capitalized software of $3,717,000,
$4,911,000, and $6,276,000, during 1993, 1994, and 1995, respectively. The
Company recognized amortization expense applicable to purchased software of
$577,000, $859,000, and $3,081,000, during 1993, 1994, and 1995, respectively.
During 1995, the Company wrote-off $942,000 of capitalized software costs
related to certain Trinzic product technologies.
The increase in purchased software costs in 1995, as compared to 1994, is
primarily attributable to the Company's acquisitions and purchases of certain
product technologies.
6. INSTALLMENT ACCOUNTS RECEIVABLE
Installment accounts receivable consist of the following:
<TABLE>
<CAPTION>
1994 1995
(IN THOUSANDS)
<S> <C> <C>
Current installment receivables......................... $ 2,110 $ 8,682
Allowance for uncollectible amounts..................... (17) (103)
Unamortized discount and maintenance fees............... (842) (2,521)
------- -------
1,251 6,058
======= =======
Non-current installment receivables..................... 11,350 1,777
Allowance for uncollectible amounts..................... (101) (11)
Unamortized discount and maintenance fees............... (6,644) (1,239)
------- -------
$ 4,605 $ 527
======= =======
</TABLE>
Non-current installment receivables are classified in other assets in the
consolidated balance sheets.
7. EMPLOYEE BENEFIT PLANS
The Company has various defined contribution retirement plans (401(k) and
profit sharing) for qualified employees. Employer contributions made under the
plans totaled $107,000, $241,000, and $406,000, in 1993, 1994, and 1995,
respectively.
8. LINES OF CREDIT
At December 31, 1995, the Company had $33,300,000 in secured and unsecured
bank lines of credit under which borrowings bear interest ranging from the
bank's prime rate to the bank's prime rate plus 2 1/2%. Certain of these lines
of credit are subject to limitations based on levels of accounts receivable,
and certain other financial ratios. At December 31, 1995, total borrowings
under these lines of credit were approximately $1,407,000.
F-19
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. STOCK OPTIONS
The Company has several stock option plans, including the plans assumed in
certain acquisitions described in note 2. Stock option transactions for the
three-year period ended December 31, 1995, for all plans, are summarized
below.
<TABLE>
<CAPTION>
SHARES PRICE
<S> <C> <C>
Outstanding on December 31, 1992............... 5,648,935 $0.0025-57.30
Granted........................................ 1,294,576 1.3825-33.73
Exercised...................................... (393,674) 0.0025-11.26
Canceled....................................... (138,532) 0.25-57.30
----------
Outstanding on December 31, 1993............... 6,411,305 0.0025-57.30
Granted........................................ 2,273,991 0.07-22.13
Exercised...................................... (1,084,377) 0.0025-20.50
Canceled....................................... (325,615) 0.07-57.30
----------
Outstanding on December 31, 1994............... 7,275,304 0.0025-57.30
Granted........................................ 1,960,711 0.07-23.75
Exercised...................................... (746,617) 0.0025-20.50
Canceled....................................... (1,116,118) 0.07-33.72
----------
Outstanding on December 31, 1995............... 7,373,280 $0.0025-57.30
Exercisable on December 31, 1995............... 3,789,621 $0.0025-57.30
</TABLE>
10. INCOME TAXES
Income tax expense (benefit) for the years ended December 31, 1993, 1994,
and 1995 consists of the following:
<TABLE>
<CAPTION>
1993 1994 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal...................................... $ 4,371 $1,084 $ 315
State........................................ 1,592 190 133
Foreign...................................... 630 836 472
Deferred:
Federal...................................... (1,424) 428 (7,991)
State........................................ (401) 935 (4,877)
------- ------ ---------
$4,768 $3,473 $(11,948)
======= ====== =========
</TABLE>
F-20
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The reconciliation of income taxes computed using the Federal statutory rate
of 35% to the income tax provision is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory tax.................................. $1,888 $ 290 $(43,358)
State income tax, net of federal tax benefit... 94 568 (4,836)
Research and experimentation credits........... (542) (1) (1,213)
Foreign tax credit............................. (510) (60) (239)
Foreign taxes.................................. 1,964 1,423 240
Foreign sales corporation...................... (565) (401) (294)
Municipal interest............................. (289) (431) (554)
Utilization of net operating losses............ (229) (302) --
Stock acquisitions............................. 2,205 2,626 11,450
Change in valuation allowance.................. 1,111 (2,293) 22,856
Change in tax accounting method................ -- 1,596 176
Nondeductible merger costs..................... -- -- 4,625
Other.......................................... (359) 458 (801)
------ ------- --------
Effective tax.................................. $4,768 $ 3,473 $(11,948)
====== ======= ========
</TABLE>
The tax effects of temporary differences and carryforwards which give rise
to deferred tax assets and liabilities at December 31, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
1994 1995
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Deferred revenue.................................... $ 6,956 $ 5,804
Allowance for doubtful accounts..................... 372 964
Net operating loss carryforwards.................... 15,325 53,685
Foreign net operating losses........................ -- 3,006
General business, AMT, and state tax credits........ 5,770 6,365
Foreign tax credits................................. 1,333 1,270
Accrued expenses and reserves....................... 1,260 856
Rent abatement...................................... 17 2,143
Purchased research and development.................. 1,169 --
Other............................................... 561 1,153
-------- --------
Total gross deferred tax assets................... 32,763 75,246
Less valuation allowance.............................. (24,472) (47,328)
-------- --------
Net deferred tax assets........................... 8,291 27,918
Deferred tax liabilities:
Capitalized software, net........................... 7,297 12,566
Installment sales................................... 654 1,175
Acquired technology................................. -- 2,952
Other............................................... 979 766
-------- --------
Total gross deferred liabilities.................. 8,930 17,459
-------- --------
Net deferred tax asset (liability).................... $ (639) $ 10,459
======== ========
</TABLE>
The net change in the total valuation allowance during 1993, 1994, and 1995
was an increase of $1,111,000, a decrease of $2,293,000, and an increase of
$22,856,000, respectively. The Company has reduced the deferred
F-21
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
tax assets by a valuation allowance to reflect the estimated amount of
deferred tax assets which will more likely than not be realized. The net
deferred tax asset at December 31, 1995, reflects management's estimate of the
amount which will be realized as a result of future profitability.
The exercise of certain stock options results in state and Federal income
tax benefits to the Company. The benefit is equal to the difference between
the market price at the date of exercise and the option price at the
applicable tax rate. The current tax benefit does not flow through the
statement of operations, but is credited directly to paid-in capital. As a
result of stock option exercises during 1993, 1994, and 1995, $3,705,000,
$108,000, and $-0-, respectively, were credited to paid-in capital.
At December 31, 1995, the Company has approximately $133,000,000 of net
operating loss carryforwards and $7,470,000 of tax credit carryforwards, which
are available to reduce future Federal income taxes, if any, through the year
2010. The Company's ability to utilize the net operating loss carryforwards
and available tax credits may be limited due to the changes in ownership as a
result of business combinations.
11. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases office space, computer and telecommunications equipment
under long-term lease agreements expiring through the year 2003. Total future
minimum lease payments under noncancelable leases are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1996....................................................... $ 23,555
1997....................................................... 23,046
1998....................................................... 20,823
1999....................................................... 16,228
2000 and thereafter........................................ 37,518
--------
$121,170
========
</TABLE>
Total rent expense under all operating leases amounted to $9,992,000,
$11,875,000, and $14,869,000 in 1993, 1994, and 1995, respectively.
Receivables Sold with Recourse
At December 31, 1995, certain accounts receivable sold with recourse were
outstanding. The Company's maximum exposure under the recourse provisions was
approximately $5,177,000. A portion of these receivables are secured by
security interests in the related software. The fair market value of the
recourse obligation at December 31, 1995 was not determinable.
Litigation
The Company is subject to certain legal proceedings and claims which have
arisen in the ordinary course of business and have not been fully adjudicated.
Management currently believes the ultimate outcome of these matters will not
have a material adverse effect on the Company's results of operations or
financial position.
F-22
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. OTHER INCOME (EXPENSE)
Other income (expense) for the years ended December 31, 1993, 1994 and 1995
is comprised of the following:
<TABLE>
<CAPTION>
1993 1994 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Interest income................................... $2,501 $2,843 $4,956
Interest expense.................................. (435) (275) (745)
Foreign exchange gain (loss)...................... (85) 282 66
Other............................................. 76 202 4
------ ------ ------
$2,057 $3,052 $4,281
====== ====== ======
</TABLE>
13. RESTRUCTURING COSTS
In 1993, total restructuring costs of $4,659,000 were incurred by Trinzic
and Locus. In connection with the stabilization of its KBMS software product,
Trinzic recorded restructuring costs of $2,844,000, consisting of $1,509,000
for the write-off of capitalized software developments costs and $1,335,000
for the discontinuation of the data center used for development activities and
for employee severance payments. Trinzic did not complete development of new
releases or release updates of this product beyond the existing version level
and has not renewed current maintenance arrangements beyond the remaining
contract terms. Locus recorded a $1,815,000 charge to income for the
repositioning of its operations. This resulted from Locus' decision to
significantly reduce its presence in Europe and to reduce its work force in
the United States to become more competitive. The charge was primarily
composed of amounts needed for reductions in work force and a loss on
subleasing the unused portion of its corporate facility.
14. SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in one industry segment. The Company markets and
services its products in the United States and in foreign countries through
its direct sales organization and affiliates (which are non-controlled product
representatives).
The following table presents information about the Company by geographic
area. Export sales and certain income and expense items are reported in the
geographic area where the final sale is made rather than where the transaction
originates.
<TABLE>
<CAPTION>
NORTH
AMERICA EUROPE OTHER TOTAL
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1993:
Revenues.......................... $ 149,714 $22,643 $ 3,023 $ 175,380
Operating income (loss)........... (3,760) 6,526 570 3,336
Identifiable assets............... 161,552 7,078 1,252 169,882
1994:
Revenues.......................... $ 186,075 $32,622 $ 6,742 $ 225,439
Operating income (loss)........... (12,656) 9,679 754 (2,223)
Identifiable assets............... 240,606 19,863 2,291 262,760
1995:
Revenues.......................... $ 233,056 $55,663 $15,957 $ 304,676
Operating income (loss)........... (141,930) 9,684 4,084 (128,162)
Identifiable assets............... 377,112 53,828 7,248 438,188
</TABLE>
F-23
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
The revenue and operating income amounts above exclude the effect of
intercompany royalties. The North America operating losses in 1993, 1994, and
1995, include all merger costs, restructuring costs and acquired in-process
technology charges.
No single customer accounted for 10% or more of revenues in 1993, 1994, or
1995.
15. SUBSEQUENT EVENTS
On January 17, 1996, the Company acquired all of the outstanding capital
stock of Advanced Systems Technologies, Inc., a developer of performance
management tools, in exchange for approximately $6,000,000 (344,640 shares) of
the Company's common stock. This acquisition will be accounted for under the
purchase method and a significant portion of the purchase price will be
charged to acquired in-process technology in the first quarter of 1996.
F-24
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REP-
RESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION WHERE SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPEC-
TUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IM-
PLICATION THAT THE INFORMATION CONTAINED HEREIN IS CURRENT AS OF ANY TIME SUB-
SEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
Use of Proceeds........................................................... 14
Price Range of Common Stock............................................... 14
Dividend Policy........................................................... 14
Capitalization............................................................ 15
Selected Consolidated Financial Data...................................... 16
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 17
Business.................................................................. 25
Description of the Notes.................................................. 35
Description of Capital Stock.............................................. 47
Certain Federal Income Tax Considerations................................. 50
Underwriting.............................................................. 54
Incorporation of Certain Documents by Reference........................... 56
Available Information..................................................... 56
Legal Matters............................................................. 57
Experts................................................................... 57
Index to Financial Statements............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$85,000,000
LOGO
% CONVERTIBLE
SUBORDINATED NOTES
DUE 2001
----------------
PROSPECTUS
----------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
HAMBRECHT & QUIST
ROBERTSON, STEPHENS & COMPANY
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the approximate amount of fees and
expenses (other than underwriting commissions and discounts) payable in
connection with the issuance and distribution of the Notes pursuant to the
Prospectus contained in this Registration Statement. The Company will pay all
of these expenses.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $ 29,622
NASD filing fee................................................. 10,275
Nasdaq listing fee.............................................. 1,000
Accountants fees and expenses................................... 75,000
Blue Sky fees and expenses...................................... 10,000
Legal fees and expenses......................................... 75,000
Printing and Engraving.......................................... 125,000
Miscellaneous expenses.......................................... 124,103
--------
Total....................................................... $450,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Ten of the Company's Restated Certificate of Incorporation provides
that the Company shall indemnify its directors to the full extent permitted by
the Delaware General Corporation Law and may indemnify its officers to such
extent, except that the Company shall not be obligated to indemnify any such
person (i) with respect to proceedings, claims or actions initiated or brought
voluntarily by any such person and not by way of defense, or (ii) for any
amounts paid in settlement of an action indemnified against by the Company
without the prior written consent of the Company. With the approval of its
stockholders, the Company has entered into indemnity agreements with each of
its directors and certain of its officers. These agreements may require the
Company, among other things, to indemnify such officers and directors against
certain liabilities that may arise by reason of their status or service as
directors or officers, to advance expenses to them as they are incurred,
provided that they undertake to repay the amount advanced if it is ultimately
determined by a court that they are not entitled to indemnification, and to
obtain directors' and officers' liability insurance if available on reasonable
terms.
In addition, Article Nine of the Company's Restated Certificate of
Incorporation provides that a director of the Company shall not be personally
liable to the Company or its stockholders for monetary damages for breach of
his or her fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
General Corporation Law of the State of Delaware, or (iv) for any transaction
from which the director derives an improper personal benefit.
Reference is made to Section 145 of the General Corporation Law of the State
of Delaware which provides for indemnification of directors and officers in
certain circumstances.
The Company has purchased an insurance policy under which its is entitled to
be reimbursed for certain indemnity payments it is required or permitted to
make to its directors and officers.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<C> <S>
1 Form of Underwriting Agreement
4.1* Form of Indenture between the Company and American National Bank
and Trust Company of Chicago, as Trustee
4.2* Form of Note (included in Exhibit 4.1)
4.3 Conformed copy of Restated Certificate of Incorporation of the
Company, as amended, incorporated by reference to Exhibit
3.1(d) to the Company's Registration Statement on Form S-1,
Registration Statement No. 333-07783
4.4 Bylaws of the Company, incorporated by reference to Exhibit 3.2
to the Company's Registration Statement on Form S-1,
Registration Statement No. 33-39233 (the "IPO
S-1")
4.5 Specimen stock certificate representing Common Stock,
incorporated by reference to Exhibit 4.1 to the IPO S-1
4.6 Rights Agreement dated as of December 21, 1995 between the
Company and Harris Trust and Savings Bank, incorporated by
reference to the Company's Registration Statement on Form 8-A,
filed December 26, 1995
5 Opinion of Katten Muchin & Zavis as to the legality of the
securities being registered (including consent)
12.1* Computation of Ratio of Earnings to Fixed Charges
12.2 Computation of Ratio of Total Debt to Total Capitalization
15* Acknowledgment of KPMG Peat Marwick LLP regarding independent
auditors' review report
23.1 Consent of KPMG Peat Marwick LLP with respect to the Company's
financial statements
23.2* Consent of Deloitte & Touche LLP with respect to Trinzic's
financial statements
23.3* Consent of Ernst & Young LLP with respect to Altai's financial
statements
23.4* Consent of Coopers & Lybrand L.L.P. with respect to Answer's
financial statements
23.5* Consent of Arthur Andersen LLP with respect to Locus' financial
statements
23.6* Consent of Arthur Andersen LLP with respect to Softool's
financial statements
23.7* Consent of Price Waterhouse LLP with respect to Reltech's
financial statements
23.8* Consent of KPMG Peat Marwick LLP with respect to ProtoSoft's
financial statements
23.9* Consent of KPMG Peat Marwick LLP with respect to Prodea's
financial statements
23.10 Consent of Katten Muchin & Zavis (contained in their opinion
filed as Exhibit 5 hereto)
24* Power of Attorney (contained on the Signature page hereto)
25 Statement of Eligibility of Trustee on Form T-1
27* Financial Data Schedule
</TABLE>
- ---------------------
* Previously filed with this Registration Statement.
(b) Financial Statement Schedules
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants............................. S-1
Schedule II--Valuation and Qualifying Accounts....................... S-2
</TABLE>
ITEM 17. UNDERTAKINGS.
The Company hereby undertakes:
(1) For purposes of determining any liability under the Securities Act of
1993 (the "Securities Act"), each filing of the Company's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in this Registration Statement shall be deemed to
be a new registration statement relating to the securities offered herein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-2
<PAGE>
(2) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise,
the Company has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Company
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(3) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(4) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT TO THE
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF CHICAGO, STATE OF ILLINOIS, ON
NOVEMBER 5, 1996.
PLATINUM technology, inc.
/s/ Andrew J. Filipowski
By: _________________________________
Andrew J. Filipowski
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed below by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Andrew J. Filipowski President, Chief Executive November 5, 1996
____________________________________ Officer (Principal
Andrew J. Filipowski Executive Officer) and
Chairman of the Board of
Directors
* Executive Vice President, November 5, 1996
____________________________________ Chief Operations Officer
Paul L. Humenansky and a Director
* Executive Vice President, November 5, 1996
____________________________________ Chief Financial Officer
Michael P. Cullinane (Principal Financial and
Accounting Officer),
Treasurer and a Director
* Director November 5, 1996
____________________________________
Casey G. Cowell
* Director November 5, 1996
____________________________________
James E. Cowie
* Director November 5, 1996
____________________________________
Steven D. Devick
* Director November 5, 1996
____________________________________
Gian M. Fulgoni
</TABLE>
/s/ Andrew J.
Filipowski
*By: _____________________
Andrew J. Filipowski
Attorney-in-Fact
II-4
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Stockholders and Board of Directors of
PLATINUM technology, inc.:
Under date of March 29, 1996, we reported on the consolidated balance sheets
of PLATINUM technology, inc. and subsidiaries as of December 31, 1994 and
1995, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1995, as contained in a registration statement on Form S-1 of
PLATINUM technology, inc. Our report is based in part on the reports of other
auditors. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related consolidated financial
statement schedule. The financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion on the
financial statement schedule based on our audits.
In our opinion, based on our audits and the reports of other auditors, such
consolidated financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Chicago, Illinois
March 29, 1996
S-1
<PAGE>
SCHEDULE II
PLATINUM TECHNOLOGY, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ALLOWANCE FOR DOUBTFUL ACCOUNTS BEGINNING BAD DEBT ENDING
FOR TRADE ACCOUNTS RECEIVABLE BALANCE EXPENSE BALANCE
<S> <C> <C> <C>
Year ended December 31, 1995...................... 1,522,000 1,173,000 2,695,000
Year ended December 31, 1994...................... 1,290,000 232,000 1,522,000
Year ended December 31, 1993...................... 1,223,500 66,500 1,290,000
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
<C> <S> <C>
1 Form of Underwriting Agreement
5 Opinion of Katten Muchin & Zavis as to the legality of the
securities being registered (including consent)
12.2 Computation of Ratio of Total Debt to Total Capitalization
23.1 Consent of KPMG Peat Marwick LLP with respect to the
Company's financial statements
23.10 Consent of Katten Muchin & Zavis (contained in their opin-
ion filed as Exhibit 5 hereto)
25 Statement of Eligibility of Trustee on Form T-1
</TABLE>
<PAGE>
EXHIBIT 1
$85,000,000
PLATINUM TECHNOLOGY, INC.
___% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2001
UNDERWRITING AGREEMENT
----------------------
November ___,1996
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
HAMBRECHT & QUIST LLC
ROBERTSON STEPHENS & COMPANY LLC
As representatives of the several
underwriters named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette Securities Corporation
140 Broadway
New York, New York 10005
Dear Sirs:
PLATINUM technology, inc., a Delaware corporation (the "COMPANY"),
proposes to issue and sell $85,000,000 principal amount of its ___% Convertible
Subordinated Debentures Due 2001 (the "FIRM SECURITIES") to Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ"), Hambrecht & Quist LLC and Robertson
Stephens & Company LLC (the "REPRESENTATIVES"), as representatives of the
several underwriters named in Schedule I hereto (the "UNDERWRITERS"). The
Company also proposes to sell to the Underwriters not more than $12,750,000
aggregate principal amount of additional ___% Convertible Subordinated Notes due
2001 of the Company (the "ADDITIONAL SECURITIES" and, together with the Firm
Securities, the "SECURITIES"), if requested by the Underwriters as provided in
Sections 2 and 4 hereof. The Securities are to be issued pursuant to the
provisions of an Indenture to be dated as of November __, 1996 (the "INDENTURE")
between the Company and American National Bank and Trust Company, as Trustee
(the "TRUSTEE"). Pursuant to
1
<PAGE>
which the Securities will be convertible at the option of the holders thereof,
into shares of the Company's common stock, par value $0.001 per share (the
"COMMON STOCK").
1. Registration Statement and Prospectus. The Company has prepared
and filed with the Securities and Exchange Commission (the "COMMISSION") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively called the
"ACT"), a registration statement on Form S-3 with respect to the Securities and
the Common Stock issuable upon conversion thereof (No. 333-15421), including a
prospectus relating to the Securities and such Common Stock, which may be
amended. The registration statement as amended at the time when it becomes
effective, including a registration statement (if any) filed pursuant to Rule
462(b) under the Act increasing the size of the offering registered under the
Act and information (if any) deemed to be part of the registration statement at
the time of effectiveness pursuant to Rule 430A under the Act, and all exhibits
and other information incorporated therein by reference, is hereinafter referred
to as the "REGISTRATION STATEMENT"; and the prospectus (including all
information incorporated therein by reference) in the form first used to confirm
sales of Securities is hereinafter referred as the "PROSPECTUS".
2. Agreements to Sell and Purchase. On the basis of the
representations and warranties contained in this Agreement, and subject to its
terms and conditions, the Company agrees to issue and sell, and each Underwriter
agrees, severally and not jointly, to purchase from the Company the principal
amount of Firm Securities set forth opposite the name of such Underwriter in
Schedule I hereto, at ____% of the principal amount thereof (the "PURCHASE
PRICE") plus accrued interest thereon, if any, from November __, 1996 to the
date of payment and delivery.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to issue
and sell to the Underwriters, and the Underwriters shall have a right to
purchase, severally and not jointly, up to all of the Additional Securities from
the Company at the Purchase Price. Additional Securities may be purchased (in
integral multiples of $1,000), from time to time, as provided in Section 4
hereof solely for the purpose of covering over-allotments made in connection
with the offering of the Firm Securities. Each Underwriter, severally and not
jointly, agrees to purchase the principal amount of Additional Securities which
bears the same proportion to the total principal amount of Additional Securities
to be purchased as the principal amount of Firm Securities set forth opposite
the name of such Underwriter in Schedule I hereto bears to the total principal
amount of Firm Securities.
The Company hereby agrees, and concurrently with the execution of this
Agreement, shall deliver an agreement executed by each of the Company's
directors and executive officers, pursuant to which each such person agrees, not
to, directly or indirectly, offer, sell, contract to sell, grant any warrant,
right, or option to purchase or sell or otherwise dispose of (whether directly
or synthetically),
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without the prior written consent of DLJ, any shares of Common Stock owned by
such person or with respect to which such person has the power of disposition,
or any securities convertible into or exercisable or exchangeable for, or
warrants, options, or rights to purchase or acquire, Common Stock owned by such
person or with respect to which such person has the power of disposition, or in
any other manner transfer all or a portion of the economic consequences
associated with the ownership of any Common Stock, or enter into any agreement
to do any of the foregoing or file a registration statement with respect to any
of the foregoing (whether directly or synthetically) for a period of 90 days
after the date of the Prospectus (the "Lock-Up Period"), except pursuant to this
Agreement. Notwithstanding the foregoing, during the Lock-up Period (i) the
Company may grant stock options pursuant to the Company's existing stock option
plans (provided that any such options so granted shall not by their terms be
exercisable during the Lock-Up Period) and (ii) the Company may issue shares of
Common Stock upon the exercise of stock options outstanding on the date hereof.
3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose (i) to make a public offering of their respective portions
of the Securities as soon after the effective date of the Registration Statement
as in your judgment is advisable and (ii) initially to offer the Securities upon
the terms set forth in the Prospectus.
4. Delivery and Payment. Delivery to the Underwriters of and
payment for the Firm Securities shall be made at 10:00 A.M., New York City time,
on the third or fourth business day, unless otherwise permitted by the
Commission pursuant to Rule 15c6-1 of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT") (the "CLOSING DATE"), following the date of the
initial public offering, at such place as you shall designate. The Closing Date
and the location of delivery of and the form of payment for the Firm Securities
may be varied by agreement between you and the Company.
Delivery to the Underwriters of and payment for any Additional
Securities to be purchased by the Underwriters shall be made at such place as
DLJ shall designate, from time to time, at 10:00 A.M., New York City time, on
such date or dates (each, an "OPTION CLOSING DATE"), which may be the same as
the Closing Date but shall in no event be earlier than the Closing Date, as
shall be specified in a written notice from DLJ to the Company of the
Underwriters' determination to purchase a certain principal amount, specified in
said notice, of Additional Securities. Such notice may be given at any time and
from time to time not later than 30 days after the date of this Agreement,
PROVIDED that no Option Closing Date shall be earlier than two business days nor
later than ten business days after such notice. Any Option Closing Date and the
location of delivery of and payment for any Additional Securities may be varied
by agreement between you and the Company.
Certificates for the Securities shall be registered in such names and
issued in such denominations as you shall request in writing not later than two
full business days prior to the Closing Date or, if applicable, each Option
Closing Date. Such certificates shall be made available to you for inspection
not later than 9:30 A.M., New York City time, on the business day next preceding
the Closing Date or, if applicable, each Option Closing Date. Certificates in
definitive form evidencing the Securities shall be delivered to you on the
Closing Date or, if applicable, each Option Closing Date with any transfer
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taxes thereon duly paid by the Company, for the respective accounts of the
several Underwriters, against payment of the Purchase Price therefor by wire
transfer of federal (same-day) funds to the Company.
5. Agreements of the Company. The Company agrees with you:
(a) To use its best efforts to cause the Registration Statement to
become effective at the earliest possible time.
(b) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) when the Registration Statement has become effective and
when any post-effective amendment to it becomes effective, (ii) of any request
by the Commission for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Securities
for offering or sale in any jurisdiction, or the initiation of any proceeding
for such purposes and (iv) of the happening of any event during the period
referred to in paragraph (e) below which makes any statement of a material fact
made in the Registration Statement or the Prospectus untrue or which requires
the making of any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading. If at any
time the Commission shall issue any stop order suspending the effectiveness of
the Registration Statement, the Company will make every reasonable effort to
obtain the withdrawal or lifting of such order at the earliest possible time.
(c) To furnish to you, without charge, four (4) signed copies of the
Registration Statement as first filed with the Commission and of each amendment
to it, including all exhibits, and to furnish to you and each Underwriter
designated by you such number of conformed copies of the Registration Statement
as so filed and of each amendment to it, without exhibits, as you may reasonably
request.
(d) Not to file any amendment or supplement to the Registration
Statement, whether before or after the time when the Registration Statement
becomes effective, or to make any amendment or supplement to the Prospectus of
which you shall not previously have been advised and had reasonable opportunity
to review prior to filing or to which you shall reasonably object; and to
prepare and file with the Commission, promptly upon your reasonable request, any
amendment to the Registration Statement or supplement to the Prospectus which
may be necessary or advisable in connection with the distribution of the
Securities by you, and to use its best efforts to cause the same to become
promptly effective.
(e) Promptly after the Registration Statement becomes effective, and
from time to time thereafter for such period as in the opinion of counsel for
the Underwriters a prospectus is required by law to be delivered in connection
with sales by an Underwriter or a dealer, to furnish to each Underwriter and
dealer as many copies of the Prospectus
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(and of any amendment or supplement to the Prospectus) as such Underwriter or
dealer may reasonably request.
(f) If during the period specified in paragraph (e) any event shall
occur as a result of which, in the opinion of counsel for the Underwriters it
becomes necessary to amend or supplement the Prospectus in order to make the
statements therein, in the light of the circumstances when the Prospectus is
delivered to a purchaser, not misleading, or if it is necessary to amend or
supplement the Prospectus to comply with any law, forthwith to prepare and file
with the Commission an appropriate amendment or supplement to the Prospectus so
that the statements in the Prospectus, as so amended or supplemented, will not,
in the light of the circumstances when it is so delivered, be misleading, or so
that the Prospectus will comply with law, and to furnish to each Underwriter and
to such dealers as you shall specify, such number of copies thereof as such
Underwriter or dealers may reasonably request.
(g) Prior to any public offering of the Securities, to cooperate with
you and counsel for the Underwriters in connection with the registration or
qualification of the Securities for offer and sale by the several Underwriters
and by dealers under the state securities or Blue Sky laws of such jurisdictions
as you may request, to continue such qualification in effect so long as required
for distribution of the Securities and to file such consents to service of
process or other documents as may be necessary in order to effect such
registration or qualification.
(h) To mail and make generally available to its security holders as
soon as reasonably practicable a consolidated earnings statement covering a
period of at least twelve months after the effective date of the Registration
Statement (but in no event commencing later than 90 days after such date) which
shall satisfy the provisions of Section 11(a) of the Act, and to advise you in
writing when such statement has been so made available.
(i) During the period of five years after the date of this Agreement,
(i) to mail as soon as reasonably practicable after the filing of each report of
the Company on Form 10-K for each fiscal year to the record holders of its
Securities a financial report of the Company and its subsidiaries on a
consolidated basis (and a similar financial report of all unconsolidated
subsidiaries, if any), all such financial reports to include a consolidated
balance sheet, a consolidated statement of operations, a consolidated statement
of cash flows and a consolidated statement of shareholders' equity as of the end
of and for such fiscal year, together with comparable information as of the end
of and for the preceding year, certified by independent certified public
accountants, and (ii) to file with the Commission within the time required after
the end of each quarterly period (except for the last quarterly period of each
fiscal year) a consolidated balance sheet, a consolidated statement of
operations and a consolidated statement of cash flows (and similar financial
reports of all unconsolidated subsidiaries, if any) as of the end of and for
such period, and for the period from the beginning of such year to the close of
such quarterly period,
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together with comparable information for the corresponding periods of the
preceding year.
(j) During the period referred to in paragraph (i), to furnish to you
as soon as practicable a copy of each report or other publicly available
information of the Company mailed to the security holders of the Company or
filed with the Commission and such other publicly available information
concerning the Company and its subsidiaries as you may reasonably request.
(k) Whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, to pay all costs, expenses, fees
and taxes incident to (i) the preparation, printing, filing and distribution
under the Act of the Registration Statement (including financial statements and
exhibits), each preliminary prospectus and all amendments and supplements to any
of them prior to or during the period specified in paragraph (e), (ii) the
printing and delivery of the Prospectus and all amendments or supplements to it
during the period specified in paragraph (e), (iii) the printing and delivery of
this Agreement, the Blue Sky Memoranda and all other agreements, memoranda,
correspondence and other documents printed and delivered in connection with the
offering of the Securities (including in each case any disbursements of counsel
for the Underwriters relating to such printing and delivery), (iv) the
registration or qualification of the Securities for offer and sale under the
securities or Blue Sky laws of the several states (including in each case the
fees and disbursements of counsel for the Underwriters relating to such
registration or qualification and memoranda relating thereto), (v) filings and
clearance with the corporate financing division of the National Association of
Securities Dealers, Inc. in connection with the offering, (vi) the listing of
the Securities on The Nasdaq SmallCap Market, (vii) the performance by the
Company of its other obligations under this Agreement, including (without
limitation) the fees of the Trustee, the cost of its personnel and other
internal costs, the cost of printing and engraving the certificates representing
the Securities and any shares of Common Stock issuable upon conversion of the
Securities, and all expenses and taxes incident to the sale and delivery of the
Securities to the Underwriters, and (viii) furnishing such copies of the
Registration Statement, the Prospectus and all amendments and supplements
thereto as may be reasonably requested for use in connection with the offering
or sale of the Securities by the Underwriters or by dealers to whom Securities
may be sold.
(l) To use its best efforts to maintain the inclusion of the
Securities on The Nasdaq SmallCap Market and the Common Stock obtainable upon
conversion thereof on the Nasdaq National Market (or on a national securities
exchange) for a period of five years after the effective date of the
Registration Statement.
(m) During the period beginning on the date hereof and continuing to
and including the Closing Date, not to offer, sell, contract to sell or
otherwise dispose of any debt securities of the Company or warrants to purchase
debt securities of the Company
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substantially similar to the Securities (other than (i) the Securities and (ii)
commercial paper issued in the ordinary course of business), without your prior
written consent.
(n) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company prior to
the Closing Date and to satisfy all conditions precedent to the delivery of the
Securities.
(o) To timely complete all required filings and otherwise fully
comply in a timely manner with all provisions of the Exchange Act to effect the
registration of the Securities pursuant thereto, and to file on a timely basis
all reports and any definitive proxy or information statements required to be
filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of the Prospectus and for so
long as the delivery of a prospectus is required in connection with the offer or
sale of Securities.
(p) During the period beginning on the date of this Agreement and
continuing to and including the later of the Closing Date or the last Option
Closing Date, if any, to occur, not to enter into any transactions which are
material with respect to the Company and its subsidiaries, taken individually or
as a whole, other than those undertaken in the ordinary course of business, and,
except for regular dividends declared and paid consistently with past practices,
not to declare, pay or make any dividend or distribution of any kind on any
class of its capital stock.
(q) Not voluntarily to claim, and to actively resist any attempts to
claim, the benefit of any usury laws against the holders of the Securities.
6. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before or threatened by the Commission.
(b) (i) The Registration Statement, when the Registration Statement
became effective, at the date of the Prospectus (if different), at the Closing
Date and at each Option Closing Date, did not and will not contain and each such
part, as amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
the Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the Act
and (iii) the Prospectus does not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or
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<PAGE>
omit to state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, except
that the representations and warranties set forth in this paragraph (b) do not
apply to statements or omissions in the Registration Statement or the Prospectus
based upon information relating to any Underwriter furnished to the Company in
writing by such Underwriter through you expressly for use therein. The Company
acknowledges for all purposes under this Agreement that the statements with
respect to price and discount and the last paragraph on the cover page of the
Prospectus and the statements set forth in the ______ paragraph and the _______
and _______ sentence of the _______ paragraph under the caption "UNDERWRITING"
in the Prospectus constitute the only written information furnished to the
Company by or on behalf of any Underwriter through DLJ expressly for use in the
Registration Statement, the preliminary prospectus, or the Prospectus (or any
amendment or supplement to any of them) pertaining to any arrangement or
agreement with respect to any party other than the Underwriters, and that the
Underwriters shall not be deemed to have provided any other information.
(c) The documents incorporated by reference into the Prospectus, at
the time they were or hereafter are filed with the Commission, complied or when
so filed will comply, as the case may be, in all material respects with the
requirements of the Exchange Act, and, when read together with other information
in the Prospectus, did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were or are made, not misleading, except
that the representations and warranties set forth in this paragraph (c) do not
apply to statements or omissions in the Registration Statement or the Prospectus
based upon information relating to any Underwriter furnished to the Company in
writing by such Underwriter through you expressly for use therein.
(d) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, and each Registration Statement filed
pursuant to Rule 462(b) under the Act, if any, complied when so filed in all
material respects with the Act; and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations and
warranties set forth in this paragraph (d) do not apply to statements or
omissions in the Registration Statement or the Prospectus based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein.
(e) The Company and each of its material subsidiaries listed on Annex
A (the "Material Subsidiaries") has been duly incorporated, is validly existing
as a corporation in good standing under the laws of its jurisdiction of
incorporation and has the corporate power and authority to carry on its business
as it is currently being conducted and to own, lease and operate its properties,
and the Company and each of its domestic Material Subsidiaries is duly qualified
and is in good standing as a foreign corporation authorized to do business in
each jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the failures to be
so qualified would not, in the aggregate, have a material adverse effect on the
Company and its subsidiaries, taken as a whole. The Company has the requisite
power and authority to authorize the offering of the Securities, including the
Common Stock issuable upon conversion thereof, to execute, deliver and perform
this Agreement and to issue, sell and deliver the Securities, including the
Common Stock issuable upon conversion thereof.
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(f) All of the outstanding shares of capital stock of, or other
ownership interests in, each of the Company's subsidiaries have been duly
authorized and validly issued and are fully paid and non-assessable, and are
owned by the Company, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature. All offers and sale of the
outstanding Securities of capital stock of the Company were duly registered
under the Act and all applicable state securities laws or were made pursuant to
valid exemption from registration under the Act and all such other laws.
(g) The Securities have been duly authorized and, when executed and
authenticated in accordance with the provisions of the Indenture and delivered
to the Underwriters against payment therefor on the Closing Date and each Option
Closing Date, if any, as provided by this Agreement, will be entitled to the
benefits of the Indenture, and will be valid and binding obligations of the
Company, enforceable in accordance with their terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability. All of the shares of Common Stock to be issued upon
conversion of the Securities have been duly authorized and duly reserved for
issuance and, upon issuance of such shares upon conversion of Securities in
accordance with the terms of the Indenture, shall be validly issued, fully paid
and nonassessable.
(h) This Agreement has been duly authorized, executed and delivered
by the Company and is a valid and binding agreement of the Company enforceable
in accordance with its terms.
(i) The Indenture has been duly qualified under and conforms in all
material respects with the Trust Indenture Act of 1939, as amended (the "TIA"),
and has been duly authorized, executed and delivered by the Company and is a
valid and binding agreement of the Company, enforceable in accordance with its
terms except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii) rights
of acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability.
(j) The Securities and the Common Stock each conform as to legal
matters to the description thereof contained in the Prospectus.
(k) Neither the Company nor any of its subsidiaries is in violation
of its respective charter or by-laws or in default in the performance of any
obligation, agreement or condition contained in any bond, debenture, note or any
other evidence of indebtedness or in any other agreement, indenture or
instrument material to the conduct of the business of the Company and its
subsidiaries, taken as a whole, to which the Company or any of its subsidiaries
is a party or by which it or any of its subsidiaries or their respective
property is bound.
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(l) The execution, delivery and performance of this Agreement, the
Indenture and the Securities and compliance by the Company with all the
provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not require any consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body (except as such may be required under the
securities or Blue Sky laws of the various states) and will not conflict with or
constitute a breach of any of the terms or provisions of, or a default under,
the charter or by-laws of the Company or any of its subsidiaries or any
agreement, indenture or other instrument to which it or any of its subsidiaries
is a party or by which it or any of its subsidiaries or their respective
property is bound, or violate or conflict with any laws, administrative
regulations or rulings or court decrees applicable to the Company, any of its
subsidiaries or their respective property.
(m) Except as otherwise set forth or incorporated by reference in the
Prospectus, there are no material legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or of which any of their
respective property is the subject, and, to the best of the Company's knowledge,
no such proceedings are threatened or contemplated. No contract or document of a
character required to be described or incorporated by reference in the
Registration Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement is not so described incorporated or filed as required.
(n) Neither the Company nor any of its subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), nor any federal or
state law relating to discrimination in the hiring, promotion or pay of
employees nor any applicable federal or state wages and hours laws, nor any
provisions of the Employee Retirement Income Security Act or the rules and
regulations promulgated thereunder, which in any such case would reasonably be
expected to result in a material adverse change in the business, prospects,
financial condition or results of operation of the Company and its subsidiaries,
taken as a whole (a "MATERIAL ADVERSE EFFECT")
(o) The Company and each of its subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("PERMITS"), including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease and operate its respective
properties and to conduct its business; the Company and each of its subsidiaries
has fulfilled and performed all of its material obligations with respect to such
Permits and no event has occurred which allows, or after notice or lapse of time
would allow, revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such Permit; and, except as
described in the Prospectus, such Permits contain no restrictions that are
materially burdensome to the Company or any of its subsidiaries, taken as a
whole.
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(p) The Company and each of its subsidiaries owns, possesses or
reasonably expects to obtain in the ordinary course of business without giving
rise to a Material Adverse Effect, adequate rights with respect to its use of,
all patents, patent rights, inventions, trade secrets, know-how, proprietary
techniques, including possesses all substances, trademarks, service marks, trade
names and copyrights (collectively, "INTELLECTUAL PROPERTY") described or
referred to in the Prospectus (or in the documents incorporated by reference
therein) as owned or used by it, or which are necessary for the conduct of its
business as described in the Prospectus, other than Intellectual Property the
lack of which would not reasonably be expected to have a Material Adverse
Effect, and no such rights as are material to the business and prospects of the
Company and subsidiaries, taken as a whole, expire or are subject to termination
at the election of another party without the Company's consent at a time or
under circumstances which would have a Material Adverse Effect. Neither the
Company nor any of its subsidiaries has received any notice of infringement of
or conflict with asserted rights of others with respect to any patents, patent
rights, inventions, trade secrets, know-how, proprietary techniques, including
processes and substances, trademarks, service marks, trade names or copyrights
which, singly or in the aggregate, if the subject of an unfavorable ruling or
filing, would reasonably be expected to have a Material Adverse Effect.
(q) Except as otherwise set forth in the Prospectus or such as are
not material to the business, prospects, financial condition or results of
operation of the Company and its subsidiaries, taken as a whole, the Company and
each of its subsidiaries have good and marketable title, free and clear of all
liens, claims, encumbrances and restrictions except liens for taxes not yet due
and payable, to all property and assets described in the Registration Statement
as being owned by it. All leases to which the Company or any of its subsidiaries
is a party are valid and binding and no default has occurred or is continuing
thereunder, which might result in any material adverse change in the business,
prospects, financial condition or results of operation of the Company and its
subsidiaries taken as a whole, and the Company and its subsidiaries enjoy
peaceful and undisturbed possession under all such leases to which any of them
is a party as lessee with such exceptions as do not materially interfere with
the use made by the Company or such subsidiary.
(r) The Company and each of the Material Subsidiaries maintains
reasonably adequate insurance.
(s) KPMG Peat Marwick LLP are independent public accountants with
respect to the Company as required by the Act.
(t) The financial statements, together with related schedules and
notes, included in or incorporated by reference into and forming part of the
Registration Statement and the Prospectus (and any amendment or supplement
thereto), present fairly the consolidated financial position, results of
operations and changes in financial position of the Company and its subsidiaries
on the basis stated in the Registration Statement at the respective dates or for
the respective periods to which they apply; such statements and
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related schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein; and the other financial and statistical
information and data set forth or incorporated by reference in the Registration
Statement and the Prospectus (and any amendment or supplement thereto) is, in
all material respects, accurately presented and prepared in good faith on the
basis of the assumptions described in the Registration Statement and such
assumptions are reasonable and the adjustments used therein are appropriate to
give effect to the transactions and circumstances referred to therein.
(u) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(v) No holder of any security of the Company has any right to require
registration of shares of Common Stock or any other security of the Company in
the Registration Statement.
(w) The Company has complied with all provisions of Section 517.075,
Florida Statutes (Chapter 92-198, Laws of Florida).
(x) There are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities, commitments of sale or liens related to
or entitling any person to purchase or otherwise to acquire any shares of the
capital stock of, or other ownership interest in, the Company or any subsidiary
thereof except as otherwise disclosed in the Registration Statement or in the
documents incorporated by reference therein.
(y) The Company has filed a registration statement pursuant to
Section 12(g) of the Exchange Act, to register the Securities, has filed an
application to list the Securities on the Nasdaq SmallCap Market, and has
received notification that the listing has been approved, subject to notice of
issuance of the Securities.
(z) All material tax returns required to be filed by the Company and
each of its subsidiaries in any jurisdiction have been filed, other than those
filings being contested in good faith, and all material taxes, including
withholding taxes, penalties and interest, assessments, fees and other charges
due pursuant to such returns or pursuant to any assessment received by the
Company or any of its subsidiaries have been paid, other than those being
contested in good faith and for which adequate reserves have been provided.
7. Indemnification. (a) The Company agrees to indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), from and against any and
all losses, claims, damages, liabilities and judgments caused by any untrue
statement or alleged untrue statement of a material fact contained in or
incorporated by reference in the Registration Statement or the Prospectus (as
amended or supplemented if the Company shall have
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furnished any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information relating to any Underwriters
furnished in writing to the Company by or on behalf of any Underwriter through
you expressly for use therein; provided, however, that the foregoing indemnity
agreement with respect to any preliminary prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any such losses,
claims, damages and liabilities and judgments purchased Securities, or any
person controlling such Underwriter, if a copy of the Prospectus (as then
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Underwriter
to such person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the Securities to such person, and if the
Prospectus (as so amended and supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or judgment.
(b) In case any action shall be brought against any Underwriter or
any person controlling such Underwriter, based upon any preliminary prospectus,
the Registration Statement or the Prospectus or any amendment or supplement
thereto and with respect to which indemnity may be sought against the Company,
such Underwriter shall promptly notify the Company in writing, and the Company
shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to such indemnified party and payment of all fees and expenses. Any
Underwriter or any such controlling person shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Underwriter or such controlling person unless (i) the employment of such counsel
shall have been specifically authorized in writing by the Company, (ii) the
Company shall have failed to assume and diligently maintain the defense and
employ counsel or (iii) the named parties to any such action (including any
impleaded parties) include both such Underwriter or such controlling person, and
the Company and such Underwriter or such controlling person shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the Company
(in which case the Company shall not have the right to assume the defense of
such action on behalf of such Underwriter or such controlling person, it being
understood, however, that the Company shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all such Underwriters and controlling
persons, which firm shall be designated in writing by Donaldson, Lufkin &
Jenrette Securities Corporation and that all such fees and expenses shall be
reimbursed as they are incurred). The Company shall not be liable for any
settlement of any such action effected without its written consent but if
settled with the written consent of the Company, the Company agrees to indemnify
and hold harmless any Underwriter and any such controlling person from and
against any loss or liability by
13
<PAGE>
reason of such settlement. Notwithstanding the immediately preceding sentence,
if in any case where the fees and expenses of counsel are at the expense of the
indemnifying party and an indemnified party shall have requested the
indemnifying party to reimburse the indemnified party for such fees and expenses
of counsel as incurred, such indemnifying party agrees that it shall be liable
for any settlement of any action effected without its written consent if (i)
such settlement is entered into more than thirty business days after the receipt
by such indemnifying party of the aforesaid request and (ii) such indemnifying
party shall have failed to reimburse the indemnified party in accordance with
such request for reimbursement prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and any person controlling the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent
as the foregoing indemnity from the Company to each Underwriter but only with
reference to information relating to such Underwriter furnished in writing by or
on behalf of such Underwriter through you expressly for use in the Registration
Statement, the Prospectus or any preliminary prospectus. In case any action
shall be brought against the Company, any of its directors, any such officer or
any person controlling the Company based on the Registration Statement, the
Prospectus or any preliminary prospectus and in respect of which indemnity may
be sought against any Underwriter, the Underwriter shall have the rights and
duties given to the Company (except that if the Company shall have assumed the
defense thereof, such Underwriter shall not be required to do so, but may employ
separate counsel therein and participate in the defense thereof but the fees and
expenses of such counsel shall be at the expense of such Underwriter), and the
Company, its directors, any such officers and any person controlling the Company
shall have the rights and duties given to the Underwriter, by Section 7(b)
hereof, mutatis mutandis.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Underwriters on the other hand from the offering of the Securities or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Underwriters in connection with the statements or omissions which resulted
in such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations.
14
<PAGE>
The relative benefits received by the Company and the Underwriters shall be
deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company, and the total underwriting
discounts and commissions received by the Underwriters, bear to the total price
to the public of the Securities, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault of the Company and the
Underwriters shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the Company or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 7(d) are several in proportion to the respective number
of Securities purchased by each of the Underwriters hereunder and not joint.
8. Conditions of Underwriters' Obligations. The several obligations
of the Underwriters to purchase the Securities under this Agreement are subject
to the satisfaction of each of the following conditions on the Closing Date and,
as applicable, each Option Closing Date:
(a) All the representations and warranties of the Company contained
in this Agreement shall be true and correct on the date hereof and the Closing
Date and each Option Closing Date, if applicable, with the same force and effect
as if made on and as of the Closing Date. The Company shall have performed or
complied with all obligations and agreements herein contained and required to be
performed or complied with by it at or prior to the Closing Date and such Option
Closing Date, if applicable.
(b) The Registration Statement shall have become effective not later
than 5:00 P.M. (and in the case of a Registration Statement filed under Rule
462(b) of the Act,
15
<PAGE>
not later than 10:00 p.m.), New York City time, on the date of this Agreement or
at such later date and time as you may approve in writing, and at the Closing
Date and each Option Closing Date, if applicable, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date and each Option Closing Date, if applicable, there
shall not have been any downgrading, nor shall any notice have been given of any
intended or potential downgrading or of any review for a possible change that
does not indicate the direction of the possible change, in the rating accorded
any of the Company's securities by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule 436(g)(2) under the
Securities Act.
(d)(i) Since the date of the latest balance sheet included in the
Registration Statement and the Prospectus, there shall not have been any
material adverse change, or any development involving a prospective material
adverse change, in the condition, financial or otherwise, or in the earnings,
affairs or business prospects, whether or not arising in the ordinary course of
business, of the Company, (ii) since the date of the latest balance sheet
included in the Registration Statement and the Prospectus there shall not have
been any change, or any development involving a prospective material adverse
change, in the capital stock or in the long-term debt of the Company from that
set forth in the Registration Statement and Prospectus, (iii) the Company and
its subsidiaries shall have no liability or obligation, direct or contingent,
which is material to the Company and its subsidiaries, taken as a whole, other
than those reflected in the Registration Statement and the Prospectus and (iv)
on the Closing Date you shall have received a certificate dated the Closing
Date, signed by Andrew J. Filipowski and Michael P. Cullinane, in their
capacities as the Chief Executive Officer and Chief Financial Officer of the
Company, respectively, confirming the matters set forth in paragraphs (a), (b),
(c) and (d) of this Section 8.
(e) You shall have received on the Closing Date and each Option
Closing Date, if applicable, an opinion (satisfactory to you and counsel for the
Underwriters), dated the Closing Date, of Katten, Muchin & Zavis, counsel for
the Company, to the effect that:
(i) the Company and each of its subsidiaries has been duly
incorporated, is existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and has the corporate power and
authority required to carry on its business as it is currently being conducted
and to own, lease and operate its properties as described in the Prospectus;
(ii) the Company has the requisite power and authority to
execute, deliver and perform this Agreement and to authorize, issue and sell the
Securities as
16
<PAGE>
contemplated by this Agreement (and the underlying Common Stock, as contemplated
by the Indenture);
(iii) the Company and each of its Material Subsidiaries is duly
qualified and is in good standing as a foreign corporation authorized to do
business in each jurisdiction listed opposite its name in Annex A;
(iv) the shares of Common Stock, par value $0.01 per share,
initially issuable upon conversion of the Securities have been duly authorized
and reserved for issuance upon conversion of the Securities, are free of
preemptive rights and, when issued upon conversion of the Securities in
accordance with the terms of this Indenture, will be validly issued, fully paid
and non-assessable;
(v) all of the outstanding shares of capital stock of, or other
ownership interests in, each of the Company's Material Subsidiaries have been
duly and validly authorized and issued and are fully paid and non-assessable,
and are owned by the Company, free and clear of any security interest, claim,
lien, encumbrance or adverse interest of any nature;
(vi) the Securities have been duly authorized and, when executed
and authenticated in accordance with the provisions of the Indenture and
delivered to and paid for by the Underwriters in accordance with the terms of
this Agreement, will be entitled to the benefits of the Indenture and will be
valid and binding obligations of the Company enforceable in accordance with
their terms except as (a) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
(b) rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability;
(vii) this Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the Company
enforceable in accordance with its terms (except as rights to indemnity and
contribution hereunder may be limited by applicable law);
(viii) the Indenture has been duly qualified under the Trust
Indenture Act of 1939, as amended, and has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the Company,
enforceable in accordance with its terms except as (a) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (b) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of general
applicability;
(ix) the Registration Statement has become effective under the
Act, no stop order suspending its effectiveness has been issued and no
proceedings for
17
<PAGE>
that purpose are, to the knowledge of such counsel, pending before or
contemplated by the Commission and any required filing of the Prospectus
pursuant to Rule 424(b) under the Act has been made in accordance with Rule
424(b) and 430A under the Act;
(x) the statements under the captions "_______________",
"_______________", "_______________", "_______________", "_______________",
"_______________", "DESCRIPTION OF SECURITIES" and "UNDERWRITING" in the
Prospectus, as amended or supplemented, and Items 14 and 15 of Part II of the
Registration Statement insofar as such statements constitute a summary of legal
matters documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters, documents and
proceedings;
(xi) the statements set forth in the Prospectus under the
heading "CERTAIN FEDERAL INCOME TAX CONSIDERATIONS," insofar as such statements
constitute a summary of legal matters, are accurate in all material respects;
(xii) the execution, delivery and performance of this
Agreement, the Indenture and the Securities and compliance by the Company with
all the provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not require any consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body (except as such may be required under the
securities or Blue Sky laws of the various states) and will not conflict with or
constitute a breach of any of the terms or provisions of, or a default under,
the charter or by-laws of the Company or any of its subsidiaries or any
agreement, indenture or other instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
their respective properties is bound, or violate or conflict with any rulings or
court decrees applicable to the Company or any of its subsidiaries or their
respective properties;
(xiii) after due inquiry, such counsel does not know of any legal
or governmental proceeding pending or threatened to which the Company or any of
its subsidiaries is a party or to which any of their respective property is
subject which is required to be described in the Registration Statement or the
Prospectus or the documents incorporated by reference therein and is not so
described, or of any contract or other document which is required to be
described or incorporated in the Registration Statement or the Prospectus
18
<PAGE>
or is required to be filed as an exhibit to the Registration Statement which is
not described or incorporated or filed as required;
(xiv) the Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended;
(xv) the Registration Statement (including any Registration
Statement filed under 462(b) of the Act, if any) and the Prospectus and any
supplement or amendment thereto (except for financial statements as to which no
opinion need be expressed) comply as to form in all material respects with the
Act.
Such counsel shall also confirm that it has no reason to believe that
(except for financial statements, as aforesaid and except for that part of the
19
<PAGE>
Registration Statement that constitutes the Form T-1) the Registration Statement
and the prospectus included therein at the time the Registration Statement
became effective contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus, as amended or
supplemented, if applicable (except for financial statements, as aforesaid)
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
In giving such confirmation with respect to the matters covered by the
preceding paragraph, such counsel may state that their confirmation and belief
are based upon their participation in the preparation of the Registration
Statement and Prospectus and any amendments or supplements thereto and review
and discussion of the contents thereof, but are without independent check or
verification except as specified.
The opinion of Katten, Muchin & Zavis described in paragraph (e) above
shall be rendered to you at the request of the Company and shall so state
therein.
(f) You shall have received on the Closing Date and each Option
Closing Date, if applicable, an opinion, dated the Closing Date, of Sachnoff &
Weaver, Ltd., counsel for the Underwriters, as to the matters referred to in
clauses (vi), (vii), (viii), (x) (but only with respect to the statements under
the caption "Description of Securities" and "Underwriting") and (xx) of the
foregoing paragraph (e). In giving such opinion with respect to the matters
covered by clause (xvii) such counsel may state that their opinion and belief
are based upon their participation in the preparation of the Registration
Statement and Prospectus and any amendments or supplements thereto and review
and discussion of the contents thereof, but are without independent check or
verification except as specified.
(g) You shall have received a letter on and as of the Closing Date,
in form and substance satisfactory to you, from KPMG Peat Marwick LLP,
independent public accountants, with respect to the financial statements and
certain financial information contained in the Registration Statement and the
Prospectus and substantially in the form and substance of the letter delivered
to you by KPMG Peat Marwick LLP, on the date of this Agreement.
(h) The Company shall not have failed at or prior to the Closing Date
(or any Option Closing Date, if applicable) to perform or comply with any of the
agreements herein contained and required to be performed or complied with by the
Company at or prior to the Closing Date or any Option Closing Date, if
applicable.
9. Effective Date of Agreement and Termination. This Agreement
shall become effective upon the later of (i) execution of this Agreement and
(ii) when notification of the effectiveness of the Registration Statement has
been released by the Commission.
20
<PAGE>
This Agreement may be terminated at any time prior to the Closing Date
by you by written notice to the Company if any of the following has occurred:
(i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or
development involving a prospective material adverse change in the condition,
financial or otherwise, of the Company and its subsidiaries or the earnings,
affairs, or business prospects of the Company or any of its subsidiaries taken
as a whole, whether or not arising in the ordinary course of business, which
would, in your judgment, make it impracticable to market the Securities on the
terms and in the manner contemplated in the Prospectus, (ii) any outbreak or
escalation of hostilities or other national or international calamity or crisis
or change in economic conditions or in the financial markets of the United
States or elsewhere that, in your judgment, is material and adverse and would,
in your judgment, make it impracticable to market the Shares on the terms and in
the manner contemplated in the Prospectus, (iii) the suspension or material
limitation of trading in securities on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq National Market or limitation on prices for
securities on any such exchange or Nasdaq National Market, (iv) the enactment,
publication, decree or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority which in
your opinion materially and adversely affects, or will materially and adversely
affect, the business or operations of the Company or any of its subsidiaries,
(v) the declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in your
opinion has a material adverse effect on the financial markets in the United
States.
If on the Closing Date or any Option Closing Date any one or more of
the Underwriters shall fail or refuse to purchase the Securities which it or
they have agreed to purchase hereunder on such date and the aggregate number of
Securities which such defaulting Underwriter or Underwriters, as the case may
be, agreed but failed or refused to purchase is not more than one-tenth of the
total number of Securities to be purchased on such date by all Underwriters,
each non-defaulting Underwriter shall be obligated severally, in the proportion
which the number of Securities set forth opposite its name in Schedule I bears
to the total number of Securities which all the non-defaulting Underwriters, as
the case may be, have agreed to purchase, or in such other proportion as you may
specify, to purchase the Securities which such defaulting Underwriter or
Underwriters, as the case may be, agreed but failed or refused to purchase on
such date; provided that in no event shall the number of Securities which any
Underwriter has agreed to purchase pursuant to Section 2 hereof be increased
pursuant to this Section 9 by an amount in excess of one-ninth of such number of
Securities without the written consent of such Underwriter. If on the Closing
Date or any Option Closing Date any Underwriter or Underwriters shall fail or
refuse to purchase Securities and the aggregate number of Securities with
respect to which such default occurs is more than one-tenth of the aggregate
number of Securities to be purchased on such date by all Underwriters and
arrangements satisfactory to you and the Company for purchase of such Securities
are not
21
<PAGE>
made within 48 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter and the Company. In any
such case which does not result in termination of this Agreement, either you or
the Company shall have the right to postpone the Closing Date or such Option
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting Underwriter from liability in respect
of any default of any such Underwriter under this Agreement.
10. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (a) if to the Company, to PLATINUM
technology, inc., 1815 South Meyers Road, Oakbrook Terrace, Illinois 60181,
Attn: General Counsel, and (b) if to any Underwriter or to you, to you c/o
Donaldson, Lufkin & Jenrette Securities Corporation, 140 Broadway, New York, New
York 10005, Attention: Syndicate Department, or in any case to such other
address as the person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, its officers and directors and
of the several Underwriters set forth in or made pursuant to this Agreement
shall remain operative and in full force and effect, and will survive delivery
of and payment for the Securities, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of any Underwriter or
by or on behalf of the Company, the officers or directors of the Company or any
controlling person of the Company, (ii) acceptance of the Securities and payment
for them hereunder and (iii) termination of this Agreement.
If this Agreement shall be terminated by the Underwriters because of
any failure or refusal on the part of the Company to comply with the terms or to
fulfill any of the conditions of this Agreement, the Company agrees to reimburse
the several Underwriters for all out-of-pocket expenses (including the fees and
disbursements of counsel) reasonably incurred by them.
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the
Underwriters, any controlling persons referred to herein and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Securities from any of the several Underwriters merely because of
such purchase.
THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS (WITHOUT GIVING EFFECT TO CONFLICTS OF LAW PRINCIPLES) OF THE
STATE OF NEW YORK.
22
<PAGE>
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
PLATINUM technology, inc.
By______________________________
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
HAMBRECHT & QUIST, LLC
ROBERTSON, STEPHENS & COMPANY
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By__________________________
23
<PAGE>
SCHEDULE I
----------
Principal Amount of
Underwriters Securities to be Purchased
------------ --------------------------
Donaldson, Lufkin & Jenrette $
Securities Corporation
Hambrecht & Quist, LLC
Robertson Stephens & Company
______________________
Total $
=====================
24
<PAGE>
Exhibit 5
November 5, 1996
PLATINUM technology, inc.
1815 South Meyers Road
Oakbrook Terrace, Illinois 60181
RE: REGISTRATION STATEMENT ON FORM S-3
----------------------------------
Ladies and Gentlemen:
We have acted as counsel for PLATINUM technology, inc., a Delaware
corporation (the "Company"), in connection with the preparation and filing of a
registration statement on Form S-3 (the "Registration Statement") with the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
The Registration Statement relates to the Company's public offering (the
"Offering") of up to $97,750,000 in principal amount of the Company's ___%
convertible subordinated notes, including the up to $12,750,000 in principal
amount of the Company's ___% convertible subordinated notes issuable upon
exercise of the Underwriters' over-allotment option (collectively, the "Notes"),
and the shares of the Company's common stock, $.001 par value per share, which
may be issued upon conversion of the Notes (the "Conversion Shares").
In connection with this opinion, we have relied as to matters of fact,
without investigation, upon certificates of public officials and others and upon
affidavits, certificates and written statements of directors, officers and
employees of, and the accountants and transfer agent for, the Company. We have
also examined originals or copies, certified or otherwise identified to our
satisfaction, of such instruments, documents and records as we have deemed
relevant and necessary to examine for the purpose of this opinion, including (a)
the Registration Statement, (b) the Restated Certificate of Incorporation of the
Company, as amended, (c) the By-Laws of the Company, (d) resolutions adopted by
the Board of Directors of the Company in connection with the Offering, (e) the
form of Indenture between the Company and American National Bank and Trust
Company of Chicago, as Trustee, relating to the Notes (the "Indenture"), (f) the
form of Note attached as Exhibit A to the form of Indenture, and (g) the form
of Underwriting Agreement between the Company and Donaldson, Lufkin & Jenrette
Securities Corporation, Hambrecht & Quist LLC and Robertson, Stephens & Company
LLC, as representatives of the several Underwriters.
In connection with this opinion, we have assumed the accuracy and
completeness of all documents and records that we have reviewed, the genuineness
of all signatures, the authenticity of the documents submitted to us as
originals and the conformity to authentic original documents
<PAGE>
PLATINUM technology, inc.
November 5, 1996
Page 2
of all documents submitted to us as certified, conformed or reproduced copies.
We have further assumed that all natural persons involved in the Offering as
contemplated by the Registration Statement have sufficient legal capacity to
enter into and perform their respective obligations and to carry out their roles
in the Offering.
Based upon and subject to the foregoing, it is our opinion that:
(1) The $97,750,000 in principal amount of Notes covered by the
Registration Statement (including the up to $12,750,000 in principal amount of
Notes issuable upon exercise of the Underwriters' over-allotment option), when
issued by the Company pursuant to the Indenture, will be legally issued and
binding obligations of the Company under the terms of the Indenture, except (i)
as enforceability may be limited by the effects of bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar laws affecting the
rights and remedies of creditors generally; (ii) as enforceability may be
limited by the effects of general principles of equity, whether applied by a
court of law or equity; (iii) as rights to indemnity or contribution under the
same may be limited by federal or state securities laws or the public policy
underlying such laws; and (iv) that we express no opinion as to the waiver of
the defense of usury; and
(2) The Conversion Shares, when issued by the Company upon the conversion
of outstanding Notes in accordance with their terms and the terms of the
Indenture, will be validly issued, fully paid and non-assessable.
Our opinions expressed above are limited to the General Corporation Law of
the State of Delaware and the laws of the State of New York, and we do not
express any opinion concerning any other laws. This opinion is given as of the
date hereof and we assume no obligation to advise you of changes that may
hereafter be brought to our attention.
We hereby consent to use of our name under the heading "Legal Matters" in
the Prospectus forming a part of the Registration Statement and to use of this
opinion for filing as Exhibit 5 to the Registration Statement.
Very truly yours,
/s/ KATTEN MUCHIN & ZAVIS
<PAGE>
EXHIBIT 12.2
PLATINUM technology, inc.
Ratio of Total Debt to Total Capitalization
(in thousands)
<TABLE>
<CAPTION>
As of September 30, 1996
-------------------------------
Actual As Adjusted (1)
<S> <C> <C>
Total Debt:
- ----------
Short-term debt and current maturities of
long-term debt 10,848 10,848
Long-term obligations and acquisition-related
payables, less current portion 8,957 93,957
----------- -----------
Total Debt 19,805 104,805
----------- -----------
Total Capitalization:
- --------------------
Long-term obligations and acquisition-related
payables, less current portion 8,957 93,957
Stockholders' Equity 263,011 263,011
----------- -----------
Total Capitalization 271,968 356,968
----------- -----------
Ratio of Total Debt to Total Capitalization 0.07 0.29
=========== ===========
</TABLE>
(1) Adjusted to reflect the issuance and sale of the Notes from this offering.
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS CONSENT
We consent to the use of our reports dated March 29, 1996, relating to the
consolidated balance sheets of PLATINUM technology, inc. and subsidiaries as of
December 31, 1994 and 1995, and the related statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1995, and related schedule, included herein and to the
reference to our firm under the headings "Selected Financial Data" and "Experts"
in the prospectus. Our report was based in part on the reports of other
auditors.
KPMG PEAT MARWICK LLP
Chicago, Illinois
October 30, 1996
<PAGE>
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
FOR STATEMENTS OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939
OF CORPORATIONS DESIGNATED TO ACT AS TRUSTEES
AMERICAN NATIONAL BANK AND TRUST COMPANY
OF CHICAGO
(Name of Trustee)
36-0727623
(I.R.S. employer identification No.)
33 NORTH LASALLE STREET, CHICAGO, ILLINOIS
(Address of principal executive offices)
60690
(zip code)
PLATINUM TECHNOLOGY, INC.
(Name of obligor)
DELAWARE 36-35-9662
(State or other jurisdiction of (I.R.S. employer identification No.)
incorporation or organization)
1815 South Meyers Road
Oakbrook Terrace, Illinois 60181
(Address of principal executive offices) (zip code)
___% SECURED NOTES
DUE 2001
(Title of Indenture Securities)
<PAGE>
GENERAL
1. General information. Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Comptroller of the Currency, Washington, D.C.
Director of Financial Institutions, State of Illinois, Springfield,
Illinois (as to Trust Department only).
Chicago Clearing House Association, 164 West Jackson Boulevard,
Chicago, Illinois.
Federal Deposit Insurance Corporation, Washington, D.C.
The Board of Governors of the Federal Reserve System, Washington, D.C.
(b) Whether it is authorized to execute corporate trust powers.
The trustee is authorized to execute corporate trust powers.
2. Affiliations with obligor and underwriters. If the obligor or any
underwriter for the obligor is an affiliate of the trustee, describe each
affiliation.
No such affiliation exists. See Note, page 4 hereof.
12. Indebtedness of the Obligor to the Trustee.
As of October 31, 1996:
<TABLE>
<CAPTION>
Nature of Indebtedness Amount Outstanding Date Due
---------------------- ------------------ --------
<S> <C> <C>
Line of Credit $ .00 12/31/96
Standby Letter of Credit* $400,000.00 3/31/97
Standby Letter of Credit* $160,000.00 3/31/97
Standby Letter of Credit* $125,000.00 3/31/97
Standby Letter of Credit* $492,997.20 3/31/97
Corporate Visa $ .00 12/31/96
*Unsecured
</TABLE>
13. Defaults by the Obligor.
None.
15. Foreign Trustee.
Not applicable.
2
<PAGE>
16. List of Exhibits.
Exhibit 1 A copy of the existing Articles of Association of the trustee.
(Filed herewith).
Exhibit 1(a) A copy of Certificate of Change of Name.*
Exhibit 2 A copy of the Certificate of Authority to commence business.*
Exhibit 3 A copy of the authorization to exercise corporate trust powers.*
Exhibit 4 A copy of existing by-laws of the trustee. (Filed herewith).
Exhibit 5 None.
Exhibit 6 The Consent of the trustee required by Section 321(b) of the Act.
(Filed herewith).
Exhibit 7 A copy of the latest report of condition of the trustee published
pursuant to law or requirements of its supervising authority.
(Filed herewith).
* These Exhibits are hereby incorporated by reference to Exhibits bearing
identical Exhibit numbers submitted by this trustee in its statement of
eligibility and qualification filed with Securities and Exchange Commission
with respect to the Indianapolis Power & Light Company First Mortgage
Bonds, 5-1/8% Series due July 1996, Securities and Exchange Commission
Registration No. 2-24581.
3
<PAGE>
NOTE
The answer to item 2 is based on incomplete information. To the best of our
knowledge and belief, however, there is no person, firm or corporation
ordinarily engaged in underwriting securities of the obligor:
(1) which is an affiliate of the trustee;
(2) of which any director or executive officer of the trustee is a
director, officer, partner, employee, appointee or representative;
(3) which individually owns, beneficially, more that 1% of the outstanding
Common Stock of the trustee or First Chicago NBD Corporation;
(4) whose securities are owned beneficially by the trustee as collateral
security for obligations in default.
This statement may therefore be considered as correct unless amended
contemporaneously with the filing by the obligor of the Amendment or Supplement
to its Registration Statement disclosing underwriters for the Indenture
securities.
4
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, a corporation
organized and existing under the laws of the United States of America, has duly
caused this Statement of Eligibility and Qualification to be signed on its
behalf by the undersigned thereunto duly authorized, all in the City of Chicago,
State of Illinois, on the 31st day of October, 1996.
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO
By: /s/ Dana L. Brink
-----------------------------
Its: Vice President
-----------------------------
5
<PAGE>
State of Illinois )
County of Cook )
The Undersigned, Dana L. Brink, hereby certifies that she is a duly
appointed and qualified Vice President of American National Bank and Trust
Company of Chicago, a corporation duly organized and existing as a national
banking association under the laws of the United States of America, and has
authority to execute this Certificate.
She further certifies that attached to this certificate are true and
correct copies of Amended Articles of Association and the By-Laws of said
Association, that said Articles and By-Laws were duly adopted by the Board of
Directors of said Association, and that said Amended Articles and By-Laws have
never been repealed and are still in full force and effect.
She further certifies that the Seal affixed to this certificate is the
corporate seal of said Association.
In witness whereof, the undersigned has set her hand and has affixed the
corporate seal of said association, this 31st day of October, 1996.
By: /s/ Dana L. Brink
------------------------
Dana L. Brink
Its: Vice President
--------------
(Seal)
6
<PAGE>
EXHIBIT 1
Amended Articles of Association
of
AMERICAN NATIONAL BANK AND TRUST COMPANY
OF CHICAGO
Charter No. 13216
<PAGE>
Amended Articles of Association
of
American National Bank and Trust Company
of Chicago
Charter No. 13216
First. The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "American National Bank
and Trust Company of Chicago."
Second. The place where the main banking house or office of this Association
shall be located, its operations of discount and deposit carried on, and its
general business conducted, shall be Chicago, County of Cook, State of Illinois.
Third. The Board of Directors of this Association shall consist of such
number of its shareholders, not less than five nor more than twenty-five, as
from time to time shall be determined by a majority of the votes to which all of
its shareholders are at the time entitled. By vote of a majority of the full
Board of Directors, the Board may increase such number, within such maximum
limit, by not more than two and appoint a person or persons to fill the
resulting vacancy or vacancies between meetings of the shareholders. A majority
of the Board of Directors shall be necessary to constitute a quorum for the
transaction of business.
Fourth. The regular annual meeting of the shareholders of this Association
shall be held at its main banking house, or such other convenient place as shall
be duly authorized by the Board of Directors, on such day of each year as is
specified therefor, in the By-Laws of the Association, at which meeting a Board
of Directors shall be elected; but if no such election shall be held on that
day, it may be held on any subsequent day, in accordance with the provisions of
the banking laws of the United States.
Fifth. The amount of capital stock of this Association shall be divided into
2,000,000 shares of common stock of the par value of Ten Dollars ($10) each; but
said capital stock may be increased or decreased from time to time, in
accordance with the provisions of the laws of the United States.
If the capital stock is increased by the sale of additional shares thereof, each
shareholder shall be entitled to subscribe for such additional shares in
proportion to the number of shares of said capital stock owned by him at the
time the increase is authorized by the shareholders, unless another time
subsequent to the date of the shareholders' meeting is specified in a resolution
adopted by the shareholders at the time the increase is authorized. The Board of
Directors shall have the power to prescribe a reasonable
<PAGE>
period of time within which the pre-emptive rights to subscribe to the new
shares of capital stock must be exercised.
If the capital stock is increased by a stock dividend, each shareholder shall be
entitled to his proportionate amount of such increase in accordance with the
number of shares of capital stock owned by him at the time the increase is
authorized by the shareholders, unless another time subsequent to the date of
the shareholders' meeting is specified in a resolution adopted by the
shareholders at the time the increase is authorized.
Sixth. The Board of Directors shall appoint one of its members President of
this Association, who shall be Chairman of the Board; but the Board of Directors
may appoint a Director, in lieu of the President, to be Chairman of the Board,
who shall perform such duties as may be designated by the Board of Directors.
The Board of Directors shall have the power to appoint one or more Vice-
Presidents, at least one of whom shall also be a member of the Board of
Directors, and who shall be authorized, in the absence of the President, to
perform all acts and duties pertinent to the office of President, except such as
the President only is authorized by law to perform; to appoint a Cashier and
such other officers as may be required to transact the business of this
Association; to fix the salaries to be paid to all officers of this Association;
and to dismiss such officers, or any of them.
The Board of Directors shall have the power to define the duties of officers and
employees of this Association, to require bonds from them, and to fix the
penalty thereof; to regulate the manner in which Directors shall be elected or
appointed, and to appoint judges of the election; to make all by-laws that it ma
be lawful for them to make for the general regulation of the business of this
Association and the management of its affairs; and generally to do and perform
all acts that it may be lawful for a Board of Directors to do and perform.
Any person made a party to any actions, suit or other proceeding, civil or
criminal, by reason of the fact that he is or was a director, officer, or
employee of the Association shall be indemnified by the Association against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorney's fees, actually and necessarily incurred by him in connection with the
defense of such proceeding, or in connection with any appeal therein, except in
relation to (i) any matter as to which it shall be adjudged in such proceeding
that he is liable for negligence or misconduct in the performance of his duties
to the Association, provided that in the case of a criminal action, suit, or
proceeding, a conviction or judgment shall not be deemed an adjudication that
the director, officer, or employee is liable for negligence or misconduct in the
performance of his duties to the Association if it shall be determined that he
was acting in good faith in what he considered to be the best interests of the
Association and without reasonable cause to know that his acts were illegal; or
(ii) any matter settled or compromised unless it shall be determined that there
is not reasonable ground for such
<PAGE>
person being adjudged liable for negligence or misconduct in the performance of
his duties to the Association. All such determinations hereunder shall be made
by a majority of those members of the Board of Directors who were not parties to
such proceeding, or by one or more disinterested persons to whom the question
shall be referred by the Board of Directors. Such right of indemnification shall
not be deemed exclusive of any other rights to which such director, officer, or
employee may be entitled apart from this provision.
Seventh. This Association shall have succession from the date of its
organization certificate until such time as it be dissolved by the act of its
shareholders in accordance with the provisions of the banking laws of the United
States, or until its franchise becomes forfeited by reason of violation of law,
or until terminated by either a general or a special act of Congress, or until
its affairs be placed in the hands of a receiver and finally wound up by him.
Eighth. The Board of Directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten per centum of the stock
of this association, may call a special meeting of shareholders at any time:
Provided, however, that, unless otherwise provided by law, not less than ten
days prior to the date fixed for any such meeting, a notice of the time, place,
and purpose of the meeting shall be given by first-class mail, postage prepaid,
to all shareholders of record of this Association at their respective addresses
as shown upon the books of the Association. These Articles of Association may be
amended at any regular or special meeting of the shareholders by the affirmative
vote of the shareholders owning at least a majority of the stock of this
Association, subject to the provisions of the banking laws of the United States.
The notice of any shareholders' meeting, at which an amendment to the Articles
of Association of this Association is to be considered, shall be given as
hereinabove set forth.
* * *
Certified to be a true copy of the Articles of Association of American National
Bank and Trust Company of Chicago, as amended, now in force and effect.
Date: October 31, 1996
---------- --
(Seal) /s/ Dana L. Brink
--------------------------
Vice President
<PAGE>
================================================================================
By-Laws
of
[LOGO OF AMERICAN NATIONAL BANK]
American National Bank
and Trust Company of Chicago
(AS AMENDED AND RESTATED FEBRUARY 2, 1996)
CHARTER NO. 13216
================================================================================
February, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article I Meetings of Shareholders ................................ 1
Article II Directors ............................................... 2
Article III Officers ................................................ 4
Article IV Transfers of Real Estate ................................ 5
Article V Contracts and Voting .................................... 5
Article VI Authority to Sell Stocks, Bonds, etc. ................... 6
Article VII Stock Certificates & the Transfer Thereof ............... 6
Article VIII Increase of Stock ....................................... 7
Article IX Banking Hours ........................................... 7
Article X Seal .................................................... 8
Article XI Trust Department ........................................ 8
Article XII Amendments of By-Laws ................................... 9
</TABLE>
<PAGE>
BY-LAWS
OF
AMERICAN NATIONAL BANK AND TRUST COMPANY
OF CHICAGO
(AS AMENDED AND RESTATED FEBRUARY 2, 1996)
CHARTER NO. 13216
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETINGS. The annual meeting of shareholders shall be held
on the first Friday of February each year or at such other date as is from time
to time designated by the Board of Directors (the "Board"), for the purpose of
electing directors and the transaction of such other business as may come before
the meeting. If the election of directors shall not be held on the day
designated for the annual meeting, or at any adjournment thereof, the Board
shall cause the election to be held at a meeting of the shareholders as soon
thereafter as possible.
SECTION 2. SPECIAL MEETINGS. The Board, or shareholders owning in the
aggregate not less than 10 percent of the stock of the Bank, may call a special
meeting of shareholders at any time for the purpose or purposes stated in the
call of the meeting.
SECTION 3. PLACE OF MEETINGS. Shareholder meetings shall be held at the main
banking office of the Bank or at such other convenient place established by the
Board.
SECTION 4. NOTICE OF MEETINGS. The Chairman of the Board or the Secretary
shall give written notice stating the place, day and hour of each meeting of
shareholders and, in case of a special meeting, the purpose or purposes for
which the meeting is called. Such notice shall be delivered not less than ten,
nor more than forty days before the date of the meeting, either personally or by
mail to each shareholder of record entitled to vote at such meeting. If mailed,
such notices shall be deemed to be delivered when deposited in the United States
mail, addressed to the shareholder at his address as it appears on the records
of the Bank with postage thereon prepaid. Such notice may be waived in writing.
SECTION 5. PRESIDING OFFICER. The Chairman of the Board, if present, shall
preside at all shareholder meetings. In the Chairman's absence, the President,
if present, shall preside. In the absence of the Chairman and President, the
shareholders may elect a Chairman pro tem to preside at the meeting.
<PAGE>
SECTION 6. QUORUM; MAJORITY VOTE. A majority of the outstanding shares of
stock, represented in person or by proxy, shall constitute a quorum at any
meeting of the shareholders, provided that if less than a majority of the
outstanding shares of stock are represented at said meeting, a majority of the
shares of stock so represented may adjourn the meeting from time to time without
further notice. If a quorum is present, the affirmative vote of the majority of
shares represented at the meeting shall be the act of the shareholders.
SECTION 7. PROXIES. Proxies may be secured for annual and special meetings,
shall be dated, and shall be filed with the Secretary of the Bank before or at
the time of the meeting. At all meetings of the shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his attorney-in-fact.
No proxy shall be valid eleven months from the date of its execution, unless
otherwise provided in the proxy. No officer or employee of the Bank may act as
proxy.
SECTION 8. VOTING RIGHTS. Each outstanding share shall be entitled to one vote
on each matter submitted to a vote at a meeting of shareholders.
SECTION 9. CONSENT OF SHAREHOLDERS IN LIEU OF ANNUAL OR SPECIAL MEETING.
Unless otherwise restricted by the Articles of Association or by law, any action
which may be taken at any annual or special shareholder meeting may be taken
without a meeting, without prior notice and without a vote, if written consent
setting forth the action so taken shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those shareholders who did not give written consent.
ARTICLE II
DIRECTORS
SECTION 1. AUTHORITY. The property and business of the Bank shall be managed
by the Board, which shall have all of the powers conferred by law, the Articles
of Association and these by-laws.
SECTION 2. NUMBER. The Board shall at all times consist of not less than five
nor more than twenty-five individuals. The exact number within such minimum and
maximum limits shall be fixed and determined from time to time by resolution of
a majority of the full Board or by resolution of the shareholders at any meeting
thereof; provided, however, that the Board may not increase the number of
directors to a number which: (i) exceeds by more than two the number of
directors last elected by shareholders where such number was fifteen or less; or
(ii) exceeds by more than four the number of directors last elected by
shareholders where such number was sixteen or more, but in no event shall the
number of directors exceed twenty-five.
-2-
<PAGE>
SECTION 3. TERM OF OFFICE. Each director shall hold office from the date of
his election or appointment until the next annual shareholder meeting. Any
director ceasing to be the owner of the amount of stock required by law or in
any other manner becoming disqualified, shall thereby vacate his office as
director. A director who is an officer of the Bank or one of its affiliates
shall not stand for re-election to the Board at the annual meeting coincident
with or next following the date of his retirement or other termination of
employment from the Bank or such affiliate. A director who is not an officer of
the Bank or any such affiliate shall not stand for re-election to the Board at
the annual meeting of the Bank held in the third year following the year in
which he retired from his principal occupation; provided, however, that no
director shall be eligible for re-election at the annual meeting of the Bank
next following his 73rd birthday. The Board may fill any vacancy which occurs in
the Board at any regular meeting of the Board or at a special meeting called for
that purpose.
SECTION 4. COMPENSATION. By resolution, the Board may provide that a
reasonable fee be paid to any of its members or to the members of any duly
authorized committee for services rendered. No such payment shall preclude any
director from serving the Bank in any other capacity and receiving compensation
therefor.
SECTION 5. REGULAR MEETINGS. Regular meetings of the Board shall be held on
such dates, times and locations as determined by the Chairman of the Board and
communicated to the directors in writing by the beginning of each calendar year
for that calendar year.
SECTION 6. SPECIAL MEETINGS. Special meetings of the Board may be held at any
time and at any place upon the call of the Chairman of the Board or upon the
call of at least three directors. Notice of special meetings shall state the
meeting's purpose, and shall be given to each director in person, by facsimile
transmission, by telephone, by overnight delivery service, or by U.S. first
class mail addressed to his usual place of business or to his residence.
Personal notice or notice by facsimile transmission or telephone shall be given
not later than the second day before the meeting. A director's attendance at a
special meeting shall constitute a waiver of notice of such meeting, except when
the director attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
SECTION 7. QUORUM; MAJORITY VOTE. A quorum of directors shall be required to
transact business at any regular or special meeting of the Board. A majority of
the directors shall constitute a quorum. Each director shall be entitled to one
vote. A vote by a majority of the directors present at any regular or special
meeting of the Board at which a quorum is present shall be required to approve
any matter or proposal at any such meeting.
SECTION 8. PRESIDING OFFICER. The Chairman of the Board, if present, shall
preside at all meetings of the Board. The President, if present, shall preside
at meetings of the Board in the Chairman's absence. In the absence of both the
Chairman and the President, the Board shall designate another one of their
members to so preside.
SECTION 9. MINUTES OF MEETING. The Board shall appoint a Secretary, who need
not be a member of the Board, to take minutes at any regular or special meeting
of the Board. If the
-3-
<PAGE>
Secretary is not present at any such meeting, the Chairman of the Board may
designate a secretary pro tem to take minutes at the meeting. The Secretary or
secretary pro tem shall record the actions and proceedings at each regular or
special meeting of the Board as minutes of the meeting and shall maintain such
minutes in a minute book of proceedings of such meetings of the Board. Minutes
of each such meeting shall be signed by the presiding officer and secretary of
each meeting.
SECTION 10. PARTICIPATION IN MEETINGS BY TELEPHONE. Unless otherwise
restricted by the Articles of Association or by law, members of the Board or any
committee designated by the Board may participate in a meeting of the Board or
committee by means of conference telephone or similar communications equipment
which allows each person participating in the meeting to hear each other.
Participation in such a meeting shall constitute presence in person at such
meeting.
SECTION 11. CONSENT OF DIRECTORS IN LIEU OF MEETING. Unless otherwise provided
in the Articles of Association or by law, any action required to be taken at a
meeting of the Board or any action which may be taken at a regular or special
meeting of the Board or a committee thereof, may be taken without a meeting,
without prior notice and without a vote, if written consent setting forth the
action so taken is signed by all of the directors that would be necessary to
authorize or take such action at a regular or special meeting of the board.
SECTION 12. COMMITTEES. The Board may, from time to time, establish such
committees as it deems appropriate and as required by law. Any such committee
shall be comprised of such members, shall have such authority and shall conduct
its activities in such manner as is provided in the resolution establishing the
committee. The members of any such committee who are not officers of the Bank
shall receive such compensation as the Board determines from time to time. The
Chairman of the Board shall be an ex-officio member of all committees of the
Board.
ARTICLE III
OFFICERS
SECTION 1. OFFICER TITLES. The titles of the officers of the Bank may include
the Chairman of the Board, one or more Vice Chairmen of the Board, a President,
one or more Executive Vice Presidents, one or more Senior Vice Presidents, a
Chief Credit Officer, a Chief Trust Officer, a Chief Financial Officer, a
General Auditor, a General Counsel, one or more Vice Presidents, a Cashier, a
Secretary, one or more Assistant Secretaries, one or more Trust Officers, and
such other officers as may be appropriate for the prompt and orderly transaction
of the business of the Bank. Individuals appointed as Chairman and Vice Chairman
of the Board and President must be members of the Board. The same person may
hold any two or more offices. The Chairman of the Board and the President shall
have the authority to establish all officer titles below the level of Senior
Vice President.
SECTION 2. ELECTION OF OFFICERS. The Chairman of the Board and the President
shall be elected by the Board for the current year for which such Board was
elected and each shall hold his office for such year unless he shall resign,
become disqualified or be removed. Officers at the
-4-
<PAGE>
level of Senior Vice President and above shall be elected by the Board. The
Chairman of the Board and the President shall have the authority to appoint all
other officers, and to further delegate such authority to other officers of the
Bank.
SECTION 3. AUTHORITY AND RESPONSIBILITY. The authorities and responsibilities
of all officers, in addition to those specifically prescribed herein, shall be
those usually pertaining to their respective offices, or as may be designated by
the Board or by the Chairman of the Board or by the President, or by any officer
of the Bank designated by one of the foregoing.
SECTION 4. MISCELLANEOUS. All officers and employees of the Bank who shall be
responsible for any moneys, funds or valuables of the Bank shall give bond, or
be covered by a blanket bond, in such penal sum and with such security as shall
be approved by the Board, conditioned for the faithful and honest discharge of
their duties as such officers or employees and that they will faithfully apply
and account for all such moneys, funds and valuables and deliver the same on
proper demand to the order of the Board of this Bank, or to the person or
persons authorized to receive the same.
SECTION 5. TERM OF OFFICE. Officers shall be appointed for an indefinite term,
and their employment may be terminated and/or they may be removed from office at
any time. The Bank's holding company, First Chicago NBD Corporation, may
terminate and/or remove the Chairman of the Board, the President and the Chief
Executive Officer. The Chairman of the Board, the President, and their
designates have the authority to terminate and/or remove all other officers. The
salary of any officer whose employment terminates shall cease as of the date of
his termination, and he shall cease to be an officer as of the date of
termination.
ARTICLE IV
TRANSFERS OF REAL ESTATE
The Chairman of the Board, the President and any Vice President or above of the
Bank shall have authority (without an order of the Board) to execute and deliver
on behalf of and in the name of the Bank, deeds or contracts for deeds conveying
any real estate owned by the Bank in its own right or in which the Bank has an
interest either with or without covenants of warranty, and the same shall be
attested to by any of such officers of the Bank other than the officers so
executing said instruments; provided, however, that deeds, contracts or leases
with respect to any real estate used by the Bank as its banking quarters, must
be executed by an executive vice president or above, or an officer designated by
an executive vice president or above. All releases of mortgages or trust deeds
shall be executed in the same manner as provided in the preceding sentence in
respect of transfers and conveyances of real estate in which this Bank has an
interest.
ARTICLE V
CONTRACTS AND VOTING
-5-
<PAGE>
SECTION 1. EXECUTION OF INSTRUMENTS ON BEHALF OF BANK. Any officer of the Bank
and such other persons as may be authorized by the Chairman of the Board or the
President from time to time are severally and respectively authorized to execute
documents and take action(s) in the Bank's name in connection with transactions
conducted in the ordinary course of business including, without limitation, to
guarantee signatures, certify resolutions and/or agreements, endorse checks,
drafts and notes, sign orders for the deposit of securities and for the
withdrawal of securities deposited with the bank correspondents of this Bank.
Notwithstanding the foregoing, (i) all notes evidencing obligations of the Bank
must be executed and delivered by a Vice President of the Bank or above, or the
Cashier, (ii) letters of credit must be signed and issued by two designated
officers or by a designated officer and any employee who shall be authorized to
do so by the Chairman of the Board or the President.
SECTION 2. VOTING. The vote of this Bank as stockholder in any corporation in
which it may hold stock or upon any securities carrying voting rights which it
shall have the right to vote in its individual capacity as a Bank, shall be cast
at any stockholders' meeting by any Vice President or above, or the Cashier, in
person, or by some person or persons authorized by written proxy signed by one
of said officers. In all cases where shares of stock or other securities
carrying voting rights and owned by this Bank shall be held in the name of a
nominee of the Bank, any Vice President or above, or the Cashier may authorize
such nominee to vote such stock or other securities in person, either
unconditionally or upon such terms, limitations, or conditions as such officer
may direct, or any such officer may authorize such nominee to execute a proxy to
vote such shares of stock or other securities carrying voting rights, either
unconditionally or upon such terms, limitations or conditions as such officer
shall approve.
ARTICLE VI
AUTHORITY TO SELL STOCKS, BONDS, ETC.
Any two officers from the group consisting of Vice Presidents and above and the
Cashier or such officers as authorized from time to time by the Board, may at
any time jointly:
(1) Sell, assign, and transfer any and all United States registered bonds now
standing, or which may hereafter stand in the name of the Bank;
(2) Sell, assign, and transfer any and all notes, bonds, certificates of
indebtedness or obligations of any corporation, firm or individual, which notes,
bonds, certificates of indebtedness or obligations are now registered or may
hereafter be registered in the name of this Bank, or are payable or endorsed to
this Bank; or
(3) Sell, assign, and transfer to any assignee or transferee, for and on behalf
of this Bank and in its name, any and all shares of capital stock of any
corporation or corporations held by this Bank.
ARTICLE VII
-6-
<PAGE>
STOCK CERTIFICATES AND THE TRANSFER THEREOF
SECTION 1. TRANSFERABILITY OF SHARES. Shares of stock of this Bank shall be
transferable only upon the books of the Bank, subject to the provisions of the
National Bank Act. The Bank shall maintain a transfer book in which all
transfers of such stock shall be recorded. Transfers of stock may be suspended
preparatory to any election or payment of any dividends.
SECTION 2. RECORD DATE. The Board shall have power to fix a date of record of
stock holdings for purposes of notices of shareholders' meetings, voting rights
at such meetings, the payment of dividends, or any other proper purpose.
SECTION 3. MISCELLANEOUS. All stock certificates shall be signed with a manual
or facsimile signature by any Vice President or above, and by another of such
officers or the Secretary or Cashier, and the seal of the Bank shall be
impressed thereon or a facsimile thereof printed thereon. Each certificate shall
also be signed manually by the Chief Financial Officer or General Auditor, on
behalf of the Bank as registrar, and by a duly authorized officer or employee of
the trust department as transfer agent. Each certificate shall recite on its
face that the stock represented thereby is transferable only upon the books of
the Bank by the holder thereof, or the holder's attorney, upon surrender of the
certificate, and when stock is transferred, the certificates thereof shall be
returned to the Bank, canceled, preserved, and new certificates issued. In case
of loss of any certificates a new one executed in the manner above provided,
shall be issued in lieu thereof upon proof satisfactory to the Chairman of the
Board, the President, any Executive Vice President, or the Chief Trust Officer
of such loss and upon appropriate indemnity if required by such officer.
ARTICLE VIII
INCREASE OF STOCK
In the event of any increase in the capital stock of this Bank, the preemptive
rights of the shareholders, if any, in respect of any such increased stock shall
be set forth in the Articles of Association. Any warrants or certificates
issuable to shareholders in connection with any increase of the capital stock of
this Bank shall be delivered to the respective shareholders entitled thereto,
either by hand or by mail, first-class postage prepaid, addressed to their
respective addresses as shown on the books of the Bank. If, in the event of sale
of additional shares, any subscription rights shall not have been exercised at
the expiration of the specified subscription period, such unsubscribed new
shares may be issued and sold at such price, not less than the par value
thereof, to such persons and on such terms as the Directors may determine.
ARTICLE IX
BANKING HOURS
The Bank shall be open for business during such days of the year and during such
hours of the day as the Chairman of the Board or the President or their
designate shall determine.
-7-
<PAGE>
ARTICLE X
SEAL
The seal of the Bank shall be circular in form and the words AMERICAN NATIONAL
BANK AND TRUST COMPANY OF CHICAGO-CORPORATE SEAL thereon. Such seal or a
facsimile thereof may be affixed to or printed on any instrument requiring the
same and attested by the Chief Financial Officer, the Cashier, the Secretary,
any Assistant Secretary, any Trust Officer, or any other officer thereunto
designated by the Board.
ARTICLE XI
TRUST DEPARTMENT
SECTION 1. EXERCISE OF FIDUCIARY POWERS. All fiduciary powers of the Bank
shall be exercised through the trust department, subject to all applicable laws
and governmental regulations. The Bank shall maintain separate books and records
for the trust department that are distinct from the other books and records of
the Bank.
SECTION 2. CHIEF TRUST OFFICER. All operations and fiduciary activities of the
trust department shall be the responsibility of the Chief Trust Officer, subject
to the powers and duties of the Board, the Committees appointed by the Board,
the Chairman of the Board, the President, and any Executive Vice President. The
Board may appoint one or more Vice Presidents and/or Trust Officers in addition
to the Chief Trust Officer to administer said trust department, who shall have
such powers and perform such duties as may be prescribed by these By-laws or as
may be delegated to them by the Chief Trust Officer, the Board, the Chairman of
the Board, the President, or any Executive Vice President.
SECTION 3. EXECUTION OF INSTRUMENTS. Any Trust Officer or above, the
Secretary, any Assistant Secretary, the Cashier, the Chief Financial Officer, or
any other officer or person appointed by the Chairman of the Board or the
President or their designate, for that purpose, or for the purpose of appointing
vault custodians may sign, execute, acknowledge, deliver and accept on behalf of
the Bank all checks against any trust department account or accounts and all
agreements, indentures, mortgages, deeds, conveyances, releases, transfers,
assignments, certificates, declarations, receipts, discharges, satisfactions,
settlements, petitions, schedules, accounts, affidavits, bonds, undertakings and
other instruments or documents in connection with the exercise of any of the
fiduciary powers of the Bank in the ordinary course of business of the trust
department.
SECTION 4. AUTHENTICATION OF INSTRUMENTS. All authentication or certificates
by the Bank as trustee under any mortgage, deed of trust or other instrument
securing bonds, notes, debentures or other obligations of any person or
corporation, and all certificates as registrar or transfer agent, and all
certificates of deposit for stocks, bonds, or other securities, and interim and
trust certificates may be signed or countersigned on behalf of the Bank by any
of the officers designated in the preceding Section hereof or by any other
person appointed by the Chairman of the
-8-
<PAGE>
Board or the President or their designate and when so signed shall be binding on
the Bank as the valid act of the Bank.
SECTION 5. VOTING. The vote of this Bank as stockholder in any corporation in
which it may hold capital stocks trustee or other fiduciary capacity may be cast
at the stockholders' meetings of such corporation by any Trust Officer or above,
the Secretary, any Assistant Secretary, in person or by some person authorized
by written proxy signed by one of said officers; provided, however, that such
proxy if given to any person not an officer or director of this Bank shall be
limited to a single meeting and shall either be limited to voting for trustees
or directors or shall direct how such proxy holder shall vote. The above
provision, however, shall not apply to stock held by this Bank under a written
agreement which expressly provides for the giving of proxies. Whenever this Bank
has been or may be appointed attorney in fact with power of substitution in and
about the transfer of shares of capital stock of any corporation, any Second
Vice President or above may substitute by proper written instrument an attorney
in fact to act in the place and stead of this Bank in and about such transfer.
ARTICLE XII
AMENDMENTS OF BY-LAWS
The Board may amend these By-laws in any respect to the extent permitted at law
at any regular or special meeting of the Board or shareholders duly called for
that purpose, by a vote of a majority of the Board or a majority of the
shareholders.
-9-
<PAGE>
EXHIBIT 6
CONSENT OF TRUST UNDER SECTION 321(b) OF THE
TRUST INDENTURE ACT OF 1939
The American National Bank and Trust Company of Chicago hereby consents
that reports of examination of said bank by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities and
Exchange Commission upon its request therefor.
Such reports shall be used for the purposes and subject to the limitations
and conditions set forth in Section 321(b) of the Trust Indenture Act of 1939.
Dated: October 31, 1996
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
By: /s/ Dana L. Brink
-------------------------------------
Its: Vice President
-------------------------------------
<PAGE>
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
EXHIBIT 7 Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires March 31, 1999
Federal Financial Institutions Examination Council
- --------------------------------------------------------------------------------
[LOGO] Please refer to page i, | 1 |
Table of Contents, for
the required disclosure
of estimated burden.
- --------------------------------------------------------------------------------
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices--FFIEC 031
(960930)
Report at the close of business September 30, 1996 ----------
(RCRI 9999)
This report is required by law: 12 U.S.C. /Section/ 324 (State member banks); 12
U.S.C. /Section/ 1817 (State nonmember banks); and 12 U.S.C. /Section/ 161
(National banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
- --------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I, Joseph E. Ernsteen,
Chief Financial Officer & Executive V.P.
---------------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and Income
(including the supporting schedules) have been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and are true
to the best of my knowledge and belief.
/s/ Joseph E. Ernsteen
- --------------------------------------------------------------------------------
Signature of Officer Authorized to Sign Report
October 15, 1996
- --------------------------------------------------------------------------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions.
NOTE: These instructions may in some cases differ from generally accepted
accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
/s/ Signature
- --------------------------------------------------------------------------------
Director (Trustee)
/s/ Signature
- --------------------------------------------------------------------------------
Director (Trustee)
/s/ Signature
- --------------------------------------------------------------------------------
Director (Trustee)
- --------------------------------------------------------------------------------
For Banks Submitting Hard Copy Report Forms:
STATE MEMBER BANKS: Return the original and one copy to the appropriate Federal
Reserve District Bank.
STATE NONMEMBER BANKS: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
NATIONAL BANKS: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
- --------------------------------------------------------------------------------
_ _
FDIC Certificate Number |_|_|_|_|_| | |
(RCRI 9050)
CALL NO. 197 31 09-30-96
STBK: 17-1490 00952 STCERT: 17-03619
AMERICAN NATIONAL BANK AND TRUST COM
33 NORTH LA SALLE STREET
CHICAGO, IL 60690
|_ _|
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE>
FFIEC 031
Page i
| 2 |
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices
- --------------------------------------------------------------------------------
Table of Contents
Signature Page........................................................... Cover
Report of Income
Schedule RI--Income Statement....................................... RI-1, 2, 3
Schedule RI-A--Changes in Equity Capital.................................. RI-4
Schedule RI-B--Charge-offs and Recoveries and
Changes in Allowance for Loan and Lease
Losses............................................................... RI-4, 5
Schedule RI-C--Applicable Income Taxes by
Taxing Authority........................................................ RI-5
Schedule RI-D--Income from
International Operations................................................ RI-6
Schedule RI-E--Explanations............................................ RI-7, 8
Report of Condition
Schedule RC--Balance Sheet............................................. RC-1, 2
Schedule RC-A--Cash and Balances Due
From Depository Institutions............................................ RC-3
Schedule RC-B--Securities........................................... RC-3, 4, 5
Schedule RC-C--Loans and Lease Financing
Receivables:
Part I. Loans and Leases............................................. RC-6, 7
Part II. Loans to Small Businesses and
Small Farms (included in the forms for
June 30 only).................................................... RC-7a, 7b
Schedule RC-D--Trading Assets and Liabilities
(to be completed only by selected banks)................................ RC-8
Schedule RC-E--Deposit Liabilities................................ RC-9, 10, 11
Schedule RC-F--Other Assets.............................................. RC-11
Schedule RC-G--Other Liabilities......................................... RC-11
Schedule RC-H--Selected Balance Sheet Items
for Domestic Offices................................................... RC-12
Schedule RC-I--Selected Assets and Liabilities
of IBFs................................................................ RC-13
Schedule RC-K--Quarterly Averages........................................ RC-13
Schedule RC-L--Off-Balance Sheet
Items.......................................................... RC-14, 15, 16
Schedule RC-M--Memoranda............................................. RC-17, 18
Schedule RC-N--Past Due and Nonaccrual
Loans, Leases, and Other Assets.................................... RC-19, 20
Schedule RC-O--Other Data for Deposit
Insurance Assessments.............................................. RC-21, 22
Schedule RC-R--Regulatory Capital.................................... RC-23, 24
Optional Narrative Statement Concerning
the Amounts Reported in the Reports
of Condition and Income................................................ RC-25
Special Report (to be completed by all banks)
Schedule RC-J--Repricing Opportunities (sent only to
and to be completed only by savings banks)
Disclosure of Estimated Burden
The estimated average burden associated with this information collection is 32.2
hours per respondent and is estimated to vary from 15 to 230 hours per response,
depending on individual circumstances. Burden estimates include the time for
reviewing instructions, gathering and maintaining data in the required form, and
completing the information collection, but exclude the time for compiling and
maintaining business records in the normal course of a respondent's activities.
Comments concerning the accuracy of this burden estimate and suggestions for
reducing this burden should be directed to the Office of Information and
Regulatory Affairs, Office of Management and Budget, Washington, D.C. 20503, and
to one of the following:
Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219
Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429
For information or assistance, National and State nonmember banks should contact
the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington, D.C.
20429, toll free on (800) 688-FDIC(3342), Monday through Friday between
8:00 a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-1
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
Consolidated Report of Income
for the period January 1, 1996 - September 30, 1996
All Report of Income schedules are to be reported on a calendar year-to-date
basis in thousands of dollars.
Schedule RI--Income Statement
--------------------
I480
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest income: ////////////////////
a. Interest and fee income on loans: ///////////////////
(1) In domestic offices: ///////////////////
(a) Loans secured by real estate................................................. 4011 100,208 1.a.(1)(a)
(b) Loans to depository institutions............................................. 4019 1,046 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers.......... 4024 192 1.a.(1)(c)
(d) Commercial and industrial loans.............................................. 4012 229,053 1.a.(1)(d)
(e) Acceptances of other banks................................................... 4026 0 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures: ////////////////////
(1) Credit cards and related plans........................................... 4054 177 1.a.(1)(f)(1)
(2) Other.................................................................... 4055 11,689 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions....................... 4056 0 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political ////////////////////
subdivisions in the U.S.: ////////////////////
(1) Taxable obligations...................................................... 4503 0 1.a.(1)(h)(1)
(2) Tax-exempt obligations................................................... 4504 9,138 1.a.(1)(h)(2)
(i) All other loans in domestic offices.......................................... 4058 13,874 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs.................... 4059 0 1.a.(2)
b. Income from lease financing receivables: ////////////////////
(1) Taxable leases................................................................... 4505 644 1.b.(1)
(2) Tax-exempt leases................................................................ 4307 0 1.b.(2)
c. Interest income on balance due from depository institutions:(1) ////////////////////
(1) In domestic offices.............................................................. 4105 0 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs.................... 4106 2 1.c.(2)
d. Interest and dividend income on securities: ////////////////////
(1) U.S. Treasury securities and U.S. Government agency and corporation obligations.. 4027 8,504 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.: ////////////////////
(a) Taxable securities........................................................... 4506 0 1.d.(2)(a)
(b) Tax-exempt securities........................................................ 4507 64 1.d.(2)(b)
(3) Other domestic debt securities................................................... 3657 34 1.d.(3)
(4) Foreign debt securities.......................................................... 3658 197 1.d.(4)
(5) Equity securities (including investments in mutual funds)........................ 3659 414 1.d.(5)
e. Interest income from trading assets.................................................. 4069 899 1.e.
--------------------
</TABLE>
- ----------
(1) Includes interest income on time certificates of deposit not held for
trading.
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RI-2
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
Schedule RI--Continued
<TABLE>
<CAPTION>
----------------
Dollar Amounts in Thousands Year-to-date
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Interest income (continued) RIAD Bil Mil Thou
f. Interest income on federal funds sold and securities purchased under ////////////////////
agreements to resell in domestic offices of the bank and of its Edge ////////////////////
and Agreement subsidiaries, and in IBFs................................... 4020 15,304 1.f.
g. Total interest income (sum of items 1.a through 1.f)...................... 4107 391,439 1.g.
2. Interest expense: ////////////////////
a. Interest on deposits: ////////////////////
(1) Interest on deposits in domestic offices: ////////////////////
(a) Transaction accounts (NOW accounts, ATS accounts, and ////////////////////
telephone and preauthorized transfer accounts).................... 4508 5,046 2.a.(1)(a)
(b) Nontransaction accounts: ////////////////////
(1) Money market deposit accounts (MMDAs)......................... 4509 17,849 2.a.(1)(b)(1)
(2) Other savings deposits........................................ 4511 5,404 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more.............. 4174 25,456 2.a.(1)(b)(3)
(4) All other time deposits....................................... 4512 16,079 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement ////////////////////
subsidiaries, and IBFs................................................ 4172 51,575 2.a.(2)
b. Expense of federal funds purchased and securities sold under ////////////////////
agreements to repurchase in domestic offices of the bank and of its ////////////////////
Edge and Agreement subsidiaries, and in IBFs.............................. 4180 30,013 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading ////////////////////
liabilities, and other borrowed money..................................... 4185 85 2.c.
d. Interest on mortgage indebtedness and obligations under capitalized ////////////////////
leases.................................................................... 4072 0 2.d.
e. Interest on subordinated notes and debentures............................. 4200 4,080 2.e.
f. Total interest expense (sum of items 2.a through 2.e)..................... 4073 155,587 2.f.
-------------------------
3. Net interest income (item 1.g minus 2.f)..................................... //////////////////// RIAD 4074 235,852 3.
4. Provisions: //////////////////// -------------------------
a. Provision for loan and lease losses....................................... //////////////////// RIAD 4230 12,750 4.a.
b. Provision for allocated transfer risk..................................... //////////////////// RIAD 4243 0 4.b.
-------------------------
5. Noninterest income: ////////////////////
a. Income from fiduciary activities.......................................... 4070 20,118 5.a.
b. Service charges on deposit accounts in domestic offices................... 4080 13,044 5.b.
c. Trading revenue (must equal Schedule RI, sum of Memorandum ////////////////////
items 8.a through 8.d).................................................... A220 8,062 5.c.
d. Other foreign transaction gains (losses).................................. 4076 0 5.d.
e. Not applicable ////////////////////
f. Other noninterest income: ////////////////////
(1) Other fee income...................................................... 5407 21,559 5.f.(1)
(2) All other noninterest income*......................................... 5408 2,230 5.f.(2)
----------------------
g. Total noninterest income (sum of items 5.a through 5.f)................... //////////////////// RIAD 4079 65,013 5.g.
6. a. Realized gains (losses) on held-to-maturity securities.................... //////////////////// RIAD 3521 0 6.a.
b. Realized gains (losses) on available-for-sale securities.................. //////////////////// RIAD 3196 0 6.b.
-----------------------
7. Noninterest expense: ////////////////////
a. Salaries and employee benefits............................................ 4135 92,626 7.a.
b. Expenses of premises and fixed assets (net of rental income) ////////////////////
(excluding salaries and employee benefits and mortgage interest).......... 4217 20,609 7.b.
c. Other noninterest expense*................................................ 4092 50,201 7.c.
-----------------------
d. Total noninterest expense (sum of items 7.a through 7.c).................. //////////////////// RIAD 4093 163,436 7.d.
-----------------------
8. Income (loss) before income taxes and extraordinary items and other ////////////////////
-----------------------
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d).... //////////////////// RIAD 4301 124,679 8.
9. Applicable income taxes (on item 8).......................................... //////////////////// RIAD 4302 44,795 9.
-----------------------
10. Income (loss) before extraordinary items and other adjustments (item 8 ////////////////////
-----------------------
minus 9)..................................................................... //////////////////// RIAD 4300 79,884 10.
------------------------------------------
</TABLE>
- ---------
*Describe on Schedule RI-E--Explanations.
4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RI-3
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
Schedule RI--Continued
------------
Year-to-date
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
11. Extraordinary items and other adjustments: ////////////////////
a. Extraordinary items and other adjustments, gross of income taxes*......... 4310 0 11.a.
b. Applicable income taxes (on item 11.a)*................................... 4315 0 11.b.
c. Extraordinary items and other adjustments, net of income taxes ////////////////////
------------------------
(item 11.a minus 11.b).................................................... //////////////////// RIAD 4320 0 11.c.
12. Net income (loss) (sum of items 10 and 11.c)................................. //////////////////// RIAD 4340 79,884 12.
------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------
I481 (-
------------
Memoranda Year-to-date
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after ////////////////////
August 7, 1986, that is not deductible for federal income tax purposes....................... 4513 3,123 M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic offices ////////////////////
(included in Schedule RI, item 8)............................................................ 8431 1,210 M.2.
3.-4. Not applicable ////////////////////
5. Number of full-time equivalent employees on payroll at end of current period (round to //// Number
nearest whole number)........................................................................ 4150 1,977 M.5.
6. Not applicable ////////////////////
7. If the reporting bank has restated its balance sheet as a result of applying push down //// MM DD YY
accounting this calendar year, report the date of the bank's acquisition..................... 9106 00/00/00 M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments) ////////////////////
(sum of Memorandum items 8.a through 8.d must equal Schedule RI, item 5.c): //// Bil Mil Thou
a. Interest rate exposures................................................................... 8757 6,022 M.8.a.
b. Foreign exchange exposures................................................................ 8758 2,040 M.8.b.
c. Equity security and index exposures....................................................... 8759 0 M.8.c.
d. Commodity and other exposures............................................................. 8760 0 M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than trading: ////////////////////
a. Net increase (decrease) to interest income................................................ 8761 1,362 M.9.a.
b. Net (increase) decrease to interest expense............................................... 8762 (39) M.9.b.
c. Other (noninterest) allocations........................................................... 8763 0 M.9.c.
10. Credit losses on off-balance sheet derivatives (see instructions)............................ A251 0 M.10.
--------------------
</TABLE>
- ---------
*Describe on Schedule RI-E--Explanations.
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RI-4
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
Schedule RI-A--Changes in Equity Capital
Indicate decreases and losses in parentheses.
<TABLE>
<CAPTION>
------
I483
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Total equity capital originally reported in the December 31, 1995, Reports of Condition ////////////////////
and Income.......................................................................................... 3215 612,811 1.
2. Equity capital adjustments from amended Reports of Income, net*..................................... 3216 0 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2)................................ 3217 612,811 3.
4. Net income (loss) (must equal Schedule RI, item 12)................................................. 4340 79,884 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net.................................. 4346 0 5.
6. Changes incident to business combinations, net...................................................... 4356 0 6.
7. LESS: Cash dividends declared on preferred stock.................................................... 4470 0 7.
8. LESS: Cash dividends declared on common stock....................................................... 4460 28,000 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions for ////////////////////
this schedule)...................................................................................... 4411 0 9.
10. Corrections of material accounting errors from prior years* (see instructions for this schedule).... 4412 0 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities.................... 8433 (24) 11.
12. Foreign currency translation adjustments............................................................ 4414 0 12.
13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above)............ 4415 50,000 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal ////////////////////
Schedule RC, item 28)............................................................................... 3210 714,671 14.
--------------------
</TABLE>
- --------
*Describe on Schedule RI-E--Explanations.
Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance for Loan and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases
Part I excludes charge-offs and recoveries through
the allocated transfer risk reserve.
<TABLE>
<CAPTION>
------
I486
--------------------------------------------
(Column A) (Column B)
Charge-offs Recoveries
--------------------------------------------
Calendar year-to-date
--------------------------------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Loans secured by real estate: //////////////////// ////////////////////
a. To U.S. addressees (domicile)....................................... 4651 2,898 4661 600 1.a.
b. To non-U.S. addressees (domicile)................................... 4652 0 4662 0 1.b.
2. Loans to depository institutions and acceptances of other banks: //////////////////// ////////////////////
a. To U.S. banks and other U.S. depository institutions................ 4653 0 4663 0 2.a.
b. To foreign banks.................................................... 4654 0 4664 0 2.b.
3. Loans to finance agricultural production and other loans to farmers.... 4655 0 4665 0 3.
4. Commercial and industrial loans: //////////////////// ////////////////////
a. To U.S. addressees (domicile)....................................... 4645 15,652 4617 3,638 4.a.
b. To non-U.S. addressees (domicile)................................... 4646 0 4618 0 4.b.
5. Loans to individuals for household, family, and other personal //////////////////// ////////////////////
expenditures: //////////////////// ////////////////////
a. Credit cards and related plans...................................... 4656 0 4666 0 5.a.
b. Other (includes single payment, installment, and all student loans). 4657 73 4667 77 5.b.
6. Loans to foreign governments and official institutions................. 4643 0 4627 0 6.
7. All other loans........................................................ 4644 486 4628 160 7.
8. Lease financing receivables: //////////////////// ////////////////////
a. Of U.S. addressees (domicile)....................................... 4658 0 4668 0 8.a.
b. Of non-U.S. addressees (domicile)................................... 4659 0 4669 0 8.b.
9. Total (sum of items 1 through 8)....................................... 4635 19,109 4605 4,475 9.
--------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RI-5
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
</TABLE>
Schedule RI-B--Continued
Part I. Continued
<TABLE>
<CAPTION>
--------------------------------------------
(Column A) (Column B)
Charge-offs Recoveries
--------------------------------------------
Memoranda Calendar year-to-date
--------------------------------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-3. Not applicable //////////////////// ////////////////////
4. Loans to finance commercial real estate, construction, and land //////////////////// ////////////////////
development activities (not secured by real estate) included in //////////////////// ////////////////////
Schedule RI-B, part I, items 4 and 7, above.......................... 5409 0 5410 0 M.4.
5. Loans secured by real estate in domestic offices (included in //////////////////// ////////////////////
Schedule RI-B, part I, item 1, above): //////////////////// ////////////////////
a. Construction and land development................................. 3582 0 3583 0 M.5.a.
b. Secured by farmland............................................... 3584 0 3585 0 M.5.b.
c. Secured by 1-4 family residential properties: //////////////////// ////////////////////
(1) Revolving, open-end loans secured by 1-4 family residential //////////////////// ////////////////////
properties and extended under lines of credit................. 5411 138 5412 82 M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties.. 5413 0 5414 81 M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties......... 3588 22 3589 0 M.5.d.
e. Secured by nonfarm nonresidential properties...................... 3590 2,738 3591 437 M.5.e.
--------------------------------------------
</TABLE>
Part II. Changes in Allowance for Loan and Lease Losses
<TABLE>
<CAPTION>
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Balance originally reported in the December 31, 1995, Reports of Condition and Income.. 3124 166,398 1.
2. Recoveries (must equal part I, item 9, column B above)................................. 4605 4,475 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above).......................... 4635 19,109 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a.)................ 4230 12,750 4.
5. Adjustments* (see instructions for this schedule)...................................... 4815 25,893 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC, ////////////////////
item 4.b).............................................................................. 3123 190,407 6.
--------------------
</TABLE>
- ----------
*Describe on Schedule RI-E--Explanations.
Schedule RI-C--Applicable Income Taxes by Taxing Authority
Schedule RI-C is to be reported with the December Report of Income.
<TABLE>
<CAPTION>
------
I489
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Federal................................................................................ 4780 N/A 1.
2. State and local........................................................................ 4790 N/A 2.
3. Foreign................................................................................ 4795 N/A 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b)..... 4770 N/A 4.
5. Deferred portion of item 4........................................... RIAD 4772 N/A //////////////////// 5.
----------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RI-6
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
Schedule RI-D--Income from International Operations
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs
where international operations account for more than 10 percent of total
revenues, total assets, or net income.
Part I. Estimated Income from International Operations
<TABLE>
<CAPTION>
------
I492
--------------
Year-to-date
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, ////////////////////
and IBFs: ////////////////////
a. Interest income booked...................................................................... 4837 51,532 1.a.
b. Interest expense booked..................................................................... 4838 51,598 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and ////////////////////
IBFs (item 1.a minus 1.b)................................................................... 4839 (66) 1.c.
2. Adjustments for booking location of international operations: ////////////////////
a. Net interest income attributable to international operations booked at domestic offices..... 4840 0 2.a.
b. Net interest income attributable to domestic business booked at foreign offices............. 4841 (51,598) 2.b.
c. Net booking location adjustment (item 2.a minus 2.b)........................................ 4842 51,598 2.c.
3. Noninterest income and expense attributable to international operations: ////////////////////
a. Noninterest income attributable to international operations................................. 4097 2,040 3.a.
b. Provision for loan and lease losses attributable to international operations................ 4235 0 3.b.
c. Other noninterest expense attributable to international operations.......................... 4239 1,159 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a minus ////////////////////
3.b and 3.c)................................................................................ 4843 881 3.d.
4. Estimated pretax income attributable to international operations before capital allocation ////////////////////
adjustment (sum of items 1.c, 2.c, and 3.d).................................................... 4844 52,413 4.
5. Adjustment to pretax income for internal allocations to international operations to reflect ////////////////////
the effects of equity capital on overall bank funding costs.................................... 4845 0 5.
6. Estimated pretax income attributable to international operations after capital allocation ////////////////////
adjustment (sum of items 4 and 5).............................................................. 4846 52,413 6.
7. Income taxes attributable to income from international operations as estimated in item 6....... 4797 19,525 7.
8. Estimated net income attributable to international operations (item 6 minus 7)................. 4341 32,888 8.
--------------------
</TABLE>
Memoranda
<TABLE>
<CAPTION>
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Intracompany interest income included in item 1.a above........................................ 4847 51,530 M.1.
2. Intracompany interest expense included in item 1.b above....................................... 4848 23 M.2.
--------------------
</TABLE>
Part II. Supplementary Details on Income from International Operations Required
by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
<TABLE>
<CAPTION>
--------------
Year-to-date
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest income booked at IBFs................................................................. 4849 0 1.
2. Interest expense booked at IBFs................................................................ 4850 0 2.
3. Noninterest income attributable to international operations booked at domestic offices ////////////////////
(excluding IBFs): ////////////////////
a. Gains (losses) and extraordinary items...................................................... 5491 0 3.a.
b. Fees and other noninterest income........................................................... 5492 2,040 3.b.
4. Provision for loan and lease losses attributable to international operations booked at domestic ////////////////////
offices (excluding IBFs)....................................................................... 4852 0 4.
5. Other noninterest expense attributable to international operations booked at domestic offices ////////////////////
(excluding IBFs)............................................................................... 4853 1,135 5.
--------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RI-7
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
Schedule RI-E--Explanations
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedule RI-A and RI-B, all extraordinary items and
other adjustments in Schedule RI, and all significant items of other noninterest
income and other noninterest expense in Schedule RI. (See instructions for
details.)
<TABLE>
<CAPTION>
----------
| I495 |
----------------
| Year-to-date |
----------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f. (2)) | ////////////////// |
Report amounts that exceed 10% of Schedule RI, item 5.f. (2): | ////////////////// |
a. Net gains on other real estate owned......................................................... | 5415 2,190 | 1.a.
b. Net gains on sales of loans.................................................................. | 5416 0 | 1.b.
c. Net gains on sales of premises and fixed assets.............................................. | 5417 0 | 1.c.
Itemize and describe the three largest other amounts that exceed 10% of Schedule RI, | ////////////////// |
item 5.f. (2): | ////////////////// |
-------------
d. | TEXT 4461 | | 4461 | 1.d.
----------------------------------------------------------------------------------------------
e. | TEXT 4462 | | 4462 | 1.e.
----------------------------------------------------------------------------------------------
f. | TEXT 4463 | | 4463 | 1.f.
----------------------------------------------------------------------------------------------
2. Other noninterest expense (from Schedule RI, item 7.c): | ////////////////// |
a. Amortization expense of intangible assets.................................................... | 4531 854 | 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c: | ////////////////// |
b. Net losses on other real estate owned........................................................ | 5418 0 | 2.b.
c. Net losses on sales of loans................................................................. | 5419 0 | 2.c.
d. Net losses on sales of premises and fixed assets............................................. | 5420 0 | 2.d.
Itemize and describe the three largest other amounts that exceed 10% of Schedule RI, | ////////////////// |
item 7.c: | ////////////////// |
-------------
e. | TEXT 4464 | INTERCOMPANY CHARGES | 4464 22,248 | 2.e.
----------------------------------------------------------------------------------------------
f. | TEXT 4467 | | 4467 | 2.f.
----------------------------------------------------------------------------------------------
g. | TEXT 4468 | | 4468 | 2.g.
----------------------------------------------------------------------------------------------
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and applicable | ////////////////// |
income tax effect (from Schedule RI, item 11.b) (itemize and describe all extraordinary | ////////////////// |
items and other adjustments): | ////////////////// |
-------------
a. (1) | TEXT 4469 | | 4469 | 3.a. (1)
------------------------------------------------------------------------------------------
(2) Applicable income tax effect | RIAD 4486 | | ////////////////// | 3.a. (2)
------------- ----------------------------
b. (1) | TEXT 4487 | | 4487 | 3.b. (1)
------------------------------------------------------------------------------------------
(2) Applicable income tax effect | RIAD 4488 | | ////////////////// | 3.b. (2)
------------- ----------------------------
c. (1) | TEXT 4489 | | 4489 | 3.c. (1)
------------------------------------------------------------------------------------------
(2) Applicable income tax effect | RIAD 4491 | | ////////////////// | 3.c. (2)
----------------------------
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, item 2) | ////////////////// |
(itemize and describe all adjustments): | ////////////////// |
-------------
a. | TEXT 4492 | | 4492 | 4.a.
----------------------------------------------------------------------------------------------
b. | TEXT 4493 | | 4493 | 4.b.
----------------------------------------------------------------------------------------------
5. Cumulative effect of changes in accounting principles from prior years | ////////////////// |
(from Schedule RI-A, item 9) (itemize and describe all changes in accounting principles): | ////////////////// |
-------------
a. | TEXT 4494 | | 4494 | 5.a.
----------------------------------------------------------------------------------------------
b. | TEXT 4495 | | 4495 | 5.b.
----------------------------------------------------------------------------------------------
6. Corrections of material accounting errors from prior years (from Schedule RI-A, item 10) | ////////////////// |
(itemize and describe all corrections): | ////////////////// |
-------------
a. | TEXT 4496 | | 4496 | 6.a.
----------------------------------------------------------------------------------------------
b. | TEXT 4497 | | 4497 | 6.b.
--------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RI-8
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
Schedule RI-E--Continued
<TABLE>
<CAPTION>
----------------
| Year-to-date |
----------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13) | ////////////////// |
(itemize and describe all such transactions): | ////////////////// |
-------------
a. | TEXT 4498 | CAPITAL CONTRIBUTION FROM PARENT HOLDING CORP. | 4498 50,000 | 7.a.
----------------------------------------------------------------------------------------------
b. | TEXT 4499 | | 4499 | 7.b.
----------------------------------------------------------------------------------------------
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, item 5) | ////////////////// |
(itemize and describe all adjustments): | ////////////////// |
-------------
a. | TEXT 4521 | ADJUSTMENT INCIDENT TO BUSINESS COMBINATION | 4521 25,893 | 8.a.
----------------------------------------------------------------------------------------------
b. | TEXT 4522 | | 4522 | 8.b.
--------------------------------------------------------------------------------------------------------------------
9. Other explanations (the space below is provided for the bank to briefly describe, at its | I498 | I499 |
option, any other significant items affecting the Report of Income): --------------------
No comment [__] (RIAD 4769)
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-1
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
Consolidated Report of Condition for Insured Commercial and State-Chartered
Saving Banks for September 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
<TABLE>
<CAPTION>
SCHEDULE RC--BALANCE SHEET
<S> <C> <C> <C>
_____
| C400| LESS THAN
---------------------
Dollar Amounts in Thousands| RCFD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------
ASSETS | ////////////////// |
1. Cash and balances due from depository institutions (from Schedule RC-A): | ////////////////// |
a. Noninterest-bearing balances and currency and coin(1).................................. | 0081 612,103 | 1.a.
b. Interest-bearing balances(2)........................................................... | 0071 0 | 1.b.
2. Securities: | ////////////////// |
a. Held-to-maturity securities (from Schedule RC-B, column A)............................. | 1754 0 | 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)........................... | 1773 181,525 | 2.b.
3. Federal funds sold and securities purchased under agreements to resell in | ////////////////// |
domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | ////////////////// |
a. Federal funds sold..................................................................... | 0276 320,150 | 3.a.
b. Securities purchased under agreements to resell........................................ | 0277 0 | 3.b.
4. Loans and lease financing receivables: _________________________| ////////////////// |
a. Loans and leases, net of unearned income (from Schedule RC-C) |RCFD 2122 | 6,764,142 | ////////////////// | 4.a.
b. LESS: Allowance for loan and lease losses.................... |RCFD 3123 | 190,407 | ////////////////// | 4.b.
c. LESS: Allocated transfer risk reserve........................ |RCFD 3128 | 0 | ////////////////// | 4.c.
d. Loans and leases, net of unearned income, -------------------------| |
allowance, and reserve (item 4.a minus 4.b and 4.c).................................... | 2125 6,573,735 | 4.d.
5. Trading assets (from Schedule RC-D)....................................................... | 3545 21,301 | 5.
6. Premises and fixed assets (including capitalized leases).................................. | 2145 42,091 | 6.
7. Other real estate owned (from Schedule RC-M).............................................. | 2150 5,733 | 7.
8. Investments in unconsolidated subsidiaries and associated companies (from | |
Schedule RC-M)............................................................................ | 2130 0 | 8.
9. Customers' liability to this bank on acceptances outstanding.............................. | 2155 29,870 | 9.
10. Intangible assets (from Schedule RC-M).................................................... | 2143 4,286 | 10.
11. Other assets (from Schedule RC-F)......................................................... | 2160 138,414 | 11.
12. Total assets (sum of items 1 through 11).................................................. | 2170 7,929,208 | 12.
-----------------
- -------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-2
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
Schedule RC--Continued
Dollar Amounts in Thousands Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E,
part 1)........................................................................ RCON 2200 4,263,939 13.a.
(1) Noninterest-bearing (1)..........................RCON 6631 2,035,581 13.a.(1)
(2) Interest-bearing.................................RCON 6636 2,228,358 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule
RC-E, part II)................................................................. RCFN 2200 1,404,190 13.b.
(1) Noninterest-bearing..............................RCFN 6631 0 13.b.(1)
(2) Interest-bearing.................................RCFN 6636 1,404,190 13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and
in IBFs:
a. Federal funds purchased........................................................ RCFD 0278 1,298,985 14.a.
b. Securities sold under agreements to repurchase................................. RCFD 0279 6,855 14.b.
15. a. Demand notes issued to the U.S. Treasury....................................... RCON 2840 0 15.a.
b. Trading liabilities (from Schedule RC-D)....................................... RCFD 3548 212 15.b.
16. Other borrowed money:
a. With a remaining maturity of one year or less.................................. RCFD 2332 2,292 16.a.
b. With a remaining maturity of more than one year................................ RCFD 2333 0 16.b.
17. Mortgage indebtedness and obligations under capitalized leases.................... RCFD 2910 0 17.
18. Bank's liability on acceptances executed and outstanding.......................... RCFD 2920 29,870 18.
19. Subordinated notes and debentures................................................. RCFD 3200 125,000 19.
20. Other liabilities (from Schedule RC-G)............................................ RCFD 2930 83,194 20.
21. Total liabilities (sum of items 13 through 20).................................... RCFD 2948 7,214,537 21.
22. Limited-life preferred stock and related surplus.................................. RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus..................................... RCFD 3838 0 23.
24. Common stock...................................................................... RCFD 3230 20,600 24.
25. Surplus (exclude all surplus related to preferred stock).......................... RCFD 3839 324,680 25.
26. a. Undivided profits and capital reserves......................................... RCFD 3632 369,294 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities......... RCFD 8434 97 26.b.
27. Cumulative foreign currency translation adjustments............................... RCFD 3284 0 27.
28. Total equity capital (sum of items 23 through 27)................................. RCFD 3210 714,671 28.
29. Total liabilities limited-life preferred stock, and equity capital (sum of items
21, 22, and 28)................................................................... RCFD 3300 7,929,208 29.
----------------------------------
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best Number
describes the most comprehensive level of auditing work performed for the bank by -------------------------
independent external auditors as of any date during 1995................................... RCFD 6724 N/A M.1.
-------------------------
1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a
certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public
accounting firm (may be required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- --------------------
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-3
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
Schedule RC-A--Cash and Balances Due From Depository Institutions
<TABLE>
<CAPTION>
Exclude assets held for trading.
----------
| C405 | <->
-----------------------------------------------
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
|----------------------|----------------------|
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Cash items in process of collection, unposted debits, and currency and | //////////////////// | //////////////////// |
coin........................................................................ | 0022 486,133 | //////////////////// | 1.
a. Cash items in process of collection and unposted debits................. | //////////////////// | 0020 445,021 | 1.a.
b. Currency and coin....................................................... | //////////////////// | 0080 41,112 | 1.b.
2. Balances due from depository institutions in the U.S........................ | //////////////////// | 0082 34,128 | 2.
a. U.S. branches and agencies of foreign banks (including their IBFs)...... | 0083 0 | //////////////////// | 2.a.
b. Other commercial banks in the U.S. and other depository institutions | //////////////////// | //////////////////// |
in the U.S. (including their IBFs)...................................... | 0085 34,128 | //////////////////// | 2.b.
3. Balances due from banks in foreign countries and foreign central banks...... | //////////////////// | 0070 7,407 | 3.
a. Foreign branches of other U.S. banks.................................... | 0073 0 | //////////////////// | 3.a.
b. Other banks in foreign countries and foreign central banks.............. | 0074 7,407 | //////////////////// | 3.b.
4. Balances due from Federal Reserve Banks..................................... | 0090 84,435 | 0090 84,435 | 4.
5. Total (sum of items 1 through 4) (total of column A must equal | //////////////////// | //////////////////// |
Schedule RC, sum of items 1.a and 1.b)..................................... | 0010 612,103 | 0010 612,103 | 5.
-----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------
Memorandum Dollar Amounts in Thousands | RCON Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2, | //////////////////// |
column B above) ............................................................................. | 0050 34,128 | M.1.
------------------------
</TABLE>
Schedule RC-B--Securities
<TABLE>
<CAPTION>
Exclude assets held for trading.
----------
| C410 | <->
---------------------------------------------------------------------------------------------
| Held-to-maturity | Available-for-sale |
---------------------------------------------------------------------------------------------
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value (1) |
|----------------------|----------------------|---------------------------------------------|
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. U.S. Treasury securities...... | 0211 0 | 0213 0 | 1286 161,253 | 1287 161,302 | 1.
2. U.S. Government agency | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
and corporation obligations | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
(exclude mortgage-backed | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
securities): | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
a. Issued by U.S. Govern- | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
ment agencies (2).......... | 1289 0 | 1290 0 | 1291 0 | 1293 0 | 2.a.
b. Issued by U.S. | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
Government-sponsored | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
agencies (3)............... | 1294 0 | 1295 0 | 1297 4,074 | 1298 4,114 | 2.b.
---------------------------------------------------------------------------------------------
</TABLE>
- ----------------
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool
Certificates," U.S. Maritime Administration obligations, and Export-Import
Bank participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the
Farm Credit System, the Federal Home Loan Bank System, the Federal Home
Loan Mortgage Corporation, the Federal National Mortgage Association, the
Financing Corporation, Resolution Funding Corporation, the Student Loan
Marketing Association, and the Tennessee Valley Authority.
13
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-4
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
Schedule RC-B--Continued
__________________________________________________________________________________________
| Held-to-maturity Available-for-sale |
| _________________________________________________________________________________________ |
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value (1) |
| _____________________|______________________|______________________|_____________________ |
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
_______________________________|______________________|______________________|______________________|_____________________ |
3. Securities issued by states | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
and political subdivisions | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
in the U.S.: | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
a. General obligations......| 1676 0 | 1677 0 | 1678 1,034 | 1679 1,040 | 3.a.
b. Revenue obligations......| 1681 0 | 1686 0 | 1690 30 | 1691 29 | 3.b.
c. Industrial development | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
and similar obligations..| 1694 0 | 1695 0 | 1696 0 | 1697 0 | 3.c.
4. Mortgage-backed | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
securities (MBS): | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
a. Pass-through securities: | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
(1) Guaranteed by | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
GNMA.................| 1698 0 | 1699 0 | 1701 264 | 1702 268 | 4.a.(1)
(2) Issued by FNMA | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
and FHLMC............| 1703 0 | 1705 0 | 1706 456 | 1707 467 | 4.a.(2)
(3) Other pass-through | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
securities...........| 1709 0 | 1710 0 | 1711 0 | 1713 0 | 4.a.(3)
b. Other mortgage-backed | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
securities (include CMOs,| //////////////////// | //////////////////// | //////////////////// | //////////////////// |
REMICs, and stripped | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
MBS): | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
(1) Issued or guaranteed | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
by FNMA, FHLMC, | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
or GNMA..............| 1714 0 | 1715 0 | 1716 201 | 1717 196 | 4.b.(1)
(2) Collateralized | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
by MBS issued or | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
guaranteed by FNMA, | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
FHLMC, or GNMA.......| 1718 0 | 1719 0 | 1731 0 | 1732 0 | 4.b.(2)
(3) All other mortgage- | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
backed securities....| 1733 0 | 1734 0 | 1735 8 | 1736 8 | 4.b.(3)
5. Other debt securities: | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
a. Other domestic debt | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
securities...............| 1737 0 | 1738 0 | 1739 369 | 1741 369 | 5.a.
b. Foreign debt | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
securities...............| 1742 0 | 1743 0 | 1744 3,115 | 1746 3,165 | 5.b.
6. Equity securities: | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
a. Investments in mutual | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
funds....................| //////////////////// | //////////////////// | 1747 0 | 1748 0 | 6.a.
b. Other equity securities | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
with readily determin- | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
able fair values.........| //////////////////// | //////////////////// | 1749 0 | 1751 0 | 6.b.
c. All other equity | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
securities(1)............| //////////////////// | //////////////////// | 1752 10,567 | 1753 10,567 | 6.c.
7. Total (sum of items 1 | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
through 6) (total of | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
column A must equal | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
Schedule RC, item 2.a) | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
(total of column D must | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
equal Schedule RC, | //////////////////// | //////////////////// | //////////////////// | //////////////////// |
item 2.b)...................| 1754 0 | 1771 0 | 1772 181,371 | 1773 181,525 | 7.
____________________________________________________________________________________________
</TABLE>
- -------------
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
14
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-5
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-B -- Continued
<S> <C> <C> <C>
_____
| C412| LESS THAN
---------------------
Memoranda Dollar Amounts in Thousands| RCFD Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------
1. Pledged securities (2) ................................................................. | 0416 165,416 | M.1.
2. Maturity and repricing data for debt securities (2), (3), (4) (excluding those in | ////////////////// |
nonaccrual status): | ////////////////// |
a. Fixed rate debt securities with a remaining maturity of: | ////////////////// |
(1) Three months or less............................................................. | 0343 40,639 | M.2.a.(1)
(2) Over three months through 12 months.............................................. | 0344 96,785 | M.2.a.(2)
(3) Over one year through five years................................................. | 0345 29,324 | M.2.a.(3)
(4) Over five years.................................................................. | 0346 2,063 | M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a. (1) through 2.a.(4) | 0347 168,811 | M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently..................................................... | 4544 0 | M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly.................. | 4545 2,147 | M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually........... | 4551 0 | M.2.b.(3)
(4) Less frequently than every five years............................................ | 4552 0 | M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b(1) through 2.b.(4))| 4553 2,147 | M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal total | ////////////////// |
debt securities from Schedule RC-B, sum of items 1 through 5, columns A and D, minus | ////////////////// |
nonaccrual debt securities included in Schedule RC-N, item 9, column C).............. | 0393 170,958 | M.2.c.
3. Not applicable | ////////////////// |
4. Held-to-maturity debt securities restructured and in compliance with modified terms | ////////////////// |
(included in Schedule RC-B, items 3 through 5, column A, above)......................... | 5365 0 | M.4.5519
5. Not applicable | ////////////////// |
6. Floating rate debt securities with a remaining maturity of one year or less (2), (4) | ////////////////// |
(included in Memorandum items 2.b.(1) through 2.b.(4) above)............................ | 5519 0 | M.6.5519
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale | ////////////////// |
or trading securities during the calendar year-to-date (report the amortized cost at | ////////////////// |
date of sale or transfer)............................................................... | 1778 0 | M.7.5519
8. High-risk mortgage securities (included in the held-to-maturity and available-for-sale | ////////////////// |
accounts in Schedule RC-B, item 4.b): | ////////////////// |
a. Amortized cost....................................................................... | 8780 0 | M.8.a.
b. Fair value........................................................................... | 8781 0 | M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale accounts in | ////////////////// |
Schedule RC-B, items 2, 3, and 5): | ////////////////// |
a. Amortized cost....................................................................... | 8782 0 | M.9.a.
b. Fair value........................................................................... | 8783 0 | M.9.b.
----------------------
</TABLE>
- -----------------------------
(2) Includes held-to-maturity securities at amortized cost and available-for-
sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(4) Memorandum items 2 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
15
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-6
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
Schedule RC-C--Loans and Lease Financing Receivables
Part I. Loans and Leases
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Do not deduct the allowance for loan and lease losses from amounts ________
reported in this schedule. Report total loans and leases, net of unearned | C415 |
income. Exclude assets held for trading. _____________________________________________
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
|_____________________|______________________|
Dollar Amounts in Thousands |RCFD Bil Mil Thou | RCON Bil Mil Thou |
__________________________________________________________________________ |____________________ _______________________|
1. Loans secured by real estate........................................ | 1410 1,873,006 | //////////////////// | 1.
a. Construction and land development................................ | /////////////////// | 1415 207,567 | 1.a.
b. Secured by farmland (including farm residential and other | /////////////////// | //////////////////// |
improvements).................................................... | /////////////////// | 1420 992 | 1.b.
c. Secured by 1-4 family residential properties: | /////////////////// | //////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | /////////////////// | //////////////////// |
properties and extended under lines of credit................ | /////////////////// | 1797 96,404 | 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: | /////////////////// | //////////////////// |
(a) Secured by first liens .................................. | /////////////////// | 5367 436,160 | 1.c.(2)(a)
(b) Secured by junior liens ................................. | /////////////////// | 5368 249 | 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties........ | /////////////////// | 1460 71,361 | 1.d.
e. Secured by nonfarm nonresidential properties..................... | /////////////////// | 1480 1,060,273 | 1.e.
2. Loans to depository institutions: | /////////////////// | //////////////////// |
a. To commercial banks in the U.S. ................................. | /////////////////// | 1505 11,999 | 2.a.
(1) To U.S. branches and agencies of foreign banks............... | 1506 0 | //////////////////// | 2.a.(1)
(2) To other commercial banks in the U.S. ....................... | 1507 11,999 | //////////////////// | 2.a.(2)
b. To other depository institutions in the U.S. .................... | 1517 191 | 1517 191 | 2.b.
c. To banks in foreign countries ................................... | /////////////////// | 1510 277 | 2.c.
(1) To foreign branches of other U.S. banks...................... | 1513 0 | //////////////////// | 2.c.(1)
(2) To other banks in foreign countries.......................... | 1516 277 | //////////////////// | 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers. | 1590 3,078 | 1590 3,078 | 3.
4. Commercial and industrial loans: | /////////////////// | //////////////////// |
a. To U.S. addressees (domicile).................................... | 1763 4,174,478 | 1763 4,174,478 | 4.a
b. To non-U.S. addressees (domicile)................................ | 1764 2,800 | 1764 2,800 | 4.b.
5. Acceptances of other banks: | /////////////////// | //////////////////// |
a. Of U.S. banks.................................................... | 1756 0 | 1756 0 | 5.a.
b. Of foreign banks................................................. | 1757 0 | 1757 0 | 5.b.
6. Loans to individuals for household, family, and other personal | /////////////////// | //////////////////// |
expenditures (i.e., consumer loans) (includes purchased paper)...... | /////////////////// | 1975 202,932 | 6.
a. Credit cards and related plans (includes check credit and other | /////////////////// | //////////////////// |
revolving credit plans) ......................................... | 2008 1,506 | //////////////////// | 6.a.
b. Other (includes single payment, installment, and all student loans)| 2011 201,426 | //////////////////// | 6.b.
7. Loans to foreign governments and official institutions (including | /////////////////// | //////////////////// |
foreign central banks).............................................. | 2081 0 | 2081 0 | 7.
8. Obligations (other than securities and leases) of states and | /////////////////// | //////////////////// |
political subdivisions in the U.S. (includes nonrated industrial | /////////////////// | //////////////////// |
development obligations)............................................ | 2107 214,620 | 2107 214,620 | 8.
9. Other loans......................................................... | 1563 262,553 | //////////////////// | 9.
a. Loans for purchasing or carrying securities (secured and | /////////////////// | //////////////////// |
unsecured)....................................................... | /////////////////// | 1545 145,382 | 9.a.
b. All other loans (exclude consumer loans)......................... | /////////////////// | 1564 117,171 | 9.b.
10. Lease financing receivables (net of unearned income)................ | /////////////////// | 2165 33,749 |10.
a. Of U.S. addressees (domicile).................................... | 2182 33,749 | //////////////////// |10.a.
b. Of non-U.S. addressees (domicile)................................ | 2183 0 | //////////////////// |10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above..... | 2123 15,541 | 2123 15,541 |11.
12. Total loans and leases, net of unearned income (sum of items 1 | /////////////////// | //////////////////// |
through 10 minus item 11) (total of column A must equal | /////////////////// | //////////////////// |
Schedule RC, item 4.a).............................................. | 2122 6,764,142 | 2122 6,764,142 |12.
_____________________________________________
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-7
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-C--Continued
Part I. Continued
---------------------------------------------
| (Column A) | (Column B) |
| Consolidated | Domestic |
Memoranda | Bank | Offices |
|---------------------------------------------
Dollar Amounts in Thousands |RCFD Bil Mil Thou | RCON Bil Mil Thou|
- -----------------------------------------------------------------------------------------------------------------------
<S> |<C> <C> | <C> <C>| <C>
1. Commercial paper included in Schedule RC-C, part I, above............. |1496 0 | 1496 0 | M.1.
2. Loans and leases restructured and in compliance with modified terms |///////////////////// | ////////////////////|
(included in Schedule RC-C, part I, above and not reported as past |///////////////////// | ////////////////////|
due or nonaccrual in Schedule RC-N, Memorandum item 1): |///////////////////// | ////////////////////|
a. Loans secured by real estate: |///////////////////// |---------------------|
(1) To U.S. addressees (domicile)................................. |1687 0 | M.2.a.(1)
(2) To non-U.S. Addressees (domicile)............................. |1689 0 | M.2.a.(2)
b. All other loans and all lease financing receivables (exclude loans |///////////////////// |
to individuals for household, family, and other personal |///////////////////// |
expenditures)..................................................... |8691 0 | M.2.b.
c. Commercial and industrial loans to and lease financing receivables |///////////////////// |
of non-U.S. addressees (domicile) included in Memorandum item 2.b |///////////////////// |
above............................................................. |8692 0 | M.2.c
3. Maturity and repricing data for loans and leases(1) (excluding those |///////////////////// |
in nonaccrual status): |///////////////////// |
a. Fixed rate loans and leases with a remaining maturity of: |///////////////////// |
(1) Three months or less.......................................... |0348 838,937 | M.3.a.(1)
(2) Over three months through 12 months........................... |0349 449,246 | M.3.a.(2)
(3) Over one year through five years.............................. |0356 1,394,195 | M.3.a.(3)
(4) Over five years............................................... |0357 401,322 | M.3.a.(4)
(5) Total fixed rate loans and leases (sum of Memorandum |///////////////////// |
items 3.a.(1) through 3.a.(4)................................. |0358 3,083,700 | M.3.a.(5)
b. Floating rate loans with a repricing frequency of: |///////////////////// |
(1) Quarterly or more frequency................................... |4554 3,593,350 | M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly|4555 6,832 | M.3.b.(2)
(3) Every five years or more frequently, but less frequently than |///////////////////// |
annually...................................................... |4561 170 | M.3.b.(3)
(4) Less frequently than every five years......................... |4564 0 | M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1) |///////////////////// |
through 3.b.(4)).............................................. |4567 3,600,352 | M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and |///////////////////// |
3.b.(5)) (must equal the sum of total loans and leases, net, from |///////////////////// |
Schedule RC-C, part I, item 12, plus unearned income from |///////////////////// |
Schedule RC-C, part I, item 11, minus total nonaccrual loans and |///////////////////// |
leases from Schedule RC-N, sum of items 1 through 8, column C).... |1479 6,684,052 | M.3.c
d. Floating rate loans with a remaining maturity of one year or less |///////////////////// |
(included in Memorandum items 3.b.(1) through 3.b.(4) above)...... |A246 2,257,294 | M.3.d
4. Loans to finance commercial real estate, construction, and land |///////////////////// |
development activities (not secured by real estate) included in |///////////////////// |
Schedule RC-C, part I, items 4 and 9, column A, page RC-6(2).......... |2746 50,628 | M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, |///////////////////// |
above)................................................................ |5369 0 | M.5.
6. Adjustable rate closed-end loans |///////////////////// |----------------------
secured by first liens on 1-4 family residential properties |///////////////////// | RCON Bil Mil Thou |
(included in Schedule RC-C, part I, items ---------------------|
1.c.(2)(a), column B, page RC-6)...................................... |///////////////////// | 5370 17,110 | M.6.
----------------------------------------------
- --------------------
(1) Memorandum item 3 is not applicable to savings banks that must complete supplemental Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C, part I, item 1, column A.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC- 8
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
Schedule RC-D--Trading Assets and Liabilities
Schedule RC-D is to be completed only by banks with $1 billion or more in total
assets or with $2 billion or more in par/notional amount of off-balance sheet
derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e,
columns A through D).
<TABLE>
<CAPTION>
______
| C420 |
---------------------
Dollar Amount in Thousands| //// Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------
<S> | <C> | <C>
ASSETS | ////////////////// |
1. U.S. Treasury securities in domestic offices.............................................. | RCON 3531 0 | 1.
2. U.S. Government agency and corporation obligations in domestic offices (exclude | ////////////////// |
mortgage-backed securities)............................................................... | RCON 3532 0 | 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic offices.... | RCON 3533 3,610 | 3.
4. Mortgage-backed securities (MBS) in domestic offices: | ////////////////// |
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA................... | RCON 3534 0 | 4.a
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC or GNMA (include | ////////////////// |
CMOs, REMICs, and stripped MBS)........................................................ | RCON 3535 494 | 4.b
c. All other mortgage-backed securities................................................... | RCON 3536 0 | 4.c
5. Other debt securities in domestic offices................................................. | RCON 3537 16 | 5.
6. Certificates of deposit in domestic offices............................................... | RCON 3538 0 | 6.
7. Commercial paper in domestic offices...................................................... | RCON 3539 0 | 7.
8. Bankers acceptances in domestic offices................................................... | RCON 3540 16,204 | 8.
9. Other trading assets in domestic offices.................................................. | RCON 3541 0 | 9.
10. Trading assets in foreign offices......................................................... | RCFN 3542 0 | 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and | ////////////////// |
equity contracts: | ////////////////// |
a. In domestic offices.................................................................... | RCON 3543 977 | 11.a
b. In foreign offices..................................................................... | RCFN 3544 0 | 11.b
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5)......... | RCFD 3545 21,301 | 12.
--------------------
--------------------
LIABILITIES | //// Bil Mil Thou |
--------------------
13. Liability for short positions............................................................. | RCFD 3546 0 | 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and | ////////////////// |
equity contracts.......................................................................... | RCFD 3547 212 | 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b).... | RCFD 3548 212 | 15.
--------------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC- 9
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
Schedule RC-E--Deposit Liabilities
Part I. Deposits in Domestic Offices
<TABLE>
<CAPTION>
----------
| C425 |(-
----------------------------------------------------------------------
| | Nontransaction |
| Transaction Accounts | Accounts |
----------------------------------------------------------------------
| (Column A) | (Column B) | (Column C) |
| Total transaction | Memo: Total | Total |
| accounts (including | demand deposits | nontransaction |
| total demand | (included in | accounts |
| deposits) | column A) | (including MMDAs) |
|----------------------|----------------------|----------------------|
Dollars Amounts in Thousands | RCON Bil Mil Thou | RCON Bil Mil Thou | RCON Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deposits of: | //////////////////// | //////////////////// | //////////////////// |
1. Individuals, partnerships, and corporations ......... | 2201 2,182,217 | 2240 1,857,859 | 2346 1,762,244 | 1.
2. U.S. Government ..................................... | 2202 10,083 | 2280 10,083 | 2520 0 | 2.
3. States and political subdivisions in the U.S. ....... | 2203 20,604 | 2290 9,887 | 2530 140,555 | 3.
4. Commercial banks in the U.S. ........................ | 2206 103,541 | 2310 103,541 | 2550 0 | 4.
5. Other depository institutions in the U.S............. | 2207 9,585 | 2312 9,585 | 2349 0 | 5.
6. Banks in foreign countries .......................... | 2213 4,636 | 2320 4,636 | 2236 0 | 6.
7. Foreign governments and official institutions | //////////////////// | //////////////////// | //////////////////// |
(including foreign central banks).................... | 2216 139 | 2300 139 | 2377 0 | 7.
8. Certified and official checks ....................... | 2330 30,335 | 2330 30,335 | //////////////////// | 8.
9. Total (sum of items 1 through 8) (sum of | //////////////////// | //////////////////// | //////////////////// |
columns A and C must equal Schedule RC, | //////////////////// | //////////////////// | //////////////////// |
item 13.a) .......................................... | 2215 2,361,140 | 2210 2,026,065 | 2285 1,902,799 | 9.
----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Memoranda
------------------------
Dollars Amounts in Thousands | RCON Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): | //////////////////// |
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts ....................... | 6835 80,721 | M.1.a.
b. Total brokered deposits.................................................................... | 2365 1,381 | M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): | //////////////////// |
(1) Issued in denominations of less than $100,000.......................................... | 2343 0 | M.1.c.(1)
(2) Issued either in denominations of $100,000 or in denominations greater than | //////////////////// |
$100,000 and participated out by the broker in shares of $100,000 or less.............. | 2344 1,381 | M.1.c.(2)
d. Maturity data for brokered deposits: | //////////////////// |
(1) Brokered deposits issued in denominations of less than $100,000 with a remaining | //////////////////// |
maturity of one year or less (included in Memorandum item 1.c.(1) above)............... | A243 0 | M.1.d.(1)
(2) Brokered deposits issued in denominations of $100,000 or more with a remaining | //////////////////// |
maturity of one year or less (included in Memorandum item 1.b above)................... | A244 1,381 | M.1.d.(2)
e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S. | //////////////////// |
reported in item 3 above which are secured or collateralized as required under state law)| 5590 3,833 | M.1.e
2. Components of total nontransaction accounts (sum of Memorandum items 2.a through 2.d | //////////////////// |
must equal item 9, column C above): | //////////////////// |
a. Savings deposits: | //////////////////// |
(1) Money market deposit accounts (MMDAs).................................................. | 6810 656,079 | M.2.a.(1)
(2) Other savings deposits (excludes MMDAs)................................................ | 0352 234,569 | M.2.a.(2)
b. Total time deposits of less than $100,000.................................................. | 6648 261,128 | M.2.b.
c. Time certificates of deposit of $100,000 or more........................................... | 6645 618,837 | M.2.c.
d. Open-account time deposits of $100,000 or more............................................. | 6646 132,186 | M.2.d.
3. All NOW accounts (included in column A above)................................................. | 2398 335,075 | M.3.
------------------------
4. Not applicable
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-10
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
Schedule RC-E--Continued
Part I. Continued
Memoranda (continued)
<TABLE>
<CAPTION> ______________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
________________________________________________________________________________________________|______________________
<S> |<C> | <C>
5. Maturity and repricing data for time deposits of less than $100,000 (sum of | //////////////////// |
Memorandum items 5.a.(1) through 5.b.(3) must equal Memorandum item 2.b above): (1) | //////////////////// |
a. Fixed rate time deposits of less than $100,000 with a remaining maturity of: | //////////////////// |
(1) Three months or less..................................................................| A225 109,559 | M.5.a.(1)
(2) Over three months through 12 months...................................................| A226 109,651 | M.5.a.(2)
(3) Over one year.........................................................................| A227 41,801 | M.5.a.(3)
b. Floating rate time deposits of less than $100,000 with a repricing frequency of: | //////////////////// |
(1) Quarterly or more frequently..........................................................| A228 117 | M.5.b.(1)
(2) Annually or more frequently, but less frequently than quarterly.......................| A229 0 | M.5.b.(2)
(3) Less frequently than annually.........................................................| A230 0 | M.5.b.(3)
c. Floating rate time deposits of less than $100,000 with a remaining maturity of | //////////////////// |
one year or less (included in Memorandum items 5.b.(1) through 5.b.(3) above).............| A231 28 | M.5.c.
6. Maturity and repricing data for time deposits of $100,000 or more (i.e., time certificates | //////////////////// |
of deposit of $100,000 or more and open-account time deposits of $100,000 or more) | //////////////////// |
(sum of Memorandum items 6.a.(1) through 6.b.(4) must equal the sum of Memorandum | //////////////////// |
items 2.c and 2.d above): (1) | //////////////////// |
a. Fixed rate time deposits of $100,000 or more with a remaining maturity of: | //////////////////// |
(1) Three months or less..................................................................| A232 548,751 | M.6.a.(1)
(2) Over three months through 12 months...................................................| A233 169,528 | M.6.a.(2)
(3) Over one year through five years......................................................| A234 31,513 | M.6.a.(3)
(4) Over five years.......................................................................| A235 1,231 | M.6.a.(4)
b. Floating rate time deposits of $100,000 or more with a repricing frequency of: | //////////////////// |
(1) Quarterly or more frequently..........................................................| A236 0 | M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly.......................| A237 0 | M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually................| A238 0 | M.6.b.(3)
(4) Less frequently than every five years.................................................| A239 0 | M.6.b.(4)
c. Floating rate time deposits of $100,000 or more with a remaining maturity of | //////////////////// |
one year or less (included in Memorandum items 6.b.(1) through 6.b.(4) above).............| A240 0 | M.6.c.
______________________
</TABLE>
- -----------------
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
20
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-1
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-E--Continued
<S> <C> <C>
Part II. Deposits in Foreign Offices (including Edge and
Agreement Subsidiaries and IBFs)
______________________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------------
Deposits of: | /////////////////// |
1. Individuals, partnerships, and corporations.....................................................| 2621 1,391,090 | 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks)..................................| 2623 13,000 | 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks, including their IBFs).....| 2625 0 | 3.
4. Foreign governments and official institutions (including foreign central banks).................| 2650 0 | 4.
5. Certified and official checks...................................................................| 2330 0 | 5.
6. All other deposits..............................................................................| 2668 0 | 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b)............................| 2200 1,404,190 | 7.
---------------------
Memorandum
---------------------
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------------
1. Time deposits with a remaining maturity of one year or less (included in Part II, item 7 above) | A245 1,400,290 | M.1
---------------------
Schedule RC-F--Other Assets
----------
| C430 |
------------------------
Dollar Amounts in Thousands | ///// Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------------
1. Income earned, not collected on loans...........................................................| RCFD 2164 35,461 | 1.
2. Net deferred tax assets(1)......................................................................| RCFD 2148 79,233 | 2.
3. Excess residential mortgage servicing fees receivable...........................................| RCFD 5371 0 | 3.
4. Other (itemize and describe amounts that exceed 25% of this item)...............................| RCFD 2168 23,720 | 4.
a. | TEXT 3549 | A/R INTERCOMPANY CHARGES | RCFD 3549 | 7,062 | //////////////////// | 4.a.
b. | TEXT 3550 | | RCFD 3550 | | //////////////////// | 4.b
c. | TEXT 3551 | | RCFD 3551 | | //////////////////// | 4.c
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11)..............................| RCFD 2160 138,414 | 5.
_________________________
________________________
Memorandum Dollar Amounts in Thousands | ///// Bil Mil Thou |
- ----------------------------------------------------------------------------------------------------------------------------
1. Deferred tax assets disallowed for regulatory capital purposes..................................| RCFD 5610 0 | M.1.
|-----------------------|
Schedule RC-G--Other Liabilities -----
|C435|
Dollar Amounts in Thousands | ///// Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------------
1. a. Interest accrued and unpaid on deposits in domestic offices (2).............................| RCON 3645 9,104 | 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable)...................| RCFD 3646 69,311 | 1.b.
2. Net deferred tax liabilities (1)...............................................................| RCFD 3049 0 | 2.
3. Minority interest in consolidated subsidiaries.................................................| RCFD 3000 0 | 3.
4. Other (itemize and describe amounts that exceed 25% of this item)..............................| RCFD 2938 4,779 | 4.
a. | TEXT 3552 | Deferred STANDBY L/C Fees (PRE-FAS 91) | RCFD 3552 | 1,696 | //////////////////// | 4.a
b. | TEXT 3553 | | RCFD 3553 | | //////////////////// | 4.b.
c. | TEXT 3554 | | RCFD 3554 | | //////////////////// | 4.c.
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20).............................| RCFD 2930 83,194 | 5.
|-----------------------|
</TABLE>
______________________
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.
21
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-1
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
--------
| C440 |
--------------------
| Domestic Offices |
---------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- ----------------------------------------------------------------------------------------------------------------------
1. Customers' liability to this bank on acceptances outstanding.................................| 2155 29,870 | 1.
2. Bank's liability on acceptances executed and outstanding.....................................| 2920 29,870 | 2.
3. Federal funds sold and securities purchased under agreements to resell.......................| 1350 320,150 | 3.
4. Federal funds purchased and securities sold under agreements to repurchase...................| 2800 1,305,840 | 4.
5. Other borrowed money.........................................................................| 3190 2,292 | 5.
EITHER | /////////////////// |
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs..................| 2163 N/A | 6.
OR | /////////////////// |
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs....................| 2941 1,406,662 | 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and | /////////////////// |
IBFs)........................................................................................| 2192 7,929,101 | 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, | /////////////////// |
and IBFs)....................................................................................| 3129 5,807,769 | 9.
---------------------
Items 10-17 include held-to-maturity and available-for-sale securities in domestic offices.
---------------------
| RCON Bil Mil Thou |
---------------------
10. U.S. Treasury securities....................................................................| 1779 161,302 | 10.
11. U.S. Government agency and corporation obligations (exclude mortgage-backed | /////////////////// |
securities).................................................................................| 1785 4,114 | 11.
12. Securities issued by states and political subdivisions in the U.S ..........................| 1786 1,069 | 12.
13. Mortgage-backed securities (MBS): | /////////////////// |
a. Pass-through securities: | /////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA.........................................| 1787 735 | 13.a(1)
(2) Other pass-through securities........................................................| 1869 0 | 13.a(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): | /////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA.........................................| 1877 196 | 13.b.(1)
(2) All other mortgage-backed securities.................................................| 2253 8 | 13.b.(2)
14. Other domestic debt securities..............................................................| 3159 369 | 14.
15. Foreign debt securities.....................................................................| 3160 3,165 | 15.
16. Equity securities: | /////////////////// |
a. Investments in mutual funds..............................................................| 3161 0 | 16.a.
b. Other equity securities with readily determinable fair values............................| 3162 0 | 16.b.
c. All other equity securities..............................................................| 3169 10,567 | 16.c.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16).......| 3170 181,525 | 17.
---------------------
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
---------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------
EITHER | /////////////////// |
1. Net due from the IBF of the domestic offices of the reporting bank..........................| 3051 N/A | M.1.
OR | /////////////////// |
2. Net due to the IBF of the domestic offices of the reporting bank............................| 3059 N/A | M.2.
---------------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-1
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Schedule RC-I--Selected Assets and Liabilities of IBFs
To be completed only by banks with IBFs and other "foreign" offices. -------
| C445 | (-
---------------------
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
- ----------------------------------------------------------------------------------------------------------------------
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12)................| 2133 N/A | 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, | /////////////////// |
item 12, column A)...........................................................................| 2076 N/A | 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, | /////////////////// |
column A)....................................................................................| 2077 N/A | 3.
4. Total IBF liabilities (component of Schedule RC, item 21)....................................| 2898 N/A | 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E, | /////////////////// |
part II, items 2 and 3)......................................................................| 2379 N/A | 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6)....| 2381 N/A | 6.
---------------------
Schedule RC-K--Quarterly Averages(1)
--------
| C455 |
----------------------
Dollar Amounts in Thousands | ///// Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------
ASSETS
1. Interest-bearing balances due from depository institutions..................................| RCFD 3381 100 | 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations(2)..........| RCFD 3382 181,616 | 2.
3. Securities issued by states and political subdivisions in the U.S. (2)......................| RCFD 3383 1,080 | 3.
4. a. Other debt securities(2).................................................................| RCFD 3647 3,659 | 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock)....| RCFD 3648 9,816 | 4.b.
5. Federal funds sold and securities purchased under agreements to resell in domestic offices | /////////////////// |
of the bank and of its Edge and Agreement subsidiaries, and in IBFs.........................| RCFD 3365 316,065 | 5.
6. Loans: | /////////////////// |
a. Loans in domestic offices: | /////////////////// |
(1) Total loans..........................................................................| RCON 3360 6,477,243 | 6.a. (1)
(2) Loans secured by real estate.........................................................| RCON 3385 1,788,006 | 6.a. (2)
(3) Loans to finance agricultural production and other loans to farmers..................| RCON 3386 2,901 | 6.a. (3)
(4) Commercial and industrial loans......................................................| RCON 3387 3,966,284 | 6.a. (4)
(5) Loans to individuals for household, family, and other personal expenditures..........| RCON 3388 202,315 | 6.a. (5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs................| RCFN 3360 0 | 6.b.
7. Trading assets..............................................................................| RCFD 3401 22,319 | 7.
8. Lease financing receivables (net of unearned income)........................................| RCFD 3484 25,986 | 8.
9. Total assets(4).............................................................................| RCFD 3368 7,589,487 | 9.
LIABILITIES | /////////////////// |
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts, | /////////////////// |
and telephone and preauthorized transfer accounts) (exclude demand deposits)................| RCON 3485 383,017 | 10.
11. Nontransaction accounts in domestic offices: | /////////////////// |
a. Money market deposit accounts (MMDAs)....................................................| RCON 3486 638,504 | 11.a.
b. Other savings deposits...................................................................| RCON 3487 240,586 | 11.b.
c. Time certificates of deposit of $100,000 or more.........................................| RCON 3345 609,564 | 11.c.
d. All other time deposits..................................................................| RCON 3469 411,020 | 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs.....| RCFN 3404 1,403,522 | 12.
13. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs.................| RCFD 3353 1,126,979 | 13.
14. Other borrowed money........................................................................| RCFD 3355 4,407 | 14.
---------------------
</TABLE>
- ----------------
(1) For all items, banks have the option of reporting either (1) an average of
daily figures for the quarter, or (2) an average of weekly figures (i.e.,
the Wednesday of each week of the quarter).
(2) Quarterly averages for all debt securities should be based on amortized
cost.
(3) Quarterly averages for all equity securities should be based on historical
cost.
(4) The quarterly average for total assets should reflect all debt securities
(not held for trading) at amortized cost, equity securities with readily
determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
23
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-1
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Schedule RC-L--Off-Balance Sheet Items
Please read carefully the instructions for the preparation of Schedule RC-L. Some of the amounts
reported in Schedule RC-L are regarded as volume indicators and not necessarily as measures of risk.
-------
| C460 | (-
---------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- ----------------------------------------------------------------------------------------------------------------------
1. Unused commitments: | /////////////////// |
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home | /////////////////// |
equity lines.............................................................................| 3814 95,974 | 1.a.
b. Credit card lines........................................................................| 3815 18,347 | 1.b.
c. Commercial real estate, construction, and land development: | /////////////////// |
(1) Commitments to fund loans secured by real estate.....................................| 3816 257,926 | 1.c.(1)
(2) Commitments to fund loans not secured by real estate.................................| 6550 5,691 | 1.c.(2)
d. Securities underwriting..................................................................| 3817 0 | 1.d.
e. Other unused commitments.................................................................| 3818 2,974,120 | 1.e.
2. Financial standby letters of credit and foreign office guarantees...........................| 3819 685,075 | 2.
----------------------
a. Amount of financial standby letters of credit conveyed to others | RCFD 3820 | 53,254 | /////////////////// | 2.a.
----------------------
3. Performance standby letters of credit and foreign office guarantees.........................| 3821 231,772 | 3.
----------------------
a. Amount of performance standby letters of credit conveyed to others | RCFD 3822 | 10,115 | /////////////////// | 3.a.
----------------------
4. Commercial and similar letters of credit....................................................| 3411 82,561 | 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by the | /////////////////// |
reporting bank..............................................................................| 3428 0 | 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting | /////////////////// |
(nonaccepting) bank.........................................................................| 3429 0 | 6.
7. Securities borrowed.........................................................................| 3432 0 | 7.
8. Securities lent (including customers' securities lent where the customer is indemnified | /////////////////// |
against loss by the reporting bank).........................................................| 3433 0 | 8.
9. Loans transferred (i.e., sold or swapped) with recourse that have been treated as sold for | /////////////////// |
Call Report purposes: | /////////////////// |
a. FNMA and FHLMC residential mortgage loan pools: | /////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date.........| 3650 0 | 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date.................| 3651 0 | 9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential mortgage loan pools: | /////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date.........| 3652 0 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date.................| 3653 0 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools: | /////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date.........| 3654 0 | 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date.................| 3655 0 | 9.c.(2)
d. Small business obligations transferred with recourse under Section 208 of the | /////////////////// |
Riegle Community Development and Regulatory Improvement Act of 1994: | /////////////////// |
(1) Outstanding principal balance of small business obligations transferred | /////////////////// |
as of the report date................................................................| A249 0 | 9.d.(1)
(2) Amount of retained recourse on these obligations as of the report date...............| A250 0 | 9.d.(2)
10. When-issued securities: | /////////////////// |
a. Gross commitments to purchase............................................................| 3434 0 | 10.a.
b. Gross commitments to sell................................................................| 3435 0 | 10.b.
11. Spot foreign exchange contracts.............................................................| 8765 6,203 | 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives) (itemize | /////////////////// |
and describe each component of this item over 25% of Schedule RC, item 28, "Total equity | /////////////////// |
capital")...................................................................................| 3430 0 | 12.
| /////////////////// |
------------- ------------------------
a. | TEXT 3555 | | RCFD 3555 | | /////////////////// | 12.a
-----------------------------------------------------------------
b. | TEXT 3556 | | RCFD 3556 | | /////////////////// | 12.b.
-----------------------------------------------------------------
c. | TEXT 3557 | | RCFD 3557 | | /////////////////// | 12.c.
-----------------------------------------------------------------
d. | TEXT 3558 | | RCFD 3558 | | /////////////////// | 12.d.
----------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-1
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
Schedule RC-L--Continued
<TABLE>
<CAPTION>
--------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and ////////////////////
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") 5591 0 13.
--------- ------------------------------------- ////////////////////
a. TEXT 5592 __________________________________________ RCFD 5592 //////////////////// 13.a.
b. TEXT 5593 __________________________________________ RCFD 5593 //////////////////// 13.b.
c. TEXT 5594 __________________________________________ RCFD 5594 //////////////////// 13.c.
d. TEXT 5595 __________________________________________ RCFD 5595 //////////////////// 13.d.
</TABLE>
<TABLE>
<CAPTION>
------
C461
--------------------------------------------------------------------------------------
(Column A) (Column B) (Column C) (Column D)
Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and
- --------------------------------- Contracts Contracts Contracts Other Contracts
Off-balance Sheet Derivatives --------------------------------------------------------------------------------------
Position Indicators Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
14. Gross amounts (e.g., notional //////////////////// //////////////////// //////////////////// ////////////////////
amounts) (for each column, //////////////////// //////////////////// //////////////////// ////////////////////
sum of items 14.a through //////////////////// //////////////////// //////////////////// ////////////////////
14.e must equal sum of items //////////////////// //////////////////// //////////////////// ////////////////////
15, 16.a, and 16.b): //////////////////// //////////////////// //////////////////// ////////////////////
--------------------------------------------------------------------------------------
a. Futures contracts......... 0 0 0 0 14.a.
--------------------------------------------------------------------------------------
RCFD 8693 RCFD 8694 RCFD 8695 RCFD 8696
--------------------------------------------------------------------------------------
b. Forward contracts......... 0 69,410 0 0 14.b.
--------------------------------------------------------------------------------------
RCFD 8697 RCFD 8698 RCFD 8699 RCFD 8700
--------------------------------------------------------------------------------------
c. Exchange-traded option //////////////////// //////////////////// //////////////////// ////////////////////
contracts: //////////////////// //////////////////// //////////////////// ////////////////////
--------------------------------------------------------------------------------------
(1) Written options....... 0 0 0 0 14.c.(1)
--------------------------------------------------------------------------------------
RCFD 8701 RCFD 8702 RCFD 8703 RCFD 8704
--------------------------------------------------------------------------------------
(2) Purchased options..... 0 0 0 0 14.c.(2)
--------------------------------------------------------------------------------------
RCFD 8705 RCFD 8706 RCFD 8707 RCFD 8708
--------------------------------------------------------------------------------------
d. Over-the-counter option //////////////////// //////////////////// //////////////////// ////////////////////
contracts: //////////////////// //////////////////// //////////////////// ////////////////////
--------------------------------------------------------------------------------------
(1) Written options....... 37,000 0 0 0 14.d.(1)
--------------------------------------------------------------------------------------
RCFD 8709 RCFD 8710 RCFD 8711 RCFD 8712
--------------------------------------------------------------------------------------
(2) Purchased options..... 37,000 0 0 0 14.d.(2)
--------------------------------------------------------------------------------------
RCFD 8713 RCFD 8714 RCFD 8715 RCFD 8716
--------------------------------------------------------------------------------------
e. Swaps..................... 568,373 0 0 0 14.e.
--------------------------------------------------------------------------------------
RCFD 3450 RCFD 3826 RCFD 8719 RCFD 8720
--------------------------------------------------------------------------------------
15. Total gross notional amount //////////////////// //////////////////// //////////////////// ////////////////////
of derivative contracts held //////////////////// //////////////////// //////////////////// ////////////////////
for trading.................. 132,025 0 0 0 15.
--------------------------------------------------------------------------------------
RCFD A126 RCFD A127 RCFD 8723 RCFD 8724
--------------------------------------------------------------------------------------
16. Total gross notional amount //////////////////// //////////////////// //////////////////// ////////////////////
of derivative contracts held //////////////////// //////////////////// //////////////////// ////////////////////
for purposes other than //////////////////// //////////////////// //////////////////// ////////////////////
trading: //////////////////// //////////////////// //////////////////// ////////////////////
--------------------------------------------------------------------------------------
a. Contracts marked to //////////////////// //////////////////// //////////////////// ////////////////////
market.................... 0 0 0 0 16.a.
--------------------------------------------------------------------------------------
RCFD 8725 RCFD 8726 RCFD 8727 RCFD 8728
--------------------------------------------------------------------------------------
b. Contracts not marked to //////////////////// //////////////////// //////////////////// ////////////////////
market.................... 510,348 69,410 0 0 16.b.
--------------------------------------------------------------------------------------
RCFD 8729 RCFD 8730 RCFD 8731 RCFD 8732
--------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-1
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
Schedule RC-L--Continued
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
(Column A) (Column B) (Column C) (Column D)
Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and
- --------------------------------- Contracts Contracts Contracts Other Contracts
Off-balance Sheet Derivatives --------------------------------------------------------------------------------------
Position Indicators RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
17. Gross fair values of //////////////////// //////////////////// //////////////////// ////////////////////
derivative contracts: //////////////////// //////////////////// //////////////////// ////////////////////
a. Contracts held for //////////////////// //////////////////// //////////////////// ////////////////////
trading: //////////////////// //////////////////// //////////////////// ////////////////////
(1) Gross positive //////////////////// //////////////////// //////////////////// ////////////////////
fair value............ 8733 1,261 8734 0 8735 0 8736 0 17.a.(1)
(2) Gross negative //////////////////// //////////////////// //////////////////// ////////////////////
fair value............ 8737 935 8738 0 8739 0 8740 0 17.a.(2)
b. Contracts held for //////////////////// //////////////////// //////////////////// ////////////////////
purposes other than //////////////////// //////////////////// //////////////////// ////////////////////
trading that are marked //////////////////// //////////////////// //////////////////// ////////////////////
to market: //////////////////// //////////////////// //////////////////// ////////////////////
(1) Gross positive //////////////////// //////////////////// //////////////////// ////////////////////
fair value............ 8741 0 8742 0 8743 0 8744 0 17.b.(1)
(2) Gross negative //////////////////// //////////////////// //////////////////// ////////////////////
fair value............ 8745 0 8746 0 8747 0 8748 0 17.b.(2)
c. Contracts held for //////////////////// //////////////////// //////////////////// ////////////////////
purposes other than //////////////////// //////////////////// //////////////////// ////////////////////
trading that are not //////////////////// //////////////////// //////////////////// ////////////////////
marked to market: //////////////////// //////////////////// //////////////////// ////////////////////
(1) Gross positive //////////////////// //////////////////// //////////////////// ////////////////////
fair value............ 8749 2,621 8750 567 8751 0 8752 0 17.c.(1)
(2) Gross negative //////////////////// //////////////////// //////////////////// ////////////////////
fair value............ 8753 6,108 8754 812 8755 0 8756 0 17.c.(2)
--------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------
Memoranda Dollar Amounts in Thousands RCFD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1.-2. Not applicable ////////////////////
3. Unused commitments with an original maturity exceeding one year that are reported in ////////////////////
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments ////////////////////
that are fee paid or otherwise legally binding)................................................... 3833 1,568,424 M.3.
a. Participations in commitments with an original maturity ////////////////////
exceeding one year conveyed to others................................... RCFD 3834 0 //////////////////// M.3.a.
4. To be completed only by banks with $1 billion or more in total assets: ////////////////////
Standby letters of credit and foreign office guarantees (both financial and performance) issued ////////////////////
to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above................. 3377 100 M.4.
5. Installment loans to individuals for household, family, and other personal expenditures that ////////////////////
have been securitized and sold without recourse (with servicing retained), amounts outstanding ////////////////////
by type of loan: ////////////////////
a. Loans to purchase private passenger automobiles (to be completed for the ////////////////////
September report only)......................................................................... 2741 0 M.5.a.
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY)..................................... 2742 0 M.5.b.
c. All other consumer installment credit (including mobile home loans) (to be completed for the ////////////////////
September report only)......................................................................... 2743 0 M.5.c.
--------------------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC- 1
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
Schedule RC-M--Memoranda
<TABLE>
<CAPTION>
------
C465
--------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors, principal ////////////////////
shareholders, and their related interests as of the report date: ////////////////////
a. Aggregate amount of all extensions of credit to all executive officers, directors, principal ////////////////////
shareholders, and their related interests..................................................... 6164 56,217 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the amount of ////////////////////
all extensions of credit by the reporting bank (including extensions of credit to ////////////////////
related interests) equals or exceeds the lesser of $500,000 or 5 percent Number ////////////////////
of total capital as defined for this purpose in agency regulations....... RCFD 6165 3 //////////////////// 1.b.
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches ////////////////////
and agencies of foreign banks(1) (included in Schedule RC, items 3.a and 3.b).................... 3405 40,000 2.
3. Not applicable. ////////////////////
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others ////////////////////
(include both retained servicing and purchased servicing): ////////////////////
a. Mortgages serviced under a GNMA contract...................................................... 5500 0 4.a.
b. Mortgages serviced under a FHLMC contract: ////////////////////
(1) Serviced with recourse to servicer........................................................ 5501 0 4.b.(1)
(2) Serviced without recourse to servicer..................................................... 5502 0 4.b.(2)
c. Mortgages serviced under a FNMA contract: ////////////////////
(1) Serviced under a regular option contract.................................................. 5503 0 4.c.(1)
(2) Serviced under a special option contract.................................................. 5504 0 4.c.(2)
d. Mortgages serviced under other servicing contracts............................................ 5505 0 4.d.
5. To be completed only by banks with $1 billion or more in total assets: ////////////////////
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must ////////////////////
equal Schedule RC, item 9): ////////////////////
a. U.S. addressees (domicile).................................................................... 2103 29,870 5.a.
b. Non-U.S. addressees (domicile)................................................................ 2104 0 5.b.
6. Intangible assets: ////////////////////
a. Mortgage servicing rights..................................................................... 3164 0 6.a.
b. Other identifiable intangible assets: ////////////////////
(1) Purchased credit card relationships....................................................... 5506 0 6.b.(1)
(2) All other identifiable intangible assets.................................................. 5507 1,826 6.b.(2)
c. Goodwill...................................................................................... 3163 2,460 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10)........................ 2143 4,286 6.d.
e. Amount of intangible assets (included in item 6.b.(2) above) that have been grandfathered or ////////////////////
are otherwise qualifying for regulatory capital purposes...................................... 6442 0 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to ////////////////////
redeem the debt.................................................................................. 3295 0 7.
--------------------
</TABLE>
- ----------
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
27
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-18
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
Schedule RC-M--Continued
<TABLE>
<CAPTION>
------------------------
Dollar Amounts in Thousands Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
8. a. Other real estate owned: ////////////////////////
(1) Direct and indirect investments in real estate ventures.......................... RCFD 5372 0 8.a.(1)
(2) All other real estate owned: ////////////////////////
(a) Construction and land development in domestic offices........................ RCON 5508 2,532 8.a.(2)(a)
(b) Farmland in domestic offices................................................. RCON 5509 0 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices........................ RCON 5510 344 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices........... RCON 5511 0 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices........................ RCON 5512 2,857 8.a.(2)(e)
(f) In foreign offices........................................................... RCFN 5513 0 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7)........ RCFD 2150 5,733 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: ////////////////////////
(1) Direct and indirect investments in real estate ventures.......................... RCFD 5374 0 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies.... RCFD 5375 0 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8)........ RCFD 2130 0 8.b.(3)
c. Total assets of unconsolidated subsidiaries and associated companies................. RCFD 5376 0 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, ////////////////////////
item 23, "Perpetual preferred stock and related surplus"................................ RCFD 3778 0 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include ////////////////////////
proprietary, private label, and third party products): ////////////////////////
a. Money market funds................................................................... RCON 6441 62,801 10.a.
b. Equity securities funds.............................................................. RCON 8427 1,070 10.b.
c. Debt securities funds................................................................ RCON 8428 512 10.c.
d. Other mutual funds................................................................... RCON 8429 325 10.d.
e. Annuities............................................................................ RCON 8430 0 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a through ////////////////////////
10.e above).......................................................................... RCON 8784 0 10.f.
------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
--------------------
Memorandum Dollar Amounts in Thousands RCFD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interbank holdings of capital instruments (to be completed for the December report only): ////////////////////
a. Reciprocal holdings of banking organizations' capital instruments............................. 3836 N/A M.1.a.
b. Nonreciprocal holdings of banking organizations' capital instruments.......................... 3837 N/A M.1.b.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-29
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
Schedule RC-N--Past Due and Nonaccrual Loans, Leases, and Other Assets
The FFIEC regards the information reported in
all of Memorandum item 1, in items 1 through 10,
column A, and in Memorandum items 2 through 4,
column A, as confidential.
<TABLE>
<CAPTION> ----------
| |
| C470 | LESS THAN
|---------------------|-----------------------|---------------------- |
| (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
| accruing | accruing | |
|---------------------|-----------------------|---------------------- |
Dollar Amounts in Thousands |RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- --------------------------------------------------|---------------------|-----------------------|---------------------- |
<S> |<C> <C> | <C> <C> | <C> <C> | <C>
1. Loans secured by real estate: |//////////////////// | //////////////////// | //////////////////// |
a. To U.S. addressees (domicile)............. |1245 40,324 | 1246 6,461 | 1247 23,670 | 1.a.
b. To non-U.S. addressees (domicile)......... |1248 0 | 1249 0 | 1250 0 | 1.b.
2. Loans to depository institutions and |//////////////////// | //////////////////// | //////////////////// |
acceptances of other banks: |//////////////////// | //////////////////// | //////////////////// |
a. To U.S. banks and other U.S. depository |//////////////////// | //////////////////// | //////////////////// |
institutions.............................. |5377 0 | 5378 0 | 5379 0 | 2.a.
b. To foreign banks.......................... |5380 0 | 5381 0 | 5382 0 | 2.b.
3. Loans to finance agricultural production and |//////////////////// | //////////////////// | //////////////////// |
other loans to farmers....................... |1594 0 | 1597 0 | 1583 0 | 3.
4. Commercial and industrial loans: |//////////////////// | //////////////////// | //////////////////// |
a. To U.S. addressees (domicile)............. |1251 113,985 | 1252 2,700 | 1253 70,364 | 4.a.
b. To non-U.S. addressees (domicile)......... |1254 0 | 1255 0 | 1256 0 | 4.b.
5. Loans to individuals for household, family, |//////////////////// | //////////////////// | //////////////////// |
and other personal expenditures: |//////////////////// | //////////////////// | //////////////////// |
a. Credit cards and related plans............ |5383 4 | 5384 0 | 5385 0 | 5.a.
b. Other (includes single payment, |//////////////////// | //////////////////// | //////////////////// |
installment, and all student loans)....... |5386 9,590 | 5387 380 | 5388 0 | 5.b.
6. Loans to foreign governments and official |//////////////////// | //////////////////// | //////////////////// |
institutions................................. |5389 0 | 5390 0 | 5391 0 | 6.
7. All other loans.............................. |5459 14,950 | 5460 0 | 5461 1,597 | 7.
8. Lease financing receivables: |//////////////////// | //////////////////// | //////////////////// |
a. Of U.S. addressees (domicile)............. |1257 183 | 1258 0 | 1259 0 | 8.a.
b. Of non-U.S. addressees (domicile)......... |1271 0 | 1272 0 | 1791 0 | 8.b.
9. Debt securities and other assets (exclude |//////////////////// | //////////////////// | //////////////////// |
other real estate owned and other |//////////////////// | //////////////////// | //////////////////// |
repossessed assets).......................... |3505 0 | 3506 0 | 3507 0 | 9.
|---------------------|-----------------------|---------------------- |
</TABLE>
===============================================================================
<TABLE>
<CAPTION>
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed portions of past due and nonaccrual loans and
leases. Report in item 10 below certain guaranteed loans and leases that have already been included in the amounts reported in
items 1 through 8.
|---------------------|------------------------|---------------------|
|RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou|
|---------------------|------------------------|---------------------|
<S> |<C> <C> | <C> <C> | <C> <C>| <C>
10. Loans and leases reported in items 1 |//////////////////// | //////////////////// | ////////////////////|
through 8 above which are wholly or |//////////////////// | //////////////////// | ////////////////////|
partially guaranteed by the U.S. Government.. |5612 0 | 5613 0 | 5614 0| 10.
a. Guaranteed portion of loans and leases |//////////////////// | //////////////////// | ////////////////////|
included in item 10 above................. |5615 0 | 5616 0 | 5617 0| 10.a.
|---------------------|------------------------|---------------------|
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-20
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Schedule RC-N--Continued
-------
| C473 |
------------------------------------------------------------------
| (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
| accruing | accruing | |
Memoranda |-----------------------------------------------------------------|
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------
1. Restructured loans and leases included in | /////////////////// | /////////////////// | /////////////////// |
Schedule RC-N, items 1 through 8, above (and not | /////////////////// | /////////////////// | /////////////////// |
reported in Schedule RC-C, part I, Memorandum | /////////////////// | /////////////////// | /////////////////// |
item 2).............................................| 1658 0 | 1659 0 | 1661 0 | M.1.
2. Loans to finance commercial real estate, | /////////////////// | /////////////////// | /////////////////// |
construction, and land development activities | /////////////////// | /////////////////// | /////////////////// |
(not secured by real estate) included in | /////////////////// | /////////////////// | /////////////////// |
Schedule RC-N, items 4 and 7, above.................| 6558 1,358 | 6559 0 | 6560 4,327 | M.2.
|-----------------------------------------------------------------|
3. Loans secured by real estate in domestic offices | RCON Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
|-----------------------------------------------------------------|
(included in Schedule RC-N, item 1, above): | /////////////////// | /////////////////// | /////////////////// |
a. Construction and land development................| 2759 6,000 | 2769 0 | 3492 2,070 | M.3.a.
b. Secured by farmland..............................| 3493 0 | 3494 0 | 3495 0 | M.3.b.
c. Secured by 1-4 family residential properties: | /////////////////// | /////////////////// | /////////////////// |
(1) Revolving, open-end loans secured by | /////////////////// | /////////////////// | /////////////////// |
1-4 family residential properties and | /////////////////// | /////////////////// | /////////////////// |
extended under lines of credit...............| 5398 3,431 | 5399 3,388 | 5400 0 | M.3.c.(1)
(2) All other loans secured by 1-4 family | /////////////////// | /////////////////// | /////////////////// |
residential properties.......................| 5401 1,151 | 5402 3,073 | 5403 0 | M.3.c.(2)
d. Secured by multifamily (5 or more) residential | /////////////////// | /////////////////// | /////////////////// |
properties.......................................| 3499 321 | 3500 0 | 3501 0 | M.3.d.
e. Secured by nonfarm nonresidential properties.....| 3502 29,421 | 3503 0 | 3504 21,600 | M.3.e.
-------------------------------------------------------------------
---------------------------------------------
| (Column A) | (Column B) |
| Past due 30 | Past due 90 |
| through 89 days | days or more |
|-------------------------------------------|
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
---------------------------------------------
4. Interest rate, foreign exchange rate, and other | /////////////////// | /////////////////// |
commodity and equity contracts: | /////////////////// | /////////////////// |
a. Book value of amounts carried as assets..........| 3522 0 | 3528 1 | M.4.a.
b. Replacement cost of contracts with a | /////////////////// | /////////////////// |
positive replacement cost........................| 3529 0 | 3530 0 | M.4.b.
---------------------------------------------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-21
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
Schedule RC-O--Other Data for Deposit Insurance Assessments
<TABLE>
<CAPTION>
-------
| C475 |
---------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Unposted debits (see instructions): | /////////////////// |
a. Actual amount of all unposted debits.................................................... | 0030 N/A | 1.a.
OR | /////////////////// |
b. Separate amount of unposted debits: | /////////////////// |
(1) Actual amount of unposted debits to demand deposits................................. | 0031 597 | 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1).................... | 0032 0 1.b.(2)
2. Unposted credits (see instructions): | /////////////////// |
a. Actual amount of all unposted credits................................................... | 3510 N/A | 2.a.
OR | /////////////////// |
b. Separate amount of unposted credits: | /////////////////// |
(1) Actual amount of unposted credits to demand deposits................................ | 3512 6,818 | 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1)................... | 3514 12 | 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total | /////////////////// |
deposits in domestic offices).............................................................. | 3520 339 | 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in Puerto | /////////////////// |
Rico and U.S. territories and possessions (not included in total deposits): | /////////////////// |
a. Demand deposits of consolidated subsidiaries............................................ | 2211 3,434 | 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries............................... | 2351 0 | 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries.................... | 5514 0 | 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: | /////////////////// |
a. Demand deposits in insured branches (included in Schedule RC-E, Part II)................ | 2229 0 | 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II)... | 2283 0 | 5.b.
c. Interest accrued and unpaid on deposits in insured branches | /////////////////// |
(included in Schedule RC-G, item 1.b)................................................... | 5515 0 | 5.c.
-----------------------
-----------------------
Item 6 is not applicable to state nonmember banks that have not been authorized by the | /////////////////// |
Federal Reserve to act as pass-through correspondents. | /////////////////// |
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on | /////////////////// |
behalf of its respondent depository institutions that are also reflected as deposit | /////////////////// |
liabilities of the reporting bank: | /////////////////// |
a. Amount reflected in demand deposits (included in Schedule RC-E, Part I, item 4 or 5, | /////////////////// |
column B).............................................................................. | 2314 409 | 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, | /////////////////// |
item 4 or 5, column A or C, but not column B)........................................... | 2315 0 | 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1) | /////////////////// |
a. Unamortized premiums.................................................................... | 5516 0 | 7.a.
b. Unamortized discounts................................................................... | 5517 0 | 7.b.
-----------------------
- -----------------------------------------------------------------------------------------------------------------------------
|8. To be completed by banks with "Oakar deposits." |
| ---------------------- |
| Total "Adjusted Attributable Deposits" of all institutions acquired under Section 5(d)(3) | /////////////////// | |
| of the Federal Deposit Insurance Act (from most recent FDIC Oakar Transaction Worksheet(s)).| 5518 N/A | 8. |
| ----------------------- |
- -----------------------------------------------------------------------------------------------------------------------------
-----------------------
9. Deposits in lifeline accounts.............................................................. | 5596/////////////// | 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total | /////////////////// |
deposits in domestic offices).............................................................. | 8432 0 |10.
-----------------------
</TABLE>
_____________________________________
1) For FDIC insurance assessment purposes, "time and savings deposits" consists
of nontransaction accounts and all transaction accounts other than demand
deposits.
31
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-22
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-O--Continued
<S> <C>
---------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------
11. Adjustments to demand deposits in domestic offices reported in Schedule RC-E for | /////////////////// |
certain reciprocal demand balances: | /////////////////// |
a. Amount by which demand deposits would be reduced if reciprocal demand balances | /////////////////// |
between the reporting bank and savings associations were reported on a net basis | /////////////////// |
rather than a gross basis in Schedule RC-E.............................................. | 8785 0 | 11.a.
b. Amount by which demand deposits would be increased if reciprocal demand balances | /////////////////// |
between the reporting bank and U.S. branches and agencies of foreign banks were | /////////////////// |
reported on a gross basis rather than a net basis in Schedule RC-E.......................| A181 0 | 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of | /////////////////// |
collection were included in the calculation of net reciprocal demand balances between | /////////////////// |
the reporting bank and the domestic offices of U.S. banks and savings associations | /////////////////// |
in Schedule RC-E.........................................................................| A182 428 | 11.c.
-----------------------
Memoranda (to be completed each quarter except as noted)
---------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------
1. Total deposits in domestic offices of the bank (sum of Memorandum items 1.a.(1) and | /////////////////// |
1.b.(1) must equal Schedule RC, item 13.a): | /////////////////// |
a. Deposit accounts of $100,000 or less: | /////////////////// |
(1) Amount of deposit accounts of $100,000 or less.......................................| 2702 1,081,714 | M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be Number | /////////////////// |
----------------------| /////////////////// |
completed for the June report only)........................... | RCON 3779 | N/A | /////////////////// | M.1.a.(2)
----------------------
b. Deposit accounts of more than $100,000: | /////////////////// |
(1) Amount of deposit accounts of more than $100,000.....................................| 2710 3,182,225 | M.1.b.(1)
Number | /////////////////// |
----------------------
(2) Number of deposit accounts of more than $100,000.............. | RCON 2722 | 7,536 | /////////////////// | M.1.b.(2)
---------------------------------------------
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by multiplying the
number of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2)
above by $100,000 and subtracting the result from the amount of deposit accounts of
more than $100,000 reported in Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a method or YES NO
procedure for determining a better estimate of uninsured deposits than the -----------------------
estimate described above.................................................................| 6861 | | /// | X| M.2.a.
-----------------------
b. If the box marked YES has been checked, report the estimate of uninsured deposits | RCON Bil Mil Thou |
determined by using your bank's method or procedure .....................................| 5597 N/A | M.2.b.
-----------------------
- -----------------------------------------------------------------------------------------------------------------------
Person to whom questions about the Reports of Condition and Income should be directed: | C477 |
--------
Gerald R. Huesing, Second Vice President (312) 661-5662
- ----------------------------------------------------------------------- --------------------------------------------
Name and Title (TEXT 8901) Area code/phone number/extension (TEXT 8902)
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-23
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
Schedule RC-R--Regulatory Capital
This schedule must be completed by all banks as follows: Banks that reported
total assets of $1 billion or more in Schedule RC, item 12, for June 30, 1995,
must complete items 2 through 9 and Memoranda items 1 and 2. Banks with assets
of less than $1 billion must complete items 1 through 3 below or Schedule RC-R
in its entirety, depending on their response to item 1 below.
<TABLE>
<CAPTION>
<S> <C> <C><C>
-----------------
| |
| C480 |
1. Test for determining the extent to which Schedule RC-R must be completed. To -----------------
be completed only by banks with total assets of less than $1 billion. | YES NO |
Indicate in the appropriate box at the right whether the bank has total -----------------
capital greater than or equal to eight percent of adjusted total | RCFD 6056 | |///| | 1.
assets..................................................................... --------------------------------
For purposes of this test, adjusted total assets equals total assets less
cash, U. S. Treasuries, U.S. Government agency obligations, and 80
percent of U.S. Government-sponsored agency obligations plus the allowance
for loan and lease losses and selected off-balance sheet items as reported
on Schedule RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to
complete items 2 and 3 below. If the box marked NO has been checked, the bank
must complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual
risk-based capital ratio is less than eight percent or that the bank is not in
compliance with the risk-based capital guidelines.
- --------------------------------------------------------------------------------
| NOTE: All banks are required to complete items 2 and 3 below. See optional |
| worksheet for items 3.a through 3.f. |
- -------------------------------------------------------------------------------- ------------------------------------------
Dollar Amounts in Thousands | (Column A) | (Column B) |
- -------------------------------------------------------------------------------- |Subordinated Debt(1)| Other |
2. Subordinated debt(1) and other limited-life capital instruments (original | and Intermediate | Limited-Life |
weighted average maturity of at least five years) with a remaining |Term Preferred Stock|Capital Instruments |
maturity of: |--------------------| -------------------|
|RCFD Bil Mil Thou|RCFD Bil Mil Thou|
|--------------------|--------------------|
a. One year or less........................................................ |3780 0|3786 0|2.a.
b. Over one year through two years......................................... |3781 0|3787 0|2.b.
c. Over two years through three years...................................... |3782 0|3788 0|2.c.
d. Over three years through four years..................................... |3783 0|3789 0|2.d.
e. Over four years through five years...................................... |3784 0|3790 0|2.e.
f. Over five years......................................................... |3785 125,000|3791 0|2.f.
3. Amounts used in calculating regulatory capital ratios (report amounts |////////////////////|////////////////////|
determined by the bank for its own internal regulatory capital analyses) |////////////////////|RCFD Bil Mil Thou|
consistent with applicable capital standards):
a. Tier 1 capital.......................................................... |////////////////////|8274 710,288|3.a.
b. Tier 2 capital.......................................................... |////////////////////|8275 230,056|3.b.
c. Total risk-based capital................................................ |////////////////////|3792 940,344|3.c.
d. Excess allowance for loan and lease losses.............................. |////////////////////|A222 85,351|3.d.
e. Risk-weighted assets (net of all deductions, including
excess allowance)....................................................... |////////////////////|A223 8,319,139|3.e.
f. "Average total assets" (net of all assets deducted
from Tier 1 capital)(2)................................................. |////////////////////|A224 7,589,487|3.f.
-------------------------------------------
------------------------------------------
| (Column A) | (Column B) |
Items 4-9 and Memoranda items 1 and 2 are to be completed | Assets | Credit Equiv- |
by banks that answered NO to item 1 above and | Recorded | alent Amount |
by banks with total assets of $1 billion or more. | on the | of Off-Balance |
| Balance Sheet | Sheet Items(2) |
-------------------------------------------
|RCFD Bil Mil Thou |RCFD Bil Mil Thou|
4. Assets and credit equivalent amounts of off-balance sheet items ----------------------| --------------------
assigned to the Zero percent risk category: |/////////////////////|////////////////////|
a. Assets recorded on the balance sheet: |/////////////////////|////////////////////|
(1) Securities issued by, other claims on, and claims unconditionally |/////////////////////|////////////////////|
guaranteed by, the U.S. Government and its agencies and |/////////////////////|////////////////////|
other OECD central governments...................................... |3794 161,517|////////////////////|4.a.(1)
(2) All other........................................................... |3795 135,941|////////////////////|4.a.(2)
b. Credit equivalent amount of off-balance sheet items..................... |/////////////////////|3796 0|4.b.
- ----------
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not deduct excess allowance for loan and lease losses.
(3) Do not report in column B the risk-weighted amount of assets reported
in column A.
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-24
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-R--Continued
---------------------------------------------
| (Column A) | (Column B) |
| Assets | Credit Equivalent |
| Recorded | Amount of Off- |
| on the | Balance Sheet |
| Balance Sheet | Items (1) |
|--------------------------------------------|
Dollar Amounts in Thousands |RCFD Bil Mil Thou | RCON Bil Mil Thou|
- -----------------------------------------------------------------------------------------------------------------------
<S> |<C> <C> | <C> <C>| <C>
5. Assets and credit equivalent amounts of off-balance sheet items |///////////////////// | ////////////////////|
assigned to the 20 percent risk category: |///////////////////// | ////////////////////|
a. Assets recorded on the balance sheet: |///////////////////// | ////////////////////|
(1) Claims conditionally guaranteed by the U.S. Government and |///////////////////// | ////////////////////|
its agencies and other OECD central governments................ |3798 0 | ////////////////////| 5.a.(1)
(2) Claims collateralized by securities issued by the U.S. |///////////////////// | ////////////////////|
Government and its agencies and other OECD central governments; |///////////////////// | ////////////////////|
by securities issued by U.S. Government-sponsored agencies; and |///////////////////// | ////////////////////|
by cash on deposit............................................. |3799 76,802 | ////////////////////| 5.a.(2)
(3) All other...................................................... |3800 815,540 | ////////////////////| 5.a.(3)
b. Credit equivalent amount of off-balance sheet items................ |///////////////////// | 3801 106,741| 5.b.
6. Assets and credit equivalent amounts of off-balance sheet items |///////////////////// | ////////////////////|
assigned to the 50 percent risk category: |///////////////////// | ////////////////////|
a. Assets recorded on the balance sheet............................... |3802 438,655 | ////////////////////| 6.a.
b. Credit equivalent amount of off-balance sheet items................ |///////////////////// | 3803 12,091| 6.b.
7. Assets and credit equivalent amounts of off-balance sheet items |///////////////////// | ////////////////////|
assigned to the 100 percent risk cateogry: |///////////////////// | ////////////////////|
a. Assets recorded on the balance sheet .............................. |3804 6,491,063 | ////////////////////| 7.a.
b. Credit equivalent amount of off-balance sheet items................ |///////////////////// | 3805 1,492,620| 7.b.
8. On-balance sheet asset values excluded from the calculation of the |///////////////////// | ////////////////////|
risk-based capital ratio(2)........................................... |3806 97 | ////////////////////| 8.
9. Total assets recorded on the balance sheet (sum of items 4.a., 5.a., |///////////////////// | ////////////////////|
6.a., 7.a., and 8, column A) (must equal Schedule RC, item 12 plus |///////////////////// | ////////////////////|
items 4.b and 4.c).................................................... |3807 8,119,615 | ////////////////////| 9.
---------------------- |----------------------
<S>
Memoranda -----------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou|
- -----------------------------------------------------------------------------------------------------------------------
1. Current credit exposure across all off-balance sheet derivative contracts covered by | ////////////////////|
the risk-based capital standards............................................................. | 8764 4,883| M.1.a.
---------------------
-----------------------------------------------------------------------------------------
| With a remaining maturity of |
------------------------------ ----------------------------- -----------------------------
| (Column A) | (Column B) | (Column C) |
| | | |
| One year or less | Over one year | Over five years |
| | through five years | |
2. Notional principal amounts |----------------------------| ----------------------------| ----------------------------|
of off-balance sheet |RCFD Tril Bil Mil Thou | RCFD Tril Bil Mil Thou | RCFD Tril Bil Mil Thou |
derivative contracts(3): ----------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
a. Interest rate contracts.|3809 208,371 | 8766 265,279| 8767 131,723 | M.2.a.
b. Foreign exchange | | | |
contracts..............|3812 67,153 | 8769 2,257| 8770 0 | M.2.b.
c. Gold contracts..........|8771 0 | 8772 0| 8773 0 | M.2.c.
d. Other precious metals | | | |
contracts..............|8774 0 | 8775 0| 8776 0 | M.2.d.
e. Other commodity | | | |
contracts..............|8777 0 | 8778 0| 8779 0 | M.2.e
b. Equity derivative | | | |
contracts..............|A000 0 | A001 0| A002 0 | M.2.f.
-----------------------------------------------------------------------------------------
</TABLE>
- --------------------------------
(1) Do not report in column B the risk-weighted amount of assets reported in
column A.
(2) Include the difference between the fair value and the amortized cost of
available-for-sale securities in item 8 and report the amortized cost of
these securities in items 4 through 7 above. Item 8 also includes on-balance
sheet asset values (or portions thereof) of off-balance sheet interest rate,
foreign exchange rate, and commodity contracts and those contracts (e.g.,
futures contracts) not subject to risk-based capital. Exclude from item 8
margin accounts and accrued receivables as well as any portion of the
allowance for loan and lease losses in excess of the amount that may be
included in Tier 2 capital.
(3) Exclude foreign exchange contracts with an original maturity 14 days or less
and all futures contracts.
34
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490 FFIEC 031
Address: 33 North LaSalle Street Page RC-25
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
Optional Narrative Statement Concerning the Amounts
Reported in the Reports of Condition and Income
at close of business on September 30, 1996
American National Bank & Trust Company of Chicago
- --------------------------------------------------------------------------------
Legal Title of Bank
Chicago , Illinois
- ----------------------------------------------- -------------------------------
City State
The management of the reporting bank may, if it wishes, submit a brief narrative
statement on the amounts reported in the Reports of Condition and Income. This
optional statement will be made available to the public, along with the publicly
available data in the Reports of Condition and Income, in response to any
request for individual bank report data. However, the information reported in
column A and in all of Memorandum item 1 of Schedule RC-N is regarded as
confidential and will not be released to the public. BANKS CHOOSING TO SUBMIT
THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE STATEMENT DOES NOT CONTAIN THE
NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL BANK CUSTOMERS, REFERENCES TO THE
AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS IN SCHEDULE RC-N, OR ANY OTHER
INFORMATION THAT THEY ARE NOT WILLING TO HAVE MADE PUBLIC OR THAT WOULD
COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks choosing not to make a
statement may check the "No comment" box below and should make no entries of any
kind in the space provided for the narrative statement; i.e., DO NOT enter in
this space such phrases as "No statement," "Not applicable," "N/A," "No
comment," and "None."
The optional statement must be entered on this sheet. The statement should not
exceed 100 words. Further, regardless of the number of words, the statement must
not exceed 750 characters, including punctuation, indentation, and standard
spacing between words and sentences. If any submission should exceed 750
characters, as defined, it will be truncated at 750 characters with no notice to
the submitting bank and the truncated statement will appear as the bank's
statement both on agency computerized records and in computer-file releases to
the public.
All information furnished by the bank in the narrative statement must be
accurate and not misleading. Appropriate efforts shall be taken by the
submitting bank to ensure the statement's accuracy. The statement must be
signed, in the space provided below, by a senior officer of the bank who thereby
attests to its accuracy.
If, subsequent to the original submission, material changes are submitted for
the data reported in the Reports of Condition and Income, the existing narrative
statement will be deleted from the files, and from disclosure; the bank, at its
option, may replace it with a statement, under signature, appropriate to the
amended data.
The optional narrative statement will appear in agency records and in release to
the public exactly as submitted (or amended as described in the preceding
paragraph) by the management of the bank (except for the truncation of
statements exceeding the 750-character limit described above). THE STATEMENT
WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR
ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY
FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE
INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY
PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE
REPORTING BANK.
- --------------------------------------------------------------------------------
No comment | | (RCON 6979) | C471 | C472 |(-
----- ------------------
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
-------------------------------------- -----------------------------
Signature of Executive Officer of Bank Date of Signature
35
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: American National Bank & Trust Company of Chicago Call Date: 9/30/96 ST-BK: 17-1490
Address: 33 North LaSalle Street
City, State Zip: Chicago, IL 60690
FDIC Certificate No.: |0|3|6|1|9|
-----------
</TABLE>
<TABLE>
<CAPTION>
THIS PAGE IS TO BE COMPLETED BY ALL BANKS
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF BANK OMB No. For OCC: 1557-0081
CALL NO. 197 31 09-30-96 OMB No. For FDIC: 3064-0052
STBK: 17-1490 00952 STCERT: 17-03619 OMB No. For Federal Reserve: 7100-0036
AMERICAN NATIONAL BANK AND TRUST COM Expiration Date: 3/31/99
33 NORTH LA SALLE STREET
CHICAGO, IL 60690
</TABLE>
<TABLE>
<CAPTION>
SPECIAL REPORT
(Dollar Amounts in Thousands)
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------
CLOSE OF BUSINESS | FDIC Certificate Number | | Less
DATE | | C-700 | Than -
9/30/96 | |0|3|6|1|9| | |
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report Date)
- -------------------------------------------------------------------------------
The following information is required by Public Laws 90-44 and 102-242, but does
not constitute a part of the Report of Condition. With each Report of Condition,
these Laws require all banks to furnish a report of all loans or other
extensions of credit to their executive officers made since the date of the
previous Report of Condition. Data regarding individual loans or other
extensions of credit are not required. If no such loans or other extensions of
credit were made during the period, insert "none" against subitem (a). (Exclude
the first $15,000 of indebtedness of each executive officer under bank credit
card plan.) See Sections 215.2 and 215.3 of Title 12 of the Code of Federal
Regulations (Federal Reserve Board Regulation O) for the definitions of
"executive officer" and "extension of credit," respectively. Exclude loans and
other extensions of credit to directors and principal shareholders who are not
executive officers.
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------
a. Number of loans made to executive officers since the previous Call Report date......... | RCFD 3561 | 0 | 3 a.
----------------------------------
b. Total dollar amount of above loans (in thousands of dollars) .......................... | RCFD 3562 | 0 | 63 b.
----------------------------------
c. Range of interest charged on above loans -----------------------------------------------------------------
(example: 9 3/4% = 9.75).............................| RCFD 7701 | 0.00 | % to | RCFD 7702 | 0.00 | % c.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------
SIGNATURE AND TITLE OF OFFICER AUTHORIZED TO SIGN REPORT | DATE (Month, Day, Year)
|
/s/ Joseph E. Ernsteen, Chief Financial Officer & Exec. V.P. | October 15, 1996
- -----------------------------------------------------------------------------------------------------------------------------
NAME AND TITLE OF PERSON TO WHOM INQUIRIES MAY BE DIRECTED (TEXT 8903) | AREA CODE/PHONE NUMBER/EXTENSION
| (TEXT 8904)
Gerald R. Huesing, Second Vice President | (312) 661-5662
- -----------------------------------------------------------------------------------------------------------------------------
FDIC 8040/53 (6-95)
</TABLE>
36
